Bigbloc Construction Ltd (BIGBLOC) Q3 FY23 Earnings Concall Transcript

Bigbloc Construction Ltd (NSE:BIGBLOC) Q3 FY23 Earnings Concall dated Jan. 25, 2023.

Corporate Participants:

Mohit Saboo — Director and Chief Financial Officer

Analysts:

Anuj Sonpal — Valorem Advisors — Analyst

Garvit Goyal — Invest Research — Analyst

Chintan Desai — Param Capital — Analyst

Tushar Sarda — Athena Investments — Analyst

Anirudh Singhi — Dalal and Broacha Portfolio Managers — Analyst

Avinash Gorakshakar — Profitmart Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY’23 Conference Call of Bigbloc Construction Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, sir.

Anuj Sonpal — Valorem Advisors — Analyst

Thank you, Michelle. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Bigbloc Construction Limited. On behalf of the company, I would like to thank you all for participating in the company’s earnings call for the third quarter and nine months ended of financial year 2023.

Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s earnings call is purely to educate and bring awareness about the company’s fundamental business and financial quarter under review.

Let me now introduce you to the management participating with us in today’s earnings call and hand it over to them for remarks. We have with us, Mr. Mohit Saboo, Director and Chief Financial Officer. Without any further delay, I request Mr. Mohit to start with his opening remarks. Thank you, and over to you, sir.

Mohit Saboo — Director and Chief Financial Officer

Good afternoon, everyone. It gives me immense pleasure to welcome you all to our earnings conference call for the third quarter and nine months ended for the financial year 2023. In the interest of those participants joining us today who may be unfamiliar with the business of the company, I’d like to give a brief overview of the company first.

Bigbloc Construction Limited is one of the largest manufacturers in India of Autoclaved Aerated Concrete blocks, AAC blocks, and related products manufacturing company, with a total installed capacity of 575,000 cubic meter per annum. AAC blocks are superior quality building material, which provide unparalleled blend of strength, thermal insulation, sound proofing, unsurpassed fire resistance and highly proficient building capacity. AAC is a lightweight natural and non-toxic construction material that saves energy and is eco-friendly. These AAC blocks of the company are marketed under the brand name NXTBLOC, which is a green product for the construction industry. Bigbloc aims to become an unparalleled name in the industry, manufacturing quality building materials that focus on sustainability. It also hopes to aid the construction and infrastructure industry and adopting green and sustainable practices for a better future.

Bigbloc currently has two state-of-the art manufacturing units located at Vapi and Ahmedabad near Gujarat and making it one of the largest AAC manufacturers in India. Moreover, with the ongoing capacity expansion plans, the company will catapult to become the largest AAC manufacturer in India by FY’24.

Now, let me start by briefing you on the company’s financial performances on a consolidated basis for the third quarter of financial year 2023. The third quarter’s operating revenues were INR49.5 crores, which was up by 2% quarter-on-quarter, but were marginally down by 6% year-on year due to impact on demand driven by an extended monsoon season, Diwali season, and also some impact due to inflationary reasons, although the decline in sales volume were offset by the higher sales realizations.

The consolidated capacity utilization improved from 79% in Q2 FY’23 to 83% in Q3 FY’23. EBITDA stood at INR13.3 crores witnessing a robust growth of 82% on a year-on year basis. EBITDA margin stood at around 26.87 percentage. EBITDA margins improved in Q3 FY’23 due to higher sales realization and further cost optimization on logistics and power costs. PAT was reported at INR7 crores, which grew by almost 83% year-on year basis. PAT margin for the quarter was approximately 15.56 percentage. For the nine months under review, we reported consolidated operating revenue of INR154 crores, which grew by 25% year-on year basis. EBITDA was reported, INR40 crores, which grew by 141 percentage year-on year. EBITDA margin stood at 25.72%. Also, PAT was reported INR25 crores witnessing a growth of almost 186 percentage on a year-on-year basis. PAT margin stood at 16.02 percentage.

Coming to the operational highlights for the quarter under review. During the quarter, the joint venture company, Siam Cement Bigbloc Construction Technologies Private Limited, acquired 60,000 square meter land at Kapadvanj, Khdea district near Ahmedabad, Gujrat, for setting up a 3 lakhs cbm per annum plant. Siam Cement Bigbloc Construction Technologies Private Limited is a JV between Bigbloc Construction Limited and SCG Group from Thailand wherein Bigbloc holds 52% stake and SCG holds a stake of 48 percentage. The JV with SCG Group aims to share techno-commercial knowledge, promote mutual growth and cooperation in the construction industry and bring new edge building materials to Indian markets. The company is also setting up two greenfield projects with a combined capacity of 8 lakhs cbm per annum, out of which 5 lakhs CBM plant at Wada in Palghar district at Maharashtra is currently under installation and the commercial production are expected to begin in the month of February.

