U.S. Markets closed

Edited Transcript of ASTRAL.NSE earnings conference call or presentation 2-Aug-19 12:30pm GMT

Q1 2020 Astral Poly Technik Ltd Earnings Call

Aug 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Astral Poly Technik Ltd earnings conference call or presentation Friday, August 2, 2019 at 12:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Hiranand A. Savlani

Astral Poly Technik Limited - CFO

* Sandeep Pravinbhai Engineer

Astral Poly Technik Limited - MD & Executive Director

================================================================================

Conference Call Participants

================================================================================

* Ashish Poddar

Anand Rathi Financial Services Limited, Research Division - Research Analyst

* Chintan Shah

Investec Bank plc, Research Division - Research Analyst

* Maulik Patel

Equirus Securities Private Limited, Research Division - Research Analyst

* Nehal Shah

ICICI Securities Limited, Research Division - VP of Research of Midcaps

* Praveen Sahay

Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst

* Ritesh Shah

Investec Bank plc, Research Division - Analyst

* Sonali Salgaonkar

Jefferies LLC, Research Division - Equity Analyst

* Tejal Shah

Reliance Nippon Life Insurance Company Limited - Equity Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [1]

--------------------------------------------------------------------------------

Thank you. Good evening, everyone. On behalf of ICICI Securities, we welcome you all to the Q1 FY '20 Earnings Conference Call of Astral Poly Technik Limited. We have with us the management represented by Mr. Sandeep Engineer, the Managing Director; and Mr. Hiranand Savlani, the CFO of the company, to discuss the Q1 performance.

Over to Sandeep bhai for his initial remarks.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [2]

--------------------------------------------------------------------------------

Thank you, Nehal bhai, and thank you, everyone, for joining this con call of Q1 results. The Q1 results are with you and hope you -- everyone has gone through the numbers.

I would brief you about what exactly happened in Q1 on the piping business and the adhesive business. To start with the expansion of Ghiloth, which was complete and the Ghiloth plant just settled. And in Q1, the Ghiloth plant is now 60% at -- operating at 60% efficiency. Dispatches are started in north, and we've also opened the dispatches in east from the Ghiloth plant. The Ghiloth plant also is undergoing expansions. We have a corrugator, which is now at Ghiloth plant of [800 mm] in diameter, which is up and operational from last month.

We are also starting the manufacturing of other piping products from Ghiloth plant, especially in the agriculture sector, the column sector and in the CPVC, the fire sprinkler sector. So Ghiloth plant will undergo expansion, even this year where capacities aim to run at the maximum efficiency.

At Hosur plant, the plant is -- also the new expanded plant is operational, 5,000 tons additional capacity is operational. And the rest of the capacities and machines are coming and will be completely operational in this quarter. Hosur is also receiving a corrugator in this month, which also will be operational in this quarter. So expansions are going on in Hosur. Corrugated pipes will be started in Hosur. And we have now a warehouse of 3 lakh square feet for the -- feeding the south market, which is also completely settled and operational to feed the entire south market.

We got the land allotted from the Odisha government in Odisha. The possession of land has been taken by us. The plans for the planted Odisha for east are already prepared and ready, and we will be starting the construction activity in this quarter. So we will be ready with the Odisha capacity by next fiscal, which will be also operational in next fiscal.

Rex also got a new machine in Sitarganj or the corrugated pipe in this quarter, which is also operational and started feeding the market. That all -- that machine makes corrugated part up until 600 mm.

So now with the corrugated pipe, Astral can supply from north to the northern -- further northern markets, right up until Uttaranchal and the markets in -- quite up in the north, near the Himalayas. Sitarganj will be doing this. Ghiloth has also a corrugated to supply Delhi and surrounding areas and part of Punjab, Haryana. Hosur has a machine which will be supplying corrugated pipes to the south market. And already, there are expansions, and balancing equipments are coming at the plant of Rex, which is also going to keep expanding.

Rex passed through some challenges in this quarter, especially SAP was implemented. Merger with Astral happened. So we have to go and change the orders and the order book from Rex to Astral. Some of the contracts were also needing -- needed to be revised. So this quarter, we faced these 2 challenges in Rex, where we actually lost an effective sale of almost close to a month.

In the Q3 and Q2, all these challenges have been overcome. New capacity has been added in corrugated business. And the numbers will keep growing in Q2 and Q3 for the corrugated business, which is the new business for Astral.

We are also -- we also acquired land in Sangli, where we would be expanding the capacity in next year and this year at Sangli plant, for corrugated pipe and various other pipes, which Astral makes in Ahmedabad and other plants will also be made from Sangli to feed this Central India market from that location.

Astral also kept on changing its way of doing business in the different segments. We have now distributors almost at PAN India base for our agriculture products, for our column products, for our casing products, for the electrical piping products, for plumbing products. Even in the plumbing product, we have 2 divisions. The PAN division takes care of the projects. It's directly with the projects and the new product. The other division deals with the retail channel.

Our low-noise piping system also is growing and gaining good market share in the drainage system. We are also equally getting projects for our PEX pipe, which was introduced a few months back in the market. And regularly, these projects are coming month-on-month for the PEX business. So PEX business is slowly but steadily growing and establishing itself in the Indian market.

The fire sprinkler also is moving at a good pace, growing, and we are getting good projects in the fire sprinkler, and which is the -- today, the -- one of the biggest challenge of government to address the issues of fire accidents happening throughout the country, by bringing more modern products in the business.

So overall, to summon the piping business, Astral has given good numbers, good growth in Q1. Our plants are going as scheduled, as layout -- laid out to you as discussed in our analyst meet -- as presented in the analyst meet, and we are moving in the right direction in the market. And we will keep growing at the level of guidance which we have given in both the growth in the business, the growth in tonnage and expanding our EBITDA and maintaining the EBITDA.

