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Edited Transcript of SUPREMEIND.NSE earnings conference call or presentation 7-May-19 11:00am GMT

Q4 2019 Supreme Industries Ltd Earnings Call

Mumbai May 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Supreme Industries Ltd earnings conference call or presentation Tuesday, May 7, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Mahaveer Prasad S. Taparia

The Supreme Industries Limited - MD & Director

* P. C. Somani

The Supreme Industries Limited - CFO

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Conference Call Participants

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* Abhishek Ghosh

* Achal Lohade

JM Financial Institutional Securities Limited, Research Division - VP

* Akhil Parekh

Elara Securities (India) Private Limited, Research Division - Analyst

* Ankit Mukesh Gor

Systematix Shares & Stocks (India) Ltd., Research Division - Research Analyst

* Ashish Poddar

Anand Rathi Financial Services Limited, Research Division - Research Analyst

* Avi Mehta

IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary

* Bhargav Buddhadev

Kotak Mahindra Asset Management Company Limited - Research Analyst

* Kashyap Pujara

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

* Madhav Marda

Fidelity Investments - Equity Research Associate

* Nikhil Gada

Asian Markets Securities Private Limited, Research Division - Analyst of Consumption Appliances, Plastics, and Building Materials

* Pritesh Chheda

* Rajesh Kothari

AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director

* Ritesh Shah

Investec Bank plc, Research Division - Analyst

* Rohan Gupta

Edelweiss Securities Ltd., Research Division - Research Analyst

* Sneha Talreja

Edelweiss Securities Ltd., Research Division - Research Analyst

* Sonali Salgaonkar

Jefferies LLC, Research Division - Equity Analyst

* Trupti Agrawal

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to The Supreme Industries Limited Q4 FY '19 Investors Conference Call hosted by Axis Capital Limited. (Operator Instructions) Please note this conference is being recorded.

I now hand the conference over to Mr. Kashyap Pujara from Axis Capital Limited. 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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Thank you, everyone, for standing by. And it's a great pleasure to have with us the management of Supreme Industries. From the management side, we are represented by Mr. Taparia, who's MD; Mr. Somani, who's the CFO; and Mr. Saboo, who is the Company Secretary.

Without taking much time, I'll hand over the floor to Tapariaji. Over to you, sir.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [3]

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Thank you very much, Mr. Pujara. I am M.P. Taparia, Managing Director of The Supreme Industries Limited.

I welcome all the participants who are participating in the discussion of the audited stand-alone and consolidated financial results for the quarter and the year ended 31st March 2019. The stand-alone results and the consolidated results are already with you. I'll be brief on company product operating performance and other highlights.

The company showed 113,921 ton of plastic goods and achieved net product turnover of INR 1,487 crore during the first quarter of the current year against sale of 103,215 ton of plastic goods and achieved net product turnover of INR 1,389 crore in the corresponding quarter of previous year, achieving volume and product value growth of around 10% and 7%, respectively.

The company sold 397,983 ton of plastic goods and achieved net product turnover of INR 5,437 crore during the year under review against sale of 371,176 ton and net product turnover of INR 4,826 crore in the previous year, achieving volume and product value growth of about 7% and 13%, respectively.

The stand-alone profit before tax and profit after tax, excluding exceptional item and construction business, for the fourth quarter of the current year amounted to INR 150 crore and INR 105 crore as compared to INR 230 crore and INR 157 crore for the corresponding quarter of the previous year, recording decrease of around 35% and 33%, respectively. The stand-alone profit before tax and profit after tax, excluding exceptional item and construction business during the year under review amounted to INR 541 crore and INR 361 crore as compared to INR 602 crore and INR 401 crore for the previous year, recording decrease of about 10% and 9%, respectively.

Construction business. During the year under review, company realized INR 81 crore from the sale of 38,718 square feet of the premises. After allocating proportionate cost and overhead, profit before tax accrued INR 51 crore and profit after tax INR 35 crore from construction business. Exceptional item include gain of INR 70.44 crore in the stand-alone result on divestment of Khushkhera Unit on 30th June 2018 to a joint venture associate company, gain of INR 11.31 crore on sale of land and building of Hosur Unit I. After including above, total income for the year under review is INR 5,632 crore. Profit before interest, depreciation and tax INR 886 crore. Profit before tax INR 677 crore. And profit after tax INR 461 crore.

The consolidated profit before tax and profit after tax, excluding exceptional item and construction business, for the fourth quarter of the current year amounted INR 161 crore and INR 116 crore as compared with the INR 242 crore and INR 169 crore for the corresponding quarter of the previous year, recording decrease of about 33% and 31%, respectively.

The consolidated profit before tax and profit after tax, excluding exceptional item and construction business, during the year under review amounted to INR 556 crore and INR 379 crore as compared to INR 637 crore and INR 436 crore in the previous year, recording a decrease of about 15%.

After including construction business and exceptional item, total consolidated income for the current year under review is INR 5,620 crore. Consolidated profit before interest, depreciation and tax is INR 874 crore. Consolidated profit before tax is INR 655 crore and consolidated profit after tax INR 449 crores.

The Board of Directors has recommended payment of final dividend at 450% INR 9 per equity share on 12.7 crore equity shares of INR 2 each for the year ended the 31st March 2019. This dividend with interim dividend paid at 200%, that is INR 4 per equity share aggregating INR 13 per equity share for the current year. Previous year INR 12 per equity share. Total outflow for dividend, including tax on distribution, absorb a sum of INR 199 crore as against INR 180 crore in previous year.

The business scenario of all the product segment of the company for the year ended 31st March 2019 as compared to previous year ended as under.

Plastic Piping Systems business grew 9% in volume and 16% in value term. Packaging Products segment business 5% growth in volume and 2% in value term. Industrial Products segment grew by 10% in value term. Consumer products segment business grew by 5% in volume and 14% in value term.

The overall turnover of value-added product increased to INR 1,944 crore as compared to INR 1,734 crore in the previous year, achieving growth of 12%.

Total borrowing of the company stands at INR 162 crore as on 31st March 2019 as against INR 248 crores on 31st March 2018. Average net borrowing level during the current year remained at INR 266 crore against INR 336 crore in the previous year. Average cost of borrowing as on 31st March 2019 increased to 8.23% against 7.12% as on 31st March 2018.

Total debt-to-equity ratio as on 31st March 2019 came down to 0.08x as against 0.14x as on 31st March 2018.

The initiative taken up by government are gaining momentum, which had expected growth in the businesses of several verticals, the company took steps to put new production unit and also expand capacity in several existing units and incurred CapEx of INR 384 crore in the year 2018-'19.