Post completion of all expansion projects, the company’s total capacities increased to 13.75 lakh cubic meter per annum, making the company a largest AAC player in the country. We also expect to generate almost 2.5 to 3 lakh tonnes of carbon traded every year post this expansion. With these expansions, the company will further penetrate its presence into untapped markets across the Western region and also make it the largest player in India.

Strategic initiatives, operational efficiency with a vision for building a brand with innovative product, are likely to contribute to a healthy growth and maximize value for all stakeholders in the near to medium term. With this, we can now open the floor for questions and answers session. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of CA Garvit Goyal from Invest Research. Please go ahead.

Garvit Goyal — Invest Research — Analyst

Hello, good afternoon, sir. Am I audible?

Operator

Yes.

Mohit Saboo — Director and Chief Financial Officer

Yes, you’re audible. Can you be a little louder.

Garvit Goyal — Invest Research — Analyst

Yeah, sure. That’s fine. So my first question is on the volume side, our volumes for the quarter three are significantly down on Y-on-Y basis, despite being a very good quarter for construction activities as you also mentioned in last con call, right. So this fall is raising a big question on migration from red brick to AAC blocks and ramping up of your upcoming facilities. So what is your honest view on the same, sir?

Mohit Saboo — Director and Chief Financial Officer

So the volumes are quite — year-on-year basis is a little on the lower side. There are mainly three attribution reasons for the same. One of them is a little prolonged monsoon — monsoon continued, even during October month in Gujarat and Maharashtra region. Secondly, also this year because of a lot of travel and everything opening up during Diwali, so it was a long vacation season during which labor as well as a lot of people were busy traveling. And thirdly, because of better prices realizations, and our volume turned out to be a little on the lower side, but in spite of that, the capacity utilization has been at around 83 percentage and also during after Diwali, what happens generally in Gujarat and such regions is there is a long vacation period because of which the capacity for the Gujarat plant was comparatively lower whereas for Bombay. It was comparatively on a higher side.

Garvit Goyal — Invest Research — Analyst

That is one. And coming to the guidance part that was given in last con call, you mentioned your volume shall grow around 8% to 9% over FY’22, but your nine-year volumes are down as compared to the corresponding nine months. That is 4% down. So what is your view on that and how will the total volume will shape up by the end of financial year ’23, sir?

Mohit Saboo — Director and Chief Financial Officer

So for the financial year 2023, the volume should be at almost similar levels as what it was for FY’22 because of the slowdown because of the monsoon season and prolonged monsoon and Diwali vacations. And also, apart from this, because of the interest rate hikes and inflationary pressures, there was a little bit sluggishness in the market as compared to what it was in the previous year, but that margin compensation has been happened because of — by the increase in realizations.

Garvit Goyal — Invest Research — Analyst

But sir, in this particular quarter, your realizations. I think are down, down to 4,290, in half one, it was 4,380, so what is the reason for that?

Mohit Saboo — Director and Chief Financial Officer

The realizations are little down in that aspect because of, overall, the pricing of all the raw materials and everything will also come down and because of which our customers have also requested us to reduce some prices on some aspects. That is the whole and sole reason behind that.

Garvit Goyal — Invest Research — Analyst

Means. your your earlier guidance is not holding true, right. 8% to 9% increase in volume, as we mentioned, the volume will be flattish for FY’23.

Mohit Saboo — Director and Chief Financial Officer

Our volume should remain flattish in FY’23 for the existing capacities; for the new upcoming capacities, the scale-up will happen month-over month. And our guidance remains still the same that the lower capacity volumes are being compensated by higher margins — higher selling prices. [Technical Issue] prices for year-on-year basis and the selling prices have gone up by almost 12 to 15 percentage.

Garvit Goyal — Invest Research — Analyst

That I agree, but earlier you mentioned that the volume growth will be 8% to 9% over FY’22, in FY’22 you did around 497,000 kind of volume. And based on that, it should be 552,000, right? So. I was asking from that point of view, whether you are stepping back from those guidance in volume?

Mohit Saboo — Director and Chief Financial Officer

So on a year-on-year basis, our volumes should be more or less flattish.

Garvit Goyal — Invest Research — Analyst

Okay, and earlier guidance in terms of top line, you were mentioning, you will achieve INR225 crores kind of top line. So what is your view on that now?

Mohit Saboo — Director and Chief Financial Officer

So that top line should be achieved as what it was guided earlier because the volume down growth has been compensated by better pricing and better margin realization.

Garvit Goyal — Invest Research — Analyst

So that means you are saying, your guidance for INR225 crores of top line you will achieve, but in nine months, you have done only INR154 crores, so for that to achieve, you have to achieve almost INR55 crores kind of revenues in quarter four. Is it okay with you, means, in accordance with your guidance, right?

