Ladies and gentlemen, good day and welcome to the Q2 FY 2022 Earnings Conference Call of Astral Limited, hosted by Spark Capital Advisors. As a reminder, all participant lines will be in the listen -only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Girish Choudhary from Spark Capital Advisors. Thank you, and over to you, sir. Good evening, everyone. On behalf of Spark Capital Advisors, I welcome you all to the conference call of Astral Limited to discuss the Q2 FY 2022 and First Half FY 2022 Results. From the management side, we have Mr. Sandeep Engineer, Chairman and Managing Director, and Mr. Hiranand Savlani, Chief Financial Officer of the company. I now hand over to the management for opening remarks, post which we can open the floor for Q&A. Over to you, sir. Thank you. Firstly, I take the opportunity to wish you all Happy Diwali and Happy New Year. As we all know, that we are passing through a tough time of pandemic. Initially, we have great challenges in the business, and now the supply chain is giving equal challenges in trade. Under all these circumstances and challenges, I'm very happy to convey the Astral team has done a remarkable job and delivered once again an excellent historically high quarter in top line. Our CFO, Mr. Hiranand bhai Savlani, will give details on all financial numbers post my initial remarks. To give you the brief of our expansion plans, which got delayed due to the closure and the ongoing challenges of COVID, we are all going to start production in next few months. The much-awaited East Plant is almost ready and the installation of machinery is going on. We are going to start the trial production in the month of December, and the commercial production should be started, will be started from January next year. Our valve plant is ready and will start production from December. We need not require to take trial runs, as most of the products have already been started and have been tested in our existing facilities. As time goes, we will be adding a huge range of industrial plumbing valves in CPVC and PVC to the size up to 12 in, which would be the biggest valve ever produced in India, in CPVC as well as PVC. Hosur plastic tank plant is complete. The machinery has been installed, and the commercial production will start from the month of December. The southern states will be supplied water tank, plastic water storage tank from our Hosur plant December onwards. I also take the opportunity to brief you about a new launch, both in new launches in pipes and adhesives. In December, the company has planned to launch first time in India, a very ultra-modern state-of-the-art DWV, drain waste and vent pipe system with noise insulation properties, which will be very cost-effective compared to the existing polymers for drainage application. The key features are to save time and efforts for easier installation, giving noise insulation properties, will be maintenance-free, will have high impact, improve occupational health and safety hazards, reduce risk of defects because of high impact strength, easy inspection for services, and shock and vibration proof. UV resistance will be there in the polymer which we will be using as a compound. In our Resinova, we have successfully relaunched Bondtite PRO epoxy in the Indian market. This is the first of its kind epoxy in the Indian market, and we are getting very encouraging response from the market. It is most advanced epoxy adhesive, having seven times impact strength in comparison to standard epoxy adhesives, and also it gives 20% high extra coverage. It is also having holding strength of four hours and gives better weather resistance. These properties make Bondtite PRO an ideal product for bonding multiple product, multiple substrates used for construction and maintenance purpose. Wood and plywood is the major component of making furniture since past several decades. Now the world has started moving to replace the wood with artificial boards to protect the forest and maintain the ecosystem. Plastic wood is also going to take a big shape in this sector. The major challenges currently the world is facing to how to bond it properly. How to bond this artificial products which are made out of different materials and not wood. Even the traditional PVA and rubber adhesives are not giving satisfactory results. WPC is winning battle in the same, but there is no specific adhesive available in the Indian market. To overcome this issue, first time in India, Resinova has launched and introduces one innovative product called Resiwood WPC Fix, which is ideal to bond WPC to WPC and other substrates like laminate and acrylic boards, as well as WPC to other products like even metals and mortars or any other product, which has to be bonded with WPC. Looking to the excellent demand scenario in both businesses and pipes and adhesives, the company has decided to undertake a CapEx of INR 200 crore, which will be spent in FY 2023 and FY 2024. This includes a state-of-the-art plant of CPVC, PVC pipes and fittings at Telangana South, for which the company has already acquired a land measuring 98,970 sq m, which is almost equal to 10 lakh+ sq ft from Telangana government. We are planning to start production by FY 2024, as our Hosur plant in the south will cross 80%+ production utilization by FY 2022. This will be helping to grow and cover the south states in addition to the Hosur facilities which we have. Similarly, adhesive business, we are putting up one more adhesive plant in chemical zone at Dahej. The plant will be ready by FY 2023 end, and the production will be available by FY 2024 onwards. The company is already having land measuring 67,000 sq m at Bhesana. Till this production plant will be completed, the existing capacity will be substantially utilized in this one and a half to two years. We are preparing for additional capacity as the growth is happening and the challenges will be faced in the future. We will be answering most of your queries or in your question answer about our plans, about our CapEx, which we have told about the new product, about the product line which we have almost announced to launch, the ceramic ware as well as the faucets. We'll be covering that in more detail in our question answer, and we'll give you more clarity on this, on the new product line which we are going to enter and which we are already the planning is on, and which we have announced to give the clarity. As we have told that we'll give you complete clarity on this business in our con call after the fiscal results. We'll take up in the question answer, and we'll brief you in detail on this subject. Till then, I will hand over to Hiranand Savlani to go through the financials, and then we'll straightaway go to the question answer session. First of all, I want to thank all the participants for joining this earnings call. At the same time, we want to thank Spark Capital for hosting this con call. Wishing you all a very happy Diwali and Happy New Year. We hope we'll continue our growth journey in this new year and keep you all more wealthy and prosperous. As Sandeep brother said, this quarter was once again a blockbuster historic high quarter in terms of growth. The market dynamics are challenging, and within this challenging, we are giving lifetime high quarter, which keep our confidence more and more at a higher level. Now let's see the numbers which is already there in the press release, but I want to take it through a few numbers and then we'll highlight about this quarter. On a standalone basis on pipe business, the top line has grown up in this quarter by 60%, and the similar growth was there in the half-yearly that it was 61%. EBITDA has grown up by 47% on a QoQ basis and a half-yearly 67% compared to last year first half. As far as this adhesive is concerned, adhesive