During the current year, that is 2019-'20, the company envisaged CapEx in the range of about INR 300 crore to INR 350 crore mainly on the following. Putting molding shop at Kharagpur Complex to make plastic pipe fitting. Establishing capacity to manufacture PVC pipe system, high-intensity polythene pipe system, CPVC pipe system, plus piping system at Jadcherla. Expanding rotomolding capacity at Jadcherla. Putting another unit at Pondicherry new site to increase bath fitting capacity. Having several variety of injection mold and blow mold more furniture in the complete range of furniture. Installing additional equipment to increase production of cross lam molded exceptional at Silvassa and Getmuvala unit.

Increasing PVC pipe manufacturing capacity at (inaudible), to add innovative fabricating machine to produce several variety of new fabricated products from cross-laminated film, to add end-of-the-line fabricating machine to across flexible packaging film, to install balancing machine in protective packaging division, to increase capacity at Gadegaon and replace certain old machine at (inaudible) plant and to invest in mold for (inaudible) metal and energy division, to expand capacity in industrial product division at Ghiloth and multilayer molding unit.

Business outlook. The various initiative taken by the central and state government have started showing fruitful outcome in the year. The focus on construction (inaudible), effective implementation of RERA, Swachh Bharat mission Amrut Yojana and other interactive building activities are enabling the company to grow its Plastic Piping System business. We can expect the growth in the business of several vertical. The company took steps to put new production unit and also expand capacity in several of its existing unit. All the investment plan are certified or are certifying by June 2019 within the planned investment and time frame.

The raw material availability, while adequate and affordable, the PVC prices in the first 10 months maintained upward bias. Suddenly the price had dropped in March by 12.5% in 5-week time. The price in polypropylene, other polymer and HDPE Pipe and film grade also dropped between 15% and 20% in a short span of time during the year. This resulted in a steep inventory losses in the working of the company for the year regarding its operating margin. The prices of polymer have improved to some extent from their lowest level, the company turnover mostly for plastics have pressured inventory to remain volatile. However, for the current year, the company expects polymer price to remain affordable and in the range.

Availability of raw material price will also going to remain -- availability of raw material is also going to remain adequate. When the GST was introduced, it was expected that informal sector may grow a bit faster to move to formal sector. However, pace of movement to formal sector from -- by informal player is quite slow. The company remains committed to increase its export turnover. The company participated last year in 20 international exhibition for its various products. This has boosted this export turnover from $16.93 million to $23.05 million. Company continued towards aggressively to put its export business by intensive marketing and making investment product, which can generate larger growth in export business.

During the current year, that is 2019-'20, the company is still projecting turnover in the range of between INR 6,100 crore to INR 6,250 crore with an estimated operating margin of around 13.5% to 15%. You see a brief and overall summary for the quarter and the year under reference.

Thank you for your presence. Now I and my colleague, Mr. P. Somani, CFO; and Mr. Saboo are available to reply to your various queries raised by all of you. Thank you very much.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have our first question from the line of Ankit Gor from Systematix Shares & Stocks.

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Ankit Mukesh Gor, Systematix Shares & Stocks (India) Ltd., Research Division - Research Analyst [2]

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First of all, sir, I would like to know your view on our packaging business. What's your sense -- is it -- has the packaging business bottomed out in terms of margins or even in terms of realization because we have seen some bump up in the margins as well as realization in Q-on-Q basis? Yes, that was my first question.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [3]

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We believe it has bottomed out.

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Ankit Mukesh Gor, Systematix Shares & Stocks (India) Ltd., Research Division - Research Analyst [4]

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Okay. So there's 15%, 16% sort of margin. You feel that's sustainable for at least for a couple of quarters?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [5]

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I'll not say the percentage, but I know the margins have bottomed out. There is no pressure to drop price further. We don't believe also raw material price to go down further in a big way. In a small way, it may also go, moving up and down. Our product prices all -- will drop the price substantially in our cross-laminated film, which are the only product where we dropped price substantially. We now see no reason to drop price any more. We estimate good demand at our current price range.

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Ankit Mukesh Gor, Systematix Shares & Stocks (India) Ltd., Research Division - Research Analyst [6]

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Great to know that. Sir, my second question with regards to -- what was the revenue from Kumi Kasei JV in Q4 FY '18? So can we get those like-to-like numbers, if you can share that number?

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P. C. Somani, The Supreme Industries Limited - CFO [7]

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There are nothing in Q4. Everything was in Q1 only. It's the one-time revenue by sale of that unit. So it was in Q1.

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Ankit Mukesh Gor, Systematix Shares & Stocks (India) Ltd., Research Division - Research Analyst [8]

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Okay. And sir, if you can share the inventory loss number for Q4, if anything, that will be great.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [9]

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Very difficult. We are a very large player. As you've seen, we sold nearly 33,000 ton polymer product every month. You see our principal product on our turnover. I mean, prices dropped by 9.5 in a very short time. And we have to maintain large stock because it's the start of the season each year for plastic piping, March, April, May, June. Not only local, we have to import large volume because local material is inadequate, the demand is 3.2 million tons. Only local is 1.3 million. So 1.9 million ton we imported and imported from a long distance. So when we committed at particular price, we have to honor it. And there is resultant (inaudible) inventory loss.

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Ankit Mukesh Gor, Systematix Shares & Stocks (India) Ltd., Research Division - Research Analyst [10]

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Okay. My last question with regards to your guidance. You guided for INR 6,100 crores to INR 6,250 crores of revenue for FY '20, which is roughly 10% growth of our financial...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [11]

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Last year, our share was INR 5,437 crores of product, and that was due to construction business. Our product till now is below INR 5,450 crore, around 12% to 18%.

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Ankit Mukesh Gor, Systematix Shares & Stocks (India) Ltd., Research Division - Research Analyst [12]

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Okay. Would you be able to break this in volume and value if it is possible?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [13]

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Not possible.