Mohit Saboo — Director and Chief Financial Officer

Yes, in nine months we have achieved almost INR154 crores of volumes and also there will be new capacity addition taking place in the upcoming months — the Wada plant will start commercial production. So that should also add to the volumes — the net revenues.

Garvit Goyal — Invest Research — Analyst

No, I agree, but the point is, you are saying — earlier you had guided for INR225 crores kind of revenue, right. And in the first nine months you have achieved INR154 crores. So you are saying the guidance is still holding true for revenues in value term. So for that to achieve, you have to almost do around INR75 crores kind of revenues in quarter four. So are you seeing these numbers to come in quarter four?

Mohit Saboo — Director and Chief Financial Officer

We should be getting almost INR55 crores to INR65 crores of revenue in quarter four. That’s what we are envisaging so far because of — in Q3 also, we got a revenue of almost INR50 crores and in last year also we got similar revenues, so INR50 crores is the revenue from the normal operation that we are getting on a quarter on quarter basis. And apart from that, we should get some additional revenue from the upcoming facilities. So 55 crores INR to 65 crores would be the revenue for the next quarter.

Garvit Goyal — Invest Research — Analyst

Understood. And what kind of PAT margins you are expecting for that INR55 crores revenue?

Mohit Saboo — Director and Chief Financial Officer

The EBITDA margins that we have witnessed in the last two, three quarters we should be able to continue with those same.

Garvit Goyal — Invest Research — Analyst

In the quarter four, right? Yes. Okay, okay. So that’s it from my side, sir. Thank you. Thank you. [Operator Instructions] We have the next question from the line of Forum Goshal [Phonetic], an individual investor. Please go ahead.

Unidentified Participant — — Analyst

Yeah, good afternoon, sir. So just can you elaborate on previous person question as been why volumes declined by over 15% year-on year. Is there a structural slowdown in the real estate sector that you are witnessing? Like we are hearing very good sales from the real estate players these days. So then why is it that it’s not reflecting in our sales? How is to make the current order book right now And also, if demand was down, why did realizations go up even in this quarter? Do you see any correction impact on the realization in the coming quarters due to the lower demand?

Mohit Saboo — Director and Chief Financial Officer

So, the capacity utilization has been down by almost approximately 15%, majority of the reasons that can be attributable to the same is a little bit of the prolonged monsoon as I already mentioned earlier, and also what happens during Diwali this year after two years of COVID which was there during Diwali period, this time, it was a completely open travel season. So because of which a lot of people were traveling and that was probably one of the reasons that we can envisage for the slowdown during Diwali period which was for almost 10 to 15 days. And regarding pricing utilization, the demand has been pretty good, because of which we have been able to get our prices on a better — and get better realizations in this quarter and we see in the current quarter also we see the pricing to be on almost a similar basis or a little bit maybe also on the higher side.

Coming down to some question for the real estate sector and the demand scenario. So overall currently also we are seeing good demand in the market and we are continuously seeing that red bricks are being replaced by AAC blocks on a quarter-on-quarter basis. Consumption of AAC blocks is going high. And as of today also, I think AAC blocks in majority of the regions that we are participating — we are present in, the pricing of AAC blocks is lower than that of red bricks. So from that angle also, we see a good comfort level in increasing the prices or maintaining our similar margins going ahead.

Unidentified Participant — — Analyst

So then if you’re saying that if demand is good, then why are current sales down?

Unidentified Participant — — Analyst

As I mentioned, the sales were down during October and November month, October was because of prolonged monsoon season when because generally people don’t expect monsoon to continue until almost 10, 15 October, One reason was that. And secondly, also during Diwali period, what happened was, there was — the demand was a little slow because of unavailability of labor also and also because of lot of people traveling, so these were the main things that we have observed. December month, the demand was at full fledge and currently also we are observing full demand scenario.

Unidentified Participant — — Analyst

Also sir, one follow-up question regarding volume, so with volume coming down, are you sure that we’d be able to sustain the margins in the long-run. And what is the biggest reason for seeing such a high-margin size, we haven’t seen such margins in the industry before.

Mohit Saboo — Director and Chief Financial Officer

The volumes have come down, but as you have seen in Q3 also that margins have gone up. So it means that the prices are sustainable. And also this is a product in which you cannot do an inventory for a very long period nor at our factories nor at the site of the builder or the contractor. Looking at that aspect. It gets a little difficult to get —

Operator

I’m sorry sir. We are not able to hear you — I’m sorry to interrupt, can you please repeat your last lines, sir?

