Ladies and gentlemen, good day, and welcome to the Greenply Industries Limited Q3 FY 2023 conference call, hosted by Asian Markets Securities Limited. 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 from Asian Markets Securities Limited. Thank you, and over to you. Hi, everyone. On behalf of Asian Markets Securities, we thank you for joining us on the Greenply Industries 3Q and 9-month FY 2023 conference call. In the panel today, we have Mr. Manoj Tulsian, Joint Managing Director and CEO, Sanidhya Mittal, Joint Managing Director, and Nitin Kalani, CFO, along with Gautam Jain, AVP, Strategy and IR. May I now invite Manoj sir to begin the proceedings of the call. Thank you, and over to you. Thank you, Karan. Very warm welcome to everyone, and thank you very much for joining us today to discuss Greenply's operating and financial performance for Q3 FY 2023. Before discussing our performance and outlook, I would like to put forward a clarification that we have categorized plywood business as a sum of standalone numbers and Greenply Sandila numbers. Because Greenply Sandila numbers is purely plywood business for better understanding when we are comparing on a quarter-to-quarter basis or on a YoY basis, and this is after eliminations. The objective is to provide fair reporting of our combined plywood business under the two legal entities. On our performance, we started the quarter on a weak note due to festive season which is very normal during the third quarter of the year. But post the festive season also, demand pickup was below our expectations. In our plywood business, we have achieved a sales growth of around 8.7% in Q3 FY 2023 on a year-over-year basis, supported by volume growth of 2.4% and a realization growth of 6% in quarter three FY 2023 on a year-over-year basis. Despite the demand challenges, we were able to maintain our sales contribution from premium category at around 57% as compared to 55% in trailing quarters, which helped us in achieving our best ever realization per unit of INR 249 per square meter without any price hike in the last quarter. Our plywood business adjusted operating margin was 10.3% in quarter 3 FY 2023 and 10% in nine months FY 2023, a decline of 72 basis points and 30 basis points, respectively, on a Y-o-Y basis. During the same period, we have achieved realization growth of 6% and 5.3%, respectively. So it is evident that despite our command in premium category business and price hike, the cost escalations were steep and impacted our margins. In the current scenario, chemical prices have stabilized after reaching their peak, while the cost of timber remains elevated to some extent. The net debt at the end of quarter stood at INR 555-556 crores. The year-end net debt is likely to be, likely to be in line with our guidance of around INR 650 crores, and which is post the major CapEx on the MDF line, which will be completed by the year-end. Going forward, we are assuming no major external challenges. We should be able to meet our increased sales growth guidance of 20% for this full year, with similar margin profile in the plywood business. In our Gabon business, as indicated in our previous call, last quarter has been very challenging due to energy crisis in European regions, which contribute significant portion of our business. Consequently, our financials has got impacted severely during the last quarter. Recently, there has been some positive traction in order inflow, but it's too early to provide any guidance on this interest in the near term. From demand perspective, we remain optimistic on the back of resilient demand in the residential sector, consumer shift towards organized segment, and most importantly, our command in premium category, our value brand, reach and innovation. With this, I would like to hand over to Sanidhya to update on the new projects and manufacturing partners. Over to you, Sanidhya. Thank you, Manoj ji, and good afternoon to everyone on the call. Our plywood manufacturing unit at Sandila, which, with its capacity is 13.5 million square meters per annum, has started contributing significantly to our volumes. We have been able to ramp up the utilization to almost 60% now in Q3 FY 2023, and are focused to further streamline the machines and labor with an aim to reach 80%-90% from the next year onwards. Competitive timber cost and product premiumization makes Sandila unit a significant contributor in the overall portfolio. In our asset-light model, we have two manufacturing partner units in Bareilly, UP, for manufacturing of plywood and allied products. We are already fully utilizing the capacity of the first project. In the second project, we have started partial production last year and working to streamline the remaining capacity for doors soon. In another such unit at Hapur, UP, with a capacity of 7.5 million square meters per annum, construction activities are progressing well, and we are expecting to start trial runs in this quarter. In our upcoming MDF plant in Vadodara, Gujarat, machinery installation and civil construction work has now been completed. We are expecting to start trial runs in the quarter. Further, most of the sales force for this segment have been recently onboarded, and we are working on the distribution channel and developing a robust marketing strategy to get a good hold in the market. With this perspective, I would like to open the floor for Q&A session. Thank you. Thank you. We will now begin the question 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'll wait for a moment while the question queue assembles. We have the first question on line of Anand Venugopal from BMSPL Capital. Please go ahead. Yeah, thanks for the opportunity. So my question is... Hello. Yeah. So the debt has increased substantially. Is this