Cera Sanitaryware Ltd (CERA) Q4 FY21 Earnings Concall Transcript

Cera Sanitaryware Ltd (NSE:CERA) Q4 FY21 earnings concall dated Jun. 11, 2021.

Corporate Participants:

Devrishi Singh — CDR India

Ayush Bagla — Executive Director

Analysts:

Arun Baid — BOB Capital Markets — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Archana Gude — IDBI Capital — Analyst

Prakash Kapadia — Anived Portfolio Managers — Analyst

Saurabh Shroff — QRC Investment Advisors — Analyst

Achal Lohade — J.M. Financial — Analyst

Rajesh Kumar Ravi — HDFC Securities — Analyst

Rahul Agarwal — InCred Capital — Analyst

Presentation:

Operator

Ladies and gentlemen good day and welcome to the Q4 FY ’21 Earnings Conference Call of Cera Sanitaryware Ltd. [Operator Instructions]

I now hand the conference over to Mr. Devrishi Singh of CDR India. Thank you, and over to you, sir.

Devrishi Singh — CDR India

Thank you, Steve. Good morning everyone and thank you for joining us on the earnings conference call for Cera Sanitaryware Ltd. for Q4 and FY ’21 earnings which were announced yesterday. We have with us today the management team comprising Mr. Ayush Bagla, Executive Director; Mr. Rajesh B. Shah, CFO and COO of the company; and Mr. Mahesh Taparia the Deputy CFO for Cera Sanitaryware. We will start with brief opening remarks from the management, following which we will open the call for Q&A.

A quick disclaimer before we begin. Some of the statements made in today’s conference call may be forward looking in nature and a detailed note in this regard is contained in the results documents that has been shared with all of you earlier.

I would now turn the call over to Mr. Ayush Bagla for his opening remarks. Thank you, and over to you, sir.

Ayush Bagla — Executive Director

Good morning everyone and thank you for taking time to join our call. The earnings for the fourth quarter and 12 months for the period ended 31st March, 2021 were adopted by the Board of Directors yesterday, 10th June, 2021. The earnings documents have been released to the stock exchanges.

As we indicated during the last quarter, the demand from both retail and projects in Q4 was robust, and we witnessed strong traction across all markets and products. The home improvement theme has been resonating well with consumers. Project sites which were gradually opening up during Q2, were in most cases fully operational in Q3 and in Q4. The impact of reduced interest rates for home loans at 6.5% to 6.75% was the single most important factor for the surge in interest for acquisition of new homes. We truly experienced the elasticity of demand in relation to cost of capital and real estate. Stamp duty reduction in a few geographies for a limited period, made consumers think forward their new homebuying decisions. This resulted in demand exceeding all estimates in Q3 and Q4.

As the challenges posed by COVID-19 steady [Technical Issues] boost in Q4, we started witnessing on notable improvement in our performance. The positive rebound in demand we witnessed starting Q2 FY ’21 and continuing in Q3 from our most profitable verticals, that is sanitaryware and faucet ware businesses continued to sustain into the fourth quarter as well. The sanitaryware business and the faucet ware business both continued their positive trajectory of growth during Q4.

These present trends are expected to remain strong in FY ’21, ’22 as well. The temporary blip of the second wave has halted offtake of products, as some markets remained closed in April and May. We at Cera do not see it as a worry going forward. Demand is expected to exceed supply, and since Cera’s manufacturing operations remained fully operational in Q1 of ’21-’22, there will be an increased product availability going forward.

The media campaign on staycation at home, which was unfurled by the company from September ’19, directly connected with consumers post lockdown. Recently the public TV recognized Kuch Pal Ghar Ke Naam as an innovative campaign, embedded with a social message delivered to the current times.

In Q4 FY ’21, the company initially took some more days than anticipated to restore the overall normalcy in production, post the labor disruption of Q3. Sanitaryware operations required a plant maintenance cycle and fresh mold making process, which took almost 45 days in Q4 to complete. So the one-time impact of plant disruption in Q3 also had a spillover effect in Q4. For the first 45 days, the sanitaryware plant operated at a capacity utilization of 75% and for the balance half, Q4 capacity utilization was 95%. Overall on a 90-day basis, sanitaryware plant operated at a capacity utilization of 85%, whereas our faucet ware capacity utilization continued to remain high throughout the quarter at 92%.

There has been a strategy to develop agile infrastructure by leveraging a mix of in-house and outsourced facilities, to enable us to rapidly respond to evolving circumstances. This proved highly beneficial in the backdrop of the partial disruption, as we were able to increase volumes from our vendors, to cater to the improved demand.

Normal percentage of outsourcing and sanitaryware, which is around 50% to 55%, rose to 65% during this quarter. In facuet ware, the normal percentage of outsourcing, which is also 50% to 55%, rose to 59%.

Coming to our numbers, revenues in Q4 FY ’21 were INR438.42 crores, higher by 39% on a sequential basis. EBITDA including other income was INR65.62 crores in Q4 from INR48.21 crores reported in Q3 this year. The EBITDA margin had been 15.2% versus 15.6% in Q3 FY ’21. PAT was INR43.02 crores in Q4 FY ’21 versus INR29.09 crores in Q3 FY ’21.

