Finolex Industries Ltd (FINPIPE) Q2 FY23 Earnings Concall Transcript

Finolex Industries Ltd (NSE:FINPIPE) Q2 FY23 Earnings Concall dated Oct. 25, 2022

Corporate Participants:

Anil V. Whabi — Managing Director

Niraj Kedia — Chief Financial Officer

Analysts:

Arun Baid — ICICI Securities — Analyst

Rahul Agarwal — InCred Capital — Analyst

Sonali Salgaonkar — Jefferies Asia Equity Research — Analyst

Chintan Sheth — Sameeksha Capital — Analyst

Praveen Sahay — Edelweiss Wealth Management — Analyst

Arafat Saiyed — Reliance Securities — Analyst

Sandesh Barmecha — Haitong Securities — Analyst

Abhishek Singh — DSP Mutual Funds — Analyst

Ritesh Shah — Investec — Analyst

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Chirag Lodaya — ValueQuest Investment Advisiors — Analyst

Shrenik Bachhawat — LIC Asset Management — Analyst

Vipul Shah — Sumangal Investments — Analyst

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Aasim Bharde — DAM Capital Advisors — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q2 FY ’23 Earnings Conference Call of Finolex Industries, hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Arun Baid from ICICI Securities. Thank you and over to you, sir.

Arun Baid — ICICI Securities — Analyst

Good morning, ladies and gentlemen. On behalf of ICICI Securities, I welcome you all to the Q3 — Q2 FY ’23 Post Results Con Call. We have the senior management of Finolex Industries with us today.

I would request Mr. Anil Whabi to give an opening remark, post which we can open the floor for question and answers. Over to you Anil, sir.

Anil V. Whabi — Managing Director

Thank you, Arun. Good morning, ladies and, gentlemen. On behalf of entire Finolex family, I extend warm greetings and best wishes to you and your family for this festive season of Diwali. Welcome to the investor conference call for Q2 FY ’23 earnings release. We thank you for your continued interest in Finolex Industries. The results of the company for quarter ended 30th September ’22 were approved by the Board of Directors on 21st October. This second quarter is generally a drag on volumes due to monsoon. However, the company has delivered higher volumes over last year, which reflects spur in demand. The financial results for the quarter had a severely adverse impact due to sharp correction in PVC prices against higher priced inventory of raw material and finished goods. The silver lining is that correction in commodity rates could further improve demand from consumers across segments.

The company is well-positioned to sail through this trough of the cycle as it has strong debt-free balance sheet with positive cash flows. Let me give you some of the performance indicators for the second quarter of the financial year. Total income from operations decreased by 13% to INR941 crores against INR1,083 crores in Q2 FY ’22. Loss at EBITDA level was at INR143 crores for Q2 FY ’23 against a profit of INR300 crore in the previous corresponding quarter of Q2 FY ’22. The Company reported loss after tax of INR94 crore in Q2 FY ’23 as compared to the profit after tax of INR235 crore in Q2 FY ’22. Now getting into segmental performance. In Pipes & Fittings, the revenue fell by 11% to INR802 crore in Q2 FY ’23 from INR899 crores in Q2 FY ’22. Volumes was up by about 7% Y-o-Y to 59,218 metric tons compared to 55,453 metric tons in the corresponding last quarter. The EBIT in Pipes & Fittings segment was INR57 crores in the last year in Q2 compared to the loss of INR48 crores during this quarter of Q2 FY ’23.

Moving to PVC Resin segment. Revenue in the Resin segment decreased 26% from INR654 crores in Q2 FY ’22 to INR481 crores in Q2 FY ’23. Volume in Resin segment grew by 4% to 54,063 metric tons in Q2 FY ’23 against 52,029 metric ton in Q2 FY ’22. Loss at EBIT level in the Resin segment was INR111 crores in Q2 FY ’23 compared to the profit of INR231 crores in the corresponding previous year’s quarter. The company continues to have a strong balance sheet with a net cash surplus of roughly about INR1,300 crores as on 30th September ’22.

Let me now leave the floor open for questions. I have my colleague, Niraj, also to take the questions. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.

Rahul Agarwal — InCred Capital — Analyst

Hi, sir. Good morning and wish you all also a very Happy Diwali. Sir, few questions from my side. Firstly on the EBITDA loss, is that entirely driven by inventory loss or is there any other element to it like ForEx or anything else? If we adjust for these, what is the EBITDA adjusted number we should look at? Either ways you can give it on EBITDA per ton basis for Resin or Pipes segments or the overall absolute EBITDA number. That’s my first question.

Niraj Kedia — Chief Financial Officer

Good morning, Rahul. Happy Diwali to you too. So, am I audible?

Rahul Agarwal — InCred Capital — Analyst

Yes, you are.

Niraj Kedia — Chief Financial Officer

So Rahul, you are right. See in terms of ForEx, there was no major swing per se and because we didn’t have much of borrowings because September quarter is when we kind of repay all our short-term loans. So, ForEx did not have a material adverse event. But most of the numbers that you see on the negative is because of inventory loss.

Rahul Agarwal — InCred Capital — Analyst

So if we adjust for that, what is the normalized EBITDA number like? From a business perspective, what is the profitability of the business in the quarter?

Niraj Kedia — Chief Financial Officer

See if you remove this — I’m just trying to think how do I put this. See, if this is…

Anil V. Whabi — Managing Director

See Rahul, this inventory loss impact was there in Q1 also. If you see Q1 and Q2, the PVC prices have fallen by 30%. So first quarter we did show some profit, but it was compressed and in the second quarter there is a loss. And our normal EBIT levels are about INR8 to INR10 a kg in pipes and about INR15 a kg in PVC segment.

Rahul Agarwal — InCred Capital — Analyst

Okay. So, I can back-calculate using those numbers, is that correct?

Anil V. Whabi — Managing Director

Again that is difficult. I mean quarter-on-quarter, you won’t see these numbers because of the volatility. But these are general numbers, yes.

Rahul Agarwal — InCred Capital — Analyst

Yeah. I mean I understand because of volatility, it’s tough to get to that number. But that is what I really wanted to understand that if I assume INR8 to INR10 per kg and INR50 per kg for resins, will that give me enough decent idea for the quarter on a business level? Is that okay?

Anil V. Whabi — Managing Director

For a year. See quarter-on-quarter, you will see this variation. Even Q3 will have some spillover impact of Inventory losses.

