Ladies and gentlemen, good day, and welcome to Q3 FY24 Earnings Conference Call of Greenply Industries, hosted by Asian Market Securities Limite d. This conference may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of our company as on date of this call. These statements are not guarantees of future performance, 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 participants' line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatelia from Asian Market Securities Private Limited. Thank you, and over to you, sir. Thanks, Nishan. Hi, everyone. On behalf of Asian Market Securities, we thank you for joining us on the Greenply Industries 3Q and 9-month FY 2024 earnings conference call. In the panel today, we have Mr. Manoj Tulsian, Joint Managing Director and CEO, Sanidhya Mittal, Joint Managing Director, and, and Nitin Kalani, CFO. May I now invite Manoj Ji to begin the proceedings of the call. Thank you. Over to you. Thank you, Karan, and good evening, everyone. It is a pleasure to have you all on this call. I will be updating you on Greenply's operating and financial performance for Q3 and 9 months FY 2024. First of all, I'm very happy to share with you that we have achieved a consolidated revenue of INR 621 crore during this quarter, which is the new highest ever for the company in any single quarter. I'm also excited to share with you that on a consolidated basis, our revenue has grown by 45% on a YOY basis, and on a 9-month basis, a growth of 24%. With this, I'm very confident that this trend will continue in the upcoming quarters, and this also corroborates to the 22% CAGR for FY 2024 over FY 2022, which was mentioned earlier in my last quarter's speech. Please note that actual numbers will have to be looked at on a like-to-like basis, excluding Gabon revenue, once the transaction is approved by the shareholders. During the quarter, our consolidated EBITDA has grown by 56.5% on a YOY basis. I'll share some highlights of business-wide performance. In our plywood business, revenue growth was 11.9% on a YOY basis, majorly driven by 11% volume growth. On a 9-month basis, we have achieved approximately 8% volume growth. With this, we are very confident of achieving our annual volume growth target of 8%-10%, as guided earlier. On the margin front, our adjusted core EBITDA margin was at 8%. The raw material cost continued to show an increasing trend seen during this year. During the quarter, we continued to invest in building the brand equity and continued with TVCs to leverage our partnership with Jr. NTR, whom we appointed as our brand ambassador earlier this year. This also had an additional impact on the quarter's margin. Our PAT for the quarter was at INR 27 crores. The PAT includes one-time impact of reversal of interest provision in the matter pertaining to area-based exemption under central excise to the tune of INR 8.9 crores as a result of favorable order received from the department. Moving on to MDF business, our revenue in the third quarter was at INR 128 crores and a volume of 41,928 CBM, which was better than our expectations, and we are confident that we will well exceed our guided 100,000 CBM volume during this financial year. I'm happy to share with you all that we have started selling our value-added products during the quarter, and we are also planning to add more VAPs in our portfolio in the near future. During the quarter, our EBITDA without forex was at 13.5%, as against 13.4% in the previous quarter. We realized that our EBITDA in quarter two included positive impact of forex income on the loan outstanding, which during the current period reversed and turned negative due to adverse currency movement. These items distort the quarterly performance. We have now corrected the EBITDA calculation to exclude such income or expenses, which are non-cash items and significantly fluctuating quarter over quarter and not a part of operating EBITDA performance. Since we are still in the phase of stabilizing the plant, trial runs of new products, as well as ramping up of our capacities, cost optimization, we believe that the true level of EBITDA will be visible in the coming financial year only. More details on the same, will be shared by Sanidhya later on. Our revenue in Gabon business were almost similar to last quarter, and we continue to make losses in that business during the current quarter. We are happy to share with you that we have reached an agreement to give away majority stake and management control in our Gabon business. The business had been loss-making for past several quarters, and the company was finding it difficult to manage the operations of, Gabon. One after another, challenges were getting posed while running the business. Since the pandemic, the Gabon operations have not shown any signs of stability, and the debt levels kept on increasing. Subject to shareholder approval, the transaction should be completed within quarter four. On a consolidated basis, our net debt levels are at INR 732 crore against the previous quarter debt level of INR 713 crore, which is well within our guided peak net debt level of INR 750 crore. This increase in debt is due to two main reasons. Firstly, we made an investment in our hardware JV amounting to INR 10 crore during the quarter. And secondly, our working capital levels in absolute terms increased both in MDF as well as plywood business. We have accumulated an additional inventory of timber as well as core, which is typical in this quarter, to meet our requirements in the fourth quarter. However, if we have to compare with quarter three FY 2023, our working capital days for the plywood business are at a level of 36 days, as compared to 38 days in the third quarter last year. In January, we have already made additional investments of INR 15 crore in the JV, and are also likely to make additional investment towards VAP in our MDF business going forward. However, we are confident that we'll remain below the guided net debt level of INR 750 crore. After the completion of Gabon transaction, which is subject to shareholder approval, the consolidated net debt at the year-end will be somewhere around INR 525 crore. With this statement, I would like to hand it over to Sanidhya to provide more insights on our MDF business. Thank you, Manojji, and good evening to everyone on the call. In our MDF business, we are progressing well. I'm happy to share that we have achieved a revenue of INR 128 crore, also having a positive cash flow from operations, and at net zero at PBT level in this quarter as well, ahead of our original plans. It is a result of our meticulous planning, team effort, brand strength, and commercial discipline. During the quarter, we have installed a few short-cycle presses, as well as ramped up production of our Prelam MDF boards. In addition, we have launched other value-added product categories like CARB and boil proof. Being a premium player, we will be introducing other innovative value engineering products to serve all categories of customer segments going forward. In the last quarter, we sold 41,928 CBM, with a blended realization of INR 30,629 per CBM. On a year till date basis, our sales volume has been 79,009 CBM, with a sales realization per CBM of 29,649. As our share of, share of sales of value-added product increases, the realization should also increase. From the full year perspective, we are confident of well exceeding our sales volume guidance of 100,000 CBM. With this perspective, I would like to open the floor for the Q&A session. