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Edited Transcript of ASTRAL.NSE earnings conference call or presentation 12-Feb-20 10:30am GMT

Q3 2020 Astral Poly Technik Ltd Earnings Call

Feb 13, 2020 (Thomson StreetEvents) -- Edited Transcript of Astral Poly Technik Ltd earnings conference call or presentation Wednesday, February 12, 2020 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Hiranand A. Savlani

Astral Poly Technik Limited - CFO

* Sandeep Pravinbhai Engineer

Astral Poly Technik Limited - MD & Executive Director

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Conference Call Participants

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* Ankit Mukesh Gor

Systematix Shares & Stocks (India) Ltd., Research Division - VP of Midcaps

* Devansh Nigotia

Securities Investment Management Pvt Ltd - Research Analyst

* Girish Choudhary

Spark Capital Advisors (India) Private Limited, Research Division - VP

* Hitesh Taunk

ICICIdirect.com, Research Division - Analyst

* Madhav Marda

Fidelity Investments - Equity Research Associate

* 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

* Rishab Bothra

Sharekhan Limited, Research Division - Equity Research Analyst

* Ritesh Shah

Investec Bank plc, Research Division - Analyst

* Saumil Mehta

BNPP Asset Management India Private Ltd - Research Analyst of Equities

* Sonali Salgaonkar

Jefferies LLC, Research Division - Equity Analyst

* Kashyap Pujara

Axis Capital Limited, Research Division - Head of Research & Executive Director of Strategy

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Astral Poly Technik Limited Q3 FY '20 Earnings Conference Call, hosted by Axis Capital. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Kashyap Pujara from Axis Capital. Thank you, and over to you, sir.

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Kashyap Pujara, Axis Capital Limited, Research Division - Head of Research & Executive Director of Strategy [2]

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Good evening, everyone, and thank you so much for standing by. It's a great pleasure to have with us the senior management of Astral Poly Technik to discuss Q3 FY '20 results. From the management side, we have Mr. Sandeep Engineer, who is a Managing Director; and Mr. Hiranand Savlani, who is the CFO.

I now hand over the floor to Sandeep bhai. Over to you, sir.

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

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Thank you, Kashyap bhai, and thanks, everyone, for joining this Q3 results con call with you all. And I would like to take you through the business of Pipe and Adhesives one after the other.

In the pipe business, the numbers are already in front of you. Looking to the challenges of this quarter, which was -- one, was extended monsoon. And second was a very aggressive festive season in the month of November. Still, we have delivered a good set of numbers, big growth and also with good margins. We have overall grown in piping segment in our core business of CPVC and even the PVC business and the new products.

To take you through the expansion programs. We already have completed the expansion in our south plant at Hosur, new machines, which had to be brought and add the capacities and even make a few product lines, which were actually being supplied from Ahmedabad is complete and Hosur now makes complete product line of Astral Pipes. And the expansion of -- which was going on at the north plant at Ghiloth is also complete, and we are also undertaken an expansion program for double-wall corrugated pipes, which will also be complete before the month of March. But the corrugators for double-wall corrugated pipes in Hosur is completely operational. We are supplying the double-wall corrugated pipe up till 300 mm from Hosur for the south market. And in the north Ghiloth also, we have a bigger corrugated up till 600 mm, which we supply to the north and the central market.

Odisha land was allotted when we were on the last con call and then we are in today's con call, the work for Odisha plant has started. The construction work has started. And we should be up and running the Odisha plant in next 9 to 10, 12 months.

There was a expansion program going on at Sangli plant for adding of certain product line, for balancing certain product line, for debottling certain product lines and also streamlining the operations after our takeover. And most of these programs are over and the remaining work of these programs will be completed by the month of March end.

Ahmedabad at the mother plant, the Santej plant, also underwent certain expansion programs of automization. And today proudly we have automized many things like packaging, injection molding operations at the Santej plant. And also some balanced capacity addition has happened at both Santej and at the Dholka plant. And we have added injection molding capacity at both the plants in this quarter, and it is up and running to feed the requirement of this last quarter.

We had some balance fittings, which we had to make and we have completed this program also. These fittings are mainly for agri and certain other product lines. And today proudly, we have a complete product line. We have all the product lines with every fitting available from in-house. And we also added certain fittings for industrial use also in CPVC and PVC.

The expansion program at Dholka is on to make an indigenous plant, a stand-alone plant to make complete range of industrial and plumbing valves. And this project construction is on, machine ordering is on, and we are also in the process of procuring certain molds for this plant. And we already have streamlined a range of valves for which we have procured the molds and technology from Europe.

So as Astral continuous growth, continuous development, continuous upgradation and continuous addition of product line is on. We have been importing PEX under our own brand PEX Pro from Europe and have been feeding the Indian market. The PEX market has a positive response from the market. We have been doing a consistent business. We are getting good growth. We are getting good projects also. And we would be making PEX in-house in a year from now. And the process for this for the technology sourcing and for the machine sourcing is already on and will be completed before the month of March.

And Astral would be the company making the best of the PEX available in the world that is PEX-a. PEX comes in 3, PEX-a, PEX-b and PEX-c with different properties and grades. But PEX-a is the highest cross-linking and the best properties of bendability and temperature to register a high temperature. So we would be going with PEX-a. PEX-b and c are cheaper technologies, but don't have the bendability and the lifespan also of these product is very low. For PEX, we are going with one of the best technologies.

Silencio has got a very good response from the market. It is consistently growing. We have been getting good export orders for Silencio and Silencio capacity addition is on. So we are going to double the Silencio capacity a year from now. And we have almost finalized the sourcing of the machines and also have made their unnecessary ordering of the same. So there, we have a good response. The capacity would be doubled in a year from now because the machine takes a year to get it really work.

Overall, the clamps, hangers and a lot of other product insulations, which we source and sell, who complete our buffet are also getting good response. So as Astral right from the electrical pipes to the plumbing pipes, to the infrastructure piping, to the fire pipes, or fire sprinklers, all the product line has got a positive response of growth from the market, and it is continuously developing.

We are also running certain programs, which have got good response in the plumbers programs, the dealer attachment programs, and we are also working on a lot of other systems, which would be helping the network to move fast for distributor connect, the customer connect, to service the -- how to attend to the customers, all these programs are on and these are also giving positive response.

The branding activity, as usual, Astral believes in -- it's best to do its branding activity, but I would proudly say that from the month of April, which is in public domain that we have the new brand ambassador joining us and he is Ranveer Singh, who will the -- our new brand ambassador for the next 3 years from now.