Mohit Saboo — Director and Chief Financial Officer

So it’s not possible to stop this product for a very long period or huge quantity of it, nor at our factory premises nor in the site of the customer who is the builder or a contractor, because it is a bulky product and because of that when there is a temporary slowdown like because of prolonged monsoons or because of slowdown in — during Diwali season when a lot of the construction sites were closed because of all such things, the capacity utilization has been a little lower in this quarter. But we have been able to get better realizations in the last quarter even after the lower capacity utilizations and in the current quarter also we are witnessing almost similar pricing.

Unidentified Participant — — Analyst

Also just one last small question, did we have any carbon credit sales during the quarter and if so, how much was it?

Mohit Saboo — Director and Chief Financial Officer

In the running quarter Q3, there was no carbon credit sales. We are currently getting our credits issued for which the audit is ongoing. And the last carbon credits that we had sold were in Q2, which was for amount of approximately INR1.35 crores or INR1.4 crores. And these credits were issued for the period up to August 2021. Now for the period from September 2021 till November 2022, the audit is ongoing.

Unidentified Participant — — Analyst

That’s it from my side. Thank you, sir.

Mohit Saboo — Director and Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] We have the next follow-up question from the line of CA Garvit Goyal from Invest Research. Please go ahead.

Garvit Goyal — Invest Research — Analyst

Hello.

Operator

You may proceed.

Garvit Goyal — Invest Research — Analyst

Yeah. I am audible, right?

Mohit Saboo — Director and Chief Financial Officer

Yes

Garvit Goyal — Invest Research — Analyst

Sir, one quick question. First of all, congrats on your good results. Sir, can you spend some time on your expansion plans, right? Number one. Do you have currently expansion planned at two facilities, isn’t it? One is in Wada and one is in Kapadvanj, right. One is in Maharashtra and another one would be in Gujarat, right. So what is the status currently? And how are you looking at utilizing these facilities, uf you’re not going to see aggressive growth in AAC blocks? So can you give — spend some time in explaining this, sir?

Mohit Saboo — Director and Chief Financial Officer

So we have two upcoming facilities for expansion. One of them is at Wada which is again in a wholly-owned subsidiary of Bigbloc Construction Limited, whereby we are putting up a capacity of 500,000 cubic meter per annum, which will be into two phases, the first phase, we are starting commercial production tentatively in February 2023 of 250,000 cubic meters per annum, and the second expansion that is upcoming at Kapadvanj near Kheda is in the JV company with SCG where Bigbloc holds a stake of 52% and SCG holds a stake of 48%. So the expansion at Wada is only for AAC blocks whereas expansion at — in the JV company is for AAC blocks as well as panels. Coming down to the status of expansion, so the Wada plant is — as I mentioned, we will start commercial production in February ’23 for Phase one and Phase two, we intend to start commercial productions tentatively later on in the year at 2023 itself and for the JV company also, we intend to start commercial productions in calendar year 2023, so probably in Q3 2023 — 2024. And regarding the capacity addition, so we see a robust future for the real-estate segment. And also, we are increasing our marketing spread and marketing teams in order to get better capacity utilization for the upcoming capacities, and replacement of red bricks is still huge opportunity market for us. As per our estimate still the share of our AAC blocks, is just around 10% to 11% whereas red bricks is still around 80%, 85%.

Garvit Goyal — Invest Research — Analyst

Okay, see, when they look at these capacity expansion this is huge, right. So are you sure that the market needs that level of capacity, which can be observed within, say, one or two years from the time you go or commercialize these facilities, sir. You have any view on this?

Mohit Saboo — Director and Chief Financial Officer

So this capacity addition is needed, because as I mentioned the share of AAC blocks is still very low in our country. If we look at a country like China where there are more than 3,500 to 4,000, AAC block plants. Whereas India maybe just around 150 to 175 AAC block plants. So if you look from that dynamics and if you look from that growth opportunity, I’m sure you can visualize that kind of growth is possible and much-needed. Moreover, what happens is, earlier red bricks used to be very cheap and also off lately the government is also trying to reduce down and curb down on the use of red bricks. And that’s how we are trying to gain attraction in advantage for AAC blocks.

Garvit Goyal — Invest Research — Analyst

Okay. Another question, in your presentation, you have spoken about 60% subsidy from state government, it is on which amount sir, like, when you say 60%, how would you quantify that? The capex that you incurred is it?

Mohit Saboo — Director and Chief Financial Officer

So the capex that is upcoming in Wada — in Wada there is a state government subsidy ongoing whereby if you’re an MSME and if your capex is less than INR50 crores, then 60% of that amount will be received as subsidy from the government spread over a period of 10 years. So that is the reason that we have divided the project into two phases. The first phase will be 2.5 lakh cubic meters for which the capex will be approximately INR45 crores, to INR48 crores, INR49 crores and on this we will get subsidy from the government, which will be in the form of interest subvention, electric utility subvention, stamp duty exemption, gross GST refunds, all such methods.