for the new MDF plant? And secondly, what is the-- Yeah, yeah, yeah. Yeah, it's purely for the new MDF plant, and as I said in the opening speech, that for the year end also, we have projected a net debt of around INR 650 crore. So, we have used around INR 100 crore addition in the debt also during this quarter, and all of it is towards the MDF plant only. Okay, okay. And, secondly, what is the current size of domestic MDF production in cubic meters? Because, how much will it be in two years from now, given a number of players are putting up new capacity? Can you please repeat your question? Yeah. What is the current size of domestic MDF production in cubic meters, and how much will it be in two years from now, given a number of players are putting up new capacity? See, right now, it is closer on 2 million, 2 million CBM annually. As much as the information which is there with us, this will be anything around 3.2 million in the next two to three years, because every plant which will come will also take time to ramp up their capacity. Okay. Okay, got it. All good. Thanks. Yeah. Thank you. Participants who wish to ask a question may press star and one on your touchtone telephone. Participants who wish to ask a question, may press star and one on your touchtone telephone. We have the next question on the line of Udit Gajiwala from Yes Securities. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. Just a couple of questions from my end. Firstly, could you give us an overview of the demand scenario which is currently in and how is it shaping up for your standalone business? Your voice is not clear. Just acting on the demand situation, which is panning out in the ongoing quarter. What is the demand scenario in ongoing quarter? Mr. Gajiwala, I request you to kindly go off the speaker phone because your voice is breaking up in between. Is this better? This is better, yes. Please go ahead. Yeah. So, sir, I'll repeat my question. So, you know, can you highlight the demand scenario which is going on currently, say, from January? Well, you know, quarter four, also January, if you ask me, I would say that could have been much better, not still as per the expectation. The way quarter four should have picked up, I've still not seen, you know, it really picking up. Sir, on the. subsidiary Gabon front, are you seeing that the orders are coming up or last quarter were annual orders? What is the current situation? Gabon, please, you have to repeat. Sorry, but, you know, your voice is not so clear, so. Yes, sir, I'll come back in the queue with better network, sir. Okay, okay, okay. Thank you. We have the next question on the line of Nikhil Agarwal from VT Capital. Please go ahead. Good evening, sir, and thank you for the opportunity. Sir, I just wanted to understand, since you are putting up the MDF plant in the west, so how is the market out there? Like, in terms of adaptability, are you taking any steps to increase the adaptability of MDF out there, or will it, I mean, have you started taking any steps? So in the west, you know, since our plant is in the west, our primary focus is going to be the Western India market. So I don't think there's a challenge in terms of acceptability. You know, the competition is already selling enough material today in the west. So I don't think there's an acceptability challenge. There's already a ready market, and we are going to address and capture that ready market very soon. And for sure, the price advantage we'll have in terms of freight, you know, we'll be passing on to the consumer in the western region, which will help us capture the market much faster than planned. Okay. Will you be focusing on exports as well, or will it only cater to the domestic market? ... I think, time will say we have no export obligation as a company. I believe there are some competition players who had export obligation because of the way they imported machinery. We have no such export liability, so we will be exporting on the need basis whenever we get good prices or on value-added segment. We will be exporting very little quantity and whenever we get good prices. Okay, got it, sir. Sir, just one last question: Will you be, like, the machines that you've ordered, these are from the German vendor, right? Yes, absolutely. Okay, got it, sir. That's it from me. Thank you so much. Thank you. We have the next question on the line of Achal Lohade from JM Financial. Please go ahead. Yeah, good evening. Thank you for the opportunity. My first question is with respect to the ply business. If you look at our growth, it's somewhere around 4%, 5% for last few quarters, while the competitor is showing a bit higher than us. So, can you elaborate a bit in terms of, you know, in terms of the premium segment growth, non-premium, you know, for us and for the industry? See, industry, you know, we can't say much, but in terms of this year also, on volume, we have a growth of around 15%, and value. For the full year, we are saying we'll be growing at around 15% on volume and around 20% in terms of value. Okay? Yes, see, if you look at our company, we have a very different business model. We are a premium player, and today, the volumes are actually there at the economy level. So we are also strategizing that, how do we need to improve further in terms of our volume in the premium segment itself. Okay. Okay, so you're saying basically you are still focused on the premium segment, and that is kind of reflected in slightly lower volume growth? Have I got it right? Yes, yes, yes. Any particular reason why we are slightly, you know, non-aggressive for the economy segment? Is it to do with the distribution, margin, pricing, competition, anything you want to highlight, sir? Well, look, you know, traditionally, if you see, Greenply