Due to a rebound in performance, Q4 this year has nearly reached parity with Q4 last year, despite the challenging backdrop due to the partial disruption at the manufacturing facility. For Q4 FY ’21, the revenue for the quarter stood at INR431.37 crores what is INR293.24 crores in Q4 FY ’20, which is up by 47% on a YoY basis. On a YoY basis, EBITDA excluding other income for Q4 FY ’21 was at INR63.15 crores versus INR42.4 crores in Q4 FY ’20, an increase of 48.9%. The EBITDA margin for Q4 FY ’21 stood at 14.64%, higher by 18 basis points. Profit after tax for Q4 FY ’21 has been INR43.02 crores against the YoY number of INR38.47 crores, an increase of 11.83%. EPS for Q4 was INR33.07 versus INR29.58 in Q4 FY ’19-’20. For Q4 FY ’21, 48% of the topline was from sanitaryware, 30% from faucet ware and tiles represented 20% of topline. Wellness was 2% of top line. On a YoY basis, sanitaryware revenues registered an increase of 46.8%. Faucet ware represented revenues increased by 62.3%. Tiles revenues increased by 39.2% and wellness declined by 10%. The sanitaryware and faucet ware verticals remain the backdrop of the business, with contribution of 78% to our overall revenues.

Cera continues to witness encouraging demand for its newly launched products. During Q4 FY ’21 and during FY ’21, our new products contributed close to 20% of revenues. The company has been receiving positive responses towards new packaging designs, which were introduced with an aim to create more brand awareness and for retail customer visibility.

The quarter also witnessed an increase in raw material prices of ABS, of stainless steel, brass, ring [Phonetic] and a few others. There was an increase in overall logistics costs due to rising fuel prices. These factors led the company to undertake a price hike of around 5% to 7% in sanitaryware, 8% to 10% in faucet ware from the month of February 2021.

Inventory days in Q4 FY ’21 were 51.66 days compared to 62.01 days in Q4 FY ’20. The receivable days in Q4 FY ’21 were 53.24 days versus 56.78 days. Payable days in Q4 were 52 days against 44.36 days in Q4 FY ’20. Therefore net working capital days in Q4 FY ’21 were 52.9 days versus 74.43 days in Q4 of FY ’20. As most of you who closely track our company, are aware that this has been a strong focus area for Cera. Considerable efforts to compress working capital have been made over the last few years. Some of the initiatives, such as digitization, establishing local warehousing, has enabled us to offer just-in-time inventory management solutions for finished goods to trade partners and large customers. These efforts have gone a long way, enabling declogging at the respective locations and sites, leading to faster and smaller billing cycles for Cera, resulting in better receivable management. FY ’21 has largely been recorded as a period of disruptions caused by COVID-19.

The company has adapted well to these disruptions and through its judicious capital management, was able to increase its already high liquidity position. So, as on 31st March, 2021 our cash and cash equivalents increased to INR479 crores compared to INR230 crores as on 31st March, 2020. Cash position has increased and become a significant portion of capital employed. ROC, including cash of INR459 crores, was at 18% and without cash at 32%. Our capex spend for FY ’21 stood at INR10 crores as against our initial plan to spend close to INR22 crores. Capex for FY ’21-’22 is estimated at INR26 crores. Though significant liquidity has been released, as working capital has contracted, we do endeavor to monetize all of consumer demand going forward. During FY ’21-’22, we may use a small portion of liquidity to increase inventory levels and stock up on products from vendors.

The Board of Directors have recommended a final dividend of 260% on a face value share of INR5 and works out to INR13 per share subject to shareholders’ approval. To conclude, overall the sector fundamentals are strong, and the domestic demand continues to grow at a steady pace.

As we look ahead, we continue to see an immense potential for our products. Healthy demand, coupled with a strong positioning in the industry should further enable us to gain traction and build momentum going forward. On the whole, we are confident of the future growth potential and opportunities across our market over the medium to longer term.

On that note, I would now like the moderator to open up the line for Q&A. Thank you very much.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Arun Baid from BOB Capital Markets. Please go ahead.

Arun Baid — BOB Capital Markets — Analyst

Hi Ayush. Just a few questions on the number front. You know, in this quarter, we did see our gross margins declining significantly both — if I look at the YoY numbers. Any particular reason for that?

Ayush Bagla — Executive Director

There are three contributory factors Mr. Baid. First of all, COGS increased due to two factors, in faucet ware, a sharp increase in the critical raw material of brass and that sharp increase was consistent in every quarter from Q2. So the dramatic price decrease in brass that we saw in Q1 of last year, was beneficial to the company. We did reduce our prices. And as brass prices went up from Q2, Q3, Q4, we increased one price hike last year and one this year, that was one reason. The second impact on COGS was the mold, so post resumption of the factory on 22nd December, it took another 45 days for — to run a maintenance cycle and to build fresh molds for sanitaryware, so that’s one reason why the COGS is impacted.

Arun Baid — BOB Capital Markets — Analyst

So going ahead, this should normalize, right? This is one-off in that?