Rahul Agarwal — InCred Capital — Analyst

Okay. That’s the next question actually I had that because we are seeing PVC pricing further falling even in October, is this loss thing done with or could we also see a similar situation because it’s still higher than the pre-COVID level. So let’s say if it goes down to INR70, are we seeing more markdowns next quarter as well?

Anil V. Whabi — Managing Director

The major part of if it is done within Q2, some effect will be there in Q3. You’re right, INR3 it has fallen and there is an expectation of further correction probably in next two weeks.

Rahul Agarwal — InCred Capital — Analyst

Okay. Got that. And PVC, ethylene, EDC, and VCM if you could give the pricing for 2Q average and what are they currently at?

Niraj Kedia — Chief Financial Officer

Just a minute. So today at the end of September — on 28th September, the PVC-EDC delta was roughly $75 and PVC-VCM delta was $165. During the quarter, the PVC-EDC delta was $600 and PVC-VCM delta was $235.

Rahul Agarwal — InCred Capital — Analyst

Got it. Anything on ethylene, please?

Niraj Kedia — Chief Financial Officer

Ethylene delta generally we don’t compute because it’s a very small component. I mean do you want pricing, what is the detail?

Rahul Agarwal — InCred Capital — Analyst

Yes, just the price.

Niraj Kedia — Chief Financial Officer

So ethylene for the quarter was $975. It ended September at $900.

Anil V. Whabi — Managing Director

And Rahul, if you look at it today, this PVC-EDC delta has come down to $510 because of drop in PVC prices.

Rahul Agarwal — InCred Capital — Analyst

Got it, sir. Thank you so much. I’ll come back in the queue. Thank you and all the best.

Operator

Thank you. The next question is from the line of Sonali from Jefferies. Please go ahead.

Sonali Salgaonkar — Jefferies Asia Equity Research — Analyst

Sir, thank you for the opportunity and warm wishes for Diwali to you and your team. Sir, my first question is could we get the PVC-EDC and PVC-VCM delta for Q2 FY ’22? That’s the same quarter last year, please.

Niraj Kedia — Chief Financial Officer

Subsequent Q2, is it? So PVC-EDC delta last year same quarter was $790 and PVC-VCM delta was $391.

Sonali Salgaonkar — Jefferies Asia Equity Research — Analyst

Understand. Sir, from the current trend of PVC, what — sorry. What was the PVC price as of 28th September and what it is right now and what’s the kind of correction that you said you expect in the coming few weeks?

Niraj Kedia — Chief Financial Officer

So, end of September it was $900 PVC. Last week it was — it has come down to $830.

Sonali Salgaonkar — Jefferies Asia Equity Research — Analyst

Understood. Got it.

Niraj Kedia — Chief Financial Officer

And regarding the drop as we just discussed, INR60 has fallen just now. Okay. And market sentiments are slightly weaker on the PVC front. Again lot of other factors, which are impacting it is dumping from China and all of that. So in the next two weeks, there is a feeling in the market that this will go down further. By how much and when? That remains to be seen.

Sonali Salgaonkar — Jefferies Asia Equity Research — Analyst

Understood. Sir, but structurally where do you think PVC can stabilize from here on? I mean we have seen such a sharp drop YTD in PVC, what do you think or rather your take on the near-term of PVC given its global factors?

Niraj Kedia — Chief Financial Officer

See, before 2020 March I would say, historically, PVC was trending between $900 — $850, $900, $950 and that has been the average for many years. This sharp decline that we see, we must also appreciate the fact that in the last two years PVC also almost doubled. So, there was a sharp increase also and for which the benefits also we kind of reaped. This was — and we’ve always been saying that $1,500, $1,600 of PVC that is not sustainable. It was a matter of time when the prices came back to the normalized levels. In my personal opinion, these are pretty much there. They have almost bottomed out. Some more negative sentiment that we see around is mostly driven by demand and dumping of stock in the country. So if global factors slightly improve, China opens up; we should see some stability. But until that happens, I don’t think there is a very material downside left when it comes to drop in PVC prices now. Because right now at INR83, INR81; we are almost at the normal levels.

Sonali Salgaonkar — Jefferies Asia Equity Research — Analyst

Understood. Sir, my second question is regarding CPVC volumes and revenue if you could help for the quarter and same quarter last year, please.

Niraj Kedia — Chief Financial Officer

So CPVC during the quarter Pipes & Fittings, we did 4,000 tons and this was 3,600 tons last year.

Sonali Salgaonkar — Jefferies Asia Equity Research — Analyst

And the revenue?

Niraj Kedia — Chief Financial Officer

In terms of revenue, it was INR170 crores versus INR125 crores last year.

Sonali Salgaonkar — Jefferies Asia Equity Research — Analyst

Got it. Sir, also what is our agri to plumbing mix right now for the quarter and do we still expect plumbing to come up to about 50% over the next three, four years?

Niraj Kedia — Chief Financial Officer

Yes. So, our year-to-date in terms of tonnage; agri was 31.69%. During the quarter non-agri was 37%.

Sonali Salgaonkar — Jefferies Asia Equity Research — Analyst

Got it. Sir, and my last question. How do you see the demand trends on the ground both for agri and plumbing right now and what is the current inventory level in the channel? That’s it from my side.

Niraj Kedia — Chief Financial Officer

See, demand per se — the good thing about all this falling prices and all is that we always keep on talking about muted demand, people deferring their decisions and all. It is difficult to put a number to it, but that is the general sense that we get. But with PVC coming back to normal levels, we feel that demand should pull-up and we are pretty optimistic and positive about this. If you look at this quarter also, this is highest tonnage that we’ve achieved in Q2 ever and while the prices have come down, profitability has taken a hit, the volumes have grown even in this quarter compared to last year. So, this is actually a good thing and this prices correction had to happen one day. In another term, you can say that it’s good that they happened very quickly so whatever has to be — whatever was to be there, it has happened and now it should be a positive for the industry. And in terms of channel inventory, channel inventory generally is lower and it continues to be low.

Sonali Salgaonkar — Jefferies Asia Equity Research — Analyst

Understood. Thank you, sir.

Operator

Thank you. The next question is from the line of Chintan Sheth from Sameeksha Capital. Please go ahead.

Chintan Sheth — Sameeksha Capital — Analyst

Thank you for the opportunity and greetings for the Finolex team. Am I audible?

Niraj Kedia — Chief Financial Officer

Yes, Chintan bhai, you’re audible.