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ritesh Shah from Investec. Please go ahead. Yeah. Hi, sir. Congratulations on a good set of numbers. A couple of questions. First, on Gabon, any particular rationale to take out a 51% stake? That is one. What impact would it have on both the balance sheet and P&L? That's related to Gabon. Probably, I'll come with the other questions after you answer, if that's fine. Ritesh, you know, I mean, let me again ask you a question. When you are saying, the rationale behind, 51%, right? That's right. So, I mean, what exactly is you are trying to understand? It is more, it is less, or what exactly you are trying to figure out? So why not 100%? Okay. Okay, okay. So, Ritesh, you know, the simple reason, you know, we were actually trying to get a buyer since almost last two years, and it was not at all easy to find anyone who could have taken over the business, right? Our intent here was that, you know, if we are able to fully hive off this business. But we could not, because what happens is, you know, the other party still felt that we still have so much of experience in this, and there is a huge risk. I can only tell you this much, for the buyers, at 51%, whatever they have taken, and they felt that they are not interested in taking anything more at this point of time. Second thing, in terms of balance sheet and P&L, you know, once the shareholder approval is in place, which I think would be there, in quarter four, yes, by February end. For quarter four results, when we will declare, from quarter four, one, only, this consolidation will not happen, so debt and all other assets and everything of Gabon, which was getting consolidated, will no more get consolidated. And in terms of P&L, only one line item will start reflecting as our share of, profit or loss from the JV going forward. The control, of course, will move away to the buyers. Right. Sir, should one assume INR 150 crores-INR 200 crores of delta on debt because of this, or is the number higher than this? I mentioned that, you know, we have a debt of close to around 3 5 crores-INR 37 crores. which will not get consolidated, you know, in the year-end balance sheet, which means that our debt profile will somewhere come down to around INR 525.25 crore. Perfect. This, this is helpful. My second question is, congratulations on MDF for ramp-up and margin profile. You did indicate that we will have incremental investment in value-added products going forward. Possible to give some timelines and CapEx numbers and incremental benefit that will draw out of this? Yeah, thank you. So, next financial year, we, we plan to spend almost close to INR 40 crore on, CapEx and, in MDF, and this is mainly on two grounds. One is, to increase production capability to manufacture value-added products, and the other is to increase our existing line capacity from 800 CBM to 1,000 CBM. So all our balancing machines in the plant is planned for 1,000 CBM from day one. The prep, however, will get extended, and we will be able to turn out 1,000 CBM from this line instead of 800 CBM. So this INR 40 crore includes both line extension as well as value-added products. So when do we see that coming in? So this will happen in FY 25. So should we presume these benefits will come, say, from FY 26 on the PNL? For sure. Yes, absolutely. Okay, fine. This is quite useful. I'll join back with you. Thank you so much. All the very best. Thank you, Ritesh. Thank you. The next question is from the line of Neha from Nuvama. Please go ahead. Good evening, sir, and congrats on good set of numbers. Just a couple of questions from my end. If I look at your MDF segment, there are a couple of questions on that particular segment. If I see this quarter, you have started value-added segment, but ex of Forex, your margins have remained same. Could you clarify on that particular point, like, why have your margins remained stable, ideally it should have moved upwards? Secondly, could you speak about raw material sourcing and what pricing is it, what's the mix, and have the raw material prices improved mostly? Neha, your voice is cracking, so I think the first question we were able to understand, but the second one was not clear. Maybe Ritesh can answer the first question. What was the first question? That, you know, despite increase in sales, the margins are same. So, there are a couple of reasons for that. So, when we started the line, we started buying timber right from March. So if you see, and if you see the timber trend from March to now, you know, there's been a continuous increase. So in quarter two, we were consuming the older raw material, obviously, because we cannot carry that forward. So the raw material side, the cost was low. Also, when we started value-added products in this quarter, there were some losses which we made while producing value added. These were just start-up losses or, you know, losses related to production and inefficiencies in terms of consumption parameters. And then, followed by that, there was another drag, which was the marketing cost. How much was that in rupees? So in quarter two, there was almost nil marketing cost, and in quarter three, it was INR 3 crore. A fter that effect, the margin is remaining same. Understood. Your raw material supplies are coming from where? If at all you could mention, as those older inventories have gone away, what's the kind of timber pricing are you receiving? Some sense there would be helpful. You want the number? Yes. Nitin, do you have an average number? The prices currently are about INR 6,650 a ton, essentially INR 6,500-INR 6,700 a ton on an average, which was around INR 5,500 when the initial stock was built up. Understood. So that initial stock is gone away, right? We are now building up the inventory as and when required. A bsolutely. Understood. What would be your current regional mix in terms of sales, and where are we exactly targeting MDF? Obviously, we are trying to sell most of our capacity in West, and we are selling a little bit in North as well, and very little in East and very little in South. And being placed in Gujarat, it gives us a great advantage because, you know, not only do we use road transport, we also use sea transport to domestically send our material to South India, which is really cost-effective. Understood. Do you have any share of exports at this point of time? I understand you don't have obligations, but are you exporting some bit, given that you have, you know, port, which is close to you? I mean, it's not making economic sense to export, and we have only one line. And as a company, our philosophy is very clear that, you know, we want to focus on value-added products. W e want to use our brand name, we want to focus on that and pump value-added products to the market. And as of now, we are just sitting with one line, and we are quite confident that, you know, we can sell this in the trade itself. We don't need to look at exports. Understood. And lastly, on your pricing, in case you can just mention where are we versus our peers and imports at this point of time? Quarter three, if this question is pertaining to quarter three, we were probably, you know, 1 or 2% cheaper, depending on market and product to product, compared to peers. If you talk about today, I think, you know, we are, everybody's at the same level because I guess, you know, the scenario is very competitive at the moment. How much were the imports cheaper at this point of time, sir? See, imports are mainly industrial grade and of a lower density. And honestly, that is not our segment at all. You know, we are not, we are neither trying to match that, neither are we trying to focus there. We, we are very clear that we want to make, even in the interior grade, we are making much higher density than import. We are trying to leverage our brand, we are trying to leverage our distribution strength, and we are trying to play there. So we're not trying to compete with import because the given, the size we have, you know, in terms of just one line and that much material to sell, we are quite confident that we have to sell only domestically at our prices. We should not get into this price war of matching with import. We'll not be able to survive. Understood. And last question, if I may. If you could speak about BIS norm implementation, what's your take on that? Do you think it's getting implemented in sales, or are you expecting some delays around? And what's the kind of impact that you see on your business because of BIS? Thanks. I think it's a great step that the government is taking, and, we definitely