Greenpanel Industries Ltd (NSE: GREENPANEL) Q1 2026 Earnings Call dated Aug. 01, 2025
Corporate Participants:
Unidentified Speaker
Shobhan Mittal — Managing Director & Chief Executive Officer
Vishwanathan Venkatramani — President – Finance
Himanshu Jindal — Chief Financial Officer
Analysts:
Unidentified Participant
Rishab Barar — Analyst
Keshav Lahoti — Analyst
Ritesh Shah — Analyst
Praveen Sahay — Analyst
Udit Gajiwala — Analyst
Akash Shah — Analyst
Utkarsh Nopany — Analyst
Shivkumar Prajapati — Analyst
Yash Sonthalia — Analyst
Pathanjali Srinivasan — Analyst
Pritesh Chheda — Analyst
Tanmaiy Mohta — Analyst
Bhargav Buddhadev — Analyst
Hrishikesh — Analyst
Presentation:
operator
Ladies and Gentlemen, good day and welcome to the Green Panel Industries Q1 FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rishabh Bharar, CDR India. Thank you and over to you sir.
Rishab Barar — Analyst
Good day everyone and thank you for joining us on Green Panel Industries Limited’s Q1FY26 earnings conference call.
We have with us today Mr. Shobhan Mittal, the Managing Director, Mr. V. Venkatramani, President Finance and Mr. Himanshu Jindal, CFO. Before we begin, I would like to state that some statements made in today’s discussion may be forward looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the result presentation that was sent to you earlier. I would now like to invite Mr. Shoban Mitta to begin the proceedings of the call. Over to you Sir.
Shobhan Mittal — Managing Director & Chief Executive Officer
Thank you Rishabh. Good afternoon ladies and gentlemen and welcome to our quarter one FY26 earnings call. While sequentially our domestic MDF volumes grew by 2% versus quarter for FY25, there was a degrowth of 8.5% versus quarter one of last year largely due to the discontinuation of 37,000 cubic meters of commercial grade MDF sales post implementation of Bisqcos. Excluding this, domestic sales grew by 47% on a like for like basis. On the domestic front though, demand continues to be robust growing at a lower to mid double digit cagr. The recent bunching up of capacity additions led to price and credit aggression by players to quickly gain relative market share impacting volume growth.
The excessive buildup of inventories at the channel, both domestic and imported before implementation of BIS are yet to be fully liquidated is also another reason for a less than expected volume growth in quarter one. On the exports front our volumes were almost flat sequentially but degrew by 40% year on year. Obviously exports has been more of an opportunistic play for us and we have been taking conscious calls based on possible volumes versus margin play. The recent geopolitical situation, especially in the Middle east also disrupted movements impacting volume growth. Plywood sales are yet to stabilize although we have already taken steps to improve synergies with our existing MDF business both in markets as well as on costs, this will take a bit more time, but we’re confident of a revival over the next few quarters.
Our domestic realizations both for MDF and also plywood remain flat year on year while the MDF export realizations improved by 7%. As a consequence, our MDF revenues degrew by 12% versus last year and our Plywood revenues were lower by 3% as well. Consolidated revenues from both segments being Rupees 323 crores in quarter one. On the operations front, we were able to stabilize the new thin panel plant at Andhra Pradesh. This though came with the initial hiccups and cost deficiencies impacting margins and should get normalized from quarter two onwards. Timber prices are on course correction already and were lower by 7% sequentially leading to an improvement of 2.5% on gross margins.
Consolidated gross margins being 47% for quarter one. Consolidated operating EBITDA excluding the impact of currency movement on the euro borrowing for the new plant was rupees 13 crores or 4% of revenues, MDF at 4.4% and plywood at 0.6%. On the industry front, the tailwinds for the sector are becoming more and more visible now with each passing month. Some very clear green shoots which should play out over the short to medium term. Being further expected reduction in timber prices, no further meaningful capacity additions in the sector. Slowing down of MDF imports run rate for quarter one already being one to one and a half thousand cubic meter versus recent historical highs of 15 to 1000 cubic meters per month.
