AVRO India Limited (AVROIND) Q2 FY23 Earnings Concall Transcript

AVRO India Limited (NSE:AVROIND) Q2 FY23 Earnings Concall dated Aug. 09, 2022

Corporate Participants:

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Analysts:

Vastupal Shah — Kirin Advisors Private Limited — Analyst

Sandeep Mane — Individual Investor — Analyst

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Avinash Gorak — Profitmart — Analyst

Kuber Chauhan — IDBI Capital — Analyst

Devang Baldeja — Individual Investor — Analyst

Apurva Mehta — Retail Investor — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen. Welcome to the Q1 FY ’23 Results Conference Call of Avro India Limited hosted by Kirin Advisors Private Limited. [Operator Instructions]. Please note that this conference is being recorded.

I now hand the conference over to Mr. Vastupal Shah from Kirin Advisors Private Limited. Thank you, and over to you, sir.

Vastupal Shah — Kirin Advisors Private Limited — Analyst

Thank you. Good morning, everyone. I would like to welcome Mr. Sushil Kumar Aggarwal, Chairman of Avro India Limited, who will give you a brief about the Q1 FY ’23 results and quarter development. Sushil sir, over to you, sir.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Thank you very much, Vastu, and hello, everyone, and good morning. I trust all of you are in an absolutely fantastic great health. I welcome you all for the first quarter FY ’23 conference con call. Avro India Limited is one of the largest manufacturers of quality molded plastic furniture in Northern India and amongst the top five brands in the country. The product portfolio of the Company includes household and office ware molded furniture, chairs, tables, stools, almirah and various products of this kind. The products of the Company are mainly known for its quality and durability along with the long-term guarantee. We are the only company to offer three-year guarantee on lots of our products. This has propelled the growth of its two established brands, Avro and Avon.

The Company has one of the largest product range with more than 100 SKUs and strong sales distribution system to 20,000 retail outlets across India, its online presence on Flipkart, Amazon, Flipkart, Amazon, Snapdeal, Pepperfry, IndiaMart, Meesho, Jio, etc. And I think we are probably the largest on Amazon or Flipkart put together in terms of the sales. So quarter of the Company has expanded its offline distribution to pan India basis and we are progressing today and moving towards pan India in terms of, let’s say, right from reaching to Bangalore to Kerala to Bhuj to Guwahati to Kashmir to Assam. Everywhere, we are reaching out, so your company is keen on business growth and expansion. The company is looking to expand its product portfolio by introducing new furniture mold in the current year. We have already got three molds this year. We’re getting another four molds by this FY ’23 itself. And we will continue to get such molds, which means we take the product leadership by introducing latest new designs and that’s how we are probably different in the industry.

It is also evaluating the outsourcing opportunity to expand business product portfolio and regional presence. The new product we launched almirah — steel almirah, revolving chairs of various kinds, imported furniture, which are imported from China and that kind of thing and even mattresses for that matter because we have the existing infrastructure we can piggyback on the online and offline distribution model that we already have and the same distributors sell all these products and they keep them and they have been asking for quite some time Mr. Aggarwal to please give us these products also because it helps them to get everything sourced from one single source. So, we’re trying to do that and we will keep you posted about the new launches from time to time.

We are among the five leading companies with molded furniture in India market. We’re equally focused on environment safety in this regard. As I mentioned in my Q4 FY ’22 con call, we are setting up a recycling unit to produce granules from post-consumer and post-industrial plastics. It is estimated that each use of kilo of the regenerated plastic leads to a saving of 2.5 kg of greenhouse gases emissions, which contributes towards climate change. The Company is supporting circular economy by creating sustainable business model by collection upcycling and making final products of HDPE, LDPE and PP plastics, which are some of the highest used plastic in India for self-consumption and commercial sales. It is estimated that these three items themselves constitute about 66% of the use of plastic across globe and especially in India.

So, we have a huge, let’s say availability of such for such products. The Company by using in-house innovation has started using post-consumer industrial plastic and has already crossed more than 300 metric ton of regenerated polymer manufacturing by outsourcing in the first quarter of financial year 2022-’23, which it will gradually scale up to — we will scale up to 500 metric tons per month in FY 2023 and thereafter further also.

The plan is to meet major annual requirement of polymer during FY ’22-’23 and beyond by regeneration and upcycling. This is our step in making Avro India a green company and something, which is compliant in terms of ESG. Recycled granules are 30% cheaper per kilo contributing to significant cost saving and improvement in profits and that will rise on the basis of consumption, which is estimated to be 70% of entire production of Avro as we go along. Hence, production is being scaled up for upcycling, so we’re in the process of building the capacity. So, that 70% of our consumption can be in-house produced.

So, let me take you through the financial performance of the Company. For Q1 FY ’23, revenues reported are at 67.3% growth to INR20.31 crores. EBITDA came at INR2.17 crore as against just INR9 lakh in corresponding year and which happened due to COVID those days. EBITDA margin improved substantially to 10.68%. Net profit was INR1.04 crores as against net loss of INR36 lakhs and net profit margin was 5.12%.

So, now I open the floor for Q&A. Please go ahead. Thank you very much.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions]. The first question is from the line of Sandeep Mane, an individual investor. Please go ahead.