need to bring these standards in and protect the domestic manufacturers from cheaper quality imports which are coming in. And with this, then the, you know, the field becomes level playing. And obviously for any, organized player like us, it's going to be great because with BIS, definitely in the short run, imports will be greatly affected. And fingers crossed, hoping that it comes in and all of us start doing very well in MDF. I think, yeah, just to add, I think there are representations, possibly that's why you are asking this question. We have also heard that there are representations to delay this. But if you really read the intent paper, it very clearly says that, you know, one, that the government wants, you know, the basic standards to be maintained in the wood panel industry. And second, they also are trying to see that, you know, the domestic industry, that the Make in India concept, actually, it gets a boost. So, it remains to be seen. But if you truly ask me, with the intent, it's kind of difficult, you know, to see that this will get extended and this will not get implemented from first of March. Even if it happens, maybe the government might give a leeway of 2-3 months, not more than that. Understood. And what's the cost of getting a BIS license. So BIS licensing, we are, we as a, you know, organized player, we are already have licenses. Okay? So, for us, it's not going to make a major difference. Yes, except in the some of the categories where we were not putting, the BIS mark. We'll also start putting the BIS mark. It's a cost, but it's very minuscule compared to, you know, the overall, turnover of the business. And it's different for different grades also of standards. I 's very difficult to quantify it that way. No, by this, what I wanted to understand was, will it be difficult for smaller players to get the license or for in exporting, players to get the license? Or is it not the cost impact, it's time and, you know, effort or changes in the process, which is more of an impact? I think the change, I don't see it, the smaller players having a challenge of not getting the license, to be honest. I think in India, everybody will get the license. As far as foreign players are concerned, it is time-consuming, and it's a difficult process, more than cost, I feel. Because all the foreign players who are exporting material, they're not small players, so I don't think cost at all is a challenge for them. Understood, sir. Thanks. Thanks a lot, and all the best to you. Domestically, the quality what we produce in India, okay, leave aside the organized players like, us, even the unorganized players, what I have seen that, you know, most of the other places, those qualities are not as good as what we produce and consume in India. So, what Sanidhya is trying to say is that, yes, domestically, anyone who follows the standard in this will be able to get a license. And I think the authorities will be more than willing to do that also, because they also want that the material which gets sold in this country, everything should be compliant and should be a proper standard. Internationally, yes, there can be a challenge for them to get it so fast. Understood. Sir, just one basic question, since you asked this, I know I'm just having a lot of questions. Internationally, also, I think global players are very limited. If I'm not wrong, those are the same players playing here in Indian market. Why is it that, you know, their quality would be largely different and it would be very difficult for them to, you know, comply with our quality standards? No, it's not a question of, it's not a question of difficulty or this, okay? It's a question of, one, their mindset, because they also have to undergo their change, their economics, right? And when, then we don't know that, you know, in terms of cost and everything, the competitiveness, which, you know, today they might be finding for the Indian market. And second, as I said, that, you know, if you look at the intent paper, whatever, you know, we have read, it's very clear that the, the reason, also one of the reason of doing this is that, you know, the Make in India concept is being, given a boost. So, rest you understand. Thank you. Thank you for joining. The next question is from the line of Achal Lohade from JM Financial. Please go ahead. Yeah, good, good evening, team. Thank you for the opportunity. Good evening. My question was, with respect to the plywood, volume growth, you know, how do you look at it, for FY 25, 26? And how has been, obviously, it's 11% growth on a YoY basis, but how the momentum has been? Is it picking up? Is it, the same, as we speak? I think for the journey what Greenply is traveling, and the type of things what we have done in the past 2-3 years, our confidence in terms of volume growth has increased. If you really see in terms of our spend, has also gone up further. That one of the prime reason as a part of that strategy is that, you know, we can get better traction, both in terms of the premium and the mass category. Okay. Going forward also, we are very much willing to make sure that, we grow in this volume range, 8%-10%. Now, this is something which, as I keep mentioning, is more of, the growth within. It's an intrinsic growth. Irrespective whether the market is growing by that volume or not, I am assuming as a company, you know, the type of efforts what we are taking and the reach and distribution what we have, and the product stack-up, we should be able to grow in that range of 8%-10% in terms of volume. From the industry perspective, I think, you know, if you really look at it, I don't see anything negative happening now for the country in the next 5-10 years. The things are looking better only. I was just looking at some, you know, residential house sale data. First time, in H2 of last year, I'm sure you guys you have also looked at that report. First time it has happened that in H2 of last year, the premium sales of housing is much more than the mid-level. It has crossed that level, you know. So these are very encouraging sign. Of course, they define the premium level is anything over INR 1 crore as the ticket size. So these are very encouraging signs and the housing sales trend also is growing. Last year also it has grown by around 5%-6%. The previous also it grew. So these are all encouraging signs. And over and above that, you know, if the GST rationalization takes place, which, you know, I feel that now after this elections, you know, whosoever the government comes, there is a likely chance to curb the unorganized market and to improve compliance and this, you know, there will be a level of GST rationalization, and if that happens, then for sure, this type of a growth in plywood looks very much feasible, 8%-10%. Understood. Would you be able to talk about what is the mix we have in terms of the premium, mid, and the low, low end? In terms of, you know, the volume, premium is almost similar, like, the last quarter. We are close to around 43%, and the mid-value is around 57%. In terms of volume. In terms of value, sir? Value is 56, you know, 44. This is for third quarter, right? Yeah, and it was very similar for the second quarter also. I mean, the same number for second quarter. Understood. Another question I had in mind is with respect to the timber prices for the plywood business, you know, can you help us understand how that has changed on a YOY as well as a QoQ basis? What is the price, I mean, for the third quarter and the change? The timber prices this year, again, has only gone up. And, you know, if you really see, if I, if I recall, from the beginning of the year till date, there would be, almost maybe 8%-10% increase in the prices. Okay, we try to do our best to see that, you know, how we are able to cut it down by, by trying to source materials, not only domestically, but even now internationally. So we have been importing material also to, you know, try and, see that how the costs are under control to the extent possible. Because on the sales side, I have seen that the