Lastly, the play of BIS norms and stricter implementation of these covering the smaller domestic players from September onwards. Apart from the QCO expected on furniture next year. Moving ahead to facilitate sales apart from some of the more visible actions we took recently example the change of sales lead and convergence of CLI and MDF sales team to complement product offerings to the channel. We simultaneously continue on our quest to strengthen our branding presence and channel Connect. In quarter one we rewarded 150 top performing channel partners at Bali Indonesia, reinforced ambitions to scale up via our annual sales conference re strengthened our in shop branding across 2000 dealers and sub dealers ran HDWR campaigns both physically and also digitally launched thin MDS and HWR doors and also revamped a loyalty program app for a more seamless experience for our partners and the associated carpenter fraternity.
This should help improve our connect and salience of our products going forward. To summarize, while quarter one was fraught with a few exceptions, some clearly beyond a control example FX movements and while there are still challenges, especially on the pricing. For now our renewed focus will be to recoup loss volumes and regain market share going forward over the next nine months. Our aim is to counter pricing pressure through expected reduction in both raw material and other variable costs as well as fixed cost optimizations and operating leverage by increasing volumes. With this I request our CFO Himanshu Jindal for the financial and other updates.
Over to you Himanshu. Thank you Shubanji. Good afternoon all. Since we have already covered revenues along with the underlying details on volumes and realizations, let me briefly give you more details on the exceptions impacting quarter one and along with the balance sheet aspects for the quarter. On the exceptions which impacted quarter one results, the first one was the impact of adverse currency movement the euro INR the forex loss on euro borrowings which is the ECB being 27.6 crores and on capex there is another 2 crores. Almost 26.5 crores of this is unrealized which is nominal mark to market non cash.
The second piece was initial stabilization of the new thin panel plant which Shobhaanji already talked about which is what led to a higher consumption largely on power and fuel. This impacted margins by another 3% versus the last fiscal year. Apart from these, there was also the first time capitalization of the new plant which was absent last year obviously which is what resulted in a higher interest in depreciation expense of 10 crores. Counting these in the reported EBITDA was negative 12.4 crores, the PBT was negative 47.4 crores and the PAT was negative 34.6 crores. On the balance sheet front our working capital requirements did increase mildly as expected given the new MDF plant coming into operation March and last fiscal, the core cash conversion cycle expanded by 11 days to 47 in quarter one.
Our gross debt at June end was 386 crores, bulk of which is for the new plant at AP which is almost at par with the March figures. Despite repayment of the scheduled branches in quarter one due to the unrealized FX loss on the Euro denominated borrowings, counting the cash and bank balance at end on hand, the net debt was rupees 233 crores and there was zero utilization of our funded working capital facilities implying a comfortable leverage and liquidity position and thus financial strength for the company. On that positive note, I think we can open the Q and A please.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question May press char and one on the touchdown telephone. If you wish to remove yourself from the question queue, you may press char and two Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Keshav Lahoti
Thank you for the opportunity. As we know, you know, possibly Q1 should have not been how possibly we might have expected earlier. So what are. What sort of. Will there be any curtailment guidance on the volume and on the margin side what you have guided earlier?
Shobhan Mittal
Yes. So no, we are not changing anything on the guidance side in terms of volume or margins at this point of time. As mentioned earlier as well that we are going to there is pricing pressure in the market but we are going to counter that with cost savings both on the variable and fixed side as well as operating leverage.
And as of now we want to maintain our guidance for the volume as well as our margins.
Keshav Lahoti
Understood. So this implies that you need to, you know, sort of achieve a big growth on the later nine months. So when that means you will be more possibly aggressive on the pricing side and what sort of price cut you have taken in last few months.
Shobhan Mittal
So there have been schemes already in place from July and as a company we are very comfortable with our balance sheet at this point of time. So now the focus of the company is strongly going to be on recouping the market share that we have lost and on the growth side.
So yes, pricing pressure will be there. We will work strongly to negate that with optimization of cost and leveraging our volumes. And that’s our expectation at this point of time.
Keshav Lahoti
Got it. What sort of, you know, schemes you have given in July and secondly, possibly as the new plant has came up for you, normally players take a, you know, give higher discount in the market. So will green panel follow a similar practice?
Shobhan Mittal
So sorry, can you repeat the last part of your question and catch it?
Keshav Lahoti
So as I was saying, you know, right now your new plant has came up.
So the capacity utilization is low. Normally what happens player practice, you know, giving higher discount than other players in the market to gain market share. Your commentary is more, you know, aggressive on the growth side. So will green panel follow a similar strategy.
