Ladies and gentlemen, good day, and welcome to the Greenply Industries Ltd Q2 FY 2023 conference call, hosted by Asian Market Securities Ltd. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ from such expectations, projections, et cetera, whether expressed or implied. Participants are requested to exercise caution while referring to such statements and remarks. 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 and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatelia. Thank you, and over to you. Hi, everyone, and thank you for joining us on the Greenply Industries 2Q and first half FY 2023 conference call, hosted by Asian Markets Securities Pvt Ltd. In the panel today, we have Mr. Manoj Tulsian, Joint Managing Director and CEO, and Mr. Sanidhya Mittal, Joint Managing Director, Mr. Nitin Kalani, CFO, and Gautam Jain, AVP, Strategy and IR. May I now invite Mr. Manoj sir to begin the proceedings of the call. Thank you, and over to you. Thank you, Karan. Very warm welcome to everyone present, and thank you very much for joining us today to discuss Greenply's operating and financial performance for quarter two, FY 2023. To share the overall perspective, last quarter was a mixed bag of challenges and opportunities. From a demand perspective, consumer sentiments have been positive, especially during the festival season, supporting good sales momentum. Although on the costing side, we have faced similar headwinds of continued rise in timber prices with easing of chemical prices. On standalone basis, we have achieved sales growth of 14.8% in quarter two, FY 2023 on a YoY basis, supported by volume growth of 7.2% and realization growth of 6.5% on a YoY basis. The recently launched Green Platinum in premium brand category, supported both volume and realization growth during the quarter. Also, our largest and latest plant at Sandila, aided in serving the demand uptake. On a YoY basis, operating margins declined due to steep rise in raw material prices, I had mentioned earlier, and increased marketing expenses also. However, on a sequential basis, it has improved due to better product mix. We have maintained our prudent working capital management, that stood at 28 days for the previous quarter. In our Gabon business, we achieved sales of almost INR 59 crores in the last quarter, with a growth of almost 5% on a YoY basis. This was supported by added capacities and billing of dispatches done in previous quarter due to better mobility. European power and energy costs to remain volatile on supply versus demand in winter and Russia-Ukraine war, and that has created new level of challenges for the Gabon business. This will remain under watch for us in quarter three and quarter four. We are not very optimistic in terms of the performance of our Gabon business in quarter three and quarter four, for sure, at this point of time. In India business, we remain optimistic on the back of surge in housing demand, improving consumer sentiments, and shift towards branded products. To cater to the new age customer segment, we have introduced 10x4 extra large plywood sheets, first time in India, with grandness in structure and aesthetics. We believe this new introduction will enhance our brand portfolio propositions further. With this statement, I would like to hand over to Sanidhya to update on our new projects and manufacturing partners. Thank you, Manoj ji, and good evening to everyone on the call. Most importantly, our latest and largest greenfield plywood manufacturing unit at Sandila, Lucknow, has started commercial production during the last quarter. The plant's capacity is 13.5 million sq m per annum, contributes to almost 28% of our plywood capacity in India. Equipped with the state-of-the-art technology, it is one of a kind in India, having single line plywood production. The plant has been strategically located for better proximity of major raw materials and will help to cater to emerging demands in north and central markets efficiently. Our focus is on streamlining the machinery and labor and expect to reach 75%-80% utilization levels by Q4 FY 2023. In our asset-light model, we have two manufacturing partner units in Bareilly, U.P., for manufacturing of plywood and allied products. We are fully utilizing the capacity of the first project. In the second project, on increasing demand for doors in the market, we have started partial production in Q3 FY 2022, and expect the remaining to start soon. This will enhance our ability to cater to growing demand in this segment. Construction activities at our newly signed plywood partnership unit in Hapur, U.P., with a capacity of 7.5 million sq m per annum, is going as planned. It is expected to be commissioned by the end of the fiscal and support to serve the mid-segment plywood market. In our upcoming MDF plant in Vadodara, Gujarat, major machinery dispatches are completed and installation is in progress. Civil construction work is going on as scheduled. Due to some bottlenecks in international ocean freight movement and congestion at ports, we might experience some delays in remaining machinery inflows. However, we are still trying to complete the project in our timeline of Q4 FY 2023. We have also started other groundwork activities of building the team for this new segment, and recently onboarded an experienced person to drive the MDF sales. Alongside, we are working on the distribution channel and developing market strategies to cater most of the opportunities. Talking of the demand scenario in the plywood industry, healthy traction is in real estate sector, post-Diwali will support the growth. The momentum is expected to continue beyond as well, with improving consumer sentiments towards homeownership, especially in semi-urban and rural regions, and government trust on spending on infrastructure. With this perspective, I would like to open the floor for Q&A session. Thank you. Thank you. We will now begin the question and answer session. Participants who wish to ask a question may press star and one on your touchtone 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. We have the first question from the line of Arun Agarwal from Kotak Securities. Please go ahead. Thank you for the opportunity, sir. Sir, my first question is on plywood demand. You talked about, you know, the momentum continues there. Could you just help us out, what sort of volume growth we are looking at for the industry and maybe for the company this year? Hi, Arun. See, in terms of industry, again, you know, I have been saying this, you know, that we don't get any such public data. So it's very difficult to say that at what percentage the industry is growing. We have grown this time in volume. We had a volume growth of around 6%-7% on a QoQ basis. And we feel that, you know, for the full year, we can have a volume growth of anything between 12%-14%. Uh- This is also helped by our new capacities now, which is coming in place in Sandila. On the supply side, we are better off, and that will help us to grow on the volumes. Correct, sir. Sir, I mean, so second half, we will still be somewhat in single digit growth, is it? Or because the