Apollo Pipes Ltd. (APOLLOPIPE) Q4 FY22 Earnings Concall Transcript

Apollo Pipes Ltd. (NSE: APOLLOPIPE) Q4 FY22 Earnings Concall dated May. 06, 2022

Corporate Participants:

Udit Gajiwala — Yes Securities — Analyst

Sameer Gupta — Managing Director

Ajay Kumar Jain — Director

Anubhav Gupta — Chief Strategy Officer

Analysts:

Pankit — Bamboo Capital — Analyst

Anik Mittal — Invest Research — Analyst

Kaushal Shah — Bank Securities — Analyst

Unidentified Speaker —

Aman Agarwal — Equirus Securities — Analyst

Hirotada — Cotogacin Management — Analyst

Udan chuwan — Rising Prices — Analyst

Jisha — Baroda BNP Paribaa — Analyst

Aditi Kasbekar — Private Investor — Analyst

Varun Jain — Edelweiss Financial Service — Analyst

Manish Mahawar — Antique Stock Broking — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Apollo Pipes Limited Q4 FY ’22 Earnings Conference Call hosted by Yes Securities Limited. [Operator Instructions]

I now hand the conference over to Mr. Udit Gajiwala from Yes Securities. Thank you, and over to you, sir.

Udit Gajiwala — Yes Securities — Analyst

Yes. Thanks, Neda. Good evening. And on behalf of Yes Securities Limited, I welcome you all on the Q4 FY ’22 earnings call of Apollo Pipes Limited. From management side, we have with us Mr. Sameer Gupta, Managing Director; Mr. Ajay Kumar Jain, Chief Financial Officer; and Mr. Anubhav Gupta, Group Chief Strategy Officer. We shall start the call with brief opening remarks from the management side and then open the call for the questions.

Over to you, Mr. Gupta.

Sameer Gupta — Managing Director

Good afternoon, everyone, and thank you for joining us on our Q4 and FY ’22 earnings call to discuss the operating and financial performance. I hope you all had the opportunity to go through our results presentation, which provides details of our operational and financial performance for the fourth quarter and full year ended 31st March 2020. To begin with. I’m pleased to unveil the performance, which has been outstanding compared the CAGR of the industry in this segment. We have reported strong performance during the quarter with our sales volume growing by 26% Y-o-Y to 16,409 metric tons per annum. Healthy contribution from the CPVC pipes and value-added product segments were the major drivers for the growth complemented by expanding product portfolio, increasing reach in newer geographies and incremental ground-field capacities.

Over the next few quarters, we anticipate this sales performance trend to strengthen led by an improving demand environment expansion in addressable markets and a sustained uptick in utilization levels. Moving on to the operational front. The company did an annual CapEx of 42 towards announcement of capacity, debottlenecking and adding balancing units majorly in CPVC, LTV pipes and fittings. Enter management continued to keep strong focus on value-added products on the building portside, which continue to be in collection. The impact of improved capacity in earlier quarters has a visible growth in sales of locomotive products. Going forward, we remain confident that this product along with our other value-added offers like treating solvent cements, passporting, adhesives, steps, deposits will enhance our reach and sentences.

Additionally, we are aiming towards optimally pledging our capacity over the next coming years, which will also help augment sales volume going ahead. On branding media campaign around Tiger Shark as an investor continue to garner good response. And recently, we launched our TV commercial, which will further strengthen our brand positioning in the market. To conclude, I would like to state that we are continuously working towards enhancing our presence across existing and new potential geographies. As we further improve our operation capacity utilization of our rate plan, we are confident to open up the untapped market and high potential markets of Central and Eastern India positive trend in industrial growth in the current year 2023.

Going forward, we expect to deliver a robust performance in the quarters to come and further gain momentum on the back of making India journey for improved profitability, expansion in key geographical areas, better brand acceptance and [Indecipherable].

Now I would like to invite Mr. Jain to run you through the key financial highlights of the quarter and period ending 31st March 2022.

Ajay Kumar Jain — Director

Good afternoon, everyone. I will briefly cover the financial performance during the quarter and full year ended 31st March 2022. The company delivered solid operational and financial performance during the quarter, driven by an uptick in demand and consumption in key domestic markets. Revenue from operations for the quarter stood at INR247.5 crores as against INR174.2 crores in Q4 FY ’21, higher by 42% and FY ’22 revenue growth was even better at 51% Y-o-Y with revenues of INR784.1 crores against INR518.1 crores last year. Sales volume for the quarter stood at 16,409 metric tons, reporting a growth of 26% as against 12,987 metric tons. And FY ’22 sales volume stood at 53,849 metric tons as against 47,333 metric tons, up by 14%.

On the profitability front, EBITDA for the quarter improved by 5% Y-o-Y to INR28.4 crores versus INR27 crores in Q4 FY ’21. EBITDA margin, which stood at 11.5% in Q4 FY ’22 was lower by 406 bps Y-o-Y. EBITDA for FY ’22 stood at INR93.4 crores as against INR743 crore growing by 26% Y-o-Y with EBITDA margin at 11.9% for FY ’22 versus 14.3% during corresponding period last year, lower by 242 bps Y-o-Y. Going forward, we anticipate EBITDA margin trends to sustain. During the quarter, higher depreciation and financial costs impacted net profit. Depreciation costs stood at INR7.1 crores in Q4 FY ’22 as against INR5.8 crores in FY ’21, growing by 23%. Financial cost was higher by 95% during Q4. Net profit for the quarter stood at INR15.6 crores declined by 6% Y-o-Y when compared to INR16.6 crores in Q4 FY ’21.