Ayush Bagla — Executive Director

See COGS, if you look at the last six, seven quarters, has been between 49% and 51% and that’s where we feel it should normalize. So the raw materials in sanitaryware are widely available, there is very little impact in pricing. So clay, feldspar, all of that have very little pricing and availability continues to be plenty. The only moving item in this is brass. So zinc is less than 1% of raw material where the prices have gone up. So brass is a largely contributory factor, and the mold making process completed on 15th February, since then there has been no extraordinary maintenance cycle that the companies had to spend on.

Arun Baid — BOB Capital Markets — Analyst

So sir, incrementally for this year and going ahead, should we look at this quarter margins as the normalized margins, EBITDA margins at least for the time being?

Ayush Bagla — Executive Director

See, we always look at between 14% to 15%. We are at 15.2%. So anything between 14.5% to 15.5% is a good indicator, is not really a guidance, it’s a good indicator, because we see the full effect of the February price hike in Q1 of this year.

Arun Baid — BOB Capital Markets — Analyst

Okay. And sir, today morning in your interview, you had basically indicated that INR130.50 odd crores, it was not a guidance, but that’s the indicator [Indecipherable] with CNBC. So, you had mentioned 70% CAGR after that. Basically, you are going to say that, this growth of 17% to 20% is sustainable beyond FY ’22, am I correct to understand that?

Ayush Bagla — Executive Director

Even if you look at the year that has gone by, 2021, we would have ended with INR13.50 crores. So the lost sales in Q3,, we had given in our last call, was INR65 crores. The lost sales in Q4 have been INR31 crores. So the INR100 crore deficit would have been made up from there. So we would have been INR13.25 crores in any case. So the plant disruption cost us lost sales of INR100 crores, and that demand is way ahead of supply, and that is a phenomena we are seeing from August. There has been no change. The second wave may have closed down a few metro markets, project markets continue to function. Wherever dispatches could be made, they were made, and as markets are opening up, there is again going to be a surge in demand. So demand is not the issue right now, it is just the factory’s ability and vendors ability to supply.

And there is one more interesting factor, we have continuously spoken about us being a Atmanirbhar company and relying on domestic vendors, and that’s why we’ve given out our China numbers consistently, it’s always less than 5% of top line. So, our import from China have consistently been less than 5% of top line. During the year, there was a 11% appreciation of the Chinese currency against the U.S. dollar. So those companies, which were China dependent, which had not built capabilities in their factories, not only were they constrained to import, but they were unable to price their products to pass on those increases to the consumer. So these are a lot of moving parts and each of the moving parts is working in favor of the company right now.

Arun Baid — BOB Capital Markets — Analyst

But in this quarter, current quarter, you know — our production is normalized right, for the plant? Q1? So whatever sales you have lost technically because of COVID in the first quarter, we have been able to catch up with that, because we have the production ready, it will be [Indecipherable] two quarters, right?

Ayush Bagla — Executive Director

That’s right.

Arun Baid — BOB Capital Markets — Analyst

Great. Sir, thank you very much.

Ayush Bagla — Executive Director

Thank you.

Operator

Thank you. Before we take the next question, a reminder to the participants, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. Should you have any follow-up, may we request you to rejoin the queue. The next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah, thank you for the opportunity. Sir, it would be helpful if you could give the mix for FY ’21 and what was the growth or decline in your core categories for FY ’21 that’s the first question. And second, what is the total price hike that you would have taken in FY ’21 which flows to in FY ’22 and did we in some way mention that, there is a possibility of INR1,400 crores plus of sales in FY ’22 is my second question.

Ayush Bagla — Executive Director

So I’ll answer the first question first, for the quarter, sanitaryware was…

Pritesh Chheda — Lucky Investment Managers — Analyst

No, I want for full year sir.

Ayush Bagla — Executive Director

I will give you both.

Pritesh Chheda — Lucky Investment Managers — Analyst

No, quarter four I have, I have written. For full year, if you could repeat?

Ayush Bagla — Executive Director

Okay. So for the full year sanitaryware was 48.51% of top line, faucet ware was 28.28%. Tiles was 20.80% and wellness was 2.41%.

Pritesh Chheda — Lucky Investment Managers — Analyst

And the corresponding growth rates or decline in sanitaryware, faucet ware…

Ayush Bagla — Executive Director

Sanitaryware was a decline of 0.62%. Faucet ware grew 10.49%. Tiles was minus 6.62% and wellness was minus 34.54%. And then coming to price increase, in August, we took a price hike of 3% to 5% across all products, and in February 2021, we took in sanitaryware between 5% to 7% and in faucet ware 8% to 10%.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. Basically — yeah, please go ahead sir.

Ayush Bagla — Executive Director

No, the way the brass prices have behaved, there is a good case to have a intermediate price hike between now and August, so that is under discussion, it may or may not take place, that’s under discussion right now. And the third question was your — the run rate on revenues, right?

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah, you mentioned something on lost sale of ’21 of INR100 crores, using a certain scale of — do you think it was possible [Indecipherable] number?

Ayush Bagla — Executive Director

Because the factory had a 82 day disruption in Q3 and it had a 45 day lower than normal capacity utilization in Q4, complicated products which were made at the factory could not be sourced from anywhere else, because vendors can’t make those products. So lost sales of INR100 crores took place, if you combine Q3 and Q4. So that’s why, if you look at our INR1,201 crore top line, it’s closer to INR1,310 crores in any case. That’s how we are putting.