first half base was low last year. So if you look at second half to second half, how are we placed in terms of growth there? Well, as I said, that, in the second half, we are trying to look at a replica of quarter two. Okay. Quarter two multiplied by two is what we are targeting at second half. H2. All right. All right. So the other question is on, you know, the manufacturing, you know, partners that we talked about. I think we are talking about that we are fully utilizing their capacity. But if I look at the sales volume breakup, it seems that for the past two quarters or so, the manufacturing partner sales volumes have come down, you know, so just trying to... Well, yes, so there are two reasons. One, of course, there has been, you know, some production challenges also, at their end. The plant has not been able to fully stabilize. In bits and pieces, there has been some bottlenecks. And also, one portion of the plant, which is door manufacturing, we even still could not start. I mean, we just kick-started, with a very small pilot lot finally in the previous month, which is, I would say actually this month, in the month of October. And we are expecting that, that will start flowing now, production, you know, and, and ramp up starting from November. So, I think primarily it is, the efficiency issue at the plant level. Sure, sir. Just one last question here. Sir, depreciation and interest cost has increased on the consolidated level. If you look at standalone numbers, I mean, there, there's not much increase there, but at the consolidated level, that has increased. Can you just throw some light on that? Well, yes. So you know, to some extent, whatever. One, the loan in Gabon has slightly gone up. And the second is also that the earlier facility, whatever we were taking in Gabon, was all backed by, you know, the Greenply's standalone guarantees. Okay. We have withdrawn some of the guarantees, and we have shifted those loans to Gabon. So we've taken, you know, converted those loans to Gabon banks, where the pricing is slightly higher. Oh. We felt that it is better to de-risk that, and that actually challenges the Gabon team also further to, you know, stand on their feet properly and try and make that much of money that we are able to not only meet the interest, but also start repaying. It was more of a strategic call. What about the depreciation? Why the depreciation would have increased? Well, depreciation is. Sandila has now been capitalized, so you know, you will have new stream of added depreciation in the overall cost. That would be in the standalone books, correct? Not- No, no, no. At the console level. Okay. Just the Lucknow plant is in a subsidiary, is it? It's a subsidiary, yes. Okay, okay. All right, sir, got it. Thank you so much. I'll return in the queue for further question. Thank you. Thank you. We have the next question from the line of Sneha Talreja from Edelweiss. Please go ahead. Thanks a lot for the opportunity. Couple of questions, and first- Miss Sneha, your voice is not very clear. Could you kindly come on the handset mode? Is it better now? It's still breaking up in between. Sure, I think this should be better. Yes, this is clear. Go ahead. A couple of questions from my end in that case. You mentioned about your guidance. So firstly, you said that, you know, I'm trying to 14% guidance. Secondly, you also said that you want to revise that. You also want to do 17% MSM kind for volume, the sq m kind of volume in the coming two quarters. That actually brings me to the question that, in that case, you know, you will be actually doing 16%-17%. Sneha, your voice was not very clear. Okay. Can you repeat the question again? Miss Sneha, can you hear us? I think we lost her. Yes. We move on to the next question. Yeah. I now invite Miss, Mr. Udit Gajiwala from YES SECURITIES. Please go ahead. Yes, hi, sir. Thank you for taking up my question. Yeah. To check that, what can be the peak revenue that we can expect from the Sandila facility that we have started? See, if you talk from a capacity perspective, we can touch anything around INR 250s here. But I would say, you know, optimally, the plant will run somewhere around INR 200 -INR 220s here. Got it. And, sir, on, your comments on, you know, what type of timber escalation can we expect further? And also on the chemical front, if you can throw some light for H2 and FY 2024 as well. See, we have been waiting for, you know, I mean, just waiting that, timber prices will soften, and this has not happened in the last 12-15 months. It has, just gone, against all the trend charts, what I understand, what I have seen over the past many years. But, we've just seen some signs of slight softening in the timber prices. Chemical, chemical prices have come down to a certain extent. They are again stable at those prices. It all remains to be seen, from there also, whether they will go down further or not. See, most of the commodities, we have seen so much of corrections which has happened, but, unfortunately in timbers, that has not yet happened. It's, it's very well, actually a cyclical crop. As far as chemicals is also concerned, we all have seen corrections in chemical prices. Whether it will go down further or not remains to be seen. Understood. And, sir, any price hikes that we took this quarter and any anticipated for the remaining part of the year? No, quarter two, we could not take any price hikes. In fact, there was, as I said, that, since the raw material prices continued to move up, we were just trying to do some working. It has affected our margin to the extent of, you know, almost 0.8%-1% during the quarter. Having said that also, we didn't wanted to take any further price increase at this point of time, because, you know, the numbers might look good, but, the whole quarter, was slightly topsy-turvy. At times, we felt that the demand scenario is very good, and the other times we felt that it is weak. So we had to balance it out. Now that, you know, we have some additional supplies coming from Sandila, we have the opportunity to grow our volumes also, which for some time was not taking place. Got it. Got it. And sir, you have talked about, you know, repeating your Q2, I mean, Q2, numbers into Q3 and Q4. So that is somewhat something around for the full H2 could be something 34 million type of a number, just a ballpark on the volume front. Yeah, yeah. So that is kind of a growth of a 16%-17%, as compared to previous year, whereas you are guiding for 12%-14%. So is there some missing- No, I think, last year we did around 57.5 million MSM. Right. This year, then, it will turn out to be around 67. It is, right, right. Right? So how much is the growth coming? 16%-17%. 