revenue has grown up by 36%. Little setback was there in the revenue because our U.K. plant was having little shortages of raw materials, so U.K. had grown up only 12%, while our Indian operation, Resinova, had grown up this quarter 47% growth. On a full year, half-yearly basis, U.K. has delivered 36% growth, and Resinova has delivered a 70% growth. We are continuing our guidance of crossing INR 1,000 crore top line this year, and we are maintaining this guidance at this stage. Now coming to the consolidated number, an EBITDA margin of this adhesive business is maintained compared to last year Q2. That was last year 15.1% and this year is 15%. So more or less same EBITDA percentage is maintained. On a half-yearly basis, there is a improvement into the EBITDA margin. Last year it was 13% and this year it is 14.5%. On a consolidated basis, if you see the number, the top line. QoQ basis has gone up by 54% on a half-yearly basis it has gone up by 61%. EBITDA has gone up by 48% on QoQ basis, and on a half-yearly basis it has gone up by 72.5%. With this, now I want to take you to the key highlights of this quarter. In spite of 20% volume growth, company was able to reduce its receivable days and control its working capital cycle. The inventory was high because of inflationary trend in the pricing of polymer, and we are expecting further price rise in the Q3. Hence, we have kept intentionally a high level of inventory, which we are confident that it will be reduced substantially by year end. Because by year end, we are expecting the polymer will start dropping the level. Demand scenario is excellent in both the segment, that is in pipe and adhesive. Plastic storage tank is picking up momentum month-on-month, will pick up further once our south operation will start from December. Polymer prices had an upward trend in October also. As you know, PVC price has gone up by INR 20 in the month of October itself, and we have passed on this to the market in October itself. Similarly, CPVC price rise also been taken by Astral in the month of October, which was very high price rise. From October 1st, we have taken 5% price rise, and from October 25th, we have taken another 7% price rise. So 12% price rise in the month of October in CPVC, which will improve our gross profit margin substantially in Q3. We have lost some gross profit margin in Q2, mainly because the pass-through took place in the CPVC with a lag. Because of that, we have to sacrifice margin into the GP levels. I am sure you are keen to know about our new business vertical, that is sanitaryware and the faucet business. We are working for the same in detail and will be ready with the plan by next phone call. We will let you know in detail about your question, which normally related to the products, kind of product, SKUs, investment, outsourcing model or manufacturing plant, et cetera. All these questions will be answered in the next phone call. Till that time, we request you to please have a patience and allow us to work on this plan. Housing side demand is good and booking numbers are coming robust from the developer, which indicate that piping demand will pick up further with some lag. CPVC demand was robust mainly due to good demand from housing side, and secondly, shift from PVC to CPVC due to narrow down of gap between CPVC and the PVC pricing. There was a huge pressure on gross profit margin in last quarter, but we were able to maintain our EBITDA at 19%, which is the highest in industry. We are expecting this pressure will substantially reduce in Q3 because we have already taken the price rise in PVC and CPVC in the month of October, as explained earlier. This is mainly because of pass-through took place with little lag. Similar pressure was in the adhesive business too. There also pass-through take place with some lag. Because of that, GP was under pressure, but due to robust top line growth, we were able to maintain our EBITDA margin. Once chemical price will come down, we will see a good improvement in GP as well as EBITDA margin in adhesive business. Now I am opening up the floor for the Q&A session. Over to moderator. Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nitin Jain, Fairview Equity Advisory. Please go ahead. Thank you for the opportunity. I have just one question. Is it possible to quantify the inventory gain for the quarter? What would be the price gap between PVC and CPVC now? Thank you. I don't think any inventory gain in this quarter. On the contrary, we might have lost some because of this late pass-through in CPVC, which I already explained that we have passed on 12% price rise in the month of October. There is no scope for inventory gain in this quarter. Okay. Post the price hike, what would be the price gap between PVC and CPVC? The price gap, which was sizably narrowed down, so now it will further increase. At the same time, PVC price has also equally gone up. It will not be that gap. More or less 2%-3% gap might have been widened up with this price rise of PVC and CPVC. Okay, thank you. Thank you. The next question from the line of Rahul Agarwal from InCred Capital. Please go ahead. Hi, good evening, and congratulations for the results. Thanks for the opportunity. I had three questions. Firstly, to start with the, you know, entry into Sanitaryware and Faucets. Obviously, you explained that more details will come later. Just wanted to understand your thought process. Because the way I understand is, the existing segments of pipes and adhesives were anyway growing. Next five years, we were expecting like 15% revenue CAGR, and, you know, coupled with margin expansion, higher bottom line growth as well, right? The aspiration of entering into a new segment is purely from a higher growth perspective, or could you explain some thoughts, maybe Sandeep, I can explain that, you know, what basically drive the entry into this segment? You know, what is the need for the company to invest here right now? You know, what is the external environment telling you? That's my first question. Thank you. See, basically, you can say, and you are correct, that existing business has prospects and it is growing, and we are equally working on it. It is not that we have let down anything in that. When we were in pipe and when we entered the adhesive business, similar questions were raised, and we have proven ourselves to make headway in that business too, and at least make our mark in our adhesive business. Now, we have a strong dealer network now, which is very active, almost close to 2 lakh active dealer network and a huge network of distribution. We have almost with adhesive and with our pipe, we have crossed 12,000+ distribution points. The same is getting added up all the time. This was the right product mix for Astral to get into, to make it for it, use its brand. First is the strong brand equity it holds with the users. Second, come out of the wall. We are behind the wall, now we'll be in front. Secondly, use this channel which we have created, a very strong channel. This business was thought around, worked around for almost substantial time. It's not that overnight we have just opened our eyes and said, "Come on, run after this." More than a year and a half, I have made my homework on this, done a couple of surveys of the market. Our channel has been surveyed, and then we have gone ahead with the decision, but still we will not be rushing into anything. We don't want to rush and say, "Here, my tap is there." We would be making the product in the right mix, right pricing, right quality, and then place it with the market. The right plan of the product line, the ranges and, plus the investment behind it, what we would be making, what we'll be outsourcing will 100% be given in total clarity, which Astral has always done with its investors as well as the