Finolex Industries Ltd (FINPIPE) Q3 FY23 Earnings Concall Transcript

Finolex Industries Ltd (NSE: FINPIPE) Q3 FY23 Earnings Concall dated Feb. 06, 2023

Corporate Participants:

Anil V. Whabi — Managing Director

Niraj Kedia — Chief Financial Officer

Ajit Venkataraman — Chief Executive Officer

Analysts:

Arun Baid — ICICI Securities. — Analyst

Aman Agarwal — Equirus Securities — Analyst

Akshat Mehta — Sameeksha Capital — Analyst

Rahul Agarwal — InCred Capital. — Analyst

Dwanith — Individual Investor — Analyst

Aasim Bharde — DAM Capital Advisors — Analyst

Abhishek Ghosh — DSP Mutual Fund — Analyst

Sandesh Barmecha — Haitong Securities — Analyst

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Ritesh Shah — Investec — Analyst

Vipul Kumar Shah — Sumangal Investment — Analyst

Karan Bhatelia — Asian Market Securities — Analyst

Padma Raju Mathi — SBI Life Insurance Co. Ltd. — Analyst

Presentation:

Operator

Ladies and gentlemen, welcome to the Finolex Industries Limited Q3 FY ’23 Earnings Conference Call hosted by ICICI Securities.

As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. [Operator Instructions] Please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Arun Baid from ICICI Securities. Thank you. 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 FY ’23 post result con call of Finolex Industries.

From the management side, we have Mr. Anil Whabi, Managing Director; Mr. Ajit Venkataraman, CEO; and Mr. Niraj Kedia, CFO.

Now, I hand over the call to Mr. Whabi, for your opening remarks, post which the floor will open for Q&A. Over to you, Mr. Whabi.

Anil V. Whabi — Managing Director

Thank you, Arun. Good morning, ladies and gentlemen. Welcome to the investor conference call Q3 FY ’23 earnings release. We thank you all for continued interest in Finolex Industries Limited.

After the adverse impact on Q2 FY ’23 due to fall in prices of PVC, this quarter Company reported a substantial improvement in performance on account of robust growth in sales volume for both PVC Resin and Pipes and Fittings segment and stabilization of PVC prices. Earnings performance improved on the back of stability in raw material prices.

Let me give you some of the performance indicators for the second quarter of the financial year ’23. Q3 FY ’23 highlights; total income from operations increased 12% to INR1,125 crores against INR1,004 crores in Q3 FY ’22. The EBITDA on a Y-o-Y basis decreased 62% to INR92 crores in Q3 FY ’23 from INR242 crores in the previous corresponding quarter of Q3 FY ’22. However, there is a marked improvement over the EBITDA loss of INR142.67 crores incurred in Q2 FY ’23. The Company reported profit after tax of INR72 crores in Q3 FY ’23 as compared to INR178 crores in Q3 FY ’22 and compared to a loss of INR93.92 crores in the previous quarter.

Now getting into segmental performance, Pipes and Fittings; Pipes and Fittings revenue increased 30% to INR1,077 crores in Q3 FY ’23 from INR831 crores in Q3 FY ’22. Volume in Pipes and Fittings segment reported a robust growth of 92% Y-o-Y to 90,396 metric tons in Q3 FY ’23 against 46,994 metric tons in the corresponding last quarter. The EBIT in Pipes and Fittings segment was INR69 crores in Q3 FY ’23, 25% up on Y-o-Y basis compared to INR55 crores in Q3 FY ’22 and compared to loss of INR47.63 crores in Q2 FY ’23. Moving to PVC Resin segment, revenue in the Resin segment decreased 21% from INR636 crores in Q3 FY ’22, INR504 crores in Q3 FY ’23. Volume in Resin segment grew 49%, 64,696 metric tons in Q3 FY ’23 against 43,464 metric tons in Q3 FY ’22. EBIT in Resin segment was INR12 crores in Q3 FY ’23 compared to INR178 crores in the corresponding previous year’s quarter and compared to loss of INR110.68 crores in Q2 FY ’23.

The company continues to have a strong balance sheet with net cash surplus of roughly INR1,520 crores as on December 31, ’22.

Let me now leave the floor open for questions. I have my colleagues Ajit and Niraj with me. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Aman Agarwal from Equirus Securities. Please go ahead.

Aman Agarwal — Equirus Securities — Analyst

Yeah. Hi sir. Thanks for the opportunity and congratulations on great results. So, just wanted to understand on the demand side for the piping segment. 3Q obviously had some good impact because of fall in PVC prices. So how is the situation now and what’s the kind of annual number that you’re looking at now?

Niraj Kedia — Chief Financial Officer

Hi. Good morning, Aman. So yes, Q3 was I would say very good in terms of demand. It’s reflected in the results. Primarily because the markets opened up, we believe there were some pent-up demand, which was long due which came up. So Q3 in fact what we have achieved it is highest ever Q3 numbers that we have achieved. Q4 and Q1 traditionally are strong quarters when the season opens up, but we expect that we will breach the pre-COVID levels by the end of this financial year, but there is a slight sluggishness in demand, as compared to Q3 what we saw.