Net profit for FY ’22 grew by 12% stood at INR49.8 crores as against INR44.5 crores in FY ’21. Net margins during the year, a period stood at 6.3% as compared to 8.6% in FY ’21, lower by 224 bps. On the balance sheet front, our net cash position stood healthy around INR3.3 crores in FY ’22, with healthy cash flow generation and improving capacity utilization levels, we are in the planning mode for our next phase of CapEx, which will be focused towards value-added products, witnessing strong demand spend. CapEx will be largely funded from internal cash flows. On the working capital front, additional raw material requirements at newly commissioned capacities has moderately impacted inventory levels, though our endeavor remains on maintaining our overall working capital cycle at stable levels.

With this, I would now request the moderator to open the forum for any questions or suggestions that you may have. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Pankit from Bamboo Capital.

Pankit — Bamboo Capital — Analyst

Congratulations for a decent set of numbers given the volatility seen in PBC pages and good growth in the volumes that we are seeing. So, if you can give us a broad breakup of the split of revenues in Agri and Building segments. So what has been the breakup of sales from great and building segment for Q4 FY ’22 and FY ’22 full year. And the outlook for both the segments for next year as of — as we are seeing currently?

Anubhav Gupta — Chief Strategy Officer

So between the Agri and Building Materials, if you see the mix, broadly, we closed FY ’22 at 50-50, right, which was 40-60 in the beginning, and we improved it to 50-50 through all the quarters. And with the CPVC and the Baton treating and water tanks growing at much faster pace versus the overall growth of the company. We see the will move towards 60-40 and 65, 35 eventually. And plus also the push we will get from the media campaign, which we started. So that also will help us build our brand in the building metal category at the accelerated pace. So we believe that we are on track to get to 65, 35 kind of sales mix towards building material.

Udit Gajiwala — Yes Securities — Analyst

Outlook for both the segments, building materials, we have been doing pretty well for some time now. But Agri, last two years have been [Indecipherable] ago. So given the increase in prices of Agri products, do you think the Agri demand might also revise in next year? Or — and how has been the demand for the month of April and starting first week of May? You can talk about on Agri particularly.

Sameer Gupta — Managing Director

So see, it was a conscious call that we focused more reading materials in last two years, okay? The portfolio, which we built the distribution network, which we expanded, this was targeted towards higher sales towards building material products, right? Agri as a conscious call because the margins were low and of course, because of increasing PVC prices, the overall demand was slightly low versus what demand we were seeing in the building material products. So these are pretty slow on every site.

And also the collection receivables which are always a bit on the tricky side when you were doing government projects — so I guess, I mean, as an overall broader strategy, I mean, we do believe that our brand has still a lot of scope to grow aggressively in the building material category. We have just started our ad campaign, which is giving us very good pull for our products from our distributors, our channel partners. And all the new products which we have added in the last two to three years, whether it is CPVC, whether it is fittings, whether it is water tanks, whether it is batten[Phonetic] fitting, I mean this will drive our building digital sales in a significant way over the next two years.

And agree, we have the capacity, right? Today, we have capacity of 125,000 tonnes, and we did around 53,000 tonnes in FY ’22. So we still have a lot of capacity for equity pipes. If demand is good, we can always push our volume, but not at the cost of margin, number one. And number two is the extended working capital cycle.

Udit Gajiwala — Yes Securities — Analyst

Sure. But Q1 is the business reason for it. So how has been the demand on Agri side during open

Sameer Gupta — Managing Director

Yes. So April has started on a good note because seasonally, it is the strongest quarter for Agri. So we are on track to achieve our targets in the Agri business based on the Q1 seasonality, the trends have been good. I think for benefit of everyone, what I can tell you is that, we are looking for a 30% revenue CAGR for the next three years, right, right from FY ’23 through FY ’25. And obviously, the more incremental sales will come from the building tail side. And if Agri sector does well for us, we could grow beyond 30% also.

Udit Gajiwala — Yes Securities — Analyst

And then secondly, on the margin side, last two, three quarters, we have seen that our margins have come in the range of around 11, 12, percentage. So — and during the same time, we have also seen significant volatility on the PVC side. So if you have to repeat it in a stable PVC size and margin, what kind of sustainable margins can we see in the company?

Sameer Gupta — Managing Director

So if you see over last four years, which we are proud to say that we have increased our market share from 1% to 2.5% today, okay? We used to be at EBITDA per tonne of INR9,500, right? If you look at FY ’18 numbers, we used to be at INR9,500 per tonne at EBITDA level. FY ’22, we closed at INR17,500 per tonne, okay? And even last year, FY ’21, we were at around INR15,000 per ton at EBITDA level.

So you will see that we have significantly improved our EBITDA per tonne, which I think should be the right metric in the industry to evaluate the margins because margins look deceptive because of the increase in the net selling price, which is due to the increase in the PVC resin prices, right? So — and it is all pass through, right? So what I would urge our investors, shareholders and analysts on the street[Phonetic] is that you should evaluate us at least for other RPs also on the EBITDA button level because it will give you the clear picture rather than on 11%, 12%.