analyst people and whoever needs this information will be completely disclosed, put in front of you, and then the business will be moving. It has been this choice has been made with a lot of homework, not just like without doing any homework. We again are there to make a right product and grow slowly. We don't want to benchmark ourselves against anyone and just say that we would like to fight with anyone or become big. We'll create a right impact in the market with this product, and it is going to give us a great leverage in the market. Got it, sir. Sir, just to clarify, this Sanitaryware and Faucets, both will be metal part as well, right? I mean, not only PVC fittings, right? Metal. Okay, got it. Second question was on CapEx. My sense is, you know, first half cash flow statement gives a number of about INR 190 crores. I think this is substantially higher than what fiscal FY 2022 guidance was. Just to understand, you know, what has drawn down this, you know, higher CapEx for first half, where have you spent this? And second is related question was what is the revised number for this year? Because 2023, 2024, you already mentioned that you'll spend INR 200 crores. But I just want to understand this year's CapEx. That's my second question. Like this year we have spent almost INR 40 crore-INR 50 crore for purchase of land. Like Telangana land was there, then we have purchased the land at Hosur. We have purchased the land at Rajasthan. We have purchased the land at Ahmedabad. Because all the lands which we have purchased except this, Telangana, which were adjacent land to our existing plant. That was the perfectly ideal for us to add to the land bank because the kind of growth which we are seeing in the market and the opportunity which we can see clearly, the way unorganized players are getting affected and the way brand Astral is getting stronger and stronger day by day, that has given us the boost to acquire the adjacent land first, and then there is a additional land to Telangana. Sizable amount we have spent into that side. Because of that, I think CapEx has increased. We will give you again a final figures with all this sanitaryware and all this investment because we have to keep in mind the new businesses also in mind. Like Sandeep has said in the initial remarks also that we are coming up with the DWV also. That product will be produced in Ahmedabad, so we needed additional land over there also. Plus, I'm very happy to say that we are also thinking to put up a state-of-the-art R&D facility. So far, whatever the CapEx Astral was doing or whatever the amount was spending, it was merged with the current CapEx and the expenditure where. Charged to the P&L for all this R&D related activity. Now we are going to put up a separate R&D facility, which will be a state-of-the-art facility, and there we are going to do R&D work for pipes as well as adhesives, and that facility will be separate from the plant. There also we are going to spend some money. I think a lot of new plants are coming, so because of that, we have to spend a little more CapEx than originally planned. With this additional CapEx, we are definitely going to give you additional revenue also and additional growth also and additional new products also. Sir, just to conclude on this, fiscal 2022 should be assumed INR 200 crore as full year CapEx or it will be higher? That depends how this Sanitaryware and Faucet plant is working out, because there we are still working. Once that amount will be frozen, I think that time will be the right time to tell you what CapEx will be there. Initially, we have worked out that it should be somewhere around INR 200 crore-INR 250 crore kind of CapEx. Right. You said INR 200 crore will be spent on the new, you know, for expansion of pipes and adhesives in fiscal 2020 to fiscal 2024. Just wanted to know, you know, what kind of volume capacity will be added in pipes and adhesives separately, if you could, just give that number. What kind of additional sales can we get from this INR 200 crore CapEx? This pipe we are targeting to add 30,000-35,000 metric tons capacity at Telangana. Adhesive, I don't have a capacity number, to be very frank. But that will generate additional close to about six times revenue than what we are going to spend the money. Yeah, in adhesive, always the capacities are very high because the packings are very low and you cannot bring a small reactor today, then when it grows you bring a bigger reactor, then bigger and then bigger. Always in adhesives, you will see that the capacity looks very high because the reactor sizes are very high. The reactors cannot be replaced YoY or two years, three years. Pipes, there are extruders which are added in the lines, and then the capacity comes up. Both businesses have different ways of calculating the capacity. Adhesive, I think the right capacity can be calculated on your packing lines because you can make enough product, but how fast and how speed you pack the product is very important. Because it is sold in small packs. It is sold in tubes. It is sold in 100 ml, 200 ml, 500 ml packs. Capacity-wise, adhesive will always look a bigger capacity. Utilization-wise, it will look like you are utilizing this much, but ultimately you have to see how much a guy is growing in volume terms. That is very important. The best part of this adhesive is that the asset turn is very high. That gives the comfort to the return point of view. Secondly, the addition of capacity cycles are very long. You don't need to keep adding and investing so much money. Once a proper reactor and a system is placed, just you have to keep adding the packing machines, and that only keeps on increasing the capacity. That CapEx, after a proper CapEx is done, is much less and substantially very low. How much are you spending on adhesive capacity? At present, not much because we will be going one by one, chemistry in this Dahej, and it will be a phase-wise. First phase we'll be adding around INR 40 crore-INR 50 crore, not more than that. Land is already with us. Sir, may I take this question and put it into the question queue for follow-up questions? Yeah, sure. I'll come back in the queue. Thank you. Thank you. Ladies and gentlemen, please limit your questions to two per participant. The next question is from the line of Sonali Salgaonkar from Jefferies India. Please go ahead. Sir, thank you for the opportunity. My first question is regarding the demand trends in October. You did mention that housing demand is quite strong. Would you be able to quantify the volume growth in October? I don't have a handy number for volume, but it should be double-digit and the value growth was roughly about 50% kind of level, 50%. This is the consolidated revenue, right, sir? Yeah, the consolidated only. Got it. My second question is regarding the PVC scenario globally. You know, you did mention that you expect the uptrend in PVC to continue even in the further two quarters. You know, just wanted to understand broadly, is there any supply constraint globally? And just another part to this question is what is the current capacity utilization that Astral is operating in the pipes division? Like, Sonali, that we have not said that this trend will continue for two quarter. We have clearly mentioned in the press release that Q3, this trend will continue, because we are not sure whether it will continue in Q4 or not. As per today's situation, still there is a short supply globally. Because of that, it looks that it can be extended in Q4 also. But at least for Q3 we have a clear visibility. The kind of new booking everyone has done for the import, that is at a higher price. That all material will land in India in the month of December. Till December we have a very clear idea about the price rise continue. But how it is going