Understood. So lastly I just wanted to understand about the cost saving measures that you all have opted for and what would have been ad spend last year same quarter versus this year same quarter?
Ad spend as such is not a big part of the total whatever other expenditures are there. Ad spend is a very miniscule part of it. So I think the main thought process is wrong that if the ad spend stop then the other expense will go down because ad spend contributes to maybe less than 5-10 percent of the total other expense. So it's not it's not that only ad spend side we have saved we have saved on a lot of different things and it's better that we can discuss this in person because we do not want to discuss publicly what all cost saving measure we have undertaken.
Sir first on the CAPEX in 1H. We have roughly done Rs. 282 crore. So for full layer Rs. 300 crores-Rs. 350 crores that previously we guided that remains the same?
So whatever we have given the guidance it is going to remain same. We are not going to incur more.
My first question would be on the CPVC side. So just wanted to understand on a brief aspect that how much price erosion have been seen on a quarter-on-quarter basis and YOY basis?
That is very difficult to derive, because every companies pricing are different, Japanese prices are different, Europe prices are different. Local domestic player pricings are different. So very difficult to say that this much price erosion has taken place. [Sandeep Engineer]: I think it is very confidential on our part.
Sir couple of questions, though you have highlighted in your opening remarks but just trying to understand better in terms of the numbers so as you mentioned, so first on the plumbing business. The second half is always better but just is it possible to get a some sense that can we can we see even if let's say ADD does not come, it comes obviously is better but if it doesn't come then also can we see a kind of a 17% kind of a growth in the second half? And then normally last time we have said that for next five years also we are looking at double digit growth so that things remains intact?
I think we have already given a guidance of double digit we have never said that we are going to deliver 17%. So we stand by with the 17%. And if ADD will come that is the bonus to us then that will be even a much higher number. Historically if you see normally the first half is 40% to 45% of the volume and the second half is between 55% to 60% kind of volume. So similarly we are also expecting that the second half should be better, but at this stage we don't want to communicate that we will be growing 20%, 17%, whatever the double digit guidance we have given we standby with that and we are confident that we will be delivering the double digit growth. [Sandeep Engineer]: Even if the ADD is not in place the same pace of growth will be continuing for us.
Okay and just on the realization front. So if you can help us so this quarter we have seen QOQ plumbing realization kind of 8% excluding bathware growth. So is it kind of a more of a product mix change particularly on the CPVC front maybe on the higher side if you can specify the out of overall growth was the CPVC growth, was on the higher side?
See product mix has improved and that is the region you see there is a substantial improvement in the margin compared to Q1. So definitely the all value-added product contribution has gone up. Otherwise the margin could have been under pressure. So product mix definitely helped us. I think we already communicated that whatever this Rs. 1,400 crore which we have spent in last 3 year for this all new products and all, slowly and gradually it has to perform because you have spent sizable money and now the time has come to generate the cash flow out of that. So definitely the value-added ratio in the coming time has to improve otherwise we have already spent this much of money.
And on the adhesive front so both India, so obviously sir has mentioned that the 15% kind of a growth that we even previously guided will continue but on the margin front, so in 1H we have already done 15.6%, so is there a possibility that in the second half and maybe going forward we can even 17% kind of a margin is also possible in India as they say?
If the growth will be better that economy of scale advantage will be available to us. So definitely it is going to help us in the margin improvement also, but as of today we have given the guidance of 15%-16%. We standby with that and if the growth will be higher definitely margin can improve. Last year also you see the margins were much better.
Just wanted to understand what has actually changed between Q1 and Q2, while I understand the volatility in polymer prices continued, demand as you said that on ground was still subdued, there was no government spending and everything, what's really changed that moved our volume growth from 0% to about 21%?
So basically we have changed as Iran and I said that some of the product mixes definitely changed. So certain products that we manufacture good demand was there in Q2. Also we have become a bit more aggressive in terms of our selling in the market and taking the competition head-on. So we will continue taking the competition head-on and trying to figure out wherever our weaknesses are we have added some network, we have added more dealers, we have increased our distribution count. So on all fronts we have put in our best efforts to give this number. [Hiranand Savlani]: Secondly Sneha, I already communicated in my initial remark that whatever this last four new plant has been come up whether it is a Guwahati, whether it is a Cuttack, whether it is a Hyderabad or now in Kanpur. So all this plant definitely is going to help us to grow market share in that respective geography where our presence was low compared to the other geography.
So my first question is as you highlighted your know mix has improved. If we see your EBITDA per kg so which is still flat year on year in spite there was a Rs. 2-Rs. 3 per kg loss in September '24 quarter. So that way margin has reduced if we see in EBITDA per kg terms. Is it due to price aggression? How should we read it? And secondly first time you know sort of normally Astral don't get in price aggression. So looks like Astral is recouping its market share with the help of price aggression. Is it over or should we expect more price aggression and possibly a better volume growth?
So see price aggression doesn't mean that we are selling at any price. Price aggression is geography-to-geography wherever we feel that it is the correction and secondly what happened earlier the centralized dispatch system was there but now with this new plans and there because of lot of saving is there into that. So considering that saving in mind we are passing on to the market that is why you see that our per kg EBITDA or with a percentage term EBITDA is the highest in the industry. So in spite of so much of challenges and polymer drop was there in this quarter in terms of PVC. In CPVC also price drop was there in this quarter. In spite of that also we are able to maintain that thing whether it is a per kg or whether it is a percentage term EBITDA and in spite of getting aggression also.