Chintan Sheth — Sameeksha Capital — Analyst

Thank you. So Whabi, if I have to understand inventory write-off is one — one aspect is because we are still carrying high cost inventory which we have reversed based on the current prices. The other aspect about it is the conversion which we did of the high inventory and sold it in the bucket. That is the — that is not a national loss or the inventory write-down, it’s actual loss which we have incurred during the quarter, right? The inventory which we have built in the previous quarter and we have used the material this quarter to manufacture and sell it in the market. So, some portion of this is real loss rather than the inventory led loss. Would that be the right understanding? And second is on the Pipes front. When we see the write-down like this on the PVC front, it eventually our PVC pipes business because that’s the end product. But this quarter we have seen the losses in that segment to be far severe. So, what should be understood from that if you can explain that?

Niraj Kedia — Chief Financial Officer

Yeah. So see, inventory loss as you rightly said, it is both. Now there is no defined definition of inventory loss. So when if I have stock which I had bought at a higher cost when raw material cost was higher and per this is a commodity business, I have to pass on whatever changes in the prices of finished goods. So now it is on how do you view it? Somebody would view it as inventory loss only. Somebody — because see, it is not a normal trading or shrinking of margins. It is the passing of raw material prices changes or finished good price changes to the end customer. So this quarter had, as you rightly said, both. We had — we were carrying inventory, which was high cost. When we sold it, at that time also we had to sell it below the cost and at the same time at the quarter-end to make the inventory levels reflect as per accounting standards the right numbers, that write-down was also taken. So, both these things together.

Operator

Seems like we lost the connection for the current participant. We move to the next question from the line of Praveen Sahay from Edelweiss Wealth Management. Please go ahead.

Praveen Sahay — Edelweiss Wealth Management — Analyst

Thank you for taking my question. Sir, the first one is can you give the number for the fitting revenue?

Niraj Kedia — Chief Financial Officer

So during the quarter, we sold 7,000 tons of fittings and INR200 crores of in terms of the numbers.

Praveen Sahay — Edelweiss Wealth Management — Analyst

Okay. Second question is related to the CPVC realization. So if I look at and calculate as per the numbers you had given on the sequential on the volume side is from the higher side whereas the PVC we had seen could decrease in the realization. So what we had seen in the past year the narrowing of the pricing of PVC and the CPVC, I think that widening, is it still going on and like why is it not falling?

Niraj Kedia — Chief Financial Officer

Yeah. So, I’ll tell you. I mean this is something very strange. CPVC prices — see in PVC price passing on and price movement is almost real-time. But CPVC for some reason does not follow the same trend and this is how industry has been working. I don’t have an answer to that why CPVC does not follow PVC pricing so closely. Probably one guess would be that in the overall terms the volume of CPVC still is very less in the overall market, domestic as well as global. So that may be one of the reasons, but it is hard to assign one particular reason why CPVC prices don’t tail PVC prices on a much regular basis.

Anil V. Whabi — Managing Director

No. The other reason is that there are very few suppliers of CPVC so that is why they are able to sustain the higher prices.

Praveen Sahay — Edelweiss Wealth Management — Analyst

Okay. Got it. And the second question, sir, related to the PVC. So as you had already mentioned that the PVC prices have fallen and there is a lot of the China dumping happening. So, is there any move from the government for a new safeguard duty or something?

Niraj Kedia — Chief Financial Officer

See, I think representations have gone to the government, but nothing has come up as of now.

Anil V. Whabi — Managing Director

No, the action has started. It will take some time, but there will be some action, yes.

Praveen Sahay — Edelweiss Wealth Management — Analyst

Okay. But still we are seeing the falling of the PVC resin prices continue because of our…

Anil V. Whabi — Managing Director

No. In fact after the investigations have started, this dumping has slowed down.

Praveen Sahay — Edelweiss Wealth Management — Analyst

Okay. And what is the current — in the INR term, what’s the current rate — trading rate of the PVC resin?

Anil V. Whabi — Managing Director

The market price is around INR79, INR80.

Praveen Sahay — Edelweiss Wealth Management — Analyst

Okay. Thank you, sir. That’s it and Happy Diwali to everyone.

Operator

Thank you. The next question is from the line of Arafat from Reliance Securities. Please go ahead.

Arafat Saiyed — Reliance Securities — Analyst

Yeah. Hi sir. Thanks for taking my question. As we discussed that PVC prices are not close to the bottom, but I just want to understand is there risk that it can go further down?

Niraj Kedia — Chief Financial Officer

That could be anybody’s guess, Arafat.

Arafat Saiyed — Reliance Securities — Analyst

Okay. So on your — next question on your margin. So what is the steady-state margin you can expect for next couple of quarters on these prices?

Niraj Kedia — Chief Financial Officer

See, next couple of quarters it will depend on how volatile PVC prices are. But on a steady-state basis if you see our past also, roughly INR8 to INR12 a kg is what we expect on the Pipe segment and around INR15 in PVC.

Arafat Saiyed — Reliance Securities — Analyst

Okay. And my last question, sir. Just want to understand how the demand outlook especially from the government for especially demand — especially agri demand which can drive the growth for next couple of quarters? So, any thought on that?

Niraj Kedia — Chief Financial Officer

See, as I also said earlier, demand should improve. That is our sense. We are having — we are looking at positive vibes from our channel partners. So hopefully with these prices, demand should be there.

Arafat Saiyed — Reliance Securities — Analyst

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

Operator

Thank you. The next question is from the line of Sandesh Barmecha from Haitong. Please go ahead.

Sandesh Barmecha — Haitong Securities — Analyst

Good morning, sir, and a very Happy Diwali. Sir, I have few questions. To start with sir, by when do we expect proceeds from the sale of remaining land bank to come in and any plans of utilizing the excess cash-in the book in the form of special dividend or buyback?

Niraj Kedia — Chief Financial Officer

Sandesh, hi. So, almost half of the land we disposed of in the last financial year itself and the entire proceeds — the entire cash was received before the end of the financial year. On the remaining bit, there is nothing which will happen as of now. You might be also alluding to a report or a news article which was floating around last week or couple of weeks ago. That actually was a mistimed article. The transaction which it referred to was the same transaction which we concluded in the March 2022.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. On the part of the excess cash in the book, anything from a special dividend or cashback — buyback sorry?

Niraj Kedia — Chief Financial Officer

Yeah. When the appropriate time comes, this will be — if we cannot able to deploy in the business, this will be returned to the shareholders either as a special dividend or something of that sort.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. Sir, just want to understand something, sir. What would be the difference between PVC agri pipe and HDPE pipe at the moment, sir?