Shobhan Mittal
So if we are monitoring market and geographies very closely, you know, the new panel is taking to a certain segment of the market as well. Sorry, there is some disturbance. The new plant is also catering to a certain segment of the market where pricing is Slightly different than the retail market because thin panels is going into a different segment of consumption.
So we’re responding accordingly how each segment and each geography is playing out and accordingly, you know, tailoring our schemes to that.
Keshav Lahoti
Okay, got it. Understood. I’ll come back. Thank you. Thank you.
Shobhan Mittal
So there’ll be a dynamic approach to, you know, there won’t be a sort of blanket kind of scheme. There will be a dynamic approach to how we address schemes in different product segments and different markets. Looking at the competition,
Keshav Lahoti
any quote, any number, what is the average being you have given a discount in July month, what would be average?
Shobhan Mittal
I think, I think on a.
On an, I mean on an average basis, I would say could be somewhere around about 3 odd percent.
Keshav Lahoti
If possibly, you know, get. Possibly ask you one more question. So what is happening on, you know, the earlier you used and commercial grade mbs which we have stopped now. So big, you know, sales is coming on that side. So how you are handling that part, possibly that dealer, you’re not able to possibly regain that dealer and possibly convert that to, you know, more, you know, quality mdf. Better get it from thin panels.
Shobhan Mittal
No. So you know, what we have noticed is that we’ve been able to convert a lot of that volume into a standard industrial grade because commercial grade was basically competing with industrial grade or the cheaper industrial grade from unorganized segment.
So we’ve been able to convert those volumes into our industrial grade sales, albeit not entirely, but the majority of it has already been done. So.
Keshav Lahoti
Got it. So was that done in Q1 because you.
operator
Sorry to interrupt. Sorry to interrupt, Mr. Keshav. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Ritesha from Investec. Please go ahead.
Ritesh Shah
Yeah, hi sir. Thanks for the opportunity. I’ll just pick up from the prior question. Sorry. If I had to understand the market sizing, what historically we have indicated is around 2.4, 2.6 million CBM at the country level, what part of this would be commercial grade? The reason to ask this question is it’s a sizable knock on volumes that we are taking when you indicate around 37,000 forgone. So just trying to understand the market landscape and I’ll just take a pause over there.
Shobhan Mittal
So, you know, actually there is no. I would say the commercial grade was an offering on our part.
You know, it falls in the industrial category only. It was an offering on green panels part to be able to compete with the imported segment and you know, the unorganized segment. So there is no commercial grade segment per se. It was, let’s say a more competitively priced product with some cost savings in terms of volume, sorry, in terms of density glue consumption to be able to compete with that. But this category falls in the industrial segment and in today’s market I would say the industrial category would still account for about 60 to 70% of the total market size.
Vishwanathan Venkatramani
So to just add to what Shobhaji said, there was a lot of inventory lying with channel partners from imports which happened before the implementation of BIS and also from unorganized companies, the smaller MSMEs to which BS implementation will be effective from August. So I would say that we were not able to convert our entire commercial grade to the industrial category. So possibly the balance conversion will happen during quarter two.
Ritesh Shah
Right? Thank you. Thank you Venkat sir. Thank you Shubanji. But I just a follow up question over here. I understand the price point of math. Basically we want to be competitive. But it honestly perplexes me when we say that it is because of BIS the volumes have fallen. Like how should one read into it? Is it about price point or is it about quality because the production should go? Price point was always correct. Or is it like the market is undercutting us significantly specifically for the unorganized space? That is where our volumes are actually taking a knot.
Shobhan Mittal
So you know, I’m not saying that because of BIS volumes have fallen. We had a certain segment of voluminous sales coming to us from the commercial grade in anticipation of BIS and for complying with bis, because I had to be fully compliant with BIS from February onwards we removed that segment offering from our portfolio. So which was helping us compete with the imported as well as the unorganized segment both in terms of quality and in terms of price competitiveness. So as Mr. Venkat is saying, now that we see that imports getting more and more diminished and the volumes disappearing from the market, even the inventories disappearing from the market, it provides us with an opportunity to now go with our industrial segment and convert that even further.
So because that category of material is becoming lesser available in the market, imports have gone out of the picture. So even our oem. OEM custom.