Garvit Goyal — Invest Research — Analyst

Okay. Okay. Okay, sir, regarding this joint-venture, right that you are with the Singapore-based company. Can you elaborate on the products? I see that something like wall panels and stuff, which is being considered. So, can you spend two minutes on explaining the products that you’re looking as part of the joint venture?

Mohit Saboo — Director and Chief Financial Officer

Yes, so currently we are manufacturing AAC blockS which is an autoclaved aereated concrete blocks, and one block is almost in terms of size that nine red bricks is equal to one AAC block. In the joint venture we will be manufacturing AAC panels. So, again, more or less, majority of the sector — majority of the infrastructure is the same, but instead of manufacturing, AAC blocks, what will happen is the panels, will be huge — big size panels, which will have a height of almost 8, 9, or 10 feet as required in the construction side. A width of 3 feet, which will be more or less standard and a thickness of 3 inch, 4 inch, or 6 inch which is required by the customer, depending on is internal or external wall partitions.

Moreover, these panels will be reinforced with steel. So because of using these panels, the construction will be much more faster. It is steel reinforced, so that way, the product is much superior as compared to AAC block. So this will be what [Technical Issue] and currently, there is hardly anyone was doing AAC panels in India. So it is another new age green building material.

Garvit Goyal — Invest Research — Analyst

Okay, okay. Okay, and predominantly these panels are used in commercial projects, is it sir or it could be used anywhere?

Mohit Saboo — Director and Chief Financial Officer

It can be used anywhere, it can be used even in residential, commercial, industrial, all projects. So currently, the AAC blocks also that we are selling, we are supplying to lots of industries as well. So we are supplying to semi-organics if you are aware. Also we are getting lots of inquiries from lots of other industrial developments that are taking place in Gujarat as well as Maharashtra. So L&T also with the likes of developing a factory for JSW. For that also we are using AAC blocks. Reliance Township is coming up in Nagothane for which we are supplying AAC blocks. So the demand scope and the potential is huge.

Garvit Goyal — Invest Research — Analyst

Okay, and have you started doing some pilot work on this wall paneling as well sir? Like, I know that your facility is not ready, but in order to test the pulse of the customer like whether they would be really using those stock. So have you had any experience — firsthand experience on that?

Mohit Saboo — Director and Chief Financial Officer

So our partner teams from SCG has already been selling panels at different locations across the country and we together have also done some mock ups at some of our customer sites, which includes the likes of Lodha R&D. They have shown interest in the product and they have liked the product, but they want to know the consistent supply, the lead time and everything. And when you’re importing and selling the product, all those things turn out to be a little bit of a challenge. And we are not able to comment them, all those things and because of which they have not yet placed commercial orders for the same, but the additional marketing efforts that we’ll have to do which will done in before three months of when we commercial production about that particular plant.

Garvit Goyal — Invest Research — Analyst

Okay. Okay, and regarding this target sir, like for this year, you — as the previous participant was asking you, it was INR225 crores or something like that, right, for FY ’23. You were confident of achieving that levels, that’s what you responded, I suppose. Can you confirm that?

Mohit Saboo — Director and Chief Financial Officer

So we are confident of achieving at least around 95% of that target.

Garvit Goyal — Invest Research — Analyst

Okay, and with a similar level of margins, that’s what you said correct?

Mohit Saboo — Director and Chief Financial Officer

Yes. I think you would have observed that. Moreover, in all quarters, our margins have been at almost similar levels.

Garvit Goyal — Invest Research — Analyst

Correct, correct. And I think I asked this question again and again. You have this basic raw material for manufacturing this block, which is ash right — fly ash right?

Mohit Saboo — Director and Chief Financial Officer

Yeah.

Garvit Goyal — Invest Research — Analyst

So is it sufficiently available for you, are you seeing any challenges in the near future in terms of the raw material procurement side?

Mohit Saboo — Director and Chief Financial Officer

No, we are not facing any challenges because our main raw materials are fly ash, cement and lime, and all of them are abundant — available in abundance in the regions where we are currently present.

Garvit Goyal — Invest Research — Analyst

Okay. Okay, and what is your view for next three years, sir. Like where do you want to reach?

Mohit Saboo — Director and Chief Financial Officer

So, this we already have two capex planned for the West in hand and once we start the commercial productions at Wada, we will be looking at two other new locations for — two other altogether new geography for our further expansion. One of them will be in the North and the second in the South.

Garvit Goyal — Invest Research — Analyst

Okay. Okay, sir, that’s it from my side. Thanks for the opportunity.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Chintan Desai from Param Capital. Please go ahead.

Chintan Desai — Param Capital — Analyst

Thank you sir, just one data point I needed for the bricks per se. Till Q1 we have been sharing the price of bricks, can you please share us what would be the pricing for Q2 and Q3 of bricks?