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Operator [14]

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We have next question from the line of Sneha Talreja from Edelweiss Financial Services.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [15]

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It was more pertaining to the margin guidance that you have been giving. So we started the year with around 15.5% margin. And this quarter, you've given a broad range, just about 13.5% to 15%. Would like to know which are the areas -- I mean, which are the segments where you're facing the highest amount of margin pressure?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [16]

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No pressure. Pressure is not once the price required has been dropped already. We have given a margin, which is lower band and a large range because it has become now very volatile business. The pressure (inaudible) on same crude prices and foreign exchange. Last year, the foreign exchange went up to $74.23 and then came down to $68.80. So with the foreign exchange and crude price falling so badly, it is difficult to give a focus for full year or months from today. So better to be on the safe side, we've given a range of 13.5% to 15%. You ask me how the year we can maintain 15%, but (inaudible) is not adequate. We presume near market yields.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [17]

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Sir, just to put it this way, in the current quarter, I mean, which is the segment where you think that we have received the highest margin pressure and that is likely to continue even going ahead?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [18]

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Last year, third quarter was the highest in the context of the PVC pipe. And the prices dropped significantly and we had a big inventory loss. And the first month of this quarter also some loss has been carried forward from the import material. And for the full year, there is basically no pressure.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [19]

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You're saying we can expect some inventory losses again in Q1 FY '20?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [20]

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Definitely some small items. Major volume has been taken in the first -- in the month of March, but certain value has come in the month of April also.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [21]

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Okay. Can you even highlight or some specification related to what's happening in the HDPE price trend?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [22]

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Demand is very good. Well, the price had dropped by 20% in HDPE pipe raw material, resulting in loss. We believe now the prices should be stabilized. But demand is quite brisk.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [23]

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How big is this segment for us? Can we get some sense on that?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [24]

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Not big segment. Our big segment is PVC pipe. Our capacity is around 3,000 ton per month and PVC capacity is around 20,000 tons per month.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [25]

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And we are operating at 100% rate, sir?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [26]

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So only during the peak season we are having 100%, but overall, our impression is between 65% to 70% for the full year.

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Operator [27]

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(Operator Instructions) We have the next question from the line of Ashish Poddar from Anand Rathi Securities.

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Ashish Poddar, Anand Rathi Financial Services Limited, Research Division - Research Analyst [28]

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My question is again on the margin side. So looking at your guidance, even at the top end of your guidance, which is 15%, and if I look at your last 5, 6 years of performance, perhaps this is even the lowest of what we have achieved in last 5 years. So do you think this margin thing is going to be a structural thing that sub-15% kind of margin is what will be the base case scenario? Or it is just a temporary phase you're facing and you will achieve 15% to 16% kind of margin?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [29]

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As we change our product mix, we have now high density polyethylene pipe and (inaudible) HDPE pipe, the margins there are quite low. So basically their 2 product is growing quite nicely in our volume -- value, we are giving a lower guidance. They never fall in the value-added product, the percentage of value-added product will be -- will rise to the occasion to reach the level of now more sale of high density polyethylene pipe and PVC pipe where the margins are quite low. If you want to include the margin to 18%, then you must close our 2 businesses. We get adequate return, so we want to continue.

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Operator [30]

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We have the next question from the line of Shrenik Bachhawat from JM Financial.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [31]

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This is actually Lohade here. Sir, my first question is in terms of the CPVC mix, what would be the mix roughly for FY '19 in terms of volumes?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [32]

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In terms of -- we added growth of 28% in value last year.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [33]

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Okay. Is there any pricing pressure you're facing in the CPVC given...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [34]

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We don't see any pricing pressure.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [35]

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No pricing pressure in the case of CPVC?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [36]

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We don't have.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [37]

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Okay. Sir, you just mentioned about the HDPE, DWC pipe. Possible to share like what is the mix in FY '19 from these products?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [38]

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No. Generally, what we said, these are the item we are having very huge capacity around 50,000 tons per year capacity. We may not sell 50,000 tons fully, but they always get down the margin -- the operating profit margin. Operating profit margin will come down because of the more sale of the pipe business.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [39]

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From the guidance perspective, okay, I thought...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [40]

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From the guidance perspective, because after (inaudible) in the piping system, this is not only pipe, but many other product. But pipe is always more value addition, low operating margin business.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [41]

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Correct, correct. And in terms of the CapEx, what kind of CapEx are we looking at in FY '20 and how much capacity are we targeting?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [42]

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As on today, for the current year, what we have planned around INR 300 crore. Capacity may be 50,000, 60,000 tons. We have quite large capacity of PVC pipe. Capacity -- at the end of the year, how much capacity we added because we make so many product, mix and you can tell your capacity.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [43]

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Correct. Sir, just last question. If you could help us with the capacity as of March '19 in...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [44]

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I request our CFO to give you.

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P. C. Somani, The Supreme Industries Limited - CFO [45]

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We have total capacity of around 605,000 metric ton and which includes Plastic Piping System of about 419,000, Industrial Product of about 69,000 and furniture, consumer product for 34,000, and packaging product for 83,000.

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Operator [46]

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We have next question from the line of Bhargav Buddhadev from Kotak Mutual Funds.

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Bhargav Buddhadev, Kotak Mahindra Asset Management Company Limited - Research Analyst [47]

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Yes, sir, is it possible to know what would be our revenue from the DWC pipe business? And sir, you are keen to grow in this particular business?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [48]

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No, our business as on today fully stabilized of HDPE pipe only. DWC business has not started in a big way. We are giving quality product and majority players are mixing (inaudible) chemical waste material. They are quoting a price lower than the raw material price. Such supply we don't want to make because they are putting BIS, which is a certification. So we are getting small quantity who are dumping quality product. So they are selling -- we believe that over a period, the buyers will realize that what type of pipe they are buying. And over the period, ours are completely fully utilized, that's what we expect today and (inaudible).

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Bhargav Buddhadev, Kotak Mahindra Asset Management Company Limited - Research Analyst [49]

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And, sir, whether this DWC pipe will be classified as a value-added product for us or not?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [50]

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Not at all.

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Bhargav Buddhadev, Kotak Mahindra Asset Management Company Limited - Research Analyst [51]

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Not at all. Okay. And the working capital in this particular product would be much, much higher as compared to our traditional business?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [52]

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It will depend how much capacity we are loading today. Load capacity is not so -- not much will be required today. And we cannot give loan credit. So we will not be in a difficulty. Overall, our credit this year -- when we ended, our credit is only 21 days of our sale. We don't believe in the business where the credit is very low. We sell good -- best in our quality, not on credit policy.

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Bhargav Buddhadev, Kotak Mahindra Asset Management Company Limited - Research Analyst [53]

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Okay. And lastly, sir, are we seeing some signs of market share gains in South India. We are hearing that Ashirvad is now moving to cash and carry, and they are sort of losing market share in South. So are we capitalizing on there?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [54]

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We are in good demand. So that's why we are building Jadcherla capacity very quickly. We got a large plant at Jadcherla. We would always learn there how quickly started and we are putting very quickly capacity at Jadcherla. That's why we ended up near Hyderabad.

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Bhargav Buddhadev, Kotak Mahindra Asset Management Company Limited - Research Analyst [55]

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And margin in South will be the highest, sir, given that they are sort of a branded?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [56]

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Margin dependent on product mix. There are -- now throughout the country people demand quality product. The pipe is a very functional item. We are seeing that in overall welding business was 13%, but pipe sales grew by 16%.