And we are also proudly going to be the part of the Mumbai Indians teams this time and Kolkata Knight Riders. So that is also going to be there from the first quarter that is major planning activities. And with the brand ambassador changing, we would be taking a major brand initiative activity in 360 degrees.

DWC pipe had its own response but due to the lower spending, we have not grown in that pipe. But from this quarter, we are seeing a good number of orders and growth. And next year, we will be seeing very, very positive growth in this product. But the other good thing is we have opened this DWC pipe in our retail -- in our distribution channel for the nongovernment business, where we have got a very good response from the market. And that market segment in the next 2 to 3 years will be also developing and will be equal to the market segment of our supplies for infrastructure to the government projects.

So other things on the piping side, I would be answering your views during my question-answer. But overall, the piping business has been a very, very positive business and growth and overall, has been helping us.

Everybody would have been -- would now like to know about the CPVC situation for Astral to supply due to antidumping and lot of things going around in the market.

Astral in CPVC is very, very secure. We have never gone with the countries where the antidumping has been there. We have gone with multiple sources. We have gone with good suppliers. Our suppliers have been positively supporting us with the supplies being taking a rationalized way of pricing and Astral has been always been positive in getting the supplies, the stocks, the inventories and would maintain a continued growth on CPVC and will have a continued supply on CPVC though anything or any situation arises due to the government legality of antidumping or anything is imposed. And Astral sits on a very, very strong position on CPVC on its supplies and pricing and to feed the market. And Astral also makes best of its product in CPVC, which is now NSF, which is all our plants have CPVC, which are NSF-approved. And all our products are NSF approved. Our pipes are NSF approved, and our fitting is also very NSF approved. So Astral has a lot of positives about CPVC. And if you have any questions again, I would answer it during my question-answer on CPVC.

Adhesives, I know, everyone has a great concern and questions about the Adhesives. But I would like to clarify that we have kept behind whatever was to be changed, every change has been done. In the last quarter, we did have a positive impact on growth. But as we made the structural change in the first 2 quarters and due to the structural change, we had to -- we had some goods, which we took back from our change in the distribution pattern, the distributors who were discontinued and all these did effect negative on the growth.

So overall, growth we came to -- we could not grow. We just had a flat growth, but actually, the structural changes put behind it is done. We have a new channel, which actually was the secondary channel. These are already connected with them. We are adding more to this channel and this channel is fully active. We are getting consistent orders. We are getting consistent growth. Even in this quarter, we have done very good in the first month, and we should continue to do the same. But I would assure you that our margins are good. It would be always -- it will be even better off in next year, quarter-on-quarter, and we'll be back to our EBITDA levels of 18%, 19%; 17%, 18% in the Adhesives and even more, and the growth will be back. And we would be pushing the products through the market in the right way in the right directions and to the right customers.

The Adhesives business also has verticals. We have made changes in the drivers of the business. We have brought in good talents from the market. We have very good senior people, who are driving the company in the right direction. We have a very good senior people in the R&D at the plant level. So many, many corrections have been done in last -- over 1 year. And all these are giving us positive results because we have added many products which were not there in our stable, in the white glue section, in the epoxy silicon, in the silicon, in the cyanoacrylates, in the hybrids. In the construction chemicals, we are filling the gap.

So we have been taking a lot of positive steps in seeing the business growth and we will reach to a next level, and we are committed to this business.

The change which we did in -- structural change, which we did, was a change where we were undergoing a process of understanding a business because this business was acquired, and we did not create it, but all these changes and all these ups and downs have brought us more closer to the business and have given us in-depth knowledge of the business, which is now helping us to guide it and drive it in the right direction. And we assure you of a good year next year, and we assure you that we will be riding high in all the ways in this business like the pipe business in coming quarters to come.

Kenya plant is on growth. It is in 20% plus growth. The cash losses are not anymore. And we have been doing good. We have added some product lines there with Astral mix here. And overall, there is a positive result from the Kenya plant, and we have some assets which were unutilized, the land, huge land we bought to expand the plant, which would be not utilized at least for next coming 3 to 5 years. And we have -- we are disposing those assets, and this will help the Kenya plant to reduce the interest burden to a huge extent. And so next year, the Kenya plant will see positive not only good growth in EBITDA, but also in the bottom line, in the net profit.

So overall, Astral is committed to its both the businesses and all the plants. The U.K. plant is stable, growing at consistent 10%, doing good, the margins are stable, the EBITDA is stable and U.K. will still continue to grow. And the Brexit effect is going to be positive on the U.K. plant for growth and improvement of margins.

So Astral is committed to its overseas plants, businesses, pipes and Adhesives, the Indian businesses of Adhesives and also the pipe. And one more thing to add, the last thing before we move to Hiranand bhai and then question-answer is, we just got a clearance from the environmental site clearance for our Dahej land for the Astral adhesive business, Resinova and we would be starting to put a state-of-art Adhesives plant at Dahej in next year.

And we would be making most of the chemical products, which for the long-term growth prospects as the land is big and it's the chemical zone at Dahej. And in next 2 years, we'll be completing this project at capacities and make a state-of-art Adhesive plant and R&D center at Dahej. So thank you very much for joining this call.

I'll hand over the con call to our CFO, Mr. Hiranand bhai Savlani, and then we will move to the question-answers.

Thank you very much, everyone.

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [4]

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Good evening, everybody. I think numbers are all with you. So I will quickly take this to the number, and then we will move to the question-answer session. So the top line growth of this quarter was roughly about 6%, and the EBITDA growth of this quarter was 22.6%. On a 9-month basis, the top line growth is 12.5%, and the EBITDA growth is 23.26%. So as communicated earlier also that our focus is that the top line -- compared to top line growth, the EBITDA growth should be higher. So thus that same we are maintaining this quarter also that our EBITDA growth is much, much higher than our top line growth.

PAT growth is higher because of this tax effect also in the current year. So that's why you can see that the PAT growth is 30% in this quarter. On a full 9 months basis, it is close to about 47%.

As far as this volume is concerned, the volume growth in this quarter -- overall volume growth was close to about 15%, including Rex numbers. And if we remove this Rex effect, then the volume growth to this pipe business was close to about 6.5% kind of level.

Now coming to the -- most of the point I think Sandeep bhai has covered. I just wanted to highlight what are the going forward scenario for Astral in terms of piping business, Rex business, and the energy business.

In this quarter also, as well, we have kept the working capital cycle very tight. We have reduced our receivable days in this quarter also. On a consolidated basis, with Rex and the piping business, our number of days receivable has come down from 31 days to 26 days. So we have reduced that day.