Mohit Saboo — Director and Chief Financial Officer

So brick pricing earlier used to be in the range of almost two years back, it used to be in the range of INR3 and INR3.5 which on the top most level has gone up to almost INR10 to INR11 a brick. And after that, the brick price have also come down marginally and current brick pricing are ranging in the of INR8 to INR9 a brick. If we see that in terms of cubic meters, then the brick pricing comes down to almost INR4,500 to INR5,500 a cubic meter approximately.

Chintan Desai — Param Capital — Analyst

Okay, got it. And any outlook on the pricing for the bricks? As in the stricter regulation and hence this price more or less should be the precursor that we should look at, or it can further fall?

Mohit Saboo — Director and Chief Financial Officer

So I think this pricing of bricks are nowhere coming down because for them the transportation cost is three times than what it is for us because the densities are much higher. Secondly, slowly and gradually the kilns are moving away from the city. So for them, the distance is also increasing and the pricing is also going up. And also you know overall manufacturing bricks, as well as application of bricks, making a wall using bricks, in every aspect bricks are turning out to be more and more expensive. So looking at that aspect, brick will keep on going down on a quarter-on-quarter basis going ahead.

Chintan Desai — Param Capital — Analyst

Got it, thanks. And just last question on in terms of awareness, particularly with respect to AAC blocks tier-wise, if you could give us some flavor as to you know urban areas developers are well aware of AAC blocks, how is the situation in rural areas or the towns where a single house is made by an individual?

Mohit Saboo — Director and Chief Financial Officer

So in urban areas, I think the market penetration in tier one cities is going up to maybe even tier-two cities, the penetration has been pretty good. In tier-one, the penetration may be going up to 75% to 80% and tier-two maybe at around 60% oddly. But in tier-three cities, the penetration and awareness is still a little bit low. And that’s where we are working on ourselves also as well as through the contract manufacturing that we are doing for Ambhuja and [Technical Issue], because of which we are able to penetrate such markets and extended some deep line [Phonetic] inquiries and increase our quantities in that region.

Chintan Desai — Param Capital — Analyst

All right. Any activities from your side that you do to increase awareness in those areas?

Mohit Saboo — Director and Chief Financial Officer

Just the normal marketing activities and getting them more aware about the advantages of AAC blocks and the harmful effects of bricks.

Chintan Desai — Param Capital — Analyst

Got it, got it. Thanks a lot, sir.

Mohit Saboo — Director and Chief Financial Officer

Thank you.

Chintan Desai — Param Capital — Analyst

Yeah.

Operator

Thank you. We have the next question from the line of Tushar Sarda from Athena Investments. Please go ahead.

Tushar Sarda — Athena Investments — Analyst

Yeah, thank you for the opportunity. There is a lot of questions on your volume and demand. So do you have any way to estimate the demand in the region that you saw when you have market share?

Mohit Saboo — Director and Chief Financial Officer

So the market share as of today in the region that we are present in, so we would be having a market share of almost 4% to 6% on an average out-of-the-total market of AAC blocks in Western India which includes the cities of Bombay, Pune and mainly the states of Gujarat and Maharashtra. And there is no concrete way to understand the demand scenario because this product is replacing red bricks, which is more or less, a complete unorganized industry, and what has happened is, since April, even red bricks have been gotten under GST, so lot of the red brick manufacturers and all have also been able to facing lots of challenges because of the compliance burden [Technical Issue].

Operator

I’m sorry to interrupt, sir, can you please repeat your last line, we couldn’t hear you, Mr. Saboo. Mr. Saboo, we are unable to hear you, sir.

Mohit Saboo — Director and Chief Financial Officer

Hello?

Operator

Yes sir, please proceed. I would request you to repeat your last line, sir.

Mohit Saboo — Director and Chief Financial Officer

So from 1st April onwards even red bricks have come under the purview of GST and GST is okay, but for them, the entire compliance of GST, e-Way bills, and all such things are huge headache because of which lots of small unorganized red brick manufacturers are also shutting down their facilities to be very frank. So there is no concrete market-share for this product as compared to against what red bricks.

Tushar Sarda — Athena Investments — Analyst

No, when I say market assessment, you have given two states right, Maharashtra and Gujarat, but I thought your product would get transported to very small distance. It will really not travel very large distances. So, I really mean micro markets share.

Mohit Saboo — Director and Chief Financial Officer

Sorry, I didn’t get you, can you come again.

Tushar Sarda — Athena Investments — Analyst

No your product can’t be transported very long distances, right, because of the volume and the weight.

Mohit Saboo — Director and Chief Financial Officer

So we can go to a distance of almost 300 to 400 kilometers easily to be very frank for this product.