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Bhargav Buddhadev, Kotak Mahindra Asset Management Company Limited - Research Analyst [57]

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All right. All right. And lastly, sir, on the packaging side of the business, you mentioned last year that there were many players, French players who had entered into this business and they will get exposed as their product quality sort of is tested by the customer. So when do we expect sort of some pickup on the margin side and...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [58]

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Margin may not pick up. We have got no plan to increase the price, but we have no plan to drop the price also further. Demand is very good. We expect this year, the growth will be better. Last year, we had growth in our cross-laminated film only 2%. This year, we expect growth will be more than 10%.

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Operator [59]

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We have next question from the line of Pritesh Chheda from Lucky Investment Managers.

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Pritesh Chheda, [60]

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Sir, in the quarter 4's 4% revenue growth and full year is 12% revenue growth. What is the volume growth for us total?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [61]

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For the quarter only.

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Pritesh Chheda, [62]

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For the quarter and for the full year, blended volume growth?

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P. C. Somani, The Supreme Industries Limited - CFO [63]

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For the quarter, the volume growth was 10% -- 10.3% precisely. And the value growth for the quarter was...

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Pritesh Chheda, [64]

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4%?

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P. C. Somani, The Supreme Industries Limited - CFO [65]

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Yes, 5%.

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Pritesh Chheda, [66]

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And for the full year, the....

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P. C. Somani, The Supreme Industries Limited - CFO [67]

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For the full year, the volume growth was 7% -- 7.2% and value was 13%.

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Pritesh Chheda, [68]

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And if you could you just give the full year total volume number?

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P. C. Somani, The Supreme Industries Limited - CFO [69]

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Yes, total volume of full year is 397,983 metric ton.

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Pritesh Chheda, [70]

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Okay. And sir, in the last 2 years or last 3 years, we have seen continuous drop in margins about 200, 250 basis points-odd, and lot of it is gross margin driven. So maybe your comments there, is it also mix, which is playing in...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [71]

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One year, there were too much profit due to inventory gain. See our margin remains around 15%. Only this year, the margin came down to 13.3%. While in the 2008-'09, when there was drop in polymer prices, our margin had dropped. We generally move around 15%, generally. And what you're comparing 2%, 3% drop in the first week -- in a year -- and 3 year before there was big inventory gain. So inventory gain, you can't consider it going to (inaudible), operating margin in our (inaudible) production.

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Pritesh Chheda, [72]

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Okay, okay, okay. And in the capacity that you mentioned, initially did you mention the capacity of plastics at 419,000, Industrial's at 69,000 and whatever those 2, 3 numbers, you mentioned the capacity, right?

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P. C. Somani, The Supreme Industries Limited - CFO [73]

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Capacity.

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Pritesh Chheda, [74]

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And in the INR 300 crore CapEx that we're doing, how much of the capacity increase that we would be taking?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [75]

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I think it will be around 50,000, 60,000 ton, but precise capacity we'll tell you only at the end of the year. Large machine (inaudible) machine. We don't sell -- we don't work on capacity. Our company, again, we care for only value, not volume.

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Pritesh Chheda, [76]

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And what is the utilization of our capacity?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [77]

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Around 65%.

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Operator [78]

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We have the next question from the line of Abhishek Ghosh from DSP Mutual Fund.

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Abhishek Ghosh, [79]

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Sir, in the Industrial Products segment, partly because of highways, but there is a sharp decline in volume. So is it attributable to the auto slowdown. How should one look at it?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [80]

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No, we are -- we don't actually much in auto, the industrial volume doesn't play big role because it depends on what product we're selling. There is a big supply to the premium machine -- Electronic Voting Machine as the value will be high, very expensive raw material and volume will be low. So industrial item depending on what product we are making for our customer, but they are all custom molded. We had no -- don't damage our own branded groups. They are custom molded for the customers built on the model and what raw material we use. If we are using INR 200 kilo raw materials, then value will be good, but volume will be lower.

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Abhishek Ghosh, [81]

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But on volumetric terms, are you seeing some kind of slowdown there?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [82]

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There is slowdown since November.

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P. C. Somani, The Supreme Industries Limited - CFO [83]

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Last year, in the industrial product, there was one unit, which was full fledged there. This year, after July, that unit is not there. So comparative figures, you are looking at, because of last year quarter, the unit was there.

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Abhishek Ghosh, [84]

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Okay. Sir, adjusted for that, probably the decline will not be as sharp as it is.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [85]

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Yes, you are right, yes. Thank you.

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Abhishek Ghosh, [86]

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And sir, just one more thing in terms of consumer product, on a sequential basis, we see a sharp margin improvement. So that is because of the drop in polymer prices and you have been able to kind of...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [87]

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Basically ,we are moving there into value-added business. We have declined from commodity product in Furnitures. In Furniture segment, only one consumer product and we are trying -- we are not participating actively in the commodity product, (inaudible) products, so mostly they are all value-added items.

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Abhishek Ghosh, [88]

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But sequentially, the sharp margin improvement, will that be attributable to better product mix or some...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [89]

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Sequentially in our business basically, not like IT business. You can't have sequentially.

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Abhishek Ghosh, [90]

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Okay. And, sir, just one last question from my side. We have done closer to INR 380 crores in terms of CapEx this year and we have announced our capacity. And next year, the kind of revenue guidance that we're looking from you is closer to that 10 percent to 12-odd percent. So the new capacity that we have added, are you kind of building in utilization improvement there or not yet?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [91]

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If you see -- if you go by our 15% value addition, (inaudible) growth from INR 5,437 crore to INR 6,250 crore, the INR 800 crore. Actually, we (inaudible) value from one of the investment. We are using INR 380 crore, so normally we should get INR 760 crore additional in turnover. We are giving the outer side already in the INR 6,250 crore.

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Abhishek Ghosh, [92]

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Okay, okay. But there should be some organic growth also, right, in the existing side of business?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [93]

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All organic only. We don't do anything to acquire. There is no inorganic growth. All coming from our own investment.

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Abhishek Ghosh, [94]

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No, where I'm coming from, sir, that earlier -- before this CapEx what you have done in FY '19, prior to that also there would have been -- there would be some growth, right, on the basic business itself plus you've added capacity. So can we -- INR 800 crore number that is coming about is largely from the new capacity?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [95]

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You're very kind. Let's hope that it will be more than INR 800 crore.

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Operator [96]

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We have next question from the line of Rajesh Kothari from AlfAccurate Advisors.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [97]

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Sir, I have 2 questions. First question is you have already done the INR 380 crores CapEx. So that CapEx will start capacity from when?