16%. So whatever will be the number, if it is 16%- Right. ... I stand corrected, it will be, it will be around 16%. Got it. Got it. And so just lastly, sorry to bring it up back, just on the margin front, also, if you can throw some guidance or, you know, when will we see, you know, margins inching up back? No margins at this point of time, I think, you know, it's slightly difficult to guide. As I said, that, the market looks good. At times, the market, at times doesn't look so encouraging also. I am sure that you people would have heard that from others also. We are trying to work our way out, and as I said that now that we are slightly supported better off on the capacity, we're trying to make sure that we are able to utilize those capacities and grow on volumes also, also. So, at this point of time, and, and with a similar performance, I don't see any further improvement in EBITDA margin. Our marketing spend also we are slightly up. Okay. If you see on a YoY basis, you know, last year we were around 2.5%, same quarter. This year we are around 3.5%. We think we'll continue at 3.5% for the full year also. So we won't get any advantage. Neither we want to grow any advantage, you know, out of that, because we feel that these are investments on a longer horizon. So, you know, whatever is needed to be done to the business at this point of time for future growth, we'll not back out, we'll continue to invest. Even if in the short run, you know, there is some impact on the margins. Got it. Got it, sir. Thank you so much, sir, and all the best. Thanks. Thank you. Participants who wish to ask a question, may press star and one on your touchtone telephone. We have the next question from the line of Manan Shah from Moneybee Investment Advisors. Please go ahead. Hi, thank you for the opportunity. You mentioned in your opening remarks about some delay in the plant and machinery for the MDF unit. So is this delay purely due to logistics? Or I believe our supplier is a German company, so is... Or is our supplier guiding for some delay due to power issues that are being faced over there? I think I'll answer this question. This is mainly on account of, you know, congestion at ports and, even after the ship is reaching India, by the time the ship actually gets berthing, it's like another 8-10 days, and then getting those goods from the port to the site, and all of that is becoming a challenge. There is no major delay from the end of the supplier. Right. So, the delay should not be more than 10, 15 days, right? Hopefully, yes, fingers crossed. As of now, it looks like we can achieve our committed target of quarter four, FY 2023. March of, March? March, yes. March, looks like March is achievable. Sure, understood. Secondly, on, from the data, it seems that the MDF imports are on an increasing trend. So, is this putting any pressure on the realizations on the MDF front? And also, post our commissioning on the capacity, our capacity, do you envisage any softness in the realizations, on the MDF side? So, I think, the current level, you know, the, we see the listed players and their margin. So honestly, when we see these margins, we feel very encouraged, but we also feel that these margins are not sustainable. So, on a long run, honestly, all our paybacks and calculations are made at, you know, 18%-20% level EBITDA. So I'm not worried, on a long run, but in the short run, yes, we were also expecting that, you know, the whole industry is enjoying a 50%+ EBITDA number. We'll also get that, but that looks very difficult. Because you have rightly pointed out the problem, yes, there will be imports, and there will be capacity challenges on the shorter run within India, because everybody is trying to put a capacity, including us. Also, you know, a 30%+ margin is also not sustainable. We have been discussing this, that possibly there has to be correction. Otherwise, there would be substitutes which will come back. Okay. So, you know, anything between 22%-25% margin looks sustainable, but, you know, who knows how things pan out? Nowadays, it's very, very difficult to really, you know, give a very forward-looking view. Understood. Also, from your answer to the earlier participant on the demand side, you mentioned that some months you felt there was strong demand, while some months... So if you can just throw some more color on that side, I mean, I mean, what are you trying to exactly say? No, look, last year we were seeing a very steady trend, okay? Mm. Even in any particular month. Of course, at that point of time, we were slightly marred with the supply side challenges, and we even faced that maybe till quarter one. Now, Sandila has come into place, so we got some relief in terms of getting some extra supplies. Once our Hapur comes into place, you know, by quarter four, then next year again, we will have better supplies. Even in Bareilly, like, you know, as I said, that those manufacturing facility has not really kickstarted for us what we were assuming. Sorry to interrupt you. My question is not on the supply side, I am, I am asking on the demand side. You mentioned that. You know, last year, in retail, it was very smooth. Mm. In terms of, you know, our sales pattern also throughout the month. This year we are seeing, at times, you know, a pressure for a particular week, and then we suddenly see that, you know, the sales team is very gung ho, and they say, "Sir, you know, very good, uptick again into the market. Mm-hmm. So finally, we have been able to deliver numbers, you know, so we didn't find that as a challenge, and that's why we were very optimistic also, going forward. But yes, it was, it was not so smooth as it was last year. Okay. And are you anticipating any correction in the realizations on the plywood side? See, I think, if the raw material prices, I mean, the timber prices starts coming down- Mm. Then we will have to see, because how the other players also behave is going to be very, very important. We, in any case, if you see, is our dependence is on, you know, our premium segment, right? More than the value segment. Right. That's something where, you know, we are predominantly present at category one player. Mm. So, if other players drops prices, then definitely there will be pressure on our premium segment. Right. But current trend, is stable or? Current trend is stable. Okay. Thank you. That was helpful. I'll come back in the queue. Okay, thanks. Thank you. We have the next question from the line of Parth Bhavsar from Investec India. Please go ahead. Hi, sir. So congratulations on the good quarter from us, and thank you for the opportunity. So this might be a little off, but I wanted to understand. So I found this document, where, you know, there's a summary that you gave out, which is on a farm forestry. This is Greenply Industries Ltd, this is Nagaland. So can you throw some light on this? Like, you mentioned the area under coverage and what could this bring on the table, like going ahead? Parth, we have not been able to get your question properly. I don't know whether it's, you know, the voice was not totally clear. Can you just repeat your question, please? You might have to repeat it. So there's this document that you GIL have uploaded, which says there's this Farm Forestry Agreement with Tizit, Nagaland, which basically is of 602 hectares of land, and from where you can—you'll be able to source raw material supply, eucalyptus and everything. So can you like guide us on like what could you know this bring on the table going ahead when you you know start procuring materials