So in this tough environment, also, we would never ever diluted our working capital cycle. We are very, very closely monitoring the working capital cycle. And we are targeting that. From here on also, we will try to slightly improve, but now the scope is very limited. So we -- our ultimate target is 20 days. So we may be close to about 20 days in the next year.

Now coming to the growth side, the piping business is continuously giving growth. You can see in this year also close to about 17% growth is there into the piping sector in 9-month basis. But the only letting part was the Adhesives business of Resinova and the Rex part because Rex was not able to grow because this project activity is very slow. And secondly, we were doing a lot of systemic correction into the company because of the acquisition, we wanted to streamline the system into that company. Also, we implemented SAP and everything to that company. We wanted to streamline the receivable cycles also. We have brought down the receivable cycle to below 60 days in the Rex also, which is a very, very big achievement for our company. So the Rex was working on a very, very high receivable days. So that we have controlled very well. And going forward also, we will see that how best way we can improve this cycle also when again, the business will start growing from here on because now we are seeing a good attraction into that business also. And January was very good, I can say, for the Rex also.

Now coming to the Resinova side, Resinova on a quarterly basis, it was a 2% kind of growth. And on a full year basis still, it is a minus 5%. So Resinova has not contributed this year to the top line, but the silver line is that what Mr. Sandeep Engineer indicated that the legacy issues are done now. So whatever the sales return we wanted to take from the system that is being done. And from last 2 months, from December and January, we are seeing a double-digit growth into the Resinova also. But still, I am again cautioning that still, we are in a correction mode in the sense that the return part is over, but new distribution onboarding is taking this. Because once you remove the stockists, all the distributor will be dealing with you directly. So right now the KYC process is on and we are fixing up the limit for each and every distributor so that work is going on which may take some more time to come back to consistently a double-digit growth. So there may be up and down, but at least we are positive that this quarter also we will be ending at a very, very positive note into the Resinova side also.

Another good part is that on a gross profit margin level, Resinova has increased the gross profit margin to the tune of 400 bps. So like we were working on a 37%, 37.5% gross margin in Resinova. So right now, we are working close to about 41% gross margin. But that gross margin improvement was not converted into EBITDA, mainly because of the structural correction, and there was no growth so our fixed overhead were continuously increasing. Because of the launch of a lot of new products, we have added the new senior people in the team. We have added the junior level people also in the marketing side. So our salary cost has shoot up. Because of all these things, it is not converted into EBITDA. But we are quite confident that in the coming quarter, you will see that this 400 bps improvement into the GP margin will definitely going to convert into the EBITDA also.

As far as the anti-dumping duty on CPVC, Sandeep bhai has already explained in detail, which is going to consolidate the market, a lot of small player, which were disturbing the market, particularly by importing the Chinese goods and all that maybe the history in this coming quarter. So we are of the view that the CPVC growth will be also a good growth for companies who are brand. So we will be getting benefit out of that in the coming quarter also.

Odisha plant is almost working on a full fledge and hopefully, we are targeting that we should be done by December. So some benefit we will see for the Odisha plant in Q4, like you see the Ghiloth plant coming to the north, we have saved a lot of logistic cost and other overhead. So that is also helping us to improve our margin. And this Odisha plant will also help us to improve in our margins in the going forward once it will be operational at a certain level of capacity utilization.

Rooftop solar system, which we communicated earlier. Now, I think, almost on the verge of completion. And you will see the benefit of that from the next year because we are targeting to complete this by 15th of March, safely, we can say by year-end. So you will see the benefit of that power saving from the next year Q1 onward.

Further, the capacity utilization right now, we are working on a 60% capacity utilization. So a lot of space is available for the utilization once this Odisha will be done. I think we will be focusing to improving the capacity utilization. We are targeting to take it to 75% to 80% utilization. That will help the company to improve all its ratios, including ROCs and all this thing. So that is going to help the company in a big way in the next year onward. And the incremental CapEx will be substantially low from the next year onward.

As of today, the consolidated basis, the net debt position of the company is only INR 140 crore, which we are observing that next year, we will be in a position to almost pay out that thing unless and until there is something like acquisition kind of opportunity or something can come then they are different scenario. Otherwise, we are of the view that by next year, and we'll be close to about debt-free company.

Now with this, I'm opening up the question-answer session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from the line of Ritesh Shah from Investec Capital.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [2]

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First question is for Sandeep bhai. This is on Adhesives. Sir, it has been like 3 quarters we haven't seen much of growth. You did indicate in the last quarter as well that we are getting new management in place. We have done away with the stockists. I do understand the return sales phenomena is behind. But what worries me is when we say that it will take time for us to reach in double-digit growth rates. So I wanted to have a view over here? And secondly, we have had a lot of new people at the senior level. How does the management structure look like? So earlier, we had the same distributors who are looking at multiple chemistries. So now do we have new management, which is responsible for each chemistry and region? How is it plays from a management perspective?

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

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See, Ritesh bhai, the first question is we have -- the growth being double-digit will be seen from next year first Q1. We don't want to push and do sales, we are equally with the addition. We are equally trying. We are not trying, we are doing -- we are maintaining our cash cycles. We are adding distribution. Addition is going on. It's almost complete, I can say, but distribution addition is never completed in any business. Even in pipes, we had distributors and we have been adding everywhere.

And we have a target also in pipes that we should add so many new distributors and cover the regions every year, more and more regions. So here, the channel settlement or the change is almost -- it's done. It is on also, and it is showing good results. We have been getting very positive results because we are now monitoring the secondary sales by ourselves. And we are trying -- we are always selling the product to the distribution channel, it's a channel, which is facilitating the sales to the secondary dealers and users, and we are only selling products to them not to overburden them with stocks, which goes to the actual user in the market. So that is setting up well and is doing well. I'm assuring you that double-digit growth will be back soon and with the good numbers.

We have hired a senior at higher levels, and we have separated every chemistry, both in the verticals of sale and also in the distribution channel. Formally, the same distribution channel was doing good also, construction chemicals also, maintenance also. Now the maintenance distributors are doing maintenance, the construction chemicals, we have new distributors, and for the wood we have complete new channel. And this is working very well. This is setting up and all the heads who work for each channel are separate. And this is actually the org chart for us, has been very, very nicely devised now, the way things work for marketing, the way things work on sales and the way things work on credit control, supplies, logistics, depots everything.

So the channel lever systems, the management, the people at the top, the people at the right bottom of the pyramid are all set and are all knowing what they would have to do? What they should do? And how they should do? And how they should reach to the market? And how they should sell. And it is giving a very, very positive result in growth and margins. And I would give you -- I assure you that we would be back on a very good growth, and we would, mean, like in -- on a racing track where we have gone behind but we'll cover up our car, we'll cover up the distance and will be way ahead in the next year on this front.