elasticity is very high, and, this year, if you really see on the plywood, business, we are not seeing anyone taking any major price increase. That is one of the reasons also that we are seeing that, you know, the margins overall are slightly under pressure for most of the players. Going forward also, next 12-15 months from here on also, it looks like that the prices will remain in this zone. It can slightly move up also, it may slightly come down also, but would be in this range. And then in FY 2026, we are hoping and expecting now that, you know, the supply side will improve and the prices may come down to some extent. So what kind of margins one should look at, I mean, on a reported basis? I know there is a ESOP charge, but on a reported basis, how do we see the plywood EBITDA margins for next two years, sir? Well, see, I think, you know, we are at near 8% level, okay? ±0.2-0.3% because of the ESOP charges. See, we can only improve from here. You know, I can only tell you, maybe 0.5% drop in the next six months or this, but I mostly see that from here, at this level, from this level, we have all the chances only to improve on our margin profile. See, our marketing spend also, we have slightly increased, okay? And I'm not disturbed at all, despite slightly being a pressure on the margin front. We have not reduced that because that's a part of our strategy. The company on the plywood business is almost nearing around INR 2,000 crore +, by next year. It was high time that after doing so much of our internal corrections, we needed to up our investments on the brand equity also. Because as of today, we are still the leader in the premium category. That is one category in our case, which has not been growing. You know, you all know that. So we still have the, you know, all our efforts there. Of course, in the mid segment we have been growing, so overall growth we are able to get, but we also need to work to see that how we are able to grow our premium category, which if that happens, then clearly, you know, you will see upstream in the margin. Got it. Sorry, just a clarification, sir. With respect to the mix, you talked about 2Q and 3Q, FY 2024. Can you help us with the 3Q, FY 2023 mix, if you have it? Yeah, yeah, yeah. 3Q, FY 2023, on volume basis, premium was 49. And so the balance is your mid 51. And in terms of v alue is 61 premium and 39 this. What it means is that, the premium has actually declined and the entire growth is driven by the mid. Absolutely. So the premium is almost stagnant, and the growth, whatever has happened, you know, in the last one year has happened in the mid-value segment. You think this is, this is for the industry also, premium has declined, or you think it is more to do with our own strategy and we will be able to recover that? No, there is a significant pressure on the premium for the industry. Okay? And since we had a larger chunk of premium, you know, I feel that we have also seen the pressure on our margin. But as I clearly mentioned that, you know, one, we have, we are taking all our efforts to see that, you know, how we are able to improve this and grow. Not maybe the company may grow at 11%, 12%, the premium, if it grows at 5%, 6% also, within the same, you know, you will see that the margin starts improving further on account of this also. It's a effort which we have to take, but yes, in the industry today, there is clearly a challenge. See, what has happened in the last three years, what we look at, the price points have, you know, moved up. The sweet spot today in the industry looks somewhere around INR 100-INR 110. And most of our premium products there is from INR 120 +. So every such INR 10 or INR 20 is making a difference. Okay? And this is all resultant of the continuous pressure on the cost side in the last three years on timber. So the other thing which can also happen, as I said, in FY 2026, you know, when you see that, the raw material prices starts coming down and, you know, maybe there would be some level of correction for sure in this industry on the, on the price side, you will see MDF premium picking up automatically also. So one, the trust which we are trying to, build upon in terms of our marketing activity, in terms of distribution, in terms of E zero as a property, zero emission, CARB certified, product. And second, maybe, you know, from the, the market side, if the raw material costs start coming down, then also you will see better traction again happening in the premium side. Understood. Understood. Just one clarification. With respect to Gabon, how much have we actually invested in the form of equity till date? And, we, you know, against this 51% stake, what is the consideration we are getting? Sorry, I missed that detail in the press release, if there was any. See, so the enterprise value, you know, of today of that business was close to around INR 270-odd crore. INR 270-odd crore. So that is the value almost what we have got. M ore than that. Slightly more than that. The transaction has happened at enterprise value of around INR 270 crore. Whereas the equity value was somewhat, I think, INR 21 crore-INR 22 crore, basically plus debt, so INR 250 crore-INR 260 crore. Okay. So, enterprise value is somewhere around INR 250 odd crores. And, you know, we have been able to do the transaction somewhere around INR 265 odd crores. The equity portion in this was only to the tune of around INR 30 crores, right? Or INR 25 crores. What was it? 23 crore was the equity. For our 51%, we are getting somewhere around INR 15.5 crore. Nitin. Capital investment was INR 248 crore, which included an equity of s on 31st December, the equity value was INR 18.2 crore in the books. But Nitin, because of the losses, this would have got reduced to 18.2, right? This is the net value. The net value after considering the losses still was December 31, 2018. Yes. Actually, investment would be more than that, right? No, that may not be true, because first three years, we made profits in Gabon. If you really see 2016 or 2015, we invested basically. First three years, we made profits. Three or four years, we made profits. Only in the financial year 2021, 2022, we made losses. The initial losses were very small, so that got offset by the profits which we made in earlier years, basically. So, net- net, I don't think we have lost anything from the equity we had. We have not lost anything on the equity value, that much, that much I remember. Okay, perfect. About INR 3 million would have been lost. Last, what was the line last, Nitin? I couldn't hear that. So just give me one minute. The share capital, if you really see, was about INR 2.72 billion, we had invested so far. Long back at an exchange rate of INR 66, basically. So net investment was only INR 18.2. There was a profit which was eroded, essentially, over the last 2-3 years. Understood. In terms of investment, how much is, the-? We have sold it at a full value of about INR 29 crore now. Okay. So now let me give you the numbers. The equity value, which we had invested was INR 18 crores, and the transaction had happened on the equity value side only. You know, leave aside, the debt side at around INR 29 crores. Understood. I think this is very, very helpful. Thank you so much, and wish you all the best, sir. Thank you. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead. Hello. Sir, congratulations on healthy ramp-up of MDF plant. Just want to understand, how is the distribution network on MDF side? What sort of network you have right now and where do you want to reach? And how much is the common distribution between MDF and ply? So, I think the first question was the current market splits. You know, currently, we are doing maximum, most of our business, like, you know, almost close to 40%. These are approximate numbers. 