Ladies and gentlemen, good day and Welcome to the Q2 FY 2022 Earnings Conference Call of Supreme Industries, hosted by DAM Capital Advisors Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aasim Bharde from DAM Capital Advisors Limited. Thank you, and over to you, sir. Thank you, Rutuja. Good evening, everyone, and seasonal greetings to all. Today, on behalf of DAM Capital Advisors, I welcome all of you here for Supreme Industries Q2 results conference call. I would like to thank Supreme for giving us the opportunity to host them on this forum today. From the management side, we have Mr. M. P. Taparia, Managing Director, Mr. P.C. Somani, Chief Financial Officer, and Mr. Rajendra J. Saboo, VP Corporate Affairs and Company Secretary. I will now hand over the floor to Mr. Taparia. Post that, we can open the floor for Q&A. Thank you, and over to you, sir. Thank you very much. I am M. P. Taparia, Managing Director of The Supreme Industries Limited. I, along with my colleagues, Mr. P.C. Somani, Chief Financial Officer, and Mr. Rajendra J. Saboo, Vice President, Corporate Affairs and Company Secretary, welcome all the participants who are participating in the discussion of the unaudited stand-alone and consolidated financial results for the quarter and half year ended 30th September 2021. The stand-alone results and the consolidated results are already with you. I'll give brief on company product operating performance and other highlights. The company sold 102,673 metric ton of plastic goods and achieved net product turnover of INR 1,901 crore during the Q2 of the current year against sales of 94,836 ton of plastic goods and achieved net product turnover of INR 1,322 crore in the corresponding quarter of previous year, achieving volume and product value growth of around 8% and 44% respectively. The company sold 173,937 ton of plastic goods and achieved net product turnover of INR 3,211 crore during the first half of the current year against sale of 186,287 ton and net product turnover of INR 2,362 crore in the corresponding half year of previous year, resulting in volume de-growth of about 7% and product value growth of around 36%. Total consolidated income and operating profit for the Q2 of the current year amounted to INR 1,932 crore and INR 350 crore as compared to INR 1,378 crore and INR 282 crore for the corresponding quarter of the previous year, recording increase of about 40% and 24% respectively. Total consolidated income and operating profit for the half year of the current year amounted to INR 3,279 crore and INR 617 crore as compared to INR 2,434 crore and INR 396 crore for the corresponding period of the previous year, recording increase of about 35% and 56% respectively. The consolidated profit before tax and profit after tax for the Q2 of the current year amounted to INR 296 crore and INR 229 crore as compared to INR 228 crore and INR 175 crore for the corresponding quarter of the previous year, recording increase of 30% and 31% respectively. The consolidated profit before tax and profit after tax for the half year of the current year amounted to INR 509 crore and INR 399 crore as compared to INR 283 crore and INR 215 crore for the corresponding period of the previous year, recording increase of 80% and 86% respectively. The business scenario of all the product segments of the company for the Q2 of current year ended 30th September 2021 as compared to corresponding quarter in the previous year has been as under. Plastic Piping Systems business grew 9% by volume and 50% in value term. Packaging Products segment business grew 5% in volume and 26% in value term. Industrial Products segment business grew 10% in volume and 39% in value term. Consumer Products segment business grew by 4% in volume and 30% in value term. The overall turnover of value-added product increased to INR 758 crore during the current Q2 as compared to INR 533 crore in the corresponding period of previous year, achieving growth of 42%. The Board of Directors has declared the interim dividend at 300%, that is INR 6 per share of INR 2 each, for the financial year 2021-2022. The dividend will be paid to those shareholders whose name is stand on the register of members as on the record date, that is 1st November 2021. The company has cash surplus funds of INR 331 crore as on 30th September 2021, as against cash surplus funds of INR 759 crore as on 31st March 2021. As the effect of second wave of COVID-19 started ebbing down, there was revival of business in all the segments serviced by the company. In spite of continuous rise in all grades of polymer prices, the company had volume growth in all the segments. The polymer prices have risen between 7%-28% during this quarter. Highest increase was in the price of PVC resin, where price has gone up by INR 34 per kilo. The price increase trend continued unabated in the current quarter also. In plastic pipe segment, the demand from housing segment is revived. The company had 9% volume growth in pipe system in the quarter. In spite of current high price, the demand outlook in housing and agri segment looks maintainable. There's a shift in higher demand for CPVC system as the prices of that system have not gone higher compared to the price increase in PVC system. The company's progress in putting a plant in Guwahati, Cuttack, and Erode are moving smoothly. All these plants will be operational between January 2022 to May 2022. The company initiates CapEx plant of INR 521 crore for the year, including carry forward commitment of previous year, is going on smoothly. The company adding new system over and above its existing 36 system in plastic pipe system during this financial year, following the investment plan is going smoothly. The new system are PEX pipe, PEX composite pipe, electrofusion and welding fittings, new model of furniture, polypropylene pipe system, varieties of crates and laminates in cross laminated film, protective packaging, and performance film. They will be adding new application from these substrates. The company market reach is being targeted to spread to more tehsil for all its product. Overall, in the 5,734 tehsil, company is aware that many tehsil