But, that being said, I mean overall, we still maintain that when we say 30% revenue CAGR over the next three years, so whatever number you would come at, we should be around 13%, 14% at EBITDA level. And at EBITDA per tonne level, we should be at INR20,000 per tonne. So we are pretty much satisfied with our EBITDA per tonne performance.

Udit Gajiwala — Yes Securities — Analyst

And the 30% revenue growth that you guys are marketing, will this be largely driven by volume or product mix also moving towards seeing more CPVC and [Indecipherable]?

Sameer Gupta — Managing Director

It will be a mix of both because a lot of products we just added in the last two years, which has yet to scale up and all the incremental capacities which will come in the company that will be only towards value-added products. So our overall NSR because of the product mix improvement and the volume growth, should move in tandem.

Udit Gajiwala — Yes Securities — Analyst

And what kind of volume growth are you looking over the next three years?

Sameer Gupta — Managing Director

Yes, I think it — I mean, it is I mean, if I break it up into my current portfolio and the new capacity, which will come up. So I guess, I mean, 15% to 20% minimum volume growth we are looking at, and 10% should be the value growth, right? Irrespective of the increase in the resin prices. So our current business model does not factor in any like sharp increase in the PVC resin prices.

Udit Gajiwala — Yes Securities — Analyst

And what will drive this 10% — 10% to 12% — 10% to 15% kind of realization improvement?

Sameer Gupta — Managing Director

Because the products which are growing faster in the overall portfolio, they are anyways better realizable products, and they have better margins also. So like, for example, CPVC, which is growing at a very high rate for us, bathroom pertains, water tanks, all these categories are growing above 70%, 80% for us.

Udit Gajiwala — Yes Securities — Analyst

And just last question on the CPVC raising availability. So we have been hearing that the last year has been tough in terms of procuring it your raising. So how is the situation currently? And how are the case in this situation where the supply of a challenge?

Sameer Gupta — Managing Director

Regarding the surprise of CPVC resin, it is — right now, we have got contracts, long-term contracts with some of the players, and we are very much in company comfortable position in terms of supply of the product. We are getting regular supplies from our suppliers. And there is no such consent at our end. Of course, there is some legal challenges are there in the industry to procure. But as far as Apollo is concerned, we are very much comfortable in [Indecipherable] comparable.

Udit Gajiwala — Yes Securities — Analyst

So thank you, and wish you all the best.

Operator

[Operator Instructions] The next question is from the line of Anik Mittal from Invest Research.

Anik Mittal — Invest Research — Analyst

Sir, my first question is, what’s the portion of the fittings and CPVs particularly in our revenue mix for financial year ’22?

Sameer Gupta — Managing Director

So if you see, our fittings, the proportion will be around 15%.

Anik Mittal — Invest Research — Analyst

Okay. And what about the — this CPVCs?

Sameer Gupta — Managing Director

CPVCs, again, will be of the same range.

Anik Mittal — Invest Research — Analyst

15%?

Sameer Gupta — Managing Director

Yes.

Anik Mittal — Invest Research — Analyst

Right. Okay. And sir, can you tell the demand outlook for the next year? — for that product particularly the building side product?

Sameer Gupta — Managing Director

Yes. So we are pretty much confident of healthy growth because like I said, that we are targeting 30% revenue growth, which will be constituting of 15% to 20% volume growth and unrest value growth. So there are like two, three factors, which I’d like to highlight. One is that our southern and western plants and even the new put[Phonetic] plant, which we started last year. So they are ramping up quite well. We are expanding into new markets. We are adding new distributors, new channel points and even our retailer base is expanding.

Secondly, all the new products which we have added in the last two years, so their capacities are ramping up for CPVC for [Indecipherable], we may have to increase capacities because whatever we set up thinking our initial targets, we achieved those targets much in advance. So we may have to expand capacities there. Third, like I said, our brand campaign, which started starting on a very good note. We’re getting good response from our channel partners.

The — there is good motivation level in our sales team and in our channel partners backed by this campaign which we started. So overall — and housing demand, I mean, if you look at the other building material sectors, whatever companies have come up with the results so far and whatever commentary they have given. I think people are talking about like high single-digit or low double-digit growth at industry level at every building material product category. So I think if we are able to achieve a 10% growth in PVC space at the industry level for us to grow at 30%, shouldn’t be a challenge, which we have demonstrated in the last four years already. So we believe that this growth momentum should sustain going forward.

Anik Mittal — Invest Research — Analyst

Okay. Okay. Got it. And sir, my next question is what are the developments by our company towards this technology side for our product market in future. It’s like in the recent past also we are doing innovative products. Is there anything going on towards this innovative side for future also…

Sameer Gupta — Managing Director

See, I mean some of the addition keeps on happening, okay? Some ideas are already in our mind. But I guess for next one to two years, you will see what we will like to see is that the proportion, the contribution from marketing from water tanks and from CPVC category. The showed ramp up significantly, and these products will contribute maximum to our incremental sales. Beyond that, our focus is to keep on adding new SKUs within these product categories, okay? And yes, very soon, I mean, we may come up with something more value-added products also, but let us talk about when there is like time about it.

Anik Mittal — Invest Research — Analyst

Okay. Sir, actually, you mentioned that your EBITDA per ton will be somewhere around 20,000 in future. So is it — you are talking about next year or next to next year now two to three years ago this is the guidance for last year.

Sameer Gupta — Managing Director

Yes. So I think when we are saying that 30% volume CAGR over the next 3 years and from INR17,500 to 20,000 per tonne, that’s a fair journey we’re talking about.