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [4]

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Further, Ritesh, what Sandeep bhai has said, I can add you that any business when they do the structural correction, it cannot be defined that it will be done in 6 months or 9 months. So it happened that one quarter plus/minus can also happen. I remember when we acquired the Resinova, the entire street and entire investor were very disappointed with the acquisition. The moment we delivered the 1 quarter, the entire mindset of the community changed. So it happens that sometimes when you are doing a structural correction, it takes some time also. And structural correction are always painful. It's not a easy thing. And that is the reason we always caution the investor community well in advance that we are going to do all this correction, which will take some time because of that, some number will be affected. So we are always transparent to communicate the industry well in advance. And it's not that we are not working, we are working very hard on that side but it's a question of time.

In my initial remark, I already communicated with this structural correction, 400 bps of GP improvement, which is not a small thing in the industry. And you see the -- compare the number of the PRs or leaders in the industry of adhesive, everybody is struggling for the growth in this environment. Under that also if we have maintained our EBITDA, we have maintained our top line itself at a internal level, we feel that we have done a good job. So it will take some more time. But yes, we are quite confident. Your concern is also a valid concern that, yes, adhesive should grow faster rate. But yes, it's a question of time only. Now we are almost at the last leg. Hopefully, in the coming quarter, you will see a positive response.

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

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I would only like to add someone -- up here that my 70% to 80% time goes in this business. And the pipe business is now more -- handle mainly by Kairav, my elder son, and only strategic decisions I enter. I'm in and out in Adhesives, and I'm enjoying it with my younger son Saumya, who is also handling the thing. And I assure you that what I've seen and I've got into the deeper because after acquisition due to the changes in Astral in the CPVC product lines, I was very busy 2 years in getting -- stabilize the new CPVC product line and CPVC Pro. But everything is going great there. I'm maintaining it. I'm -- in pipe business for the key decisions, but I'm in and out in Adhesive. You ask any nook and corner what is going now, I'm aware of it. And when I'm aware of it, I would tell you that I know how to deliver the results, and I will be delivering it very soon to the market, and I'm sure about it. Thank you very much.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [6]

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Sir, my second question is, you indicated in the initial remarks that we'll make chemical products at Dahej land. Sir, can you details this?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [7]

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We're not making chemical products, we'll be making adhesive products. Because we have an agreement that in Kanpur we have 2 plants, Unnao and Rania. And we have a agreement when we acquired Resinova, the Unnao plant at the seventh year, we have to hand over the plant facility, the land and the building towards the owner Vijay bhai. That falls in November 2021. So we will be -- Kanpur will then run only one plant, Rania and the Unnao facility product line will be shifted to Dahej. Okay, it's clear?

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [8]

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Right. Sir, what is the kind of CapEx that we will have over here?

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

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We have not finalized it. As soon as we finalize -- in this quarter work is on, we'll let you know in the next con call after this Q4 ending.

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Operator [10]

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(Operator Instructions) The next question is from the line of Madhav Marda from Fidelity Investments.

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Madhav Marda, Fidelity Investments - Equity Research Associate [11]

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I just wanted to understand the reason for our gross margin expansion? Because if I look at the peers, including the larger peer in the industry, he's also seen a positive gross margin expansion. So is it raw material prices declining? Or is it better pricing when we cut the discounts that we were earlier offering on some of our products, what's driven the expansion?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [12]

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So both are contributing to that. Some -- the raw material side also we are getting and at the same time, we are improving our realizations also. At the same time, we have done a lot of structural corrections, logistic things and all these things that is also contributing. I don't know whether you were there in analyst meet or not. Last analyst meet, we were just focusing on to that side only, how we are transforming the company to the systemic approach kind of things rather than a human dependent approach. So that is also paying us a lot. So I think with this another Odisha plant and all will be added, that will be the -- further added to that side. And in piping industry, logistic play a very, very important role. So that is helping us in a big way.

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Madhav Marda, Fidelity Investments - Equity Research Associate [13]

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Got it. Got it. And sir, on the Adhesive side, just one other question that -- if I look at the distribution side for Adhesive, it's a very diverse distribution channel across plumber, construction, chemicals is very, very diverse. And there are players, including large ones who spent years setting up the distribution network. So how challenging are you actually finding it penetrating into this market? Because there are people who have done a lot of market development activity, especially in the construction, chemical side for the last 10, 15 years.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [14]

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Basically, we are already a brand, Astral. We are already penetrated not from today, we have 20 years in plumbing. So we know plumbers. In construction, chemicals, we are -- our -- if you see our product buffet even in Adhesives were -- it is used in that 4 walls of the house. And in 4 walls of the house, the brand Astral is known. So penetrating with the backup of such a strong brand, you can always see the change other -- the smaller guys or the other guys and Astral people take -- people want to join us. People want to be our distributor. Now people want to sell our products. And we are also equally keeping good quality. We are equally in the branding activities. We are doing good servicing. Our logistics are good. A lot of things couple for a brand to grow. And we are doing everything for that -- for the brand to grow. We don't say that only a branding activity helps. We are doing everything which helps the product to grow. So for us to find distributor also, for us to get into the market, for us to develop the market, I feel is much, much better and much easier. And I don't say other brands cannot do it or are not doing it, but we are doing it in the right way, and we are getting the results out.

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Operator [15]

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The next question is from the line of Saumil Mehta from BNP Mutual Fund.

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [16]

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Sir, first question is, while we've seen because of the raw material benefits, the all-time high margins, both on gross as well as EBITDA margin. From now to maybe over the next 2 years, is this the peak of the margin, and we would like to distribute more of the incremental margins to gain more market share? How should we look at the approach between market share and profitability over here?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [17]

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So I think even last quarter also, we were thinking that this will be the peak margin. In fact, in our commentary also, we said these are the high-margins. But the market is giving opportunity, so we keep improving our margins. And again, logistics thing and all that is also adding to the margin side. So it is very, very difficult to define that these are the peak margin. We are open on both side. If the opportunity will be there, we can improve the margin also. And if the market scenario demands where we feel that now the compromise is happening to the volumes and all the side and we have to drop the margin for 1% or 2%, we are ready for that also. So it is not that this is a peak or this is the bottom. We will act as per the market requirement, and we are not choosy only for the margin improvement. But at the same time, we don't want to lose our market share also. So for maintaining our market share or improving our market share, if we have to sacrifice some margin, we are always ready to sacrifice that.