its reach is still not there, so various product efforts are being now made rigorously to increase our reach in more and more tehsil. The demand for tarpaulin and made-up product made from XF Film is maintained at a higher level. The company is able to pass the increased raw material prices to its end product. Furniture business has gone up by around 4% in volume in the quarter. The company has launched successfully new models. In spite of chip shortage, industrial component business has grown in the quarter with a promising future for second half of the year. Material handling division has shown 16% volume growth. Company continue to add new product range to add value to its customers. It continues to deepen its market reach. Composite cylinder division has shown surplus in the quarter after several years of its operation. The increased acceptance of the cylinder from domestic and international market harbors well for this segment in future. The company had a volume growth of 3% in protective packaging division and 10% in performance packaging film in the quarter. Overall, in packaging segment, company's focus is to boost export business and develop new application, laminating with different substrate to add increased value to its customers. The company is solution provider to protect the content by innovative packaging. Several new varieties of product have been launched in bath fitting division. The appointment of new dealers in that division are continuing. The business is also growing. The company expects it to reach INR 75 crore business in this division this year. This is a brief and overall summary for the Q2 and first half of the year under reference. Thank you for your patience. I and my colleague, Shri P.C. Somani and Shri R.J. Saboo, are available to reply to various query you may have. Thank you very much. Thank you very much. We will now begin the question- and-a nswer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rahul Agarwal from Incred Capital. Please go ahead. Yeah. Hi, good evening, and thank you for the opportunity. Sir, I had some broader questions, not specific to the results. On the volume side, I can see fiscal 2019, 2020, 2021 all being close to about 4 lakh tons in overall of volumes last three years. First half of this year is looking about 7% year-over-year down volumes. Could you help me understand the direction in terms of volume CAGR, what you're looking for? Will we grow in fiscal 2022? If you would just help me in terms of next two years. That's my first question. If you have seen in the first half, overall, our volumes have gone down, principally due to demand destruction in every pipe segment in April, May, June this year, as the COVID-19 was very much widely spread in the rural area. That loss we could not recover fully in the quarter two. In quarter two, plastic pipe business has grown. We are confident that in the remaining six months, we will recover the lost volume in our plastic pipe division. As there was severe loss of around 20,000 tons in the Q1, overall, we anticipate that this year the volume growth will be still around 3%, which means we will still move in the cycle of 400,000 + but not reaching the coveted number of 5 lakh number. This is an exceptional year, last year and this year, so definitely we are on the path to grow volume. This year, we don't think that we can grow by more than 3% or 4%. Got it, sir. That helps. My second question, sir, again, is more on the EBITDA per ton and margins. Broadly speaking, fiscal 2016 to fiscal 2020, if I look at the five-year average, it is about INR 20 a kilo, right, on the entire product on the company level. Fiscal 2021 obviously was INR 25 a kilo because of improved product mix and stuff like that. Assuming a scenario where PVC resin prices go back to INR 70, INR 75, on a steady state basis, your EBITDA per ton would be higher than INR 20 a kilo? No. We will definitely, when the price it will drop to INR 75, at one time there will be a good inventory loss. Sir, I understand that. I'm saying excluding inventory loss on a steady state basis. No. You see, with the change of product mix, what we are now doing, revisiting our lower value items and adding more and more new systems, new SKUs. Definitely it should be maintained or should be improved. No, our value addition was higher than INR 20 a kilo. Last year we sold around 300,000 ton plastic pipe system. I'm talking at company level. Company level or plastic pipe you are asking? We're talking PVC. You're You're talking PVC or company level? Sir, I'm asking about company level, sir. Sorry. Please. Okay. Yeah. For company level also, we take more than INR 20 a kilo. In 400,000 ton, if you exclude depreciation also, we are making INR 900 crore. You are maintaining INR 20 kilo what? EBITDA per ton, sir. At company level, the average was about INR 20 a kilo. Anyway, broadly my point is when PVC resin prices normalize, obviously there will be inventory loss, which I understand. Adjusted to that, because of your improved product mix in favor of value-added products, your EBITDA per ton should be higher than INR 20 a kilo directionally. Yes. It is going to be higher. It was higher than INR 20 a kilo last year also. If I exclude the inventory gain also, it was definitely higher than INR 20 a kilo. Yes, sir. Got it. If I exclude inventory gain, it was INR 1,100 crore or 400,000 tons. It was coming close to INR 28 a kilo. Yes, sir. Got that. Lastly, I wanted to check on the inventory. Looks pretty high, about 90 days of COGS. Any specific reason why it is at INR 1,160 crores? That's my last question. Thank you. PVC resin, we were finding extreme shortage, so we took in more quantity of PVC resin in our stock. Okay. This is like raw material stocking, is it? More raw material and somewhat more finished goods also. Okay, got it. Thank you so much, and all the best. Thank you. Thank you. The next question is from the line of Kashyap from Theleme Partners. Please go ahead. Good evening, sir. Congrats for a decent number in such times. Sir, I had two questions. First is, if you can just explain your thoughts on how you see the raw materials cycle panning