has always been a premium player, okay? And, and there was a time when almost 70% of our business used to come from the premium segment and almost 30% from economy. I'm just talking of, let's say, you know, last year and, and maybe the year before and, and earlier also. And, that equation to some extent has already changed. So it is not that we are not growing in the economy segment. The most of the volume growth actually is coming in the economy segment, which will continue to grow. Otherwise, we would not have even got a 15% volume growth. But if you look at the focus, for sure, we believe that we are the only one in the country who is serious about the brand in the premium segment, and we will continue to work on that also. We, we don't want our, premium segment not to grow. At the same time, the focus on economy segment is also there. Otherwise, the volumes will not be even to the extent what we have picked up. Got it. And, you know, how do you see the growth in FY 24-25? You think you will be able to deliver a double-digit growth, or that's a bit of a challenge as we speak? Are you saying two years? Yeah, FY 2024 and 2025, in terms of volume growth for the plywood business, sir. See, today, I mean, you know, if you really look at, I, feel that a 10% volume growth is something which we have started looking at for every year, and, volume growth. So base is the same. Actually, value growth will totally depend on how might the raw material prices are also going up, down, or, or it's stable, because last 2 years, there has been too much of changes in the raw material prices. But as far as volume growth is concerned, internally, we are very clear that minimum 10% growth we'll have to try and achieve in the years to come, at least next 2-3 years. Understood. How about margins? Well, margins right now are in the range of 10%. We will work towards improving the same, but at the same time, our investments also will go up, because if we have to get a 10% volume growth in this business, somewhere our investment on the business will also go up. So marginally, the benefit of the operating leverage may actually get adjusted with my additional expenses. But for sure, double-digit margin is, you know, 100% we are looking at. This is expense of ESOP charge, you mean, basically, right? This is? Excluding the ESOP charge. Can you give us the ESOP quantum for FY 2024-2025? Roughly, how much would that be? 2024, 2025 or 2023, 2024? Yeah, FY 2023, 2024, 2025, if you could, sir. 2023, 2024, right now, basis, you know, whatever grants has been issued, it is only to the extent of around INR 6 crore, which will be in quarter one and two, and nothing beyond that at this point in time. Three, three. Total three? Three. Only 3. Sorry, only INR 3 crore in the next year, and nothing beyond that. FY 2024, INR 3 crore, INR 3 crore, and nothing beyond that, right, sir? Have I got that? Yeah, as per the grants, whatever has been issued. So any fresh grant which will get issued, we'll add that cost. ... Got it. Sir, if I may ask on the MDF business, you know, how has been the progress? You mentioned about the trial runs are beginning this quarter, but if you could also highlight, is there any cost overrun we have seen? And what kind of utilization are we looking at for FY 2024 as a year, as a full year? So, see, this, in terms of cost overrun, we had mentioned, maybe around a year back itself, that, our initial cost was around INR 555-odd crores, and we mentioned that we are able to see a 6%-7% increase in the cost. We are almost on target, and, possibly we will be anywhere around INR 600 crores, maybe INR 595, maybe INR 600 crores. But having said that, you know, there were some changes, additional scope change also, which we did during this journey. So it's not purely, purely, cost increase or cost escalation, but a few new things also, which we did during this period. So it is, it is, you know, it is including everything. What was the second question? In terms of the utilization for FY 2024 and 2025, and what kind of margins one would look, given the current prices where we are? In terms of capacity utilization, we are targeting that, you know, we would be able to start the commercial production, from the month of May, mid-May. Because since we are taking the trial production in the month of March, normally after that, there is a shutdown which has to be taken and which lasts for anything between 30 days to 45 days to correct all the snags, and then the full commercial production will start. I mean, full means, of course, it will be a ramp-up. We are assuming, given these timelines, that we should be able to do somewhere around INR 300 crore of sales in the coming year. At INR 300 crore, margin is something which we'll have to see, because, initially you will have a ramp-up, you will have a few sizes, and, we may not be able to produce, you know, the premium products from day one, so everything will become a part of the ramp-up plan. We are at best trying to cash breakeven, on a INR 300 crore sales in the coming year. Got it. Thank you. I have more questions, but I'll come back in the queue now. Again, thank you. Sure. Thank you. We have the next question from line of Shrenik Jain from LIC Asset Management. Please go ahead. Hi, thanks for the opportunity. So my question is relating to our MDF segment. So, as we are seeing that the influx of imports have increased significantly and as, our plant is near the ports, so what will be the MDF pricing strategy? Will we have to sell close to the imports price? And, so, previously, at peak utilizations, we were assuming a EBITDA margin of 20%. So is there any change in the assumptions for the margins, assuming the, what are, what are the pricing we plan to sell at? So we, our pricing level