Coming to Resinova, as we had guided, we are going through a structural change from a 3-Tier distribution system to a 2-Tier distribution marketing system. Most of these corrections have been concluded in Q1 and established and going on well with the market share scenarios. A few corrections are still to be undertaken, which will be completed in Q2. And Q2 onwards, we will see a good growth quarter-on-quarter in this business.

We have made parallel corrections here also to have distributions for specialized products, especially the wood and the white glue product, the construction chemical division, in maintenance division, and both for retail and projects. So these teams and this distribution channel, which we are reviving is getting well established, going on the right track, right directions. And we would be giving the numbers and results as per the guidance, and as the EBITDA will be expanded and maintained as per the guidance.

Coming to BOND IT to U.K., U.S., both have done excellently well. U.K. is doing a double-digit growth. EBITDA has expanded. Similarly, U.S. which passed through many challenges after acquisition is well settled. It is not only getting growth in the United States, but even we are now selling the product in U.K. And to -- and that we launched RESCUETAPE in India, and it is a great success for us. We already have sold almost 3 containers in the past 4 months, and more containers are on the way to feed the Indian market. So RESCUETAPE in India will be a great success. And U.K. and U.S. business will keep growing with these products. And we are also adding a few products in the United States market to be sold, which will be manufactured at the U.K. plant.

Kenya is also doing great from last few quarters. The numbers are both growing and the margins are expanding. And we expect that company also to perform as per guidance and with good numbers and come out of all the losses this fiscal from quarter-on-quarter.

Market scenario has its own challenges from various angles. But again, to add Astral will keep up with its numbers, with its growth, with its margin and expanding its -- both in the business of pipes and adhesives in quarter-on-quarter for this fiscal. And add more products, add more distribution network, add more delivery points, add more capacities and add more chemistries in adhesives as well as new product ranges will be added in the piping segment also in this Q2, Q3 and Q4.

With this, we will take on more on the business in our Q&A, question-answer time. So I would hand over the con call to Mr. Savlani to take you through the numbers.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [3]

--------------------------------------------------------------------------------

Good afternoon, everybody. Welcome to the Q1 numbers call. If the numbers are with you, I'm again repeating the few numbers, and then we'll jump into the Q&A session.

The stand-alone number, pipe number has grown up from INR 344 crores top line to INR 472 crores top line, registered a growth of 37%. The 37% growth is mainly because the numbers are clubbed with the Rex. So last year Q1, Rex was not there. So this quarter, Rex is there. So because of that, there is a huge jump you are seeing in 37%. So Rex had delivered INR 40 crores into this top line. So if we remove the Rex number out of this stand-alone number, then on a stand-alone core piping business growth is around 26% in value terms.

As far as the volume term is concerned, Rex had delivered sales volume of 2,973 metric tons. If I remove that number from the top line of consolidated, the stand-alone of our core piping business has delivered a volume growth of 28,756 metric tons, which is close to about 28% volume growth. So value terms is 26% and the volume growth is 28%.

As far as the EBITDA is concerned, you can see that the EBITDA has grown up from INR 61 crores to INR 79 crores, almost 28% growth. So now we've seen numbers are consolidated, it's difficult for us to segregate the EBITDA of Rex, so we'll be -- we'll not be sharing that number to you because it is very difficult now to pull out the separate EBITDA number of Rex.

PBT has grown up by 38% from INR 38 crores to INR 52 crores, and same 38% kind of growth impact from INR 24.7 crores to INR 34.1 crores. And if you see the consolidated volume growth, last year, the similar quarter was 24,476 metric tons. This year, it is 31,729 metric tons, which is close to about 41% volume growth in sales tonnage.

Coming to the adhesive side of business, as communicated in the last con call that now onward we will not be sharing the individual company-wise, subsidiary-wise quarterly number. So we have given a consolidated number of adhesive business. The revenue has grown up from INR 141 crores to INR 144 crores, almost 2.3% growth is there. And EBITDA is maintained at the same 14.4%, registered a growth of 2%.

So the Resinova number was more or less flat in the last quarter. And the U.K. unit has given us almost double digit, 10% to 12% kind of top line growth. But of course, these all numbers of subsidiaries will be available on our website on a yearly basis. All the annual reports will be there for all the subsidiary at the year-end.

Now coming to the consolidated number, this top line has grown up by 27% from INR 477 crores to INR 606 crores. EBITDA has grown up by 22.78% from INR 81 crores to almost INR 100 crores, and PBT has grown up from INR 53 crores to INR 68 crore, that is 27.34%, and PAT has grown up by 27% from INR 37 crores to INR 48 crores.

As Sandeep bhai has mentioned already, the Rex numbers were below our expectation because we have almost lost 1 month number because almost 13, 14 days of April, we lost because of the implementation of SAP because that was needed to have a more clarity on the numbers and the robust MIS system, which Astral follow in its core businesses. So we implemented that. So that is affected heavily because the small company implementation is always a big challenge. So because of that, it took more time than we -- what we planned. So because of that, we have to suffer the sale loss.

And same thing, the same quarter, we took the -- we got to order from the high court for the merger. So because of that also all these spending orders that -- all the construction companies, we hope to get it rectified because we have to change the GST number and all as per the Astral GST number. So all orders got changed with them. So that also took away our couple of weeks' time. So almost 1 month number sales we lost because of these 2 reasons: implementation of SAP and implementation of this merger order.

Rest, all, I think Sandeep bhai has already mentioned about individual product-wide and the plant-wide capacity additions and all. So now, we'll straight away go to the question-and-answer session. Thank you very much.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We have an -- first question from the line of Praveen Sahay from Edelweiss.