Yeah. So 16%, 17% growth is a normal run rate. I’m not even looking at this 46% run rate that we had Q4 versus Q4.

Pritesh Chheda — Lucky Investment Managers — Analyst

So you’re saying that 15% to 17% growth rate is possible next year, is how you’re putting on a normalized — on the INR1,200 crore revenue, because you’re assuming that it’s not INR,1,200 crore, but it is INR1,300 crore, that’s how you’re applying?

Ayush Bagla — Executive Director

That’s right.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. And lastly sir on the margin side, aren’t there any levers on the higher scale which can flow through on the margin profile?

Ayush Bagla — Executive Director

There are two, three levers. First, we had a burst in advertising and publicity spends from September ’19 to March ’20 and that’s the reason, advertising and publicity during this lockdown year could be curtailed, because that was a very successful campaign. That’s is one. The INR10 crores of contracts for rentals and godown rents etc were renegotiated, so that was another reduction in fixed costs. And finally, if you look at the ratio of variable costs to fixed costs in the company is 80-20. So that will be a very important operating lever for the company.

And fourth and most importantly, the margin profile for products taken in sanitaryware, especially from vendors, is as close to own manufactured products. So share of outsourcing will increase with increase in revenue, and the margin profile will be maintained. So these are the four levers.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. So because the A&P spend was curtailed this year, right, in ’21, is it a case where it rises, and hence you are still pegging the margin or whatever, 14.5% to 15.5%?

Ayush Bagla — Executive Director

See normally our advertising publicity is 4% of topline, but now, that is no more a rigid rule, because the marketing professionals choose to have these spends in smaller bursts, and then they evaluate the impact and then they go for many bursts during the year. So if a burst remains effective for six months or nine months, then they postpone the next burst. That’s how we calculate the numbers.

Pritesh Chheda — Lucky Investment Managers — Analyst

Can you quantify what is the A&P spend for ’21 as a percentage of sales?

Ayush Bagla — Executive Director

It will be around 1.5%.

Pritesh Chheda — Lucky Investment Managers — Analyst

1.5% versus 4% in ’20?

Ayush Bagla — Executive Director

Correct. 3.5% in ’20.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. Should this go back to the normal?

Ayush Bagla — Executive Director

No, it’s not known right now. These are going to be small bursts, and then post evaluation, a call will be taken. In any case there is a shortage of product. So — yes.

Pritesh Chheda — Lucky Investment Managers — Analyst

Thank you very much sir. All the best.

Ayush Bagla — Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Archana Gude from IDBI Capital. Please go ahead.

Archana Gude — IDBI Capital — Analyst

Hi, sir. Thank you for the opportunity and congratulations on a very good set of numbers. Sir, two questions. Sir, if you see most of the organized players have gained the market share in last two, three quarters may be your pipes or may be your paints. So how are we placed in terms of market share?

Ayush Bagla — Executive Director

See, currently there is no external data available or industry wide data available for us, to be able to conclude any market share. So we consider ourselves to be market leaders. And others will tell you the same thing. Our sanitaryware numbers are well known. So it is HSIL, Cera, and Jaguar are neck and neck, and Parry is one step behind in sanitaryware numbers. We are number two to the market leader in faucet ware. So we know our faucet ware numbers and the other players faucet ware numbers. So, I mean the industry data is not really available or validated by third parties. So for me to compare us on an industry-wide basis is very difficult. In any case, all the MNCs are unlisted. Couple of domestic players, which are held by MNC they’re also unlisted. So it’s very difficult to get authenticated data.

Archana Gude — IDBI Capital — Analyst

Sir, what I was trying to understand is, is that the competitive intensity from the small unorganized players has reduced in last couple of quarters, is what I want to understand?

Ayush Bagla — Executive Director

In sanitaryware, that theme of unorganized to organized has fully played out. Because sanitaryware players provide a 10-year warranty on the ceramic product. There is after-sales service. Similarly for faucet also, we are the only company to provide a 10-year warranty versus a five year warranty by the rest of industry. So after sales service, availability of spares, those have become very critical factors. The price gap for a product that’s going to last to between 10 and 20 years, sometimes is miniscule at the lower end. So that theme of sanitaryware, moving from unorganized to organized is more or less paid out 80% plus of the market in any case, would be organized.

Archana Gude — IDBI Capital — Analyst

Okay. And faucet ware?

Ayush Bagla — Executive Director

Faucet ware, anything between 60% and 70% is organized.

Archana Gude — IDBI Capital — Analyst

Okay. Sure. As there — this second wave of COVID has been like very badly affecting the ruler, which was supporting the Q3 and Q4 sales. So like, how has been April and May for us — is any improvement from June — like beginning June in demand?

Ayush Bagla — Executive Director

See, demand continues to be very strong and the problem for us was supply. The most important factor during the second wave and April and June, was the factory continued to operate at 95% capacity. So whatever little inventory has been built up, will easily get absorbed in June and July. Last year we were grappling with supply issues throughout the year. This year, that is of single-minded focus of the company. So demand is not a issue. Project sites remained open during the second wave in most places, and only retail and dealers suffered, which — their demand will come back very strongly in June-July.