Sandeep Mane — Individual Investor — Analyst

Hello.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yes. Good morning, Mr. Sandeep.

Sandeep Mane — Individual Investor — Analyst

Yeah, good morning. Good morning. Sir, I wanted to just tell you, what is the return of ROE and return on equity, ROE?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yeah. Equity, Sandeep. I think I can say that we are having an EPS of about INR1.03 for this quarter one. So, possibly I can get this data to you. I am extremely sorry. Right now, I don’t have it in front of me.

Sandeep Mane — Individual Investor — Analyst

No. My second question is, how much is debt-to-equity ratio?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Debt to equity, we are — I think that is very low, as I know it’s about — that’s — a long-term debt is about INR1.5 crores and we have certainly limits. So I would say that it is less than 0.8% of debt to equity. And how much company’s inventory turnover ratio and sales growth? Inventory turnover ratio is pretty high. We have more than 24 times in terms of inventory and second question you asked was turnover?

Sandeep Mane — Individual Investor — Analyst

Sales growth, sir.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Sales growth? Sales growth, of course, we have some amount of sales growth from the, let’s say, last quarter, which was INR18.3 crores, to INR20.24 crores and these — normally these first and second quarter are a little subdued because what happens, there are no festivals etc., but I believe Q3 and Q4 onwards, the traction picks up and even otherwise the economy is opening up in the entire country and probably the scare of COVID has gone, the commodity prices are smoothening up. So, we believe and assume that this year will be a little different and stellar year than what we had been posting in the previous years.

Sandeep Mane — Individual Investor — Analyst

Okay. Sir, which will be your best quarter?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Q3 and Q4 will be the best because that is the festive time where the uptake picks up dramatically. And even otherwise, what is happening is two things. Very good things that are happening is Mr. Sandeep that number one, we are expanding our footprint across country. We are already — we are in the, let’s say, process of acquiring about 50 odd distributors across country, of which about 10 have already been onboarded and 40 are likely to go onboarded in the next two to three months. So, that is one thing that we will have an advantage. Plus, as I said, because recycling or upcycling that we have been doing is doing great and we have gone through the entire nitty-gritties and we’re in the process of setting up a brand new plant for this so whereby we assume that once we start this entire thing, it’s 500 metric ton going up to about 1,000 tons per month, we are assuming that if a bottom line will grow substantially, so these two good things will happen that will get reflected in Q3 and Q4.

Sandeep Mane — Individual Investor — Analyst

Okay. What kind of sort of demand you should see from next three quarters?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

What kind of? What kind of demand you should see from next three quarters? It will become very, very good, Mr. Sandeep, because for reason as I’ve said, we will be also very aggressive on the pricing because since we have a deep pockets in terms of bottom line growth because of the 30% cost and reduction of the raw material that we will be consuming or will be manufacturing that will give us the leverage to actually become very predatory pricing or aggressive in terms of market. So, once we are able to do that because we have a huge product range, I’ve been in resistance for 20 years in this industry. I’m also National President of Furniture Manufacturers Association, so across India I know who all are sitting, what is their strength, how far they can go because there are a lot of regional specific players. So, what is happening is in the periphery of 300 km, 500 km that they offer it in, they do not want to venture out, but probably we are one of the rare companies, which has now taken a big leap and right from Kashmir to Kanyakumari, we are reaching out Bhuj to Assam Guwahati, we are reaching out to almost every sector of the country. And by doing so, we believe that not only the demand that persisted that continued that we had from our existing customers, these new customers that we’re onboarding should bring in additional sales volume, which is the virgin territory, which had not been explored in the past. So, that should really give us a great amount of push.

Sandeep Mane — Individual Investor — Analyst

Sir, one more question. Yeah. As you think about recycling, when we can expect the same to start?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Sorry, you said what we expect out of recycling?

Sandeep Mane — Individual Investor — Analyst

Yeah, yeah. No, I would not say it recycling, it’s an upcycle, I will not call it recycling. I will start calling it upcycling because we’re regenerating polymer and that will help the company to bolster not only in terms of Eco savings that we’re talking about, but in terms of profitability also and another best part, Mr. Sandeep, here is that because the Indian market is pretty wide and huge, 6 million tons of plastics is available. Not many people have the scientific way of producing and manufacturing that, but we are following the entire norms of the ETP as well as the pollution control boards, etc., creating a green economy and not only we will be consuming, but we will also be able to sell this kind of product to other companies. We are actually in the same domain and same 40 are manufacturing similar product range at a reasonable price so that they can buy from us. That is one sector that we’re looking at. Plus, we are also looking at also servicing the domestic and MNC companies we’re looking for EPR benefit because come what may as per the government guidelines, extended producer responsibility that they have the onus is on them to procure 100% of the plastic that they consume, it could be Dabur, it could be ITC, it could be anybody for that matter. In the three years, they have to procure in recycling. Now, unfortunately, they do not have many people who can offer them that quality product and they are forced to pay penalties on that. So, we have a great opportunity in terms of not only doing self consumption. Turning to some companies or companies of similar nature that we are into and also be able to service the EPR companies for their requirement. So, we see a great opportunity coming from that standpoint of view. Okay. Sir, one another, when production will start and what will the capex be?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Right now, what we’re doing, Mr. Sandeep, is that whatever capex is required, we are doing it through internal accrual with a settlement debt exposure, which we have an access in the bank because we’re a little low on the debt. Long-term debt is only INR1.5 crores. And we — our bankers are very more than happy to extend this wherever necessary. So this capex will go into manufacturing, this backward, which is the integrated process that we’re talking upcycling, we’ll do that. We already are in the &D let’s say forward in terms of the product category and SKUs that we are increasing. As I said, we are in the leadership and running position because right now, the amount of more than design that I’m introducing this average introducing, not many companies in the country are introducing which might be large or small also. So, that is giving us an edge.