out on the PVC side. It continues to remain tight. What are your thoughts on by when things will get a bit normalized? Or do you think this tightness will persist? Just some thoughts on how one should look at it. Structurally, PVC has gone into a super cycle mode. Structurally, which may remain even up to year 2023, because there is not much capacity coming up in PVC. The constant is feedstock. PVC is not completely petrochemical, it is also around 50% chlor-alkali. As you see now, Lanco is coming with 1 million ton capacity, but they are getting the feedstock being made in Gulf country, which is expected to arrive, and then the plant may operation by 2024. Adani is planning based on imported coal from Australia, maybe 2 million tons, but that also may not come before 2024 end. That is Indian condition. India is today dependent 55% on import. When you are so much dependent on import, then country becomes vulnerable. We are paying the top price of PVC in the world market. Compared to us is only either Latin America or Turkey, and they are also more dependent on imports. We believe overall such a tight scenario may start easing sometime in March, April, not before. Where apart from less available PVC, there's a problem with shipping lines. The freights are extremely high, and the ships' movements are very slow due to the COVID-19 restriction on every port. We are told also there is some cartel in the shipment movement. I think shipping line and this everything may become slightly normal after six months. Currently, PVC prices in India are going to go further higher in the quarter that we are up to December quarter. This is a trend. Sure. Fair enough. Sir, would it be fair to assume that given such a scenario of tightness, our inventory days will sustain on a higher side because we will obviously not want to starve the factory of the raw material. We will obviously keep higher level of inventory than we used to normally keep when situation was normal. Maybe for the next six months to one year, we might just have an elevated level of inventory. Some inventory we may maintain. There is some gain, but there is some loss in production cost also. Because we are not running our pipe plant in full capacity. Our PVC pipe plant, we are running at a lower capacity because we are at a loss in business also. That's why we are saying that we may have only 3% volume growth. Sure. Fair enough, sir. Sir, just do you think that CPVC, which has not gone up as much, will probably also see a cycle similar to PVC? Do you think that will remain because that's been surprising. It's been pretty stable relative to what PVC has kind of seen. CPVC additional quantity is not available in the world. Okay. CPVC become completely short now. CPVC such a big demand, CPVC we never expected. Okay. Our company had 30% volume growth in CPVC. Sure. We are not able to meet the demand. Oh, great. Sir, finally, on Supreme Petrochem, even that also we've been going through a super cycle as far as the spreads are concerned. There also, I think there also the cycle seems strong. Can you actually give your thoughts on how we see the spreads going forward? Last year, the spread was unusually very high. Which was not a sustainable spread. Now the spread has come down little bit, but fortunately, we have got huge demand from Indian market. Our plant is fully sold out. Today, we are not able to meet the demand in the country. Fortunately, our expansion plan is going very smoothly, and we hope that our expanded capacity will be in operation by April, May next year, which will give a capacity of 130,000 tons of polystyrene and EPS. Presently, both the products are short from all companies. We are running the plant flat out, giving around 24,000 tons per month in the market, and that is not adequate to meet the country demand. Supreme Petrochem is in excellent position from the point of demand supply side. Sure. At one point we used to export. Would it be fair to assume that we are basically now not able to even meet the domestic demand? Exports are virtually down to zero now. No, not zero. We have some customer commitments, we may be exporting around 1,000 ton per month. Additional quantity, we don't have to give. We have no material to give. Our first responsibility is to look after Indian market. Sure. Sir, the second company which went out of the system as far as capacity is concerned, there is no chance of them coming back because obviously this is going to take a huge amount of time for it to recalibrate operations. That vacuum remains. At that location, they can't restart, and we have not heard they have any alternate plan. Okay. Fair enough, sir. Sir, all the best to you and the Supreme team, and I'll look forward to meeting you in person soon. Thank you very much. Thank you. The next question is from the line of Chirag Lodaya from ValueQuest. Please go ahead. Yes, sir. Thank you for the opportunity. Sir, my first question was on agri demand. What is your expectation from upcoming agri season? Agri demand for pipe started 10, 12 days before, but then there was unusual rainfall in Maharashtra, Bengal, Karnataka, Madhya Pradesh. Temporarily demand is slowed down, but we had unusual rainfall. This is not the rainy season. We believe when the things become normal, the normal agri demand will come back to PVC. Okay. On a full year basis, you said that you will grow your volumes around 3%-4%. When it comes to specific pipe division, what is the expectation? Will we be able to surpass last year pipes volume or it is difficult to cross that volume? Presently, we are minus by around 15,000 ton pipe. We hope that we will recover the whole loss and there may be some margin, 1% growth in plastic pipe this year. Got it. We can't recover the lost business, what we lost in the April, June, which is a peak period for pipe demand. No, sir. Sir, what you're trying to say is, last year, whatever volumes you would have done in H2, we'll be able to do that similar volumes, right? What we did in H2 last year, we'll do better this year. On a year basis, we should be maintaining or achieving a nominal growth in piping volume. No, because the asking rate