Archana Gude — IDBI Capital — Analyst

Sure sir. And sir lastly, sir, do we have any dividend policy at place?

Ayush Bagla — Executive Director

Yes. Yesterday, a revised dividend policy, which takes into account lot of external economic and internal factors, such as availability of positive cash flow, capex requirements, business risks, all that has been captured in a document. In any case, there is a dividend policy on our website from many years, and that has been revised with a little bit off more focus, with numerical clarity, and that will be immediately placed on the website. It was adopted by the Board of Directors yesterday. So the past dividend guidance of between 14% to 18% of PAT being declared as dividend, that is pretty much the guidance going forward.

Archana Gude — IDBI Capital — Analyst

Sure, sir. Sure. Thank you so much and all the best sir.

Ayush Bagla — Executive Director

Thank you.

Operator

Thank you. A reminder to the participants, please limit your questions to two per participant. Should you have any follow-up, may we request you to rejoin the queue. The next question is from the line of Prakash Kapadia from Anived Portfolio Managers. Please go ahead.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Yeah, thanks. I had two questions. On the real estate sector, we are seeing larger cities demand for you know households being much better this time, as compared to tier-3, tier 4 cities. Historically, what trends have you seen in metro cities and tier 1 cities, see higher demand? Is it easier to sell more value-added products or high value added products? Are we also witnessing that trend and, you know, if that hypothesis is proved, then you know the value growth would be much higher than what we are looking at in the near term?

Ayush Bagla — Executive Director

The metro towns, specially Delhi, Bombay and Bangalore, they look very appealing to all sanitaryware and faucet ware companies. So maximum efforts by any new entrant in the business, especially MNCs, are made in these three markets. So not only is there intense price competition, but company spent a huge amount on display, rentals and renovation of the interiors. Dealers also are very demanding. They want to get a lot of freebies from the company. So we believe that the competitive intensity in tier 1 towns is much higher, and that’s why we historically our numbers have been always tilted towards tier 3 towns.

So if you would like, I can give you the breakup. There is not much change in the percentage. But our focus has always been Tier 2 and Tier 3 towns, where 65% to 70% of our sales take place. Tier 1 towns, of course, we have a significant presence in these three markets, but the competitive intensity and the focus of all MNCs is in these three places.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Even now we are witnessing that trend. We are seeing, there is no major change in terms of metro or tier 2 or tier 3 cities even now.

Ayush Bagla — Executive Director

No, I will give you some data that will give you — throw further light. So — for in Q4, tier 1 was 31% of top line for us, and for the year, it was about 27% of top line. Tier 2 was 14% for the year or so — 14%. Tier 3 was 54% of topline in Q4, and for the year, it was 58%.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Okay. And on tier 2, tier 3 side, in the gone by quarter, most of the lockdown was more broad based this time as compared to the lockdown last year. So how does that demand shape up? Is there a huge pent up demand? Because you know most of the retailers were shut or semi shut practically for 35, 40 days during the quarter. So does that incremental demand also lead to pent-up demand, once things open up. And how do you cope up in that scenario, where you are saying obviously the plant and capacity ramp up seems to be the focus. So, how are we managing the scenario between the possible higher demand and capacity?

Ayush Bagla — Executive Director

See second wave happened in April and May. So till 31st March, there was virtually no impact on any market shutting down. During the second wave, most of our project customers continued to function. Now, the dealers that shutdown, they have nearly staggered their demand. So I would not call it pent-up demand, I will call it a chain of sustainable demand, which has got staggered by 60 or 90 days. So since August, I’ve been saying that this is not any pent-up demand. This is not a must-have consumer durable, its completely discretionary.

But there has been a sequence of events, where a lot of projects have now neared completion, because the end consumer is buying, projects find it easier to complete and sell their inventory, and that’s where we come in. So sanitaryware companies come in the last three to four months of project completion. That has been a real awakening. That’s been a positive surprise and that is fully sustainable. So I don’t see this trend at pent up at all. Even retail customers and dealers are simply staggering their purchases due to the second wave.

The important thing was to keep sourcing from vendors and keep the factory operational. So last May and last April 2020, there was negligible sales. This May and April were decent sales. So we definitely crossed three digits, combined in these two months. So if you compare it to last year, it was much higher. If you compare it to any other normalized year, it was lower, but it will easily be made up in June-July.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Thank you. That helps. Thanks guys. All the best.

Operator

Thank you. The next question is from the line of Saurabh Shroff from QRC Investment Advisors. Please go ahead.

Saurabh Shroff — QRC Investment Advisors — Analyst

Yeah, hi Ayush, congratulations on a great set of numbers. Ayush, my one question is, you’ve mentioned multiple times that demand is much stronger than supply, and I’m guessing this is in your case as well as the industry. Can you help us understand what is our capacity addition plan and do we see any issues in meeting this demand or what are we going to do about it?