So, what is happening is we are firing up all cylinders on both these fronts right from the forward integration in terms of the product enhancements as well the backward integration. So, this should certainly give us an edge and we believe that the entire result, FY ’23 and FY ’24. We will see a very different company altogether.

Sandeep Mane — Individual Investor — Analyst

Okay. Okay. Thank you, sir.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Thank you, Mr. Sandeep.

Sandeep Mane — Individual Investor — Analyst

Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Nilesh Karani from Magnum Equity Broking Limited. Please go ahead.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Yeah. Good morning. Am I audible?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Very good morning, Mr. Nilesh. You are audible, sir.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Yeah. Thank you, sir. Sir, only this — I mean my question is on upcycle, this thing recycling upcycle. Basically, sir, what you see down the line if I talk about 2023 FY. So, probably how much percentage would be our recycle business, like upcycle business?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yes, Mr. Nilesh. As I’ve said, whatever consumption we do, we are expecting and assuming that we will scale it up to 70% of self-consumption and self-production, which we should be able to do that. So, we are looking forward to that to meet our first our own personal demand, company’s demand and mitigate the costs. That is one thing. And then once we are able to scale it up further, as I was just telling Mr. Sandeep, on the basis, the capex that we are investing, so that we will be able to also sell to other companies also. So, we are looking forward to this.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

And sir, basically now furniture in our UP market, we have a strong hold, but rest of India, how we are going, can you just elaborate on that?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Incidentally, Mr. Nilesh, it’s a good thing that you asked. We are one company with more than 28 designs registered with us, which is very rare in the entire Indian continent for that matter because not many companies actually pay attention to designing. But we do a lot of designing ourselves and that is how we have these [Indecipherable] Government of India, now by the virtue of that, the product exclusivity that we have, none of these other companies have. So, wherever we go, we get that huge welcome reception, let’s say, for example, Mumbai, where we have a distributor now, we are setting up in Mumbai again. We have started selling in Kerala. We started in Bangalore. We are in Metro AG stores across India and everywhere, consumers are lapping up our products, and it’s a B2B model. So, in the B2B space also, we are getting great response. So, I believe that because of the product leadership and the design capability that we have and very interesting, I wanted to share this. probably I forgot to share that we are almost 40% cheaper than national brands. You can go online and check everything on Flipkart and Amazon. We are the only company probably, which has got the highest ranking and rating in the product category of all kinds of product category on Amazon or Flipkart at this point.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

So, sir. Again, I’ll come to that same question, like see for example, now how much percentage of our market right now and rest of India is how much percentage? Can you just…

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yeah, right now, we are doing about 70% in Uttar Pradesh because that’s our domestic home market and we are absolutely embedded in this market for past two decades. And 30% came from other states in Northern India, right, from Delhi, Haryana, Punjab, Himachal, J&K, Uttarakhand, Rajasthan, etc. Now, we’re expanding more into Gujarat as well as Madhya Pradesh, Bihar, Chhattisgarh, even Odisha and Jharkhand. Plus, we are also going towards Southern India in terms of the other states, Maharashtra including. So, we believe that over a period time, my assumption is that 50% will be Uttar Pradesh or let’s say UP home market and 50% should come from other areas.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Okay. And sir, as we discussed in the last con call, basically you were planning to set up something in South, correct? Another factory or some warehousing type. So, the trends are — how it is going on?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yeah, yeah, that’s absolutely true, Mr. Nilesh. Number one, we are not planning to set up factory as such right now, but in the first half, we will certainly set up warehouses facilities wherever necessary to reach out to consumers. For example, today, on Flipkart and Amazon, our major buyers are from South India. So, it has been requested by these companies, why don’t we set up a warehouse. We said, all right. Let that traction take place because right now we’re selling more than INR10 crores worth of plastic furniture online and we believe that over a period of time, on the basis of the increase in the sales volume, etc., we should be able to set up warehouses wherever necessary to facilitate and make it easy to reach out to consumer very, very fast, which we’re anyway doing at this point in time also. But that would certainly be — certainly benefit our small retailers as well as distributors who can take small consignments from us, which we are in the process of setting up over a period of time.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Okay. So, can you elaborate on any time frame, like how much time it will take to…