Anik Mittal — Invest Research — Analyst

Okay. Okay. Means 20,000 EBITDA per tonne is for the next three years, you are saying?

Sameer Gupta — Managing Director

Yes, on the side. So that’s on a conservative approach. We are guiding this number to investors. And if demand is stronger than expected, if the brand pool, what we are expecting becomes better — so we could do better than this. But this is, I mean, a minimum that we should achieve over the next 3 years.

Anik Mittal — Invest Research — Analyst

Thank you…

Operator

[Operator instructions]. The next question is from the line of Kaushal Shah from Bank Securities.

Kaushal Shah — Bank Securities — Analyst

So I had a follow-up question to the previous participant. If I look at our historical, we have kind of doubled our volumes in the last five years. And now we’re talking about doubling our volumes more or less in the next three years. So just wanted some more color on that, which are the segments that we are targeting. And also maybe some thoughts on the CapEx over the next two to three years, which may be required. I mean, even — we may be is around 95,000 or maybe 100,000 tonnes of volume. But what kind of CapEx will be needed to ramp up the capacity. So some thoughts on that.

Sameer Gupta — Managing Director

Right. So just one clarification that we have doubled our revenue, not the volume, right? — guidance to more than double is also revenue in the next three years, not the volume, right? So 30% revenue CAGR we are talking about, right? So the driver — the key drivers for this aggressive growth are various, okay? So one is the product expansion, what we have done in the last two years, right? So those products will ramp up. We see — we see good demand for those products. We have already started marketing those products. The acceptance has been both from our clients, from our customers. And now as the production is ramping up, there is good volume which we are getting from these newer products, which we launched in the last two years.

Second, the distribution at the distribution side, the work our sales team has done is quite commendable, right? Today, we have 600, 700 direct channel partners and who are supplying our products to at least 25,000 retailers, okay? So the net addition, what we see over the next two, three years is, again, 10%. Obviously, the gross addition will be higher, but then we also rationalize our existing partners. So the net addition will be 10% year-on-year over the next three years. Then over the last two, three years, the below-the-line branding, what we have done, right, whether it is towards the in-shop branding, the — the lumber side, what the influencers there, right? So that has given us a very good platform to now launch our above-the-line brand campaign. So we started in November through social media.

We were waiting for that campaign to show some ROI, right? After seeing that for the last three, four months, only then we took a call now is the time to launch it on TV commercial, which is started on 2nd May, right? So the response garantie media was quite commendable, right? And that gave us confidence that, yes, now we should move towards the TV campaign also, which is much expensive — so we were trying to test waters and the results were positive. And then we moved ahead and launched TV commercial. It’s been only a week until today. But again, I mean, the response, whatever — the sound, what we are hearing is very encouraging. Then the capacity, which is lying with us at 125,000 tonnes. I mean if you look at the overall utilization rate, it is still 45%. But assuming that one can achieve 75%, 80% capacity utilization levels in TVCs, et cetera.

Still, there is like good 50%, 60% volume jump, which would happen from the existing facilities, right? So that ramp-up will start showing numbers in FY ’23 onwards. Now on previous the previous participant, we mentioned that our supply PVC supply has been at a very comfortable situation. Whatever is happening at a global level due to the supply chain disruption, but we have ensured that our plants are always well stopped with the PVC resin so that we never see shortage of PVC in to run our plants. Then we are getting good leverage from the overall group branding, which is APL Apollo. So over there, also, the growth has been quite high. And we definitely get the leverage in the building metal category when we talk about either steel tubes or PVC pipes.

So — and we have been very, very categorically cautious on our quality standards. So today, our products are in line with, I mean, top 5 players, if you look at the quality standards, right? So all the repeat customers, either from the trade channel or from whatever little OEM business we do, the feedback on our quality has also been very good. And whatever new plants we have started, we have ramped up, we have ensured that we are achieving higher quality standards every time. And we have also, lastly, I mean, before we move to the CapEx, the last point of like highlight is the improvement in the serviceability to our clients what we have done over the last one to two years. We have expanded our sales team in a big way who are servicing our distributors and we have improved our supply chain logistics also significantly.

We have bought new people, new talent in the operations also. So we are ensuring that the order fulfillment ratio has improved the servicing to the customer. Secondary sales also, we are — we have started doing a bit through our sales team. So all these factors have helped us to achieve whatever we have achieved in the last two, three years, and we are confident that this will continue over the next few years. Now coming to the CapEx. Like I said, today, we are at 45% utilization. So a lot of scope to improve levels, utilization levels from here. But if you see our last three, four years of growth phase, we have always spent INR40 crores, INR50 crores of CapEx every year. We were — we were a INR30 crore, INR40 crore EBITDA company.

Now we are a INR95 crore EBITDA company. So we are in much comparable situation to spend INR40 crores, INR50 crores on an annual basis, given that our operating cash flow to EBITDA is 60%, 65%. We will continue to spend this much of money to increase our capacity to do value addition capacity expansion and also try to innovate new products. So yes, I mean, going forward, INR40 crores, INR50 crores kind of EBITDA — -IN40cror5 crore kind of CapEx budget you can assume.

Anik Mittal — Invest Research — Analyst

And, just one follow-up to that. You spoke about 30% CAGR in revenues, that would mean roughly maybe type of number or maybe even more than that.