Ritesh Shah
Yeah sir, sorry. So what we are saying is we had certain non BIS portfolio which was there. Would you draw parallel for the other industrial player, other peers at the listed companies in the space, like will they have a similar problem to what we had or is it something which is specific to green panel?
Shobhan Mittal
No, the commercial grade offering was specific to us.
Ritesh Shah
Okay.
Vishwanathan Venkatramani
Since the commercial grid was primarily going into the OEM segment and a large number of OEMs are based out of South India, it was not really applicable to players operating in North India specifically. So you know, north players would not have been impacted by that. Because Most of the OEMs are operating out of South India.
Ritesh Shah
Correct. And Shobanji, you just touched upon this. Sorry to dig in a little more. You indicated that we will move from commercial to non commercial. So is the market ready for that? Is there appetite for that? And if you could highlight what is the differential? Is it like
Shobhan Mittal
non commercial is industrial. Non commercial is industrial. So. And of course the largest segment of the market is industrial.
Ritesh Shah
Correct. So what is industrial standard?
Shobhan Mittal
Well, yes, absolutely. Because you know,
Himanshu Jindal
I’ll just add to what Shobhi and Venkatji just mentioned. I think please try and understand this as a product offering that we had to compete against unorganized play or imports. Yeah, that category was not applicable for the others in the industry. Why? Because obviously a lot of entrants came in very recently, last two, three years in the organized space. So we were there in the market with this product to be able to compete against a particular section of suppliers.
Now that the BIS has already kicked in, this product offering has already been shut down voluntarily upfront by green panel. And now we are converting everyone into industrial. This is exactly what is happening. So there is enough market for industrial where people are buying. Obviously this is a low value, low margin product but people are the bulk of the market is this. Yeah.
Ritesh Shah
So my question.
Vishwanathan Venkatramani
Okay, just to add to that, Know what Himanshu Ji is trying to explain is that the commercial category will disappear from the market over a period of time because it’s a non BIS compliant product. Imports like Shobhanji mentioned have already come down significantly. I would say Approximately by about 90% what we witnessed during quarter one and the current month. And since BIS is applicable for MSME players also from August, assuming that implementation happens from that date, they will also not be able to produce the commercial grade. So over a period of time the entire market for commercial grid will be converted into industrial grid.
Ritesh Shah
Sure sir, just last follow up, what I was trying to ask is what will be the price point?
operator
Sorry to interrupt. Maybe request that you return to the question queue for a follow up question. Thank you. The next question is from the line of Praveen Saif from PL Capital. Please go ahead.
Praveen Sahay
Yeah, just continuation of a last participant question. What is the realization difference between the BIS compliant versus non compliant, you know, the mdf.
Shobhan Mittal
So the general difference of the, you know, industrial and commercial grade product was anywhere between 6 to 8%.
Praveen Sahay
Okay. And next question related to the pricing. As you had said that price, timber, price correction is there and there is some price challenges. Last quarter you had given for a month 5% of scheme. Now again in the July 3% of a scheme. So the way forward or the rest of the quarters in a year, what kind of a price correction you are building in because you had a given up, you know volume and the margin guidance already.
So what’s your take on that?
Shobhan Mittal
So you see I think a lot of the schemes are also dependent how, you know the Robert Hill price corrections are going on for all the producers and people are reacting to the market pressure accordingly. So I would say to give a very far sighted sort of information on what the schemes will be, it’s very hard to say. You know, that is why even as a company we are also releasing very short term schemes, you know, to counter the month on month pressures. And you know if this month is going to be for example, I mean hypothetically 5%, it’s hard for me to say that will it continue to be 5% next month or will it go down to 3% or will it go up to 6? So it’s not possible for me to factor that in right now, you know and tell you that this is what’s going to happen.
Because a lot of plays are in the picture right now. Competitors activity, raw material prices, market conditions. So it’s not easy for us to predict that.
Praveen Sahay
Anything on the industry capacity, sir? How much is the addition this year or next year expected?
Shobhan Mittal
Sorry, I didn’t understand that. Venkatji, can you answer that?
Vishwanathan Venkatramani
Yeah. So we are not expecting any major capacity addition in the MDF segment during FY26 and 27. There might be a couple of additions in the unorganized segment but we are not expecting any major capacity additions in the organized segment.