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [18]

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So basically, what I was looking at, especially on the PVC side, you've seen a lot of competition coming over the last 2 years while -- between us and Supreme and some of the larger players, margins are really very healthy, but volumes aren't coming through for an industry as a whole. So is it because of, in general, softness in demand? Or are you seeing some of the smaller players looking at this profit margin have come to the industry and actually taking some market share at the bottom of the pyramid?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [19]

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It is both. We are taking some market share from the unorganized player also, at the same time, a lot of stress there onto the organized side also. You see a lot of organized players are facing problem because of the quality of the balance sheet. Because they are not getting funding from the bank, especially banks are not ready to fund a smaller player. So it's a combination of both. We are taking some share from the unorganized side also and at the same time, organized players also. And also, continuously, we are increasing our product basket. Secondly, we are continuously decentralizing our businesses. We started our journey with west, then we entered into south. Then last year, we are -- we entered with the plant in north, now we are entering into east. So that is also helping. So it is not a one thing which is driving to the growth. It's a combination of all. And you see that even if economy is not that -- growing that pace and market is also, particularly the construction side is slow, but still, we are growing. In 9 months, you see, our numbers are still healthy number.

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [20]

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Sure, sure, sure. Sir, my last question on distribution of adhesives. In terms of retail touch points, where we would be? And over the next 2 to 3 years, what is the kind of growth we can envisage?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [21]

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Can I give this picture clearly in my next con call after Q4 and in the analyst meeting because I would be better off there? I don't want to give any hazy pictures at present. But we are -- your question is right, and we are exactly working on this, and we will be giving you a very detailed presentation on this in the next Q4 results.

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [22]

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Perfect, perfect, perfect.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [23]

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And it will be a very clear picture for you. But we are doing all these things very positively.

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Operator [24]

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Our next question is from the line of Praveen Sahay from Edelweiss.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [25]

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It possible to give Rex sales number, sir?

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

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I think now it is merged. So we are not sharing the number of individual products.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [27]

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Okay. And as you had said that 6.5% in the stand-alone volume growth. So we had seen a good double-digit growth in the Rex volume?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [28]

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No, Rex would degrowth in 9-month basis.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [29]

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I have told in the opening remarks, Rex sales actually degrowth. So that tonnage, our PVC, CPVC tonnage growth has been little taken over by the Rex degrowth. One is, there is a slowdown in the infrastructure project usage. And second is Rex, we had to go through a correction of the creditors aggregator cycle, where we took some hits on orders, but we need to correct that in cycle. We ended up to degrowth in Rex, and we will be back on growth from this quarter and coming quarters.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [30]

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Okay. And also, you have given a detailed explanation regarding plant wise. So can you give like currently, we are at 221,000 metric tonne. So after completion of all the 3 major things, like Odisha and Sangli and Ahmedabad, how much the expansion -- the capacity expansion you are expecting?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [31]

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I think it will be 250,000 metric tonne.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [32]

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Okay. And south plant at what level of utilization currently?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [33]

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Which plant?

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [34]

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South plant, sir.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [35]

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South, in the original capacity level, if you see, it is close to about 82% utilized. 70 -- sorry, 80% to 82% kind of utilization. But now with the new addition of capacity, which we have done in the last quarter, it will be lower.

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Operator [36]

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Our next question is from the line of Devansh Nigotia from SIMPL.

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Devansh Nigotia, Securities Investment Management Pvt Ltd - Research Analyst [37]

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Sir, my question was predominantly related to CPVC  pipe and the competition, which is coming up. I think we -- when we look at the agri players, who are also showing strong scale-up of CPVC pipes.

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [38]

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Devansh...

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Devansh Nigotia, Securities Investment Management Pvt Ltd - Research Analyst [39]

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Hello?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [40]

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Yes, yes, carry on.

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Devansh Nigotia, Securities Investment Management Pvt Ltd - Research Analyst [41]

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Yes. Yes. Sorry, sir. Sir, I mean, even they are showing strong scale up in terms of their pipe segment and volumes are flat. And even some of other building material player, they have been able to scale up, though a very small base, but a sizable business. So sir, then if you can just elaborate on the competitive strength, which will prevent them from hurting our margin, maybe not today but over next 2, 3 years? And then you can -- if you can just throw some light on that.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [42]

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I don't understand what the question is that? Our margins are not affected at all. Our margins are lifetime high.

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Devansh Nigotia, Securities Investment Management Pvt Ltd - Research Analyst [43]

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No, no. Sir, not -- sir, my question is not in context in today. But I mean, today, we are in the phase that CPVC pipe, the opportunity is also growing, and it's a growing market. So maybe not today, but maybe like after 3, 4 years when growth moderates, do we see a margin risk over there? So the question is not related to what -- of course, our margins are at lifetime high right now.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [44]

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See 3, 4 years scenarios can be predicted, but we need time and prediction of a 3- to 4-year scenario. See, one thing is that India is 1.3 billion people, and housing is going to be there always. Going -- if you go back in the history, many slowdown scale. And every slow down our -- in our con call, there was a question, what will you do? How will you grow? What will you do? How will you grow? I remember, 7 years, 8 years back also 9 years back, the same things have been happening. And still, we have delivered the results because the country itself is going to grow. And you see, we are not iPhones or we are not very big technology. People that -- every time the tech -- the pipe is going to be round, the elbow is going to be elbow, whether it was in the Mohenjo-daro time or in the future. And the water is going to flow through that. Technologies are -- if you see the technologies today, the researches -- or CVPC, the vinyl chloride is polyethylenes and the -- these are the 2 polymers which the world has developed. There's nothing other going to be developed. If there are bio things coming or anything coming, it will be happening only in the next maybe many, many years to come, bioplastics. So I don't see any issue of 3, 4 years about anything. And especially with the strength of the brand we're growing day by day, I think we'll be on the solid footing. If we do the right things, one, if we keep our financials right, two, which we also know. And if we do the right expansion. And even if we keep on adding technology, that's why we are seeing visions of 3, 4 years in bringing in Pex. We're always the first one. We brought Silencio 8 years back. Nobody -- people were laughing at that time. Why this silent, hot cases, but today you can see Silencio this year will be a very good market and very good numbers we'll deliver after March. This is growing at 30%, 40%.