Niraj Kedia — Chief Financial Officer

You mean to say difference in terms of…

Sandesh Barmecha — Haitong Securities — Analyst

Pricing and usage, sir. What is the difference between the two?

Niraj Kedia — Chief Financial Officer

Mr. Whabi would like to answer that because I’m…

Anil V. Whabi — Managing Director

See, if you talk today, the HDPE prices are lower. So if we look at the raw material prices, of course HDPE prices are — after correction of PVC prices, they would be at similar level. The densities differ. Generally in India the usage of HDPE pipes is very limited because it requires special technology to connect, the fusion technology, which is not generally available with the plumbers. So in common use, PVC pipes are used. But for smaller diameters in some cases like gas distribution and other cases or some other uses, these HDPE pipes are used but the use is very limited.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. Sir, just two questions. Sir, how many SKUs Finolex has at the end of September ’22, sir?

Niraj Kedia — Chief Financial Officer

2,000 plus. I don’t have the exact count as of now, but it is 2,000, 2,100 roughly.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. And last question, sir, what will be our total capex outlook for FY ’23 and ’24?

Niraj Kedia — Chief Financial Officer

FY ’23 we should be targeting for roughly INR250 crores — INR200 crores, INR250 crores.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. And ’24, sir, anything planned, sir?

Niraj Kedia — Chief Financial Officer

Generally our replacement capex is roughly at INR150 crores, INR200 crores and that should continue.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. Great, sir. Thank you, sir. Good day and Happy Diwali.

Operator

Thank you. The next question is from the line of Abhishek from DSP Mutual Fund. Please go ahead.

Abhishek Singh — DSP Mutual Funds — Analyst

Hi sir. Thanks for the opportunity. Sir, in terms of you mentioned that prior to the crisis in March 2020, PVC prices used to be in the range of INR70 to INR80. But if you see on overall there is an inflation in terms of crude being much higher now and also the EDC costs have increased, sir. How should one look at in terms of cash cost profitability as far as production of PVCs are concerned globally?

Anil V. Whabi — Managing Director

See, you are right the inflation is there so conversion cost to a certain extent would have gone up. But PVC prices are not really connected to the crude prices and it would depend again if the PVC prices are down, with a lag of time EDC prices also tend to come down. Today EDC prices are also low because caustic soda industry is doing pretty well, caustic soda prices are fairly high, and PVC demand being low that is why EDC prices have also come down. So, there are multiple factors. But going forward we believe that if the prices of PVC fall and fall below the breakeven point, the supplies will be cut off. Many producers will curtail production. So, again the prices would tend to correct and this spread normally which we talk about of INR550 should come back. If we talk of today, it has come below that normal level, it is now today at $510. But let’s see what lies ahead.

Abhishek Singh — DSP Mutual Funds — Analyst

And sir what’s the outlook on incremental PVC, take in India, they all are not making any capacities because of no certainty of EDC. So what’s the outlook over the next couple of years in terms of higher EDC capacities coming through or PVC capacities, any color on that?

Anil V. Whabi — Managing Director

See, in the domestic market we understand that some capacities will come up in next few years. But globally if you see, there are just enough EDC supplies to — for the existing PVC capacities, so there will be some addition to PVC capacities, globally very low addition, India being a major consumer, yes, the capacity will be added here and — but at the same time for these capacity additions we understand the EDC capacities are also coming up in Gulf region.

Abhishek Singh — DSP Mutual Funds — Analyst

Okay, okay. Sir, just one more thing is, we have seen you all have reported losses given the sharp decline in PVC prices. Sir, how should one read the competitive intensity as far as the unbranded or the unorganized players are concerned, in terms of their ability to absorb losses, but at the same time, few quarters back they also had issues of they’re not able to source enough supply. So in light of these two aspects, how should one look at the competitive intensity from the unbranded and unorganized players?

Anil V. Whabi — Managing Director

See, unorganized or unbranded have never been the competition. They do have certain volumes of the market, but they have not been the competition. And unorganized sector has been suffering, not only in this previous quarter, but since last two years also when the PVC prices went up, there were supply disruptions. So, it was difficult for them to operate, but at the same time it is very easy for such units to just close down during such difficult times and again start operating when the times are normal.

Abhishek Singh — DSP Mutual Funds — Analyst

Okay, okay. And sir, just one last question in terms of the regional presence, have you reached any distribution or anything to improve your regional presence, anything on that sort in terms of more of presence in East or North or Southern region, anything on that regional presence aspect?

Operator

The South and West are our core markets and that we continue to be our core strengths. But our presence is pan-India, we have supplies to as far as Himachal in the East and even in Kashmir. So that presence wise there is not a — any large area that we are not covering per se. But South and West are our strong points or strong areas.

Abhishek Singh — DSP Mutual Funds — Analyst

Okay, sir, thank you so much and wish you all the best.

Operator

Thank you. The next question is from the line of Ritesh Shah from Investec. Please go-ahead.

Ritesh Shah — Investec — Analyst

Yes, hi sir, thanks for the opportunity. A couple of questions. First, Whabi sir, you indicated like safeguard duties, something has actually happened, can you elaborate at what stage of the process the government is at and what sort of industry representation has gone in, specifically for the safeguard duties?

Anil V. Whabi — Managing Director

Ritesh, actually nothing has happened so-far. I just said that the discussions have started and there is some inquiry investigations going on. Well, it will take little time, these things take little time.

Ritesh Shah — Investec — Analyst

Sure. But sir, any indication on what sort of duties can be expected?

Anil V. Whabi — Managing Director

No. I don’t think we can expect what corrective actions will be taken. But I’m sure this issue will be addressed.

Ritesh Shah — Investec — Analyst

Okay, that helps.

Anil V. Whabi — Managing Director

See, what the industry taken-up is, we see in presence more than two PPI, which is normally lower in ethylene based supplies. So that has been taken-up and let’s see what happens.

Ritesh Shah — Investec — Analyst

Sure, sir. Sir, my second question is, I think in one of your earlier questions, you indicated agri, non-agri mix at 31% and 37% for Q1 and first-half. I presume this is on volumetric terms, did I hear it, right?

Niraj Kedia — Chief Financial Officer

Yes, yes, in volume.

Ritesh Shah — Investec — Analyst

And what would be the same numbers for last year?