to maintain the last year volumes is around 14% volume growth you required in H2, which is a tall task number. I'm just trying to reconfirm that. Still, quantity we sold last year in six months, we'll do better in this year, six months. This is what we presume today. Got it. On a full year basis, it might be below last year because Q1 was disrupted. Full year basis, there may be no gain. Got it. Secondly, on overall pipe division margins, how one should look at this given the volatility in PVC prices. Is it fair to assume that Q3 margins would be better than Q2? Margin, you see ultimately prices continue to remain and continue to go high. In terms of percentage, margin will come down because your numerator and denominator both goes up. Sure, your margin will be there. Mathematically, the margin will come down if the prices continue to rise in a similar fashion. Okay. What is the sustainable margins you are looking, particularly in pipe division? Maybe around 15%. Okay. Thank you. Thank you. The next question is from the line of Sonali Salgaonkar from Jefferies India. Please go ahead. Sir, thank you for the opportunity. Sir, my first question is, could you share with us the operating margins in terms of percentage for Q2 FY 2022 across segments? Operating margin, I think this time we have done EBIT. Our desire is to discontinue giving the operating margins per se. Understand, sir. Sir, my second question is, how would you look at expanding or probably increasing the volumes in your CPVC? As in, any thoughts on expanding the CPVC product mix within Supreme? CPVC, we had a volume growth of 30%. We have increased our capacity by putting a new plant in Jadcherla. We are also putting new capacity in Karegaon. Definitely we sell more volume of CPVC in this year compared to last year. Got it, sir. That's it from my side. Thank you. Thank you. The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund. Please go ahead. Yeah. Thank you very much for the opportunity and congrats for this performance in a tough environment. Sir, my first question is that if you look at the pipe realization in 2Q and compare it with 1Q, there is just about a marginal increase in pipe realization. What we understand is that bulk of the PVC price increase has happened in the second half of the quarter. Is that the reason why there is just a marginal increase in pipe realization and maybe in the Q3, we will see a much higher realization in pipes? Is that a fair understanding? When we see the Q1, the PVC price has gone down by INR 90 a kilo. Yes. Q2, it went up by INR 34 a kilo. Right. There are too much volatility. Month by month, I can't compare it. Can't tell you also. Net-net, the price of PVC gone up by INR 15 a kilo, if we see what was the price 31st March and what was the price on 30th September. Right, sir. The second thing, Bhargav, in the Q1, there was less or no agri pipes. Understand. That's why there's just a small movement on a QO Q basis. Yeah. Sir, assuming the PVC prices hold at these levels, wise on a margin, percentage margin basis, we might see a reduction, but on an EBITDA per kg, we should see an increase, right? I mean, assuming the PVC prices increase or stay at these levels, because we've accumulated a lot of inventory as on September. Almost INR 400 odd crores of inventory. In this given situation, we are reluctant. We want to maintain the market of the product. We increase the price also after a gap of two weeks or slightly more than two weeks. We don't increase the price immediately. Far in the Q3, have we seen any price increase in pipes? Yes, in pipes. Yes. Increase in prices. I don't have the number in front of me. Okay. We have seen some increase in the cement goods, right? Normally, our policy when the prices go down, we drop immediately. Okay. When go up also, then we increase it slightly with a gap of even 15- 18 days. Right. Sir, my second question is that on a two-year volume CAGR, if you look at in pipes, it is close to about 3%. This is despite a rising consolidation happening in the market. Is it fair to say that on a two-year basis, India as a country overall would have seen a decline in overall pipe consumption? How to look at that scenario, sir? There may be decline this year also. Last year, there was a de-growth of around 13, 14% in plastic pipe in the country. This year also, there may be some de-growth. There will be a de-growth. Up till now, we are not clear, but we believe that there will be de-growth of around 4% this year also. Okay. This is mainly led by lower demand for agri. Is that a fair understanding? Lower demand, there people may be using more calcium carbonate also. Achha. Okay. There are many type of non-BIS pipes are being produced. Okay. People are going for cheaper quality PVC pipe. Okay. Price has gone too high. Sir, my last question is that in the value-added product side, we've seen almost a 42% growth. Is it possible to share what has led to such a strong growth, which segments have led to this growth? We are into several new products in piping also, in our protective packaging division also, and material handling division also. We are working always to increase share and range of value-added product in all our segments of business. Okay, sir. Thank you very much and all the very best. Thank you. The next question is from the line of Utkarsh Nopany from Haitong. Please go ahead. Yeah, hi. Good evening, sir. Just to continue with the previous question, what we see that our pipe EBITDA per unit has gone down from INR 36 per kg in June quarter to INR 31 per kg in September quarter, despite we have a better product mix in September quarter due to low agri pipe sales volume and favorable resin price movement in September quarter versus unfavorable resin price movement in June quarter. Sir, do you see any possibility that we may have to operate at a lower margin, going forward, to clock decent volume growth? We are still operating at almost double the rate of pipe EBITDA per unit, which we used to clock in the past. I don't know. What is lower volume? I didn't follow question properly. What he's saying is your per kg EBITDA in pipe was higher in Q1 compared