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [45]

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I mean, when you see that the post anti-dumping, on the contrary, CPVC, whatever the number of players are there in the market today, it is going to go down, not going to increase in the CPVC side. We are on the contrary, positive of that side.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [46]

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As Astral, I'm very happy with this correction, because now I will be piping with the right people because I was paying the right price, I was making the right product. I was taking the right price. Now the others -- other brands, I don't want to name the brands, who are selling 15%, 18%, 19% lower than me, which are bigger brands and names and you know all these brands. They get material costlier than Astral. So they will have to come to my level. Or they will have to come to near to my level to maintain their margins, maintain their profits, maintain their growths. And if they don't -- if they come to my level, I'm sure that I would have a preference above them, because I deliver the best products, I'm making the best products. And I'm a better brand in any context. So I'm happy that the rationality of pricing is going to help Astral for its future and for its growth and for its stability and for its margin in years to come. It's a very good initiative to get all the pricing at 1 level of the raw material which is going to happen. Actually, we being with others will have a little edge of benefit than the others who have not been -- been working only on China or Korea. So that's a move for us, Astral. If you do the right analysis of numbers, we have -- and as a businessman, I'm very happy about it.

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Devansh Nigotia, Securities Investment Management Pvt Ltd - Research Analyst [47]

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Okay. And sir, just a follow-up on that. Sir, the backward integration in terms of the compounding that we started producing ourselves. How much delta on margins did that give to us?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [48]

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We don't share individual number how much delta is generated by compounding and how much is the final products. But you can see from the number, it is definitely helping.

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

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Generally, if you -- it is obvious. If you go backward and backward, you always get benefited. And secondly, you are in control of your product. Thirdly, you are making the right product, you are in control of your raw material supplies, you can even source the right raw material and save on that, so -- which is always going to be beneficial in many ways for us.

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Operator [50]

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The next question is from the line of Maulik Patel from Equirus Securities.

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Maulik Patel, Equirus Securities Private Limited, Research Division - Research Analyst [51]

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Sandeep bhai, just -- if you can update on this anti-dumping duty on -- I mean, 6 months have passed. What's the status now?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [52]

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It is almost finalized. The order has been -- the orders will be through any time and they have maintained the same duty, which was provisional.

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Maulik Patel, Equirus Securities Private Limited, Research Division - Research Analyst [53]

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Okay. Sir, now this time of the year...

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

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But currently budget is...

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [55]

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Once the government -- this commerce department gets this thing, it goes through the finance and it becomes an order in the state. So it's a process, which is -- it should be through. But in this process also, people have to pay the same duty, which is there.

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [56]

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Even people are paying the provisional duty with the expectation that some reversals will take place, but that is not going to be reversal. So whatever the provisional duty paid, it will be treated as a final duty.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [57]

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Because the order was very clear. If the final duty would be lower than the provisional, then only it would be refunded. But the final and the provisional are the same actually.

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

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Okay. And this will be applicable for 3 years?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [59]

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Normally, it takes 3 years, but it depends on the government to take the final call.

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

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Okay. Okay. I got it. Second question is on the CapEx side. What kind of CapEx we have done so far? What we envisage in this -- the remaining quarter? And what's the CapEx for the next year?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [61]

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So like in 9 months, we are close to about INR 140 crores or so. And next year, we are projecting somewhere around between INR 75 crores kind of level to maybe INR 100 crore. Because now we are working on this -- some backward integration into this adhesive also with this Dahej facility. So we are working actually for this adhesive side. But roughly, it will be somewhere around INR 75 crore, maybe on a upper side INR 100 crore.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [62]

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But adhesive in Dahej also, we have 1.5 years. We are almost more than 1.5 years. So we'll be moving one by one chemistry, and adhesives does not take a huge CapEx. We'll be doing it in the right way. We would not be going and making a INR 200 crores, INR 300 crores world class, like a bombshell facility. We are very cautious about our moving ahead investment, and we would see that it is done in the right way, matching up with the margins of the adhesives business and the growth book. We will not be doing any activity blindfoldedly.

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Maulik Patel, Equirus Securities Private Limited, Research Division - Research Analyst [63]

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And this year this CapEx would be what INR 160 crore, INR 170 crore? Because INR 140 crore you did for the 9 months, right?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [64]

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It's only much in the last phase, 1.5 month. Maybe balance maybe around INR 10 crore -- INR 5 crore, INR 10 crore?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [65]

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May be INR 15 crore, INR 20 crore max.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [66]

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Yes. Maximum.

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Operator [67]

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Our next question is from the line of Sonali Salgaonkar from Jefferies India.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [68]

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My first question is, could you give us an update on the demand situation on the ground that you have seen over January and up till mid of February?

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

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So like if you consider the pipe segment, last 3 months consistently, demand is very good, I can say. October was the worst we have never ever seen in our history. It was close to about minus 22%. But from November, December and January -- January was the extraordinary. I know, in fact, communicated in my TV interview today also, that we have delivered -- we have done 24% in volume in pipe, which is extraordinary number. But don't consider that as a benchmark for the quarter. Because it's a bumpy ride right now in the system. So that cannot be considered a full quarter, we are going to deliver 20%, 25% kind of volume. But with this encouraging number, it looks that a double-digit number in the last quarter should not be at all a problem.

Coming to the adhesive side of the business, I think till November, this structural correction was happening. So because of that, growth was not there. But from December, it was a double-digit growth. January, again, it's a double-digit growth. But again, I'm repeating that in adhesive also, new distributor onboarding is taking place, so it will take some more time to complete this onboarding exercise. So there may be a little slower growth in Q4 for adhesive, but Q1 onward the adhesive should also deliver a good number. And it depends. If February and March will be good, even adhesive also we can deliver a double-digit growth. It's -- keep fingers crossed. So I'm not giving any positive or negative side. But at least I can say, this quarter's beginning is robust. I can say like that.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [70]

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Sure, sir. And which sectors are contributing to your 24% growth in pipes in January?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [71]

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It's across. Across. Plumbing, even conduit, even column, even agriculture, CPVC the highest. So all are contributing actually. Without that, 24% kind of volume is not possible.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [72]

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Sure. Sir, and my last question is, you mentioned that you have a new brand ambassador on board. So how should we look at ad spend to net sales going forward?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [73]

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It will actually be in the same line. We won't be doing any -- blasting any ad spend. We have always been in line with our ad spend.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [74]

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Sure. And sir, last question, if I may squeeze in. Sir, an update on the government projects and the industry opportunity, particularly...

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [75]

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Government projects are only for our infrastructure business, and we are very -- we don't do direct projects. We only go through the government contract agencies, like big contractors and the smallest. And I think we are getting good positive response from January, and we have been -- we will be doing good for that also in this quarter and coming year also.

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [76]

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But now we are getting a sense that even Andhra and all are getting open again. So hopefully, that will happen. So we have a lot of pending orders over there also. So then it will quickly pick up the Rex volumes also. So keep finger crossed that things will be better right now. If the government start dispersing the money and all the things with the contractor. So hopefully, from April onwards, the New Year will begin. So a lot of new avenues will open for the government also to raise the money and all these things. So then it should start picking up.