Ayush Bagla — Executive Director

See because we have been very careful with capex all these years, we didn’t ramp up capacity in our manufacturing operations, we chose to build up capabilities, and that worked out well for us, because we were neither China dependent and in any case, Indian vendors works not in a position to manufacture many of the complicated pieces of sanitaryware and faucet ware. So each year a new list is made on basic items to be outsourced to third party vendors, and that continues. So as the top line grows, the bulk of the contribution of incremental sales will continue to come from vendors, and our factory will be used to make more and more high end pieces. So if you ask me volumes on the factory, that may not be a good benchmark. But value being made in the factory will continue to increase, both sanitaryware and faucet ware. So I just give you some flavor on the capex, that we have planned.

So for the year, ’20-’21, the total capex budget was INR21.82 crores, of which only INR9.84 crores was spent. And for financial year ’21-’22, the total budget is INR25.59 crores, of which the split is sanitaryware automation is INR6.69 crores; faucet ware automation INR4.97 crores. INR8.4 crores in customer touchpoints and logistics and IT is INR5.53 crores. So there is no major capacity addition planned in the current plan right now.

Saurabh Shroff — QRC Investment Advisors — Analyst

So between this whole outsourcing mix, you think that we should not be at a disadvantage in terms of meeting the strong demand that is there, clearly?

Ayush Bagla — Executive Director

See that’s why we are all looking at all options. First, a lot of cash was released by compressing the net working capital days from 74 to 52. So maybe that 52 needs to go up a little bit, the inventory days needs to go up a little bit from current level of 51 days. So those are under discussion. There are plans being made to increase inventory days, so that we don’t have to turn away any customer like we had to last year. So that’s the single most important factor for the company this year.

Saurabh Shroff — QRC Investment Advisors — Analyst

Okay, got it. And I saw on your website, you all have started some Italian kitchen line as well. I mean, I am guessing it’s still very small, but can you talk us through how you all are thinking about adjacencies and new lines of business?

Ayush Bagla — Executive Director

See, we entered into arrangement with an Italian company, where we would not have to incur, neither any capex nor any opex. So this is a brand called SENATOR Puccini. We take a full advance from a customer, and we design a bespoke kitchen for his home and the designs are then implemented in the Italian partner’s factory in Italy and then shipped to India, where it’s installed. So this is a zero working capital or opex business, and it’s still very small, topline is less than INR5 crores. So as and when it scales up beyond 10 crores, then of course the Board will take a call on what it wants to do with that business.

Saurabh Shroff — QRC Investment Advisors — Analyst

Okay. And any other sort of products that you all have added? There was a whole plethora of wellness products, and now this kitchen line. So I just want to understand, how the Board and the management is thinking in terms of new lines of business designs? What do you think is the potential scale on this kitchen business? Because obviously this is very high end, I guess competing with the big brands — mand correct me if I’m wrong. So, is this a competition with Poggenpohl and Hafele and things like that, or is it more Indian pricing to Italian product?

Ayush Bagla — Executive Director

See it’s right at the bottom of the pyramid, starting at INR2.5 lakh for an entire kitchen. So it competes with even a carpenter’s version of a kitchen, and it can go up to INR15 lakhs and we figured that between INR15 lakhs and INR30 lakhs and beyond, there is a lot of competition. We don’t want to be there. We want to be at the bottom of the pyramid, to get certain volumes. And we got a very good deal from an Italian partner. So that’s where…

Saurabh Shroff — QRC Investment Advisors — Analyst

But INR2.5 lakh — I am sorry, at INR2.5 lakh, this is still all imported landed into India?

Ayush Bagla — Executive Director

Yes, yes.

Saurabh Shroff — QRC Investment Advisors — Analyst

With margins for us and them?

Ayush Bagla — Executive Director

Plus gadgets, plus electronic whitegoods.

Saurabh Shroff — QRC Investment Advisors — Analyst

Okay, got it. Okay. This is interesting.

Ayush Bagla — Executive Director

Then the second question you asked about new SKUs, so I’ll just tell you why our SKU focus remains in sanitaryware and faucet ware. They have plenty of opportunities in sanitaryware and faucet ware, even during these COVID times in sanitaryware, in Q4, we launched 22 products and during the year we launched 75 products. In faucet, during the year, we launched 11 products. So there are plenty of opportunities in these two businesses. And we had, as a pilot project started three years ago, a water heater business, which became a INR8.5 crore to INR10 crore business. So the Board is not very keen to have any of these INR8.5 crore to INR10 crore kind of businesses, which are too small for the company. So gradually, the water heater business will be phased out. So that’s what we mentioned on the wellness side.

Saurabh Shroff — QRC Investment Advisors — Analyst

Sure. Got it. Okay. Thank you and all the best.

Ayush Bagla — Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Achal Lohade from J.M. Financial. Please go ahead.

Achal Lohade — J.M. Financial — Analyst

Yeah, good morning. Thank you for the opportunity. My first question is, how do we look at the tiles business? I mean, it has been a few quarters that we are kind of struggling with the numbers. I mean on a YoY, it is a strong growth of 40%. But if I look at on a two year CAGR, it is still a drop. So how do we look at this business in terms of the scale up? Where are we in terms of the growth aspirations?

