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00:00My guest today is from Astral, Mr. Hiranand Savlani, who is the CFO and ED of the company.
00:06Mr. Savlani, thank you very much for joining us on NDTV Profit. My first question to you is,
00:12sir, you know, we've seen a little volatility in the raw material prices in this quarter.
00:17Can you take us through how you've been navigating that and what kind of impact it had on your
00:21margins? So there was a very high volatility of the polymer in the last quarter. So April was
00:2978% minus and then May was flat compared to last year, maybe 1% minus or so.
00:37June, all of a sudden polymer price shook up very fast. But because of the quarter ending
00:44and everyone was sitting with the old inventory, so it was not taken place,
00:47passed through in the industry. The industry was not able to pass through. Everyone was
00:51expecting once quarter will be over, next quarter onward, we will pass on. Then again,
00:56July, the prices fall back. So there was no practically pass through in the July.
01:01But in spite of that, I can say that we were able to deliver 16% volume growth
01:06and the top line growth was almost close to about 8%. And normally, if you see in our industry,
01:12Q1 is always overloaded with the PVC sale more than the CPVC. So because of that also,
01:18realizations are always under pressure. But in spite of that, we were able to deliver the number
01:24as we guided and our EBITDA margins were also in the range what we have guided,
01:2916% to 18% kind of zone. So that was there in the piping side.
01:34Now, as far as the chemical business or adhesive business is concerned, adhesive business also,
01:39India operation has done excellent work. So almost 14% growth was there in the top line
01:44and EBITDA was also maintained. Last year was also 16%, this time also 16%. The only challenge
01:50came in the UK operation where the EBITDA last year was 8%, this time it has come down to 2.5%.
01:57And top line was also negative by 5%. But that element to our overall sales is very low,
02:03which is roughly about 90 crore. So it is not affected too much to the overall number.
02:07But otherwise, quarter was much good, looking to the circumstances and looking to the volatility
02:12in the industry. Sir, you had guided for a volume growth of 15% and you've been able to,
02:20you know, mark a volume growth more than that and the EBITDA margin 16% to 18%. Do you see going
02:25into the next three quarters, you will be able to maintain that guidance and do you see a headwind
02:32of raw material prices coming back again, even though it may have fallen again off late?
02:39So I think it will come back. There is no reason that it will not come back because BIS standard
02:43is going to be finalized shortly and then the anti-dumping duty is also expected on the PVC.
02:49So the prices will definitely come back in the coming quarter. It's a question of only
02:52time when it will come back. So it is very difficult to give the exact timeline,
02:56but definitely it will come back. So we don't see any challenge into that. As far as our guidance
03:02is concerned, yes, right now we are standing by with the 15% volume guidance, which we have given.
03:07And secondly, this quarter was a lean quarter. Normally, in the history of last 10 years,
03:14if you see the Q1 is always low quarter. So in a low quarter, even if plus minus something is
03:19there, it is not going to affect too much on the yearly number. So our second half is always
03:25very big in terms of volume. I am sure that by the time volume will also come back and the demand
03:31will also pick up, monsoons will be over. So we should be definitely going to deliver 15%
03:36kind of volume growth. Are you looking at demand coming in from all the quarters now,
03:43in the sense, we saw some kind of sluggishness coming in, especially in light sectors like
03:48cement, where the prices are not moving and volumes have been a little slow to move. Do you
03:53see a similar trend in your sector as well, that there is sluggishness coming in demand?
04:02So normally our industry is not directly linked with the cement industry. Last year also,
04:09if you see, our company has delivered 25% volume growth. So there is no direct connection.
04:15But on the contrary, in our industry, normally polymer price normally decides the growth of the
04:20industry. Whenever prices are going up, the demand goes up. And whenever prices come down,
04:26the demand goes up. Because normally the dealer and distributor, they don't buy when there is a
04:31falling curve. When there is an upward, then everybody is going to rush to do the stocking.