Aman Agarwal — Equirus Securities — Analyst

Okay. So, you intend to say 262,000 — 263,000 was the number that we achieved in FY ’19 for the piping segment, we will breach that at least in this year?

Niraj Kedia — Chief Financial Officer

Yes.

Aman Agarwal — Equirus Securities — Analyst

And sir, on the realization side, do you see any further cuts in 4Q or there should be a slight jump up?

Niraj Kedia — Chief Financial Officer

See, if you see in Q3, after September the prices, in fact, went down by INR11.5.

Aman Agarwal — Equirus Securities — Analyst

Yeah.

Niraj Kedia — Chief Financial Officer

PVC prices, subsequently, in the month of December, some of it was recovered. In fact, most of it was recovered actually but last month has been more or less stable. After the first week of January, we have not seen any price increases. Neither, we have seen any reductions. So there is stability in the market, which is a good thing. We don’t foresee any abnormal movements either side. So as of now, and the way the prices have behaved in the last one month, we hope this to continue, but again this is anybody’s call.

Aman Agarwal — Equirus Securities — Analyst

Yeah, sure. And sir, lastly, do you see any capacity constraint for further growth or for the company in this year or maybe FY ’24?

Niraj Kedia — Chief Financial Officer

No. Not yet.

Aman Agarwal — Equirus Securities — Analyst

Sure. Thank you. That will be it from my side.

Niraj Kedia — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Akshat Mehta from Sameeksha Capital. Please go ahead. Mr. Mehta, you are not audible, please speak a little close.

Akshat Mehta — Sameeksha Capital — Analyst

Am I audible properly, now?

Operator

Yes, you are audible.

Akshat Mehta — Sameeksha Capital — Analyst

Yeah. So a couple of questions, sir. If you can provide the mix between agri and non-agri for quarter three and the CPVC volumes as well?

Niraj Kedia — Chief Financial Officer

Yeah. So in terms of volumes, our non-agri was 38%.

Akshat Mehta — Sameeksha Capital — Analyst

Okay.

Niraj Kedia — Chief Financial Officer

And agri was remaining for the full year as of now, nine months non-agri is 41% in terms of — sorry, this was — sorry, the non-agri was 27% in terms of volumes and for the full year, nine months, it is 30%.

Akshat Mehta — Sameeksha Capital — Analyst

Okay. And CPVC?

Niraj Kedia — Chief Financial Officer

So, CPVC we did roughly 4,100 tons this quarter.

Akshat Mehta — Sameeksha Capital — Analyst

Okay. Secondly sir, my question is on the cash that you have on your balance sheet, in September, you had around INR1,300 crores of cash on the balance sheet. So again, what is the plan to utilize this cash that is available with you, either put into expansion or some inorganic acquisition or you want to pay it out as dividend to shareholders, what is the plan for use of that cash?

Niraj Kedia — Chief Financial Officer

See, in the last one year, I know this question has been coming and we have also been saying. See, the whole idea was first for the markets to get stabilized. After all this last two years of [Indecipherable] of COVID, we were not able to kind of very strongly predict how the market is going to behave. But now mostly COVID is behind us and volumes have come back to normalized levels, so we’ll see probably in a year or two’s time we will require additional capacity. So this money will be either used there and if the money generation is more, then it will be returned to the shareholders in one form or other and it will not be kept in the balance sheet for a very long term.

Akshat Mehta — Sameeksha Capital — Analyst

Okay. Apart from that, sir, if you can — is there any inventory loss that we had in quarter three, any figure that you can provide for that?

Niraj Kedia — Chief Financial Officer

Figure is difficulty, in our case, figure is difficult. Yes, we did have inventory loss, in fact the whole losses that we reported was primarily on account of inventory losses.

Akshat Mehta — Sameeksha Capital — Analyst

Okay. Okay. And can you guide me as to how, going forward, you are saying that non-agri will be — we want to increase share of that non-agri side, because you have higher margins there, and you want to reduce our dependence on the agri side. So what is the plan to go forward with that, how are you going to execute that?

Niraj Kedia — Chief Financial Officer

I like Ajit to answer that, but before he answers, see, yes, there is a very clear focus on improving non-agri. If you see on the non-agri side per se also, in this quarter, our non-agri growth has been 33%. On a nine month basis, our non-agri growth has been 20% in terms of volumes. So non-agri is definitely moving up as per our expectations. The split has slightly changed in this quarter because the agri demand far surpassed the non-agri demand. So in fact, if you see on a quarter-on-quarter basis, our agri volumes of more than 100% as compared to last year. So that is what has skewed the ratio towards agri. Otherwise, if you look at non-agri from a standalone perspective, that growth is substantial.

Ajit Venkataraman — Chief Executive Officer

Thanks, Niraj. In addition to what Niraj mentioned, there is a renewed force on making sure that the brand awareness of Finolex in the non-agri segment has been increased. We are going after increase in network for our non-agri business. And in terms of our product range also we are expanding it and therefore all these areas put together, we expect that the renewed focus of Finolex on non-agri segment will help us grow in these segments.