Unidentified Speaker —

So sorry to intro, can I request speak loud of lease?

Unidentified Speaker —

Yes. So am I audible now?

Unidentified Speaker —

Yes. Yes.

Anik Mittal — Invest Research — Analyst

Yes. So I was saying that at this 30% CAGR, we will be roughly doubling our numbers in the next three years. That will also mean a decent requirement for working capital. So any thoughts on that where we — where would we want to take the working capital days? Is there a chance that we could shrink the current numbers in the working capital?

Sameer Gupta — Managing Director

Yes, definitely. I mean, if you see, last year, we were at 55 days. FY ’21 have closed a slightly higher 60-day. But that is only because of a slight increase in the inventory levels. If you look at the collections and the creditors payables, I mean, they are pretty much in line. Inventory during end of financial year when you saw when you saw global supply chain getting disutid due to Ukraine Resale. So we were slightly cautious to stop some of the raw materials and not only PVC, but the other chemicals, additives, and the other kind of raw material as well. So that’s why it is looking slightly higher on the higher side. But yes, I mean, if you see — I mean, our target is to take our working aptly cycle below 50 days, right? — once things improve globally and at the supply chain level, we target to finish our net WC at 50 days in FY ’23 and then 45 days in FY ’24.

Unidentified Speaker —

Great…

Anik Mittal — Invest Research — Analyst

Best of luck

Operator

Next question is from the line of Aman Agarwal from Equirus Securities.

Aman Agarwal — Equirus Securities — Analyst

Ratio set of numbers. Sir, firstly, on the strategic CapEx, which was commissioned a few months ago, how are the actions we are witnessing for the central region from there? And secondly, are we also catering the instant market from that front?

Sameer Gupta — Managing Director

Yes. So, I mean that CapEx was done, keeping in mind two things. One was to penetrate in the Agri BeldoCentral India, which was NPS, and then to start selling in our Eastern markets towards building material side, right? So the total CapEx was completed in the month of March and April last year. So it’s been almost like 11, 12 months of operations we have seen. And we have targeted to ramp up this plant in the next two years. So the first 12 months performance has been as per expectations, right, and the results are encouraging. We have been able to add good distributors as well there, right? And with the help of our above-the-line campaign, Meda campaign, we are hopeful that even the two operations should yield results as peticaid lines.

Aman Agarwal — Equirus Securities — Analyst

Sure, sir. Sure. And sir, on CapEx that you mentioned that will be going in for CapEx for value-added products. So would it be predominantly in the northern region? Or you’ll be scattering into multiple plants or what’s the strategy over there for the upcoming dear?

Sameer Gupta — Managing Director

Right. So the maximum expansion you may see in our North facility for the value-added products. But because value-added product, the logistics, the freight doesn’t come into play significantly. So we will build the capacity at one place, but then it will feed all India, right? So one is there in second. That being said, we’ll also add capacity in our southern plant in Bangalore for the value-added products. But yes, a majority of capacity will come in north, but that will feed that brand will feed whole of India.

Aman Agarwal — Equirus Securities — Analyst

Okay. Okay. And sir, for the CapEx related to pipes, will — we won’t be seeing any CapEx related to pipes for a few years, I mean, for at least a couple of years until we ramp up the capacity utilization. You already mentioned that we are sitting at 45%, and one can go up to 70%, 75% factoring in seasonality. So apart from the value-added products, would we be seeing the capacity addition for price anytime to?

Sameer Gupta — Managing Director

Yes. So I can assume that 80%, 90% of our money will go towards non-pipe capacity addition.

Aman Agarwal — Equirus Securities — Analyst

Okay. Sure.Sir, lastly, on PVC resin procurement, how is the issue going on live right now for the imports versus leasing or PVC and 2, I guess, would largely be important, but for PVC?

Sameer Gupta — Managing Director

Yes. Regarding the raw materials, yes, we are still on the same line, we are precluding almost 70%, you can say from imports and 3% from medium sources. And of course, import is always cheaper as compared to the local sources. So we are trying to maintain the same Earlier, we were trying to increase the local bank, but. We are still on the same line of going from outside India.

Unidentified Speaker —

Sure.

Aman Agarwal — Equirus Securities — Analyst

So that’s it from my side. Thanks for that.

Operator

Participant mutation to ask a question. The next question is from the line of Hirotada from Cotogacin Management.

Hirotada — Cotogacin Management — Analyst

On good performance. My first question is, would it be possible to highlight what could be the overlap in terms of distribution between your marketing business and your?

Ajay Kumar Jain — Director

So the channel is same almost same.

Anubhav Gupta — Chief Strategy Officer

Okay.

Sameer Gupta — Managing Director

Again…

Hirotada — Cotogacin Management — Analyst

Understood. Secondly, in the last two years, the payable days have been coming down. So I mean it was only 60, 65 days, it has reduced about 30 to 35 days. Now that the raw material situation is likely to improve going forward. Do we expect trade payables for them go back to historical levels? Or this is where it should be maintained…

Sameer Gupta — Managing Director

So see, I mean, we have lowered our cycle credit payables from 34% to 26%, right? So I guess 26% to 30% should be the new normal going forward now that we are getting better terms as our scale is increasing, whether it is exports or domestic. And going forward, we are confident that it should remain between 25 to 30 days.

Hirotada — Cotogacin Management — Analyst

Okay. Lastly, in terms of working capital cycle, is the cycle significantly different between your South and non-South markets? I mean, is there a way to sort of optimize the working capital cycle in South and then simply your overall working capital base?