to be further extended, that will be known only one month or two month down the line. As of today, still short supply is going on. Because of that, we don't see any easing in the pricing in PVC. Coming to your second question of capacity utilization, I think overall capacity utilization of a company as a whole is roughly about 61%-62% at Q2 level, which will further accelerate in the coming quarter in Q3 and Q4. Because CPVC demand is robust, but at the same time there is a constraint of supply going on. Astral is able to manage that, but otherwise there is a challenge of getting the raw material also in CPVC as well as PVC. Somehow we are able to manage because of our long relationship with the supplier. Understood, sir. Sir, lastly, just one confirmation. You said CapEx INR 200 crore in FY 2023 and 2024, we mean per annum INR 200 crore, right? No. INR 200 crores for two years for this adhesive and the pipe, and plus there will be a Sanitaryware and Faucet. Uh. Plus anything added will be added by Astral if the new product launches will be there, which we can't disclose at this point of time because a lot of things are in pipeline we may launch. If we may launch the new product, in that case there will be additional CapEx. Understood. Like, CPVC, we have introduced the first question was that this year the CapEx is more because we are going to launch these new products and which is the one of the best products available in the market when we are going to launch next month. Got it, sir. Thank you. That's it from my side. Thank you. The next question from the line of Bharat Shah from ASK Investment Managers. Please go ahead. Good evening, Sandeep bhai, Hiranand bhai. Continued excellence. Just a broader longer-term wanted to understand your mind. As it appears, at least to me, I think as a country, as an economy, we are poised for a very different kind of a growth profile than what it has been so far. Relatively, infrastructure and other CapEx related activity also should be picking up significantly rather than very tepid and slow strength we have seen for last several years. Given all of that, do we believe, looking at our product portfolio and our entrepreneurial ability to keep identifying new opportunities as we have added from time to time from pipes to adhesive and then to the tanks and now looking at the SCH 40, SCH 80 sanitaryware activity. Would it be fair to say probably if we look at next five years, Astral is at probably one of the best opportunities than at any other time in the past? See, Bharat bhai, we are exploring products which have similarity in business and sales. In the segment we are in, the construction industry and the building industry is always going on and opportunities come and go, knock on our doors and we are always exploring. Whatever we have taken, if you have seen that, pipe was our initial business, but adhesive as we took, we made it stable. We have put it on the path of growth and the systems have been in place. Similarly, now we have taken up to come into the faucets and which also a lot of homework has been done before even we just let the market know at large at our internal levels, at our management level. Similar opportunities will always be continuously explored by Astral. The leverage we will be using is two things. One is the strength of its brand and now the strength of its reach in the market. Through dealer network one, through distribution network and the strongest program and connect with the users. You are in a sense right that this process of exploring and getting into newer opportunities is there and it will continue. It's too early to say that what is going to unfold in these five years or in the near future or the longer future. No, my question was. If you look at last several years, we have grown because we have been more agile in understanding and grabbing the opportunity, despite the fact that external environment has not been particularly supportive. My conjecture is that external environment, the economy, the businesses and infrastructure in particular, we probably are going to see a remarkable change in the next five years than what we have seen so far. Therefore, what helped us to grow all along was our internal agility and capability and entrepreneurial ability to spot and fructify those opportunities. Now, probably external environment also will aid to that strength, what is internally there. Therefore, would it be fair to assume or is it merely conjecture on my part, that probably both externality and internality are at a happy kind of, holy union now. Yeah, you are very correct. You are absolutely correct that the external environment is very conducive now for growth. The internal capabilities which we have created all around, from the manpower to the managerial levels to the management level, to the senior levels, and made our own in-house corrections and put things in right place, is going to help us the way the external things are moving in a positive direction. You are absolutely correct. These five years are going to be the great growth drivers from both ends, and it will drive Astral to new heights. You are absolutely correct, and thank you for this understanding of the market. Let me add, Bharat bhai, what Sandeep bhai has said. I think I am the most bullish person in the history of Astral in this today's environment. I've been working with Astral for almost 2003, okay? The kind of environment which we are seeing for the sector, it is really remarkable changes happening at the ground level. We are very, very bullish internally. The second thing is that Sandeep bhai rightly said that the team, I think Astral was not having too many senior management people within the team. Now, Astral has added the people from maybe from IIM or maybe having good companies in India. People are waiting to join Astral. Biggest advantage Astral is enjoying, that we are adding the strong team with the Astral. That is going to take the Astral to the next level. Third thing is, I think the biggest thing which we have done so far is the technology support. So far we were not using too much of technology support in the business. The way now we are using the technological support in the system and the way things are moving in the automated concept, that I think going to take the business to the next level. Because with this technology only you can take the higher volumes without getting more pains. Which is what I think Astral is doing today. All our distributors need not to call even our head office. Sitting in their cabin, sitting in their office, sitting in their shop, they can do everything they want to do with Astral. That is the biggest achievement Astral has done in this last three years, I can say. That is the biggest advantage I am seeing today. That another thing which Sandeep bhai has rightly pointed out, the connect to the end user, that is our plumber, carpenter. We are connecting to each and every plumber with our system. Okay? Today in our loyalty program, each and every plumber is connected. I think that is the biggest achievement we have done in this last two and a half year. We have developed so much of software and technology front that today we are connected with all our channel partner, dealers, distributor, plumbers, everybody. That is going to give us the edge in the industry, and that is going to give us a leap to grow at a faster run rate without taking too much of pain. I think we are very, very positive about this current scenario. Therefore, will it be fair to say that, if you look at a base which has now become higher, over last five years, if you look at next five years, even on these increased base, given the fact that we have, we are adding new lines of activity, external environment is supportive and internally, a, number of