ACRYSIL LTD (ACRYSIL) Q2 FY23 Earnings Concall Transcript

ACRYSIL LTD (NSE:ACRYSIL) Q2 FY23 Earnings Concall dated Nov. 10, 2022

Corporate Participants:

Chirag Parekh — Chairman and Managing Director

Anand H. Sharma — Chief Financial Officer

Analysts:

Pranav — Atara Securities — Analyst

Harshal Setia — AUM Fund Advisors — Analyst

Adit Kajal — Yes Securities — Analyst

Pritesh Chira — Lucky Investment Managers — Analyst

Prasheel — Kitara Capital — Analyst

Anika Mittal — Invest Research — Analyst

Anshul Mittal — Care PMS — Analyst

Chirag — Ratnatraya Capital — Analyst

Randip S — Mass Capital — Analyst

Harsh Sagar — Centrum PMS — Analyst

Ana Mittal — Investor search — Analyst

Munjal Shah — individual Investor — Analyst

Chintan Mehta — Prudent Broking — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Teresa Limited Q2 H1 FY ’23 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]

I now hand the conference over to Mr. Chirag Parekh, Chairman and Managing Director from Karusel Limited. Thank you, and over to you, sir.

Chirag Parekh — Chairman and Managing Director

Thank you. Now let’s go and Good evening to all. I wish you Analadon Health and safety. I hope you had the opportunity to review our presentation and financial results, which are available on the stock exchange and on our company’s website. I’m accompanied by our CEO — CFO, Mr. Anand Sharma, and our CEO, Investor Relations adviser on this call today. To begin with, we are happy to announce that company name has changed for macrosite to Carosited.

The name of the company change in order to increase brand recall value, introduce Catasys a global brand and tenants global presence. Now let me begin with giving an update on the global scenario. U.S. and European economics continue to grapple with inflationary environment. However, the pace of it is slowing down. The port market, we are witnessing a periodic slowdown phase due to higher inventory levels maintained uro coin period by our customers.

Based on the feedback received from customers understand the secondary sales of porting are still growing and its continued sustainable demand in online and retail segments. The high inventory levels built up by our sales channels are getting liquidated slowly, and hence, we’re expecting ordering levels of what things to increase from quarter four FY ’23 onwards. Our newly acquired business, Selma, which operates in U.K. performed well in current business scenario. The sales for the quarter with strong growth on sequentially and on a yearly basis.

In economy has showed tremendous resilience to global fees and have high demand for porting. We are now sufficient capacity to full print demand in domestic market, which is continuously growing. — recent update, our relation with low and care is getting stronger day by day. We have doubled our supply to ICA sales to grow an increasing year-on-year basis. We’re trying to establish new partnership anti global businesses for their global requirements. In our steel category, demand for photos on the rise that we have witnessed a healthy growth in revenue FY ’23 on Y-o-Y business.

We have mentioned in our last call that high-tech process are in demand in global markets. We have started working on forset assembling line for 10,000 units and supply will start from Q4 FY ’23 onwards. We have witnessed good inquiries for procurement of onset by export customers as well as premium customers like IC grower. Further, we have received orders from France and other countries for new PVD zinc and other under mounting which will be great operating export market.

Given the current global operating environment, the Board has decided to postpone the expansion of additional 40,000 capacity or porting. Further looking at the growing demand in the building kitten appliances, we have decided to utilize the resources for manufacturer assembling of approximately 200,000 building kitchen uppers to become Atmanirbar in this segment. This expansion will take place in two phases, that is 100,000 units in Q1 FY ’24 and balance 100,000 units in Q3 FY ’24. –

Further of the capacity expand of use by additional 90,000 in expected to complete by December 2022. New innovations at Cat — like we mentioned in the last call, we have filed patents for green thing technology, which will be manifest from organic materials with Chaco, Fintech and B2. The segmentation is natural and sustainable will be soon launching in the exhibition in Paris on November 19, 2022. Due to a positive effect on the environment as the product acceptance will be very high.

This is a breakthrough innovation in the zinc industry — we are in process of developing new type of things, which will double the trend compared to existing things without any further increase in manufacturing cost. The improved Singtel result in reduced packaging costs. also lead to reduced packaging side will allow us to ship more things per container, thereby reducing shipping costs. We expect it to complete this invention by end of this current year December 22, and the supplies will start in January 2023. Keeping in with a vision of taking the brand globally, we are launching the Caravelle and Stania brand in Dubai in December 2022.

In order to further strengthen our foothold and export market and we acquired a separate girl side for export business. We have also appointed four staff who oversee our foreign operations and business had overseas institutional sales. Future growth global market. The current ongoing geo-vertical tensions and energy crisis in Europe are presenting a very strong opportunity for Carousel on medium- to long-term basis. economies of Germany, Italy and rest of Europe, excluding France, continued to suffer from energy crisis.

As a result, the production costs had grown up to a very large level. Currently, three million to four million things are being manufactured in that area, around Germany and Italy. With the rise in cost and the inability to manufacture — at compared levels and to sustain escalating cost inflation levels will ultimately work through our advantage. The ongoing crisis has presented a Europe plus one opportunity, and therefore, carried has tremendous potential to enter into markets and bridge the supply gap, which will ultimately lead to an expansion of our customer base across the globe.

We are already in discussion with few other customers for their future requirements. Future growth Indian market. Further, in spite of the global recession, Indian economy has shown strong resistor — we are strategizing to increase our penetration in Indian market or midtolong-term. We are witnessing a strong traction in domestic markets. Over the last few years, into capacity come not able to wrap up our supply minded market.