--------------------------------------------------------------------------------

Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [2]

--------------------------------------------------------------------------------

And first of all, many congratulations for giving us such a great set of numbers. Firstly, as you had already given all the volume numbers. So 26% of growth in the sales and 28% of growth in the volume of a pipe, can you -- a bit more elaborate from where -- which segment you have received such a high growth?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [3]

--------------------------------------------------------------------------------

We received growth -- Astral is predominantly a plumbing-based company, supplying to infrastructure projects. And we received the growth from almost all the markets on our plumbing sector business. We also expanded our capacities in our agriculture business. But still compared to the competition, we are quite small in the agriculture business, but we did get a good business from agriculture sector, also on the growth part. But our major growth has come from our infrastructure plumbing business. And our major growth has come from the CPVC segment.

--------------------------------------------------------------------------------

Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [4]

--------------------------------------------------------------------------------

And it's a -- due to -- of a geographical expansion is a more -- is it like that?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [5]

--------------------------------------------------------------------------------

Geographical expansion, our branding creation of awareness of reach, we are working heavily on expanding the distribution channel to the smallest town. We are also working very aggressively to create the expansion of the reach by retail outlets. We are also having now a parallel division for the projects. So I would say the geographical expansion is a part of it, but at the same time, the brand and the market creation has helped us to keep on the growth pace.

--------------------------------------------------------------------------------

Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [6]

--------------------------------------------------------------------------------

All right. And secondly, on the margin front of the pipe, earlier, we had seen a 17%, 18% of a margin. From the last couple of quarters, we are seeing a -- in the range of around [another] 15%, 16%. So can we assume this is a new normal for the piping division of Astral?

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [7]

--------------------------------------------------------------------------------

So like -- Praveen, the margin is volatile because the market challenges are there, like raw material volatility is there. In this quarter also we lost in inventory because, as you know, that the PVC price dropped in last quarter. March, it was heavily dropped. And April, again, it dropped. So because of that, we incurred some losses. In PVC, it is very difficult to quantify the number, but it was roughly about INR 7 crores to INR 8 crores kind of rough number estimate I am giving you. So that is also one of the reasons that small drop is there in the pipe margin. But otherwise, we don't see any -- much problem. So I think 15% kind of run rate will be maintained.

--------------------------------------------------------------------------------

Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [8]

--------------------------------------------------------------------------------

Because last quarter, Q1 -- Q4 FY '19, you had incurred some one-off expenses of INR 12 crores. So again, like INR 7 crores, INR 8 crores of a one-off, I can believe, that's the inventory?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [9]

--------------------------------------------------------------------------------

Yes. Last quarter was also the same problem because PVC price dropped by 7%, 8% in the -- that quarter itself, but that was also there. And plus, we spend on the IPL and all these things. So that was also the reason...

--------------------------------------------------------------------------------

Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [10]

--------------------------------------------------------------------------------

Write-off price (inaudible)?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [11]

--------------------------------------------------------------------------------

Yes. Similar things happened in this quarter also so -- because of that. But on an average, you can consider 15% is the long-term sustainable kind of margin, which we earlier used to tell around 14%, 15%.

--------------------------------------------------------------------------------

Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [12]

--------------------------------------------------------------------------------

And how is VAM prices in the last quarter?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [13]

--------------------------------------------------------------------------------

So -- like we are not tracking much on VAM side because we are using hardly any VAM much in our business. So I don't think it is going to affect us much. So we are not...

--------------------------------------------------------------------------------

Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [14]

--------------------------------------------------------------------------------

And the utilization of [adhesive] plant?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [15]

--------------------------------------------------------------------------------

Very small...

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [16]

--------------------------------------------------------------------------------

We are -- wood is the new segment for us, and we have relaunched the whole wood product line a few months back. And we are building on this business. So compared to our epoxies or the construction chemicals and various other products [I know, acrylics], wood is still not so big that VAM prices will affect us.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [17]

--------------------------------------------------------------------------------

But overall, market trend is -- the prices have come down.

--------------------------------------------------------------------------------

Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [18]

--------------------------------------------------------------------------------

Okay. What is the utilization of adhesive plant, currently, last quarter?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [19]

--------------------------------------------------------------------------------

In this year, utilization was around 37%.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

So we have next question from the line of Ritesh Shah from Investec Capital (sic) [Investec Bank plc].

--------------------------------------------------------------------------------

Ritesh Shah, Investec Bank plc, Research Division - Analyst [21]

--------------------------------------------------------------------------------

Sandeep bhai, you indicated on the Rex, we had some revision in contracts. Can you please clarify whether it was towards the end-user industry? Or was it towards the raw material side?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [22]

--------------------------------------------------------------------------------

On the users, actually, because the company merged from Rex to Astral. So all these users, we have to approach and change the contracts accordingly.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [23]

--------------------------------------------------------------------------------

So under -- these contracts were in the name of Rex, and they were using the Rex GST number in all. So that, we have to change it in the name of Astral and with the Astral GST number.

--------------------------------------------------------------------------------

Ritesh Shah, Investec Bank plc, Research Division - Analyst [24]

--------------------------------------------------------------------------------

Right. Sir, we were also looking to revisit our raw material contracts. Any updates over here?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [25]

--------------------------------------------------------------------------------

Which raw material?

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [26]

--------------------------------------------------------------------------------

Which raw material?

--------------------------------------------------------------------------------

Ritesh Shah, Investec Bank plc, Research Division - Analyst [27]

--------------------------------------------------------------------------------

[SDP]. I think from a sourcing point of view, we were looking to diversify the options that we had.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [28]

--------------------------------------------------------------------------------

That we already started. So we are -- earlier, we were sourcing from 1 or 2 places. So now we'll edit more sources.

--------------------------------------------------------------------------------

Ritesh Shah, Investec Bank plc, Research Division - Analyst [29]

--------------------------------------------------------------------------------

Okay. So that benefit is already there in the working capitals?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [30]

--------------------------------------------------------------------------------

That's why -- that's why -- that's why the lot of improvement we are seeing into the margin front.