My first question is, is it possible to share some channel inventory level at the sector level like because of fluctuation in the PVC prices which has come down. How is the situation right now?
Channel inventory levels are still subdued and channel is still not having the confidence of stocking much inventory. So I think after the ADD announcement some positive channel inventory built up might be there but as of right now channel inventory is very low.
I just want to say that I want to ask you that the way I see that our margin should expand from here because when I look at we are talking about new plants Hyderabad and Kanpur. So is it fair to assume right now those plants may be at the break even or even at the loss level because Kanpur we are just starting, so there is an upfront cost coming in and even in Hyderabad it is fair to assume that utilization level should be fairly low. So that once they scale up I should start seeing the benefit of operating leverage kicking in.
So Shaleen your understanding is absolutely correct, because right now we are incurring losses on new plant because utilization is hardly anything. So as and when the utilization will improve you see last 2-3 quarters every investor was asking the same question. Why your employee cost is going up? Why your other cost is going up? You are not controlling your cost. So the basic reason was that that once you put up the plant you have to appoint the teams and all this thing. And then you get all this government approval power and all this but the teams are appointed prior to that your all other cost started incurring before you start the plant and once you start the plant you come to the right level of commercial thing you have to give the teething period for the plant also to do the trials and all this but during that period your cost will always be high and that is what we were continuously communicating to everyone that give us time. Let the plant get operational then you will see the benefit out of that.
ADD, there should be a reasonable possibility for it to come, right? Why will it not come? Let us put it this way and obviously something will happen but the probability was very high that it should come in next two week?
Keep finger crossed because we are not the authority to comment on that but historically we have seen that normally whatever the last date is that prior to that the government normally signed the circular. So hopefully this time also will be same but end of the day it is the government we have no right to comment on the government action. So hopefully there are high probabilities that it should come.
Sir my first question is regarding OPVC. So is it fair to assume, like next quarter OPVC will contribute to our revenues?
See OPVC is a new product for us. We have started getting orders but contributing in the scale which you think is going to take time. There are lesser projects coming out because OPVC is all used by the government projects and government projects are coming but not at the pace which everyone expects. So we will get OPVC market growth value and volume but it is not a significant thing which everyone thinks but it is obviously going to add to our value and volume and we need to be in this product in a big way which we are doing.
in your opening remarks you mentioned regarding bathware segments growth rate. I understand we have an order book in pipeline, so what sort of run rate you are expecting for next year in this segment?
Bathware we will aim to grow at about 20%-25% for the next 5 years.
Okay and last question on the paint side for FY'27 basis what sort of margin should we expect like, is there any gradual improvement in the margins as well as of now?
It should be single digit margin in FY'27.
And so just wanted to understand on the CPVC aspect. So on a longer term, so even the global companies like Lubrizol has been setting up a plant in India and they are also coming with a huge capacity. So why don't we choose an option to opt for the whole capacity being able to cater by Lubrizol or one of the capacities should be catered by Lubrizol and other than going for their own manufacturing of CPVC?
Very clear, no company will sell the multinationals to us even if we buy the whole capacity 100% to one company. Secondly Lubrizol will sell at their own margins and things. They won't sell like we do a job and we are confident about two things. One is continued supply. Second is the improvement in the raw material cost and it will help us go backward and maintain our margin. Third is the self-dependency even if we buy and keep buying from the foreign buyers, Lubrizol, and things. We will have to buy some material from abroad because the Indian requirement even after Lubrizol setting up the plant to make money here, GCW here will only be around 20% to 30% of the Indian requirement.
the management earlier guided that the volume value gap should reduce going forward in the second half of the year. So how do we plan on achieving that? Do we plan to increase the contribution?
The gap reduction is largely dependent on the ADD coming. So once the ADD comes and the polymer prices go up then automatically this volume and value gap will reduce. But if you see last quarter, the volume and value gap has reduced quite significantly compared to the previous quarters. [Hiranand Savlani]: Yes, definitely. And you see, we have given in our press release also that the polymer price was down by 10% while value and volume growth for Astral is just 5%. Because our volume is 20 and value is 15. So gap is getting narrow and if the polymer price will getting stable and the base effect will be there, then there are high probability that our value will be higher than the volume.
So adhesive and paints now form the larger part of Astral Business Mix. Could you share the current revenue split between this adhesive and paint for H1 and Q2 as well?
I have already shared but I am again repeating that thing. H1 revenue for adhesive was 566 crore, India operation. UK, 192. And Paint 107. For H1. [On Q2]: If you want Q1, Q2, Adhesive India was 305. Adhesive UK 97. And Paint 57.
Sir, regarding the bathware, because you were on 40% YOY this quarter and 20% H1, could you share how this vertical is shaping up strategically? Is it being positioned as margin lucrative business or more as a cross-selling complement, sir?
See, initially, any business may not be a margin lucrative. It is going to be there only after a certain scale. Right now, it is not that scale where you can say that it's a margin lucrative. It will take few years, then only it will be like that. But one thing is good that you can see that in a span of 2.5 years, we have reached at this scale. So, that is I think the beauty of this business, that very few companies have reached at that level in 2.5 year in the bathware business.