from here? So, as a policy, Greenply in every single factory location where we have, we try and plant and try and promote plantation in and around that area. Nagaland being a difficult and a different territory, we work with the tribals there. We give them saplings at the market cost, and, you know, they grow it and they sell it back to us. Also, as a trial, we've got a small piece of land where, you know, we are doing this trial on our own, where we've already planted this plantation. And in the future, we will be able to kind of supply, like, you know, secure supply for our plant and also move towards our sustainable journey, and try to make sure that, you know, whatever we consume, we plant more than that. Right. So, sir, from this plan, like, when will the supply start flowing in? Any rough idea? I mean, in Nagaland, we started all activities in 2011. Right. I don't have the exact data. We can get back to you for this 600 hectare or whatever you're talking about. For this, we don't have the exact data, we can come back to you. But, in 2011, we started, and today our plant is kind of running on the plantation timber, which we've done. Right. Since 2011 till today. You know, so we've kind of increased the life of the plant because, you know, previously the plants were dependent on forest timber, and for timber, which is coming from the forest. But now the plant is completely running on plantation-based timber. And this plantation we've been working since 2011. Okay. And sir, this is, like, completely procured like utilized at the Nagaland facility only? Yes, yes, yes. Yes, yes. In Nagaland, there's a legal law, you cannot transport wood, timber in the form of timber. You can transport end product, but you cannot transport timber out. Right. In every single plant we have, we have our own team which promotes plantation. We educate the farmers, we give them the sapling at the market cost, and we tell them to grow it and sell it back to us. But this is, like, end-to-end agreement, right? Like, you give them saplings as well, like, you also procure material from there, them. No, no, no, no, no, no, no. See, see, it is actually, in a way creating more availability. They are not bound to sell their crop to us. Okay? Okay. But it is like, you know, we are only working towards creating better availability. Okay. In turn, what has happened, the other larger players also now have started looking at doing the same. So, you know, I can only say that Greenply as a house started this as a practice, and now, others also are talking to us and they, we can also see some of the other players who start talking about it and, you know, investing some amount of their time and on developing this. Sir, like, basically, the farmer would be able to, you know, sell it at the market price as well, like, if he chooses to, right? Yes, yes. He will sell it to us also only at the market price. There's no pre-agreed price. Right. There's no, there's no discount, there's nothing. It's just, you know, we are working towards creating the availability. That's it. Right. Right. Okay. Got it, sir. Thank you so much for the clarity. Yeah. Thank you. We have the next question. Well, I know Mr. Achal from JM Financial. Please go ahead. Yeah. Good evening, gentlemen. Thank you for the opportunity. You know, my first question was, you know, can you help us in terms of the cost inflation, what is the effective cost of increase in terms of the timber cost, in terms of the chemical cost? If you could help us on a YoY basis. Pat, what are the numbers? Like for timber, maybe if you could help us with INR per kg, you know, that would be of great help. So, we have this year's number only, right now. Okay, we can get the last year number also. Yeah. This year, we will... If you see at timber, okay, from April to October, there is an increase of almost 10%. Okay. And, and in terms of chemicals, as I said, yes, phenol was lower by almost 12%-14% during this period, from April to October. Melamine has come down significantly, but we don't use that much in plywood, so that has dropped by almost around 45%-50%. But formalin, formalin has also come down. Formalin has dropped by around 25%-30%. Okay. Okay. My second question was, you know, with respect to, you know, the unorganized players, you know, given, I would imagine the timber cost inflation will be similar, if not higher for them. So, you know, what is the feedback on the, how the unorganized players are, you know, are surviving or, you know, are they back in full strength in the market? What I'm trying to understand is that, you know, while our volume growth was pretty decent, is that the industry growth or is that the market sharing? Well, you know, I said that, it's slightly difficult to, you know, predict and say that. For sure, if you ask me, my answer is that, you know, the industry is not growing in terms of volume at 15%, for sure. Okay. The growth, what we see is coming more in, MDF as a business. So having said that, it's purely the play is a shift from the unorganized market to the organized market. That's how I can actually say. Understood. Sir, you know, if you could help us with the mix in terms of the premium and the economy and, you know, sub-economy. So premium versus, you know, value, we are at 60/40 in terms of value, right? And if you look at the volume side, it is almost 50/50. You know, how do you see that evolving on next two years, three years? See, the market sweet spot is slightly at the, at the tip of, you know, the value segment. We have tried to remain, you know, afloat by launching new products. So in my opening comment, you would have heard that we launched Green Platinum in the premium segment, and that has done very well. We have relaunched our club also. So we just did so. So I think even that will have some more traction because we are that one player in the plywood segment whose dependence on premium segment is very, very high compared to anyone else. So we will have to continue to do something to, you know, remain better off there. Value segment, for sure, is doing well. Right. And how much would be the margin difference between the value and the premium? That I would not like to share on the call. Okay, no problem. Yeah. Got it. Got it, sir. And just last question, if I may, with respect to Gabon. You said that we obviously are not too optimistic on Gabon performance, given the European issues. Any sense on the quantification of that? You know, do we expect it to fall by, like, 30%, 40%, 50% in the second half, and also margins? Yeah. So, see, normally speaking, for this year, we were expecting Gabon to do very well because, you know, we are seeing some easing out of some of the problems, like even the shipping side and other things. But, things have changed. And as I said, for H2, we might see a drop in terms of sales by even 50%-60%, because my Europe business is 60% of the total business. Right. So, you can actually see, and today what has happened despite, you know, because of this, gas issues and other thing in Europe, either whatever orders we had at the end of quarter two, have been put on