However, currently, we are well expected to see the domestic market as well. Keeping in mind the growth opportunity we have already taken a few stats includes number one appointment of one in Kapur brand ambassador increase our dealer count to 2,200 30th September 2022 and aim to increase 3,000 Manor — for H1 FY ’20, domestic revenues have increased by 68% Y-o-Y to INR71 crores. We are aiming to achieve a turnover of INR300 crores in domestic market in the next two to three years.

Now I would like to hand over the line to Mr. Anand Sharma, our CFO, to update you on the company’s financial performance. Over to you.

Anand H. Sharma — Chief Financial Officer

Thank you, sir. Good evening, everyone. Let me take you through the condition financial performance of the quarter two FY ’20 performance. Consolidated total income stood at INR139.2 crores for Q2 FY ’23 as compared to INR119 crores in Q2 FY ’20. The consolidated income for quarter two FY ’20 includes income from newly acquired subsidiary Silver Technology Limited. While our export sales is down by approximately 21% on a Y-o-Y basis, on account of geopolitical situation, the decline was partially offset by 20% growth in our domestic market on Y-o-Y. –

The company for quarter two FY ’23 stood at INR22.7 crores as compared to INR29.7 crores in Q2 FY ’20. The decline was primarily due to lower sales leading to under absorption of the fixed costs. Profit after tax and the managing interest stood at INR9.2 crores in Q2 FY ’23 as compared to Q2 FY ’22. Now coming to H1 FY ’20 performance. Sales volume for Quartin stood at 27, 252 units. — standard in stand at 5,294 units and Kitan appliances stand at 15,068 units in FY ’23.

Total income stood at INR30.5 crores for H1 ’20 as compared to INR221.2 crores for H1 FY ’22, which registered a growth of 14% on Y-o-Y basis. the company for H1 23 stood at INR57.1 crore as compared to INR532 crores in Q1 FY ’22, growth. Profit after tax and minority interest stood at INR27.9 crores in FY ’23 as compared to INR31.1 crores in — thank you.

Now I open the floor for questions and answers. Over to operator.

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions] First question is from the line of Pranav [Phonetic] from Atara Securities.

Pranav — Atara Securities — Analyst

Sir, I wanted to understand on how the demand as such because of the big box retailers now having a lot of inventory built up in the last six months. So Obviously, they are facing some difficulties in liquidating them. But as you said that from 4Q onward, you believe that demand should start picking up or courting, — is that correct?

Anand H. Sharma — Chief Financial Officer

Yes.

Pranav — Atara Securities — Analyst

Okay. And sir, as you said that Germany, particularly with you facing a lot of problems and you had highlighted this in the last call as well. So the opportunity size or market share gain for you guys? How much can you see kind of market share lean for shop technology code things because of this? Can you just throw some light on the same?

Anand H. Sharma — Chief Financial Officer

Like I said in my last last Para in my speech that there are about three million to four million things are manufactured by our competition just state in Germany and Italy. Now whatever we have seen from reliable resources and our customers that our competition is increasing the price almost every few weeks. And this has made as India, especially carats is a very most — probably the most competent low-cost perisinthe world. So we — we already see this traction. We already see this business transfer to us. We are in talks with already a few companies on is one or two customers already moved to us. few are in discussion.

And I have, honestly, I think I think it could be any guess. We can probably get another storm coming in, in FY ’23, ’24, if really things do not go well for them. As of now, it seems things are really not going well for them. And I think we are offering our figures. We are quite optimistic. The business will come to us. India is tremendous in terms of where as compared with global situation. So we are quite positive, and we are quite hopeful that large Suncorp business will come to us next year. Now to what extent it today anybody’s guess yes.

Pranav — Atara Securities — Analyst

Right, sir. And sir, can you throw some light on the stand-alone EBITDA margin getting impacted in this quarter? So — was this because of operation delivery that is because of lower volume that you are able to generate or or something else there in this as well? Because the freight cost has started coming down. So — that would be a major part of your that should be positive for you?

Anand H. Sharma — Chief Financial Officer

Yes. So this standalone, it’s down by 12% primarily because of the lower export sales — and because of that, there is a lower value addition happen. Now the fixed cost level is same or we have control. But with the sales, which is lower — we have a lower margin, number one. Number two, if you see the exchange differences, that has also played its part in the last compared quarter we had around INR two crores a pipeline exchange gain. — which at current quarter is INR2.5 crore exchange loss is all notional loss, MPM.

But of course, it’s a part of the profit and loss account. — okay? And as I said, like indices and depreciation, whatever we have put in on the capacity that all come in, but corresponding, the volume has not come. So overall, business fundamental is same. We have remained strong. We have controlled our costs with the every rise of the sales, the EBITDA margin will come back to the normal level.

Pranav — Atara Securities — Analyst

Okay, sir. So sir, we can consider this to be kind of a bottoming out of the EBITDA margin from next quarter onwards, you should see improvement in margins coming in on a stand-alone level?

Anand H. Sharma — Chief Financial Officer

So I think like I said in my last investor call also, we’re expecting one or two fourth quarters till this inventory, it is a temporary phase when we now. So I think still the I think we will obviously face some challenge challenges, but we’re looking at quarter four things to improve

Pranav — Atara Securities — Analyst

Okay. And sir, my last question was related to — as you said that next year, year onwards, you believe that things should improve quite well because of the shift and EU plus one kind of strategy being adopted by the big box retailers. So since you have postponed the carding capacity addition. So — are you comparing that if the demand picks up very strongly, we’ll be able to service that? Or how we should look at this?

