Greenlam Industries Limited (GREENLAM) Q3 FY23 Earnings Concall Transcript

Greenlam Industries Limited (NSE:GREENLAM) Q3 FY23 Earnings Concall dated Feb. 03, 2023.

Corporate Participants:

Saurabh Mittal — Managing Director and CEO

Ashok Sharma — CFO

Samarth Agarwal — Finance

Unidentified Speaker —

Analysts:

Udit Gajiwala — BS Securities — Analyst

Abhishek Ghosh — DSP Mutual Funds — Analyst

Abhishek Getam — Alpha Invesco — Analyst

Pankaj Agarwal — Equirus Securities — Analyst

Unidentified Participant — — Analyst

Alisha Mahawla — Envision Capital. — Analyst

Mohit Agrawal — IIFL — Analyst

Ritesh Shah — Individual Investor — Analyst

Jenish Karia — Antique Stock Broking. — Analyst

Nikhil Agrawal — VT Capital Market Pvt Ltd. — Analyst

Rahul Picha — Multi-Act PMS — Analyst

Udit Gajiwala — YES Securities — Analyst

Presentation:

Operator

Ladies and gentlemen good day and welcome to Greenlam Industries Limited Q3 FY 23 conference call. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder all participant lines will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]

Please note that this call is being recorded.

I now hand the conference over to Mr. Saurabh Mittal from Greenlam Industries. Thank you and over to you Mr. Mittal.

Saurabh Mittal — Managing Director and CEO

Thank you. Good afternoon, friends. And welcome to the Greenlam Industries call. I’ll give you a brief update of what’s happened on the business and then Ashok will take you through the financial details. I’m sure by this time, you’ve seen the presentations on the website and the Investor presentation too. So on the business front, as a result of Q3, we grew the business over 12% in top-line. The domestic business grew about 13.5% and the export business [Indecipherable] about 10%, 11%. The gross margin of the business improved to about 40% or 40%, but we had slightly higher operating costs in Q3 mainly accounts kind of manpower. On hiring additional teams for the new business. We also have the full-cost of the Gujarat plant. So. I think this all contributed to higher opening cost thereby not showing a significant improvement on the EBITDA front.

The working capital management was well in control. We improved working capital year-on year-by eight to 10 days. And we also improved working capital on a Q-on-Q basis by one [Indecipherable]. We continue to [Indecipherable] our focus on the domestic and export businesses on driving more market-share in both the geographies. The challenges we had in certain markets in the international space. It’s more or less settled now, and we are seeing business coming back from those markets. Even from the Western markets of Europe and US, while people are talking about little bit of a slowdown, but we think in the coming quarters, our number should look recently good in those markets too.

As far as the new projects are concerned, the Gujurat factories third production line will be operational in Q4 of FY 23. The power plant at Tamil Nadu should be operational by the end of Q4 of FY 23. The Andra Pradesh plant will start in Q1 of FY 24 and the [Indecipherable] plant to start by Q4 of FY 24. So we are having a close watch on the projects that [Indecipherable] is more or less going on schedule. The teams at the manufacturing plants also by and large in-place and the teams for sales, marketing [Indecipherable] as we talk. So by and large things look to be within our control and we are driving for successful inclusion of these projects.

And we hope that business as we move forward now, each quarter we think there should be improvement in terms of revenues and profitability. So that’s it from my side at the moment. Ashok will take you through the financial highlights. Of course, which I am available — the team is available for [Indecipherable].

Ashok, over to you.

Ashok Sharma — CFO

Good evening, friends. I’ll take you through the financial performance. For Q3 FY23 on a consolidated basis, net revenue for the quarter grew by 12% on a year-on-year basis and we [Indecipherable] 2.8% on a sequential basis and stood at INR503 crores. The gross margin grew by 400 basis points to 48.3% in Q3, FY 23 from 44.3% in Q3 FY 22, on a sequential basis, gross margin grew 370 basis points.

Gross margin in absolute terms, grew by 22.1% on Y-o-Y basis and 5.4% on a sequential basis. to INR443 crores this quarter. EBITDA margin was down by 100 basis points to 10.9% this quarter as compared to 11.9% in Q3 FY 22. On a sequential basis, EBITDA margin was up by 50 basis points. EBITDA in absolute terms, grew by 2.7% on Y-o-Y basis, and 2% on sequential basis and it stood at INR54.8 crores in Q3 this year. Net profit for the quarter, we stood at INR28.2 crores as against INR26.9 crores in Q3, FY 23.

Moving on to nine months performance. Consolidated net revenue for the nine months grew by 20.3% on Y-o-Y basis to [Indecipherable] crores as against [Indecipherable] in nine months last year. Gross margin was up by 150 basis points to 46% this year from 44.5% in last year, in nine months. Gross margin in absolute terms, grew by 24.5% to INR686 crores as compared to INR551 crore in nine months last year. EBITDA margin was down by 50 basis points at 10.6%. This year from 11.1% in nine months last year. EBITDA in absolute terms, grew by 15.5% to INR158.8 crores as comparison — compared to INR137.5 crores in nine months last year. Net profit grew by 26% to INR81.9 crores asagainst INR62.9 crores in nine months last year.