to Q2 because we had certain inventory gain in Q1 because of the low price. No, sir. There cannot be inventory gain in quarter. The price has gone down. Even price of. [crosstalk] what I understand is that, like. If you want a clear CAGR [crosstalk] Yes. We have not calculated the way you calculated, so I don't have reply to give immediately to you. On Q1, Q2, I don't have reply to give you what was the price relationship. I can't say to you. Yeah. You have to take product mix and the pricing that way. Sir, actually, what I wanted to understand, if I see the pipe volume growth rate on a two-year CAGR basis, it was 8.5% in last September quarter, September 2020 quarter. Which has gone down to 3.5% in this September quarter, despite having much better industry dynamics. If we see our EBITDA per unit has also gone down on a sequential basis, despite having much better resin price movement. Just wanted to understand from you, do we need to operate at a lower EBITDA margin to clock decent volume growth rate going forward? No, you say this quarter our margin has gone down. I'm not aware what you are asking. Per kg. How can it go down? I don't know this quarter. How Q1 will go above? I don't know the number. I can calculate then reply to you. You can ask separate question. We'll calculate and then let you know. Sure, sir. We don't have any problem like that. Just wanted to understand, last thing from me is that whether the EBITDA per unit which was there in September quarter, can we think that we can continue to operate at that level, at least going forward? What is EBITDA per kg? We have no idea what is EBITDA per kg. No, directionally, we can give you, we should improve the EBITDA in terms of percentage of per kg because of the various new products or new things being introduced, and the product mix getting changed on a regular basis. Okay. Thanks a lot, sir. We are introducing new systems also in the piping segment. That also should add in to the margin. That question, I have to study properly. I can't reply as you have gone in direct sales. Okay. Thanks a lot, sir. Okay. Thank you. Thank you. The next question is from the line of Akhil Parekh from Elara Capital. Please go ahead. Thanks for the opportunity. Sir, my first question is, you mentioned in your comments that this is a PVC, CPVC kind of a super cycle. Even for the medium term, like for next 1 to two years, will this create a happy scenario for companies like Supreme and other big players in terms of the realization of growth as well as improvement in margins? Just from a prospective next two years. Basically, PVC will remain short. For the next year also, PVC will remain short. One cannot plan big expansion based on PVC. Okay. In general, we have done well in an inflationary environment. Does that imply that we will continue to do better basically, as compared to, say, smaller unorganized players? No. Our purchase is very large from domestic players. They are running the plant properly, so we get adequate quantity from domestic players. Okay. Second time, in the result update, you have mentioned that there is a shift in higher demand for CPVC systems as the prices of the systems have not gone high compared to PVC systems. Does that imply that demand has shifted from PVC to CPVC because there has been an [crosstalk] Isn't it right that the application of CPVC and PVC are completely different? In plumbing system, earlier they were buying only up to one inch or 1.25 Inch pipe. Now with large diameter also, 1.5 inch, two inch, 2.5 inch, three and four inch, they are shifting to CPVC instead of PVC. Okay. You cannot get CPVC. Okay. Sir, last question on the capacity side, if you can please highlight segmentally how much the capacity is and where it is expected to grow by end of. Yes, capacity. As on 31st March 2021, we had a total capacity of about 697,000 metric tons. Okay. By end of this year, we anticipate it should be somewhere about 750,000 metric tons. 50,000 metric ton capacity will come into production by end of this year, additional. Okay. Segmentally? The breakup of 750,000 metric tons, the plastic piping will be 5 47,000 metric tons. Okay. Industrial Products, 80,000 metric tons. Packaging Products, 88,000 metric tons. Consumer Products, 33,000 metric tons. 33,000 metric tons, right? Yeah. 33,000 metric tons. Within plastic pipes, would you be able to highlight how much is CPVC? CPVC, we don't give separate data. Okay, sir. No worries. Thanks a lot and best wishes for coming up. Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. Hi, sir. Thanks for the opportunity. Sir, couple of questions. Sir, in one of the answers you indicated, that there has been price increases with a lag, because we want to maintain market share. Sir, just want to understand how should one place this basically, price increases with a lag. Because to my understanding w hen Reliance increases prices, we immediately increase prices in a week or in 10 days. Is it something to do with price elasticity? If this particular comment, is it for any specific, is it for tarpaulin or is it for Plastic Piping? Sir, how should one understand this? Tarpaulin also, I don't increase the price next day. Same in the furniture, same in plastic pipe. We don't increase the price next day. In pipe we used to, but business is volatile. Pipe also, generally don't increase, but now with such a steep increase, our distributors have given commitment to several builders to supply the piping system to them. They'll be put in great difficulty. We will take care of our market base also. With such a steep increased price, you can't increase next day. We are selling products. We are not selling raw material. That's useful, sir. Sir, what is the B2B part of our sales on Plastic Piping? Our B2C. We don't sell B2B. We sell B2B for supplying to C. Okay. Our Plastic Piping Systems business is B2B2C. Okay. Sir, there will be some project sales. I'm just trying to get a sense. Project sale again made by our distributor. Okay. That's useful. Sir, secondly, would it be possible for you to comment on how much did the industry grow, in this particular quarter? What I'm trying to understand