Praveen Sahay
Thank you sir. I’ll fall in queue.
operator
Thank you. The next question is from the line of UDIT Kajiwala from yes, securities. Please go ahead.
Udit Gajiwala
Yeah. Hi. Good afternoon team. So just to reiterate one part that you mentioned that you are sticking to the volume guidance which was 5,50,000 cbm. So that just translates your ask rate in the north of 35 40% for nine months. So can you just explain how is that possible for you to achieve and what will be the base impact of this commercial grade which you have discontinued for the balance Nine months.
Vishwanathan Venkatramani
So what was the second part of the question? What will be the
Udit Gajiwala
for the last nine, I mean nine months of FY25, what was the contribution of this commercial grade? So that Q1 you had mentioned is 36900. What was it for the balance nine months?
Vishwanathan Venkatramani
Yeah, it was 43,000 for Q2 and Q3 and as you know there was zero commercial grade in quarter four. So we had approximately 70,000 cubic meter of commercial grade sales last year. 37,000 happened in quarter one and the balance 43,000 over quarter two and quarter three.
Udit Gajiwala
Yes, precisely. So sir, if that will continue to be in the base for these coming two quarters, how are we confident of achieving that 5,50,000 CBM mark for this year?
Shobhan Mittal
So you know what we mentioned earlier, you know we are now focusing very strongly on the market share expansion and as I mentioned earlier I think cost is working in our favor. And as a company our focus is now on the market share. We’re not chasing margins. I’m not confident that there will be any price increases in the market but we are confident of cost savings both on the variable and the fixed side that will enable us to be able to compete with, you know, even with the unorganized segment to a large extent because we have a lot of, you know, operating leverage available to us by way of increasing volume.
So we’re going to play on that. So as of now our target is to stick to our guidance and achieve that number.
Himanshu Jindal
Can I add something?
Shobhan Mittal
And there will of course be a bit of aggressive play both on the pricing side, cost cutting side and taking market share from what we’ve lost.
Himanshu Jindal
Yes, maybe if I can add to what Shobhanji said. I think what we need to appreciate, you know, as green panel, we have the biggest capacity today with line three coming up, you know, operating at less than 50% capacity utilizations don’t make sense. We have been disciplined all this while playing by whatever the market norms were. Today the ask is very simple. We need to deliver volumes. I think that’s the number one priority to be able to do so. Whatever it takes in terms of whatever it takes as schemes or discounts going out to the market to supplement that will be met out from these savings that we are expecting both from the variable and the fixed cost optimization that we are undergoing right now and also from the operating leverage that is going to play out with the volumes coming in.
I think that’s what we are chasing. We’ve got a very strong balance sheet today with untouched working capital lines and A lot of cash reserves available already. I think that’s the whole thing which should drive guidances and achievement of results. See, quarter one is a very, very short period, I think just on the basis of 1/4 where there were multiple things happening apart from, you know, the line three, stabilization, etc. You know, there is still good nine months. You know, the only request that I have is at this point in time, you know, let’s discount quarter one and let’s work on what is remaining for the balance here.
Yeah. Nine months are going to be critical and we’ll see every quarter, every month how things go.
Udit Gajiwala
Precisely, sir. I mean, I completely buy that point. The only challenge is the nine month ask rate. So I’ll factoring your internal targets, excluding the commercial grade and that is what you’re working and stating that it can be a 40% growth. There’s this some, you know, disconnect on achieving those numbers or you know, maybe we may see how nine months pan out for sure or. But there’s still that disconnect that the ask rate is too high for nine months. Given that you still have 43, 43,000. Each quarter
Himanshu Jindal
completely with you. But please do appreciate there is something already like Venkatji shared, you know, 37, 36, 37 out of the 80 is already in the base on quarter one. So half of it is in quarter one. The balance is spreading out into quarter two and quarter three largely in quarter two. Yeah. So thereafter quarter three, quarter four are largely quarters where there is no base impact coming into play. So let’s, you know, hold on to it right now. Let’s see how quarter two goes by. A lot cannot be said on the call in terms of how we’re going to work.