Now, I’ll move on to segmental performance laminate. Laminate revenue in Q3 FY 23 grew by 12.5% on a year-on year basis and degrew by 2.6% on a sequential basis and stood at INR459 crores in this quarter. Volume growth, which stood at 7.1% on year-on-year basis. Domestic laminate revenue grew by 13.3% on Y-o-Y basis and degrew by 0.8% on a sequential basis. Volume growth stood at 19.1% on a year-on-year basis.

International laminate revenue grew by 11.7% on year-on-year and degrew by 4.4% laminate [Indecipherable] in value terms volume degrew by 6.8% on year-on-year basis. EBITDA margin stood at 12.4%, a degrowth of 90 basis points on a year-over-year basis, the growth — and the growth of 30 basis points on sequential basis. Products and volume were at INR4.3 crore [Indecipherable], we are at 91% this after taking into account the plant’s capacity addition. Sales volume for the quarter, it stood at 4.26 million sheets, our average realization for the quarter was at 1030 per set.

Moving on to nine-month performance for laminate. Revenue grew by 20.2% on year-on-year basis to 100 – INR1,360 crores as compared to INR1,132 crores in nine months last year. Our volume degrew by 1.6% on year-on-year basis. Domestic laminate revenue grew by 30.9% in value term on a year-on-year basis and volume growth stood at 10.8% for the period.

International laminate revenue grew by 11% in value terms. And but the volume degrew by 13.5% on year-on-year basis. EBITDA margins stood at 12.2%, a degrowth of 40 basis points in comparison to previous years. Products and volume were at 12.85 million sheets at a utilization level of 99%. Sales volume for nine months stood at 12.38 million sheets. And our average realization for nine months was at INR1048 per sheet.

Now, I’ll move on to veneer and allied segment. This consists of decorative veneer floors and engineered doors. In decorative veneer segment, revenue remained flattish on Y-o-Y basis and degrew on a sequential basis to INR24.5 crores this quarter. Volume degrew by 22% on a year-on-year basis. Revenue of decorative veneer business grew by 28.8% on a year-on-year basis to INR79.4 crores in nine month from INR61.7 crores in crores in nine months last year.

Volume grew by 10.3% on a year-on-year basis. Sales volume for the Q3 FY 23 stood at 0.23 million square meter and for nine months, it stood at 0.92 million square meter. Capacity utilization for the quarter was 26% and for nine months, it was 29%. Average realization for the quarter was 1,042 per square meters and for nine months, it was 862 rupees per square meter.

Moving onto engineered wood and flooring. Revenue. Revenue of the flooring business grew by 1.3% on Y-o-Y basis and degrew by 7.6% on sequential basis to INR10.9 crores this quarter. Revenue in nine months grew by 30.6% on a year-on-year basis to INR34.2 crores as against INR26.2 crores in nine months last year. Capacity utilization was 11% in the quarter and 12% for the nine months.

Moving onto engineered doors. Revenue for the business grew by 37% on a year-on-year basis, and grew by 68.8% on a sequential basis INR9 crore in this quarter. Revenue for the nine months degrew by 9.9% on a year-on-year basis, and it stood at INR17.9 crores as against INR19.8 crores in nine months last year. Capacity utilization for the quarter was 21% and for the nine months stood at 15%. Net debt for the quarter ended December 31, was INR147 crores as against INR75 crore at the end of last quarter. Increase in debt is primarily on account of debt raise for our new projects. Net working capital for the quarter stood at 68 days and for the nine months stood at 69 days.

That is all from my side. I would now like to open the floor for the question and answers. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question and answer session. [Operator Instructions] The first question is from the line of Udit Gajiwala from BS Securities. Please go ahead.

Udit Gajiwala — BS Securities — Analyst

Yeah, hi sir, thank you for taking my question. Two parts for you. Earlier mentioned today on interview that the growth for 23, could be close to 22% for the full year. So what are the projections for Q4 and can you through similar light for ’24 growth and margins.

Ashok Sharma — CFO

Udit for this whole year, we are expecting in the growth in the range of around 20%. So the — so you can say that for the Q4, in the range of around INR550 crores, that’s what, which it looks as of now.

Udit Gajiwala — BS Securities — Analyst

[Indecipherable] any projections for 24, on-top line and margins?

Ashok Sharma — CFO

Margin will be similar to the current month margin — current quarter margin which is in the range.

Udit Gajiwala — BS Securities — Analyst

This is ’23, right?

Ashok Sharma — CFO

You have for this year. Yes, ’23.

Udit Gajiwala — BS Securities — Analyst

Okay and sir, I’m asking also for ’24, if we have any internal projections or if you any guidance that management [Indecipherable]?

Ashok Sharma — CFO

For ’24, revenues should be like a 20%, 25% growth. And margin will be difficult to say as of now because we are starting two new projects.

Udit Gajiwala — BS Securities — Analyst

And sir, similarly can give volumes for that [Indecipherable] for the quarter?

Ashok Sharma — CFO

I think that we will that will — so this was overall margins, not specific to laminate or [Indecipherable] overall consolidated margins and top-line growth.

Udit Gajiwala — BS Securities — Analyst

Yeah, that is clear. That’s clear. And just the volume front if you can share that loading and cohorts for the quarter.

Ashok Sharma — CFO

We can share that offline.

Udit Gajiwala — BS Securities — Analyst

Sure sir, I’ll come back in that.

Operator

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

Abhishek Ghosh — DSP Mutual Funds — Analyst

Yeah, hi sir. Am I audible? Hello.