Akshat Mehta — Sameeksha Capital — Analyst

Okay. Thank you sir.

Operator

Thank you. The next question is from the line of Rahul Agarwal from InCred Capital, please go ahead.

Rahul Agarwal — InCred Capital. — Analyst

Hi, good morning. Thank you for the opportunity and hope all of you are doing well. Sir, three questions, firstly to take forward the earlier question on sales mix. My sense is the company obviously intends to become a very well-balanced company in both agri and plumbing. You said, obviously you’re expanding network and you mentioned product offering expansion. I had a related question versus other national brands like Ashirvad or Supreme, Astral, Prince whoever, could you highlight some gaps in case there are any on the plumbing pipe and fitting side today what we offer. And a sub-question to that also was that in terms of de-risking from West and South India because I think that’s like bulk of the business for Finolex, any thoughts on that, please. That’s the first question.

Ajit Venkataraman — Chief Executive Officer

All right. I don’t think there is any gap in the product portfolio. We do agree that we started a little bit late in the whole process. So it is more of a catch-up than anything else. In terms of strength, we have tremendous strength in both West and South and in our non-agri portfolio, we are seeing strength coming from North as well. So we are focusing on all these areas to make sure that the growth comes in the non-agri segment in the plumbing and sanitation.

Rahul Agarwal — InCred Capital. — Analyst

So, in terms of your internal intention to de-risk from South and West, is that an intention at all going forward?

Ajit Venkataraman — Chief Executive Officer

No. We would capitalize on our strength. There is no reason to move away from that. Also, our strength in rural areas where the growth is coming from, these regions give us pretty good foundation for us to take off.

Rahul Agarwal — InCred Capital. — Analyst

Got it, sir. The second question was on pipe volumes. The reasons attributed to such a high number in the quarter, essentially is one is agri demand is stellar and second, my sense is that there is some restocking element as you said some pent-up demand. Question sir, essentially would you expect a soft fourth quarter, because generally you would do such volumes in 4Q and 1Q of every year and assuming 4Q demand is also solid, you are using almost like 80% of your pipe capacity. I typically think the industry peaks out at this number, would you be in a situation where your capex is actually delayed and you’re not announcing that right now. These are some questions on pipe volumes please.

Ajit Venkataraman — Chief Executive Officer

No. So there is no announcement that delay, Rahul, I mean that is not the case at all. On demand side, as I said and you also said the same thing that Q4 and Q1 are generally our strong quarters. The demand is strong in this quarter as well, but it is not as strong as we saw in Q3.

Rahul Agarwal — InCred Capital. — Analyst

So that’s pretty clear and I would imagine to beat 260,000 tons for this year is pretty easy because you are already at 220 at nine months. What I’m trying to guess is your fourth quarter should be softer than 3Q purely because of the pent-up number is sitting in 3Q, is that understanding, correct?

Ajit Venkataraman — Chief Executive Officer

Yes.

Rahul Agarwal — InCred Capital. — Analyst

Okay. And in terms of capex, you think you’re not delayed. So 80% is a very high number, don’t you think so, because I think the effective usage of rated capacity is generally 75%, right, because of different sizes and stuff?

Ajit Venkataraman — Chief Executive Officer

See our rated capacity is 370,000 tons when it comes to pipes, plus there is a fitting capacity as well, so that way, we are very comfortable.

Rahul Agarwal — InCred Capital. — Analyst

Okay, got it. And lastly, on other expenses, the number is INR224 crores for the quarter, it looks really high to me. Previously you had explained that coal pricing and forex losses had impacted. Could you give clarity as to what really happened in 3Q and what lies ahead, please.

Ajit Venkataraman — Chief Executive Officer

When you are saying — which quarter are you talking about?

Rahul Agarwal — InCred Capital. — Analyst

Current quarter, third quarter you reported INR224 crores of other expenses. It looks very weirdly high to me, any one-off elements here?

Niraj Kedia — Chief Financial Officer

No. See, it is also because of higher volumes. And of course, power costs anyway has gone up for everybody compared to last year, but this jump that you see is because of higher volumes.

Rahul Agarwal — InCred Capital. — Analyst

Okay, got it. No significant forex loss sitting here, right?

Niraj Kedia — Chief Financial Officer

No, of course not.

Rahul Agarwal — InCred Capital. — Analyst

Perfect, sir. I’ll come back in the queue. Thank you so much. All the best.

Operator

Thank you. We have the next question from the line of Dwanith, an Individual Investor. Please go ahead.

Dwanith — Individual Investor — Analyst

Sir, am I audible?

Operator

Yes, you’re audible.

Dwanith — Individual Investor — Analyst

Yeah. Hi, I had a question with regard — I had two questions actually. First was with regards to the sales mix. I just wanted to know that in long-term kind of perspective, say I’m talking about like two or three years from now, is there any particular figure which we have in mind between agri and non-agri as well as plumbing and fittings and the other division?