--------------------------------------------------------------------------------

Ritesh Shah, Investec Bank plc, Research Division - Analyst [31]

--------------------------------------------------------------------------------

Okay. That helps. Sandeep sir, if you can help us understand better, you indicated from a 3-Tier to a 2-Tier distribution for adhesive sales. If you can provide some more flavor over here? Like, is it the same distributors which will -- catered to different chemistries? Or are we having different distributors for different chemistries? If you could provide some broad color with some numbers over here.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [32]

--------------------------------------------------------------------------------

Basically, when we acquired Rex, they have a huge number of distributors. Even a guy buying 10,000 was a distributor. So we have to consolidate this situation, and we consolidated accordingly. And we consolidated to have very big distributors. And we found that to create the reach, it was getting more difficult to transfer any scheme or any branding activity right to the end use was getting little difficult to pass through these 3 layers. So we have now -- most of these -- the third-Tier distributors have converted into the second channel. And these distributed -- directly catered to the dealers or end users. And we have also added quite a number of distribution channel to it to cater to the dealers and the users. So this is how the channel has been reshaped. Yes. We have different distributors for most of the chemistries. Also that is a major change we are doing. Formally, one distributor would do all the chemistries. And he would only focus and sell 1 or 2 chemistries because he was happy with that much business. And some of the chemistry we'd do, but not to the tune of needed or to the tune it is growing in the market. So we are -- we have made a lot of changes here. Almost the change cycle is established, getting completed. And it is dynamic. It will go on for years to come. I don't see nothing that's completed in business. But major part is well-established and done. To keep the company moving with a good growth, good pace and good money. So we are on the right track, and we don't -- have done the right corrections [that need].

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [33]

--------------------------------------------------------------------------------

Ritesh, this correction not only will help us for the growth, but that is going to help us into improvement into the margin because 1 entire margin, we will just cut off. So that is going to help us in improvement of the margins also going forward, not necessary that entire margin will come in our pocket. But we may pass on some margin to the market also. But that will help us to grow our volumes.

So it is not that the 7%, 8%, the Tier 1 was taking the margin. So 7%, 8% improvement in EBITDA level. But 7%, 8% -- some percentage, we may keep for us, and we pass on to the market. So to that extent, our product will be cheaper. But that is -- we are seeing, that will be a big, big advantage, maybe 1 quarter down the line. So small effect will be there in Q2 number also which we've already communicated earlier also that -- by September, we are going to complete our structural change. And from October onward, we'll be back to the normal growth and the higher-margin than what today we are delivering.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

Your next question from the line of Ashish Poddar from Anand Rathi.

--------------------------------------------------------------------------------

Ashish Poddar, Anand Rathi Financial Services Limited, Research Division - Research Analyst [35]

--------------------------------------------------------------------------------

Sir, my question is that in the difficult time, we are showing about 28% kind of volume growth in the pipe segment. While the adhesives business has -- the revenues have been flat. So if you can just touch down light, where is this demand coming from? Because when we look at the other companies in your segment or in the related segments, we see that there are a lot of challenges which they are facing, looking at the weak demand scenario. So if you can throw some highlight about the market scenario. And also in the adhesive business, why was the revenue flat? I mean was it as per expectation? Or we missed somewhere?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [36]

--------------------------------------------------------------------------------

So like -- first, coming to the piping division. So piping demand was overall good for the industry. It is not restricted to only Astral. I'm sure the other organized player will also grow in this difficult time. So it was the overall growth in the piping. Mainly, it is very difficult to understand the exact reason for the growth. But I think the shift is taking place from unorganized to organized sites. So that can be one of the bigger reasons, which we are foreseeing.

And plus, specifically coming to the Astral side, we have done a lot of corrections. I think Mr. Engineer has already briefed that we will increase the geography. We are increasing the dealer's network. We are increasing the product range. We are doing a lot of branding activity. So all these things are contributing for the growth.

And of course, these are the very high-growth territory so very, very difficult to say that these kind of higher-territory growth will continue for what time. But as of today, when we are talking on 2nd of August, this higher territory is still continue. So very, very difficult to give the guidance on how much we will continue higher territory in the coming quarters. But as of today, growth is very, very high coming. So very difficult to understand the market. Now coming to the...

--------------------------------------------------------------------------------

Ashish Poddar, Anand Rathi Financial Services Limited, Research Division - Research Analyst [37]

--------------------------------------------------------------------------------

So the -- my -- so just -- so my question was that other players have grown majorly into the agri pipe segment, while the plumbing has been not that great for them. While in our case, the agri segment is very small and more -- and most of the growth has come from the plumbing segment. So I'm just a little confused, why [the description].

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [38]

--------------------------------------------------------------------------------

It is not like that, only agri is growing. I think other -- which company you are talking that other has not grown. I don't have any number of other companies with me, but I'm sure other companies are also growing because it is not restricted to only agri demand. Because other companies are not in a public domain with a plumbing side, so that might be nonavailability of number. But otherwise, we are of the view that the plumbing side of the business is growing very fast. So at least, I don't have a number with you. If you have, please share it to me, I can go through that number also. It will be helping to me also. But overall, the growth is there. It is in the plumbing side also as well as agri size. Agri side is definitely higher growth. So that is also the reason.

Secondly, coming to your other question of adhesive side. Adhesive, we have nothing missed in the market. We are growing in the retail side. It is because of the structural change, this is low growth and which we have guided in advance that we are doing structurally. Like what we did in last year in Astral, we curtailed the credit limit. We fixed up the credit limit for each and every distributor. We connected everybody to the channel finance. So last year, we missed some growth. But now with this correction this year, you can see, it is helping us in a big way, and collection cycle has improved a lot for us. Same thing, structural correction is happening in the adhesive side also. And one more quarter, similar kind of low growth will be there. But we are quite confident that from the Q3 onwards, adhesive will -- also will be back in a higher-growth territory.

--------------------------------------------------------------------------------

Operator [39]

--------------------------------------------------------------------------------

We have next question from the line of Sonali Salgaonkar from Jefferies.