Sameer Gupta — Managing Director

I mean not being our stronger market, whether the terms we have with our distributors in the northern market. And second, since our mother plant is in the north, so the inventory stocking etc. Also becomes more efficient in our north plant. So if you compare Novartis South, yes, I mean, not should be slightly better. But I guess that should remain unless we make South as big as our note, which will take time. And also the brand pool, what we have in North, the market share, what we have in North, the domination what we have in not to have the same criteria in South, I mean, again, which would take time. So yes, I mean, overall, whatever numbers we are telling you they are on an overall basis. But yes, I mean North is slightly better than South.

Hirotada — Cotogacin Management — Analyst

And sorry, one last question. You mentioned very aggressive revenue growth over the next three years. And I would presume that would be primarily from your building material side. So any color in terms of how has been the channel addition in terms of non-agri distributors? Has it been increasing significantly as compared to your aggregate distributor?

Sameer Gupta — Managing Director

Yes. So if you see — I mean, our net addition, what we are targeting is 10% on a base of 600 distributors today and 25,000 retailers today. Going forward, again, the majority of this will be towards building material side. And given the products what we have, I mean, the question which you asked the bathroom fittings, the channel, right, for water tanks for bad fittings for CPVC for fitting solutions. So these are our revenue drivers part, right, for next three years. And the channel for all these products are same, which is — which has been our strategy there to create a platform such as from platform of distribution and marketing, right, and then to keep on adding newer products and routed for the same channel to increase our sales and get the higher wallet share from our customers, right?

So I think that strategy has played out well, and we do expect that it will continue to do so. And I agree, like I said, I mean, we have the capacity, right? We have the platform. We have the network also. Whenever we feel comfortable to push our sales down that channel, we will do. And whenever we think that margins are under pressure or the collection days under pressure, we may go slow there. So this 30% revenue growth is based on, I would say, mild growth in the Agri and good growth in the building materials side.

Hirotada — Cotogacin Management — Analyst

Thank you for the clarification and all the very best.

Operator

Thank you. Participants, you may press star and 1to ask a question. The next question is from the line of Udanchuwan from Rising Prices. Please go ahead.

Udan chuwan — Rising Prices — Analyst

Yes. Hello. Is it audible?

Operator

Yes, sir.

Udan chuwan — Rising Prices — Analyst

Yes. Just in main connection [inaudible] Yes. So congratulations on the good set of numbers. So I have like a couple of questions like management has mentioned about growth on your 30% CAGR for the next three years. But like what kind of ROC targets we are missing to end up in the three-year [inaudible] looking at around 60% as of FY ’22?

Sameer Gupta — Managing Director

Right. So see — I mean, if you see the ROC, I reported on a reported basis, it appears at 16.5%. But if you look at our business, ROC, okay, which is — I mean, core business ROC, if you just add debt and equity, so our ROC jumps to 20%, right? I mean, again, the other way to look is today, our gross block is around INR350 crores, and our working capital is INR150 crores. So the total capital employed is around — is below INR500 crores. And on this, we have generated almost INR100 crores EBITDA. And if you deduct INR15 crore, INR20 crore depreciation, that’s the ROC, right? But then we are already — we have already increased our capacity in a significant way, right? Today, we are at 45%, 50% utilization level. That’s why this appears low.

And when we are saying that we may add INR40 crores, INR50 crores of new capacity every year, and that will be towards value-added products. So the EBITDA margin — the EBITDA per tonne, which we are mentioning that also will go up. So I guess — I mean, our plan is by FY ’25, when we have — when we would have achieved 30% CAGR in revenue and EBITDA of INR20,000 per tonne, we should be at least having 30% ROC minimum. And in our business model, our business model is throwing that kind of ROC just that optically, it doesn’t appear, but the business is strong enough, we did 30% ROC. And over the next one to three years, we will see gradual jump. Which will give more confidence to the investors and analysts, that yes, we are capable of commiting 30% ROC at some level.

Udan chuwan — Rising Prices — Analyst

Rigth, and for clarification. And your second question, are you on the marketing expense. Now we have like on the — like you was a very good response on the social media campaign and now we move to the TV channel. So what kind of like marketing expense, we can see on the recurring basis as a percentage of revenue like any target like which we can to become more on like a national kind of like capturing national eyeballs on continuous basis?

Sameer Gupta — Managing Director

So yes, I mean, if you see, we started this campaign in FY ’22, hiring of the plan and vision and then making the access and then running it on social media. So that all happened in FY ’22. And the ad spends were around 1.5% of the revenue, right? Before that, it used to be around 1%. This year, FY ’23, we have launched a TV campaign. Maybe we’ll have 2 campaigns in these 12 months.

So again, we are thinking of not going beyond 2% of the revenue, right? So again, we have been like very, very efficient in using the ad budget, right, from 1% in FY ’21 to 2% in FY ’23 as a percentage of revenue. And within these two years, I mean, appointing a brand investor of a scale Bollywood celebrity than ongoing social media, then going on a campaign and then all the outdoor holding media, whatever we are doing.

So I guess this does demonstrate the use of budgets in an efficient manner. And of course, the increase in revenue has held as well, right? I mean, doing at INR500 crores, 1% and doing at INR1,200 crores at 2%. So increase in revenue has also helped us to keep this number at a very minimal level. So I guess, I mean, whatever we do, it shouldn’t move beyond 2% as a percentage of revenue in FY ’23. So that’s why we are confident of healthy margin improvement.