Niraj Kedia — Chief Financial Officer

So last year’s. Q2. On agri was 42% and it is 37% this quarter. But this year in Q1 it was 27% against 24% last year.

Ritesh Shah — Investec — Analyst

Sure. And sir, on CPVC you indicated 3,600 tons and 4,000 tons, right?

Niraj Kedia — Chief Financial Officer

Yes, last year to this year.

Ritesh Shah — Investec — Analyst

So sir, my question is basically if I just do a simple math of pertinent realization on PVC Pipes & Fittings divided by PVC Resin prices, we see a significant delta of like 1.52 times, now this is the highest number which I’ve see since FY15. So, the mix change is not huge basically if you look at CPVC or agri or non-agri, then how should we understand this ratio bump of PVC Pipes & Fittings by, PVC Resin? Is it a function of discounts or how should one look at it?

Niraj Kedia — Chief Financial Officer

So you are looking at — but what number are you taking for the Resin, I mean, it’s a one day number, quarterly average number, what is it that you are looking at?

Ritesh Shah — Investec — Analyst

It’s a Q2 FY23 number, so I’m looking at per kg price for PVC Pipes & Fittings divided by PVC Resin price, this is the reported numbers on realization. So I’m just looking at it on a per kg basis and dividing that, so it comes to 1.52 times.

Niraj Kedia — Chief Financial Officer

Okay, I got it now, in terms of absolute numbers, do you see that difference, because see PVC price is coming down, but percentage may have gone up, just look at your math probably, Ritesh.

Anil V. Whabi — Managing Director

Ritesh, that may not signify anything much, because when you are talking about quarterly numbers of PVC transfer, obviously the impact of PVC drop is higher in that number, while in Pipes & Fittings, it is a matter of mix also and other factors as well.

Ritesh Shah — Investec — Analyst

Okay. Sir, it seems a bit counter-intuitive because or it can be like for Pipes & Fittings has the prices not gone down in the equal proportion to what we have seen in PVC Resin prices or basically the discounts on Pipes & Fittings would have been lower?

Anil V. Whabi — Managing Director

See, as such there are other factors also. So it is difficult to put number on each factor.

Ritesh Shah — Investec — Analyst

That’s right. Sir, which would be the other factors besides the mix-agri, non-agri, CPVC?

Anil V. Whabi — Managing Director

See, discounts, periodic discounts, so they do not necessarily match the PVC supplies coming in.

Ritesh Shah — Investec — Analyst

Okay. Okay, sure sir, I’ll call you separately to understand this better, sir. Sir, my next question is, basically if we look at the EBIT per kg drop for PVC Pipes & Fittings versus PVC Resin, in case of Resin, it’s a very severe drop, whereas in case of PVC Pipes & Fittings, which actually moved up a little back. Sir, how should we understand it if one is looking at inventory, if one wants to understand the inventory loss. So, should we look at the quantum of PVC inventory which was sitting in Resin business and the differential in pricing being the same and that is the reason which contributed to a sharp dip on EBIT per kg on PVC Resin versus Pipes & Fittings?

Anil V. Whabi — Managing Director

See, obviously in Pipes & Fittings, 70% to 80% is the PVC content. So, that is only reason.

Ritesh Shah — Investec — Analyst

Okay, perfect. And sir last question, is there any scope at all, wherein the company we might look to divest either the Pipes & Fittings business or the Resin making operations or look to demerge, is there any probability of either of these events happening?

Anil V. Whabi — Managing Director

Nothing on the discussions right now.

Ritesh Shah — Investec — Analyst

Okay, sure. And sir last question, anything incremental on the capex side that we have planned anything upstream?

Anil V. Whabi — Managing Director

Sorry.

Ritesh Shah — Investec — Analyst

Any capex plans basically to get the mass balance right on the EDC, ethylene and VCM?

Anil V. Whabi — Managing Director

No nothing, no capex planned in PVC segment except replacement assets.

Ritesh Shah — Investec — Analyst

Okay, okay. And sir, do we have a timeframe by when we will actually conclude that, cash will actually materialize to payouts or something else, because we have been indicating to the investors that once we — when something on the capex fructifies then we’ll let you know. Is there a time-frame that we have in mind for this particular variable, because of the —

Anil V. Whabi — Managing Director

There is no strict timeframe, but yes within the reasonable time it should happen.

Ritesh Shah — Investec — Analyst

Okay, okay, so that — should one presume to be two quarters or something?

Anil V. Whabi — Managing Director

That, Ritesh, is difficult to say.

Ritesh Shah — Investec — Analyst

Okay, sure sir. Thank you so much for the answers and wish you Happy Diwali.

Anil V. Whabi — Managing Director

Happy Diwali to you, thank you.

Operator

Thank you. The next question is from the line of Bobby Jay from Falcon. Please go-ahead.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Hi, can you explain the —

Operator

Sir, sorry to interrupt, but if you can take the phone off speaker please, your audio is not clearly audible.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Am I better?

Operator

Yes sir, please proceed.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Hello. Yes, could you explain the structure of the PVC market in India, how much of it is catered to by imports?

Anil V. Whabi — Managing Director

By import cement?

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Yes.

Anil V. Whabi — Managing Director

Yes, so roughly 50% is imported, 3 million tons to 3.5 million tons is the requirement for the country, of which roughly 1.5 million tons to 1.7 million tons are made in the country and balance is imported.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Right. I mean given that India is one of the few markets where the construction sector is actually growing, why do you think imports still happen.

Anil V. Whabi — Managing Director

Because presently I would say the capacity for the production in the country is not as much as it is needed to meet the demand, that’s the only reason.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Yes, right. My question is, why still — why isn’t more capacity coming or why aren’t you increasing capacity? What’s the rationale for imports, given India is such a big market.

Anil V. Whabi — Managing Director

See, globally there are adequate capacities available and this being a business where the volatility in the prices rules and it’s capital-intensive. So possibly that is why nobody has invested in the domestic market.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Right, is there a — what is the advantage China has, because ethylene is a petrochemical product and China doesn’t have any advantage there, so how are they able to make PVC so cheaply?

Anil V. Whabi — Managing Director

No. They make ethylene based but the large part of supply comes from carbide based supplies, which involves coal burning.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

So, they do it through the carbide route.

Anil V. Whabi — Managing Director

Yes.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Okay, but India has ample coal too, though.