Anand H. Sharma — Chief Financial Officer

Yes. So I think what we are doing is to answer very quickly. We just work on traction in the built-in appliances in India. And we already have about 70% increase in sales in the built-in appliances sector, which I was telling last time it is expected to grow quite fast. While we have already infraction in Infra even to increase the production of 1.5 million units also if we Yes, there will be a further expansion, but we have — company has enough insto build it up.

So we will do tigeright now — right now, the priority was appliances and there’s traction there. So we have moved that slowly if we’ve seen a month or two because there are large contract, it will come into play, which will probably give a few months’ time for us to improve our capacity, increase our capacity. So the company is well equipped to expand to 1.5 million units within the six at any time

Operator

Our next question is from the line of Harshal Setia from AUM Fund Advisors. To interrupt Mr. Setas, can you please use your handset by asking your questions. Sir, your speaker phone, please use your handset.

Harshal Setia — AUM Fund Advisors — Analyst

Yes. So when — so my question is if we are bullish that the demand will start coming back in Q4 onwards, then due to the competitors dying in Europe and India would be the only option available to provide them with low-cost supply. And why aren’t we going ahead with the capex and putting up the capacity upfront, so that once the demand comes, we are ready with the capacity rather than waiting for the demand and then setting of the capacity.

Chirag Parekh — Chairman and Managing Director

So we already have a milling capacity in place right now, which is quite sufficient even with the increase in the order. Now further than one million tingi comes, any of the customers, we have a six to six months’ time to expand. — on to be overnight. So we feel that one million things will be sufficient to cater all the new inquiries and demand.

Harshal Setia — AUM Fund Advisors — Analyst

Okay. Sir, secondly, I want to ask how much volume is being supplied by the competitors to in quoting market and our volumes are around 600,000 things for the like annualized?

Chirag Parekh — Chairman and Managing Director

Utel shock technology are approximately four million units, which are being sold and all are manufactured in Europe.

Harshal Setia — AUM Fund Advisors — Analyst

Okay.

Chirag Parekh — Chairman and Managing Director

And all these four million things are having challenges for energy inflation. And not just that, supply chain also is going to be a very big.

Harshal Setia — AUM Fund Advisors — Analyst

Okay. And in this $4 million, does this include our volumes of 600,000 things? No, that is on. So on an average, the global industry is 4.5 million things, correct?

Chirag Parekh — Chairman and Managing Director

Yes. Like I said, again, the total leaving us million things of ports in a being manufacturers, which shock has almost 80% market share. Another one million things are being manufactured in euro by from Eastern European manufacturers, which are not so technology.

Harshal Setia — AUM Fund Advisors — Analyst

Thank you.

Operator

Yes. So just one moment, please.

Chirag Parekh — Chairman and Managing Director

Yes. Mr. Harshil Satya, do you have any other questions?

Harshal Setia — AUM Fund Advisors — Analyst

No. Thank you.

Operator

Our next question is from the line of Adit Kajal from — Yes Securities.

Adit Kajal — Yes Securities — Analyst

Sir, firstly, on the capex that we have deferred, what will be the already cost that we must have incurred for that, which we have already postponed now?

Anand H. Sharma — Chief Financial Officer

So we came the infrastructure ready. We have invested in the buildings and Infra and land. So that is all we have invested as of now. around INR20 crores. Now this infrastructure, what we have built in build that we are going to use for our budding appliances till we get the further push in the what thing. So in price available, we can use that for the building of the car as well as for the port in manufacturing.

Adit Kajal — Yes Securities — Analyst

Got it. And yes, — and sir, for — so what will be the further capex that we’ll incur for setting up this built-in appliance plant? And what will be the phase wise capex for one and like each unit and the top revenue that we expect from this capex?

Anand H. Sharma — Chief Financial Officer

So primarily, we plan to do more assembly and then manufacturing. So the total capex expected to be about INR20 crores on the first phase for the 100,000 is expected to be around INR10 crores.

Adit Kajal — Yes Securities — Analyst

Okay. And sir, what will be the revenue potential from the same of approximately INR50 crores to INR60 crores. further from the first phase, the total will be about INR120 crores with the Phase I, Phase II of 100,000 units. — all for 1,000 units.

Anand H. Sharma — Chief Financial Officer

Okay. And this peak, we should be expecting by ’25, right, if we start the second phase in. The Phase two is expected to also public next year. So first what we are expecting in the quarter one of the financial year — and second is in quarter three as an experiential year.

Adit Kajal — Yes Securities — Analyst

Right. So sir, my directional question is that the peak revenue will be achieved in next year itself for is what we are expecting.

Anand H. Sharma — Chief Financial Officer

Weak revenue will come in FY ’25, not in FY ’24. The peak will come in FY ’25. — because you will get only a quarter for the second phase of expansion.

Adit Kajal — Yes Securities — Analyst

Understood, sir. And sir, on the courts and stainless dosing, so in domestic, what will be the cost difference now? And how has the demand in domestic shaping up?

Anand H. Sharma — Chief Financial Officer

The ports, what Syngas in the premium thing and it is the fastest-growing category, like I said, global not just globally but also in India. So we are I’ll just tell you this. So we have and the average rate in India, which is coming of 5,500 and sealing about 4,000. So there is approximately about different between the steel in the grants

Adit Kajal — Yes Securities — Analyst

Understood, sir. And sir, lastly, on the export that we are expecting situation to turn around from Q4. So — and like you mentioned that we can set up 150,000 capacity of court things in six months. So that will be on the existing land or we’ll have to incur further capex for it?