is going to be very much in line with the competition. In certain markets, especially Western India, where we will have the advantage of being locally present without disturbing our margins, we will definitely pass on the benefit of freight to the local market in the West, so that we are able to capture the maximum market share in that area. I think, 20% should not be challenging once we are utilizing capacities properly, maybe year 2 and year 3, which we can easily look at this number or something better at today's realization, for sure. Year one may not be 20% or, you know, may not be equivalent to 20 or plus, because initially we will ramp up, and as we said, that, you know, we'll not be start to produce all premium category from day one, so those may start after three or four months, and that also there will be a ramp-up in the same also. So first year margin can be anything around maybe on INR 300 crore, 14%-15% itself. But from next year, definitely, you know, as Sanidhya said, basis the other players also, whatever is their EBITDA margin, we should be maybe -4% or -5% compared to that, and the subsequent year, possibly we will all be at the similar level. What is the current pricing difference between imports and domestic brand in West? Sorry, come again. What is the pricing difference between the domestic brand and the imports in Western India? See, it's, you know, we don't have these numbers to that extent because we are still waiting for our production to come. But I can only hint on this, is there are already other players who are there in the market. We have not seen any significant dip in their margins also during this period. What they have done, they have not even corrected their prices, it's just that they have given some schemes in between. And, you know, if it remains so, then I think, on a 80%-90% utilization, our margin also will be much better than 20%. Okay, and We have said also that, you know, imports only happen in the plain category. We will start focusing as our line is fully prepared; we'll start focusing on the premium category also from day one. Okay. And, can you throw some light on the OEM market? I believe 60%-70% of the OEM market is in South India. How much of the OEM market for MDF is in West India? And also, can you explain us about the sales team strength for MDF? How much, like, hiring you all have done for sales team? ... See, sales team hiring, you know, I will not share exact numbers on that, but, now we are fully geared up. Our batch is joining, in fact, it has joined today, and, which is now started undergoing a training also, induction training and everything. So we are now fully geared up in terms of our sales team for phase one. For phase two, maybe we will again start looking at, ramping up the team after six months or seven months. And, and again, the second question? On OEM, see, on OEM, the way we have looked at and when we conceived this project also in West, there are OEMs who were, you know, struggling to get their material on time from some of the suppliers in North or South. That clearly gave us an opportunity, and we had done all our due diligence at that point of time, that if we have a local plant in West, they will 100% prefer us compared to others. Second, we also found that, you know, it is like a chicken and egg story. So since there is no producer there, the OEMs also didn't wanted to set up their shop there, though they were convenient doing it in West of India, but they didn't want it to because of the logistics challenges. So as we have put our plant, we will also see influx of more OEM now coming and setting up their shop in West. Got it. Thank you so much. Yeah, thank you. Thank you. We have the next question in line of Arun Baid from ICICI Securities. Please go ahead. Yeah, hi, sir. The question was more on the MDF front. Sir, could you just explain, like, in this MDF plant, we were focusing on what thin MDF, thick MDF, and more so on the wood cost, because we have heard, players in North India are seeing a wood cost pressure, so is the case in South India. So how is the wood pricing in western part of the market? Yeah. So I'll first answer the wood cost. So our wood cost, definitely, you know, in the current scenario, the wood cost continues to rise across India, you know, it's on the higher side. But, now we are in a situation where we've already started building a stock for wood, you know, because right after we start producing, we are going to see monsoons very soon. So we had to start planning our wood in advance. So our cost of procurement of wood is absolutely at par with anybody who's producing in North India. Yeah. Definitely not as low as South, but our cost is definitely at par with North India or slightly lower than North India. True. Broadly, what would be the range, Sanidhya, if you can just help us with that? Anything between INR 5,400-INR 5,500, somewhere between that, will be the average purchase of wood delivered to our plant. Okay. And on the thick and thin MDF part, can we make both in this plant or how is it? So this particular plant is designed in a fashion, since it is our first line, that we can give any thickness from 1.5 mm right up to 35 mm. So we have the entire thickness range, and also when it comes to the sizes, we can almost give every size which is selling in the Indian market, whether it's 8 by 4, 8 by 6, 7 by 4, 7 by 3, I don't know. Any size you think of, we can give. 10 by 4, 12 by 4, all the sizes. Very good. Samet, on the front that, you know, there was a South player who has taken a price cut, you know, 5%-6%. What's your view? Because we are going to be in production ASAP. What's your view? You think the industry will have to take price cuts based on whatever you see on the pricing front, or