Sushil Kumar Aggarwal — Chairman and Whole Time Director

It’s demand driven, Mr. Nilesh. We are very much open. Let’s say if it comes to warehouses or collection centers, etc., across India, it is absolutely easy and fine for us to do so. At some point, we were contemplating that we can set it up in Jaipur, Ludhiana, Ahmedabad, etc., or Bhopal. Then, we started realizing that there is no point in setting up there because these people are buying entire material on a truckload basis. They do not want small consignment. So, if at all, even if we gave a storage house and they do not want to buy material from there, it will become useless activity. Instead of that, we will set up this particular facility where we believe that we can get it very fast. So, we’re in the process of evaluating that as and when it happens wherever demand comes in, we already have GST registration in Bangalore, we also have in Rajasthan and a couple of other places. We are in the process of doing that and we’ll continue to do that — ramp it up as much as possible.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Okay, sir. If I ask you — see this is a little bit data point question, but if I ask you, if you put together your upcycle business in ’23 and your existing business, so what kind of growth we are looking?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Sorry. Yeah, — What’s your question in that?

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Sir, if we look at our upcycle business and our existing business, which is growing. Okay. So, total like how do you see your ’23 panning out, like what would be our — roughly what would be… Mr. Nilesh, first and foremost, let’s say, furniture we assume and believe, we have been growing at a rate of about 20%, 25% or so, but I will certainly modify that figure and take it to about 40% is what we assuming. Number one, in terms of the product growth or the sales of the product is concerned. And while we’re doing that, because of this upcycling that we are doing, it will actually be for self-consumption initially, but we will also be able to sell that. So while, what we are doing is in this first phase, we are setting up a project for 1,000 tons, but in the second phase, once we were able to be a little comfortable in terms of cash flow, etc., and and we are able to manage our funds to a certain extent, we will set up a greenfield plant, which will exclusively manufacture upcycling products and that should be a little larger project. So, then, you should be able to see the benefits accruing out of that sales in FY’24. Okay. Okay. So, basically if I say blended margins will go up by nearly 30%, 40% in ’23 and probably more than that in ’24?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

I will not directly relate and say, because the cost of raw materials is going down by 30% that we should be able to do that because progressively as and when you progress to manufacture and increase the volume, it will certainly help us and benefit a lot. But direct benefit of 30% on the entire sales may not be there, because 30% we are anyway going to source from outside sources and besides, once we are ready trying to scale it up, there’ll will be certain amount of direct and indirect expenses that will get entailed, but nevertheless, possibly the results will be much better and different than what we have been posting these days.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Okay. And one more question is, sir, regarding crude, basically, if the crude is probably coming down to 80 level or 75 level and settling there around, can we see our profitability going higher?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Can we see, sorry, I missed your…

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Sorry, sir. Can you see our profitability coming [Speech Overlap].

Sushil Kumar Aggarwal — Chairman and Whole Time Director

70, 80 level crude. Yes. Next is?

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Yeah, so it will impact our profitability, correct? We will have more margins on profitability side, correct?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Correct. Yeah. Incidentally, you’re absolutely right. You know what happens, when the crude goes down, naturally the polymer prices in the virgin territory also goes down. Similarly, the, let’s say the post-consumer post-industrial also goes down to that extent, but not great. Let’s say if the virgin plastic is going down by INR1, this will be about INR0.50 because it doesn’t directly impact and same, when it goes up also, it doesn’t impact us much. Let’s say if it is a INR20 rising — increase in the prices of virgin polymer, in the upcycling, it’ll be about INR10 only, not even INR10, INR7 or INR8 only. So, that is benefit and beauty we get and very interestingly, Mr. Nilesh, I’d like to share that because people do not have scientific manufacturing facility, they are unable to procure and use that material, which is abundantly available across India for a very, very low price.

And interestingly, not many people who are actually doing upcycling are able to meet that particular criteria, from the standpoint of whatever shoddy or the shady way that they’re doing is not the right way because today PMO and Honorable Government of India is promoting this recycling and upcycling in a very, very big way. So, it’s a big time for us to take a big leap of faith. And we have already done that.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Thank you for — that’s it from our side. Thank you so much, sir.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Thank you, Mr. Nilesh.

Operator

Thank you. The next question is from the line of Avinash Gorak from Profitmart [Phonetic]. Please go ahead.

Avinash Gorak — Profitmart — Analyst

Yeah. Good morning, everybody, and congratulations for a very good set of numbers. I have two questions. One is, can you tell us what has been the improvement in the working capital cycle? No, because, this business is largely working capital intensive. So, going forward in the coming financial year, do you expect some sort of reasonable working capital kind of reduction so that that would add to your operating cash flows? And secondly, in terms of the new products, any new products the Company is planning to launch, some new designs or maybe some new product categories, if you could give us some color on that.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Right. Fantastic question, Mr. Avinash. Thank you much for this. When it comes to working capital cycle, actually last year we extended a lot of credits to our buyers just because they were going through a huge COVID challenge and now in this year we’ll do consolidation and that cycles should come down, so I believe that debtors would certainly be brought into that, let’s say, reasonable level that we were actually operating in earlier, that is one thing. Besides, the additional cash flow that we will generate will help us in mitigating if at all, there is — any capital need comes in, we’ll be able to take care of that. That will suffice and when it comes to new products, yes, I just said, we already introduced three molds this year. We are in the process of introducing the four molds that I’m talking about are almost ready and on the way. So, this year we will be able to do not only that, as we were just mentioning that revolving chairs is one thing, which we are looking forward to, we have already started, let’s say, sourcing plus certain number of trials are happening and we believe there by Q3 or Q4, that should see a certain amount of sales growth happening from that area, plus steel almirah, we have already been doing in a cold start, but now this will become a little hot on that. We will start amplifying that business model. We are also looking at mattresses because mattress is a reasonably big size market today, but we were not actually — we do not want to manufacture it, but we will get it branded in own company brand and start selling through offline and online. So, these are a couple of changes that we are looking forward to in terms of the product expansion, in terms of the market distribution expansion and upcycling also. These three areas we’re looking at.