Anand H. Sharma — Chief Financial Officer

So I said to just recorrect that 1.5 million things we can do. We’re already at one million. So 0.5 million things we can do within six months. On the — we already have enough land to build up capacity. So we don’t have to put any capex in plan.

Adit Kajal — Yes Securities — Analyst

Got it. And lastly, sir, can you.

Anand H. Sharma — Chief Financial Officer

Mr. Kajal there are several participants were question or for the tone — maybe a question on for follow-ups. Our next question is from the line of Nikhil Gada from Abacus AMC. But before we take this question, we’d like to request all participants. So please limit their questions to 2. Thank you. Kara.

Adit Kajal — Yes Securities — Analyst

Sir, firstly, could you provide the financials for HTL, please, the revenue EBITDA path?

Anand H. Sharma — Chief Financial Officer

For which?

Chirag Parekh — Chairman and Managing Director

HTL, the subsidiary the subsidy we recently.

Adit Kajal — Yes Securities — Analyst

Correct, yes. Okay.

Anand H. Sharma — Chief Financial Officer

Okay. You move to next question, Nikhil, I’m just taking that out.

Adit Kajal — Yes Securities — Analyst

Sure, sir. Sir, now we have seen the fall of close to 25%, 30% in volumes and costs. And that somewhat is also reflective in 3Q as well. Post that, I know it might be a bit difficult, but is it possible to achieve the sort of the run rate we used to do prior to the slowdown in Europe that you are seeing? Because we have expanded so much in other geographies as well?

Anand H. Sharma — Chief Financial Officer

Yes. 100% is going to come back. I mean, there is no reason why it should not come back. We all know that the fundable of the business are very strong. At the ground level, the ad business is Road is the first thing. I think I would really be concerned at the ground level, people are not taking shape. But the ground level when the quarter things, like I said, the hybrid culture is still existing in every quarter of the world. And that’s why the home improvement sector is still improved like U.S., like guys like Home Depot and lower from sources that that there’s increase in 7% of our online sales and home improvement.

So — this scenario is not going to change anymore. People will work from home culture is there. The demand is very strong, home improvement sector is still doing well because of inflation issue, mostly the event travel inflation and the geopolitical situation. It is a temporary phase. We all know that. Now it’ll take three months or six months, but the demand is not going anyway. Demand is coming back. — we are very bullish that whatever we created, it will come back.

And not only that, maybe in a year or two, we will have to expand another phase because the traction is there in the porting business. It is taking out this year. Now a cycle — I mean it’s a cycle you guys are more export than that anything is the inflation with the interest rates are more, there’s a softness in in the mortgage business, home impa business, but that event is going to be bottleneck is it? — once the interest rates go down, there is going to be a gain traction in the home sector. So yes, so we will have a little bit better brand with this current situation. But yes, we’ll be out of the quite soon.

Adit Kajal — Yes Securities — Analyst

Got it.

Anand H. Sharma — Chief Financial Officer

Coming to your first question, Nikhil, I’m reading out the numbers from Sina technology. So in the quarter 2, we have achieved turnover of GBP3.6 million against last year GBP319 million, growth up 13.8%. EBITDA is GBP588,000 against last year GBP55,000, growth of 16.5% GBP534,000 against last year corresponding GBP440 growth of 21.3% PAT against last year, GBP371 million, growth of 16.8%. So overall, similar technology had done good numbers sequentially also and via also

Adit Kajal — Yes Securities — Analyst

God, sir. Just one last question on the build and Appliances business. when we are already operating in the kitchen appliances space. And now with this in-house sort of assembling and manufacturing — is it sort of just a replacement of the sales that we are going to do? Or do you believe that this — because INR120-odd crores is what you are expecting by FY ’25. So that would be a sizable number, right, to what we are doing right now?

Anand H. Sharma — Chief Financial Officer

It may compensate a little bit, but this is mostly to drive on a different different parts or different kind of between appliances we would like to do for — the supply chain from China is still a challenge. I mean we’re still having very big challenges. And we just can’t go on imports. I mean, one, you don’t get same dollar has gone to 83%. I mean you can’t just do it. You can’t just go run. And I think our technology of stainless in fabrication gives us enough edge for us to manufacture this.

So yes, it’s going to be a new line. It’s going to be a new type of kitchen hoods will be more innovative also kitchen goods, which we have tied up with some engineering companies. We also have just recruited slowly going to build engineering and our technology team. The first lot is being recruited. We’re going to join 1st January, including engineers from IIT and which is going to — we have some plans in mind, which we can and but yes, we do have some dynamic plans, which will change the future of the kitchen worn industry in India with some complete new engineered appliances.

Adit Kajal — Yes Securities — Analyst

We largely do it domestic, right? Not no exports?

Anand H. Sharma — Chief Financial Officer

Largely for domestic Yes.

Operator

[Operator Instructions] Our next question is from the line of Pritesh Chira from Lucky Investment Managers.

Pritesh Chira — Lucky Investment Managers — Analyst

Sir, my question is on the gross margin side. So the half yearly gross margin are completely different from what we had last year. So there’s about 500 to 600 basis point difference. — easy to do with raising and raw material prices in quarts or its to do with anything else?