Anil V. Whabi — Managing Director

No, in India there is a very small capacity coming through that route. So generally world over this is discouraged because of environmental issues.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

But the thinking was that China would stop this because of environmental issues right, and there wouldn’t be [Speech Overlap] but that hasn’t happened?

Anil V. Whabi — Managing Director

In fact three years back there was some news that they have stopped. But then with PVC prices again going out beyond $1,000 the supply started coming in, then we heard that no new capacities are being added up. But we are not sure. Today again since demand in China is low, this carbide route material is being dumped outside.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

And the market doesn’t differentiate between, in terms of prices for the carbide road and the —

Anil V. Whabi — Managing Director

Carbide route prices are generally $20 to $50 lower than the ethylene based supplies.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Okay, so that will give you a bit of an advantage way, right?

Anil V. Whabi — Managing Director

Yes.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Right. And does this — is the PVC, the price almost crash that has happened, does that also apply to ECH?

Anil V. Whabi — Managing Director

Sorry?

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Does the PVC price, the decrease that has happened, does that also imply to ethylene?

Anil V. Whabi — Managing Director

You mean VCM?

Bobby Jayaraman — Falcon Investment Advisors — Analyst

No. ECH. Ethylene carbohydrate, the —

Anil V. Whabi — Managing Director

That I wouldn’t know.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Okay.

Anil V. Whabi — Managing Director

You mean EDC —

Bobby Jayaraman — Falcon Investment Advisors — Analyst

So the VCM —

Anil V. Whabi — Managing Director

EDC prices have come down, but they always do come down with a lag.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Okay, it makes sense. Great. Thank you very much yeah.

Operator

Thank you. The next question is from the line of Chirag Lodaya from ValueQuest. Please go-ahead.

Chirag Lodaya — ValueQuest Investment Advisiors — Analyst

Yes, thank you for the opportunity. Sir, my first question was on, what would be the average price for the quarter for us, PVC prices?

Niraj Kedia — Chief Financial Officer

PVC prices you meant?

Chirag Lodaya — ValueQuest Investment Advisiors — Analyst

PVC prices average for us that what rate we would have consumed?

Niraj Kedia — Chief Financial Officer

The PVC prices was $1,020.

Chirag Lodaya — ValueQuest Investment Advisiors — Analyst

For us, for the quarter right?

Niraj Kedia — Chief Financial Officer

These are the average PVC prices for the quarter.

Chirag Lodaya — ValueQuest Investment Advisiors — Analyst

Second is with that — within next two weeks time, there is a possibility PVC prices will do down [Speech Overlap].

Operator

Sir, your audio is breaking up sir, if you can take the phone off speaker please.

Chirag Lodaya — ValueQuest Investment Advisiors — Analyst

Yes, now it’s better?

Operator

Yes.

Chirag Lodaya — ValueQuest Investment Advisiors — Analyst

Well, to understand, what is the current prices today.

Niraj Kedia — Chief Financial Officer

Sorry, we are not hearing you —

Operator

May we request you to move to a better reception area please, your audio is breaking up a lot.

Niraj Kedia — Chief Financial Officer

Sorry, we can’t hear you.

Operator

It seems like we lost the connection for the participant. We’ll move to the next question from the line of Rahul Agarwal from InCred Capital. Please go-ahead.

Rahul Agarwal — InCred Capital — Analyst

Yes, thank you for the follow-up. Sir, I understand that calculating inventory losses are difficult, but this time around we have taken a mark-to-market on the closing inventory for September, could you quantify that number please?

Anil V. Whabi — Managing Director

Mark-to-market is one part of it, which is provided, after marking to the net realizable value also, the inventory value is high, which would impact the current quarter, and during the quarter whatever sales happened also, there were many instances where the realization was more than the cost, but you see compressed margin because of high-cost in raw-material we use for fall in PVC pipe prices.

Rahul Agarwal — InCred Capital — Analyst

I understand that sir, what I was referring to was the September balance sheet or the closing inventory number, what was the inventory loss on that M2M, just the markdown.

Anil V. Whabi — Managing Director

I don’t have that number.

Rahul Agarwal — InCred Capital — Analyst

Okay, okay. And in your opening commentary, Whabi ji, you said there is some reflection of demand going up purely because of pricing is now like pretty cheap, but obviously because we’re not settling down, there is no clear-cut channel filling happening by trade. But second-half, do we see growing on-sale volumes Y-o-Y or you think that is still a challenge depending on, if these prices settled down, that can happen or otherwise it’s still like a black-box?

Anil V. Whabi — Managing Director

No, what is expected is that, prices now will settle down. And the fillers that we get from the marketplaces also, once that happens, the volumes should pickup.

Rahul Agarwal — InCred Capital — Analyst

So there is a possibility of us growing in second-half Y-o-Y on volumes, we did like almost 120,000 tons for both segments last year. I think that’s a decent number to have.

Anil V. Whabi — Managing Director

Yes, so let us see, the time will tell.

Rahul Agarwal — InCred Capital — Analyst

Okay and one last, just a clarification on capex. I think, first half, you’ve done about INR66 crores, we are guiding for INR200 crore, INR250 crore, that is largely maintenance and we should see a catch-up happening in second-half, is that correct?

Niraj Kedia — Chief Financial Officer

Yes.

Rahul Agarwal — InCred Capital — Analyst

Okay, thank you so much for answering my questions, sir, all the best.

Bobby Jayaraman — Falcon Investment Advisors — Analyst

Thank you. The next question is from the line of Shrenik Bachhawat from LIC Asset Management. Please go-ahead.

Shrenik Bachhawat — LIC Asset Management — Analyst

Hi sir, thanks for the opportunity. Sir, my first question is, agri volumes have been weaker in the past season, so what is our view on the pent-up demand and how can it benefit in the upcoming agri season for us?

Niraj Kedia — Chief Financial Officer

So as we said, the view is that, now there is no reason for there being any pent-up demand per se, with PVC prices coming down. We hope that demand pool will be there even from the agri side.

Shrenik Bachhawat — LIC Asset Management — Analyst

So assuming agri demand being robust for the upcoming season, so what is your view on the non-agri mix for the next two-three years, like what does that — where can we see our non-agri mix?

Niraj Kedia — Chief Financial Officer

See, non-agri has been our major focus area in the last three-four years and that continues to be our key focus area. It does not mean that we don’t focus on agri. Agri — in agri, we know we are strong and we continue to be strong and we take efforts to ensure that part of the business is not impacted, so our sight from it does not go away, but our non-agri whatever steps that we have been taking, we’ll continue to do that. And as I said, even earlier, our initial target is to reach 40% non-agri and eventually we want to reach a scenario where both these agri and non-agri segments contribute equally to our business.