Avinash Gorak — Profitmart — Analyst

So, I think I just wanted one more clarification. The mattress products will be outsourced, right? It will not be manufactured by the Company.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Absolutely, absolutely.

Avinash Gorak — Profitmart — Analyst

So, hopefully, when can we expect this business — this product to be launched in the market? I mean, can we expect, let’s say, after the financial year, second half of FY ’23 or all these products which you mentioned would come and reflect in revenue numbers in FY ’24? If you could just give us some idea.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

I think FY’24 should be a very safe to say so, because what happens, we become aspirational and it is absolutely nothing wrong in being aspirational, but sometimes things don’t go the way we wanted. There are many people who are already more than happy and willing to partner with us and give us the product, but nevertheless we are scouting for the best one. We are also looking at the right time opportunity in terms of reaching out and probably expanding or maybe start with distribution of the product category and we are also on lookout for certain of resources in terms of manpower or certain deployment so that we can actually effectively do that. We do not want to do a start where we’re not reaching or they’re not able to scale up. So, we’re in the process of evaluating and because we are a little tight in terms of — because the distribution being expanded, the upcycling is happening, so entire team seems to be reasonably busy, but certainly we will take it up to the next level. The moment we are able to one by one complete all these projects and aspiration, we will certainly take it forward.

Avinash Gorak — Profitmart — Analyst

One last question, you mentioned a lot about upcycling, which is basically more refined for recycling. Any one thing for doing this upcycling, do you require any kind of specific technology or that has been developed in-house by the Company, you said that the quality of the product, which finally comes out matters a lot. So, up cycling is definitely got to do with a lot of precision and quality. So, for the technology part, does it involve some basic technology or is it a very simple process to recycle, I mean upcycle and actually use the polymer…

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Certainly, sir, it’s a very simple process also, that is the one way — right way to say so. But it also has settled on the nitty-gritties. You know what happens? Just converting post-industrial consumer — post-industrial waste of plastic into pallets of granule is the most easy job to do so, but post-consumer, to take that and to segregate and also do a washing as well as treating that particular product to make it, let’s say usable for non-food products are in the furniture category without compromising the quality or the color or strength is the biggest challenge and that is where our expertise comes in, because in the two decades of our experience in this line of activity, we understand this recipe reasonably well. We know what is it that needs to be mixed or what is it that needs to be fixed in terms of creating a product quality, which does not compromise the customer’s aspiration and maybe over a period time when we are going forward in terms of online and offline, we can’t be saying there is a certain return or reverse in terms of the growth that we’re looking at. So, we are very cautious, we are conscious and we are now building the technology in terms of, let’s say, we are deploying a fantastic digital technology to ensure that the value stream or the entire chain of this like upcycling is mapped beautifully well and we are also in the process of acquiring technology, which would have a blockchain probably right from the waste product, let’s just source till the time disposal where and how would this has happened. So, in the process of doing that. So, the idea here will be when we deploy these kind of process and technology, we will be definitely far ahead of others. We are built to not only sustainability, we are able to scale it up also.

Avinash Gorak — Profitmart — Analyst

Okay. I thank you very much. And all the best for you in your…

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Thank you, Mr. Avinash.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Kuber Chauhan from IDBI Capital. Please go ahead.

Kuber Chauhan — IDBI Capital — Analyst

Yeah. Thank you for taking my question. Am I audible?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yes. You are, Mr. Kuber. Thank you very much. Good morning. Please go ahead.

Kuber Chauhan — IDBI Capital — Analyst

Yeah. Good morning. I just wanted to know that have we taken price hike during this quarter to mitigate the inflationary pressure?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Price hit?

Kuber Chauhan — IDBI Capital — Analyst

How much you can quantify that?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Are you saying we are taking the price hit?

Kuber Chauhan — IDBI Capital — Analyst

Price hike.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Price hike of the final product or the raw material increase?

Kuber Chauhan — IDBI Capital — Analyst

Both. We’re happy to set a limit of increase in selling prices that we were selling earlier about 6% or so. But I think it’s the price increase of the raw material went up dramatically drastically because of this particular, let’s say, supply chain management disruption as well as the war. So, that actually it got escalated overnight, but in spite of that, by virtue of our, let’s say, certain intelligence that we have in terms of creating recipes, we are able to still sustain, but I’m sure as and when it is using now over a period time, let’s say, commodity prices, availability as a supply chain management, we believe that we should be able to cruise ahead with a great amount of plans and sustainability and scalability or in terms of, let’s say, creating that particular number that we’re looking at, we should be able to achieve that. We did have a hit on that. Okay. And second question is on the, I mean, if we are looking at the next few quarters, so how do we look at it, is it something uncertain still or we will be confident about it?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Profitability?