improvements have occurred in the character of organization and in the business, our growth rates, even on these larger base should exceed, compared to what we have done over the last five years. I think you have rightly understood, Bharat bhai. In an official way, we have communicated in our last presentation that Astral is targeting to double its top line in next five year. Conservatively, we have given the guidance also. We are quite confident that we will be doing much, much better in this environment and that we already communicated in our presentations also. With this new addition of the products and all, there are high probability that we may cross that also. Okay. Fantastic. Thank you. Just one last point, not to sound like a spoilsport, but actually to point out factual part. You mentioned that this has been a blockbuster quarter. Indeed it has been. You also said it's historically the highest in turnover, yes it is. But in profits, I think historically highest has been fourth quarter of the last year. Don't intend to be a spoilsport, but I just wanted to factually put the point on the table. I accept it very well, whatever you are communicating. Bharat bhai, at the same time, we cannot see only a particular quarter profitability because we already clarified that pass-through took place very late in this industry. In the month of October alone we have passed on 12% price rise in CPVC and equally close to about 12%-13% price rise has taken place in the PVC also. You wait for the Q3 number and I'm sure I will prove myself that what we are communicating, we are communicating always transparently and positively to the market. No, no. That there is no doubt. Congratulations. I was just pulling your leg. Nothing else. No, no issue. You have a full right. You are our oldest shareholder, so you have a full rights to do that part. Thank you. Happy congratulations to entire Astral team. Thank you, sir. Thank you. Thank you. The next question from the line of Abhishek Ghosh from DSP Mutual Fund, please go ahead. Hello, sir. Thank you so much for the opportunity. Sandeep, if you can just talk about the overall opportunity from the overall valve space that you're talking about and your new capacity coming in. How big is the opportunity? What are the kind of asset turns, ROCEs there? If you can just throw some light, it'll be helpful, sir. In the pipe and adhesive both, or you just mean? Well. Wall. In the valves, sir. The valve has two opportunities. One is the industry. It's a huge opportunity because Indian industry, in industry, the valves are mostly imported. Nobody makes CPVC and PVC industrial valves in India to the quality which industry needs. Today also we sell valves in industry which are imported from USA. There are two global giants in the world, Spears and Georg Fischer, who rule the valve market. There is a great opportunity in the industry segment. As you know, industry is growing and especially the water treatment industry is growing very fast, which needs many, many numbers of these different valves. Second, when you go to the plumbing segment, absolutely it is growing. There is a huge demand for valves and people above two inches mostly use metal valves. With a good quality of valve, we can also replace to plastic valves in plumbing in the higher sizes. The opportunity of valve is great in numbers and in growth. The best thing in the valve is the margins are very good. One. Second, it is a tough product to make. A valve, when you have to make a valve for the industry, it is a tough product to make and it is a tough product to succeed because the valve has moving parts and if you don't make it rightly with right choice of material, the failure is very high. Valve has a great opportunity, and it has an. Sir, will it be fair to assume that 15% of the overall pipe market could be these valves which could be addressable by you all? Yeah, it could be around that. 10%-15%. Oh, okay. Okay. Sir, sorry. If the higher sizes are also moving with the smaller sizes. Okay. Sir, my second question is, if you look at your. Because this quarter doesn't have any inventory gain as Hiranand sir mentioned, and it may actually have some inventory losses. Despite that, if you look at your pipe EBITDA per kg in the INR 42-INR 43 per kg. Now, if you look pre-crisis, this number used to be much lower in terms of EBITDA per kg. Now the, you know, the base seems to have moved drastically. If you can just talk about the sustenance of this, and the competitive scenario which has helped you this. If you can just throw some light will be helpful, sir. Thanks. I think the sustainability will be arrived when the stability comes in the polymer price. Till the polymer price is not stable, it is very difficult to say what will be the sustainable level. These kind of margins are very high margins, which we have communicated in past also. Market is giving opportunity us and our economy of scale is giving us the advantage. Because of that we are able to get the advantage out of that. Once the polymer price will stable down and the availability will be freely available, all the polymer, then at that stage will be the right time to arrive what will be the right number. At this stage, I think still it will be high only because still the supply constraints are going on and polymer prices are not coming down. Because of that there are high probability that these kind of high margin will be maintained. Okay. Okay, sir. Thank you so much for answering my questions. Wish you all the best. Thank you so much. Thank you, sir. Thank you. The next question from the line of Kunal Lakhan from CLSA. Please go ahead. Hi. Good evening. Sir, you mentioned that, you know, you've already taken price hikes of 12%, and still expect polymer prices to go up. Have you taken enough sufficient price hike or because of the polymer prices going up, will you consider further price hikes in November and December? No, like whatever raw material price has taken place, we have completely passed on to the market. We are not going to take new price rise unless there is a price rise in the polymer. If the raw material price will go further from here, we will take the further price rise. Otherwise, whatever so far the raw material price has increased, we have passed on to the market. Sure. The fact that, you know, your volumes, volume growth remained robust in October as well. The market is absorbing the price hike, right? Yeah, definitely the market is absorbing the price. Just a related question on that would be that, you know, what is the price gap between, say organized players and unorganized players today? Is it wider and has it narrowed? The price gap is not a question. How much unorganized player is able to make and sell because of all these cycles, the availability of raw material, the price rise, all these issues has almost, you can say that the unorganized players are in a very bad shape. Their working capital cycles have all been haywire. It is the organized sector which is being now growing and there is some price gap, but actually they are paying more to get the material. Selling at a lower price. Again, you can understand what challenges they are facing. Now the question of this unorganized sector price gap is almost gone. Market is not even talking about it. Let me add what Sandeep bhai has said, that today, most of the time, if you see in last three to four months, there is a gray market premium on polymer price. Okay. Normally, the unorganized player has to source from the traders only. Majority of the unorganized players. Few may be sourcing from the Reliance or maybe Chemplast or something. If there is a gray market premium going on the polymer and they have to source from them, then how can be they cheaper than us? It is very, very difficult for to be cheaper