hold with no clarity from the European suppliers. It's not that they don't want to buy, but they are all, at this point of time, cautious. So they are saying, "We are also waiting to see how things pan out, then only we will take a call when do we need the supply." Or some of the European suppliers have actually, for the time being, canceled their orders. So we are, as of today, we are sitting on zero orders, for Europe. So if you straightaway look at that, then my volume of business only remains is 40% of, let's say, even a Q2 number. Of course, we are trying to look at more geographies, but it is not so plain and simple that suddenly we try and we get some big traction. We are also looking at optimizing the costs wherever possible. But you know, quarter three for sure, and you know, it's anyone's guess, doesn't looks at all good. Possibly we'll even incur you know, larger loss there. We're only trying to see how we can minimize the damage. And this also, again, anyone's guess, but looks like might even extend to Q4. Got it. Thank you. I'll come back in the queue. I have further questions. I'll come back in the queue. Thank you. Thank you. We have the next question on the line of Nikhil Agrawal from VT Capital. Please go ahead. Yeah, good evening, sir, and thank you for the opportunity. Sir, I just wanted some more clarity on the debt that you have taken in the first half of the year. Your debt has increased by about INR 200 crores-INR 250 crores. So is it mostly for the MDF plant, and what is the interest cost for the debt? Yeah, you know, purely the debt, whatever has gone up, is only gone up on, yes, and, to some extent in Gabon. Sandila will be a small number, I think. Very small number, Sandila. Okay. So it is only for the capacity plant, except, you know, in Gabon. Okay. In terms of pricing, you know, both Sandila and this, which are new loans, they are in the range of around 8%-8.25%. Okay. And, sir, could you quantify the amount that has been taken for the MDF plant? And how much is remaining? No, are you talking of the total loan facility or drawn, till date? Sir, drawn till date for the MDF plant, and how much is yet to be taken? So, the total facility is INR 400 crore, and we have approximately right now taken around INR 190 odd crore. Okay, so INR 210 crore is yet to be taken in this FY 2023. Yes, mostly, mostly this will be drawn by March. Okay, sir. And, sir, have you taken the loan from an Indian bank or is it from the German bank you have been affiliated? We have deals, you know, on both sides. Okay. We have Indian debt, 2/3 and 1/3 of the total debt for MDF is. International. International debt. International. Okay, sir. And sir, just one last question. I missed out on your part, on the part of the margin guidance that you had given. You said that margins are not expected to improve from here going forward in this FY 2023. Yes, for the next six months, you know, I presume that the margins may remain in this level only. And- Okay. You know. Yes. So do we, do we see that the margins falling going forward because of the Gabon operations that you just mentioned? Because of the Gabon operations that you just- Actually, so what I mentioned was at my standalone level. Because of Gabon, yes, there can definitely be a hit because Gabon quarter three, as it looks like, because we are already sitting in the month of November, it will be a loss quarter. Yes. A larger loss, you know, than what we have seen in quarter two. Quarter four also remains to be seen, but I don't know whether things will improve by quarter four or not. If it improves, then maybe, you know, we'll make it up. Oh, okay. Great. Okay, that's it from me. Thank you so much. Okay, thank you. Thank you. We have the next question on the line of Dhiral from Phillip Capital. Please go ahead. Yeah, good afternoon, sir. Thanks for the opportunity. So what was the utilization of Sandila plant in H1? What was that? Utilization, sir. Utilization, H1, actually, it's quarter two. Quarter two, we were between 15%-17% range. Correct? And so, overall quarter. And sorry? Exit month was around 40%-45%. The September month. Okay. And sir, you are guiding that by Q4, we would be running at 75%-80%, right? Yes, yes. For that quarter. For that quarter. Okay, okay. Sir, what kind of growth we have seen in the premium category as well as value category? Premium category, we have not seen major growth. I think, just maybe 2% or 3%. Rest all is, in the value segment. Okay. And sir, what kind of price hike we would like to take in order to protect our gross margin, at least in the standalone level? No, we have not yet thought about it. Looking at the market conditions, and I had said that we just now, I mean, maybe the last few days, we are seeing some signs of softening in the timber prices. Now, whether that is sustainable or not sustainable, I don't know. It remains to be seen. So if, if that happens, then for sure, there is, you know, no thoughts of increasing prices further. So, any percentage, sir, how much we have seen the softness? Around 3%-4%. But it's too early, you know? I mean, we just got some initial signs. I mean, it's like a couple of days old, thing only. Okay. And sir, our Hapur facility will be coming from Q4, or it will again go to Q1 in terms of utilization, commercial utilization? Well, I think it will become operational sometime around March only, and, but our previous experience when we were actually doing it for Bareilly was not so good. Even in Sandila, there was delay. MDF for sure, we are doing it on time. So, maybe a month here or there. Okay, sure. Thank you so much, sir. Okay, pleasure. Thank you. We have the next question on the line of Arun Agarwal from Kotak Securities. Please go ahead. Thanks again, sir, for the opportunity. Sir, my question is on your CapEx. So could you just help us out, what is your consolidated CapEx you are looking at? And you could also bifurcate then how much you have or investing in different plants here. And how much of that you have, you know, some part of that would have come in FY 2022 as well. So if you could just help us out, how much came in FY 2022, how much we are doing in FY 2022? Are you talking about MDF or- Sir, sir, it includes your Lucknow plant, which we have already done the CapEx. Okay. So how much was this year that we have done? And for MDF, we would have possibly done something last year, and how much was that? How much we are doing this year completely, and maybe something on Hapur, how much we are doing? Just one second. One second, yeah. H1 so far has been INR 243 crore. We've already spent, in terms of CapEx, cash CapEx. Okay. On a full year basis, we believe the CapEx number would be around INR 600 crores-625 crores, basically. Including the full capitalization or full spending on MDF and capitalization of the Sandila plant, basically. These two things. Routine CapEx within Greenply will be INR 10 crores-INR 15 crores, maybe INR 20 crores at the maximum. That sums up around INR 650 crores. Okay. And sir, our net debt is now close to around, I think it's around INR 480 odd crores now. So where do you see this