Ayush Bagla — Executive Director

See the tiles business have worked out well for us for two, three reasons. First, now soluble salt is only 7% of sales. This is the first time that soluble salt is single-digit, that’s low-end and lowest margin. And GVT plus double charge, is now almost 55% of sales, which is the highest and high margin. So though Cera doesn’t have any market leadership or brand premium in tiles, like it has in sanitaryware and faucet ware, the files business is operating on 50% cash and carry. So again, inventory days are reduced. Inventory days in tiles is close to zero, because there is direct dispatch from vendors to the marketplace. So one-third of our total tiles sales is from our joint venture alliance companies, and two third is from completely third party vendors. So inventory days are close to zero.

And finally receivable days, the tiles industry as a whole has always had a problem of high receivable days. So 50% is cash and carry and all incremental dealers are being added only on 100% cash and carry. And we do not conduct any tile sales below a certain threshold margin. So though the tile sales may not be a very large number, but every sale is profitable and we have incurred no capex. See, if we had put up a plant, then we’re dealing with a lot of issues in our plant and how do you respond to changing design changes and all of those factors. So the decision taken in 2015-2016 was the most important decision not to invest in any capacity.

Achal Lohade — J.M. Financial — Analyst

Right. So how do we look at it in terms of going forward? Is it going to be a big go-to growth driver, or not really, it will be in line with the aggregate growth usage?

Ayush Bagla — Executive Director

It all depends on the tiles market growth. You see, the market leaders are also exporting lot of titles. We have not been in a position to export tiles. So the top line that the market leaders are seeing, is also a result of tiles export. So that is not happening. But overall, profitability in tiles is increasing. We are getting some pricing power, and 55% to 60% high-end sales. So that’s the most important factor.

Achal Lohade — J.M. Financial — Analyst

Right. Right. Understood. And just one more question with respect to sanitaryware. Now if I look at top line for sanitaryware in FY ’19 was close to INR700 crores. For FY ’21 these closed at INR582 crores, and you said that we lost about INR100 crores of revenues, largely in the sanitaryware piece, right?

Ayush Bagla — Executive Director

Correct.

Achal Lohade — J.M. Financial — Analyst

So that means, two years, we were kind of flat, even if I gross it up? So how do we see the growth? I mean, when you say 15%, 17% growth, is it going to be largely driven by the faucet or even sanitaryware can grow at that pace? Given the competitive intensity?

Ayush Bagla — Executive Director

See, sanitaryware we achieved INR581 crores this year, in six months of effective working. And our highest number was INR603 crores of ’19-’20. So we are almost there. On the best, 12 year numbers have been achieved in effective six months. In faucet ware, again we have beaten all previous numbers even the best year numbers have been. So faucet ware is INR339 crores, and we are a market number two in faucet ware. And we are only a 11-year-old player in faucet ware. So 16%, 17% was the growth being offered by the market, even during this year, which we couldn’t monetize. And…

Achal Lohade — J.M. Financial — Analyst

Since you’re talking about. Sorry, sorry I’m interrupting Ayush, this you are talking market growth for faucet or sanitary plus faucet put together?

Ayush Bagla — Executive Director

I’m saying in sanitaryware, we achieved INR581 crores in six months of effective working decision. Our all-time highest number of sanitaryware was INR603 crores. So then you can understand the company’s achievements. So, achieving another 16% and 17% growth, adding another INR100 crores to sanitaryware during 2021 is not difficult, because demand allows that.

Secondly faucet ware, we achieved INR339 crores, which is higher than even the best year of ’19-’20. Again, we got about nine months of effective working in faucet ware. So adding another INR50 crores in this year is not difficult. Whether tiles adds top line or not, these two businesses together can easily add INR150 crores, is what I’m saying.

Achal Lohade — J.M. Financial — Analyst

Right, understood. Understood. And…

Operator

Mr. Lohade…

Achal Lohade — J.M. Financial — Analyst

I’ll come back in the queue. No problem.

Operator

Thank you. The next question is from the line of Rajesh Ravi from HDFC Securities. Please go ahead.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Okay. Yeah, hi, sir. Will you share the quarterly breakup revenues…

Operator

Mr. Ravi, if you can speak closer to the handset please?

Rajesh Kumar Ravi — HDFC Securities — Analyst

Hello, am I audible now?

Operator

Yes, sir.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Yeah. Sir, can you give the revenue breakup for the quarter and last year same quarter please? I missed out?

Ayush Bagla — Executive Director

Yes sure. Sanitaryware is 48.67% of sales this quarter. For the year it’s 48.51%. Faucet ware is 29.81% for the quarter and 28.28% for the year. Tile is 19.70% for the quarter and 20.80% for the year and wellness is 1.82% for the quarter and 2.41% for the year.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Okay. And sir, in terms of our balance sheet, we have significant cash balance and your capex outlook also is — you are not expected to incur major capex, large capex. So what’s the plan for this cash pile up which will continue?