Chirag Parekh — Chairman and Managing Director

So I think the margin is one is factor of this prices of this pigments and MMA has gone up, but that affected a very small, mostly is because of the freight and the cost of import and the corresponding cost associated. — once volume is down, I think gross margin per unit is not gone down. Overall, it has affected the operating margin.

Pritesh Chira — Lucky Investment Managers — Analyst

So the gross margin themselves are down 500 basis points. So I’m just trying — I can understand — so then understood your EBITDA margin adjustment between quarter two and quarter one because of the volume itself is to

Chirag Parekh — Chairman and Managing Director

Yes. consolidate, when you are talking about it is a merger of Kilmer from this quarter, I mean, from last quarter. So last corresponding silver oil not there. Similar costs — gross pound margin are very different from what we have in India. So that’s why that margin define will definitely come.

Pritesh Chira — Lucky Investment Managers — Analyst

Okay. So now I understand. But is there any material led gross margin, which can improve from Europe?

Chirag Parekh — Chairman and Managing Director

Yes, Yes. So as we this freight costs have almost come back to three core levels now. And the — also the input costs are going down. So we — on the — I think on the gross margin side, you will see improvement.

Pritesh Chira — Lucky Investment Managers — Analyst

Okay. So my second question is volume. So let’s say, until quarter four of last year, we were taking that we’ll do about 900,000 volume in spend this year and may utilize our capacity fully of 1.3 million next year. Now with the capacity going to only 1.1 million. What would be your best guess for volumes this year and best get for volume next year?

Chirag Parekh — Chairman and Managing Director

So I — so we believe that starting from quarter 4, you will see some improved improvement. I think it is anybody’s guess. Now water, we’re seeing our inflation starts coming down with geopolitical situation, I think it’s very, very hard to tell. — what it is. But we are quite hopeful that we should be — I’m wishing that by half year next year, mid of half next year, things should start falling back in place. And actually, we should come back to the level of quarter 1. For one, I don’t know the quarter one volume. So I can tell you, we can also later on you want it now or later. I can give you the number. On the eating side, we have volume of 170,000 units in quarter 1 27,000 in quarter 2. Now our best case is from the quarter four onwards, we’ll back to the 170,000 kind of level.

Pritesh Chira — Lucky Investment Managers — Analyst

That’s what he’s talking about. Okay. Okay. Understood. Understood. And from there, we will start growing, right, from the 17

Chirag Parekh — Chairman and Managing Director

Yes. But it’s like a four and port. So we have to still take into consideration the issues around us. But you ask our guests. It will be our guest. And if not water or it will be quarter 1. But we are saying that they will start falling back in place. It’s just a matter of time at what period, quarter one or two year end there, but yes, it will start coming back in place.

Pritesh Chira — Lucky Investment Managers — Analyst

Thank you very much, and all the best.

Chirag Parekh — Chairman and Managing Director

Thank you. Our next question is from the line of Prasheel [Phonetic] from Kitara Capital.

Prasheel — Kitara Capital — Analyst

Yes, my question was regarding Your price difference between you guys and suppliers in our view, you said you are getting more competitive because of energy costs rising in Europe. So what is the difference now.

Anand H. Sharma — Chief Financial Officer

So we were already 20 — around 20% to 25% cheaper before this crisis hit, and now we should be more comparative by 35% to 40%.

Prasheel — Kitara Capital — Analyst

Okay. And I just mentioned the four million units that are getting manufactured in Europe what kind of shift do you see in the coming one year, maybe two years? As the situation continues to be in the way it is right now?

Anand H. Sharma — Chief Financial Officer

Yes. I mean it could be like anybody’s guess, isn’t it? Now whether that’s a million things coming to us or two million things depending upon that all depends upon the customers over there, what they would like to do. But the signs are showing that it is going to come towards us because we are one of the only licensees of shop. So we are quite confident that it should come to us to what volume, what extent, like I said, we are not sure

Prasheel — Kitara Capital — Analyst

Okay. And lastly, one data keeping question. You said around 10 — you mentioned that INR10 crores that is that the right amount that you need to spend more to convert the units capacity have been making for sent to shift that to biting appliances. Yes.

Operator

Our next question is from the line of Anika Mittal from Invest Research.

Anika Mittal — Invest Research — Analyst

Hello Yes. Sir, you were talking about this Silma technology. The company is performing good as the financial shared by — so manufacturing plant is also in U.K. So is it not catching any prices, sir?

Chirag Parekh — Chairman and Managing Director

So exactly my point. It’s a good question because Silma technology does not carry on inventory. — because it’s on made-to-order business. So even with this crisis in U.K., our order book situation is still very strong. So we clearly said that the home improvement sector is part of all the challenges still doing well.

Anika Mittal — Invest Research — Analyst

Okay. The demand is there, you are saying.

Anand H. Sharma — Chief Financial Officer

Yes. That’s the point because that’s only the SL is reporting good numbers.

Anika Mittal — Invest Research — Analyst

Exactly. And sir, second thing is we are entering into this building a plant size. So sir, this is being not a competitive one. Do you really think it will be an opportunity for us or it will give us the extent of that much growth that we will target in from Juan because the market is very competitive there, and the margins, I think also hands.

Anand H. Sharma — Chief Financial Officer

Talking for a Being appliances margins could be better than the card things also. That’s what we’re expecting because it’s more of a lifestyle pro and whatever the innovation and the new engineering what we are planning to see, it is going to completely change the — it going to completely change the way the kitchen would are manufactured. So it’s going to be a very novelty item. And plus we would be obviously manufacturing the item, which is currently in a high demand in India with some more added features to it. So yes, the gross margin side, if not more, but will be same as the working yes.