that's not going to be there. What's your view as a firm? I think the view is very clear. You know, in the past also, this industry has been slightly cyclic, you know. There is a lack of capacity in the country, the prices really go up, and the manufacturers really enjoy a very good margin. Then again, there's a lot of capacity which comes in, there's a lot of fight, the margins come down, and then again. But what we've seen, you know, in the period when Greenply was one entity, you know, at the lowest time, we've seen 18%, 19% EBITDA margins. So, you know, all our payback, everything is designed on that. And even if you see today, with the increased wood cost, with our location in West, when we make our calculations, we are much more than comfortable. So, you know, the cash flow was designed very conservatively. We are ahead of that, even today with all the increased costs. I'm not worried. Arun, I think you know, the industry numbers are already there, you know, from the other players also. Whatever numbers I have seen, we have not seen any significant dip in terms of their margins. And our own understanding of the market also is that, you know, none of them have actually cut down the prices. They have come out with some schemes, and possibly that is they are able to manage at this point of time. Manoj, you are right, but, we have seen significant dip in margins, significant dip. If you look at QOQ, the margins have come up by a huge number, anywhere between 200-5. Look, look, look, if we compare it with the 35%-36%, then that was unrealistic. I'm not comparing 36%. Like, for example, Century revised its margin guidance to 20-25%, and they are full utilization. So, you know, I'm not comparing with the 30 number at all. So QOQ, they have come down dramatically. If I do that number of that 34, which was in Q1, then it will be a big fall, big fall. This quarter, if my memory is right, you know, the margins for Century was down to 20-23% from the peak of, you know, 30-35, which you mentioned, just two quarters away. So. And that's also utilization, because they obviously have the benefit of that advantage which they had. But ballpark, what I'm trying to get to is that in your view, there would not be any big price cuts in the industry on the domestic side. Is that, I'm just trying to get that point. No, if you ask me, I have always been advocating that, you know, margins above 25% in a business like MDF is unrealistic. No, Manoj, yeah, that margin number is really relevant. I have said that number of times because that is based on CBM. Margins on, just to give you a perspective, you know, the margins of both the Greenpanel and Century Ply has come down without taking any price cuts. So that is not the point. You should look at EBITDA per CBM. That is the way you have to model this business. It will not work, the percentage will not work here. So if you have cut the price by INR 10, it does not mean that your margin will be INR 15 or INR 20, right? There will be a lot of difference there. But anyway, so the point which I was trying to drive is you don't think there's going to be price cuts or is there a material price cut we can expect from the industry? I mean, with, with more and more production coming in, there might be a price cut. We have made our cash flows and our planning on the worst, Arunji. So, you know, we are very confident that we are better than that. You know, it will not be lower than the 18%-20% on which we've planned our cash flow. So just one thing. You mentioned INR 300 crore sales in FY 2024. So does that got utilization? What utilization? Yes. So for INR 300 crore, some CBM number you have ballpark for it, right? No, are you asking for the full year? See, that amounts to around 40-45% utilization. Okay. But if you will see quarter four, then possibly quarter four will be somewhere around 65%-70% utilization. No, fair. So basically, we are penciling at about 100,000 CBM sales, right? 200,000- Yes, yes, yes. Yes, yes, around that number. Yes. So we are building a INR 30,000 realization. INR 30,000 per CBM realization we are building in, right? So in that case, because 100,000 CBM- Will be slightly, will be slightly more than 100,000 CBM only. I'm saying, ballpark, you are almost right. Because if you said, correct me if I'm wrong, is that, you know, our focus will be more initially, obviously, by default, towards the plain MDF market, where the realizations are sub twenty-five thousand rupees. It depends on the industrial grade, but, you know, sub 25,000 INR. And to achieve that INR 300 crore, you know, you have to have a significant mix of your lam, pre- lam MDF. Just trying to figure that out, because then the mix has to be pretty biased to get that 30,000 INR per CBM or a ballpark closer to that number. Oh, first of all, no, no, first of all, Arun, you know, the realization what we are taking is not INR 30,000, okay, for the full year, because you are right, it will not work out to that number. Okay? Our realization somewhere, one, the overall, the CBM would be more than 100,000. I'm saying more or less, you are, you're right. Yes. I think our working was something around maybe 115,000-118,000 CBM or something. Okay. Okay, so it's around 18-20% more than the number what you're talking. Okay, fair enough. Yes, in the, you know, your plan and this, the realization will be lower. It will be even maybe, you know, you guys are better aware of, but it should be in the range of INR 23,000-INR 24,000. Right? No, it's lower, sir. Lower. Industrial is much lower than that number. Okay. So they have the number, the team has the number. So, you know, I don't remember all the numbers exactly, you know, because we are still learning about this. Also, you know, one of the reasons why you see the