35%, maybe 35%-40% in West, around 25%-30% in North, and the balance in pockets like Northeast, East, and little bit in South. Also, being in Gujarat, we have a huge advantage in the western markets in terms of the smaller deliveries and in terms of the better supplies for the channel, so that is giving us a huge edge. And also, being in Gujarat with a great infrastructure, we are being able to send material to South India now via sea. So, you know, even domestic dispatches are happening through via containers, and the freights are very low, so that is giving us a huge advantage. Okay. Got it. Just want to understand one thing. As you highlighted, you are selling in North and South market, but if I look at the timber prices, what you have reported for this quarter is 15% higher versus North prices, what it is right now, and maybe around 30% versus South. So clearly, the other player would have advantage in North and South market, the local players. Sorry, I didn't get your question. Could you please repeat? So I'm seeing your timber prices per kg is INR 6.5 per kg for this quarter, while in north, the industry leaders have reported its number at a 15% lower timber prices. South is way below your timber prices. So how you have a right to win in north and south market, even like west, you clearly have a upper edge over other players? So, I think this price, what we quoted, is also actually eucalyptus prices, you know? And the way other players are now slightly mixing other species, we are also open to that. So my blended rates are also pretty much at par with any North India player. So, you know, Nitinji can share the exact number also of our blended cost of timber for Q3. Okay, got it. How much will be the transportation cost in this? What is our transportation? Whatever we quoted is the net cost, you know, delivered cost to Gujarat, to our plant, landed cost at door. Are you saying on the buying side or the selling side? I'm saying on the buying side. So earlier, you said your timber price is INR 6.5 is all inclusive. All inclusive, how much would be the transportation cost broadly in this? It depends, you know, because at this moment, like, you know, most, maybe 50-60% of our raw material is being sourced from Gujarat itself. Maybe 5-10% from neighboring states, and balance from north as well as south. So, you know, this is a blended cost, INR 6.5, so it's very difficult to give you freight. So in Gujarat, the freight is very low, and the rates are, rates are around, like, you know, maybe INR 5,900-6,000. In south, you know what the rates are, plus transportation from there to us. We actually even in our system, we track it as the cost of acquisition. So, you know, maybe we'll have to find that out, but we just look at our final landed cost. Whichever market, we go to buy, we just see that what is our final landed cost, delivered at our plant. And not only do we get, like, you know, outward from Gujarat, you know, for the market, we dispatch the material, but we also get incoming via ships. So our cost, from south to Gujarat is also very viable because of the Gujarat ports being so, so efficient and the infrastructure development being so great—good. Okay, understood. Got it. And how much is your OEM mix right now? And in MDF, everything is sold under Greenply brand? Absolutely. We sell everything under Greenply brand, and the OEM mix is hardly 13%-14% of our total sales, and we intend to keep it under 15% because, you know, Greenply, even in the plywood segment, our focus is always value-added. So we want to focus on value-added product, we want to focus on the trade network, we want to focus on leveraging our brand value and distribution strength. And you know, we are just sitting with one line, so we have to learn to sell this capacity at better prices and not keep running two OEMs. Got it. Last question from my side. Any guidance on FY 25 for volume and margin? And lastly, as you highlighted, because of value-added mix here, margin has been on the lower side. Is it possible to quantify the loss because of value-added ramp-up? I think at this moment, it will be very difficult to quantify it exactly because on three grounds: INR 3 crore increment, incremental marketing spend, value-added startup losses, and higher timber cost compared to the previous quarter. So on these three grounds, the costs were higher. At this moment, I cannot give you the exact number, but you can later get in touch with Mr. Nitin Kalani, he'll definitely give you the numbers. Okay, got it. This is a very initial stage, okay? You know, I'm saying for the MDF, and there are a lot of efficiency built up, which will happen. The first thing for us was to make sure that we are able to ramp up and do the distribution. And so now from this quarter, there is a focus, improved focus now to look at the efficiencies also. So once that is built up, you know, next year, for sure, you will be able to see on a similar volume also better margins. And in any case, our volumes will be much higher than this in the coming year. Hmm. True. Wonder will any guidance on for FY25 for volume, MDF side or ply? I think it's too early. We'll, we'll share it. Maybe, you know, maybe with the annual results, we'll be in a better position to tell you. It also depends, you know, how much this BIS affects. You know, the BIS affects. I think volumes can be substantially higher. Thank you. That's it from my side. Thank you. Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference, please limit your question to one question per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from the line of Utkarsh Nopany from BOB Capital. Please go ahead. Yeah. Hi, good evening, sir. First, I just need a clarification for your furniture fittings business. There was some news report that our JV partner, Samet, was already having a partnership with another player called Dorset in 2019. What is the status of that partnership at present? No, it is n o more there, and that is the reason that, Samet found this to be a good, one good market. They know that India is the place. Second, at that one time, their, arrangement with Dorset was only of supply and distribution. And, when we met them and we discussed with them, we also were very clear that, you know, we cannot make a brand. If you are just going to look at distribution or to look at us as a distribution agent in India, we are not at all interested. And they were also having a, a mindset that, yes, if they get a good partner, we'll, set up the facility here and become a serious player here over a larger period of time. That arrangement is already null and void, long back. Okay. Sir, for your plywood business, sir, can you give some sense, what is the reason for sharp decline in our JV plywood volume, for the past three consecutive quarter? We see that our traded volume has gone up substantially. What kind of a sales mix we would like to have going forward of own JV and traded volume? T wo things. When you look at the JV volumes going down, one, I think, you know, the cost parameters were very high. They were not able to stabilize the production, you know, at the prices what either we can own manufacture or we can get it from other trade partners. We tried our best, but I think there was surely a mindset issue, and that is where, you know, their volumes have got hit. And, yeah, this was the question, right? Yeah, yeah. And, how come like we have increased our traded volume, when we are not able to source the plywood at a reasonable cost from our JV partners, how we are able to source at a reasonable price from other players? That is precisely the question which we raised to our JV partners, that, you know, if, if the others, you know, sourcing partners are able to give us at this price, why is that you are not able to stabilize your cost side? Okay. This was the, the entire reason. Okay. And whether the current mix is likely to be maintained going forward or there is going to be a shift in the mix? Well, you know, it's very difficult to say this. It all depends on the volume growth. It all depends on the geographies, because, you know, we have our own multiple facilities. One, we have our own multiple facilities. Second, the traded partners are also spread out. So it all depends on, you know, which area, which geography, which product