Shrenik Bachhawat — LIC Asset Management — Analyst

Sure. And just one accounting question, sir. So basically as a reason participant also I just wanted to understand the inventory valuation. So inventory valuation would be — we would be doing on cost or realizable value, whichever is less right? So, for example, if the PVC costing is INR100 and the price has gone to INR90. So, our balance sheet will already be reflecting the INR90 price right?

Niraj Kedia — Chief Financial Officer

Yes. Yes, you are right.

Shrenik Bachhawat — LIC Asset Management — Analyst

So if you would have then taken that net loss on P&L?

Niraj Kedia — Chief Financial Officer

Yes.

Shrenik Bachhawat — LIC Asset Management — Analyst

So that will be impacting our margins further, right?

Niraj Kedia — Chief Financial Officer

It has already impacted our margins this quarter. But as you rightly said, let’s take an example, say, let’s — hypothetically we had a of material which was cost us INR120, okay? And on-balance sheet debt or one subsequently, the cost realization value came down to INR100, so that INR20 mung down did happen. But given this INR100, so what happened — what happens with this as per accounting standard is, you bring your inventory at the net realizable value, but not at the value which would have given you the markup in the past. So suppose, in the historically your costs was INR90 and you were selling at INR100. That’s INR10 impact cannot be taken into the financials, unless it materializes mostly.

Shrenik Bachhawat — LIC Asset Management — Analyst

Got it. Thank you sir, and wish you all a very happy Diwali.

Niraj Kedia — Chief Financial Officer

Thank you, Shrenik.

Operator

Thank you. The next question is from the line of Chintan Sheth from Sameeksha Capital. Please go-ahead.

Chintan Sheth — Sameeksha Capital — Analyst

Yes, I’m audible now?

Anil V. Whabi — Managing Director

Yes, sir, you are.

Chintan Sheth — Sameeksha Capital — Analyst

So when we were — I was just going back to the previous participant [Indecipherable] between the PVC Fittings — sorry, PVC Pipes and PVC Resins this year, this quarter around is at a historical high. So, that means that the reduction in PVC input for pipes is higher than the reduction in realization of PVC Pipes. The space is better, but still we reported a loss in the PVC Pipes segment. This is driven by — obviously one portion is the sitting inventory at a higher-cost, but what are the other factors which would have also impacted, that I would like to understand?

Because the raw material cost has lowered down, right? Our cost of PVC Resin for the Pipes business was lower during the quarter. There will be some element of the higher-cost inventory of the previous quarter, but still the sizable 70% of the of the raw material portion for the Pipes is PVC, that has gone down faster than the decline in the Pipes realization. I’m trying to understand the — trying to get that sense of why is the loss in the Pipes business? And —

Niraj Kedia — Chief Financial Officer

So see, in fact, both the businesses. Let me try and see if you can answer this. Say, for example, in Resin segment, our raw materials are EDC and ethylene. So, obviously we have a stock or we purchase raw materials which were high-cost, and then price is corrected.

Anil V. Whabi — Managing Director

Correct.

Niraj Kedia — Chief Financial Officer

So the losses that was incurred was because we converted something which was high-cost, our cost of production was probably more than the realization.

Anil V. Whabi — Managing Director

Correct.

Niraj Kedia — Chief Financial Officer

Now similarly, in Pipes & Fittings, the input is resin, while resin is transferred at market rate, but then there is a gradual and continuous reduction in prices, so you are always doing a catch-up. First is, you had — given day you have an inventory which is a high-cost and the prices go down, so that impact comes in Pipes. Similarly, while your input prices keep going down in terms of resin, there is always a lead-time between what you procure you manufacture and when you sell. So in this continuous falling trend, this is bound to happen in both the segments.

Chintan Sheth — Sameeksha Capital — Analyst

So are we seeing further reduction in PVC Pipe business realizations as we speak?

Niraj Kedia — Chief Financial Officer

See, they’re driven by PVC price, right? For example, INR3 reduced very recently and the impact was passed on. That is how the industry operates. I think it is the right way of operating, because I mean, commodity it is best as soon as the prices — pricing is our move. See, if you look at the last two years, whatever our margins, the large reason for that was PVC Pipes is growing up and we were able to pass-on the increase in prices to our customers.

Anil V. Whabi — Managing Director

Correct, correct. [Speech Overlap]

Niraj Kedia — Chief Financial Officer

Yes, yes, so we cannot have a one-way street.

Chintan Sheth — Sameeksha Capital — Analyst

Correct, correct, I understand, but from a business perspective, how do — how should we manage it? Sometimes when were last — when we were guiding that the prices are unsustainable the INR1,500, INR1,600 of PVC, at that point in time, would it have been a better — would we be in a better position to curtail down our PVC Resin manufacturing and source it from the market at a market rate and convert the price. Can you hear me?

Niraj Kedia — Chief Financial Officer

Yes, yes, I can hear you.

Chintan Sheth — Sameeksha Capital — Analyst

Hello. Am I audible? Hello?

Operator

Yes sir, you are audible.

Chintan Sheth — Sameeksha Capital — Analyst

Yes.

Niraj Kedia — Chief Financial Officer

See, curtailing resin production is not the answer. So that will go in a very different tailspin, there are fixed costs associated with the plant.

Chintan Sheth — Sameeksha Capital — Analyst

Correct.

Niraj Kedia — Chief Financial Officer

So that is not the right thing. The best way to deal with such a scenario are to, in my personal opinion, you have to have a cushion and a strong balance sheet so you have reserves with you, we are waiting for cash to take care of these terms and at the same time, keep a very minimalistic or a lower level of inventory, which is what we always do.

Unfortunately or fortunately what happens is Q2 —

Chintan Sheth — Sameeksha Capital — Analyst

Correct.

Niraj Kedia — Chief Financial Officer

— when our — is when our jetty closes [Speech Overlap] some amount of storage and that has happened in this quarter, could not — kind of worst time to happen. Should we are start off doing business?

Chintan Sheth — Sameeksha Capital — Analyst

No, no, I’m not saying that. I’m just trying to any other [Technical Issues] we have some nimble or flexibility to absorb — flexibility to reduce production so that at least the fixed-costs are covered. But we cannot — we shouldn’t have this kind of environment to hold such large inventory. When we were all also of a view that the prices will crash. At that point in time, so you —

Niraj Kedia — Chief Financial Officer

You are absolutely right, Chintan ji, but see, even in the last two years every quarter when we were speaking or we are doing our own analysis, Q1 would get and prices will correct, but it never corrected. But that ability to predict when is very difficult.