--------------------------------------------------------------------------------

Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [40]

--------------------------------------------------------------------------------

Sir, my question is, this restructuring of distribution system that we are doing in adhesives, approximately what kind of investment do we envisage into this?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [41]

--------------------------------------------------------------------------------

So practically, there is -- no investment is required. You understand how we are doing the correction. So right now, there are 3 layers in the business. So one, at the top of the layer is the stockist; then the second level, the distributor; and in the third level, there is a retailer. So now we are removing the stockist from the system because unnecessary, they are taking away between 6% to 8% kind of margin from us. So we thought that let us do directly with the dealer -- the distributor. So our cost will small -- will increase because we are also going to open few depots, and we'll be supporting all the distributor from the depot. And all the stockists who were interested in us, they all continue as a distributor. But they will be getting the invoice at a distributor price, not at a stockist price. So there is -- no investment is required into this system. Only that one layer we are removing from the system. And to some extent, we are adding the depots to that extent, small inventory holding may go up. Otherwise, I don't think much investment is required for this.

--------------------------------------------------------------------------------

Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [42]

--------------------------------------------------------------------------------

Sir, but in this case, don't we foresee that probably the loss [sense] of sales during this interim transition would be even beyond H1 FY '20 for us?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [43]

--------------------------------------------------------------------------------

No, I don't think so because most of our distributors are with us only. And a few of the stockists will also continue with us. So I don't think we are going to lose the sales. Yes, in a transition phase, it will be there because we are removing the inventory of the stockist. So that will come back to us. So to that extent, yes, it will be a loss of sales, but not the loss of sales to the end-user level. It is only the stock which is lying in the system that will reduce. And that is what you are seeing in last 2 quarters that the Resinova numbers are not up to the par, what earlier used to be 15%, 20% kind of top line growth.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [44]

--------------------------------------------------------------------------------

But basically, it is gaining the market. We are gaining the market in a big way. And I assure you that after Q2 and Q3, you will see this change, as Q1 has a -- great results.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [45]

--------------------------------------------------------------------------------

Even this quarter, low number is -- one of the reason is that the volume is there because value has come down, because all the chemical prices come down. Whether you pick up a VAM, whether you pick up a -- this epoxy, whether you consider a silicon, substantial drop is there in the raw material price. So we have to reduce the final product price also. So volume growth is still there. But that -- but inventory attraction is also parallelly going on from the system. So both are there. So volume growth, there is not much loss. But yes, value side, we all lost because we have dropped the price also.

--------------------------------------------------------------------------------

Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [46]

--------------------------------------------------------------------------------

Sure. So sir, what will be our full year guidance for adhesives in terms of revenue now?

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [47]

--------------------------------------------------------------------------------

So full year, we are of the view we will be double-digit plus.

--------------------------------------------------------------------------------

Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [48]

--------------------------------------------------------------------------------

Okay. All right. Sir, CapEx for the year FY 2021?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [49]

--------------------------------------------------------------------------------

So CapEx, we are forcing somewhere around INR 125 crores to INR 150 crores.

--------------------------------------------------------------------------------

Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [50]

--------------------------------------------------------------------------------

Annually?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [51]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [52]

--------------------------------------------------------------------------------

But in adhesives, we have done everything. So there would be hardly any CapEx happening in that as the business (inaudible). At least coming this year and even next year, there would be only marginally.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [53]

--------------------------------------------------------------------------------

Because adhesive, our utilization is just 37%. It's enough...

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [54]

--------------------------------------------------------------------------------

And we have put everything needed to have all the chemistries, capacities, backing, everything is in place. So the investment side on that business would be marginal. And the expansion of the market will be very heavy. And we'll be working very hard to do whatever the best needed on that side to create a brand in the market for every product and every chemistry we make.

--------------------------------------------------------------------------------

Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [55]

--------------------------------------------------------------------------------

Sure, sir. Sir, and lastly, if you could help us with the present installed capacity of Rex.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [56]

--------------------------------------------------------------------------------

Rex is around 24% or 25% plus this 3 -- around 28,000 metric tons.

--------------------------------------------------------------------------------

Operator [57]

--------------------------------------------------------------------------------

We have next question from the line of Maulik Patel from Equirus Securities.

--------------------------------------------------------------------------------

Maulik Patel, Equirus Securities Private Limited, Research Division - Research Analyst [58]

--------------------------------------------------------------------------------

Sandeep bhai, a few questions. One, will the industry as a whole benefit from this Jal se Nal scheme (sic) [Nal se Jal scheme] of the Government of India? And is there any way that Astral can play a part in that? And it accelerate our growth profile on the pipe side?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [59]

--------------------------------------------------------------------------------

Sure. Astral will play a big role in this coming business for water distribution. There will be many products which will help to -- the government and the infrastructure projects for water distribution here. There are many other products which we are already looking at on the technology front. Various meetings have been conducted which will be needed by the infrastructure projects of the government for water carrying and distribution. So yes. Astral is working very hard on this. Evaluating new products which are economical, better and faster to [lay] for these type of projects. Also accordingly, working on its capacity, adding product lines that need to be in the existing segments, existing product portfolios. And also we are working on product lines with companies from United States, where we already have received a product full of 2, 3 containers for water conservation. The product can be laid below the soil. We can conserve the water, reuse it or recharge the water to the Madera. So yes. This is the segment, which is on my -- on the top of my priority list. And a lot of work is happening from our end on this segment. And I see a great, great future in this segment in years to come. And we will not be behind anyone in this segment. We already have done a JV with this company. First to bring and sell, then to produce in India. Water conservation is on the top of our line. And water -- Jal se Nal (sic) [Nal se Jal scheme] also projects are top of my mind.

--------------------------------------------------------------------------------

Maulik Patel, Equirus Securities Private Limited, Research Division - Research Analyst [60]

--------------------------------------------------------------------------------

Great to hear that. Sandeep bhai, you mentioned about one JV, I think, so can you just put some additional colors on that? I mean...

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [61]

--------------------------------------------------------------------------------

We would not be disclosing it till we really get the product to the park.