than us. This is a very, very difficult time for the unorganized player to fight with the organized player. That is why you are seeing that all the organized players are doing good in the market and everyone is delivering the growth. Great. That's good to know. Also, just clarifying one thing. You said in your earlier comment that gap between PVC and CPVC is about 2%-3%. Is that correct? No, no, no. I said that whatever the gap was there, it might have been reduced by a couple of percentage because PVC price has gone up by almost 10% kind of level, and CPVC price has gone up by 12%. To that way, couple of percentage gap has reduced. That's what I said. Gap has reduced somewhat, but not. Not 2%, 3%. Otherwise everyone will buy CPVC or PVC. Yeah. Correct. That's what I thought. Yeah. Correct. My last question is on... So in your comment, you mentioned that, you know, in the adhesive segment, there was a shortage of raw materials in the UK plant. Has the issue been resolved or it's still going on? Yeah, yeah. Right now, this is resolved. We are expecting that this quarter should be better for them. Okay. Okay, great. Thanks so much, and all the best. Thank you. The next question from the line of Rajesh Ravi from HDFC Securities. Please go ahead. Yeah. Hi, sir. First of all, congrats on great set of numbers. My question pertains to first, housekeeping. How much is the production number for Q2, pipe production number? Oh, my God. I don't have a handy number, but you can call me separately. I will give you. Sure, sure. It goes roughly out. Let me check if I have the number with me. Secondly, how much would be the agricultural contribution in the. 39,000 metric tons something was there. 39,500 metric tons or something like that. 39,500 metric tons or 40,000 metric tons, something like that. Okay, sir. I'll check that separately. Second is, how much would be the irrigation, agricultural irrigation segment contribution to your pipes revenue, sir, broadly, even if it's for one year? Hardly anything. We are not in agriculture business much. Even a little bit agriculture pipe which we are selling, majority of them is going to the plumbing side. Right. That is reflecting in the. They are under the category of agriculture, but they are used in the plumbing application. Okay. Sir, this INR 200 crore CapEx Telangana project FY 2024, this is all encompassing in terms of the land cost is also included in that? Or, as you mentioned, you have incurred INR 40-odd crores towards land. No, no. I think you have misunderstood. INR 200 crore include adhesive CapEx also. Okay. It is not only Telangana. Land is not included. Land, we already have paid off. Sure. How for Telangana project would be for the pipes and fittings would be what size? It should be initially to start, which should be somewhere around 30,000-35,000 metric tons, and then later stage we will add. Normally, what happen that we make the plant of a bigger size. Right. Machinery and all we put as per the requirement. Like in South also, we started with 15,000 metric tons or so. Then we added. Today, we are at 35,000-40,000 metric tons in South. Similarly, I'm talking about Hosur. Similarly, we did in Ghiloth also, Rajasthan, that we started with a small capacity, 20,000 metric tons. But the plant was bigger. Because of that, now we have added the machine over there. We are increasing the capacity over there. Like, similar model we will follow in Telangana also. Initially it will be 25,000-30,000 metric tons, and then at a later stage we can add another similar capacity. Originally, our plant will take care of 50,000-60,000 metric tons capacity minimum. Okay. Machinery will be phased manner. Right. In FY 2024, you would start off with 25,000 metric tons capacity and subsequently in next few years you will double the capacity over there. Perfect. Okay. For this year, excluding the Bathware, which you are still to, you know, formalize the CapEx, what is the total CapEx one should look at? I think this year it should be somewhere around INR 250 or something like that. Okay. The Bathware would be over and above that when, as in when it starts. For next year. This include our new launch also, which is going to be in the next month. Right. For that. That is altogether a different product. The CapEx would already been done in the first half, INR 190 crore? Yes. We have already done the CapEx for that product. Right. INR 250-odd crore for the full this year and next two years would be spread over INR 100 crore-INR 200 crore spread over two years and normal maintenance and additional whatever expansions you announce going forward. Because we deviated from our original guidance because this INR 40 crore-INR 50 crore additional we spend in the land which we added at every location, and plus this new product. Okay. Great, sir. Lastly, on the margins, you mentioned that you're. Excuse me. Can I me. Can I request that you return to? Sure. I'll just put in question and move on. This price increase in CPVC and PVC which you have taken, In this month, October. Are the margins now for the this quarter, this is the current costing at similar level of the September quarter? It should be better than September. It will be better than your September quarter margin. Yes. Because we lost some inventory loss because of the pass-through of CPVC took place very late. Yes. Yes. That is why I asked this. You see margin expansions in the third quarter Q o Q. Great, sir. I'll come back in queue. All the best. Thank you. Thank you, sir. Thank you. The next question from the line of Sneha Talreja from Edelweiss Securities. Please go ahead. Good evening, sir, and congrats on great set of numbers. My first question was related to inventory at the channel. How are you seeing the inventory at the channel and is there any resistance from the distributors for picking up inventory given that, you know, prices are almost at an all-time high? I think if that is the case, we can't grow because we have grown 20% volume. That clearly suggests that there is no resistance at the distributor level or at dealer level. Yes, there is always a cautious view at the distributor and dealer level. Whenever we do the announcement of price rise, at that point of time, they pick up sizable quantity, and when there is a fear factor in the market, they sometimes reduce their uptake also. Underlying current is so strong from the demand point of view that today, even after so much of price rise, distributor and dealers are sitting with a very lean inventory. They are not sitting with a higher inventory. So we don't see any problem into the system because underlying current is very positive. They have no choice but to buy at a prevailing price because they are getting the same price from the market. I don't think any problem into the demand scenario in the market. Above all, with this, if they are holding it, our working capital cycle has improved. Obviously they are further selling the product. The receivables are also very much under control. It is, there's no holding in the channel as of. Right. Secondly, sir, any clarity with regards to BIS's implementation? We saw some impact of, you know, I mean, we got a hold from Kerala High Court. Apart from that, are other geographies implementing it? Are you seeing some market shift also because of that, or this is the working capital issues and, you know, availability issue shift that you are currently seeing? It will take a few more months to get into this. At present, even I think this coming out of this lag will take a few months. It will happen. I think even operational. When it happens, it will help the organized players in a big way. It will happen at some point. We have to wait for some more time to have a more clarity because you don't know and I don't know how the courts are taking