And my second question was with regards to the price of the raw material and by what time can we actually come to a little bit of a sustainable margin. And if there is a particular figure, which is a sustainable margin for us in the long run?

Ajit Venkataraman — Chief Executive Officer

Hi. So, see on the volume mix, a couple of years ago, two, three years ago, our mix was 20%-80% in that range, but now it’s little bit over 30%, 35%. Long-term target is both these segments, sub-segments, I would call it agri and plumbing and sanitation should be equal contributors in terms of volumes. It will take some time, but that is what we aspire for.

And coming to your question on raw material pricing, see as I said, last one month has been more or less stable when it comes to PVC prices. So if everything remains same and these are normal levels, which were there even pre-COVID. So, if there’s nothing else which changes globally, we are almost there, I would say.

Dwanith — Individual Investor — Analyst

Sir, is there a particular figure like 10% or like 20% something like that?

Ajit Venkataraman — Chief Executive Officer

Sorry.

Dwanith — Individual Investor — Analyst

The margins —

Niraj Kedia — Chief Financial Officer

No. If you see in Pipes and Fittings the normal margins in our case is normally INR8 to INR10 a kg, which we should achieve, but in case of PVC Resin, it is always volatile and depends on market parameters.

Dwanith — Individual Investor — Analyst

Okay, thank you very much and all the best for the coming quarters.

Operator

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

Aasim Bharde — DAM Capital Advisors — Analyst

Yeah. Hi, good morning. Just one question on PVC. Just wanted to know how is supply right now, especially from imports and with the China reopening and the possible — like there was a recent snowstorm that knocked out Southern US recently. Could that hit supplies and could that drive prices higher in your opinion?

Niraj Kedia — Chief Financial Officer

So, when it comes to PVC for our consumption, we make our own PVC, so we don’t generally import PVC. But on overall industry demand side, we don’t hear of any shortages anywhere. There was this condition some months ago, but now, we don’t see — we don’t hear from our purchase team or anywhere else that there is any demand — supply constrained from anywhere, PVC is available freely.

Aasim Bharde — DAM Capital Advisors — Analyst

Is PVC from China also coming in at a regular pace still, it might have come off in recent times, but is it still coming in or is that completely dried out?

Anil V. Whabi — Managing Director

No. After their New Year closure, in fact, China market has picked up. So demand is better there now. So what is expected is prices up to March if not strengthened will definitely not fall. So there will be a good demand in China. Earlier, the prices were falling because of lack of demand in China.

Ajit Venkataraman — Chief Executive Officer

Correct.

Aasim Bharde — DAM Capital Advisors — Analyst

I think there was no case for price fall from here. I was just trying to check what is the probability of a price rise in the near term, because China is reopening. So that should take supplies away from the Indian markets?

Anil V. Whabi — Managing Director

It is possible, but I don’t think the price rise will be phenomenon. It may range — it’ll be range bound.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay got it. Thank you.

Operator

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

Abhishek Ghosh — DSP Mutual Fund — Analyst

Yeah. Hi sir, thanks for the opportunity. Sir, in terms of profit from associates has seen a major jump. Any sense on that?

Niraj Kedia — Chief Financial Officer

No. So that’s a small operation that they do. I mean the demand was good on that side as well. So that’s how — again, see this is also largely agri, that business caters to largely agri demand. And in our case, also agri demand was pretty high. And similarly in the drip irrigation business also there was a large pent-up demand, which came up contributing to their profitability.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay, thanks. Sir, the other question is, since you’ve already done peak — largely closer to your peak capacity or the other way to look at it is 90,000 tons per quarter given the overall Fittings demand, Fittings capacity and overall PVC pipe capacity, in a quarter, can you produce more than 1 lakh, is there a possibility, due to —

Ajit Venkataraman — Chief Executive Officer

Yes.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay. So, if demand comes back in fourth quarter or first quarter of FY ’24, you can produce up to 1 lakh tons per quarter.

Ajit Venkataraman — Chief Executive Officer

Yes, definitely.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay, sir. The other thing is, given that you have such amount of the huge cash on balance sheet, the way we look at your businesses, you typically do 90,000 tons in those peak quarters of 4Q and 1Q and there is fairly a lean quarter as far as 2Q and 3Q is concerned, given you have so much of cash on balance sheet. Would building up inventory for those peak seasons, given that you’re not adding capacity, can that also be an option or is outsourcing also something that you will evaluate at some point in time?

Ajit Venkataraman — Chief Executive Officer

So, see, theoretically speaking, that is an option that we stock-up, but see in our business we are in commodity business, then you are leaving yourself open to the volatility in metal price movements. So today if you stock up and metal prices crash and then you will be susceptible to those risks. So then it does not really make sense for us or anybody else for that matter to stock up for the lean season or for the peak season in the lean season. So that is something that is not advisable in our view.

And secondly was on your outsourcing, no, on pipe side, we will not be outsourcing to anybody else.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay. Sir, the other thing is, if you can also help us with your CPVC volumes and revenue for the quarter?