--------------------------------------------------------------------------------

Maulik Patel, Equirus Securities Private Limited, Research Division - Research Analyst [62]

--------------------------------------------------------------------------------

Okay. I got it. I got that. And you mentioned about a couple of new products like PEX and fire sprinkler, column and the casing. Now what could be the size of this volume currently and combined? Is that like new emerging product, if I have to say that? And what size it could where the -- let's say, 5 years down the line? I guess something which would bring colors on that would be really helpful.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [63]

--------------------------------------------------------------------------------

The PEX is a very new product. You are already aware of PEX, cross-linked polyethylene. It is used in all the developed countries with CPVC for the plumbing application, both for hot and cold water. At the premium projects in India, some of them use CPVC, some of them prefer to use PEX. So not to have this in our portfolio, we already entered with the most -- the latest technology of PEX-a in this product line. At present, to quantify a market for the future is too early. The product is very -- in a near sense stage, getting itself established. But I can just throw one light that we've -- in the launch of this product, in almost 5 to 6 months, we are getting an average sale of INR 10 lakhs, INR 15 lakhs per month of PEX in the projects where the consultants want PEX and prefer PEX.

And now to quantify your product on fire sprinkler, yes, this market is evolving. This market still was in near sense stage. This product is there in the market from almost 10, 15 -- 10 years plus from Astral. Due to various reasons, due to various approval systems, this was not getting used in a big way in this segment. But the way these fire incidents are happening, the accidents are happening and as per the NFPA guideline, this product can be used in all these buildings where these incidents are happening or because of fire, people are dying. Safety is needed now in every building. And I see this product to erupt and grow very fast in the years to come, maximum the -- in 1 year or 2 years, you will see this product of growing very fast.

The biggest advantage in this product line, Astral carries and the competition is -- Astral makes every product, every fitting in-house with its own technology, with its own -- with the same approval in India. So we are much, much cost-effective than the competition that -- in this product segment. And still, we can sell the product at a good margin also. So I see a great market, great future of this product, especially the [indiscernible].

--------------------------------------------------------------------------------

Maulik Patel, Equirus Securities Private Limited, Research Division - Research Analyst [64]

--------------------------------------------------------------------------------

And Sandeep, last question, on the pipe side. Any -- what we are seeing that you continuously make investment in various operators. It's in a new plant or new product or the new malls. And this actually increase our margin profile. Is there any structural change or basically a [front tick] in the margin which we can expect from the pipe going forward?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [65]

--------------------------------------------------------------------------------

I think we normally used to say, 14%, 15% kind of a margin is a sustainable kind of margin. But the way opportunity is coming for the Astral for the new products or maybe for the existing products and all, so now the margins are expanding on the higher side. So we have to see -- we have to watch the situation of the market. And we hope to see -- and secondly, a lot of internal corrections we are doing in terms of logistic. Like last time also in the analyst meet, we explained in detail that now everywhere that we are creating the verticals and every head being getting appointed in each and every division. So -- and with expansion of the geography of the plant, so like -- now north is already up and running at a 60% capacity in the first year. It is a great achievement, I can say. So same thing next year, this east will be operational. So today, you see selling the product from Ahmedabad to east market, we are incurring 10% to 12% kind of rate. And how can be we competitive in that market. But still, we are there in that market. So once we will be there, then there are high probabilities that we may get a good market share into that geography also. And not only market share, but good margins also because once you will be at a local plant, near to the [port], so this is going to help us in a big way and going to help us in expanding our margin. But at this stage, I don't want to increase our margin guidance because that environment is tough. Lot of challenges are going on in the market. Lot of volatility is happening into this raw material side. Lot of volatility's happening into the currency side. So we don't want to jump in and to say that we will be increasing our margin by some percentage. But growing volume is more important for us. And with this higher volume growth, if we are able to maintain this kind of margin that itself is a very big achievement under the circumstances in which we are working in this Indian market. So keep finger cross. There are a lot of headroom available for the growth. Headrooms are available for the expansion of the margin. With time, we will unlock each and everything. And the trajectory is on a positive direction, I can say. But at this stage, quantifying it will be very, very difficult for us.

--------------------------------------------------------------------------------

Operator [66]

--------------------------------------------------------------------------------

(Operator Instructions) We have next question from the line of Tejal Shah from Reliance Nippon Life Insurance.

--------------------------------------------------------------------------------

Tejal Shah, Reliance Nippon Life Insurance Company Limited - Equity Analyst [67]

--------------------------------------------------------------------------------

I would just like to understand, there is a structural change in the distribution channel, which you've taken from the Tier 3 to Tier 2 distribution. While you explain, there is an inventory write-back that you've taken. Could you please explain us -- understanding that -- how is this accounted for?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [68]

--------------------------------------------------------------------------------

So let me correct you, inventory write-off, you're not say that we have taken. So there is no write-back because of this structural change, first of all. Secondly, inventory, whatever is lined with the Tier 1 level distributor, so we have to get it -- rid out of that inventory because we have to sell it to the market. Or if he's unable to sell it, then we are taking back from him, and we are selling it into the market. It's not a write-off.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [69]

--------------------------------------------------------------------------------

And no loss of anything happened.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [70]

--------------------------------------------------------------------------------

Yes. There is no loss of -- to the company. Basically...

--------------------------------------------------------------------------------

Tejal Shah, Reliance Nippon Life Insurance Company Limited - Equity Analyst [71]

--------------------------------------------------------------------------------

Sir, is it -- sir, by mistake in -- back in our books, is there some accounting that we need to do for that?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [72]

--------------------------------------------------------------------------------

So we have to consider that as a sales return.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [73]

--------------------------------------------------------------------------------

And then it is...

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [74]

--------------------------------------------------------------------------------

Okay. And again, we are billing to our new distributors.