competition's margin lower is because they have a lot of export liability. As a company, we will have zero export liability. No, true. When I was comparing the Century, you know what, with Greenpanel, that initially, they had a lot of expertise. Great. So just one clarification, on that INR 300 crore ballpark, you said we'll make 14%-15% margins. That's about 45. Hello? Yes, Arun, see, most of these numbers right now are assumptions, okay? Okay. Everything depends on how we start the plant and this. Sure. I think, you know, in one or two quarters, we'll be in a better position to discuss the nitty-gritty of these numbers to that extent. So, just help us with one more number here is what would be the depreciation for this plant? Because that number we'll have, right, for this plant. Sorry? What would be your depreciation for this plant on that INR 600 crore CapEx? What would be your depreciation for the full year? Depreciation for the full year? How much you're taking? INR 36 crore-INR 37 crore. INR 36 crore-INR 37 crore. Okay. And sir, what would be the interest cost for this plant, annualized would be total on that INR 600 crore, total number? Income- Both including your... Would be about, again, around INR 36-37 crores. So do you believe if... Okay, so when you're saying, you know, INR 36, INR 36, 70-odd crores is our cost below EBITDA, right? Yeah. Can we move to the next question? Sure, sir. We have the next question from the line of Udit Gajiwala from Yes Securities. Please go ahead. Mr. Gajiwala, can you hear us? Yes, sir. Can I hear me? Yes, you are. Yeah, I just wanted to check on the MDF front. So what will be the cost advantage that we might have in West? Because we believe that the timber cost will be higher for Greenply in West. So are we seeing any, you know, savings in terms of chemical prices or, you know, when we say maybe par with the peers, because they are in more proximity to the RM availability. No, raw material cost, as we said, is almost similar to the raw material cost in North, our procurement cost. In terms of chemical cost, we will get advantage being in West and being in Gujarat. Okay, in terms of power cost also, since we have put a you know solar energy system there, a hybrid energy mechanism, we will be much better off in terms of our power cost also. And, of course, the near proximity to our you know end buyers will equalize the logistics cost as it will be for others also. So, it will be like, you know, very similar, except the benefit what we'll get on the chemical cost and also on the power cost. ...Understood, sir. And, so largely, so from, you know, if you look at, at, at peak utilization, so what kind of geographic concentration are we looking at? Would West be around 40%-45% of our business or more than? Well, yes. Yes, for sure. Okay, sir. So lastly, on the overall current demand scenario, if you can highlight for the plywood business, like what kind of you—I mean, next year is looking like for 2024. You mentioned like a 10% volume growth. So is it, you know, par with the industry growth or we will be outperform? Well, you know, as I've always said, that, understanding the industry growth is very, very difficult. So, we are working on our own strategy, and, for next year also, we are, of course, we just started the budgeting process and everything, but our internal, guidelines is that we must look at, 10% volume growth on a year-over-year basis. Okay, sir. Thank you. Next question. Yeah. We have participants who wish to ask a question may press star and one on your touch-tone telephone. Participants who wish to ask a question may press star and one on your touch-tone telephone. We have the next question on line of Ashish Kumar from Infinity Alternatives. Please go ahead. Thank you, sir, for the opportunity. Sir, in terms of our ply margins, though, we have got a very large share of premium, but compared to, say, the competition, we still seem to be having a lower margin. Do we see that margin going up to, at least 12%-13%, or we will be at, stuck at this 10-10.5%? See, I don't know when you say competition, but, you know, today we are having just one business line, and all our costs, everything gets a portion, you know, all our fixed costs gets a portion over one single business line. So one, as we have now, MDF also going forward, there will be some operating leverage which will come as company as a whole. That is one. And, second, I think, as I said, that we are also investing a lot back into the business. So, you know, the margins for sure, will improve going forward, but I am, not able to tell you at this point of time that whether, yes, it will, for sure improve by 2%, next year. Right. And, sir, in terms of the debt that we have taken for the MDF, when does the repayment start in terms of cash flows? Repayment starts in FY, in the following year, basically, the financial year 2025. Financial year. Twenty-four, twenty-five. 24, 25. How much is the repayment in the first year, sir? First year, it will be, so every year it will be around 47-50 crore, in that range. Okay. What will be our average cost of debt for the MDF? Average cost of debt for term loan will be around 7.7% plus, basically. Fully hedged? No, not hedged. We have a natural hedge, actually, so on the foreign component. How much will the foreign component be? Foreign component is around 25%. Twenty-five percent. Of the term loan. Of the term loan. And so we will, do we have EPCG requirements as well? No. No. We have no EPCG. We've not imported the plant under the EPCG Act. We have not imported. We have no export liability. So we were, but basically for the foreign currency risk, to the extent of the foreign currency risk, that we will have to import something. Export something, sorry. Yes. Yeah, yeah. Yes. Certainly, we