Chirag Parekh — Chairman and Managing Director

I was talking from the competition point of view, I mean is it means will we be able to get that much growth that we were expecting from the quantitation — that was my question.

Anika Mittal — Invest Research — Analyst

Okay. Very I’ll say with the data because we just had a 2-day bagger sales conference. The — from the sources, what my sales team got, the total built-in appliances marketed in India is about INR3,300 crores out of which 50% of the market is shared between Erica, Cap, Siemens, Bosch cable

Chirag Parekh — Chairman and Managing Director

Okay?

Anand H. Sharma — Chief Financial Officer

So you’re talking about organized sector of INR1,500 crores. So in this INR1,500 crores, it there are only five players right now in India. We are not taking into consideration the between appliances like low cost of the Colas or on — more Sanlam and other Pierno. That’s not the sector we are into it. which is a low-margin segment. So we are into more of a premium segment, which is our potential market potential of INR1,500 crores

Anika Mittal — Invest Research — Analyst

And what is the expected growth for this INR1,500 crores market?

Anand H. Sharma — Chief Financial Officer

What is the expected growth You are having the data point now if you are having that growth expectation as well? 20%, 30% is So the whole appliance industry is growing about 15% year-on-year. Like as we said, that the first phase is going to do 200,000. Let’s see, let’s go for a year, and then we will be able to throw some more light to you closer to that We were saying from Europe plus opportunity kind of thing is going on, one million, two million, — have I heard it right, this much units will come to you, one million or two million.

Chirag Parekh — Chairman and Managing Director

I said what is coming, I don’t know. It can come from one million to two million units also. That’s what I said. I don’t know or we rather don’t know what is that exactly, but potential is there about in two million. Now let’s see what comes to us.

Anika Mittal — Invest Research — Analyst

Okay. On the right.

Operator

Our next question is from the line of Anshul Mittal from Care PMS.

Anshul Mittal — Care PMS — Analyst

Yes. Actually, sir, I wanted to ask about the goodwill increase, which we can see in INR80 crores. So what is your plan for amortization of the same going forward?

Chirag Parekh — Chairman and Managing Director

Is on account of acquisition of Silver Technology Ltd. And in the U.K., they amortize in 10-year time — but in India, there is no requirement or amortization because it’s a EUR30 million. It’s not a revaluation done. So in our books, goodwill is stand in consolidation, if you will desand. — whereas in U.K. books, it will get advertised in next one year time.

Anshul Mittal — Care PMS — Analyst

Okay. Okay. Understood. And sir, what will be the peak debt after all the expansion going forward? Currently, it is close to INR130 crores.

Chirag Parekh — Chairman and Managing Director

So it will go by another INR20 crores, INR25 crores in the next financial year. Okay. And so considering that appliances and phosphate business is more very focused towards domestic angles. So we’ll be able to maintain the margins of 20%, 22%. So that’s a considering the distribution channel. Profile in building appliances are even better compared to Quad because that’s a lifestyle product, and there is a defend range where the prices are very high. So — and with currently what we are having the margin is only a trading margin. Now with manufacturing margin coming, our margin profile will also increase. So we believe that we’ll have a better margin.

Operator

Our next question is from the line of Chirag [Phonetic] from Ratnatraya Capital.

Chirag — Ratnatraya Capital — Analyst

Just quick clarification question on the destocking that some of our customers are seeing could you broadly share what kind of inventory days they carry and currently what those numbers would be? I understand they might not be exact numbers, but what is your best estimate of that — of the inventory that they on average carry and what it is today? — we actually don’t in a position to tell you what numbers would be, but we see at least a four month inventor four months inventory

Anand H. Sharma — Chief Financial Officer

Yes.

Chirag — Ratnatraya Capital — Analyst

Okay. Okay. Got it. Right. And on the secondary demand side, is there any place where you are seeing the impact of inflation and interest cost rising — is there any place where the secondary demand is also seeing some weakness? Is there any sector or segment or geography that you have seen that?

Anand H. Sharma — Chief Financial Officer

Yes. Like I said that the front even of the business is still very strong. The costing continues to grow. But yes, there is there is a — the secondary demand is still very good. There’s a small about 8% to 10% decline in the secondary sales. So it is not what the impact volume see in compared to the Canary space. And I think which we also see the new customers coming in, we’re tying up a new customer. So I think that offsets that will offset with the new customers coming in. So — and that you are talking the second is as of now. So you’re talking in write-down the worst situation where there is about 10% decline in the secondary than — and we expect this situation to improve in — from quarter

Chirag — Ratnatraya Capital — Analyst

Understood. Understood. Very clear. Just on — just one more question, if I can squeeze on the domestic side, quarter-on-quarter, there has been some moderation in the sale whereas our sort of dealer network also has grown up — gone up by some 200 dealers — there also, is there a moderation in the secondary sales that you have seen this quarter given monsoon than everything else? Or is it just something that’s a minor blip and next quarter onwards, the things will sort of again normalize there on the domestic front.

Anand H. Sharma — Chief Financial Officer

Correct. So I think on the — what things — what has happened here so much of backlog which we had, which we had a three month backlog. So we kind of shifted it to all our distributors — so I think talking to large amount with too much is also two places. And then the rain got really is time really when prolonged range across the states in India. And now, yes. So now I think the Indian market is also now we are getting easy on the stock levels. The sales have started rising back, we will see quite a big improvement now in terms of sales in India.