--------------------------------------------------------------------------------

Tejal Shah, Reliance Nippon Life Insurance Company Limited - Equity Analyst [75]

--------------------------------------------------------------------------------

So where is the sales return inventory accounted for in our books?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [76]

--------------------------------------------------------------------------------

So like it will reduce our top line, and it will increase our inventory.

--------------------------------------------------------------------------------

Tejal Shah, Reliance Nippon Life Insurance Company Limited - Equity Analyst [77]

--------------------------------------------------------------------------------

Okay. And sir, second thing, there is an unallocated segment liability of INR 311 crores. Could you please help us understanding what this pertains to?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [78]

--------------------------------------------------------------------------------

I think that is mainly because of the borrowing of -- loans and all. And what I think, maybe -- mainly it is because of the borrowing, but I have to see the number. And I think -- if you can call me tomorrow, I can give you the exact number. I don't have any things with me.

--------------------------------------------------------------------------------

Tejal Shah, Reliance Nippon Life Insurance Company Limited - Equity Analyst [79]

--------------------------------------------------------------------------------

Sure, sir. And sir, one last question, if I could squeeze in, with regards to employee cost. Sir, there's an increase of 19% quarter-on-quarter. Could you please throw some color on that?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [80]

--------------------------------------------------------------------------------

19% what?

--------------------------------------------------------------------------------

Tejal Shah, Reliance Nippon Life Insurance Company Limited - Equity Analyst [81]

--------------------------------------------------------------------------------

Sir, there's an -- a 19% quarter-on-quarter increase in the employee cost.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [82]

--------------------------------------------------------------------------------

Yes, yes. So that is mainly 2 reasons: One is that we will increase the staff spend into the adhesive business, so that is the -- that. Secondly, the regular increment is there. And thirdly, this being a low quarter, so because of that percentage terms, it looks very high. But if you -- even now on a yearly basis, if you see the Q4, it's always big. First quarter contributes around 17%, 18% of the top line. And the last quarter contributed around 32% of the top line. So because of that, the seasonality you are seeing, that is a higher number in Q1. But on a yearly basis, I'm sure it will not be that high. And at the same time, there is a top line growth, also you can see 27% in this quarter.

--------------------------------------------------------------------------------

Operator [83]

--------------------------------------------------------------------------------

We have next question from the line of Chintan Shah from Investec.

--------------------------------------------------------------------------------

Chintan Shah, Investec Bank plc, Research Division - Research Analyst [84]

--------------------------------------------------------------------------------

Sir, in the prior question, you indicated that there has been some inventory, which has been bought back. Sir, can you quantify the amount over here?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [85]

--------------------------------------------------------------------------------

So this is taking place since last -- almost 2 quarters. So I have to check that, how much -- number. And this quarter will be small number in Q3 -- 2 also. So very difficult to say. But overall, normally, my gut feeling say, I may be wrong in exact number, I'm -- excuse me, but normally, on an average, these top distributors were held -- holding around INR 40 crores to INR 50 crores of inventory. So ultimately, INR 40 crores to INR 50 crores will come back in the system, and then we will be selling. So overall, it will be that kind of number for a full year basis.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [86]

--------------------------------------------------------------------------------

No, no, no. Basically, it is only [INR 10 crores to INR 12 crores].

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [87]

--------------------------------------------------------------------------------

That will return inventory. And then we will directly sell to them.

--------------------------------------------------------------------------------

Chintan Shah, Investec Bank plc, Research Division - Research Analyst [88]

--------------------------------------------------------------------------------

Okay. And Sandeep bhai, you indicated that the things was a normal from October onwards, given we are changing the distribution structure. So sir, how confident are we on increasing the...

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [89]

--------------------------------------------------------------------------------

We are 100% confident. Everything is almost done. And Astral, whatever it has given is a -- given a complete transparent guidance in there.

--------------------------------------------------------------------------------

Chintan Shah, Investec Bank plc, Research Division - Research Analyst [90]

--------------------------------------------------------------------------------

Correct. Sir, can you give the...

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [91]

--------------------------------------------------------------------------------

We are not trying to do anything without complete clarity and everything is done. I am 110% confident, and things are moving in a positive direction. I, too, actually show it in the form of number, and it will be reflected in the form of number.

--------------------------------------------------------------------------------

Chintan Shah, Investec Bank plc, Research Division - Research Analyst [92]

--------------------------------------------------------------------------------

Okay, sir. That helps, Sandeep bhai.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [93]

--------------------------------------------------------------------------------

And I myself, I'm scaring the whole adhesive business with the -- giving it 70%, 80%. I'm double confident about it.

--------------------------------------------------------------------------------

Chintan Shah, Investec Bank plc, Research Division - Research Analyst [94]

--------------------------------------------------------------------------------

Correct. Correct. Correct. Well, that's...

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [95]

--------------------------------------------------------------------------------

Need us (inaudible)...

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [96]

--------------------------------------------------------------------------------

You have to rely on us. What we are doing is on the long-term basis, and you will see the numbers and growth reach creation, every chemistry moving. At the same time, we are working on so many chemistry addition. We completed the whole range of construction chemicals. We have the approved R&D center now by the Government of India. So we have a very state-of-art R&D center. Some of the chemistries will be over and exporting to our U.K. plant, the work is on. So it is not that we are just going to do things because this and that went wrong or this went wrong, but we are doing things for the -- expanding the market and growth. And you will see in the numbers.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [97]

--------------------------------------------------------------------------------

I mean actually, these all are the long-term benefits. So we should not review all (inaudible) for 1 quarter or 2 quarters.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [98]

--------------------------------------------------------------------------------

We also had to pass through many such challenges in the piping business. And we have always passed through them, given the market total clarity and total confidence and delivered at every juncture where we made massive decisions, massive changes, changes completely from a source to another source in CPVC. And we have worked for it with confidence. And I'm telling you, we'll -- we have worked on it with confidence. And I cannot say for -- at this juncture, but I'm assuring you, you will see it in the form of numbers from -- at least from this quarter onwards, I am telling you. And Q3, Q4 would be even in great flying colors.