want to, and also, you know, there is, if you see the industry cyclic, right? And India does very well, then it does not do well. So a certain quantity we want to export- Okay. to kind of have an alternative market available for us. Mm-hmm. And we would plan to export, what, 25% of our production? No, no such plans, at this point of time. You know, we have the intent to be also into the export market. So, so when people look at that as a disadvantage of being near the port, there is also an advantage. Natural hedge, natural hedge will operate at concern level, not at... Yeah. So, you know, the intent is always there, but it will all depend on the domestic market scenario, export relations, what type of relations we can get, demand, situations, all those factors. Right. No, because even the people in South are exporting a reasonable percentage, even though the weak demand in Indian market. So, I thought maybe you will—one would like to import—export in the first year to get the capacity utilization high. And, sir, in terms of supply of timber in western region, you don't see that as a constraint? We don't see that as a challenge. I mean, setting up an MDF plant, the first criteria is to make sure that the timber is available. And we are very confident of the research we've done before setting up and choosing the location, and also are very confident on the current ongoing plantation activities and the initiatives taken between the company and the farmers. Where do you think that initially, where we will be getting our timber supply from? So which region? How—what will be the lead for the initial supply, where do you think, and how much will be the lead distance? Sorry, come again? How much will be the lead distance for procurement of timber for us, sir, initially? So, obviously, the target of the company is maximum 100-150 km radius. But practically speaking, today we are doing from a radius of anything between 250-300 km. All right. Okay, and you are reasonably confident that we will have our MDF up and running in May? ... Absolutely. Well, yes, it looks like. And just to add to that, on the timber thing, you know, we have also worked extensively on the plantation side of it. While we speak, we have more than 10,000 acres of coverage in plantation. Of course, we don't get the crop in year one, right? But that's a process which we have started there in a big way. No, no, absolutely, sir. Sorry? That will take its own time. That's what I was saying, the initial part- Of course, that will take its own time. But in MDF, it's a typically three-year cycle. 3-4 years. So we started this process around, you know, 13-14 months back. The moment we started, this idea of conceiving the plan there, we started working parallelly on the same also. So we are creating something for the future also to, de-risk any type of worry and help us further. All right. Okay, and wish you all the best, sir. Thank you. Thank you. Thank you. Thank you. We have the next question from Jojo Shaju from Alpha Invesco. Please go ahead. Okay, thank you, sir. I have a few questions regarding the plywood business. So first question is that, in the recent years, we are seeing a lot of products being launched as a substitute of plywood. For example, the Reliance Industries introduced this product called RelWood, which is made out of fiber and polymers, and they are not using the wood there. But on the application side, it can be used wherever the plywood is being used. So I just want to understand, a player, a big player like the Reliance coming into this industry, do you think it will be disrupting the market? See, two things on this. One, you know, the RelWood is already in existence for last 4-5 years. Okay? And second, it's not a very carpenter, contractor-friendly product because it has a, it's a composite product, which also has plastic in it, okay? Mostly this product is good to be used for cladding surfaces or like, you know, maybe some flooring surfaces where you have too much of water or exposed surfaces. And the last thing is in terms of comparison with wood prices or the plywood prices, this is significantly high. So because of all these reasons, it has not really picked up into the market. Thank you. It's a, it's a different, you know, product also in terms of usage. Okay. So it's.ot directly competing with the plywood product, you are saying? No, no, no, it cannot. Because what I understand, like, this can be used in furniture or ceiling, side, or... So most of the plywood, wherever we can use, it can be used there also. And, right now, I believe they are going to scale up the business, and, if they have the scalability, the prices will also come down in the future, right? So- Well, as I, as I said, that it is not a direct substitute for plywood. Yes, there are certain applications where one can always look at, okay, using this. Okay. But then they will have to pay a price also for the same. So it's almost like 1.6-2 times as expensive as plywood. And I don't think Reliance will wait for scale to come. I mean, if they have the price, they will first give the price at the product at a much cheaper cost, get the scale, and then increase the price. You know what they did in the telecom sector. So if they had that pricing advantage or anything of that sort in their mind, by now they would have done it and finished it. Okay, sir. Understood. And sir, second on the sales volume for the plywood, here, correct me if I'm wrong, so for the last three, four years, the plywood sales volume was almost flat. I mean, in 2019, you sold 57 MSM, and in 2020, you sold 56, and 2022, 57.5. So, I mean, what is the reason for that? And if you are guiding for 15% in volume growth, so what gives you the confidence for that? Or what are