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00:00Hello and welcome, thanks for tuning in to the SMID show here on NDTV Prophet.
00:12I'm Harsh Saita, with me is Mahima Vatsrajani as well as Puneet Javeri and we're going to
00:17speak with a couple of very interesting managements.
00:19First off we have with us Somani Ceramics, now soft quarter for ceramics, of course it's
00:25been a soft quarter overall for the entire building materials as well as the real estate
00:32market, but nonetheless, how is Q2 really shaping up, going to be interesting to watch
00:38out for because some bit of turnaround will obviously give us better footing with regard
00:43to the rest of FY25, but H2 is something that we'll also discuss, so let me quickly welcome
00:48on board Abhishek Somani, MD and CEO at Somani Ceramics.
00:53Sir talk to us, it's been a softish Q1 quarter, what's transpired and Q2, you believe there's
01:00going to be a bit of a turnaround, how do you see Q2 playing out?
01:04Yes, Q1 we've already discussed earlier, it has been soft on various grounds, there was
01:10elections etc. and Q2 also with the excessive rains across the country which really affects
01:16the building material sector, building material comes to a reasonably kind of a halt while
01:23it's raining, so it's also again been obviously better than Q1, but it's still a softer quarter.
01:31Mr. Somani, you know in terms of your segmental revenue breakup, from what I understand is
01:35in Q1 ceramics was down around 4%, PVT was flat, however the GVT segment did see a 33%
01:44YY growth, so I want to understand that going forward what will be the segment breakup be like,
01:49because you're expecting better quarters going ahead, so what will augur that growth,
01:54from which segment will it come from? So structurally what's happening in the
02:00ceramic tile sector, ceramic being a larger word, GVT, PVT, all of that is ceramics at the end of
02:06the day, but in the Indian parlance when we talk of ceramics which is the basic wall tiles, floor
02:12tiles and PVT is the polished vitrified tile and glazed vitrified tile, so structurally glazed
02:16vitrified tile is becoming more of a fancy of the market, both in terms of fashion, in terms of size,
02:22also in terms of designs, it has a lot of flexibility on all those three grounds,
02:27so therefore going forward GVT will be the sector which will keep gaining ground,
02:33PVT would remain kind of flattish and ceramics would remain again a little plus or minus,
02:40but ceramics may grow because in ceramics also we are now making larger sizes, so ceramics and
02:46GVT would pull the company, the PVT segment would be kind of flashy and that's happening across the
02:51world, it's not only in India, it's a phenomenon which is happening across the world. To make an
02:56analogy, I think it's you know how the television sector has gone from a CRT to an HD to an QLED,
03:02etc., etc., so therefore that's the kind of transaction transition we have towards GVT.
03:08So Somani, good morning, it's Puneet here joining as well, now you have mentioned that you know Q1
03:14was impacted due to various reasons, elections, monsoons as other reasons as well, but you have
03:20guided for a better quarter too specifically which will also lead recovery in the second half of the
03:24year, because you know it is a monsoon quarter as well, so what's leading this particular growth
03:30for you specifically? It's not a very large growth, it's a very small growth, I mean it's
03:36going to be a growth considering we grew in quarter one, so from that point of view it is better,
03:41but it is still quite sluggish, again it's to do with absolutely crazy rains across the country and
03:48flooding, etc., so we do believe that H2 onwards things should be better, but I am quite sure that
03:55the quarter two will be a reasonable bit better than the Q1, but serious green shoots in the
04:02quarter two because it has been inundated, the whole country has been inundated with rains.
04:09Now just one follow-up question on this, because specifically you know in this particular quarter
04:13you also mentioned that the Morbi players had just you know come to an agreement for reducing
04:18the inventory, now specifically any particular reason that you decided to do it in this particular
04:24quarter and what is the current inventory picture going in you know the second half of the financial
04:29year? No, no I never mentioned anything about Morbi and their inventory, I think you've got it
04:35wrong, but yes if you've touched that topic, but Morbi a lot of the plants are shut in Morbi,
04:41generally they're shut towards Janmashtami, so that has been the same phenomenon, a little extra
04:46has been shut this time because the exports, which is Morbi's biggest revenue generator, so exports
04:55have been hit for Morbi specifically because of the issues pertaining to freight,
05:04which is absolutely skyrocketed, so therefore the exports are slower, the trajectory for exports
05:09were approximately 1700 crore rupees a month and I believe in August it was down to about 1300-1350
05:16is what I've been told, so I have not seen those figures, but I've been told it's down to
05:201300-1350 crores for the month of August and it's slightly more than that in the month of July, but
05:26way down from 1700 crore rupees of run rate. So is the current inventory then specifically
05:34from quarter one, has it been run down a bit or is it at a manageable level right now, if any kind
05:39of quantification that you can give us? As far as we're concerned, the inventory levels remain pretty
05:43much the same as what it was quarter one, obviously you know capacity utilizations get affected, so
05:50beyond the point it's a product which you can't keep more inventory of, there's only x number of
05:55space in the warehousing, so I think we've been able to balance the product, the inventory and
06:00also our capacity utilization. I don't know what the inventory in Morbi is though. All right and Mr. Somani,
06:07you know you are recovering from lows of that exports and since you've said that you know
06:12monthly levels of exports will be roughly 1700 crores, so I want to understand that overall
06:19what is the kind of export growth that you're expecting this year and in terms of the breakup
06:23of revenue, how much is exports and how much is domestic and you know I believe that exports will
06:28be more margin accretive for you, so then I want to understand the overall impact on margins.