Yeah. But there are things very clearly on our minds. Along with Shobanji, he’s already chairing a lot of meetings with our sales and operations also. I’m sure things are going to happen. Just wait for it. You know, quarter one was also like, you know, like, you know, my peers explained was also fraught with this biscuit. You know, people moving away post the BIS implementation. They still had, you know, stocks. Yeah. Which are getting liquidated in the market as we speak. It’s come down, but it’s not completely disappeared. Let August happen. Let the MSMEs also get covered by the BIS regulations.
We’ll see how things progress.
Udit Gajiwala
Sure, sure. All of us.
Himanshu Jindal
Yeah,
Udit Gajiwala
sure. Yeah. Thank you.
operator
Thank you, ladies and gentlemen. In order to ensure that the management is able to address questions from all the participants in the conference. Please limit your questions to two per participant. The next question is from the line of Akash Shah from UTI Mutual Funds. Please go ahead.
Akash Shah
Yeah, hi sir, thank you for the opportunity. Sir, am I, am I audible?
Shobhan Mittal
Yes, you are.
Akash Shah
Yeah. Yes, thank you. So just, just wanted to ask, sir, I mean, what are the. If, if you can, if you can quantify the cost saving, that would be great. If, if quantification is not possible, then at least directionally, can you please share what is being done and I mean, and how the fixed and variable cost will, will be coming down in future, I mean in, in the coming quarters.
Himanshu Jindal
So. Sure. So we start with timber. First of all, timber, the prices are already cooling off as all you already know. Yes. So there is some impact which has already come into picture in quarter one consumption. We know our purchase rates, they are coming down as well. So there is still some 2, 3% at least on gross margins which can improve via the timber cost saving. The other pieces, you know, like I shared with you quarter one, we had this new line coming up which was going through stabilizations. I had to run this line more as a compulsion to ensure that everything that I need to produce on this line at the best economics gets done.
Right. So there were multiple, you know, let me say restart shutdown of these other two lines plus a continuation of line three. Yeah. At economics, which are not going to be the economics going forward. So there is automatically 2,3% of additional contribution which is going to be available the moment I run my lines consistently. So all in all, my margins should automatically improve. There is a lot of work which is being done as I speak, which is, you know, privy to us. We’ll demonstrate and then things automatically, you can see. Yeah. Now coming to the fixed cost.
See I am, you know, I’ve invested for 100%. My capacity utilizations are 50% today, correct?
Udit Gajiwala
Yes.
Himanshu Jindal
So from 50 to 100% I have two options possible. Either I, you know, I cut down all my cost and bring it down to 50%. Yeah. Number one strategy. The other is I focus on volumes, right. Do everything that I need to do to be able to recoup volume share losses. Right. Regain market share given the capacity that I have and simultaneously work on these other things that I told you, which is, you know, work on working capital, you know, working capital, the variable cost, etc. Etc. Optimize my fixed cost. Yeah. Things which I can defer, I’ll defer, which are luxuries at the moment.
Yeah. Things which are discretionaries are things that I’m Going to cut down very clearly. This is something which is already happening on the other fixed cost, you know, things which I don’t think are necessary. I’ll take a call maybe in quarter two, quarter three, anytime. Right. So we are gradually progressing. I don’t have a very definitive answer right now. But yes, on margins I think, you know, with automatically volumes coming in, the operating leverage is going to play out and that should also solve some part of my problem. Does that answer your question?
Udit Gajiwala
Sure, sure. This certainly helps. Thanks a lot. And I mean just one more follow up question is if a company focuses sort of on improving the volume growth and certainly if there is a sort of aggressive focus on volumes and there is certainly competition in the market, so there is certainly a possibility that we have to try and give a bit higher discounts or schemes to the channel to try and push volumes. So don’t you think because of this realization will come down a bit and as a result there will be some impact on margins as well?
Himanshu Jindal
See, I said we have buffers to play with on the cost front. Correct. I’m saying again, you know, and something that Shubhunji reiterated. We’ll, we’ll see as how you know, see, you know, it would depend on the markets, it would depend on the product, etc. Etc. How the schemes are going to be structured out. More importantly, please do appreciate there is premiumization also happening. Right. This will eventually play out which should help me arrest the decline in my realizations. Right. The costs are not going to increase so much. They are going to come down. Right. And realizations, maybe they build up a little. But I will try and manage the entire equation in a way that we are able to come back with stronger margins over a period of time.