Ajit Venkataraman — Chief Executive Officer

So CPVC as I said, our volumes for the quarter was 4,100 tons.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay.

Ajit Venkataraman — Chief Executive Officer

And revenue was roughly INR160 crores.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay. Sir, just one last question from my side. In terms of the channel inventory now which was fairly lean in 3Q FY ’23, how does it appear now in terms of the overall channel inventory?

Ajit Venkataraman — Chief Executive Officer

Channel inventory per se is not very high always. It is seven days to 10 days, between one to two weeks. Yes, in Q3, it had gone down because naturally the prices were rapidly going down. Now it is back to the normal levels. But see that this does not really make much of a difference. If you’re talking about 10 days, going down to two days or three days, you’re talking about one weeks’ impact only.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Yeah. But I’m saying now the channel inventory is back to stable levels?

Ajit Venkataraman — Chief Executive Officer

Yes, more or less.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay. So how should one expect the volume growth for FY ’24 now from here on, any thoughts?

Ajit Venkataraman — Chief Executive Officer

We will get more clarity on this after Q1 of FY ’24.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay.

Niraj Kedia — Chief Financial Officer

Because, see, that the industry dynamics are very volatile. From a very, very slum situation, we went to excess demand and again normalized now. So there are a lot of factors, which affect demand and supply. So, as we move into next year first quarter, we’ll get a bit more clarity.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Sir, my question was more trending towards the fact that last three agri seasons, two agri seasons were impacted due to the two waves of the crisis. And then last year you had sharp increases in PVC prices, so you didn’t have any demand at those PVC prices of 150, 160. Now those things have normalized, so can one expect very strong 4Q, 1Q despite a good 3Q is what my question was. And on that basis, how should one look at the growth. So, I think that is what I was trying to get a sense around.

Ajit Venkataraman — Chief Executive Officer

Let’s see, how the quarter goes. That will be the right measure. So far, as I’ve said earlier also, the demand is not bad. It’s good, but it is slightly sluggish when you compare it with Q3.

Abhishek Ghosh — DSP Mutual Fund — Analyst

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

Ajit Venkataraman — Chief Executive Officer

Thank you.

Operator

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

Sandesh Barmecha — Haitong Securities — Analyst

Thank you for the opportunity, sir. So just two questions on my end. Sir, what is the fittings revenue for Q3 FY ’23, sir?

Niraj Kedia — Chief Financial Officer

So, Fitting revenue was INR200 crores.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. Sir, what would be our capex plan for next two, three years sir, any plans to increase capacity through any brownfield or open-up any new plant in North or East.

Ajit Venkataraman — Chief Executive Officer

So there are various discussions, which keep happening on drawing board. On the pipe side, there is nothing concrete as of now. We keep on adding capacity wherever required on a modular basis, be it upgradation of [Indecipherable] or something. On fitting side, we keep on adding molds and some machines, so that will continue. But as of now, if your question is specifically, is there any plan finalized for opening a new factory somewhere for pipes, there is nothing concrete as of now.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. Sir, what would be our capex amount for nine month FY ’23 and full year FY ’23 and FY ’24, sir.

Ajit Venkataraman — Chief Executive Officer

So capex for this year —

Niraj Kedia — Chief Financial Officer

Again, as we have said earlier would be in the range of INR150 crores for the year.

Sandesh Barmecha — Haitong Securities — Analyst

Okay, Sir, anything planned for FY ’24?

Niraj Kedia — Chief Financial Officer

Similar range unless we take up some large project to implement.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. Great, sir. Thank you so much. Good day.

Operator

Thank you. The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund. Please go ahead.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Yeah. Good morning and thank you for the opportunity and congrats for good set of numbers. My first question is on the implementation of DMS. So we believe that the dealers now place orders through DMS, but how about distributors or dealers, whether they are placing — giving business to retailers. What has been progress on that front and are we able to see that all schemes are being passed on to retailers.

Ajit Venkataraman — Chief Executive Officer

Yeah. Hi, good morning Bhargav. So dealers are completely on our CRM as we call it. So I think it’s been almost a year now, no more orders on emails or excels. So they are fully using our CRM. On the secondary side, if that’s what your question was, on the retail retailers. So that has commenced. So there are pockets where this has already started and gradually it is moving to all dealers.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

So, by when do we expect that to fully get completed, the secondary side.

Ajit Venkataraman — Chief Executive Officer

In three to six months.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Okay, understood. Secondly, in terms of number of SKUs, is it possible to quantify how much we have in total.

Ajit Venkataraman — Chief Executive Officer

See, roughly 2200.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

2,200. Okay, great. Thank you. Thank you very much.

Ajit Venkataraman — Chief Executive Officer

Thank you.

Operator

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

Ritesh Shah — Investec — Analyst

Hi, sir. A couple of questions. Sir, first I missed on the volumetric terms, can you help with what was the agri and non-agri pipe for Q2 FY ’23 and for Q3 FY ’23, please?