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Operator [77]

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We'll take our next question from the line of Girish Choudhary from Spark Capital.

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Girish Choudhary, Spark Capital Advisors (India) Private Limited, Research Division - VP [78]

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My question is on adhesives business. So in your initial remarks, you had mentioned about a 400 basis point increase in gross margins. So just wanted to know what is driving this? Is it structural? Or is it to do with lower commodity prices? So I just want to take a view on the sustainability of the same.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [79]

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So it's contributing both, the chemical prices are also low and at the same time, whatever this correction we have done because we have the -- now the stockist margin is going away from the system, some portion we've passed on to the market and some we've retained with us. So because of that, you are seeing that there is a 400 bps improvement into the gross margin.

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Girish Choudhary, Spark Capital Advisors (India) Private Limited, Research Division - VP [80]

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Okay. So of the commodity prices sustaining, any view on that for us to take a call on...

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [81]

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Yes. For us, it will be there because we are not much into the white blue and all this side. Our volumes are not that high. So that's why the prices are very low. But other than that, epoxy and all that side, it's average kind of pricing. It's not sizable. Drop is also there. So it's a balanced kind of side. I don't think any problem in sustaining that kind of things.

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Girish Choudhary, Spark Capital Advisors (India) Private Limited, Research Division - VP [82]

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Okay, okay. And secondly, in terms of the eastern market, I would like to know how much of the business today comes from the eastern region? And post the commissioning of the Orissa plant, how much savings can come from servicing those markets?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [83]

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I think our share in eastern market is not that high. But once the plant will be there, it will improve sizeably because you know the logistic cost from Ahmedabad to east, it depends on the product to product, but it vary between 7%, 8% to 15% kind of zone. So definitely, if you pass on that kind of things to the market, you are going to definitely gain the market share in that region. But how much savings will be there, how much market share gain will be there, once the plant will be operational, we will keep dialoguing every quarterly with you guys, and we'll keep updating you. It's premature to communicate at this stage.

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Girish Choudhary, Spark Capital Advisors (India) Private Limited, Research Division - VP [84]

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Okay. But if you could help us with the eastern share in the current revenue side.

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

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We don't share all this geographical number. But I can say that there is a huge potential to grow the market share in east.

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Operator [86]

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Our next question is from the line of Nehal Shah from ICICI Securities.

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Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [87]

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Sir, on the other expenses side, we've seen other expenses even in the stand-alone P&L that has shot up from almost INR 56 crores to INR 77 crores. So can you comment on this?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [88]

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See, mainly because we have provided INR 8 crores for the special provisioning in this quarter for this -- our loyalty program. Actually, loyalty program, we just started. So actual outflow will not be there. But as per the accounting policy, auditor want that you provide for us -- actual outflow will not be there. You can reverse in the coming quarter. But right now, you have to do the provisioning. So that's why we have to do the provisioning of INR 8 crore, which is huge. According to us, it should not be even 50% of that. But as per the accounting norms, we have to provide because we already launched the program and accordingly we are calculating. They say we also know, but unless until the time line is valid, you have to provide. And once the time line is over, you can just reverse it. So that is also one of the reasons that other expenditures have shoot up in this quarter.

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Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [89]

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So probably, we may expect some reversal in Q4 on this?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [90]

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Possible, possible. Even anyway, the Q4, you see, Nehal, history of the Astral, that Q4 is contributing 31% to 32% of the top line.

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Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [91]

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Right. And you always get the operating leverage benefit.

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [92]

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Yes. And if you see the EBITDA level, the EBITDA contribution of last quarter on a full year basis, you work out, it will be roughly about 33% to 34% kind of EBITDA comes in the last quarter. So anyway, last quarter is robust. And the economy of scale also play. So last quarter's margins are always higher. If you see the last 5, 7 years trend also. So I think this will be added, then it will be another advantage to us.

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Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [93]

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Right. Sir, my last question is, there's one thing which probably -- sir, what kind of guidance are you giving probably for FY '21, especially in the pipe segment?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [94]

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No. It's too early. Let me finish this. But I think this year also, we communicated that we will be delivering 10% to 15% minimum volume growth, and we are going into that territory. In fact, better than that -- what we guided. So next year also, the way market is growing up and the way CPVC  scenario is developing in the country post this finalization of this anti-dumping duties and all, I think 10% to 15% volume should not be a challenge for the next year also.

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Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [95]

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And do you still think your bottom line growth should be -- would be better than the top line growth even in FY '21?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [96]

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Yes, yes. We are still believing because the -- I already said that a lot of levers are there for the next year. Adhesive will give us better margin. Rex will give us a better margin next year. This -- our -- I say this, power will give us saving -- lot of savings because solar and all this rooftop benefit will be there. So overall, I think a lot of levers are there. So we are still expecting that next year also bottom line will be better than the top line growth.

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Operator [97]

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Our next question is from the line of Hitesh Taunk from ICICIdirect.

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Hitesh Taunk, ICICIdirect.com, Research Division - Analyst [98]

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Sir, just missed that figure. You said 15% volume growth for the quarter 3 and around 6.5% volume growth for the -- for ex Rex, right? Excluding Rex?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [99]

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Yes, yes.

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Hitesh Taunk, ICICIdirect.com, Research Division - Analyst [100]

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So that means our CPVC, PVC pipes have grown more than 15%? Is it the right estimate?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [101]

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It cannot be more than 15%, you can say, but definitely, it should be close to about 10% kind of level. Because Rex was very, very -- very much degrowth.

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Operator [102]

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Our next question is from the line of Rishab Bothra from Sharekhan.

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Rishab Bothra, Sharekhan Limited, Research Division - Equity Research Analyst [103]

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Sir, just wanted to understand the pricing there -- where -- how this has been on Y-o-Y and Q-on-Q basis? How much degrowth it has been witnessed on Y-o-Y basis in pipes, sir?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [104]

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In pricing? Raw material pricing?

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Rishab Bothra, Sharekhan Limited, Research Division - Equity Research Analyst [105]

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The finished good pricing.

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

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Finished goods, I think PVC was low in the previous quarter because PVC Y-on-Y was close to about 5% down. So as per the market -- industry trend, whenever there is a drop by Reliance, we pass on to the market. And whenever there is a rise, we take from the market. So that scenario is continuing. So last quarter, yes, there was a loss into the inventory. We have not quantified yet, how much was there. But at the same time, CPVC price was on the higher side. So on a net-net basis, I don't think much variation will be there because the contribution of revenue was from the PVC and CPVC is close to about 50%, 50% kind of level. So I don't think a much change is there. But CPVC on a rising trade and PVC was on a downward trade. But beginning of this quarter, PVC prices have again started moving up, and it looks that it will keep going up from -- because now the seasonal months have started. So if that is the scenario that will help us to improve our margin into the PVC in the coming quarter, maybe Q4 and Q1 because we always sit with a reasonable good inventory levels. And that will always give us a gain into the inventory side.