line we are growing. And accordingly, you know, these numbers keep on changing. Okay. Sir, lastly, on MDF, can you give some sense that what would be the share of value added so that, say, going forward in FY 25 and 26, which we are targeting? I mean, I believe we would want to set a very high number, but I think we should first achieve and then boast about it. So, you know, I mean, our hope is that it is between 50%, 60%, maybe 70% also. But I think we should not commit on any such number. We should first perform and then come out and speak about it. Okay, thanks a lot, sir. Thank you. The next question is from the line of Kushagra from Old Bridge Asset Management. Please go ahead. Hello, thank you for the opportunity, and congrats on good set of numbers. A few questions. One is on your capital allocation. So now, this INR 237 crore of debt is out of your consolidated balance sheet, and the risk part is also reduced. So net debt is going to be sub INR 500 crore, and cash generation is also going to be strong. So what are you planning towards capital allocation, let's say, between debt repayment, future capacity expansions and M&As? What are your preferences? Any color on that? So see, at this point of time, what we are looking at is, one, stabilizing, you know, the MDF business ramp up and see the type of growth and volumes which we need to do there, so there is a lot of focus. Plywood itself is one business where we see, you know, traction going forward because of both internal and external, reasons. And third, we have also taken, you know, this JV investments of SAMET. So the hardware business also needs to be grown going forward. So I think next 12 months for us, clearly is a time when we need to work on all these three businesses, stabilize them, try and work on improving the margins. Yes, there can be some amount of CapEx other than what Sanjit said for MDF, which for sure is planned. The other CapExes can be some line balancing or maybe a few, you know, small investments here or there. But, more or less, we believe that for the next 12 months, we should only concentrate on these 3 line of businesses and make them stable, make them grow. And yes, that will also help our debt equity to improve further, and by the time we'll have our, you know, next level of plan for growth. All right. So majority of it will be then towards stabilizing and debt repayments, for next 12, 12-15 months. Yes. All right. The second question is, really on, you know, MDF. So how much you can play around with the, utilization levels, given it's a continuous manufacturing and your already, reported number is 70% in Q3. So, and, and I believe that because of the continuous manufacturing, switching off and on is not very easy, so, you will continue to ramp it up. But between, let's say, you know, the volumes and the pricing, what would be your preferences, considering you are ramping up the capacity, the others are also ramping up the capacity in the domestic market. So let's say if you have to take a call somewhere in middle of FY 2025 between volumes and pricing, how are you thinking about it, for the MDF segment? Yeah. See, in MDF, you know, pricing is a determination of a market factor. Okay? And, you know, we are no different. The only way, what Sanidhya said, we are looking to improve our margins and realization by trying to sell more and more of value-added products. And ramp up for sure is important, and, you know, that is what is the whole concentration. At the given capacity, plus, he also mentioned, you know, to someone else on the call, that next year we'll be working on the line extension also. So one, it will take the whole capacity to 1,000 CBM. You know, second, for next year, when we do our full year numbers, yes, you know, doing around 50,000 CBM per quarter looks to be possible because, you know, this year now we are close to around 40-41,000. So doing around 50,000 CBM per quarter seems to be possible from a production side also. And then the subsequent year, I will have another level of, you know, ramp-up growth because by the time the line will be extended to a capacity of 1,000 CBM. So we can continuously see a roadmap of next two years of growth from the existing business. You know, I don't see any challenge. Two years for sure, and maybe even three years. As I said that, you know, after 12 months, you know, we will again start looking at our next, investment cycles. And depending on the market situation, depending on the product lines, where we need to invest and, how we need to grow after FY 2026. Up to FY 2026, we have absolutely no challenge of even growing at around 20%+ for the next two years. Okay. Just, that's quite clear. Last question, quick one. Now with, you know, utilizations above 70%, where is your cost per CBM for non-value-added product is settling for, for the MDF segment? Just a broad number will be helpful. I think, you know, right now, you know, I think we still need to work a lot on efficiencies, you know. We are still a very new MDF player. The line is still hardly, you know, 7, 8 months old after we've announced commercial production. So I think, you know, a fair evaluation could happen, you know, sometime in quarter one, where we start reaching a desired, you know, even consumables, you know, there are some consumables which we are consuming extra, there are some efficiency losses. So, you know, all these things will start stabilizing quarter one onwards, if we see that cost, I think we'll, there'll be a fair evaluation. Sure. Thank you, and all the best. Thank you. Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. Yeah, hi, sir. Just two questions. One is, so sir, you indicated that we have different sizing of our products from the line that we have. This is something different versus what we see for imports. Hello? Sorry, come again, different? Yeah. Sir, I think you indicated that the sizing of MDF, what we have from the line that we have, it's something different from imports. Can you just quantify basically what thicknesses we have, and where do we see most of the imports from a thickness standpoint? No. We mentioned in the call saying that the import product is much inferior compared to the products which are being sold in India. You know, the product usage in India is totally different. And the only unique size we have compared to anybody else is a 1.5 mm thickness, which others do not have. You know, our line has capabilities to produce 1.5 mm thickness. And we mentioned in the call that the import material is much inferior, much lower density. And to focus on our brand and to build our brand, we don't want to sell cheaper products, we don't want to go to OEM, we don't want to make those kind of sales. We want to focus more on trade and grow our trade network and brand. So, most of our sales volumes will be 1.5 mm thickness? Would that be a fair thing? Not at all. Not at all. Not at all. Hardly, madam, not even 1%, 2% of the volume. That is just a unique product that we have and others don't have. You know, once others start putting up the new generation line, probably they will also be able to make it. That's just a machine capability at this point of time. Okay, okay, okay. And the other thing, I think there was an earlier question, we did give numbers on both volume as well as value terms. Specifically on the ex-premium category, volumes have increased. So what is the motivation over here? Is it like we acknowledge that the market demands more of ex-premium, and that is where we would like to move to? Or if I have to put it the other way around, if we had to spend INR 100, would you focus more on middle economy range as compared to premium? Just trying to understand the thought process. Look, you know, today, if you really see the good part in our, you know, plywood business, is we have capability to change the product mix, you know, at any point of time. From a production side, there are no challenges. These are all feature-based products. Okay? So based the demand, we can always, produce and sell, whether it is premium