Niraj Kedia — Chief Financial Officer

So, agri, Pipe and Fitting was roughly 66,000 tons and non-agri was roughly 24,000 tons.

Ritesh Shah — Investec — Analyst

And sir, this was for Q3 or Q2?

Niraj Kedia — Chief Financial Officer

Q3.

Ritesh Shah — Investec — Analyst

And sir, same number for Q2, please?

Niraj Kedia — Chief Financial Officer

37,000 and 22,000.

Ritesh Shah — Investec — Analyst

37,000 and 22,000. Okay. Sir, my question is, if we look at the realization on a per ton basis for Pipes and Fittings versus Resin, it has actually moved up very sharply. So if you look at last year, those numbers were at around 1.28 times, 1.22 times. This year, the same numbers are at 1.52 times, 1.53 times. I’m looking at realization per ton oif Pipes and Fittings versus PVC realization. So that’s something right, which you are doing, either on the product mix whether it is more of CPVC or whether it is more of Fittings. Sir, how should we understand this?

Ajit Venkataraman — Chief Executive Officer

Ritesh, it’s number of factors, but obviously when the demand was much more than what we could supply, there was price correction in the pipes, yes.

Ritesh Shah — Investec — Analyst

Sir, I could not understand that. So, is that we are focusing more aggressively in the mix towards non-agri side and more on Fittings, is that the reason why the numbers are actually looking —

Ajit Venkataraman — Chief Executive Officer

Obviously, if you see past periods, the Fittings volumes in terms of total have gone up.

Ritesh Shah — Investec — Analyst

Sir, possible to quantify that for PVC and CPVC together because in the presentation, we only have for PVC.

Ajit Venkataraman — Chief Executive Officer

No, it is both put together.

Ritesh Shah — Investec — Analyst

It’s both put together. Okay. That helps. Sir, my second question is, can you just provide us some color on the sourcing for EDC, ethylene, and VCM, what sort of contracts we have and is this business normal scenario right now or are we facing some challenges when it comes to sourcing of these raw materials?

Anil V. Whabi — Managing Director

No. See, we normally have annual contracts and they have been going for years and often on because of some shutdowns, there are temporary blips and then if such a thing happens we source from the open market on spot basis, but otherwise we have annual contracts with all of them.

Ritesh Shah — Investec — Analyst

Correct. So sir, currently is the business normal when it comes to sourcing all these three raw materials for us?

Ajit Venkataraman — Chief Executive Officer

Yes.

Ritesh Shah — Investec — Analyst

Okay. And sir, last question on CPVC Resin, sir, what is our sourcing right now and is it again a business normal thing or are we looking at something different over here?

Ajit Venkataraman — Chief Executive Officer

No, it is normal.

Ritesh Shah — Investec — Analyst

Okay. And sir, where do we source CPVC Resin sir?

Ajit Venkataraman — Chief Executive Officer

It is multiple sources.

Ritesh Shah — Investec — Analyst

Okay, fine. And sir last question. Would there be some mix that we’ll be looking on outsourcing versus captive manufacturing. You indicated on Pipes it will always be captive manufacturing, any specific number on Fittings, will it always be outsourced, how should we look at it.

Ajit Venkataraman — Chief Executive Officer

See, those outsource capacities when we say, they are exclusive for us. So, actually there was capacity that have been set up for us. It’s not normally — outsourcing in the normal terms, where the vendor is supposed to supply some to somebody else also. So these are exclusive capacity for us.

Ritesh Shah — Investec — Analyst

Okay. Sir, let me put it the other way, like we have full confidence in Finolex when it comes to adding capacity on the piping side, but when we do that on the piping side, will we have the same flex on the fitting outsourcing side or can there will be an element of timeline.

Ajit Venkataraman — Chief Executive Officer

So when I say, see how does it matter when the fittings — as we have been adding capacities over the year, so whether we add it at vendor or our own, it actually doesn’t make any difference.

Ritesh Shah — Investec — Analyst

Sir, I’m looking at the time element, basically we can easily add an extruder and actually increase the capacity, but the same thing, will it be as easy when it comes to fittings and outsourcing.

Ajit Venkataraman — Chief Executive Officer

See, in case of fittings you must know the molds belong to us. The molds and design of the fittings belong to us. So we keep on adding molds.

Ritesh Shah — Investec — Analyst

Okay. This is helpful, sir. Thank you so much for the answers.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Vipul Kumar Shah from Sumangal Investment. Please go ahead.

Vipul Kumar Shah — Sumangal Investment — Analyst

Hi sir, can you give the value-wise figure for agri and non-agri separately. I think you have given volume-wise, which is 30% for nine months, but what was the value-wise of course it should be much more no.

Ajit Venkataraman — Chief Executive Officer

See, generally, we don’t give this value split. See, I’ll tell you, just while we say this agri, non-agri also, we need to understand [Indecipherable] the fact that in lot of markets, especially North and all, West, the agri pipes are used for agri applications. So that way, if you look at it from a usage perspective, it becomes very difficult to say whether this is agri and non-agri. So while we gave the volumes and all, it is not right to look at them purely from an agri, non-agri perspective because there is flux in that, between agri and non-agri also. So generally we don’t give this number, it’s of less relevance.