Saurabh Mittal — Managing Director and CEO

Yes, Abhishek Ghosh.

Abhishek Ghosh — DSP Mutual Funds — Analyst

Yeah, hi sir, thanks for the opportunity. Sir, just a couple of questions in terms of the export volumes. This seemed a little muted, but although you know freight-related costs have eased off and other things have come down. So how should one expect the export volumes from hereon, in terms of improvement?

Saurabh Mittal — Managing Director and CEO

Export volumes would come back, we are seeing strong Q4 onwards, but and so if you see Q3, we have — the volume has gone down by about [Indecipherable] value is up about 14%. Well, I think as we move ahead, we should kind of — should have of things normalized and both volume and value [Indecipherable] looking at.

Abhishek Ghosh — DSP Mutual Funds — Analyst

Okay and sir this value thing, which is pull-forward because you rightly mentioned, the realization has gone up, so is it that you are now getting a better product mix, how should we look at it going forward for the export market?

Saurabh Mittal — Managing Director and CEO

Yes, certain export markets like which have come back now and then maybe towards the second half of Q3. So those are more volume markets. So because the denominator has changed, it is actually looking better, while it’s a constant endeavor to keep driving proof value mix in certain markets. So, I think it’s more of the denominator as the volumes go up the [Indecipherable] will kind of settle down a bit. So, I think that’s what, that’s how you should look at this.

Abhishek Ghosh — DSP Mutual Funds — Analyst

Okay, thanks. And sir, in this quarter, your gross margins have recovered fairly sharply. You think from here on this further scope of this gross margin improvement from hereon?

Saurabh Mittal — Managing Director and CEO

If we don’t think so that cost increases, very minor in chemicals and [Indecipherable], so, I don’t think it’s significant change will happen and so there could be some basis [Indecipherable] will be sharing that. But I don’t think any significant movements will happen from here, at least in this quarter.

Abhishek Ghosh — DSP Mutual Funds — Analyst

Okay, okay and sir, just one last question, in terms of the domestic laminates, how is the volume traction that you’ve seen good growth, but this also will be the Gujarat plant element over there. So how should one look at the domestic demand traction because in some of the other building material categories, you’re seeing slackness as far as the demand growth is concerned. So just your thoughts on the domestic [Indecipherable] market. Thanks.

Saurabh Mittal — Managing Director and CEO

The domestic market. year-on-year, there has been about 90 [Indecipherable] odd percent volume growth and Q-on-Q has been about 10% volume growth. So, in domestic, as you rightly mentioned, with Gujurat plant, we’ve also entered the [Indecipherable] segment the lower-end of the market segment [Indecipherable] So, those volumes are getting added to be revenues and the volumes, so while volume growth is 95% [Indecipherable]. Even if you see Q2 sequential basis, volume has grown, but the realization has come down. So, I think — we will keep — I think the volumes will keep inching up, right?. And the mix although we’ll keep pushing up the other segment also. We didn’t see much movement on the realization front, on the domestic market now. But I think volumes would keep inching up w move ahead.

Abhishek Ghosh — DSP Mutual Funds — Analyst

Okay and sir, the competitive intensity, domestic market, any meaningful change or is it stable?

Saurabh Mittal — Managing Director and CEO

It’s always been competitive. So, I don’t know [Indecipherable] worse or better. But, laminates, as you know, the installed capacity is more than the demand, which is not unusual in our categories, always been that way [Indecipherable]. The demand to supply that was more than [Indecipherable] clearly but just by creating capacity to [Indecipherable] marketing distribution specification [Indecipherable]. So, I think the [Indecipherable] the way it is.

Abhishek Ghosh — DSP Mutual Funds — Analyst

Okay sir. Thank you so much and wish you all the best. Thank you sir.

Operator

Thank you. The next question is from the line of Abhishek Getam from Alpha Invesco. Please go ahead.

Abhishek Getam — Alpha Invesco — Analyst

Yeah, thanks for oppotunity. Sir, I wanted to know for our particle board plant and plywood plant. What will be your sort of document of timber strategy or are we planning for our own plantations?

Samarth Agarwal — Finance

So for both our plants, the raw materials — the raw-material for plywood will be plantation, wood, and face veneer, you either import or you buy of traders who stock imported face veneer. For particle board, we will again be [Indecipherable] wood, plantation wood, any form of wood chips available saw-mill waste. So this will be [Indecipherable] format. So we are not planning our own plantation as we tal. But that is something we are actively discussing internally of not having own plantations but working with local farmers. And encouraging them to plant more of these species high [Indecipherable] species, that’s something which we are actively discussing, but we are looking at doing our own plantation, it’s more working with the farmers [Indecipherable] to plant.

Abhishek Getam — Alpha Invesco — Analyst

Understood. And just one more question. Smaller categories like [Indecipherable] laminate or acrylic sheet. So markets are sort of expanding [Indecipherable], you do we think sort of expanding that areas or and [Indecipherable] going to [Indecipherable]?

Saurabh Mittal — Managing Director and CEO

Can you please repeat your question please? I didn’t follow. Are you talking about acrylic sheets?