Kuber Chauhan — IDBI Capital — Analyst

Yeah.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

No. No. We are very confident, Mr. Kuber. From a simple standpoint of view that the business we are into, we’ve been doing for two decades, we understand the product category and integrity pretty well in terms of distribution, etc., and product leadership that we’ve taken, three years guarantee 40% cheaper price online and offline presence of 20,000 retailers, so on so forth. These are a couple of our strengths. So, I believe once we are in the progressive stage at this point of time and we are expanding our footprint, plus also doing upcycle, we’re hitting on all fronts, we are ensuring that we take care of let’s say all the avenues and areas where we can bolster our top line and bottom line both. So, we are doing as much as possible. So, I don’t really see any of this happening as such per se and even otherwise, I’d like to share this with all my friends that today plastic furniture per se is not damaging environment, they’re saving environment. Had not been the plastic furniture for about a $1 billion industry, I am assuming and believing that how much would have gone into the, let’s say, manufacturing of furniture, but instead of that, and not only that, five to six times this gets recycled and later on, it gets used to making our roads also. So, in a way, we don’t believe that there is any risk for that matter, and even otherwise the sunrise industry, it is growing at the rate of 15% organically year-on-year. And because of our expansion and distribution and we will also start in September our branding activity, we believe that we will cannibalize on other companies’ brands also. So, that should give us a great leverage and strength. Have I been able to answer you, Mr. Kuber?

Kuber Chauhan — IDBI Capital — Analyst

Yeah, I mean last part was a bit inaudible, but I got the gist of it. The next question is on how do you, I mean if you can just quantify regarding order book?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Order book, interestingly, our order book is so smart that we almost deliver in 24 hours to 48 hours every time, so we don’t keep pending, because the moment we keep it pending, then the distributors would go over to other companies. We do not want that to happen. So, our strength lies in the fact that the moment order is given, less than 24 hours, we dispatch. So, we don’t keep order book for two to three months.

Kuber Chauhan — IDBI Capital — Analyst

Okay. Okay, sir. Can you just quantify regarding the numbers of FY ’23 in terms of numbers like how do you look at volume growth and top line growth? Is there any ballpark number, if you can just give me or quantify it?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Thank you, Mr. Kuber. I will not be able to tell you ballpark, but I will just give you a small idea that it, let’s say, for example, the distribution that we’re expanding and plus the branding that we’re doing, I believe that we should be able to grow about 30% to 40% is my take at this point, unless otherwise, something unwarranted happens, so the top line that we had and correspondingly naturally the bottom line also will grow because we are doing upcycling.

Kuber Chauhan — IDBI Capital — Analyst

Okay. You’re saying, 30% on Y-o-Y basis, right?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yeah, yeah. Y-o-Y.

Kuber Chauhan — IDBI Capital — Analyst

Okay. Okay. Okay, sir. That’s it from my side. Thank you and all the best for future, sir.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Thank you, Mr. Kuber. Thank you very much.

Kuber Chauhan — IDBI Capital — Analyst

Yeah.

Operator

Thank you. The next question is from the line of Devang Baldeja, an individual investor. Please go ahead.

Devang Baldeja — Individual Investor — Analyst

Yes, sir. Congrats on the good Q1 numbers and I wanted to ask about your profitability. So in quarter four, we did around 14% EBITDA margin. In Q1, we have done around 10%, 10.5%, so what was the reason for this dip?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yeah, of course, there were certain amount of sale from plastic compounds also in this particular quarter, which was not there in the Q4 of FY 2022. So, that is how I think the profitability on the sale is a little less whereas vis-a-vis manufacturing. So, that is how there is a certain amount of drop in the profitability in this quarter, but I am sure over a period time as I was just mentioning that since we were starting with this upcycling, we believe

That over a period of time that should constitute a reasonably major amount of benefit and the bottom line will certainly grow and the Q3 and Q4 will be very different.

Devang Baldeja — Individual Investor — Analyst

Then in the last call also, you had mentioned about this polypropylene bags and then you had the idea of using this as a raw material and that this will lead to a reduction in your raw material cost and so on.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Right.

Devang Baldeja — Individual Investor — Analyst

And now also we are saying the same thing, so is there some time gap between when this idea comes and how long it takes to implement something?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

No. Last time when I mentioned, it was not too long we were in the process of building it up and we have already done that and as we sent in a message that 300 metric ton has already been generated. Now, we are scaling up that not 300 metric ton in a quarter, but 500 metric ton

In a month. So, once this amplification becomes easy because sometimes what happens there are resources constrained right from the technology, machines to maybe manpower, etc., so once this particular thing — we are sorting out all those nitty-gritties, so we believe sometimes even certain things are not in our hands also, but as much as we know and we understand because we have reasonably big grip not only me, my elder son, Sahil Aggarwal who is MD and another gentleman, another boy called Nikhil Aggarwal who handles the marketing and sales etc. So, not only three of us, but even my daughter-in-law whose name is Akshita Aggarwal also takes a branding communication. So, for us state attention to the entire

Business and this is the only focus area that we have. So, we believe unless otherwise there are certain amount of vagaries of nature or challenges that we face, beyond that we are absolutely up and running and ensuring that all this execution happens because it happens to the good and it happens for the benefit of not only the Company’s growth but in the interest of stakeholders and shareholders also.