Vipul Kumar Shah — Sumangal Investment — Analyst

Okay. And sir, my second question relates to our Fitting volumes. I can understand that Q1 and Q4 for agri has higher shares, but even in Fittings, we see a lot of volatility in our sales. So what is the reason for this volatility?

Ajit Venkataraman — Chief Executive Officer

I am not sure why and how are you coming at this volatility in fitting volumes, because if you look at last seven, eight quarters, every quarter, this has only improved. So in fact —

Vipul Kumar Shah — Sumangal Investment — Analyst

No. I think on the last slide of your presentation, I think there is some volatility. If you want, I can —

Ajit Venkataraman — Chief Executive Officer

No, not on PVC fittings — not on fittings.

Vipul Kumar Shah — Sumangal Investment — Analyst

Okay.

Ajit Venkataraman — Chief Executive Officer

See, this quarter we did roughly 8,000 tons of fittings. So it is —

Vipul Kumar Shah — Sumangal Investment — Analyst

No. So quarter four, it was 7,834, then it came down in first quarter to 644 —

Ajit Venkataraman — Chief Executive Officer

That is seasonality, Q4 will be generally more than Q1.

Vipul Kumar Shah — Sumangal Investment — Analyst

So that, I was trying to understand, sir in fitting also there is seasonality?

Ajit Venkataraman — Chief Executive Officer

Yes, there is seasonality, but there is lesser seasonality.

Vipul Kumar Shah — Sumangal Investment — Analyst

Not as seasonal as pipes, right?

Niraj Kedia — Chief Financial Officer

No, both are seasonal, it actually depends. See, the demand of fittings in agri is much less, so in fittings the major volume would always be of plumbing sanitation where the volatility is little less.

Vipul Kumar Shah — Sumangal Investment — Analyst

Okay. And sir, lastly, what is the current delta PVC, EDC as on today?

Niraj Kedia — Chief Financial Officer

See, latest one week — latest numbers on PVC EDC the delta is roughly $665.

Vipul Kumar Shah — Sumangal Investment — Analyst

It was the same last quarter average, right?

Niraj Kedia — Chief Financial Officer

Last quarter, average was roughly $570.

Vipul Kumar Shah — Sumangal Investment — Analyst

So $100 higher than that. Okay, sir. Thank you and all the best, sir.

Niraj Kedia — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.

Rahul Agarwal — InCred Capital. — Analyst

Yeah, thank you for the follow-up. Actually the question was on the pricing, if you could help me with PVC, EDC, VCM, and ethylene pricing for third quarter Y-o-Y and the current price, please? Thank you.

Niraj Kedia — Chief Financial Officer

So, for Q3, PVC was $840, EDC was $270 and VCM was $650. So the PVC, EDC delta was $570 and PVC, VCM delta was $189.

Rahul Agarwal — InCred Capital. — Analyst

And the Y-o-Y number in the current mix, please.

Niraj Kedia — Chief Financial Officer

So you mean Q3 FY ’22.

Rahul Agarwal — InCred Capital. — Analyst

Yeah.

Niraj Kedia — Chief Financial Officer

PVC was $17.53, EDC was $959, VCM was $1,403, the PVC EDC delta was $795 and the PVC VCM delta was $350, that is average for Q3 FY’ 22.

Rahul Agarwal — InCred Capital. — Analyst

Got it. And you said currently PVC, EDC delta is $665 and what would be PVC VCM.

Niraj Kedia — Chief Financial Officer

$190.

Rahul Agarwal — InCred Capital. — Analyst

Which is similar to last quarter, due to which delta has improved.

Niraj Kedia — Chief Financial Officer

Yes.

Rahul Agarwal — InCred Capital. — Analyst

Okay. And sir, the one question was on the land update. Obviously if you don’t think more transactions happened, but should we see this as a delay or this is how you are expecting it to play out.

Niraj Kedia — Chief Financial Officer

No. So we have to close this as soon as possible and we are working towards it. There is no intentional delay or there is no intentional speeding-up of things. The mandate from the Board is very clear. We have to get the disposed-off and we’re working towards that. There is no delay as such.

Rahul Agarwal — InCred Capital. — Analyst

So let’s say by December we should expect this to complete because that’s another INR300 crores of —

Niraj Kedia — Chief Financial Officer

Yes. Hopefully.

Rahul Agarwal — InCred Capital. — Analyst

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

Niraj Kedia — Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Karan Bhatelia from Asian Market Securities. Please go ahead.

Karan Bhatelia — Asian Market Securities — Analyst

Hi sir, thank you for the opportunity. Sir, if we leave aside the inventory fluctuations in both the division, what could be the margins for this quarter.

Niraj Kedia — Chief Financial Officer

That is difficult to quantify.