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P. C. Somani, The Supreme Industries Limited - CFO [98]

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Yes, that CapEx has gone (inaudible), so the CapEx is fully available now for this current year.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [99]

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Okay. And the new CapEx which you're doing, that will be operational from month of July?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [100]

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Mostly, it will be operational and fully available around 2021. We are prepared for the next year. The delivery is quite long and still construction will be required at Jadcherla so -- and still construction required at Pondicherry also. So the investment, what we are going to make this year, majority of them will go in production next year.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [101]

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I see. So around April 20, the new CapEx, which you are doing in the current year, about another INR 350 crores...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [102]

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Normal cycle, normal cycle.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [103]

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Sorry?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [104]

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You see normal cycle, the machine supply also takes time. Building construction takes time. So to make investment this year, then we are available for next year supply.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [105]

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Understood. And your current utilization you mentioned is 65%?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [106]

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You see that we have 600,000 ton capacity and we sold 397, we have 66%, which is normal (inaudible) of our company business. During the rainy season, some months, the demand is quite poor. So there is no purpose to go and making the product and to storing it in the godown where the raw materials are fluctuating.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [107]

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So your peak season utilization would be how much?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [108]

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Sorry?

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [109]

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The peak season utilization would have been how much?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [110]

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Presently, we are utilizing fully. Presently, we are running fully. Measuring pipe building, and pipe building, at this moment, this month, running fully.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [111]

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Understood. And your capacity what you have quoted INR 397,390...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [112]

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(inaudible)

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [113]

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So the capacity, what you quoted, is including INR 350 crores CapEx done in FY '19?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [114]

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Yes.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [115]

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Understood. So my last question is basically, if you are looking at around 10% to 12% to 15% kind of a revenue growth, so the new -- so it will be driven more by the new capacity? That's what you're trying to suggest?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [116]

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New capacity, something will come down, old capacity also and new capacity, something (inaudible) production immediately. So it may not be a full 12-month, some immediate 10-month, immediate 11-month, something like that.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [117]

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I see. And when should we assume about what about INR 20 crores additional depreciation in FY '20 because of your CapEx in FY '19?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [118]

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Yes, should be, should be. Last year, it was INR 182 crores. This year, INR 200 crores.

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Operator [119]

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We have next question from the line of Trupti Agrawal from White Oak Capital.

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Trupti Agrawal, [120]

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I have a question on the margins. So sir, you said to the previous participant that the margins -- normalized margins are 15%, and in the last 2, 3 years, they are actually shorter because of inventory gains. So I just wanted to clarify that if I look at the -- so I'm not looking at the EBITDA margin, but I'm looking at, let's say, EBITDA per kg. And if I look at, let's say, the EBITDA per kg in Packaging Products, it used to be in the range of like INR 42 on an -- INR 42 to INR 44 on an average in the last 3 years, which has dropped to INR 31 in this year. So what I want to understand is that is this INR 31 the new normal? I mean is that how it is going to be in the Packaging Products or you see that this could improve from this level?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [121]

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So in regard to operating margin, operating margin was never very high level. Last year also it was 15.59%. So we will never worry about 15% in the year. Only '15, '17, we had a margin of 17.12%, and it included the inventory gain. Our aim is that we must aim trying to get 15% operating margin. But because we are now working in some more piping business, which is a complicated product, we feel difficult so 10%, 15%. So that's why we give a range of 13.5% to 15%.

Now coming to the packaging goods, after -- we have different margin in different product. There are 3 products in the Packaging segment. One is Protective Packaging product, second is Cross-Laminated Film product and third is Performance Plastic Packaging Films. Our Performance Packaging Film this year is going to be more because we have put up new capacity, and there, the margins are lower. So depending on product mix because we cannot have with one single product. There are 3 different products and we have different value-addition in terms of products.

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Trupti Agrawal, [122]

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Sure. So you're saying that, basically, now because of the change in product mix in the packaging product, just like in piping, you're talking about the HDPE and the DWC pipe.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [123]

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It may be higher or it may be -- but it cannot be our most lower also. It may be remaining mostly around it, I mean mostly around it.

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Operator [124]

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We have next question from the line of Akhil Parekh from Elara Capital.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [125]

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I have 3 questions. One, you mentioned in cross-laminated film, we are expecting around 10% of growth in FY '20. Is it because of any new product launches or (inaudible) launches that we are expecting?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [126]

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Our cross-laminated film, we are now selling more cross lam bonded film, which is a better property. It is a patented process. So there is no company that can make this product and that is one reason. Secondly, we are going to more (inaudible) market. And thirdly, we have (inaudible) several new product other than tarpaulin. Otherwise, majority (inaudible) are tarpaulin. Now we make several new product from the film and got good acceptance in the market. So they are referred together. We believe that there is no reason now to raise price further, and our volume will also grow, and we should be able to maintain the margin that we were in last year and volume will grow.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [127]

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Okay. So on the cross-lam bonded film, the margin differential between our normal cross-laminated films versus the new one, the cross-lam bonded film.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [128]

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We don't get high price. We get the same price. You cannot continue with the other competitive product if you're not contented with my product, where at retail level the minimal (inaudible). But our product now, differential (inaudible) and it will compare different finishing and different finish and different design.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [129]

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Got it. And sir, anything we're brewing...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [130]

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Investment property. Yes?

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [131]

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Got it. My question is are you doing any kind of brand -- I mean our channels have suggested many of the (inaudible) they are not aware of the difference in quality so and they...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [132]

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We are in good business. You are aware we have spent huge money in advertisement. We have participated in 100s of exhibition -- in India, we participated in 100s of exhibitions last year. Internationally, we participated in 20 exhibitions. Our advertising bill has gone up by more than INR 24 last year, it has gone to INR 75 crores.

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P. C. Somani, The Supreme Industries Limited - CFO [133]

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Yes.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [134]

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INR 77 crores compared to INR 52 crores.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [135]

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Ad expenses?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [136]

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(inaudible) but also our furniture and also our contribution.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [137]

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And INR 77 crores include sales and promotions as well?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [138]

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No, the advertisement and exhibition costs.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [139]

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Got it. Got it, sir. Another question is plastic pipes. Is there a margin differential when we use the piping in affordable housing as against a normal urban housing?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [140]

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We make quality product only.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [141]

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So there's more difference in the margin.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [142]

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We make quality product only (inaudible) people who are supplying affordable house cannot use spurious material for piping. Pipe is very important to get functional product. Apply in any home, the bathroom and the kitchen, they are the only functional area. So if you are using low quality pipe, then it will start leakage and it will create problem.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [143]

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Got it. Sir, last question, would you be able to quantify this sales on the (inaudible) JV for fourth quarter FY '18? How much was the contribution?