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Rishab Bothra, Sharekhan Limited, Research Division - Equity Research Analyst [107]

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Okay. Because when I was looking at the numbers, on INR 520 crores revenue and volume of around 32,000, it was showing a negative 14% on realizations for -- on Y-o-Y basis. So just wanted to cross check...

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [108]

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14% drop in realization? I think that time Rex number was not included, so that may be the reason. So I think you can call me separately. I don't think 14% drop will be there. So I have to go through the number.

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Operator [109]

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Our next question is from the line of Ritesh Shah from Investec Capital.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [110]

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Yes. Sir, first question is for Sandeep. I -- sir, earlier, we had indicated about tie-up with ADS. Sir, any progress on that? And secondly, you indicated that Pex will have our own production in, say, 12 months or so. I think you had earlier indicated that we'll set up a plant only once we have adequate market in place. Sir, if you could provide some color over here would be useful.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [111]

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Yes, things are still on. We have not gone in deep. But by -- after this quarter, I think we could be -- we will be able to give you a clear picture on this in the analyst meet. About the next thing, which -- what?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [112]

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Pex.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [113]

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Pex, yes. Pex, I -- we wanted to build the volume and go, but we are getting volume. And the thing is that import is making the product 25% to 30% costlier, duties and transport and all. So I made the calculation that if I make it here, I make the product straightaway, which is not coming in my pocket at all. And if I make it here and make it 30% cheaper, and I can -- I can get a good market here for that product. So yes, we'll be moving ahead with this product.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [114]

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Okay. Sir, second question is, you indicated in the initial comments that there are several programs, plumber program, dealer attachment, dealer distributor, et cetera, et cetera. Sir, what is the cost attached over here? Are you in a positioning...

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [115]

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It's not a big cost-- we have already told INR 8 crore provisioning. And more picture on this, I think again we'll give you after Q4 because this is a...

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [116]

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I think we -- this time, we are going to highlight in our analyst meet how completely we have taken this company to the systemic approach. Last time also, we highlighted some point. And this time, we will be giving you more lights into that side. I think it will be difficult. Otherwise, it will last 1-hour call. So we -- to cut short, we are -- we have done a lot of work into the systemic side. Now we will be having the accurate data of the plumber. We will give accurate data of the dealer. What is their lifting, what is their disposal, everything will be shared.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [117]

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We will highlight as much as need be, that will be proprietary. I'm telling very clearly, I won't highlight everything to the market. Because we have competitors who are watching us on everything we do. And there are a lot of proprietary informations, which I don't want to discuss, and I'll keep it up to my heart, okay? I'm very clear about it. Because my certain programs, my certain initiatives are my proprietary initiatives and which are the business initiatives, which are the business strategies, which cannot always be put on the table for everyone.

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Operator [118]

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We take our last question from the line of Ankit Gor from Systematix Shares.

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Ankit Mukesh Gor, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Midcaps [119]

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Sir, my first question with regard to adhesive. We always maintained that on a longer-term perspective, adhesives margins will remain at 15%, 16%. But in the initial remark, Engineer sir said that the margin can go up to 17%, 18%, 19%. And what we maintain that incremental margin, we will spend it over brand and brand expansion and over marketing spend to widespread the product. How are we looking -- how should we look at it now, sir, adhesive side of it on a margin front?

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [120]

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See what Mr. Engineer shared that is what our ultimate wish is that we want to go back to that level. So that doesn't mean that it is going to be on an immediate basis, 17%, 18% kind of EBITDA margin. So slowly and gradually, our target is to reach at that level. The moment volume will start picking up, then it is possible to do that level. But it will -- it need the time. It cannot happen on 1 or 2 quarter. So keep finger crossed. Maybe a few quarters down the line. That is what we are targeting. Even if it is a 15%, 16%, we are very happy. As long as we are growing at a 15%, 20% volume every year, even if a couple of percentage lower also, it's a very healthy margin. So we are not only focusing on to the margin side. That is what our wish list is that we want to reach at 17%, 18%. But it, again, depends on the -- how the growth is coming. For us, growth is first priority. Margin is the second priority. Like in pipe also, I said that first priority will be growth. If my volume is growing at 20%, I have to sacrifice 1% or 2% margin, we will be okay.

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Ankit Mukesh Gor, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Midcaps [121]

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Great. So my second question with regards to, if you can explain, it's more about clarification. If you can explain the -- what Engineer, Mr. Engineer said in the initial remarks, saying that Kanpur had 2 plants. Then probably 1 is given to the older promoter and now some will be shifted to Dahej. Can you please clarify that couple of points?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [122]

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It is very clarifiable. I was very clear. I gave a complete clarity. When we acquired this, there was a -- at the acquisition level, this was agreement that the oldest plant at Unnao, the property will be handed over after 7 years of operation to the original owners, and we wanted to shift this plant. We already have a land in Rania, but because we are -- we already hold this land in Dahej from 9 to 10 years, which is a chemical zone in Gujarat, near Ahmedabad, we have decided to bring this production facility in Gujarat at Dahej in Ahmedabad -- in Gujarat. And there will be out of 2 operations in -- which are there in Kanpur, the Rania operation will continue and continue to grow. The Unnao operation, because Unnao is now a -- almost a residential zone, near the Ganga River and so there are a lot of restrictions of the Ganga Project, already a lot of housing projects are going on there. So it is also in our interest to shift to this plant to a chemical zone and to an industrial zone. That's very clear, and it was a part of the agreement. I put it on the table very clearly.

Thank you. I think we should now not take any more questions.

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Operator [123]

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Ladies and gentlemen, that was the last question. Sure, sir. Would you like to add a few closing comments?

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [124]

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No. Thank you, everyone. Thank you all for the support, and we will again going to meet everyone personally after Q4 results. Thank you. And Hiranand bhai would like to thank.

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Hiranand A. Savlani, Astral Poly Technik Limited - CFO [125]

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Thank you, every participant. If anything is left out question, you all are free to call me anytime. My mobile is 24/7 available for you. And thank you, Kashyap, for hosting this call.

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Sandeep Pravinbhai Engineer, Astral Poly Technik Limited - MD & Executive Director [126]

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Thank you, Kashyap bhai, and thanks, everyone. Thank you, everyone.

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Operator [127]

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Thank you, members of the management. Ladies and gentlemen, on behalf of Axis Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.