Abhishek Getam — Alpha Invesco — Analyst

Yeah, acrylic and 1.25 mm sheets of laminate

Samarth Agarwal — Finance

So acrylic is something which we are not at the moment considering, 12.5 mm, it’s just like brand extension or acrylic extension. We don’t as of any inspection to do that. It’s just more of getting the distribution setup to stop that category, but at the moment, there is no [Indecipherable]

Abhishek Getam — Alpha Invesco — Analyst

Okay, so but if we want to do 1.25 mm, can we re-purpose our existing plant, existing lines or is there [Indecipherable]

Samarth Agarwal — Finance

Similar. If you do 1.25 mm, it’s just a thicker laminate. It can all be done on existing lines. We don’t need any fresh investments in terms of equipment or handling materials or raw-material for that matter.

Abhishek Getam — Alpha Invesco — Analyst

Okay, That’s what a big concern. But acrylic we don’t see a big market right now. Or I mean you can sort of extension laminate right?, same distribution channels.

Samarth Agarwal — Finance

It depends and also not just to distribution, the end channel which is partner dealer probably could become, but it depends what you mean by acrylic, different products with the acrylic [Indecipherable] that are acrylic sheet, is acrylic solid surface, the different kinds of products, but [Indecipherable], we are looking at, [Indecipherable] expansion, right now, it’s more than the plywood pre lam particle board in that space and within laminates, obviously, we are continuously innovating on range and new launches, etc. So acrylic is something we considering anymore.

Abhishek Getam — Alpha Invesco — Analyst

Okay. Thank you, sir.

Operator

Thank you. [Operator Instructions] The next question is from the line of Pankaj Agarwal from Equirus Securities. Please go ahead

Pankaj Agarwal — Equirus Securities — Analyst

Yeah, thank you for the opportunity. Sir, wanted to understand on the branding [Indecipherable] for the upcoming plywood segment, sir.

Samarth Agarwal — Finance

So are getting it ready. I will not be able to talk much about it at the moment. So yeah, the team is actively working on it.

Pankaj Agarwal — Equirus Securities — Analyst

Okay and sir, second one on the deco veneer business, what are we thinking about the business or how we thinking to take it up on terms of profitability?

Samarth Agarwal — Finance

So [Indecipherable] we’re not getting the revenues like in Q3, ensuring nearly at EBITDA breakeven off, [Indecipherable] really at EBITDA breakeven on the veneer business we had raw-material cost issues in veneer were importantly the baseline [Indecipherable] veneer’s increase in prices. Realization improved, but volumes fell down. So it’s more like a borderline case of this turning around the corner. So not so far. So the EBITDA loss in Q3 cumulatively, it’s like INR1.6 crores. So, I think we’re just with [Indecipherable] some RM cost softening and some more sales push it should be there.

Pankaj Agarwal — Equirus Securities — Analyst

This can be expected in second half of 24 — in second-half of 24 or maybe FY ’25.

Samarth Agarwal — Finance

I’m not getting it, [Technical Issues].

Pankaj Agarwal — Equirus Securities — Analyst

Sure. And sir lastly on the pricing, actually I wanted to understand what was for the laminate segment percent. So the pricing [Indecipherable] that we took in 3Q. Are we expecting anything in current quarter?

Saurabh Mittal — Managing Director and CEO

So there were no price increases in Q3 and I’m — we’re not charging any further price increases. And in some categories, there could be a slight correction on it. So, but no increases clearly.

Pankaj Agarwal — Equirus Securities — Analyst

Thank you, sir. That’s it on my side.

Operator

Thank you. The next question is from the line of [Indecipherable] from Capital. Please go ahead.

Unidentified Participant — — Analyst

Hi sir, good evening. Thank you for the opportunity. Sir, my first question is with respect to volumes. Nine months is not — nine months [Indecipherable], did not see any significant volume growth. That is a slight degrowth. You did mention that exports [Indecipherable] on the domestic side also. Are we going slower than the industry?

Ashok Sharma — CFO

Alisha there was a growth of around 11% in domestic in terms of that. You don’t think that market is growing more than in terms of business coming on top of the previous year growth in terms of that, which was like last year the growth was 33% overall. We believe that 11% growth, yeah, this could have been higher, but in our opinion, it is more than the industry group.

Unidentified Participant — — Analyst

And 11% is the domestic volume growth?

Ashok Sharma — CFO

Well, yeah. [Indecipherable] volume growth and about 17% [Indecipherable].

Unidentified Participant — — Analyst

I am — so while volume growth for the current year may look slightly limited, but for FY 24 because now we have the new capacity coming in Q1 also there are other players in the industry adding capacity. So how do we think that volume growth for us for the industry in the laminates segment for FY ’24?

Ashok Sharma — CFO

Are you talking about our potential growth, [Indecipherable].

Unidentified Participant — — Analyst

Your group and also with respect to industry. Will it be in-line with the industry or it would be in a better position to [Indecipherable] both on the domestic side?

Ashok Sharma — CFO

I don’t have exact figures about what others are doing so much on the industry. Numbers accumulative, but I think we should be able to do well over the — over next year FY ’24. Because the capacity expansions will kind of debottleneck certain segments of the products we do. So we do a bigger pipeline [Indecipherable] line where the capacities have been very [Indecipherable], and with the new capacity in Andhra Pradesh, we’ll be more than doubling in capacity in that segment. We’re also adding one-line for the larger size of laminate, which serves certain European and other international markets, and some for the domestic market. The Gujarat plant will get fully operationalized by this quarter, which is also serving independent segments of markets, I think, the way the capacity expansion is happening, it’s also serving certain strategic advantages in segments where we got total capacity. We think we should be able to have a decent quality growth in the coming financial.