the decisions and how much time they are going to take. It is very difficult to give the timeline. One thing is sure that government has taken the initiative, so they will complete. Look, looking to the polymer scenario and all, the market challenges with the smaller players, the government is going to make it happen, but will take some time. Already there is a sub judice matter on it. It will take some time to get that implemented. Got that, sir. Also, similar to valves, opportunity size that you discussed, could you also discuss about your other new product launch which will be happening from next month that you said? We cannot discuss. When it is launched in the next call, we'll obviously discuss it. Sure. Let us first launch this product and then at that stage we will communicate to you. I can tell you this is a very big opportunity. At the launch stage, we'll always pass a note to the stock exchange and also pass a detailed note to all our investors and all our analysts at large. We'll get all the details at that stage. Sure. Got that, sir. Thanks. Thanks a lot, sir. Thank you. Thank you. The next question is from the line of Nikhil Agrawal from VT Capital. Please go ahead. Yeah, good evening. Sir, could you help me with some scope, revenue guidance and margin guidance for FY 2022 and FY 2023? I think this is a very difficult time to give you the guidance about margin and all these things, because we don't know what is going to be the scenario at the global level. One side, the polymer prices are going up. Second side, supply constraints are going on in the system. Under this difficult time, chemical prices are going haywire. Under this situation, I think it is very difficult for us to give you a guidance for the next year. Let the things settle down first. Afterward, we are the most vocal company, so we will definitely come forward and give you the guidance also. Sir, like, these CPVC prices have been on a rise, now in PVC as well. Do you see some demand being shifted to HDPE where Astral does not have much of a presence? Which shift to what? HDPE. No, not at all. We don't think so. Majority of the product where HDPE, there we agree and all, we are not there. I don't think it is going to affect us. No. Plumbing wise, it won't ever shift. Not at all. Oh, okay. So could you help me with the product. On the contrary, we are thinking positively that if this is going to be a scenario, CPVC will be more attractive. Astral will be taking more advantage out of that. I didn't get you. I didn't get the you. I didn't get the point. Hello. I'm telling you that if this will be the scenario, then the CPVC product will be more attractive to the market. If PVC prices would keep on going high, CPVC demand would go more and more higher. That will help us to sell more CPVC and grow our CPVC base, which is obviously growing much faster than the PVC base for us. Okay. Sir, could you help me with the current prices of the CPVC and PVC resin? How much it was at the end of the quarter? The current price and all, we cannot disclose. PVC, I think it is already there in the public domain. You can go to the Polymerupdate website. You will get every price rise, every daily price rise. Today, roughly about INR 160 per kg is going on. CPVC depend on the every company sourcing from different places, so everyone has a different pricing. It is very difficult for us to communicate our pricing to the market. Okay. Sir, just one last question. This sudden rise in the CPVC resin prices. As you said, like, if PVC prices rise, so it's better for you because the demand will shift to CPVC. With the sudden rise in CPVC prices in the last few weeks, do you see the demand going back to PVC and then having an impact on your margins again? No, actually, PVC has grown much higher than CPVC. CPVC price rise has taken place at a very small level compared to the PVC price rise. Even if the CPVC price go further from here, it is not going to affect much to their demand. Because CPVC price rise has not taken place at all in India. Actually, if you go with this fiscal, this is the first time this price rise has been done and correction has been made in CPVC. Whereas previous, several occasions and several months, every month, two or three times, the PVC price rise correction has happened. Do you have any long-term contracts with the factory supplier, or do you buy? We cannot disclose, but we are in a very safe position of raw material, which I can tell you. What contracts we have, we, our pricing are all confidential and has to be kept confidential. Okay. As Hiranand bhai says that we are keeping our fingers crossed and we are blessed that we are having relationships with the suppliers who are supporting us in both PVC and CPVC. Okay. Thank you, sir. That's it from me. Thank you. Thank you. The next question is from the line of Saumil Mehta from Kotak Life Insurance. Please go ahead. Yeah, thanks for the opportunity. If I look at the Astral journey over the last many years, we have entered into categories which are more polymer or at least strong on chemistry, which has been our core strength. Be it adhesives or tanks, and especially categories where there is a large unorganized presence as well. If I look at the new category which you are going to enter, does it mean that there is a change in DNA and will be now more open to other building material categories which might not be polymer-based or something which is strong on chemistry, but some other factors? No, see, we have communicated very clearly in many of our con calls in previous con calls that Astral is very clear as far as the growth journey is concerned. We want to focus to leverage our brand and to leverage our network. You look at any product which Astral is entering, two things we are seeing very clearly. One is leveraging the brand Astral, secondly, leveraging our network. Similar strategy we are following into the faucets and sanitaryware also, where we are going to strengthen up our brand and secondly, to leverage our network, which is having a sizable network with us. Because of that, we are entering into that business. We are not deviating anything our strategy-wise. Five years before also, we have communicated same thing. You can go back and see our earlier communication, our interviews, our con call. Every time we have communicated one clear thing that we want to go ahead with this similar strategy, and we are continuing with that only. To add what I understood about things is that, yeah, we would be open to keep on exploring where there is technology, there is a chance of growth and where there is usage of our brand. Yeah, technology-wise, we'll be playing a big role to see that we enter into a product line where we use our expertise, and we would remain in the product line which covers these four walls. Strategies are made, will be made, and will be disclosed as the time comes. Here we have one more product line which we have to work on. Sure. Sir, in terms of any update on tanks business it's been few quarters we have entered. Any in terms of, you know, from where the. Tanks is doing excellently well, the way we imagine and the way things are happening. We are not going with any job work from anyone, from any of the smaller players. Astral is building its own capacities at different locations. That is taking some time. As we first started off with Aurangabad, then the Ahmedabad came into production. Now in the last one month, over a month, the Ghiloth plant has come into production, in the north, and now the south plant will come into production. After south, the east plant will come into production. Astral is growing. People, it will look a little slower at the pace, but we are growing with a strong foundation of having the product manufactured within our own premises. We are not