04:36So our plus and minus depend on the polymer cycle. If the polymer is going to come back,
04:42definitely it will be there. But on a yearly basis, everything even out.
04:45So everyone is expecting that the industry should deliver 10 to 12% kind of volume growth.
04:50And if that is the case, delivering 15% volume growth to our organization should not be a big
04:56challenge. So keep fingers crossed. First quarter was excellent. And our seasonal quarter yet to
05:02start from Q3 onward. So we are confident that we will be able to deliver that.
05:09I just want to also check about your Hyderabad plant as well. I think it is coming on stream
05:14by the end of August or so. As and when that comes in, what kind of impact do you see on the top line?
05:21So I think Hyderabad plant is ready. Trials are going on right now. And we are expecting
05:26last week of this month, we are going to start production for a commercial purpose.
05:31So definitely that plant is going to support us because our logistic cost is going to go down.
05:39So we will be able to gain some market share into that geography. So definitely in the Q3
05:45onward, this is going to definitely help us in the volumes also.
05:52Can you give us an idea of what kind of volumes that can come from that region, Hyderabad,
05:59Andhra, Telangana region? Because a lot of infrastructure is expected to start in those
06:04regions. So do you expect good volumes coming in and what kind of impact on revenue that could
06:10come in eventually? So I think it is too early to give the numbers how extra volume we are going to
06:18face. Let us plant commission and then we see how the response is there in that market. And based
06:24on that, we will be guiding that thing. Immediately giving the number without starting
06:28the plant will be too early. So we will be definitely going to communicate to the speed.
06:34Once I think the plant is stabilized, maybe one or two quarters down the line,
06:38we will definitely be able to tell the exact how much growth we can.
06:41Also, if you can give us an update on OPVC segment that you are entering into.
06:47So OPVC is a very good product. We have already placed the order of three machines
06:53and we are expecting the first machine to be delivered in the month of October.
06:57So immediately within a month or so, we will be commissioned that and another couple of
07:03machines are also expected by December. So in December, all the three machines will be there.
07:09So we are expecting a good number from that product also because too much of demand is
07:13there for this product in the Indian market. Coming to your paint segment because you have
07:20launched it in two states, Gujarat and Karnataka, if I'm not wrong. What kind of
07:25demand and what kind of feedback are you getting from these markets and how do you
07:29take it to other states? So like paint, we launched in the month of June last week.
07:36So last quarter, there were no benefit much. I can hardly any number was there.
07:41But July was good for us because people are appreciating the quality. We recently did the
07:47test run with the painters also and they all are appreciating about the products.
07:52So we are very, very excited with that kind of feedback from the painter community.
07:57So we are expecting the good support in the paint division also from the state
08:02and we already started appointing a lot of dealers in the system and hopefully by quarter end,
08:07we will be able to enroll sizeable dealers in our company and from Q3 onwards, you will see
08:13paint should also start giving us a very good numbers from the Q3 onwards.
08:19Do you expect to get operating profitability from the third quarter onwards?
08:24Sir, we are already into the profit. If you see paint business is already giving us 14-15%
08:29kind of EBITDA. Last quarter, it was 10% kind of EBITDA mainly because we incur the launch related
08:36costs and the employee cost because the base is still low 40-45 crore base is there would be 2-3
08:41crore rupees of these kind of costs work out to be 6-7%. So that's why it looks dropping the
08:47EBITDA margin but otherwise we are very positive and in the coming time definitely we are going to
08:53generate whatever the healthy margin is there 14% kind of margin we will next year onwards we will
08:59be able to maintain. This year a lot of launch and all will be there so some extra costs will
09:04be there but definitely this will be the runway for going forward. Mr. Savlani, it was a pleasure
09:10talking to you today and good luck for the next quarter. Thank you for joining us on
09:13Earnings Edge on NDTV Profit. Thank you. Thank you for inviting.