is the amount of market share gains that the company would have won, given there is a large gray market premium or a smaller guy is finding it difficult to procure resin. I think that's a big advantage to the company. Sir, just trying to understand on the market share gains, sir. I think market share will start better in April. Okay. Sir, one last question, if I may. Sir, can you quantify or indicate which are the segments wherein we are doing more than INR 100 crores of business on an annualized run rate basis? You also indicated on bath division, around INR 75 crores of indicative business of this year, which is very encouraging. Sir, can you highlight on which are the segments wherein we could be clocking more than INR 100 crores, say, including tanks, walls? You heard the bath fitting division, we are going to cross INR 100 crore next year for sure. Other segments that we have. Other segment, our solvent project will be INR 50 crore plus. When you give INR 100 crore, I can't talk INR 100 crore. Unless you directly took INR 100 crore next year, I can't reply like that. Right. Sir, tanks, we have been in [crosstalk] Tanks we are doing already. Now we can talk INR 200 crore plus. Okay. Wonderful. Great, sir. Thank you so much. I really appreciate it. Thank you. The next question is from the line of Abhishek Ghosh from DSP Mutual Fund. Please go ahead. Yeah. Hi, sir. Thank you so much for the opportunity. Sir, if you can just help us understand the new BIS norms, which has kind of got affected from 1st October. How will that kind of impact the overall market, from the medium term perspective and mostly for the unorganized players? That has been stayed by Kerala High Court. That BIS order has been stayed by Kerala High Court. Okay. we'll have to wait for. We are not making, but there are so many pipe systems where there's no BIS standard. Correct. You can't say BIS. There's no BIS standard, you can't make a pipe. There are so many systems operating in our country, which up till now systems are not established. Okay. What proportion of the Indian market would be, or Indian pipe market would be that non-BIS pipes? No, as I told you, there are always pipes which should have BIS standard. So that one proportion is different. Second is, when there are BIS standards and people are making non-BIS product. Okay. Got that. Agri pipe, there is BIS standard. There are many people who are making non-BIS pipe, which is low cost pipe, and many people are buying those pipes. We don't have quantification of those, quantum. I can't say to you. Okay. Non-BIS pipe is quite popular in the country. In many rural areas, people are buying non-BIS pipe only. Green Tribunal, they have passed the order, it has been stayed by Kerala High Court. I think the matter was under hearing in Bombay High Court yesterday. We don't think that law will be sustainable. Okay. There are no BIS or no filter. There are certain pipes that people require non-BIS pipe also. We doubt whether that law will stand. Okay, got that. Sir, the other thing is, in our earlier con calls, because of short supply of PVC and other things, and working capital increase, there was this whole unorganized market share gains from the unorganized segment. Simultaneously also because of higher PVC prices, we are seeing downtrading happening. How would the branded players fared with vis-a-vis the non-branded or the unorganized guys during the last six months? Any color on that? No. Slowly, the share of branded players will go on growing, but it may be slow. It cannot be dramatic shift. Branded player, definitely the market share will go and increase small% over the period. Okay. Sir, just one more aspect is, there was lot of demand improvement which was expected because of the Nal Se Jal and the water projects, which the government was kind of this thing. 1Q was obviously impacted, but are you seeing any pickup there and that should also be a big demand driver going forward? Any thoughts around it? The demand should come now. After the rain withdraw from the country. During rainy season, you can't put the plastic pipe. Okay. You dig the earth to put the pipe, so the infrastructure demand remains low during the rainy season. We anticipate the demand rise from November. Peak time is November to May. Okay. Sir, just one last question. In terms of the Packaging Products, the volumes appear a little muted there. Was that the impact because of Silpaulin part of it with Kerala not doing well, was that the reason or any thoughts around it? No. Silpaulin demand is growing and food packaging demand was growing. Only protective packaging demand was not growing to the extent what we anticipate. We told you, protective packaging division, the growth was only 3%. Correct. Silpaulin packaging division growth was more than 10%. Okay, sir. Thank you so much for answering my questions. Wish you all the best. Thank you. The next question is from the line of Shailesh from B&K Securities. Please go ahead. Yeah, thanks for the opportunity, sir. My questions are pertaining to Supreme Petro. Sir, any progress on plan with regards to ABS? Also, given the tailwinds of China Plus One, are we planning to bring more products in Supreme Petro, as we have strong balance sheet and healthy cash accruals? Presently, the plan is on ABS for sure. We hope to ramp up the technology in the next four to five weeks, and then we'll immediately put the plant installation work in progress. Other investment is already going on for expanding capacity of polystyrene and expanding the EPS also. Presently, we have no plan of any more vertical, but we'll go on growing in the existing vertical. Okay. Sir, this may be [crosstalk] A new vertical is going to come. By when, sir? New vertical, no, the technology agreement is signed, we will announce to everybody when the plant is going to start. As on today, the technical agreement is not signed still, there's no date we can announce today. Okay, sir. Sir, also historically, we used to do EBITDA per kg at INR 7-INR 8, last year, FY 2021, we did INR 27 per kg EBITDA due to change in demand-supply dynamics. What is the sustainable EBITDA per kg you are targeting, sir, in