Udit Gajiwala
Sure. This last one. So what are the changes in the sales team that we are doing? I know that we have converged the PLY and MDF business sales team and also we have recently changed the sales head. But apart from that, any key other changes that you would like to call out on sales front?
Shobhan Mittal
Yeah, no. So basically you’re asking if we, if we can predict how much would be the sales price reduction. Is that what.
Udit Gajiwala
No, no, no sir. No sir, I’m not asking that. I’m just. I’m just asking any, any key change that we have made on sales team front.
So. Or let’s say sales strategy front.
Shobhan Mittal
No, I think on the same scheme front there’s not, I won’t say like of course it’s a constant, you know, endeavor to improve the sales team. The workings, etc. We do have a new sales head in place who’s joined us about four months ago. A few of the zonal heads have also been put in place and they’ve been added as well. We’ve divided some of the zones for better focus. So I mean, on a top level, those are the changes that we’ve done. But apart from that, there’s no major restructuring, I would say.
Udit Gajiwala
Sure, sure, sir, certainly. Thank you so much for answering. Thank you.
operator
Thank you. The next question is from the line of Utkarsh Nupani from Bob Capital. Please go ahead.
Utkarsh Nopany
Yeah, hi. Good afternoon, sir. So I just need few data points, so if you can help me. So over the call you mentioned that we are offering average scheme of 3% to our dealers for July month. What it would be on an average for the June quarter.
Shobhan Mittal
Sorry, for the. In the June quarter we only had. For a month. We had a scheme going on, on industrial grade. And what I said about July was that on an average, an average payout across the schemes that we ran would have been about 3%.
Utkarsh Nopany
And we are offering this scheme for both the unit for the north and the south unit for July month.
Shobhan Mittal
No. So it varies from like products and geographies. So for example, in certain markets it could be on value added products. In. In certain markets which are more concentrated on the industrial product. We will only offer schemes on that. In certain markets it’s on both.
Utkarsh Nopany
Okay. And sir, like second question is on the subsidy side. So we have stopped recognizing the subsidy benefit from this June quarter onward. So if you can help me, how much subsidy amount we have accounted for in Q1 of FY25 and in FY25.
Shobhan Mittal
So. Yes, so we. Sorry, you want to answer that, Himanshu?
Himanshu Jindal
I can. Yeah. So there is nothing which has been accounted for in these two years, Utkarsh. See, more importantly, I think that this note has been going out for quite a while. There is something like 116 crores of subsidies that we are supposed to receive for the old line that we installed it in AP. Yeah. Out of which we have accounted for 35. The balance is on hold. Yeah. Till the time we get more clarity. We are hopeful that this money will come in soon. But let’s see.
Shobhan Mittal
Okay, so we have not accounted.
Shobhan Mittal
We. We stopped recognizing it a while back. It’s not from this June. I don’t know if I misunderstood you. That.
Himanshu Jindal
Absolutely, absolutely. So.
Shobhan Mittal
So it’s. We. We stopped recognizing it a while back.
Himanshu Jindal
Long back. Long back.
Utkarsh Nopany
Okay. And sir, another question is on the Thin MDF plant. So if you can just help me out. At what rate? We operated our THIN MDF plant for July month. And how much you expect that the plant utilization to get ramped up by the coming March quarter? And what would be our sales volume and revenue for THIN MDF plant in the June quarter?
Shobhan Mittal
Do you have that data ready so.
Himanshu Jindal
I can share something? For sure. And maybe Venkatji, please add whatever you wish to. So see, I think the idea is to run this plant at at least 30, 35% this year in quarter one we were running already at 33% this capacity. Not everything got sold though in July. You know. Let’s wait for the full quarter to come into play. Maybe October, November. Whenever we are having our next call I’ll give you more data, more insights.
Utkarsh Nopany
Okay. And so volume and revenue.
operator
Sorry to interrupt. Mr. Utkarsh, may we request you return to the question queue for a follow up question?
Utkarsh Nopany
Sure.
operator
Thank you. The next question is from the line of Shivkumar Prachapati from Ambit Investment Advisors. Please go ahead.
Shivkumar Prajapati
Yeah, hi sir, thanks for having my question. The first question is on the margin front. Like how sensitive is margin to say rupees 1:1 per kg change in timber prices? Or if suppose there’s 5 or 10% of declining the timber prices then how much of the margin expansion we can expect on an estimated basis? Hello.