Alisha Mahawla — Envision Capital. — Analyst

Is it possible to give some direction or color, how much are we expecting this volume growth to be?

Unidentified Speaker —

So if you see versus this year, I think, if you add the full capacity of Gujarat and Andhra Pradesh, the capacity is expanding by nearly 40% to 50%, and I think probably, we should be looking at a12%, 15% kind of a volume growth, I guess.

Alisha Mahawla — Envision Capital. — Analyst

Sure. And as realizations have gone up sharply and I do understand that a large part of it has to do with the remuneration[phonetic], which is now seeing some softness, how much of this will be sticky and how much of it is because of product mix?

Unidentified Speaker —

Hard to give you a number, but I can say, it’s a mix of both, price increases and product mix improvements for both international and the domestic market.

Alisha Mahawla — Envision Capital. — Analyst

Sir, for the longest time, we were doing about INR750 crores to INR800 crores, kind of a realize — INR750, INR800 realization, which now is closer to INR1,000, all I’m trying to understand is how much of the INR1000 is sticky?

Unidentified Speaker —

How much of INR1,000 is sticky?

Alisha Mahawla — Envision Capital. — Analyst

Will we go back to INR750 or is that price going to be in between?

Unidentified Speaker —

So if you look at the next year or so, both volume and value both are — regarding both volume and value, so, one part of the expansion is happening in the volume segment, one part expansion is happening more on the value segment. So I would like to believe that we should be in a similar range in terms of price realizations. This is what I would tend to believe. Because it’s also about launches.

Operator

Alisha?

Alisha Mahawla — Envision Capital. — Analyst

Ma’am, thank you.

Operator

Thank you. The next question is from the line of Mohit Agarwal from IIFL. Please go-ahead.

Mohit Agrawal — IIFL — Analyst

Yeah, thanks. My first question is on particle board segment. So have you seen an increase in imports of bare particle board and has that impacted realizations and margins?

Unidentified Speaker —

At the moment, since we are not into importing particle boards, we do believe certain imports from Southeast Asia have started coming in into South South India, this is the feedback that we have. And I think of currency, currency depreciation and freight reduction. Because there was no of base of particle boards, bare boards in the country, but those plants are very small. So there is no direct comparison between what others are selling and what is coming in right now, but we do believe imports have started coming in right now.

Mohit Agrawal — IIFL — Analyst

Okay, but any sort of an approximation, How much pricing would have been impacted in the last couple of quarters?

Unidentified Speaker —

I’m not hands-on with the data, but I can say if you you’re trying to compare in relation to what we will do, our model is going to be largely laminated board basis, although we’ll produce plain boards, but largely it will be — nearly all of quality boards get laminated and sold, and they don’t get sold as bare board.

But yes, imports to come in at lower-cost. There could be some impact on the laminated price sales in the market.

Mohit Agrawal — IIFL — Analyst

Okay, how much?

Unidentified Speaker —

I haven’t got an exact sense at the moment, but if they do come in, there will be some correction in the realizations of the product.

Mohit Agrawal — IIFL — Analyst

Sure. And my second question is on the CapEx expansion, could you share how much of CapEx has been incurred so-far and how much is pending?

Unidentified Speaker —

This is — Mohit, I believe you were asking more in terms of the project, new project?

Mohit Agrawal — IIFL — Analyst

Yeah, the new projects, yes.

Unidentified Speaker —

Yeah, so as on 31st December, we have spent close to around INR325 crores on both the projects, which is Plywood and this — Laminate and Particle Board project, and out of which, as you have mentioned that Plywood will — is going to start in Q4 of this year, Q4 of FY ’23, and Laminate in Q1 of FY ’24. So INR325 crores of the total announcement of around INR950,000 crores, INR325 crores is the amount spent so-far.

Mohit Agrawal — IIFL — Analyst

Okay. And how much do you expect to spend in next year? I mean, largely, the remaining would be spent in next year, right?

Unidentified Speaker —

No. Some amount may spillover into the mix, into the FY ’25 probably also. But the most part of it will be spent by end of next year.

Mohit Agrawal — IIFL — Analyst

Okay, okay. Thanks a lot, that’s all from my side. Thank you. The next question is from the line of Ritesh Shah from investor capital. Please go-ahead. Yeah, hi, sir, am I audible.

Unidentified Speaker —

Yes, you are.

Ritesh Shah — Individual Investor — Analyst

Yeah, hi sir.

I had a very generic question. Sir, what do we see — which companies would we classify as of a competition when it comes to the global laminates markets. So that’s the first question. And the company has done phenomenally well in the past, what would you attribute this to, is it distribution designs — distribution, how should one understand this, sir? Thank you.

Unidentified Speaker —

So, global competitors, if you would take like Global competitors would be [indecipherable], which is an American-based company. But now they got split into various fields, so that’s another point[phonetic], then there would from Formica, worldwide, there’s an Italian company called [indecipherable] And there will be regional players in Southeast Asia, South America, in UK and Europe so there would be more regional players across various parts of the world. So that’s on the global competition.

The next question was regarding — what would you attribute it to? I think, if you — sorry. Please go-ahead.