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P. C. Somani, The Supreme Industries Limited - CFO [144]

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There was no divestment in fourth quarter. It was only a onetime divestment of the unit to new JV, which was done in June quarter.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [145]

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Got it. Also, if my understanding is correct that unit has contributed some sales in fourth quarter '18, right?

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P. C. Somani, The Supreme Industries Limited - CFO [146]

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Today, we are consolidating only at the profit level. We are not consolidating at the -- line by line. So only at the net profit level, we are consolidating the consolidated profit from Supreme Petrochem and from this joint venture of Kumi Kasei, Kumi Supreme. So it is nothing else -- it is not affecting our revenue.

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Operator [147]

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We have next question from the line of Vishal Mehta from Optimum Securities.

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Unidentified Analyst, [148]

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My question is regarding Supreme Petrochem. Just wanted to understand, even though our pricing has been a little volatile, has the growth been as expected, especially in value-added products? Has the performance been -- how has the performance been? And could you shed some outlook...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [149]

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We are very glad to share with you that in all the vertical whatever Supreme Petro is now making. Polish shine, demand restriction due to government order banning certain application. Polish shine expanded, polish shine normal expanded, polish shine food grade, (inaudible) polish shine (inaudible). All the segment -- (inaudible). All the segments, we had a volume growth in domestic market in the year. The working (inaudible) INR 100 crores (inaudible) INR 92 crores one time in a very short period due to steep fall in styrene monomer prices. Now the prices are stabilized and we are very optimistic that our next vertical (inaudible) also getting some traditional environment. And we are now getting (inaudible) the plan as quickly as possible. When the company is debt-free, in the end of March, INR 280 crores cash balance in the banks.

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Operator [150]

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We have next question from the line of Avi Mehta from IIFL.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [151]

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I joined in a little late, but I just wanted to understand 8% to 10% kind of revenue growth guidance. Is there a breakup in volume and value that you will be able to give us?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [152]

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8% to 10% volume, value guidance is 12% to 15%. And (inaudible) our company which have the volume. Because in the country also, last year, the growth was 5.5% of polymer consumption. So last year, we achieved 7%, which is higher than what country achieved. And volume, we don't tell volume because we sell whatever we can get more value-added product. Last year, our value-added product (inaudible) by around INR 200 crores and grow more than business value-added product in quantum.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [153]

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Okay. So essentially, you're saying that we should -- we are targeting 8% to 10% volume growth and 12% to 15% value growth, that's how I should look at it?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [154]

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We are targeting 12% to 15% value growth. That is a temporary number because my partners are asking, so I could give this number. We are changing only the value, 12% to 15% value. I want to make it clear, we share 3 items: value growth, operating margin and return on average capital employed. They are 3 which we (inaudible).

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [155]

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Okay, sir. I got your point. I got your point. So the second bit was this value growth rate that we are chasing. Now given that the Packaging segment is seeing a clear pickup in growth rate, would it be fair to say that it's driven primarily by the piping on the HDPE side and...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [156]

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(inaudible) will be entirely value-added.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [157]

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It will be entirely value-added.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [158]

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The growth out of this segment was segment entirely value-added. Furniture also value-added.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [159]

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So in that case, your margin guidance is conservative, right, sir, because we're seeing 13.5% to 15% you are assuming...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [160]

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What you want (inaudible) I can't tell you like that.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [161]

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No, sir. I'm not saying. It should be more like 14.5%, 15%.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [162]

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Now things are so volatile, we want to play safe.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [163]

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But your expectation is that input cost should be more -- should be benign. It should not go up.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [164]

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I also don't know what is my expectation. I only know that we must run the plant fully and we must try to maximize the profit.

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Operator [165]

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We have next question from the line of Madhav Marda from Fidelity Investments.

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Madhav Marda, Fidelity Investments - Equity Research Associate [166]

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So I just wanted to understand if I understood correctly on the piping side, implemented growth is coming from DWC, HDPE, which are slightly lower on the margin front?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [167]

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Not from DWC, it was hardly selling.

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Madhav Marda, Fidelity Investments - Equity Research Associate [168]

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Right. On the HDPE, is the...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [169]

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We are doing growth in PVC pipe, we are doing growth in (inaudible), we are doing growth in (inaudible) system, we are doing growth in (inaudible), we are doing growth in (inaudible). Every segment, we are growing. In our pipe division, barring DWC, which has still not started properly, every segment is growing nicely in value.

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Madhav Marda, Fidelity Investments - Equity Research Associate [170]

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Okay. Okay. Got it. Sir, just on the packaging side, (inaudible) INR 31 per KG packaging for margins that we have got.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [171]

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INR 31 per kilo, overall all the things items (inaudible) after every has got different margin is achieved product in the segment and Performance Packaging product, second is cross-laminated film and third is protective packaging film. There are 3 different products. Every product has got different value addition. We are presently doing a combined one. And she asked me if there are any residual margin, which has now cross-laminated film are the only product where we have dropped quite substantially. Now we do not see any reason for dropping price again.

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Madhav Marda, Fidelity Investments - Equity Research Associate [172]

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Sir, because you have the segment used to be around INR 40, INR 41 per KG. Can we see going back there? I think I mentioned that...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [173]

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I don't know what the segment wise, we are giving per kilo (inaudible) possible information. But I see part of it in packaging film and protective packaging product (inaudible) packaging film gathered 3 components which make packaging into our company.

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Operator [174]

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We have next question from the line of Sneha Talreja from Edelweiss Financial Services.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [175]

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Sir, Rohan here. Sir, can you give us industry volume growth for all the segments like Plastic Pipes and Industrial and Furniture?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [176]

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Volume growth?

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [177]

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For industry, sir.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [178]

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Industry growth. I think the growth was quite slower. As I told you, PVC consumption, PVC consumption has grown by 5.4% in the country.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [179]

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For the industry, 5.4% in volume you are saying?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [180]

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For the country, that is countrywide. (inaudible). And for the growth of PVC was not 5%, 4.96%.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [181]

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This is volume you're talking about, right?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [182]

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You're asking me volume just in the country, it is 4.96% of PVC. And PVC value-add is only used only for piping segment (inaudible) 4.96%. PVC is about 2.05%. This year is about 4.96%. Total market -- total consumption of 3.2 million tons, out of the 78% volume to plastic pipe.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [183]

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Okay. So you're driving the demand from the PVC consumption?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [184]

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Actually, PVC consumption was quite poor in our country. See our (inaudible).