net debt moving ahead now? So and when do we expect the debt to come down, start coming down? See, this, this year it will only go up further, okay? Yes. As you would have heard just the previous gentleman, he asked, we still have around almost INR 200 crore of debt which will get added for MDF itself. We are, minus the cash generations, looking at a net debt position of approximately INR 650 crore. That would be at the end of this year as well? Yes, yes. Yes. That's what, that's what we have been guiding, I think, you know, since the beginning of the year, so we are more or less around that number only. All right, sir. All right, sir. But sir, another thing, just one clarification here. We have done INR 243 crore in first half, and you're saying around INR 625 crore would be in second half, or it's the total number you're guiding for the full year? No, it's the total number. It's actually the capitalization number, what he's talking about. Yes, yes. The cash outflow will not be to that extent. Yes. It's capitalization I'm talking about. This is capitalization, not cash outflow. That's for the full year you're talking about, correct? Yes, yes, yes. Yes. Because MDF, MDF will get capitalized, you know, In this year. Yes, in this year. It is right now, everything is under CWIP. Okay. And the first half, you have talked about cash CapEx, right? INR 243 crore. Yes, that is cash payout. Yes, it's CapEx. Okay, thank you, sir. Thank you. ... Thank you. We have the next question in the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead. Yeah. Hi, sir. Good evening. While most of the questions are answered, one is pertaining to the MDF plant. Two, two questions first, basis current import realizations and domestic pricing, what is the difference between the two, in terms of realization? You're saying domestic and international? Yeah. Imported price, how cheaper they are compared to domestic like-to-like products. I think, yeah. I think, at this time, it's very difficult for us to, you know, comment on this. You know, as we are entering this business and we are not a part of this business, though we have been tracking the category since the time we've made up our mind to invest in the category. Mm-hmm. Yes, imports have definitely opened up, but the exact gap is... I do not have an exact number to tell you at this moment. Okay. No, my purpose of asking this, I just want to understand how much is the, you know, margin compression, if at all, imports normalize closer to pre-COVID levels. You know, that the prices may move down for domestic players by that amount. So just wanted to understand that, because you also concurred that the 30%+ margins currently are unsustainable, and the sustainable number should anything be between 22%, 23%, 25%, sort of right. So that should largely be driven by the realization numbers, you know, parity in the realization numbers. See, you know, if you look at the import trajectory, mostly it is the interior grade which actually comes and hits the India market. Okay. There are many other value-added products which is being manufactured in India only. So those are not something which is, you know, being imported. Mm-hmm. Yes, at the interior level, maybe there will be a competition, for sure. But, the other categories- Mm. Will continue to grow and be manufactured here only in India. Interior grade means, this 5 mm, less than 5 mm thickness is generally considered what? Interior grade, sir? No, no, no. No. I think it's the resin type of the board- Yeah. The board category. So there are four grades, mainly three grades, mainly to selling: interior, exterior, and HDHMR. You know, these are the three grades which is being sold in the market. Okay. Usually competition is in interior grade with import- Mm-hmm. Because the world produces interior grade in mass quantity at a very low cost, and that's what they want to dump in our country whenever there's a global crisis. Okay, okay. Understood. And sir, by, you know, first year, next year, FY 2024 would be a one full year of operations for the area. So what is your ballpark utilization level for FY 2024 you're looking at? Obviously, this is, you know, it may change, but what is your prima facie understanding? At the... Like, you know, next year being the first full year, we are expecting anything between 50%-55%. Okay. Utilization. Okay. Generally, for your cost to stabilize, what sort of utilization numbers would be, you know, would be the number you're looking at? Well, I think, you know, at that number also we might break even. Okay? Okay. It all depends on how we ramp up, you know, the other sizes and the value-added products, because the margin- Mm-hmm, mm-hmm. Profile is very, very different. Right, right. Okay. Okay. Yeah. Great, sir. That was all from my end. Thank you all to that. Thank you. Thank you. We have the next question from the line of Mr. Achal from JM Financial. Please go ahead. Yeah, thank you for the op, follow-up opportunity, sir. Just one question I had with respect to, you know, your comment about, the post-Diwali pickup is pretty decent. Just wanted to check, you know, how has the October month been? And is the channel... So when you say demand, was pretty good, in the festival, is that the secondary sales or is that the primary sales you are, indicating and how is the channel inventory? See, you know, if you see last month, it was a month full of festivals. In fact, all the festivals fell in that one month only. So, the secondaries were not so good in the month of October, because, you know, when you have a Durga Puja, Diwali, a Chhath, all of them coming in one month, then, labor tend to go back to their town, hometowns. But the primary was good, and which actually gave us that feeling and momentum that the market traction is good. The dealers are positive, and they themselves mentioned at most of the places that they have lots of orders in hand, projects in pipeline, and, you know, most of that secondaries will start happening in the month of November and onwards. Understood. And the channel inventory is optimal? Is it low? Any comment on that? No, are you asking about us or overall? Because- Overall, overall channel inventory. Oh, so I think, you know, the industry is getting more and more disciplined. We also changed our way of working around a couple of years back. And if you would have seen our working capital, you'll see that there is absolutely no pressure in terms of the working capital. Things have got more discipline in the industry. More and more players are now looking at, you know, working capital management. So I don't think that, you know, the channel is flushed with extra inventory. Got it. Just one last question, if I may, with respect to, you know, we, we're hearing that the semi-urban, rural is kind of, bit under stress. Is that the experience you also share or, you know, is it, is it little different for us? You know, we had started that journey around 18-24 months back. 18 months back, I would say. We made some inroads, but I think, you know, we could not continue that momentum. We learned a few things because if you have to be