06:33Okay sorry, I think you've got me wrong. As Somani Ceramics, most of the leading players in India
06:38are not very export focused, so we are still 96-97 percent consumption of our production is in India.
06:46I was talking about Morbi, Morbi has a very large export about 40-45 percent of Morbi gets exported
06:52and that has slowed down from the 1700-1800 crore rupee run rate to 1350 crore rupee run rate right
06:57now. We were expecting that to be a 2000 crore rupee run rate but there's been, the freight
07:04rates have absolutely skyrocketed because of the geopolitical reasons which was unexpected,
07:08so therefore Morbi is under pressure as far as export is concerned. As far as Somani is concerned,
07:13we're not under any pressure on exports because exports was very minuscule part about our revenue,
07:18so that's the clarification I have and exports are not more margin lucrative, it is almost at the
07:26same margin as India and like I said we are very very small in exports, we only export the
07:32mid-end and the upper end of the segment, unlike Morbi who export a lot of the low-end and also
07:39the mid-end. Point taken sir, I want to try and cover volumes and how volume is shaping up because
07:45Q1 is possibly softer Q2 from what you are suggesting or what much better than Q1 for sure,
07:52yeah for sure for sure but softer than what you were expecting Mr. Somani? Absolutely. Yes, so
07:59would you therefore maintain the volume of 10 percent at least that's what you
08:04guided for fully at FY25, would that still continue to remain? Yeah, so I had guided for
08:10a reasonable double digit growth, so obviously because of the Q1 and a softer Q2,
08:15that's that I mean we need a reasonable amount of growth happening going forward in Q2,
08:20in H2, so obviously that's going to be impacted but I do want to keep the commentary where we
08:26should be able to do a double digit, a very very high single digit because Q2, H2 we do
08:33believe should turn around in a very very positive way. I mean buildings are getting made, real estate
08:39is in a boom, tile is the preferred material which will go into every building, it's not no longer
08:44stone and wood and all of that, we're replacing a large part of that segment, so there is no reason
08:50for tile not to march ahead in the future. Okay and with regard to sir realizations, I'm going to
08:59club a couple of questions here, one is with regard to realizations, where should top line
09:03therefore be at and margins, would they also sustain double digit like they did last year?
09:09It all depends on capacity utilization and how much we are able to say, so obviously it will
09:14depend on how the Q2, sorry the H2 goes but yes if the capacity utilization is at the level
09:21which is it at now and a little higher than that going forward in H2, there's no reason why that
09:25should not happen because the input costs are at check, you have seen crude falling down
09:31which means that gas also should be under check going forward, so there are no surprises on the
09:37input costs on any of the fronts, be it gas which is our major input or be it any other raw material,
09:44so with input costs being at check, it's only a question of selling more and utilizing
09:51the capacity more which is a big big spoil spot as far as style is concerned, capacity utilization
09:57is paramount for us. Mr. Somani, point well taken, so capacity utilization as well as gas prices
10:03under check will be a couple of things that we'll watch out for margin specifically, I just
10:07wanted to address one small segment which you entered which is the bathware segment over the
10:11last few quarters, now we've seen a lot of competition coming in from not only tile players
10:17but we have a couple of paint companies who've gotten into bathware, we have a couple
10:21of plumbing companies also that have, so just wanted to understand your outlook for this
10:26particular segment as well as for the industry, do you see a lot of competitive intensity as well?
10:32Yes, so this industry is unlike the tile industry, there are fewer players, small scale is not that
10:37large in this industry because the brands are visible, so there is obviously the consumers more
10:43clear as to which brand they want but yes, you're right, there's been more intensive competition
10:48with some of the paint players and some of the other plumbing players and pipe players which
10:52are important to selectively, the segment is clearly heating up, we are approximately at
10:57the 300 orbit revenue, give or take a few crores which means that we do have a head start and that's
11:02our products are set, it's not an easy product to set in the market, distribution is set but I think
11:08going forward, the issue now is when you think of tiles, you think of Somani but when you
11:14think of sanitary wear, you're not thinking of Somani sanitary wear, you're thinking of
11:20the other top 3-4 brands which are available in India and some of the global brands,
11:23so that's something which is a headwind for us as to where to cross that bridge, it's not
11:30going to be an easy one, a lot of branding, a lot of distribution, so I think currently going forward,
11:34our product is in place, our production is in place, we have capacities, we have excess capacities
11:39in both those segments, it's a question of now getting our distribution and widening and deepening
11:45our distribution as far as sanitary wear and bathwear as in bath fittings is concerned.
11:50Right, okay well Mr. Somani, thank you so much for giving us those insights and thank you so
11:56much for taking your time and speaking with us at NATV Profit.