Chintan Sheth — Sameeksha Capital — Analyst

Correct, I agree. Yes, that’s all from my end. Thank you Niraj ji, and thank you Whabi ji.

Operator

Thank you. [Operator Instructions] The next question is from the line of Vipul Shah from Sumangal Investments. Please go-ahead.

Vipul Shah — Sumangal Investments — Analyst

Hi sir, Happy Diwali to all management team. Sir, my question is, are we seeing any market-share losses in agri or non-agri, your comment please?

Niraj Kedia — Chief Financial Officer

No, not really.

Vipul Shah — Sumangal Investments — Analyst

No really?

Niraj Kedia — Chief Financial Officer

No, no.

Vipul Shah — Sumangal Investments — Analyst

And sir, what was our last quarter CPVC volume?

Niraj Kedia — Chief Financial Officer

Q1 you mean?

Vipul Shah — Sumangal Investments — Analyst

Yes, this quarter it is 4,000 tons if I have heard you correctly, sir?

Niraj Kedia — Chief Financial Officer

Yes, you are right. So Q1 it was — so we were 3,670 tons, 3,700 tons, you can assume handy.

Vipul Shah — Sumangal Investments — Analyst

So, is there any seasonality in CPVC Pipe business, sir?

Niraj Kedia — Chief Financial Officer

Typically there is seasonality, Q2 is generally weak.

Vipul Shah — Sumangal Investments — Analyst

Q2 is generally weak?

Niraj Kedia — Chief Financial Officer

Yes, because see in Q2 there is monsoons, so construction activity slightly goes down. So ideally it should be weak and that is how it has been even historically.

Vipul Shah — Sumangal Investments — Analyst

But this quarter we have shown a good increase.

Niraj Kedia — Chief Financial Officer

Yes, yes.

Vipul Shah — Sumangal Investments — Analyst

Okay, okay. Okay sir, thank you very much and all the best for the future.

Operator

Thank you. [Operator Instructions] The next question is from the line of Dheeresh from WhiteOak. Please go-ahead.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Yes, thank you for the question. Just to understand better, how many days of inventory is being kept by the Pipes & Fitting division, because it seems that when prices were going up, like we explained, right, that the Pipes & Fitting division will keep the Resin, which we’ll buy from the Resin division. So in a falling resin price, they are impacted by the inventory they keep, but in a rising Resin price, they did not seem to have benefited that much. So what was the —

Niraj Kedia — Chief Financial Officer

No, there was benefit.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Not to the extent that other companies saw, because I think larger benefit was booked in the Resin division it seems, but now when prices are falling, the impact is also coming in the Pipe division. So how many days of inventory typically the Pipe division keeps?

Niraj Kedia — Chief Financial Officer

See, generally we keep —

Anil V. Whabi — Managing Director

Normally total inventory is more than a month, about a month and transfers always happen at the market price. So it is not that more — something is done at the cost of Pipe & Fittings segment. So always have particularly point of transfer, whatever is the market price, the transfer happens at that price.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Okay and typically a months inventory is kept [Speech Overlap].

Anil V. Whabi — Managing Director

And this is also a function of the drop. You see in these two quarters, the prices have fallen by almost 40%. While the rise, when it go ahead, I don’t think in particular one or two quarters we saw a rise of 40%. To that extent, it may not be seen.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Okay. Okay sir, thank you. Thank you for taking the questions.

Operator

Thank you. The next question is from the line of Aasim Bharde from DAM Capital Advisors. Please go-ahead.

Aasim Bharde — DAM Capital Advisors — Analyst

Yes, hi. So I had a question on PVC imports, so that is the ones that are dumping. So would you guys have a sense on how imports will shape up in November? You mentioned that after investigations on dumping have started, that has led to PVC slowing down, the dumping level is slowing down, but clearly not enough given that there was a price cut already and one more is expected in a week or two. So this will probably mean that shipments are already booked and on the way and hence the price pressure. So, basically I just wanted to understand, like as per your from your sense when does the source of imports basically dry up.

Anil V. Whabi — Managing Director

No, no, no, today see this weakness in the market is global today, so prices are lower in U.S., demand is lower in U.S. The prices being quoted by U.S. suppliers are also low for December shipments. So it is not necessarily China dumping which is driving the lower prices.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay so I think, maybe like two, three months ago the Chinese dumping was a major concern, but the global PVC price is otherwise fine, right?

Anil V. Whabi — Managing Director

No, no, no, you are right. In three months ago or a quarter ago, the U.S. prices which were being quoted were not so low, but then U.S. — also because of all these global situations there is oversupply.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay, okay. So then basically, I mean one can, like, may — one can probably gross up in and say that PVC prices may not go down further by a lot, but there is no scope for the near-term prices going up right? It’s basically stable or going low from here?

Anil V. Whabi — Managing Director

Yes. Yes, you’re right.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay and just one clarification on the inventory bit in the Pipes division, when you said this one month of inventory, that is just raw materials, right? Or do you keep also finished goods inventory?

Anil V. Whabi — Managing Director

No, no. It’s — see, raw material inventory is also kept in all the plants in pipe plants, then there is work-in progress compound stage, and there is finished inventory also in the warehouses.

Aasim Bharde — DAM Capital Advisors — Analyst

So when you say one month, like what exactly does that pertain to? One month of inventory.

Anil V. Whabi — Managing Director

So while [Speech Overlap] a little above one month, it would be thereabout, always.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay between the three categories you mentioned.

Anil V. Whabi — Managing Director

Yes, yes.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay, sure sir. Thanks a lot and Happy Diwali to you at the team.

Anil V. Whabi — Managing Director

Thank you. Happy Diwali to you as well.

Operator

Thank you. As there are no further questions, I now hand the conference over to Mr. Arun Baid for closing comments. Over to you, sir.

Arun Baid — ICICI Securities — Analyst

Yes, I would like to thank, on behalf of ICICI Securities to the management for allowing us to host the call. Any closing comments from you Whabi sir?

Anil V. Whabi — Managing Director

Thank you all, and let’s hope for better times. Thank you.

Arun Baid — ICICI Securities — Analyst

Okay, thank you.

Operator

[Operator Closing Remarks]