Tushar Sarda — Athena Investments — Analyst

Okay, okay.

Mohit Saboo — Director and Chief Financial Officer

For that, I’ve already given you what market-share we currently have in the states of Gujarat, and Maharashtra.

Tushar Sarda — Athena Investments — Analyst

So who is your major competitor in AAC then?

Mohit Saboo — Director and Chief Financial Officer

So there is Hyderabad Industries Limited. Apart from that, there is Magic Crit [Phonetic]. So these are the two other big names. Apart from that, majority of them are all small unorganized players sort of thing, not unorganized exactly, but single-plant or lower capacity-sized players.

Tushar Sarda — Athena Investments — Analyst

And how big are HIL and Magic Crit [Phonetic]?

Mohit Saboo — Director and Chief Financial Officer

HIL currently has a capacity of around 8.5 or 10 lakh cubic meters. And I think Magic Crit [Phonetic] is also set around similar capacity of around 7.5 to 8 lakh cubic meters.

Tushar Sarda — Athena Investments — Analyst

Okay, okay, thank you very much.

Operator

Thank you. We have the next question from the line of Anirudh Singhi from Dalal and Broacha portfolio managers. Please go ahead.

Anirudh Singhi — Dalal and Broacha Portfolio Managers — Analyst

Hi, thank you for taking my question. I just wanted to understand your margin profile. So until FY ’22, we were doing like low-teen sort of margin and suddenly we’re doing 24% and 25% margin. What has led to this expansion?

Mohit Saboo — Director and Chief Financial Officer

Your voice was quite low. Can you come again?

Anirudh Singhi — Dalal and Broacha Portfolio Managers — Analyst

Am I audible now?

Mohit Saboo — Director and Chief Financial Officer

Yes, that’s better.

Anirudh Singhi — Dalal and Broacha Portfolio Managers — Analyst

Yeah, so I am saying until last year until FY ’22, we were in low-teen sort of margin. And now we are doing mid 20s sort of margins. So what has led to this jump?

Mohit Saboo — Director and Chief Financial Officer

So as I mentioned earlier also to one of the questions regarding why has the margin gone up. And why is the — what is the pricing of red bricks. So two years back, as compared to red bricks, AAC block was an expensive product. So the pricing of red bricks, two years back used to be in the range of almost INR1,800 to INR2,200 rupees of cubic meter. Whereas red bricks were in the range of almost INR2,500 to INR2,700 per cubic meter. What has happened in the last two years is that red bricks, because of the pollution control norms, because of the transportation cost, and also moving away from the market, their overall costing and everything has gone up. Also now GST burden coming up on them. So that’s why, the pricing of have almost come up to almost INR8 or INR9 a brick which comes down to almost INR4,500 to INR5,500 rupees a cubic meter.

Whereas AAC blocks today are comparatively, cheaper than what red bricks are. So, one of the main reason for it is this. Secondly, also the awareness and availability, and acceptance for AAC blocks has grown-up drastically in the last two years.

Anirudh Singhi — Dalal and Broacha Portfolio Managers — Analyst

Okay, so do you expect these sort of margins to continue in the longer-term?

Mohit Saboo — Director and Chief Financial Officer

We definitely expect this sort of margins to continue for the longer-term and I think it can be seen from our results itself from the last eight, nine quarters where overall revenue margins and turnover is everything has gone to sort of consistent level. And also as I mentioned earlier on one of the questions that the demand scope and the growth scope or AAC blocks is used because there is a product which is still replacing red bricks.

Anirudh Singhi — Dalal and Broacha Portfolio Managers — Analyst

Okay, and just to get a better understanding in the nine months what percentage of our growth would be attributable to realization improvement and what — how much do volumes?

Mohit Saboo — Director and Chief Financial Officer

Can you come on the question again?

Anirudh Singhi — Dalal and Broacha Portfolio Managers — Analyst

So in this year, how much of our growth is from volume, and how much is from utilization?

Mohit Saboo — Director and Chief Financial Officer

So, in terms of volumes, more or less, it’s sort of flattish. So the majority of the growth has been just due to improvement in realization.

Anirudh Singhi — Dalal and Broacha Portfolio Managers — Analyst

Okay. So now going ahead if you expect this sort of utilization to continue, our volume growth will have to drive the growth, right?

Mohit Saboo — Director and Chief Financial Officer

Yes, so volume growth should also come ahead because of the capacity additions that we are also picking up.

Anirudh Singhi — Dalal and Broacha Portfolio Managers — Analyst

Okay. Right. Thank you.

Operator

Thank you. We have the next question from the line of Avinash Gorakshakar from Profitmart. Please go ahead. Mr. Avinash, I have unmuted your line. Kindly proceed with your question.