factors will be leading for this 15% volume growth? See, your voice was not totally clear, but what I understand, your concern, what you're raising is, in the last 2, 3 years, the volumes have not grown. Right? This is what you're saying? Yes, sir. Yes, sir. Yeah. Yeah. This year, the volumes have grown by 15%, correct? And, next year, we are talking of a 10%, a desired volume growth of 10%. One of the reason also is that there were many product lines where, we had supply challenges. So in this year, we have been able to mitigate many of those challenges with our fresh plant coming into existence, our capacity ramp-up, which has happened in Bareilly, the new line in Hapur, which will also become operational in quarter one. So from the product side, at least we'll not run into any challenges or from a supply constraints. Okay. We were actually big time bogged down because of, you know, not having the supply, for the products where there was demand in the market for our products itself. Okay, understood. Okay. And so my last question is on the timber price outlook. So you have already mentioned the prices will continue to rise for some period of time. So my question is related, how will we impact into unorganized players? So can they sustain at this timber prices level going forward? Or do you think there will be a, I mean, a lot of unorganized players will be exiting this business because of the timber price, anything like that? Again, your voice is not clear. This question is with respect to MDF, right? Mr. Shaju, could you kindly repeat your question a bit slowly? ... Sure, sir. So my question is related to the timber price outlook. So you have mentioned the prices will be going up, at least some period of time. So, my question is regarding whether the unorganized players in the plywood segment can sustain at this timber prices level. Do you think they will be exiting this business because of the higher timber prices? So, see, timber prices are already at a high level, okay? We have not said that it will continue to rise. You know, there are no market intelligence, which is saying it will continue to rise, and there are very mixed opinion on the same. Whatever is the price at that, today, the market is being sustained even by the unorganized players. But in the long run, personally, we have a view that the way the rules and regulations in this country are changing, and the consumer preference, which is also moving towards branded goods player. And you will see more and more branded goods player, all the label players have also started spending money on the branding. It's very good for the branded goods business. So, the regulations, like when I'm saying regulations, I am clearly talking about the GST regulations, as it continues to improve in the country. And second, the consumer preference, which is now, slowly moving more towards branded goods. These are two good signs for any branded player for future. Okay, sir. Okay, and that was useful. That's all from my time. Thank you. Thank you. Thank you. Participants who wish to ask a question may press star and one on your touchtone telephone. Participants who wish to ask a question may press star and one on your touchtone telephone. We have the next question on the line of Karan. Please go ahead. Hi, sir, thank you for the opportunity. Hi. Sir, on the INR 600 crore of CapEx at Vadodara, you know, any benefit or any subsidy from the Gujarat government with respect to green building or water or power, et cetera, and anything to highlight? Yes, there are some subsidies. I think we have- There are interest subsidies, there are subsidies on CapEx. CapEx. There are some employee-related benefits, basically, and some taxation benefits. Also, we have electricity duty exemption for first five years. Okay. Right, right, right, right. Also, sir, with Europe looking slightly weak, and also last year, we had sent our first consignment from Gabon to U.S. So any plans to de-risk the Europe exposure to U.S., and your thoughts on this? No, see, the U.S. thing, actually, we are still working on the same, but, it is not something which, it took a lot of time for them to get the material at that point of time, so, that feasibility was not coming. In terms of, they are also not happy that if it takes so much of time for the material to reach to them. And, second, Europe has started again picking up. So I think if Europe comes back to semblance, then there won't be a problem. During this period, we have tried for other countries also. We have tried even for CIS, for Africa also, but somehow, nothing major has materialized. So our dependence on Europe, for that business is high. Other than, you know, other than Europe, of course, we do in India, and we also do in Southeast Asia. But Europe is the most stable business, or it was the most stable business for us. Correct, correct. Two big bookkeeping questions on CapEx for this year and next year, and ESOP for this year and next year. Thank you. CapEx for this year and next year? Yes. CapEx, how much of CapEx? FY 2023 should be, as I mentioned earlier in the last call, around INR 620-INR 630 crore, basically, this year. And next year it will be around INR 25-INR 30 crore on a consolidated basis. Right. And on the ESOP this year, This is capitalized, on a capitalized basis. It's of this year, for the full year, it should be close to on INR 12 crore? Sixteen. This year? 16. So this year, ESOP is 16, and basis the grants, which is issued for next year, it is only- 2.8. Three crores. Three crores. Okay. Thank you. That's mine. Thank you. That was the last question. I would now like to hand it over to Mr. Sanidhya Mittal for 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 Market Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.