the long term? You already know that last year EBITDA was too high. That EBITDA was not sustainable. Yes, sir. Sir, any long-term target you have, sir, above 15, 18? This is a commodity product. You can't target long term like that. You have seen the commodity price product. The price swings also. Okay, got it. We can say that we definitely got very lean organization. We are cash surplus. We not have a debt. We will definitely go on making surplus, as on today it will look like. Okay. Sir, in B2C product, XPS, any further plans to expand or increase the scalability of the business? B2C, from Nikki also B2C. No, we don't sell direct to consumer. Okay. Mm-hmm. Any distributors we have added, sir, in the last one year? What are the future plans? In XPS business, how many distributors we have added in the last one or two years, and what is the future plan to increase the scale of this business? I don't have a number for me immediately. XPS, no, I don't have a number. We are adding a distributor definitely every quarter, but I don't have number with me just now. Yeah. Okay, sir. Thank you, sir. Thank you. The next question is from the line of Shrenik Bachhawat from JM Financial. Please go ahead. Hi, sir. Thanks for the opportunity. Sir, my question is that in the upcoming agri season, the PVC pipe prices will be much higher than the previous season. Is there risk of agri season being impacted again the upcoming agri season because of the extremely high PVC prices? The only thing we expect that the farmers may reduce their purchases of large diameter PVC pipe in agriculture. We sell 110 mm, 140 mm, 160 mm. Farmers may reduce the demand for larger diameter. They may go more for smaller diameter to meet their requirement. Demand, meterage wide, going to be more only, but not less. Because the dams are all full. Farmers will like to irrigate their land, and this is the time when you have to lay the pipes. We don't anticipate the overall meter wide demand will be less. The sizes may change. Up till now, we've received no indication that they are not buying 110 mm, they are not buying 140 mm. We have not seen any such thing. Even our 110 mm pipe also is selling. Okay. Sir, as per our channel checks in the larger cities, previously, the larger builders used to buy pipes only from larger players like Supreme and Astral. Now, as we also highlighted that they are downtrading in order to save some of the cost as PVC prices have gone up. Do you believe that in the B2B segment, the larger players have lost share to the new and upcoming players or smaller players? We have no idea. The largest reputed players are continuously They are my customers even today. We are not aware that they deserted us. They are our customers. Okay. Is there any drop in volumes from the large builders? We are not aware any drop. Now the business is good with all the builders. Okay, sir. Thank you so much. Thank you. The next question is from the line of Rajesh Ravi from HDFC Securities. Please go ahead. Yeah, hi, sir. Good evening. I have few questions. First, if you could talk on, what was the value-added product revenue in Q2? In Q2, value-added product was INR 758 crores. INR 758 crores. Okay. Sir, because we see that negative operating cash flow, you mentioned that your increase the resins inventory, if I heard it right. Given that the resin prices have shot up end to end, what sort of inventory gain is there in the 2Q numbers? Keeping high stock of resin gives me pricing power, because I don't have to increase the price, and I can still supply my customers. No. Inventory gain, which was booked in the. As on today, I'm not looking for any inventory gain. No, I didn't get your answer, sir. In the reported numbers, are there any inventory gain or not? The prices have gone up between the quarters. As of number up till September, there is no inventory gain. Okay. sir, you mentioned that prices don't go up immediately, as and when the resin prices go up. That would be the trend even earlier also, right? No, this time, because the increase is very steep. I give an example. On 1st October, price went up by INR 10. 13 days, price went up by INR 10 a kilo. INR 10 a kilo. In 13 days, price went up by INR 20 a kilo. That INR 20 a kilo, we are going to implement finally, fully from 1st November. Mm-hmm. Okay. [crosstalk] [crosstalk] As we said, such a steep increase, you can't pass it on immediately, or else you kill your whole marketing network. Okay. Yes, in this context itself, given that the prices have shot up significantly, and I understand the industry is fairly consolidated and enjoys strong pricing power, but do you see any headwinds to the pricing upward, in terms of passing on all these hikes, even after a lag? No. We can increase the price, definitely, because we take care of our market. Yes. What is the steady-state margin you're looking at in the pipes division, at least? 20% is a fairly good EBITDA margin that you're comfortable with? Recently, everything is very well disturbed. Such a big increase, very steady state, I don't know what to talk to you. No, I'm not talking about a quarter or two. I'm talking from a normal run rate, assuming things stabilize at around current levels. Is it fair to say that you can operate at 20% or 25% EBITDA margin in the piping segment? 25% EBITDA margin, we never seen. I don't know. Okay. No. What are the numbers you are working with? We work only that we must get return more than 25% on capital employed. 