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [185]

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And this -- so probably at 5% just near volume growth for the industry category of like pipes, which was supposed to grow at highest rate of 10% to 12%. Do you see that this growth -- this lower-digit growth will continue for the industry? Or if not, then what is the driver for that?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [186]

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Historically, PVC growth has not remained so poor for long. It was 2.05% in '17-'18, 4.96% in '18-'19. So now we're optimistic in this year, in '19-'20, it will be higher than 12.96%. At the beginning of the year, we are seeing demand growing quite brisk. Full year, it is difficult to forecast. Am I clear? Hello?

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [187]

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Yes, sir. Yes, sir. Other thing around the Industrial growth also, can you give us some sense how the volume growth for the Industrial -- for the industry and then Furniture segment and packaging...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [188]

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Which industry?

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P. C. Somani, The Supreme Industries Limited - CFO [189]

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Furniture.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [190]

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Furniture, now there are so many (inaudible) their numbers are not known. And organized players, there are only 4 or 5 and they are all growing equally. We see probably big growth market. We're a big growth market. We had good growth last year.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [191]

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Okay. So I think basic idea of our industry and your company was to get into furniture and packaging and industrial was to enjoy high margin in those segments, while plastic pipes are always lower-margin business. And do you see that there is any other avenue of growth, which high margin -- with a high margin you can look at or the current portfolio...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [192]

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We are building a plastic pipe with a low margin 6%, 7%. (inaudible) better margin 6%, 7%. We don't think (inaudible). We are selling plastic pipe system, not plastic pipe. So we will get much better margin than the single digit, what we are talking about for tracking. Plastic piping gives a very good return on our capital employed, and we're getting good margin.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [193]

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Sir, I was coming on that also. So you mentioned that the main criteria for pricing is generally ROC base-approved. So what kind of minimum ROC you will keep on looking or you look at when you are getting into a new product?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [194]

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We are getting better ROIC on plastic and our piping division overall. This year, our operating ROIC has gone down because our profit was down as we made large investment. So it has gone down maybe 30%, 32%. Normally, we are looking for more than 40%, (inaudible) 40%. We thought that we will be able to improve ROIC. Our aim is to improve ROIC.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [195]

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All right, sir. Sir, last thing. Sir, would it be possible for you to share the capital employed among all the segments?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [196]

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(inaudible)

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [197]

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In terms of within percentage, like how much of the capital employed is in plastic pipeline?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [198]

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(inaudible). We don't want to (inaudible) our competition.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [199]

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Okay. Sir, another thing, just last thing there. The new capacity, which you are putting 50,000 to 60,000 tons, this will be equally distributed among all the 4 segments or it's only in plastic pipe?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [200]

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I think it's more in plastic pipe.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [201]

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How much of that roughly in percentage?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [202]

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No idea, no idea.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [203]

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With INR 300 crores CapEx, which you are planning, a large part of that will go in plastic pipes. Will it be fair to assume that their ROC on that business on INR 300 crores CapEx you will be able to drive about 25% to 30% ROC, which you generally look at?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [204]

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Generally, we make an investment plan based on our ROIC. That is the most important criteria, that is what for we are in business. We are not in business just to make a turnover.

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Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [205]

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Yes. That is fair enough. That should be the basis behind doing a business. So INR 300 crores CapEx can give you 30% ROC once fully utilized over the next 2 years?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [206]

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(inaudible) less than 25% (inaudible) 25% is the benchmark, lower than benchmark.

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Operator [207]

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(Operator Instructions) We have next question from the line of Rajesh Kothari from AlfAccurate Advisors.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [208]

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Sir, my question is with reference to on consolidated basis versus stand-alone. So you have added around INR 12, INR 15 gross profit. So can you just tell us the breakup of this and why it is coming only in fourth quarter?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [209]

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I request Somani to tell you.

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P. C. Somani, The Supreme Industries Limited - CFO [210]

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See, we (inaudible) every quarter. And primarily, it is from the Supreme Petrochem, share from Supreme Petrochem where the company has about 30% holding, equity holding. This year, apart from Supreme Petrochem, the new joint venture company, the Kumi Supreme India Private Limited, where we have 20.67%, but only for 9-month period, and the share from that joint venture is very minimal, about INR 25 lakhs or so. So primarily, it is Supreme Petrochem share of the profit.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [211]

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I see. So Supreme Petrochem, the bulk of the profit gets generated in the fourth quarter?

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P. C. Somani, The Supreme Industries Limited - CFO [212]

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No, it depends upon their quarterly performance. You see, ultimately that company also is a listed company. Whatever profit they generate every quarter, we gain 30% of that.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [213]

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I see. Would you like to share any thoughts on guidance on Supreme Petrochem?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [214]

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(inaudible) are the verticals (inaudible) volume growth (inaudible) okay (inaudible) prices remain reasonably in a narrow range, not volatile. And last year, it went up to $1,400 and then came down to $980, which created huge loss. We don't share (inaudible) very high. And so if they don't go very high, there is no reason for them to (inaudible). So we deal with the (inaudible) around this level, we should be (inaudible).

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Operator [215]

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We have next question from the line of Trupti Agrawal from White Oak Capital.

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Trupti Agrawal, [216]

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I just want to know that in terms of working capital, I see that we've done a great job. We've reduced our working capital -- net working capital from 33 to 24 days in F '19. Just wanted to know how do you see this going forward. Is there something that you would be able to optimize further?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [217]

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(inaudible) to our customer. Now the things are behind us. So we could bring down our working day (inaudible) to only 21 days. We went up to even 27, 28 days, now 21 days, which gives good support on our working capital requirement. As you have seen, our net -- our working capital has gone up only by 4% requirement and value growth was 13%. So working capital requirement has gone up by 12%, and turnover went up by 13%. (inaudible) will see the working capital are in tightly.

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Trupti Agrawal, [218]

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Sure. So this is how -- what would be the level going forward, right?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [219]

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(inaudible) going forward (inaudible) demonetization.

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Trupti Agrawal, [220]

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It can't get better is what I meant.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [221]

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Yes.

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Operator [222]

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

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [223]

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Just one question. Could you please approximately quantify as to what is the quantum of price cuts that we took in cross-laminated films for the whole of FY '19?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [224]

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No, we took price cut in the year '17-'18, and again, '18-'19. So...

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [225]

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Yes, sir. So in '18-'19, what was the quantum of price cut?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [226]

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Price cut, we get more often (inaudible) There are many factors. It's a very complex question. But we gave quite reduction, so that's why our cost per kilo has come down. But now we believe that there is no reason to make money drop (inaudible) our competition was selling at 15% lower. So there's nothing left for them.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [227]

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Okay. So the price differentials between us and the competition would be about 15%.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [228]

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Due to competition only, we had to drop the price 2 time in last 24 months. Now we don't believe that we are required to drop price.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [229]

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So sir, at current levels, what could be the differential between us and the 7, 8 regional players in packaging?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [230]

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Many of them are not making product comparable to us. Some of them are making their (inaudible) 7% lower, somebody is going to give 10% lower (inaudible). I can't do comparison, which is not transparent pricing. Our pricing rates are transparent, but we are selling at prices affordable to our customers.