Devang Baldeja — Individual Investor — Analyst

Okay, sir. So, like in Q4, we did 14%, 14.5% type EBITDA margin plus with recycling, so we could expect a jump on that level although so maybe you can do 16%, 17% EBITDA going ahead, say two, three quarters down the line. Is that a fair assumption?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Absolutely. You are Absolutely right because we had just done a small consignment now but the moment we scale it up which we are in the process of doing so and as I was mentioning that we are setting up a greenfield plant for right now at this point of time when we are talking and I think that should probably happen the next four to six months or so. We already have machines procured. It is just that we need to execute it and we are already doing it in a small way, but to amplify that and once we have done this 1,000 tons, then the next step will be 2,000 tons and beyond.

Devang Baldeja — Individual Investor — Analyst

Okay. And sir, like for growth in our business, what is the kind of skill set that we need or do we need to reach out as much as possible, onboard more and more dealers, enter new geographies, or how does it work? I mean what are the cycles that lead to large growth like for FY ’23, you are saying we can do 30%, 40% growth, so let us say on a four, five year basis, what kind of plan do we have and on profitability also just a broad rough ideas if you could give?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Wonderful. Wonderful. Now what we are doing is as you rightly said because my younger son, Nikhil Aggarwal, takes care of the entire sales and distribution. So, he has got a team of people where he has taken some more people on board. So, while doing that we were not able to reach out to some places which are far flung, let’s say, for example, Maharashtra, we did not have resources or let us say South India we did not have resources, Orissa and others, we did not have. Now in the process of onboarding a lot of people who are from same trade itself, who are reasonably aligned with the distributor, know them all so that it is easy for us to connect with these distributor brands, new distributors because it takes some time for these people to get onboarded, they are a little insecure, they have anxiety, they do not know whether or not, the Company will be able to continue or so. But once they are established and feel all right, there is a company in existence of two decades and we are doing reasonably well

And as I said you are not only being national president of furniture manufacturers association, I am also chairman of CII. So, when they see that the kind of operation that we do, the amount of business that we are doing in a very truthful and honest fashion then that inspires them to get onboarded. So, we believe that the only risk, only challenge that we face at this point of time is having certain amount of key resources on boarding so that they can connect with the distributor and we can start selling. That is only small timeline and sometimes what happens when we are a little small, maybe a lot of companies, which are lot of people from the company, large companies do not want to even migrate and come on board because they believe they are happy and we are happy with wherever we are, but once they sort of settle down and they believe all of this coming in for a great purpose, then they will certainly enjoy. So with the process of onboarding people as much as possible as fast as possible and the more we are able to do so more, we are going to reach out. That is the only challenge.

Devang Baldeja — Individual Investor — Analyst

Okay, sir. And sir, when we reach out to a new distributor, so do we need to extend larger commission say versus a brand like Nilkamal which is a Pan India, an older brand. So…

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yeah. Incidentally, Mr. Devang, our price is about 40% cheaper than Nilkamal and Supreme or Cello. Normally, I do not mention these names, but they are nevertheless because I have a lot of respect for them. They created this industry and they created this product segment and category, so we have a lot of pride in that, saying that yes they are the leaders, but nevertheless today because of our aggressive predatory pricing plus distribution plus let’s say our approach and reach out, we do a lot of conferences that our distributors play, which not many companies do because they are reasonably big market. So, they do not — probably they do not have to do all these things, but we are in the process of actually building this new paradigm of how the distribution model should take place. We not only train distributors, we also train their dealers also. We have a complete electric PPT presentation lasting for three, three and a half hours where we do a lot of interactive work. So, these kind of activities when we do, I am sure over a period of time, people will certainly love those who have not seen and let’s say, heard us, will love to get associated over a period of time.

Devang Baldeja — Individual Investor — Analyst

All right. Great, sir and all the best. Thank you.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Thank you, Mr. Devang. Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Apurva Mehta, a retail investor. Please go ahead.

Apurva Mehta — Retail Investor — Analyst

Yeah, hello.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Hi. Good morning, Mr. Apurva.

Apurva Mehta — Retail Investor — Analyst

Yeah. Good morning. As I understand your majority business is coming from offline model. So, what is the breakup between offline and online sales?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Right now, I believe we should be doing about 15% and odd on online and rest comes from offline.