Udan chuwan — Rising Prices — Analyst

Thank you. And then lastly on the sales team side, like we have highlighted that some new [inaudible] were higher than we have been extending the distribution and dealer network. So we are currently around 450-odd [inaudible]. So how much we are looking to add like going ahead in the next few years to achieve the revenue growth of 30% on the ECR?

Sameer Gupta — Managing Director

If you look at our sales force, I mean, we used to be like 100 kind of sales force until last year and then last year as in FY ’21. And then in FY ’22, we increased this number 250, right? And the revenue growth target that we have. I think with 200 sales — a team of 200 salespeople, we should have enough people on ground to give us this kind of growth targets.

Udan chuwan — Rising Prices — Analyst

And on the dealer addition side, like how much we are planning to add incrementally or like on a year-over-year basis on any target from 452.

Sameer Gupta — Managing Director

Yes. So we are at 600 today. The direct channel partners, not 450. We’re at 600 and 25 [inaudible] right? So the net addition will be 10% year-on-year.

Udan chuwan — Rising Prices — Analyst

Right. Yes. Thank you for the clarification and best of luck, thank you.

Operator

Thank you. Next question is from the line of Jisha from Baroda BNP Paribas. Please go ahead.

Udan chuwan — Rising Prices — Analyst

Thank you for the opportunity. My question is what would be our non-pipe revenue for the year FY ’22? And what would be the target going forward?

Sameer Gupta — Managing Director

So I think non-pipe, you will want to include the fittings and tanks, right?

Jisha — Baroda BNP Paribaa — Analyst

Yes.

Sameer Gupta — Managing Director

Yes. So I think put together, that should around — that should be around 18%, 19%.

Jisha — Baroda BNP Paribaa — Analyst

So fittings would be around 15%, right?

Sameer Gupta — Managing Director

Yes, that’s right. 15% fitting and 4%, 5% of the products, yes.

Jisha — Baroda BNP Paribaa — Analyst

And this 15% to 20% volume guidance is including fittings or non-fittings?

Sameer Gupta — Managing Director

No. So I mean we’re talking at company level, right? So I mean —

Jisha — Baroda BNP Paribaa — Analyst

Yes.

Sameer Gupta — Managing Director

See, I mean, if you have to break it up into sales volume and value, that’s how it will become 20% volume and 10% value, right? But if we see a quick ramp-up in our value-added products, so probably the volume growth could be less, but the valuable could be high, right? So I think that we’ll see how our products are doing in which category and which market. But yes, I mean, as a thumb rule, you can take 20% volume growth and 10% value growth.

Jisha — Baroda BNP Paribaa — Analyst

I’m wondering because your volume growth and value growth is quite high. So I’m wondering and what is the non-pipe revenue for that? How would you archive 30% revenue?

Sameer Gupta — Managing Director

See the last year figure. Actually, we have very much aggressive on the value-added products, and we have received very good response from these products and the volume growth in these forces almost easy 50% to 60%. So that’s why you are seeing a value growth much higher as compared to the volume growth

Jisha — Baroda BNP Paribaa — Analyst

.So are value-added products would be how much mix?

Sameer Gupta — Managing Director

Value-added towards, including pipes, it should be roughly around 50% to [inaudible] being exclude the pipe, it is again back to 20% to 25% of the total revenue. So regarded, it’s same. Now that I mean the building material products, which are value-added products, so that is 50%, right? And agri is like non-value-added. So more or less, the math remain same.

Jisha — Baroda BNP Paribaa — Analyst

So HDB won’t be value-added, right? SDB would still have a lower margin – [Indecipherable]?

Sameer Gupta — Managing Director

Yes, the margins are very much normal in that. Of course, the revenues because of the uneven mission, we have good response from this product. But the — but that is — you cannot count that as a value added. It is much more a [Indecipherable] product, government to supply product — So — And just to give more clarification, Jigar, I mean the value-added products are the fittings, right? CPVC? Marketing and tanks, right? So Fittings, we have seen 40%, 50% growth, right, in terms of revenue. Bask fittings, of course, they started last year. So growth has been very high. Tanks also have grown at very high pace because of obviously the low base.

And similarly, CPVC. That also is growing at almost 89% for us, right? And these are the areas where we want to expand capacities now, right? So that’s why we are focusing more on the overall revenue growth rather than giving you a volume growth target. And like I said, if the ramp-up is better than expected at revenue level, we could be higher than 30% also.

Jisha — Baroda BNP Paribaa — Analyst

Understood. And my second question would be on your margin impact during the year if your marketing expense and brand campaigning is there, so will there be any impact on that?

Sameer Gupta — Managing Director

Yes, not really because, I mean even see last year also, if you see our brand spend increased from below 1% to 1.5%, but our EBITDA per tonne improved from INR15,000 to INR17,000, right? So — and this is without any inventory gains. I mean I’m saying this on record. This EBITDA per tonne does not contain any inventory gain or loss, okay? So again, we have demonstrated that improving our ad spend — increasing our ad spends shouldn’t impact our EBITDA on absolute basis or portent basis. And going forward also, we are factoring in 50 bps increase in the ad spends at 2% of revenue. We are confident that the FY ’23 EBITDA per tonne should be 22.