penetrating in the rural market and this, we will have to do a few things right, which we have started working upon. So the market for sure is very good there. Only thing is, we'll have to work our way towards the same. So there is a team which is working on the same. Got it. Thank you for the clarification, sir. Okay. Thank you. We have the next question on the line of Rishikesh from Kotak. Please go ahead. Hi, sir. Good evening. Thank you for the opportunity. So the first question is the MDF CapEx, I think the INR 555 crore, is there any escalation in the project cost or it remains at the same level? Well, we mentioned around, you know, around 6%-7% increase in the overall cost. That is also a factor of a few addition in scope also, from what earlier we perceived initially. So the cost may land up anywhere around INR 580-INR 590. Got it. So the second question is, the equity contribution for this project, in the sense that partly it's debt-funded, and partly it's obviously, it will be our own equity. Is it largely funded now? In the sense, have we contributed fully? Because the backdrop of this question where I'm coming from, is that your debt status in this guidance has not changed materially. And if I look at it compared to our first half cash flow generation of somewhere around INR 3 crore, clearly, it slightly doesn't add up, because I believe then probably we will require more debt compared to what we are guiding. Correct me if I'm wrong here. No, no, no, you are absolutely right. So your first question, whatever equity we were supposed to put, we have already put our equity. Okay? Now, as far as the control operating cash flow is concerned, yes, there were certain challenges in some of our subsidiaries. One, the Sandila plant started, you know, got operational, so there was some extra working capital which we built up there. And I think, in another couple of months or three months, you know, we'll stabilize and maybe we'll actually bring it down. Second, even in Gabon, the situation was such that, we had to advance certain amount of money to our suppliers to get, you know, better raw materials in terms of cost. That also will get corrected in the next three to four months. Internally, yes, we, we want to make sure that we end up the year with a decent operating cash flow, which helps us to manage our guidelines. Okay, but for that you remain sure, you're confident that probably the INR 500 crore... whatever you're guiding, INR 600 crore will be the peak debt? No, no, we, we said around INR 650 crore. Yeah, INR 650 crore. Sorry. Thanks. Yeah. Thank you. We have the next question on the line of Dheeresh Pathak from White Oak. Please go ahead. Yeah, thank you. So what is your logic for taking one third of the debt in euro, did you say? Well, you know, the euro loan is a fixed loan, okay? And whatever we take India loan is a variable. So we just try to mix and match, that we'll have certain portion of the loan which is on the fixed, and then the India loan is on a variable term. So Euro is a fixed rate loan? What is the rate, and do you hedge it? None. No, no, no. We don't. What is the rate? Rate, you know, we are not willing to share because, because of obvious reasons, you know. Okay. But you'll be selling most of the output in India, right? You will not be exporting MDF. So you'll be exposed to them. We are open to, we are open to do that. The market conditions and how we ramp up and the, you know, the demand-supply situation will guide that. And also, you know, we'll always want to sell a little bit of our production outside, because, you know, in case there's a crisis ever in India, we should have an alternate market. Okay. But given that we're hardly able to compete with imports coming into India, those people will also be selling, will be more competitive in the market. So where, where do you think Indian companies can be competitive in the export market? Which country? If you see the listed players today, some of them are already exporting and, you know, in their segmented results, you can see their export data. In spite of imports coming in, they have been able to export. Yes, definitely export is not that profitable, but we can look at a small percentage, I don't know, maybe like a 5% number, that we sell 95% of our production in India, ideally. And a 5% export market we create for situations, for unforeseen situations, right? When there's a crisis in India, we can try and ramp that 5% to a higher number there, in case there's a situation like that in the future. We might be advantageous in terms of, you know, selling from our plant in the Middle East area, because we'll get certain benefits maybe on the freight component. Okay. And did you say that at 50% you will break even at the MDF plant, right? Did you say that? Yes, yes, 50%, means yes, yes, almost, almost around that number. But I also said that it all depends that... No, no, not the, the seasonality only, but also that what is the mix of the same? Because, you know, if we are able to ramp up and do better on the value-added products, then the breakeven can even be lower, and if you're not able to do it, then maybe it might be slightly higher. So a lot depends on the mix and the- What is your fixed cost in, at the plant? What is your absolute fixed cost at the plant on an annualized basis? Sorry? What, because the breakeven would be a function of the revenue and the gross profit, but the fixed cost would be a factual thing, right? Yeah. That you need to cover to breakeven. So what is your fixed cost, so that we can have our own understanding of, you know, at what value add you will breakeven? I don't have the numbers right now. We don't have, but I think it should be somewhere around between INR 100 crore-INR 120 crore annually. Okay, okay. Have you established a distribution network, or is it going to be the same distribution network that you have for ply? So, we are in the process of establishing a sales team. You know, our sales head just joined, like, one and a half months ago, and we are now building the team. And, there will be a new network, and also there will be a overlap with the existing network. So yes, some are, I could say, like, probably 20% of our dealers are already dealing in MDF with some of the other brands. And, we feel that these dealers will be the low-hanging fruits for us, so we are definitely going to go to them. And also we want to create a new market where there is a trade which is only selling MDF. Okay. And for your ply, what is your share of volume between the various buckets like, you know, value, premium, mid? No, we mentioned in terms of, you know, value, it's 60/40, and 60 being premium, and in terms of volume, it's almost 50/50. Okay. Thank you so much. Okay, thank you. Thank you. We have the next question on the line of Rishab Bothra from Anand Rathi. Please go ahead. Rishab, can you hear us? Yes. So just going through the notes to accounts, you have mentioned that you will be investing in Renew Green. So what would be the investment amount totaling? Sorry, can you just repeat? Sorry. Renew Green. Okay. It is the overall investment will be about INR 5.75 crore between the two entities wherefrom we are investing, basically. Okay. So Greenply will invest for 3.1% stake. Greenply Facility Partners will invest for 28.4% stake, basically. So overall it will be 31.4%, I think around that percentage. And the overall investment will be about INR 5.75 crore. Okay, not that major. So- This is also part of, you know, the increased cost, what we spoke about in MDF. Correct. Which was, you know, not in the original scope. Right. And sir, secondly, our 2024 and 2025 capacity, I think, own manufacturing will stand at 48.4 million sq m, correct? 