compromising on quality of the product and giving the best product to the market, and market has really appreciated the Astral tanks. We have a unique technology of patent which we have brought for the first time in the tank. The inner layer is made with a special compound, which has some copper inside. As in India you know the copper vessel when the water is stored, it keeps the hygiene of the water intact. Astral has brought this new technology in the tank, which is for the first time this technology has come in the inner layer where the water is in contact with the layer in the tank. Sure. Sir, my last question is in terms of, there seems at least the expectation was there is going to be a significant pickup in the CapEx activity both at the central and the state level. Where are we in terms of, DWC business or, maybe, you know, also the Jal Jeevan Mission have significant orders coming by? That's my last question. DWC, we were a little low. As you knew that the CapEx cycles of government were on the lower end, but last few months it has picked up and we are doing excellently well on the DWC and the D-Rex and other products which are with the infrastructure. We are doing very well in that. Secondly, with the Jal Jeevan Mission, we have got lot of approvals now, and we are started supplying HDPE to Jal Jeevan Missions in some projects. Again, Astral undertakes the government project, infrastructure projects, either through distribution to secure its own finances or to supply to the contractor where the finance is very safe, or else take the bank guarantees or finance reassurance and supply. We can go faster, but we are keeping two things in mind, growth, value, and at the same time securing our payments with the government contractors, government bodies and giving the product. We don't want to break our finance cycle and rush into any business. Sure. Thank you so much and all the best for your future journey, sir. Thank you. Thank you, sir. Thank you. Thank you. The next question is from the line of Arafat Saiyed from Reliance Securities. Please go ahead. Yeah. Hi, sir. Thanks for taking my question, and congrats on great set of numbers. My first question is on organized and unorganized. I just want to see the gap. I believe this quarter is very good for organized sector while unorganized sector continue to face issues. Can you throw some light on that? See, basically no unorganized sector or no sector can be wiped off. We or nobody is here to wipe off anyone. As it is very crystal clear, you can say, I, that the polymers have gone very high. K-wire, the supplies are in restriction. The finance cycles are disturbed. The working capital cycles have gone into a spin. Obviously the organized sector with stronger financial backups are gaining on it. I don't say that unorganized sector has been wiped off. This is not what we wished and we should happen. Yeah, it's obvious. The cycles are clear and very transparent. Again, the similar question, if you look at in past couple of quarters, in fact the market consolidation happened in a big way and the smaller player continue to get out from the market. Any, and let's say, any sure. The unorganized supply chain is only restricted to one state, two states. Whereas, we have a supply chain with a strong backup systems throughout India. Elbow is a elbow, T is a T. If it is available, it is your product. If it is not available, anything can be used. Your supply chain, your how fast you supply, how fast you can give the product, how fast you can service the market, how rightly you service the market and the quality you give. Lot of things are happening which is helping these companies who have locations, plants at different locations and make the right product actually. You have to make the right product at the end. Fine, sir. That's it on my side. Thank you. Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. Hi, sir. Thanks for the opportunity. Congratulations for growth of Astral Limited, specifically on the volume growth. Sir, I failed to figure one particular variable. On the gross margins you indicated, that the passthrough happened with a lag. Sir, can you please explain this, why this phenomenon? Because, as a industry, always the passthrough has been pretty quickly, be it a fortnight or in a week. Is there any specific reason for this? The basic thing was that we had some inventory which was old, but some inventory which was new. Mm-hmm. I wanted to gain the markets very soon. I wanted to get to the maximum level of the market and the retail chain. My expansion of retail chain and the market has substantially helped me. It was the volumes which we were delivering, the value which we were delivering was a compromise of few numbers in the, in the profit, but the gain on the other end was much higher. Either I had to take the gain to reach to the nook and corner of India and to every builder of India, every retailer of India, every plumber, or else to take that. That has helped me, and it is something which was strategically done to close the last quarter and then take this price scale. Should one assume this as a short-term phenomenon for market share gains? Is it. It's not short-term. There is nothing short-term. Once the gain has happened, it's happened. Going forward, the margin will. Actually everyone has raised the price. Where obviously there is again no issue on that. If it is not that I only increase the price. Everyone has increased the price. Correct. It's not a short-term gain. It's a gain where actually helped us to create inroads in many towns and many places in the retail chain. It's never a short-term because all these data, all these are connected to us, and this is really going to help us, and it's helping us today also actually. Correct. That's useful. Sir, second question is you did touch upon availability for CPVC. Can you highlight what is the status over here? What I understand is CPVC availability specifically is tight, even for the larger players. Is there an acute dearth of the material right now in the market? Are we better placed or how should one look at? Yeah, again, I cannot comment on what the others are facing. It's not my job to comment on it. As Hiranand bhai said that, the relationships which we have and the relationships we have maintained and the amount of commitments we have from this relationship, we are on a safe track for the raw material. Great. That's quite useful. Thank you. Tomorrow, after three months, I don't care. You see, predicting today the future is the toughest call of this era, this fiscals. Right. That's quite helpful, Sandeep bhai. Thank you so much and wish you good luck. Thank you, Ritesh. Thank you. The next question is on the line of Nitin Jain from Fairview Equity Advisory. Please go ahead. Yeah, my question has been answered. Thank you. Thank you. As there are no further questions from the participant, I would now like to hand over the conference to the management for closing comments. We thank everyone, and stay safe, stay healthy, and looking forward to seeing you again after one more quarter of hard work. Hiranand bhai will give the closing comments please. Thank you all the participants for joining this con call, and if any question is unanswered, my mobile is always available for you 24/7. You can call me any time. Thanks, the Spark team for hosting this con call. Wish you again all the best for the coming times because now it looks that we all are coming out of this pandemic issue and hopefully India will be growing much faster run rate than what we have grown up in last two year and that is what we are expecting so that everyone can grow with us also. Thank you very much. Bye-bye. Thank you. Thank you, sir. Thank you. On behalf of Spark Capital Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.