or mass. Yes, our intent was that, you know, premium has always been something which was the forte of, Greenply. As I said, in the last two, three years, because of so much of cost increase and the pass on which has happened, the product prices have moved to a level where we see, I mean, that's my assumption, you know, and that's what I have seen even the other players talking about, that, you know, everyone, whatever little they were selling in the premium segment has taken a beating. So the market growth, yes, if the price point remains at this level, seems to be in the mid and mass segment only. Sure, that's helpful. And just last question, can you put some numbers on the furniture, hardware, JV, incremental investments? What sort of ROC do we look at? And any numbers on top line and margins? Okay. So I can give you very ballpark number, and I will request that don't hold us on these numbers because, you know, we, we'll be doing our P&L in detail after some time. Okay? I can give you some very broad numbers. In terms of the total CapEx, what we have seen, there will be CapEx in phases. But what we have seen is, we have an initial plan of investing somewhere around, around INR 225-250 crores, and in which there will be a equity component. I'm, I'm talking of the JV as a whole, out of which the equity component would be somewhere around INR 80 cr. Out of that eighty, 40 is our share and 40 is SAMET. In that 40-10 crore we had invested in quarter three, and equity and 15 we have put during this quarter. I think from the equity side, we don't need to put any further money during this quarter. The balance 15 mostly will get invested in the coming financial year. So that completes our equity side of investment. I told you the total approximately CapEx, but these numbers can change. Second thing, in terms of the top line, we are assuming that if everything goes well, this business can be scaled to approximately around INR 300 crores in 3-4 operational years. approximate At that point in time, so at INR 300 crores, on today's pricing and today's everything, we look at a high EBITDA margin of 20%+ in this business. Working capital investment over here would be how much, sir? Yeah, around a month to 45 days, you know. Okay, this is quite helpful. Thank you so much. All the very best. Thank you. The next question is from the line of Manan Shah, from Electrum PMS. Please go ahead. Okay. I had a couple of questions regarding MDF facility. So I know it's too early, but can we get any sustainable EBITDA margin numbers, percentage? I think, you know, industry is operating at anything between 18%-21%, and, by quarter one, we should also be pretty much in the, in that level, at that levels. You know, comparable to anybody who's rather plant in north. South will still continue to have a slight advantage. Okay. Since our peers, everyone is doing CapEx in this facility, so do we see any oversupply or margin pressure because of that? I feel yes, it can depend, you know, what happens with this BIS. Do the foreign players get licenses? They don't get licenses. A lot will depend on that. I feel, you know, this is like a double-edged sword, you know. When you do more CapEx, you have more capacity to sell, you know, you have to run to OEM and probably sell cheap. When you have one plant, I think we should only focus on trade and on selling more value products, you know? While as if I would have two or three lines at this moment, I would have to probably drop my prices further and change my strategy further to enter OEMs. You know, you have to understand that, you know, all credit also goes to the brand Greenply. Okay, which is, which has a very strong equity, and, because of the same also, the ramp up has been good, fast. So one is on the production side, the other is on the sales side also, that we have been able to, you know, generate these type of volumes. There's a lot of respect for the brand, and because of that, you know, creating this relationship in trade and entering into trade has been slightly maybe easier than what we would have assumed. And, we just need to be, you know, we thank that entire, trade fraternity for showing so much of, faith on us all along. As Sanidhya is saying, the whole idea is that, you know, since we have one plant only, we'll try to see and maximize that, this equity value, what we have because of this Greenply association. The brand also selling under Greenply banner. We'll try to see that how we are able to maximize on the value-added product. I'm sure all similar companies also must be talking of the same, but we get this clear slight edge because of the Greenply brand and the association what we have with trade for, you know, more than three decades. Okay, that was helpful. One last question: so, this is on a macro level. Do we see anything from China, like China dumping something or MDF related? China is never an MDF exporter, you know, so they are one of the largest manufacturers of MDF in the world, but they export finished goods. I have never heard MDF coming in from China. Whatever disturbance happens because of imports, it is mainly Thailand, Vietnam and countries like that. Okay. Okay, thank you so much. Thank you. The next question is from the line of Arun Baid from ICICI Securities. Please go ahead. Just one, a few questions, actually. On that, your fitting business, which will the first year of revenues we'll see from that business? Which one? Fitting business, the furniture fitting business, which you're getting into. From the hardware business, Arun. Coming year, FY 2025. So, the plant will be operational when, by when? Which quarter? The plant mostly will be operational by quarter one. Thanks. I'm sure you must have a figure there in mind. Roughly, how much in the first year are you looking revenue-wise in that business, roughly? Well, you know, this is totally a new business for us, okay? At this point of time, we were totally concentrating on first, again, setting up the facility. That is where the whole discussion is also happening between us and SAMET. Because, you all know that, you know, we just conceptualized this, sometime in quarter two, and the construction started in quarter three. So the whole focus right now is again to see that how fast we are able to bring up this plant. Our discussion on sales, volume, realization, you know, distribution, everything is now going to happen. Give us a couple of months or maybe by the next call, we will be able to give you better visibility on the same. Sure. And second thing is, Aditya, with regards to the MDF distribution, can you just let us know how many distributors, dealers we have right now, and, you know, how should we look at over the next 12-18 months? Right now, our distributor dealer base in MDF, direct distributor dealer base is 350+, and we definitely look at doubling this number by the next financial year end. That number means, would be sufficient for us to utilize this 1,000 CBM per day, right? I'm sure. Absolutely. I think it'll be more than sufficient. If we are able to make 700 channel partners, we probably don't need to run through OEM at all, you know. The next question is from the line of Tushar from KamayaKya Wealth Management. Please go ahead. Good afternoon, sir, and thank you for the opportunity. Congratulations for the good performance in the MDF business. So my question is more on the industry specific. I could see it in realization tons per CBM. We ranked in the third place, first being Century, second being your group company, thirdly, and fourth company in Southern India. So I just want to understand, like, on the realization front, where do we look at? We are just near to the second player, near to, I think, 30,000 CBM. So in order to add the value add and, you know, to increase the CBM realization, so what is your focus going forward? So see, on a long run, definitely the focus is to keep adding value add and to keep taking our per CBM realization higher. But in the short run, you know, everybody's trying to sell their capacity. So in the short run, there