2024 and 2025? Yeah. I mean, there are no further major CapEx for plywood. 48.4 million sq m would be the CapEx, which, I mean, installed capacity, which you will be having. Yeah, as of now, yes, whatever we have declared is what will be there. We'll continue to see how- Hapur is there. No, Hapur, of course, but Hapur is not taking our own manufacturing. That is partner manufacturing. That is partner manufacturing. Our own manufacturing, this is what the level will be. We haven't decided any other- At this point of time, yes. Sure. And partner manufacturing, it would be 17.5% when Hapur comes up? Yes. Yes. Yes. Yeah, correct. There are no, other opportunities being explored at partner level? Well, not at that scale, where we become an investment partner. Of course, we keep looking at opportunities where, you know, if we are able to make a few of the industrialists spend the money and we try and buy out their capacity. So such type of discussions are always on. And, you know, a few such things has to happen because the business will continue to grow, so we will need more capacities. Got it. Now that we have put one Sandila plant and we have another joint venture, partner, you know, this, Hapur. We are now looking at some other arrangements also in terms of increasing the capacities. Correct. Last question, sir. If you could throw some guidance numbers for FY 2024 margin and top line growth. I mean, twenty- Too early. It's too early. Okay, okay. But since MDF would come in and 2024's would be only 50% utilized, so there would be pressure on bottom line because of higher interest and depreciation costs. Correct to assume? Well, MDF, as we said, independently, we are looking at if we are able to, you know, deliver around INR 300 crore plus turnover, we should be almost breakeven for the MDF business. Breakeven at EBITDA level or below, I mean, PAT level as well? At PBT level, you know, we can still do some fine-tuning and come back. Maybe Gautam can come back and, you know, tell you, but I think what I remember is, you know, at PBT level, we will be able to, equate around INR 300 crore-INR 325 crore max. Okay. As I said again, you know, that is a factor of how well we can ramp up on, you know, some of the value-added products and what type of thicknesses we are selling in the market. So, that can always change that number to some extent. Okay. I'll come back to you in case any. Yes. Thank you. We have the next question from the line of Parth Bhavsar from Investec India. Please go ahead. Yes, sir. Sir, you earlier mentioned about MDF markets, that it comprises of interior, exterior, and HDHMR, right? So wanted to understand, like, would it be possible for you to give us a market mix in terms of India? Like, what India, you know, w-what is the demand like for interior, exterior, in percentage terms, like, if you could give a market mix. Sorry, can you please repeat your question? You can hear me? Hello? Your voice is not totally clear. Can you come on the handset mode? Your voice is not very clear. Is this much better? Is it better? No, we are still getting it very low. Is this better now? Hello? Hello. Yes. Yeah. So just wanted to know, like, you said that MDF market comprises of interior, exterior, and HDMR. So wanted to know the market mix in India. So how much would be, you know, of the total demand, how much would be interior demand for interior, exterior, HDMR? If you could throw some light. I think it'll be very difficult to give you the exact breakup of the Indian market, as, you know, every player in the country is not listed. And, you know, we only see the listed, players', segmented results. So it'll be very difficult for us to comment. They also don't give those numbers in terms of- They don't give the grade breakup, yes. They don't give the breakup in terms of interior, exterior, and MDF. Yeah. Any broad numbers you could help? I think it's around 40% or above, like, the interior grade. 40%. Rest everything put together is 60%. Perfect. And sir, in this interior, exterior, and HDMR, what would be like... What would come under value-added? I think HDHMR and Prelam would be value-added, and interior, exterior is pretty much bed and bathroom. Okay. Okay, and so margins, okay, okay. Okay, done, sir. Thank you so much. Thank you. We have the next question on the line of Karan. Please go ahead. Thank you for the opportunity. Team, we did some exports from Gabon to U.S., you know, in past. So, can that be a big opportunity, and are we looking to de-risk Europe exposure? Well, you know, this is something we again discussed internally also. Our Gabon team is working on that. But they have some, you know, specific requirements in terms of certifications and other things, which they raised, you know, subsequently. So it's not that immediately we'll be able to do, you know, much of that U.S. business, but we can build that up to in future. Right. Right. I also wanted to understand your production mix, you know, when it comes to standalone entity and - Hello? Hello. Yeah, am I audible? Yes. Yes, I just wanted to have some clarity on the production, you know, when it comes to standalone entity and when it comes to, you know, other entities in U.P. or Sandila. So how different is the product mix? No, not much. You know, we are gearing up to produce most of our range at all the factories. Because, you know, in plywood also, logistics cost is humongous. And, now that we have a location in north, we are trying to streamline our production, I mean, the products, and creating the capability in such a way that most of the plants will be able to cater to their local market and needs, with all our products. No, I meant with respect to premium and value. So, I believe Sandila plant will be more of premium. No, no. So all our... No, no, no. It's a mix. And, you know, because of this increased capacity, we are also looking at if, to some extent, we can start, which we have started also in a minuscule way, some portion of the value also, in our plants. Got it. Got it. I think that was helpful. Since we don't have any further follow-ups, any opening, sorry, any closing remarks that, you know, the senior management would like to make? Yes, I'll just make the concluding remarks. Thank you all for taking time to participate in this call. In case of any further clarifications or query, please feel free to reach to Mr. Gautam Jain. Thanks again, and goodbye. Thank you. On behalf of Asian Markets Securities Pvt Ltd, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.