Avinash Gorakshakar — Profitmart Securities — Analyst

Yeah, I think. I have just two questions, one is I wanted to know is the business seasonal, because now we saw a slight [Technical Issues]. If it is, tell us that…

Operator

Sorry to interrupt Mr. Avinash, I would request you to use handset to ask a question. We cannot hear you clearly, sir.

Avinash Gorakshakar — Profitmart Securities — Analyst

Hello.

Operator

Yes sir, please proceed.

Avinash Gorakshakar — Profitmart Securities — Analyst

Yeah. Of course, it is because actually I’m traveling so there was a slight disturbance, but I just wanted to understand from the management team that is the [Technical Issues] slightly seasonal. Is the second-half, that is Jan to March, slightly more robust compared the third-quarter? Because in December, we saw a slight dip in revenue. So if you could share some details. Unfortunately, I joined the call little late, so accept my apologies if I am repeating the question.

Mohit Saboo — Director and Chief Financial Officer

No, no, no, completely okay with that. So coming down to the seasonality question, it is a little bit seasonal because what happens is and monsoon period, the construction sites and all also get a little slow because of torrential monsoons in Bombay and overall Western India region. And so in terms of capacity utilizations, generally in the monsoon period, post-Holi, the capacity utilizations are a little on the lower side. Coming down to this quarter Q3, the capacity utilizations have been a little low because of prolonged monsoon season which stretched up to October also. And also during Diwali period, there was a longer break and longer shut-down because of unavailability of labor due to travel opening up everyone going to their villages, and a lot of weddings and everything as well. So because of all the majority of — these two reasons October and November were a little slow and from December onwards, I think we’ve seen the market pick-up pretty well.

Avinash Gorakshakar — Profitmart Securities — Analyst

So can we expect that from the fourth quarter that is from January onwards you could definitely see not only realizations, but even the volume pickup to be significantly robust as compared to the third-quarter? If you could give us some clarity on that?

Mohit Saboo — Director and Chief Financial Officer

Yes. I think we can definitely expect capacity utilization in Q4 as compared to what we have observed in Q3.

Avinash Gorakshakar — Profitmart Securities — Analyst

Okay and one more question, which I wanted to ask you is that your Thailand — your JV with your Thailand partner is expected to be commissioned from the fourth quarter of FY ’23. So if you could share some details on that and how is it progressing in the coming 12 months, some color on that.

Mohit Saboo — Director and Chief Financial Officer

So we have just completed the land acquisition and majority of the land that we acquired these days in Gujarat or only search regions, are agricultural lands and the first process is to convert the agricultural land into a non-agricultural and for which we have to do lots of government formalities which have been already started and we expect to complete the same in the upcoming two-three months. But irrespective of that, we can start construction activities at our site, which we intend to start in the upcoming one month or so. And we also placed machinery orders in the upcoming one or two months. And post that we have a target of completing entire construction as well as installation of machinery activities in the period of almost 9 to 10 months from starting the same.

Avinash Gorakshakar — Profitmart Securities — Analyst

So hopefully, you should be able to see some sort of revenue, some sort of turnover contributions atleast in FY ’24 or is it going to be much beyond that, because we were wanting to know the investment is about INR88 crores, INR89 crores, so whatever work is going to be completed can we see some sort of revenue in FY ’24 or a little later, if you could give some clarification?

Mohit Saboo — Director and Chief Financial Officer

So yes, we can expect some sort of revenue from the JV plant also by Q3 FY ’24, or Q4 FY ’24.

Avinash Gorakshakar — Profitmart Securities — Analyst

Okay, during the second half of FY ’24, you do see a little bit of contribution, I mean, hopefully.

Mohit Saboo — Director and Chief Financial Officer

Yes. I think we can see a good contribution from Q4 FY ’24.

Avinash Gorakshakar — Profitmart Securities — Analyst

Okay. Anyway, I think thank you very much and all the best to you and the entire management team.

Mohit Saboo — Director and Chief Financial Officer

Thank you so much. Thank you so much for such good questions.

Operator

Thank you. We have the next follow-up question from the line of CA Garvit Goyal from Invest Research. Please go ahead. Mr. Goyal, kindly proceed with your question. I have unmuted your line.

Garvit Goyal — Invest Research — Analyst

My question has already been answered.

Operator

Thank you. As that was the last question for today. I would now like to hand the conference over to the management from Bigbloc Construction Limited for closing comments. Over to you sir.

Mohit Saboo — Director and Chief Financial Officer

I would like to thank all of you for participating in this earnings conference call and asking such good questions. I hope we were able to answer all your questions satisfactorily. And at the same time offer insights into our business and for upcoming growth plans. If you have any further questions or would like to know more about the company, please reach out to our Investor Relations Manager at Valorem Advisors.

Thank you, and stay safe and stay healthy.

Operator

[Operator Closing Remarks]