might be some changes, but on a long run, you know, when you see us over the next 4-6 quarters, definitely you will see an upward trend, where we will try to pump more and more value added and drive our per CBM realization higher. Fair enough. And sir, in your peer con call, they mentioned that the BIS will have more effect on the southern and western part because the more imported MDF was on these ports. So, do you see that the effect of BIS will be major on the western regions where you cater to? Yes, I think that's quite logical. The import is definitely coming in mainly in west and south. So obviously, the players in west and south will gain more. And the good part is that, you know, we have a monopoly kind of a situation in west, where we are the only player present. So our deliveries, the facility the customer gets, and the service the customer gets from us in west is unparalleled to anybody else. Okay, sir. Sir, I could see that it is a structural change in your business, like from the set, from your ply business, you're moving towards the higher margin MDF, and also you're adding the hardware business. So what, in for the midterm, how do you see maybe FY 25, FY 26, in terms of margin, how do you see your business go till what margin your business can achieve? See, you know, our margins from here, the blended margins can only be better because one, the growth in MDF and even the new business, because the new business is add-on, will always be higher than the, the growth which will happen in plywood business, mostly the way I look at it. Which means that my blended margin is only going to continuously improve from here. Because the other two, you know, both the hardware business, as I said, that is a business for sure which will start making more than 20% EBITDA, and even MDF business is something which will sustain at around 20% +, whereas plywood still remains maybe at the range of 10% or something. So, you know, the blended margin will only continue to improve from here, because the growth will be higher on those two business lines. The next participant is Hrishikesh Bhagat from Kotak Mutual Fund. Please go ahead. It's Hrishikesh Bhagat. Hi, good evening. Thank you for the opportunity. So the question is: So when I look at your MDF unitary EBITDA per CBM, and probably the number reported by one of your peers also for their southern market or their unitary EBITDA, more specifically on the southern side. Now, where the current profitability lies, clearly, even if I look at your capital employed in this business, we, it's not a respectable ROC that we are accruing currently, even at the lower. Even if I assume that utilization moves up, probably we'll see some improvement, but clearly at this profitability, it is not, say, a respectable ROC that industry will bene, accrue. Do you feel that very likely that supply could abate considering where the profitability lies for the industry and the current, because of these imports and everything? I think, this is really too early to judge. You know, we are hardly 8, 9 months into this business, and we are just reporting the second full quarter results. I think this is not fair at this moment to judge the ROC. I think a fair judgment should start from quarter one next FY, where, we should be at par in terms of our EBITDA with the North India players, and then we will start making decent ROCs. We have been maintaining this, you know, since last two quarters that, you know, please, look at our numbers next year. I can tell you that there will be substantial improvements which will happen in the margin profile, because we can see that. Yes, we have ramped up the production, but in terms of cost efficiencies, there is varied possibilities on which we need to work. So, the margins will be substantially different from what you are seeing at this point of time. Sir, I get your point. I'm asking more from the industry standpoint, because let's say at 70% RO utilization, I do agree that probably cost efficiency will play, but say for any new entrant, does it make any sense for the incremental capacity? I think because at 70% if 5,000 per CBM is also industry is not able to generate, then clearly I don't think so that the industry is really that attractive despite the growth. So that's what the question is: Do you feel that industry supply could get pushed back? I think this, you know, scenario in the, in the MDF space keeps changing, you know. Now, for example, if from first March, actually, because of BIS, next six months, there's nil imports or the imports are close to nil, the EBITDA can really change. You know, after COVID, when imports were not there. The EBITDAs were at another level. So I think, you know, it'll really depend. People who are in the panel space to continue the growth and to continue getting their market share will probably keep investing because, you know, this is definitely a future line of product, which is here to stay for the long run. Look, look, you know, one has to clearly understand that if in case the industry level margins, you know, drop to around, as you are saying, around INR 5,000-INR 5,500 per CBM, okay? Then you will again see that there is a lot of resistance in the industries to build up new capacity. Also, not see new players coming. So again, you will see maybe, yes, there may be 6 months, 12 months period, and then again you see the numbers going up. Okay, and this is a hypothetical case. But the other corollary which I have to give on this is the way the MDF business is growing in this country, okay? You know, I for sure see that there is a place at this point of time for whatever capacities are incoming will get consumed. With some level of support from the government, like, you know, this, the BIS standards and other things, for sure, you know, we'll continue—I mean, the industry will continue to make a decent level of margin. I also maintained earlier that, you know, those 30% margins and, you know, what the industry made was like dream. That is not a margin, because the moment you are at that level of margin, you will see so many new players trying to enter. And that's when you will have overcapacity situation for some time, and then you will see margins stabilizing around 20%-22%. Okay. Thank you. I mean, you know, if your question is that, you know, can somebody see again a consistent margin of 30%-35%? No, my question was not. I am more, my question is more related to potential supply. Can it get deferred? Because at least it has been fairly lackluster in the sense, last six months, where we have seen the margins, at least for the coastal-based players like West or South, has been significantly lower, where probably the returns are below cost of capital. So from that standpoint, probably when I look at the southern company, south-based MDF plants or probably for us, western plant also. The question is more from that perspective, that even at 70% utilization, if there's such a big challenge, can it then push back the potential supply that is likely from probably non-wood panel player? Is it likely a scenario that could work out? Anyone's guess, but even if it is there, it will be there for a temporary phase, and, then again, you will see things, again getting better. My sense is, you know, that there is growth happening, there are new OEMs which is coming. The furniture market is developing. Like in Tamil Nadu, there is a furniture market which is coming with lot new incentives. So, you know, the demand will also go up. Once the demand is there, then, you know, the capitalization for everyone at a decent price and decent EBITDA will be there in the system. Sure. Thank you. Thank you. As that was the last question, I would now hand the conference over to Mr. Sanidhya for closing comments. Thank you all for taking time to participate in this call. In case of any further clarifications or queries, please feel free to reach out, to reach out to us. Thanks again and goodbye. Thank you so much. On behalf of Asian Market Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.