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Operator [231]

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We have next question from the line of Madhav Marda from Fidelity Investments.

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Madhav Marda, Fidelity Investments - Equity Research Associate [232]

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I just had one question on -- in your outlook on new product launches in any of our segments that you're planning in the coming year.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [233]

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No. In (inaudible) we are having more and more product. Last year, (inaudible) 355 varieties and furniture we added indiscernible] overall same growth.

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Madhav Marda, Fidelity Investments - Equity Research Associate [234]

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And on the composite cylinders, sir, any outlook when the business could pick up? Any outlook for this year?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [235]

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We hope this year, the business will improve despite the long waiting period.

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Madhav Marda, Fidelity Investments - Equity Research Associate [236]

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Are we seeing any early signs, sir? Any early signs of...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [237]

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So we hope this year, business will improve. (inaudible) demand further to come from Korea. We have some quality issue with Bangladesh supply, but there also things seem to be sorted out. And we hope that government of India (inaudible) every year (inaudible), which is (inaudible) that will be option only. After (inaudible) more (inaudible) customer to decide whether they would like to pay some more deposit (inaudible) some time.

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Madhav Marda, Fidelity Investments - Equity Research Associate [238]

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And how much is the differential between...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [239]

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INR 1,000 per piece?

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P. C. Somani, The Supreme Industries Limited - CFO [240]

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Yes. INR 1,000 per cylinder.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [241]

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Per cylinder. It will be INR 1,400 or it will be INR 2,400. It will be onetime investment. It will last for several years, 10, 15, 20 years. And then you save your life also because people die every year, several people die, hundreds of people die with LPG cylinder explosion. It will burn out, it will not explode.

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Operator [242]

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We have next question from the line of Nikhil Gada from AMSEC.

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Nikhil Gada, Asian Markets Securities Private Limited, Research Division - Analyst of Consumption Appliances, Plastics, and Building Materials [243]

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Sir, just one question on the cross-laminated films. You said that we are seeing some breakthrough in explodes as well as we have increased the application. So can you just highlight what is the new applications, new products that we have launched?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [244]

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Every product, what you see in the market, they require protection, (inaudible) protection. So we make product (inaudible) machines. We supply them cover, machine cover, the application. So every product we see -- every product require protection. And our product (inaudible) with a extremely good protection. So we have product which require (inaudible) in the market (inaudible) they require protection and we make (inaudible).

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Nikhil Gada, Asian Markets Securities Private Limited, Research Division - Analyst of Consumption Appliances, Plastics, and Building Materials [245]

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Sir, basically, like if we see previously agriculture and transportation was the major areas where cross-laminated films were used. So...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [246]

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We don't use in transportation. Transportation, they don't use cross-laminated, our tarpaulin. No. In transport, (inaudible) the tarpaulin will break. The tarpaulin can't restrain grinding from the (inaudible) velocity, the tarpaulin will tear out. Then (inaudible) fabric, not our tarpaulin.

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Nikhil Gada, Asian Markets Securities Private Limited, Research Division - Analyst of Consumption Appliances, Plastics, and Building Materials [247]

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Okay. And in terms of export, where are we actually targeting?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [248]

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Several countries, more than 20, 30 countries. We are exporting to U.S.A., we are exporting to Australia, we are exporting to New Zealand, we are exporting to (inaudible), we export in third countries, we export in Southeast Asia, many countries.

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Nikhil Gada, Asian Markets Securities Private Limited, Research Division - Analyst of Consumption Appliances, Plastics, and Building Materials [249]

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Any number which you can give to this in terms of how much exports has been in terms of Cross-Laminated Film?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [250]

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(inaudible) talking to you.

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Operator [251]

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So we have the last question from the line of Ritesh Shah from Investec Capital.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [252]

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Sir, just a few questions. Sir, how will -- how should one see our market share for Cross-Laminated Films this year and as you go into next year?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [253]

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Market share, we are the leader today. There is hardly any supply from them. We are the leader.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [254]

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Okay. Sir, how much of the volume growth that we registered? So I think earlier, you indicated that we would have some flat volume growth.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [255]

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(inaudible) growth of 2% volume.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [256]

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So FY '19, you registered 2% volume growth. And for next year, you have indicated 10% volume growth.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [257]

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Right. You're very right.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [258]

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Correct. And sir, how much is the installed capacity? Because in the CapEx line item, we see that...

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [259]

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(inaudible) 27,000.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [260]

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27,000. But sir, when will this number increase, too? Because we are adding incrementally at Silvassa as well as (inaudible) unit.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [261]

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We are incremental in some additional equipment to make this cross-lam bonded film. Yes, we are capable to make cross-laminated film, and we told earlier that we are now comparable more and more business to cross-lam bonded film. It is a very different product. Yet, we're adding some additional equipment on our present capacity. (inaudible) capacity, it will only be a new product, different product.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [262]

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Correct. Sir, what percentage of our volume is already on cross-bonded against cross-laminated?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [263]

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Mostly now, it is cross-lam bonded. (inaudible).

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [264]

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It is entirely cross bonded, sir?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [265]

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No, it is not entirely (inaudible) we don't need more machine (inaudible) normally, not entirely, immediately, and now it will become entirely after some time.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [266]

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Okay. Okay. And sir, you're seeing a 10% volume growth. It's good enough to maintain our market share. So we don't (inaudible) market share actually going down going forward.

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [267]

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We have already yielded 10%, which (inaudible) this year (inaudible) market is 500,000 tons. (inaudible) which are better qualities (inaudible) more Supreme property. And that's why we are commanding better price. Our streak will continue.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [268]

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Right, right, right. And sir, another question. And one-off -- in the notes of accounts, you have indicated that there were certain incentives, which we expect from the West Bengal government to come through, which hasn't. Sir, how much is the quantum over here?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [269]

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We are working cycle, how can I quantify?. We are working. We don't know anything. Nothing has come. That's all I can tell you.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [270]

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Okay. But sir, is that one of the reasons where the margins could have been a bit lower?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [271]

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We don't invest money based on any incentive.

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Operator [272]

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Thank you. So ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Over to you, gentlemen. Sir, any closing comments?

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Mahaveer Prasad S. Taparia, The Supreme Industries Limited - MD & Director [273]

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We thank you all the participants and (inaudible) Mr. Pujara. I thank you all very much. Thank you, dear friends.

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Operator [274]

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Thank you very much, sir. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference call. Thank you for joining with us. You may now disconnect your lines.