Chirag — Ratnatraya Capital — Analyst

Understood.

Operator

[Operator Instructions] Our next question is from the line of Randip S from Mass Capital.

Randip S — Mass Capital — Analyst

My question is, what’s long-term split of revenue share that you see between India and the rest of the world from the present 29 to 71 was So on the long term, that is, I think, psi,wesee the India versus export revenue will be about 55%.

Anand H. Sharma — Chief Financial Officer

Okay.

Randip S — Mass Capital — Analyst

Okay. Okay. And just a continuation to that question. What’s the game plan in terms of ramping up the India practice from, say, 2,200 dealers as of today, where do you see this heading in the next two to three years? And also, we see that distributor network seems to be stagnant at 82. So any thoughts over there?

Anand H. Sharma — Chief Financial Officer

Yes. So I think we have a lot of work to do in India. We just had a sales conference a few days back, which I we are appointing new team. We are expanding our sales team organization across the board. We are planning to double our sales force in India. We’re also trying to fill up gaps where there are distributors where you need in play where we need galleries in place where we need experience centers in place. So the plan should be ready in the next 60 days time. So we’re doing everything in India.

We see a lot of gaps. We have still got had time in the last year or two because we had so much busy in expanding our zinc capacity for the global market now and yes, and really India has taken a hit by that. time for us. I think we have now time to pull back our stocks, start looking at India seriously, and we’ve already started taking actions on that. within the next 60 days to 90 days, we plan to at least a 50% increase in sales force. And by March, we plan to double the sales force right now.

On the midterm to long term, that on three to five years, we plan to have a dealer net of about 5,000 dealers across India. — strategy for distributors when you come into play by quarter in January when we finalize our POP for next year because we started decision will have to come that we want to have appoint dealer direct dealers with the showrooms or you will have more distributable for displays.

So that again is a separate strategy for within appliances and things. We have also looked in Deloitte or do the plan for the short-term plan and in the next two to three years, how do we how do we achieve a INR300 crore revenue in India — and yes, so we’ll be doing everything in our power to see that how do we try to do a INR300 crores of revenue in India in the next two to three years.

Randip S — Mass Capital — Analyst

Sounds exciting. My second question, how will you defend this exclusivity in the quad zinc production that you have in India? What is your mode that will help you keep competition at way? I understand it’s been a long time since you have this exclusive technology. But what is the mode which all ensure that you guys remain exclusive

Anand H. Sharma — Chief Financial Officer

The way we are going to — the way we have ensured a good ensure that shock is not going to give technology to any other partner. And while we say that shock is obviously is not giving any technology to partner. And I don’t see any going various future they plan to do because they already experienced are, let’s say, a very strong competitor. And while Sam does not give there are manufacturers coming in, in and out. every — I mean, every month, we see somebody coming somewhere trying to make the bad things like us. And we still have a 90% market share probably in the in India.

So it’s a technology, which is not just done by a machine. It’s a technology from the formulations to the malls to how it manufactures the scale of the mantra we need a lot of experience to come out with a good managed thing. — it’s not — it’s not — that’s one. And over to, let’s assume even if somebody comes, the innovation taking place, like I said, we are doing this for first time and a very important point, I’d like to say, the engineering technology department, which we aggress planning to stay ahead from quarter 4, we are having our own team very IT teams and the other teams are going to join us.

So we are going to ensure that in every category, we steered as a leader in categories, we are not — we need to come out more innovative products to the leaders at 100%, like I said, the green thing, the IP are going to play a very major role to stay ahead of the competition. We have already filed two IPs recently almost worldwide. One is the green things. We’re the only company in the world who makes drinking from biopark, — that’s one.

Number two, the SuperX technology, we filed a patent where the thing is going to have double the read, even then a shock thing. And the more and more online sales happening across the world, the customers are going to prefer to have our Super technology, which is going to be launched in France and in Dubai in the next months time. So we are very confident. And if this supercatechnology, it is virtually on breakable thing, which has doubled the strength, which is, I think, would not to transform the company’s growth

Randip S — Mass Capital — Analyst

All right. All right. Thank you for that elaborate answer and wishing you all the best.

Operator

Our next question is from the line of Harsh Sagar from Centrum PMS.

Harsh Sagar — Centrum PMS — Analyst

Sir, my question was regarding — so I just wanted to know, is there any progress on the partnerships which we were looking at. So one, we had we were planning to sign partnership with IC for Stein. And secondly, there were other discussions going on with other retailers. So any update on that?

Chirag Parekh — Chairman and Managing Director

Sorry, one was I can others what.

Harsh Sagar — Centrum PMS — Analyst

Any other major partnerships in pipeline? Anything which is supine.

Chirag Parekh — Chairman and Managing Director

Yes. So there are many partnerships in pipeline. That’s all I can say right now. Periodically, you will get the announcement will share with you. We’ll be happy to share with you. As far as IT is concerned, yes, we have tied up with them for sale things and we’re starting — we have also got an opportunity for statistics the U.K. market, we have kind of and the also will be starting from quarter 4. For the other products, steel than PVD and for the porting. We have some interesting tiffs coming on the way. But periodically, as when time comes to Leo.

Harsh Sagar — Centrum PMS — Analyst

Okay, sir.

Operator

Our next question is from the line of Ana Mittal from Investor search.

Ana Mittal — Investor search — Analyst

I may add. I think most of my questions are answered.

Anand H. Sharma — Chief Financial Officer

But one question, which is more of.