Operator

[Operator Instructions]. The next question is from the line of Aditi Kasbekar, Individual Investor.

Aditi Kasbekar — Private Investor — Analyst

Am I audible?

Operator

Yes, ma’am, you are.

Aditi Kasbekar — Private Investor — Analyst

Actually, my question was just to clear a little bit of confusion around, what is the value-added part of the business? And how do you split it between fitting, times[Phonetic] and CPVC pipes? So I’m sorry, this is being a little repetitive. But the way I understand it is 15% is sitting, 45% of time[Phonetic] and another 15% is CPVC pipe. Is it?

Sameer Gupta — Managing Director

And plus, yes, broadly, you’re right. And plus in UPVC pipes that divided into Agri and building materials. So building material is value-added.

Aditi Kasbekar — Private Investor — Analyst

Okay. And how does that then relate to our EBITDA per tonne? Because typically, I mean, from the looks of it, at least, the value-added component is high enough. So does that still mean — I mean, 17,000 per tonne is a little load in that case, isn’t it? I mean, am I missing something? I just want to sort of clarify my doubt there.

Sameer Gupta — Managing Director

Yes. So EBITDA pattern varies from, I mean, 11,000, 12,000 tonnes to INR25,000 per tonne.

Aditi Kasbekar — Private Investor — Analyst

That’s correct. That’s correct. So then what we are effectively saying is that, as the share of our fitting when time goes up, we will have a better EBITDA per ton. Is it because what you’re effectively saying is that entire pipes you’re putting under one category and the riding between Building and Agri?

Sameer Gupta — Managing Director

Yes. So the pipe is in two categories, which is Agri and Building Materials, right? HDB pipe is all agricultural and [Indecipherable], marketing[Phonetic] [Indecipherable], they are all building materials.

Aditi Kasbekar — Private Investor — Analyst

Okay. Okay. Understood. Okay.

Operator

Next question is from the line of Varun Jain from Edelweiss Financial Service.

Varun Jain — Edelweiss Financial Service — Analyst

Yes. Just wanted to ask, am I audible?

Sameer Gupta — Managing Director

Yes, go ahead.

Varun Jain — Edelweiss Financial Service — Analyst

Yes. So I just wanted to ask the CapEx number, which you have guided in this, what is the proportion of maintenance CapEx? And what is the growth CapEx? And what will be this proportion going forward also?

Sameer Gupta — Managing Director

Maintenance will be 20%, 25% and 25% will be growth CapEx.

Varun Jain — Edelweiss Financial Service — Analyst

Okay sir. Thank you.

Operator

[Operator Instructions] The next question is from the line of Manish Mahawar from Antique Stock Broking.

Manish Mahawar — Antique Stock Broking — Analyst

Just first question is in terms of device mix, [Indecipherable], can you share the Northeast West South mix revenue in – [Indecipherable] —

Sameer Gupta — Managing Director

So Manish, North will be 60%, 70% and rest will be divided among the equal zones.

Manish Mahawar — Antique Stock Broking — Analyst

And can it possible to share basically how the growth in bus in terms of North, I now busy or larger, right? So I wanted to understand the overall growth if you look at, can you break it up how the North has grown and the rest of the geographies has grown in the FY ’22?

Sameer Gupta — Managing Director

So if you see, I mean, we have grown at 50%, right, at company level. So North will be like 20%, 30%, 30%, 35% north and the other states because South, we got the plant 18 months ago. So in East, we started the production 12 months ago. And Endava[Phonetic], also, the Weston[Phonetic] also started contributing in a big way in the last 12 months. So I guess, I mean, all the three zones, which are relatively new. So they are growing much faster, right, like maybe 100%, some of the markets. And North with higher base should be 30%, 35%.

Manish Mahawar — Antique Stock Broking — Analyst

Okay. And in terms of a dealer or retailer, right, is the ratio will remain same as a revenue?

Sameer Gupta — Managing Director

That’s right.

Manish Mahawar — Antique Stock Broking — Analyst

Okay. And in terms of pay for this quarter, other expense is quite high. So what was the — is there any one-off or some — any other item which is just lying to the other expenditure in the quarter?

Sameer Gupta — Managing Director

Can you please repeat?

Manish Mahawar — Antique Stock Broking — Analyst

If you look at the fourth quarter other expenditure, right, it is quite high this price, it is around INR25-odd crores versus last year, almost INR12 or INR3 crores. Is there any one-off item or any incremental item lying into the number?

Sameer Gupta — Managing Director

So there are two things. One is the ad spend and second is because of the increase in the freight and our expenses.

Manish Mahawar — Antique Stock Broking — Analyst

Okay. And last question, in terms of the overall volumes, if you look at for the year, right, we have grown — we have grown broadly on 14%, 15%. Can you — can you highlight what is the Agri business growth and the non-agri growth in terms of volume?

Sameer Gupta — Managing Director

So Agri would have been like below 5%, right? And whatever growth you are seeing is from building material.

Manish Mahawar — Antique Stock Broking — Analyst

Okay. Understood. Okay. That’s from my side.

Sameer Gupta — Managing Director

Thanks.

Operator

Thank you. Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments.

Sameer Gupta — Managing Director

Yes. Thank you, everyone. I hope we have been able to answer all your questions satisfactorily. Should you need any clarifications or would like to know more about the company, please feel free to contact our team. Thank you once again for taking the time to join us on this call.

Operator

[Operator Closing Remarks]