--------------------------------------------------------------------------------

Chintan Shah, Investec Bank plc, Research Division - Research Analyst [99]

--------------------------------------------------------------------------------

That's very helpful, Sandeep bhai. Sir, just a related question. How does that it impact the working capital moving from a 3-layer to a 2-layer? So I don't know, how much is the distribution at stockist level? Or at the...

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [100]

--------------------------------------------------------------------------------

It will not affect the working capital because even here also many of them are -- we have brought in are on cash and carry basis or the cycles are 15 to 30 days. Even we are talking with bankers for channel finance. We have got a very good offer from one bank to support us on channel finance. So we are 100% keeping our working capital intact and making all the changes as needed.

--------------------------------------------------------------------------------

Chintan Shah, Investec Bank plc, Research Division - Research Analyst [101]

--------------------------------------------------------------------------------

Okay.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [102]

--------------------------------------------------------------------------------

So we are working on all fronts. It is not restricted to only 3-Tier to 2-Tier thing. But parallelly, we are working on other like. And Astral also we took a lot of time to establish the brand and moving to the reduction into the receivable days, and then moving to the channel finance and all. This is all a continuous exercise, talking to the banker, getting them into the Board and convince to -- the distributor to come to the channel financing route, getting all the agreements on place with each and every distributor. This a very, very lengthy exercise. It cannot happen in 1 or 2 quarters. We always tell our investors that please keep patience because end of the day, we are not here for 1, 2, 3 or 4 quarter. We are here for the years. And you have to keep patience. And with this patience -- even Resinova when we took over, I'm sure that the investors were very disappointed for the first 1 year or 1.5 years because investor look from the stock price point of view. When the management point of view, if you see, we don't look at the stock price point of view. We always see that these are the structural changes which will help the organization for the long term. And we always say, "All the investors, keep your patience and put money for the 5-year point of view." I'm sure in this 5-year tenure, whatever the corrections are needed for anything, it will be converted into the profitable number. Like same thing happened in Rex also. When we acquired Rex, the EBITDA dropped from 14%, 15%, 16% are normal EBITDA of Rex. We came down to even 3% kind of EBITDA. And the last quarter, you see around 6%, 7% or 8% kind of EBITDA. Now you've come to the double-digit kind of EBITDA. So these -- all things takes time because -- and sometimes we go wrong in our predictions also. We consider that we will do the correction in 2, 3 quarters or maybe 4 quarters. It may take 6 quarters also. So very, very difficult when we do the practical things, it sometimes takes time also and we may go in our judgment also. End of the day, we are also a human being. And we are professionally taking the fall. So we always request to everyone, "Don't look, please, 1 quarter or 2 quarters. Keep patient. Once these things will -- corrected, it will convert into the number here."

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [103]

--------------------------------------------------------------------------------

Secondly, let me be very transparent that looking to the market scenario and the financial scenario. Giving credits and selling material is the last thing we have been doing from last 2 years, even in pipe and adhesive businesses. And we would not risk any growth at the cost of giving material on huge credits to this market or increasing the credit lines or predict these numbers. This is -- we are -- the first priority is to keep this in check. And keeping all these in check, we are doing all these things and moving ahead, right?

As Hiranand bhai told, we pass through challenges in Rex. We are, again, in growth in double digits. Similarly, in pipes, we pass through such challenges. And we have no challenge in adhesive. It has passed all these challenges and the growth and the margin. Still, we have never had our margin gone negative. That is one of the greatest things we have taken care of and then all the changes.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [104]

--------------------------------------------------------------------------------

Even piping, also if you see, there is a higher growth directory. We get sometimes worried on that side also. We always talk to our team that, "Is our money safe?" Because sometime, if you get a higher growth from any particular distributor or any particular geography, we become extra cautious because this is not a good time in the market, to be very honest, because market is stumped. Under that circumstances, maintaining the balance sheet quality is the biggest challenge to us. So we always double-check with our distributor, double-check with our team. Through our market information, we collect the information. That whether it is a genuine demand or somebody is taking a higher inventory and then something goes wrong, so we play very, very extra cautious. And that is the reason we -- last year, we reduced the credit days also. And you can see in the number of balance sheet also. So we have to be -- I agree with Sandeep bhai that at the cost of credit or at the cost of receivables or balance sheet quality, we don't want to do the business. We will be happy to do little lower business, but we want to keep that our balance sheet should remain healthy position. We are happy when a couple of -- or 3% lesser growth, but we don't want to sacrifice with the quality of the balance sheet.

--------------------------------------------------------------------------------

Operator [105]

--------------------------------------------------------------------------------

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Sir, over to you.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [106]

--------------------------------------------------------------------------------

So thank you, everyone. Okay, Nehal is coming. Nehal, are you there?

--------------------------------------------------------------------------------

Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [107]

--------------------------------------------------------------------------------

Hello?

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [108]

--------------------------------------------------------------------------------

Yes. Yes, Nehal.

--------------------------------------------------------------------------------

Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [109]

--------------------------------------------------------------------------------

Yes. I'm there.

Thank you so much, Sandeep bhai and Hiranand bhai for being a participant to the call. Thank you so much.

--------------------------------------------------------------------------------

Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [110]

--------------------------------------------------------------------------------

Thank you, Nehal, and thank you every participant for joining this con call. And if anything is left out, I'm available today. And tomorrow onward, we all are leaving for Europe. So please, if you have any left out question, you can call me on my mobile. I am always available to answer your question. Thank you very much.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [111]

--------------------------------------------------------------------------------

Thanks. Thank you, everyone.

--------------------------------------------------------------------------------

Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [112]

--------------------------------------------------------------------------------

Thank you so much. Bye.

--------------------------------------------------------------------------------

Hiranand A. Savlani, Astral Poly Technik Limited - CFO [113]

--------------------------------------------------------------------------------

Thank you so much.