25% on capital employed versus [crosstalk] That now we definitely like to maintain. Right. Great. Lastly [crosstalk] Lastly [crosstalk] Last financial year, we earned 40% on capital employed. Sir, in terms of demand, could you throw some light on how has been the industry demand in 2Q, if you have some numbers on that? Demand of what? Pipes YOY growth for the industry. Both design pipe demand from housing, both are maintainable, both are maintained. No. How much would have the pipes demand would have grown in 2Q? Any industry number would you have? First half? We don't have separate idea of pipe segment only. We were told by the local [barometer] producer that demand has grown more in non-pipe segment. Pipe segment demand has grown lower. Okay. In PVC resin, 74% in piping segment, 26% non-pipe. Non-pipe segment, the growth was much more. Okay. lastly, in terms of non [crosstalk] As you are aware, in our company pipe system, we have grown by 9% by volume. Correct. Lastly, in terms of, now because you're seated with a large amount of PVC resin inventory and prices have spiked up from there on itself, and if prices hold on, will that help you in terms of higher inventory gains in Q3? I can't reply to a hypothetical question. I don't know how things will fare in next two months. I can't say anything. No, on the current pricing level, or the other way around, what would be your average inventory cost which you are seated with? Is that much lower compared to the current resin prices? I'm paying today high price to Reliance. I'm still not increase the price in market. We are paying INR 20 a kilo more for the purchase made in month of October. We are going to increase the price only from 1st November. Okay. This inventory is for how many months, sir, which is at end of September quarter? Not many months. Not big like that. Not much. Okay. Great, sir. I'll come back in queue. Thank you. All the best. Okay. Thank you. The next question is from the line of Vipul Shah from Sumangal Investment. Please go ahead. Hi, sir. Congratulations for good set of numbers. Sir, can you comment on the composite cylinder business? In your release, you have said that after many quarters, it has returned in the black. Can you comment regarding volume growth and EBITDA? Any figures? No, I think there is nothing much to comment on volume growth because, you see, this division was lagging behind for so many years. Last 1.5 years or two years, no foreign travelers is allowed. No visitor, no customer came. Two, three things which we can say. One is the product is well established since Q3 of 2019, and our existing customers are putting repeat orders. We are exporting to Somalia, Maldives, African countries. Domestic players have also started. ONGC have also floated tenders, and they have taken good quantities and expected to take repeated quantities again. IOCL and BPCL have floated the tenders, and they have made a soft launch in the market. Both these things augurs well. When the domestic market opens up, definitely it will be good for the division. Now the international market is opening up, the travel has started. We are now getting good inquiries from other countries, other customers. You see, since it was a very low base, we really can't comment or we can't say we have done very good volume growth or volume from that way. Okay. Thank you, sir. At present, its contribution to turnover is very negligible. Correct. Thank you, sir. Thank you. The next question is from the line of Nakul Mehta from Trident Asset Management. Please go ahead. Hi. Thank you for taking my question. My question is on your inventory level. As you said that PVC resin is not available, and that's why you have stocked up the inventory. What is our order book to justify that stock-up of inventory? I must correct, our inventory which is high is not only PVC resin. It is PVC pipe also. It also contains huge stock of cross laminated film product, which we keep during the off-season time. It's a combination of so many items. It is not only PVC resin. Okay. Still. I must correct the impression. Secondly, inventory value has gone up because the raw material price has gone up. Okay. there's no stock-up of inventory in the sense that. I repeat again, as on today, whatever we are having, we don't say it's inventory gain. This is enough to sustain our market share and sustain our business, and look after our customer requirement. Okay. As you mentioned earlier that you are buying more inventory because it's not available. Right? Sorry. You are buying more inventory because it's not available. That's what you said, right? No, material available at a high price. Okay. Material is available at high price. You mean there is an inflation, right? The price, as I told you, price has gone up. This month also, price has gone up by INR 20 a kilo. Right. How are we able to pass on this to the customer? Is it taking a hit on our margins? How is that playing out? After time lag of two to three weeks. Okay. No. Are we able to pass on the inflation to the customer, or are we taking a hit on our margins? No, I said we are able to pass on the increased cost to the customer after a lag of two to three weeks. Okay. Understood. All right. That was my only question. Thank you. Thank you. Good luck. Thank you. The next question is from the line of Karan from Asian Markets Securities. Please go ahead. Hi, sir. Thank you for the opportunity. Sir, just wanted to understand what kind of inventory levels are the dealer distributors sitting at, given the fact a lot of volatility in the prices? Are they stocking more or they are sufficient in terms of the current inventory? Out of 1,300 distributors, I cannot say on behalf of them. They ask us questions, we advise them, we don't keep unnecessarily more inventory. You keep only that much inventory so that your customer doesn't go away empty-handed. If you keep high inventory, there's a big chance of losing big money also. Right. Even then. Just one clarification. It's only when the PVC [crosstalk] It's only when the PVC [crosstalk] Let me conclude. Even then, if my distributor is keeping large inventory, that is for them to decide. Does this answer your question, Mr. Karan? Yes. Just 1 last bit from my end. Sir, it's only when the PVC price is shot up by INR 10 or INR 12, we take two to three weeks to pass on. When it is like INR 2 or INR 5, we can pass it on with one week's lag time. Is that understanding correct? Normally, this price increase of INR 34 a kilo, we were passing increase minimum after 15 days. Right. That's it from my end. Thank you. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments. We thank you very much, and we are thankful to all the investors for their very intelligent questions. We thank all of them. We also thank you, madam. Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.