Karan Bhatelia — Asian Market Securities — Analyst

So, we’d be still in the range of —

Niraj Kedia — Chief Financial Officer

See, I will tell you why I’m saying this. See, prices after September, in October and November prices kept going down. In fact, by November, they had gone down further by INR11.5. It is only in December that prices kind of stabilize and they went up again. So that number is very difficult to give.

Karan Bhatelia — Asian Market Securities — Analyst

Right. And sir, one clarity which I wanted to have is, sir, we keep mentioning about INR8 to INR10 margins for the plastic pipe division. So that is assuming 50%-50% mix on the agri and non-agri?

Niraj Kedia — Chief Financial Officer

No, with that the margin should improve.

Karan Bhatelia — Asian Market Securities — Analyst

Right. Okay, thank you. That’s it from me.

Niraj Kedia — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Padma Raju Mathi from SBI Life Insurance. Please go ahead.

Padma Raju Mathi — SBI Life Insurance Co. Ltd. — Analyst

Yeah, thank you for taking my question. Sir, my first question is related to the capacity side. By end of this financial year, what would be our capacity on the PVC pipes?

Niraj Kedia — Chief Financial Officer

370,000 tons.

Padma Raju Mathi — SBI Life Insurance Co. Ltd. — Analyst

Okay. There could be some debottlenecking next year, or it’s not required?

Niraj Kedia — Chief Financial Officer

As of now, it’s not required. We have substantial headroom.

Padma Raju Mathi — SBI Life Insurance Co. Ltd. — Analyst

Okay. And my second question is related to your earlier comment on the sluggishness on demand. So, is that visible on the agri and non-agri or it’s overall?

Niraj Kedia — Chief Financial Officer

Overall.

Padma Raju Mathi — SBI Life Insurance Co. Ltd. — Analyst

Okay, fine. Thank you.

Operator

Thank you. We have the next question from the line of Rahul Agarwal from InCred Capital. Please go ahead.

Rahul Agarwal — InCred Capital. — Analyst

I’m sorry, just last thing. One question on — the lay of the land in PVC right now, I’m talking about Pipes and Fittings largely. Obviously PVC pricing stabilizing means that smaller regional players become competitive and they want to increase their own business. Across your markets, South, West, and North, these are three large markets where you work, a lot of new plants have come up for peers, national brands as well as you must be seeing some regional player trying to come back and increase business. Any thoughts on how is the market behaving in terms of supply side from a PVC Pipe and Fitting perspective, how is Finolex coping up with that?

Ajit Venkataraman — Chief Executive Officer

So we have done an analysis of our network and also the ideal location of plants and we are not seeing ourselves at a great disadvantage because of concentration of manufacturing location in the West of the country. And this is something which we are constantly evaluating and at an appropriate time, when the volumes reach a critical mass in any of the locations, then we will consider it.

Rahul Agarwal — InCred Capital. — Analyst

And in terms of competition, any comments, sir, how are you looking at competition right now?

Ajit Venkataraman — Chief Executive Officer

See, competition has always been there. So there are huge number of regional players and new players have been coming in the market, but as the market is growing, I think there’ll be space for everybody to grow.

Rahul Agarwal — InCred Capital. — Analyst

Okay, thank you so much for taking my questions. Thanks

Operator

Thank you. [Operator Instructions] The next question is from the line of Arun Baid from ICICI Securities. Please go ahead, sir.

Arun Baid — ICICI Securities. — Analyst

Sir, just one thing. When we look at our EBIT numbers for Resin business this quarter, it is obviously low. So we would have an inventory loss there, is that the right way to look it.

Niraj Kedia — Chief Financial Officer

Yeah, that’s right. That’s what I said, Arun, in October and November also prices kept on going down. So there was inventory provisioning in October, November as well.

Arun Baid — ICICI Securities. — Analyst

Okay. But as it stands things today, we’ll go back to normalization of profit in Q4 from this segment because PVC pipe was normal.

Niraj Kedia — Chief Financial Officer

It should. See now, most of our, that old high price inventory is over. So that we have consumed. So in our view, large part of the pain is behind us. We’ll see how markets behaves in the coming months.

Arun Baid — ICICI Securities. — Analyst

And just one more clarification, sir, when you mentioned there is a slowdown compared to Q3, are you trying to just make it a Q-o-Q phenomenon or generally your demand is good, but compared to Q3, which was abnormally high —

Niraj Kedia — Chief Financial Officer

Compared to Q3.

Arun Baid — ICICI Securities. — Analyst

But compared to a normal situation, Q4 is much better off than normally right, is that right?

Niraj Kedia — Chief Financial Officer

It’s normal quarter. It looks like normal quarter far, we’ll see how it pans out.

Arun Baid — ICICI Securities. — Analyst

Okay. Sir, there are no more questions. So I want to thank you all for giving us a chance to host this call and if there any concluding remarks, you want to give, please share it.

Ajit Venkataraman — Chief Executive Officer

Thank you. Appreciate it, Arun. Thank you very much.

Arun Baid — ICICI Securities. — Analyst

Thank you.

Anil V. Whabi — Managing Director

Thank you.