Apurva Mehta — Retail Investor — Analyst

Okay. Speaking on the same topic, what is the logistic cost for transporting for large order to deal distributor and single order of online?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Normally, we pay about — we do not pay of course our consumers, our distributor pay every freight, we have ex-factory prices. So, we believe that in the region that we operate in, the freight range is between 5% to 15%, so that is the maximum that our distributors bear, but through logistics when we send through, let us say, Cloudtail, which was the earlier one, now easy detail plus there are other companies also. They pick up the product from us. So, we actually do not pay ourselves. They pay for it and then we give them that let’s say for example Metro AG or let’s say Amazon and Flipkart. We give them the material and they in turn take up the logistics themselves, but I believe that their logistics cost is reasonably high and that is how when you see our products online prices and you will be surprised that online prices versus the distributor prices, there is a huge difference, massive difference. It is just not 10%, 20%. There are many number of times, let’s say if the product cost is INR400, maybe for online it will be

For INR1,100, so there is a huge massive difference and that particular difference has been taken by these large corporate, these e-com companies as well as the logistics that they have to bear and the beauty about that is in spite of that, we still are cheaper on online space with other large companies and our product as I was mentioning that Flipkart, Amazon, if you were to go and check for Avro Furniture, you will find that we have maximum ranking and rating for our products and we are the most after sought product, we are — in fact I would like to say and I forgot that, right now Amazon has given a certificate that we are Amazon’s number one in the country in terms of online space’s furniture. Last week itself we got it.

Apurva Mehta — Retail Investor — Analyst

Okay. So, in online order, is there any minimum order requirements?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

We just — we are okay with absolutely two pieces chair also because it is consumer driven. So we do not have any let’s say if somebody wants one single table or anything, that is absolutely fine for us no problem.

Apurva Mehta — Retail Investor — Analyst

Okay. So, how many SKUs we will have online against offline?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

We have almost about 20 odd SKUs online because we do not offer every SKU on online because there are a couple of low value added products, which probably consumer may not pick up. They will probably carry a negative connotation about the Company, so our offline distribution model in tier 3, tier 4 city as low as about INR180 to INR200 chair also goes, but in online space, people are a little conscious and cautious, they want to buy a product, which is not only branded, which has got a strength and quality and even they also do not mind paying certain more price on the basis of confidence, the comfort that they get. So, the beauty about that is, that is how we kept certain very selected products from the online and today

As I was mentioning that is how we have been very popular and successful in that particular business model.

Apurva Mehta — Retail Investor — Analyst

Okay. And which are the best-selling products online, can you give any idea?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yeah, sure, sure. We have a lot of products right on double and double fed chair, which has got a beautiful chair, four colors, we have viva table, lexa table, magna, delta, then we have got 2581, 3581, a lot of models of these products, baby chair, baby desk, etc., and these let’s say, I just said 20 odd rescue range that I got, platinum chair, probably world’s only single model that we have. It is a beautiful product, 4 kg. I think online if you were to check, probably somewhere in Europe, some company was showing about let’s say about $100 plus, we are offering for that as low as about INR550. So, the beauty about that is that the products are reasonably good and as I was mentioning, Mr. Apurva, that couple of our products are proprietary in terms of let’s say, we are the only company which manufactures that. Nobody else has these molds. We invest a lot on R&D in terms of technology in terms of designing, etc., and most of these designing I do it myself.

Apurva Mehta — Retail Investor — Analyst

All right. So, what will be the price difference of online of Avro on other big brands?

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Yeah, in fact if you were to see let’s say for example, if you go and check for let’s say a table of viva table of Avro and versus let’s say the supreme table, then you will find that there is a difference of about INR700, INR800, even up to INR1000 also, so that is a huge difference and not only online, in offline also, their prices are not priced as I said 40% cheaper, so that is how we are able to get a great reception and let’s say a great amount of

Acceptability wherever we have gone.

Apurva Mehta — Retail Investor — Analyst

Okay. Thank you. That is all from my side.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Thank you, Mr. Apurva.

Apurva Mehta — Retail Investor — Analyst

Yeah. Thank you.

Operator

Thank you. [Operator Instructions]. As there are no further questions, I now hand the conference over to Mr. Vastupal Shah for his closing comments.

Vastupal Shah — Kirin Advisors Private Limited — Analyst

Thank you.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Before that, I would like to [Speech Overlap]. Vastu, give me a minute to thank Mr. Sandeep, Mr. Nilesh, Mr. Avinash, Mr. Kuber Chauhan, Mr. Devang, Mr. Apurva Mehta and all other participants for let’s say supporting us, asking these beautiful questions because the moment you ask this question, it ignites a passion in our mind, it tells us that this is what investor community or people at large are looking at with their hopeful eyes. So, I can assure and say one thing that we as a company have a purpose and as a leadership team today, not only me, my entire team of leadership right from the down the line to the security guy, everybody has been oriented to ensure and take care of the consumer’s choice because consumer is god in any case and so are the stakeholders and shareholders. So, we will continue to perform as much as possible over a period of time and as and when we continue to have the internal resources as well as external coming in whatever means we can, so we believe that we will amplify this business model to a very different level itself altogether. So, we are in the process of that. Please keep guiding us. Please keep blessing us. We will be more than happy to collaborate and work together with all of you. Thank you very much.

Vastupal Shah — Kirin Advisors Private Limited — Analyst

Thank you. Thanks everyone for joining the conference call of Avro India Limited. If you have any queries, you can write us at vastupal@kirinadvisors.com, and once more, thanks to management team and the participants for joining the conference.

Sushil Kumar Aggarwal — Chairman and Whole Time Director

Thank you very much. Thank you.

Vastupal Shah — Kirin Advisors Private Limited — Analyst

Thank you.

Operator

[Operator Closing Remarks].