Ritesh Shah — Individual Investor — Analyst

Yes, so we have done pretty well on the export side, what would you attribute that to, what is it that sets us apart versus the peers, is it design, sizes, cost, how should one understand that?

Unidentified Speaker —

Okay, we think we’ve still not done very well, but thank you for the compliment. I did. It’s a mix of everything right from manufacturing right, right, product quality, supply-chain, sales teams in the market — in the international market working with channel partners, architects IDs, design. I think every single piece and the attention and focus to build a brand, I think, it will be probably bits and pieces of lot of small and large things and not just one particular part of the business.

Ritesh Shah — Individual Investor — Analyst

Right sir. I’ll just rephrase the question, I’ll put it the other way around. What would be the entry barrier, say if one has cap on land, labor and capital, then what is that, that would be an entry barrier for somebody to make a dent in those markets?

Unidentified Speaker —

Actual barrier would be the brand, the distribution network, it would be specification with architect, designers, engagement with the furniture manufacturers, so it would be more on the sales-marketing-distribution piece as an entry barrier.

Ritesh Shah — Individual Investor — Analyst

Sure. sir, would it be possible for you to detail something on that side, specifically on the distribution side or how we are engaging with the end-market, specifically, on the exports? And if can indicate which are the key regions, say which constitute like 60% of our export revenues, that would be great, sir.

Unidentified Speaker —

So I think it’s going to be a longish conversation, maybe you could set-up a time with Ashok; Ashok and [indecipherable] can take you through the geographies and the key market, distinguishing factor and all that stuff, [indecipherable], maybe you can tell.

Ritesh Shah — Individual Investor — Analyst

Sure. And my second question was, sir, how you see the evolution of the Company. We understand that the Company is getting into different categories, so what is the thought process behind it, is it more bundling or is the limitation on growth that we see in [Technical issue] as a segment, which actually forced us to dive into all the wood categories.

So sir, how does this fit into your overall vision, say, five years, 10 years out?

Saurabh Mittal — Managing Director and CEO

So in our next [indecipherable] presentation, we have said that that besides — along with focusing products in our category, we also want to the subset products. So again, two-parts to it. The international business is going to be still like largely only Laminates, by and large. If you look at the domestic piece because there’s a lot of channel overlap in terms of architects, IDs, homeowners, specifiers, dealers, distributors, so we need to have more products in the same channel and so every — every category has their own strategy. So if you buy a particle board because you are able to match the decor plate[phonetic] with the particle boards with laminates, with compact laminates, you are able to offer a complete solution to customers, via plywood — plywood veneers, poring doors, all got similar essential segment, so, I think in the domestic space, the strategy is to be across the wood panels segment, because of the channel overlap and customer being common.

In the international market, it’s going to be largely laminates only, the wood products are more of a domestic story, [indecipherable] stores.

While — so the next question was limitation of growth. So really, there is no limitation of growth in the laminates, but you can’t clearly price, we’ve reached –the growth cannot be like — more like a 12%, 15% quantity, 15%, 18% value, high-quality growth, it’s be a steady growth. So, I think that was the idea behind adding plywood and particle boards. And this not so uncommon, if you see globally also, laminate companies who have done well over several years also have to like particle boards, [indecipherable] they have [indecipherable] in the business of — the whole board panel segment eventually kind of merges with various products and [indecipherable] offer our solutions to customers.

Ritesh Shah — Individual Investor — Analyst

Sir, I’ll just squeeze in one question, you used the word to make-good of the channel overlap, so possible to give some numbers over here? If you’re looking at a market sizing from a retail touch point standpoint, what percentage of our touch points would we will automatically be fungible for the new product categories that we are in, because when we went the marketplace, we see laminates is something which is very-very niche and everything else, it’s more commoditized, which has changed in recent years. I’d like to hear your thoughts, I’d say that the perception is wrong. And basically, when we get to the marketplace, bundling is something which is actually –proposition which actually implementable?

Unidentified Speaker —

So when we say [indecipherable] channel overlap, the dealers are common for all categories. So dealers in our trade would carry plywood, [indecipherable] particle boards, laminates, adhesives, hardware, maybe timber. So I meant by that, so clearly, so they are a common point for the contractors, customers and carpenters.

So if we talk about what’s fungible, so mathematically, all the channel of laminates, probably also sells plywood, particle boards, [Technical issue], to sort our agreements out and work with those counters to sell our products. So mathematically, the counters that sell laminates also sell ply, also sell [indecipherable] particle boards, they all [indecipherable], every kind of, most kind of good product or good panel products along with some additional hardware, also, so that’s how it works.

And as far as question about commoditization and specialization concern, so yes, in laminates certain segments of the market is more — really it’s more design, brand and supply-chain oriented, some part of the laminate market is commoditized.

In plywood also, plywood probably it’s more commodity than laminate — [indecipherable] and particle board, again adds a design element to it, you have to go to market to get the specification done, to work with the OEMs, those OEMs also buy laminate from us, it’s all kind of interrelated and there is a significant amount overlap through the entire value chain.

Ritesh Shah — Individual Investor — Analyst

This is helpful. Sir, can I squeeze in one question, last one?

Unidentified Speaker —

Sure, if that’s the last one, yeah?