Ayush Bagla — Executive Director

So we had INR230 crores of cash balance when we started the year, 1st April, 2020 and working capital days were 74. So working capital days, which came down by one-third to 52 was one of the reasons why cash in hand increased consistently every quarter, and now we’ve ended up with INR459 crores plus unrealized gains of INR20 crores, making it INR479 crores. Some part of that will be used this year to increase our inventory days. And that’s going to be very important. Capex is planned only at INR22 crores, and each year we had cash surplus, due to profits of between INR118 crores to about INR50 crores. So this year, to add the pact [Phonetic] and depreciation is about INR135 crores and you take away capex of INR9 crores and dividend of INR20 crores, that leaves you again with a cash surplus of INR105 crores even for the year.

So, if your question is, is there a major capex plan currently? We have toyed with a few plans, but no decision has been taken. And then if there is a special dividend or a buyback plan, that also has not been — that is a decision that has not yet come in front of the board. So, no decision has been taken.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Okay. Because what we understand is, even incrementally for FY ’22, given the top line that you are looking at with a healthy margin of around 14%, 15%, you know our cash accrual will be strong, even in FY ’22, even if you factor in the working capital increase, then also you may not have to dig into your FY ’21 balance cash. Is the understanding, right?

Ayush Bagla — Executive Director

That’s correct.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Okay. Okay, sir. And on the segment wise growth outlook, as you mentioned that in sanitaryware, you looking to add at least INR100 crores growth, top line growth this year and INR50 crore in the faucet ware. But when I have to look at two to three year view, what is your outlook? Will they continue to — both these businesses will continue to grow at 15%, 17%, or do you see different growth trajectory for these two business segments?

Ayush Bagla — Executive Director

See the best way to look at that, is to look at the past. So even during the downturn in real estate, the company’s top line doubled itself every five years, and that happened twice between 2010 to 2015, and from 2015 to 2020. So going forward on a higher base, we always estimated that the company will now double itself every seven years. But given the surge in demand, we expect again the company to double itself every five years.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Okay.

Ayush Bagla — Executive Director

So if you look at that, 15% to 17% top line increase is definitely possible, both in the short-term and in the medium term consistently every year.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Okay. And almost…

Operator

Mr. Ravi, sir, sorry to interrupt, but for any follow-up, may we request to the rejoin the queue please. The next question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.

Rahul Agarwal — InCred Capital — Analyst

Yeah, hi, good morning and thanks for the opportunity. Congratulations for a good result. Just two questions Ayush. Firstly on the capex side, when you say INR9 crores to be spent on customer touchpoints, which is basically part of sales and marketing, could you explain a bit as in exactly how — where is this money spent and how does it help in incremental sales? That’s the first question.

Ayush Bagla — Executive Director

So we have company owned 10 large format customer touchpoints in the major metros. And because of the surge in demand in states like AP, Telangana and Karnataka, we put a very large format of between 8,000 to 12,000 square feet customer touch points, which are owned by the company, in Hyderabad and Bangalore, where there are tremendous amount of walk in customers, and these are experiential customer touchpoints. So there are no sales taking place from these, and the customer is then directed to a dealer in his projects area or a dealer contacts them, etc. So we found a direct correlation between surge in sales and spending on these customer touchpoint. These are all either in large format, office buildings or malls or retail outlets or shopping areas. So the Hyderabad one is just opposite to Ikea, in Gachibowli. In Bangalore, we have it on 100 Feet Road. So the best two locations possible. And these are visited by plumbing contractors, civil contractors, architects, homeowners and developers.

Now, we are also toying with a hybrid model, where we go to a dealer, and try and create some uniformity in their retail outlets, design with the customers — with the company-owned experience center. So, by spending INR1 crore, INR1.5 crores on a dealer’s outlet, we can achieve what we would by spending INR3.5 crores on a company-owned outlet. So the hybrid model is under discussion, and the company might open a fewer of its own large format customer touchpoints. The real estate is never owned, it is always rented. So this is largely the interiors and the fit-outs.

Rahul Agarwal — InCred Capital — Analyst

Got it, got it. And secondly, you mentioned on the market share bit. Obviously, there are no numbers sanctity. But still just to discuss, HSIL, Cera and Jaguar you said are neck-to-neck on sanitaryware, Parryware a notch below. And on faucets, we are the number two player? Is this correct?

Ayush Bagla — Executive Director

That’s right.

Rahul Agarwal — InCred Capital — Analyst

And on the market size, basically, if the way I understand, sanitaryware is about INR4,500 crores to INR5,000 crores and faucet is about INR8,500 crores to INR10,000 crores, is that correct? That’s the range to work with?

Ayush Bagla — Executive Director

Sanitary ware, though we really don’t have an authentic number, is a little lower than the number that you mentioned.

Rahul Agarwal — InCred Capital — Analyst

Okay. Okay, got it. That helps. Thank you so much. All the best.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Ayush Bagla for closing comments. Over to you, sir.

Ayush Bagla — Executive Director

Thank you, Steve. I would like to thank everyone for attending this call and for showing interest in Cera Sanitaryware Ltd. Cera remains positive that its strong positioning in the industry and improving macros would help it deliver steady and consistent growth going forward. With this, I hope I’ve been able to answer your questions satisfactorily. Should any of you need any clarification or would like to know more about the company, please feel free to reach out to me or CDR India. Thank you once again for taking time to join the calls, and see you all next quarter. Thank you very much.

Operator

[Operator Closing Remarks].