Ana Mittal — Investor search — Analyst

A strategic one, like you had a near-term vision and midterm mission of targets, right, in terms of turnover. So do you see any revision due to the stuff that is going on around the globe? And what type of turnover that you are looking for next — maybe next three years? Do you have any sense on that, sir?

Anand H. Sharma — Chief Financial Officer

So we are still very confident, and we still want to believe that we will put INR11,000 crores sales as what you expected could be delayed by a year, but I think it is going to come it is going to come back very soon. We have a plan in place. So even if there is some uncertainties that we are seeing right now, global trade, but we do have a plan B. we will take appropriate decision at appropriate time, but we are very confident that the plan B will take care of us achieving INR1,000 crores sale within the next two to three years.

Ana Mittal — Investor search — Analyst

That’s good. Thank nothing from my side.

Anand H. Sharma — Chief Financial Officer

Thanks.

Operator

Our next question is from the line of Munjal Shah individual Investor.

Munjal Shah — individual Investor — Analyst

Sir, two quick questions. One, I needed a clarity on that when we mentioned that we are investing — so that INR10 crores is for one lakh appliances or the INR10 crore is for two like appliances for capex INR10 crores is for 100,000 appliances So it’s INR220 crores, right?

Chirag Parekh — Chairman and Managing Director

Yes, correct.

Munjal Shah — individual Investor — Analyst

Okay. And sir, when — so now, basically, we are coming up with different basically quality of Sin. So when you said that it’s the Super ex tech, which is an unbreakable thing. So if I put the strong thing on our normal coating, the steel zinc and the facets and appliances. So basically, in the order of margin or in the order of pricing, will all be in the same range or the super strong thing and the green thing will be higher value-added products compared to our current products.

Chirag Parekh — Chairman and Managing Director

So I would say the SuperX will have the best margins, followed by our Granite thing, built-in appliances and the future.

Munjal Shah — individual Investor — Analyst

Okay.

Operator

Our next question is from the line of Chintan Mehta from Prudent Broking.

Chintan Mehta — Prudent Broking — Analyst

Sir, what is the margin we enjoy currently on appliances and what the margin we are expecting after the expansion?

Anand H. Sharma — Chief Financial Officer

So I think our current gross margins are current margins are 40%. To go to 50%.

Chintan Mehta — Prudent Broking — Analyst

Okay. Gross Okay. Understand. And sir, this appliances business will be developed in the same brand name Krefeld.

Anand H. Sharma — Chief Financial Officer

Yes.

Chintan Mehta — Prudent Broking — Analyst

Okay. And sir, if you can throw some light on this four month inventory, it is on our side that we have a four month inventory.

Anand H. Sharma — Chief Financial Officer

No, the four month inventory is at the customer side.

Chintan Mehta — Prudent Broking — Analyst

Okay. Okay. And sir, how this contract decided, does this large tier commit any volume number or how much order do they maintain in general?

Anand H. Sharma — Chief Financial Officer

Yes. So we have — we obviously have contracts on an annual basis with the large year with a large customer, and they give you quarterly revolving orders for three months.

Chintan Mehta — Prudent Broking — Analyst

Okay. Okay. That’s it from my side, sir.

Operator

Our next question is from the line of Anika Mittal from Investor Search.

Anika Mittal — Invest Research — Analyst

Sir, a quick question on — I was saying mentioning the SPL is not having the inventory — so why are distribution channels facing the inventory buildup, sir?

Chirag Parekh — Chairman and Managing Director

I don’t understand.

Anika Mittal — Invest Research — Analyst

Sorry, I did not understand you. Can you come again? I was saying I was saying the SPL is not having the inventory, as you mentioned, because the result is good. why our distribution channels are having the inventory buildup because why they are not able to clear liquidate the inventory. In the same period, the STL is able to do in

Chirag Parekh — Chairman and Managing Director

Yes. SL is a different business model. It’s on a customized. We make kitchen and the bathroom platforms, fabricated based on orders. at the site.

Anika Mittal — Invest Research — Analyst

Okay. That due to the different business model. So that’s what I was saying is they are having the demand that doesn’t mean our distribution channels will have in the demand.

Chirag Parekh — Chairman and Managing Director

No other way around. — see where there is inventory to be built up, there may be a lag between demand and supply. When there is a customized, demand comfort and then supply starts. So there is a difference between the two business models.

Anika Mittal — Invest Research — Analyst

Understood.

Anand H. Sharma — Chief Financial Officer

Like earlier on the inventory side, also the reason is that we used to have about 12 to 14 weeks of lead time delivery. And now currently, increasing the capacity to one million things they have brought down the lead time two weeks now. So that’s where the gap happens. So the way at what the momentum the think demand was based on that, the customer ordered the thing — and then you have this issue when coal open until you had engines travel and inflation in all regions.

Anika Mittal — Invest Research — Analyst

Okay. Okay.

Operator

Thank you very much — ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to Mr. Chirag Parekh for closing comments. Please go ahead, sir.

Chirag Parekh — Chairman and Managing Director

I would like to once again reiterate that the challenges posed by current geopolitical and research trends have been short term in nature. — on a medium and long term and on a sustainable basis, we see great opportunities for us, the Euros on and opportunities to increase our penetration in Indian market to grow our business substantially. We have great product client and fundamental business remains strong as ever. Thank you, everyone. I hope we have been able to answer all your questions satisfactorily. However, if you need further clarification or want to know more about the company, please get in touch with our team, or SGA, our investment relations wise. Thank you once again for taking the time to join us on the call.

Operator

[Operator Closing Remarks]