Ritesh Shah — Individual Investor — Analyst

Yes, sir, last one. sir, anything specific that we’re doing on the technology side, when it comes to say, if I am a carpenter and I am very loyal to you on laminates, and you want to push the other products as well. So is there somebody on the last mile loyalty technology that we are doing which will help us to cross-sell the other categories? Thanks.

Unidentified Speaker —

Yes, that’s right. Yes.

Ritesh Shah — Individual Investor — Analyst

Sure, this is helpful. Thank you so much, sir.

Operator

Thank you. The next question is from the line of Jenish Karia from Antique Stock Broking. Please go-ahead.

Jenish Karia — Antique Stock Broking. — Analyst

Yes, thank you for the opportunity. So my first question is with regards to the newer segments that we are entering. So, what kind of utilization levels are we targeting for the initial level target micro-market that we want to enter and the pricing strategy, will it be at a discount or at par with the market-leader? So that would be my first question.

Saurabh Mittal — Managing Director and CEO

So like I said in my initial remarks, we have additional [indecipherable] for the Gujrat plant, and parts of it is not yet operational, I think so it’ll happen in this quarter, we’re still working out on what their strategy will be. So won’t be able to also much on that, but clearly the products will do — obviously, as you know, is in our manufactured — it’ll be at the, a bit more premium end of the market, alongside the other national brands, so, right, and that pricing strategy is something we’ll, that we are working on.

And what was your first question, please? In terms of capacity utilization– in terms of capacity utilization, we are looking at around 50% to 60% in the first year of operation for the laminate and plywood, both, and in second to third year, we are looking at nearly around the optimum utilization only.

Jenish Karia — Antique Stock Broking. — Analyst

And any special micro-market we’ll be entering first, or it will be pan-India from the beginning?

Unidentified Speaker —

So, we are not looking at doing a pan-India operation from the Tamil Nadu foundry. Tax is still something we are working on, it’ll be limited to a certain region of the Company from a logistics, freight point. It will be more like circling certain parts of the market and focusing on that specific factory.

Jenish Karia — Antique Stock Broking. — Analyst

Understood, sir. Sir, second question would be regarding the M2[phonetic] decor, like we have added certain sales force, so at what pace will be expanding our sales force? Just to understand at what rate can the employee cost grow going forward, and what could be the impact on the margins?

Saurabh Mittal — Managing Director and CEO

So. Like I said in my initial remarks, we have additionally employees for the Gujrat plant. And parts of it is not yet operational, I think so it’ll happen in this quarter. It’s already started building a team for the plywood sales. Most of the team members will come on-board within this quarter. Post that, we think not significant increase on that front will happen in the coming year on account of plywoods.

We start building the teams for particle boards int he next financial year. So probably then we’ll have people and more sales for us in that period. So that’s on the on how the people [indecipherable] look like.

As far as the cost is concerned, I think with revenues rising, the cost should get normalized over the next maybe two quarters or something of that sort.

Jenish Karia — Antique Stock Broking. — Analyst

Understood, that’s helpful. And sir, my last question, if you can help with the geographical change mix, and how much has been our laminate sales currently coming from East, West, North and South regions?

Unidentified Speaker —

I think maybe we will take this on a one-on-one basis?

Jenish Karia — Antique Stock Broking. — Analyst

Yeah, no problem sir. Thank you so much and all the best for future.

Operator

Thank you. The next question is from the line of Nikhil Agarwal from VT Capital, please go-ahead.

Nikhil Agrawal — VT Capital Market Pvt Ltd. — Analyst

Good evening, sir and thank you for the opportunity. So apologies for any repeat questions, since I missed the beginning half. Sir, I just wanted to know like, how has the international demand been and what volume and value contribution was there in Q3 versus what it was in FY ’22?

Unidentified Speaker —

Yes, so demand, if you look at the numbers, international business, nine months to nine months, our revenues are up by about 9-odd percent, that’s right, in laminates, overall. So demand has been pretty okay in certain markets, certain markets we’ve announced earlier, we struggled in Q2 and part of Q3, when there were currency problems.

And our stock right now, you now, it’s more like a mixed bag, some markets are doing well, some have a little bit of challenge, which is usual, it’s nothing — we haven’t seen any significant challenges besides what we saw already earlier in Q2 and part of Q3.

Saurabh Mittal — Managing Director and CEO

And to answer your next question, in terms of contribution, the international market is contributed around 45% in terms of value and around 45% in terms of laminate in volume..

Nikhil Agrawal — VT Capital Market Pvt Ltd. — Analyst

So, this was in Q3, right?

Unidentified Speaker —

This was for the nine month, it is 45% the value.

Nikhil Agrawal — VT Capital Market Pvt Ltd. — Analyst

Okay and what was the number in FY ’22?

Unidentified Speaker —

It about 50-odd percent.

Nikhil Agrawal — VT Capital Market Pvt Ltd. — Analyst

Okay, got it, sir. And, sir, the drop in realizations quarter-on-quarte, so is it largely because of, is it because of the product mix or anything, any other reason?

Unidentified Speaker —

It’s a mix of both, actually the last year, we did increase the prices, because of the raw-material inflation. And in this year, we didn’t do any price increase. So it is a mix of both, the price increase which we did last year, and improvement in the value mix.

Unidentified Speaker —

Yeah, so answering your question on freight. So freight is not included in the price, so all additional freight within the international market was charged as a surcharge to the customer and whose reduction has been passed on to the customer as a benefit. So we agreed on a baseline with customers on a pre COVID cost and post that, whatever increases that came in was a separate line-item as a surcharge. And with the reduction now, so that’s a — that’s right back they’re getting — so we’re not charging them any surcharge, or charging them reduced surcharge, basically, an agreed baseline. So that’s what we’re doing.

So that’s not quite part of the price, the price a function of price increases and market mix.

Nikhil Agrawal — VT Capital Market Pvt Ltd. — Analyst

Okay, great. And sir, just one last question is on the particle board market in India. So you said earlier that imports are happening in the particles, both segments. So what percentage of the market would be that, I believe the market size in India is around INR3,000 crores currently. So what percentage of the imports are taking place out of that?

Unidentified Speaker —

See, according to our estimates, the market size is approximately around INR5,000 crores, the — whatever data which is available in the public domain from the government side, the — it was somewhere around — last year, it was somewhere around 15% to 17% was the import, even though earlier than that, it used to be higher, but last year, it is like 17%, 18% the import was there, approximately.

Nikhil Agrawal — VT Capital Market Pvt Ltd. — Analyst

But like are you as a Company, Greenlam is not much concerned about these imports because these are the lower-quality products, right?

Unidentified Speaker —

So these are not be lower-quality product, but these are the bare board, which are mostly imported and our focus will be on pre-lam particle board.

Nikhil Agrawal — VT Capital Market Pvt Ltd. — Analyst

Okay, okay. Got it, sir. Thank you so much. That’s it from me.

Operator

Thank you. The next question is from the line of Rahul Picha Multi Asset PMS. Please go-ahead.

Rahul Picha — Multi-Act PMS — Analyst

Yeah, hi, thanks for the opportunity. So, I had a broad question on the export market. So wanted to understand what are the key drivers of demand in that market, is it cost competitiveness? As a country, we are more competitive right now, and so that is why the demand has been there over the last few years or there has been any other country, which used to earlier export a lot and that has kind of vacated the market or any other similar kind of trends that are playing out in the export side?

Unidentified Speaker —

So, Rahul, it’s a mix of everything, there is no one single element, which goes into this. So after [indecipherable] video, the export market is not necessarily on cost-efficient manufacturing only, it’s also a lot on marketing distribution, our sales teams in various international markets represented through subsidiaries and a few directly. Working in the market towards demand creation with architects, IDs, joineries, cabinet companies, OEMs, kitchen solutions etc. So, I think it’s a mix of everything.

What’s happened over the last couple of years, one could say that international competitors or several laminate companies who are having manufacturing abroad, have not necessarily added any meaningful capacity. So lot of growth in the market, probably came to us, that could be one way to put it, but it depends on geography to geography, so.

Has someone gone out of business? So yes, you know maybe one or two competitors have gone out of business, but not that there were very significant in the whole scheme of things.

Rahul Picha — Multi-Act PMS — Analyst

Okay. And so, sir, within exports. Our business is largely on our own brand or are we doing any white labeling kind of a –?

Unidentified Speaker —

So most of it is on our own brand. So we don’t outsource — we don’t do — we don’t work for some other brand, we used to, like several decades, like a decade-and-a-half back. But now, it’s all our own, Greenlam flagship brand and our sub-brands, it’s with our own brands.

Rahul Picha — Multi-Act PMS — Analyst

Okay, okay, got it. Thank you.

Operator

Thank you. The next question is from the line of Udit Gajiwala from YES Securities, please go-ahead.

Udit Gajiwala — YES Securities — Analyst

Yeah, thank you for the opportunity again, sir. Just wanted to check that, you mentioned that we might have to take price protection in few pockets for laminate, is it only because of the RM cost which is coming down? And secondly, on the blended, do we see further contraction because our new unit of Gujarat is more towards mass-market product, so would that impact the blended realizations and the margins?

Unidentified Speaker —

So, so while Gujrat would be on the mass-market the Naidupeta plant is actually on the opposite spectrum, where you have the larger size laminates and more value items are going to be produced there, so I think I mentioned that we are set up as far as the post sheet — organization is concerned, there could be a month or a quarter here and there, but by and large, we’re driving both volume and the value mix, so, I think probably, it’s kind of that set up.

On the [indecipherable], like said in certain segments, where there could be a minor correction. I just said that, and so yes, there could be some correction in certain segments of the market, but nothing very significant as we envisage right now.

Udit Gajiwala — YES Securities — Analyst

Okay. And sir, just lastly, when you said value-added products, can you quantify that what would be the revenue mix that you’ve taken and what are those margins on value-added products?

Unidentified Speaker —

I can do that right now, Udit.

Unidentified Speaker —

And usually, it will be difficult, Udit, also in terms of that to exactly pinpoint the — what is the margin difference.

Udit Gajiwala — YES Securities — Analyst

Sure, sure. Thank you sir.

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Saurabh Mittal for closing comments.

Saurabh Mittal — Managing Director and CEO

Thank you, friends. Thank you for your time and attention, and for your certain intelligent questions, and Ashok and [indecipherable] are available for any further queries or questions to be responded.

Ashok will kindly talk to be participants whom we agreed to do an offline conversation. And thank you once again. Have a great evening ahead.

Operator

Thank you. On behalf of Greenlam Industries Limited, that concludes this conference. Thank you for joining us. Now you may disconnect your lines.