Himanshu Jindal
Yeah, can you repeat the question please?
Shivkumar Prajapati
Yes sir. So actually sir, I just want to understand the margin sensitivity in respect to the decline in timber prices. So for example, if we say there’s a decline of say 5 to 10% of price in the timber then how much of margin expansion we can expect? Either it is 2%, 3% or on. On an estimated basis.
Himanshu Jindal
See, with the rupee I think it should be roughly around 2 to 3% on the margin. Sorry, with the rupee. With the rupee change.
Vishwanathan Venkatramani
Not the rupee change.
Shobhan Mittal
No, no, no. He’s talking about specific, specific timber prices.
Vishwanathan Venkatramani
Like if there is a 10% decline in timber prices, what will be the gain in the operating margin?
Shobhan Mittal
A 10% decline in timber prices should contribute about. I would say about 4%.
Shobhan Mittal
No, it will contribute. It will contribute 3%. Okay. You know, keeping the current realization and you know, raw material prices, it will contribute 3% at the margin level.
Shivkumar Prajapati
Understood, sir. And sir, my next question is on the MDF imports. Suppose this BIS implementation, you had already mentioned that 90% of the imports, I mean the imports are down by 90%. So sir, what about the BIS licenses? I mean how many Players did got the license and how much time did it take to you know, get a license and the players who have already got the license, they belong to which country.
Shobhan Mittal
So as far as my information at the moment is is that two players have so far obtained licenses to continue to supply NBBIs compliance.
But please do keep in mind that you know it is not as simple as just getting licenses. It’s also them modifying their production quality to comply with bis. Now you know India is still for these exporters out of Southeast Asia. India is still a small dumping ground. You know every supplier is maybe sending three 4,000 cubic meters individually. So in order for them to produce specific BIS compliant material and increased cost, it’s not that straightforward that they will just get a license and start supplying. It will also result in cost increases. Given the domestic market pricing cost competitive competitiveness will also come into question.
So with BIS compliance and with the current market conditions and pricing, you know that is prevailing in the Indian market at the moment, I don’t see imports to be a threat going forward.
Shivkumar Prajapati
That’s helpful. Sir, another question is on this EPCG amount. Did we record any EPCG amount for the quarter?
Vishwanathan Venkatramani
Yes,
Himanshu Jindal
it was 5.1 crore for the quarter.
Shivkumar Prajapati
Okay sir, so that. That means our margins for MDF is below 3% the EBITDA margins if we exclude this EPCG amount.
Vishwanathan Venkatramani
That’s correct.
Shivkumar Prajapati
Okay, great. Sir, maybe the last.
operator
Sorry to interrupt. Mr. Shivkumar, may I request you return to the question queue for a follow up question. Thank you. The next question is from the line of Rishikesh from Kotak Mutual funds. Please go ahead.
Hrishikesh
Hi, good afternoon. Can you help me with the capex number for FY26 likely with new. Considering that new capacity is done, any new CapEx likely for us over the next one year or two years.
Himanshu Jindal
So this year there are no all the payments. Yeah. Yes please.
Shobhan Mittal
No new capex is planned. There is no new capex required.
Hrishikesh
Okay. And second is if I look at it obviously last cycle clearly we probably peaked out at 300 crore plus cash flow. Operating cash flow. Now incrementally let’s say considering compared to last cycle the capacity has definitely gone up. So what will be our thought in terms of capital allocation? Because obviously this cycle potentially even if say margins don’t revert to same level but still there’s a reasonable amount of cash generation that will accrue for us. Even let’s say 250, 200 crore cash flow. So any thoughts in terms of probably long term capital allocation? On this.
Shobhan Mittal
I think we will, you know, of course the focus is first to, you know, service. We are driving strongly also to recover additional working capital investments that have happened. So of course the primary focus is to service the debt that we have. And as there are no capital expense requirements in the future, we’ll also have to service a little bit of the working capital requirement as sales grow as well. So apart from that, at the end of the year based on any surplus cash flows, we will be taking a call.
Hrishikesh
Sure, sure. Thank you.
Vishwanathan Venkatramani
And to add to that, you know what Shobhanji also mentioned in the previous con call that we are interested in expanding our private capacity. But we will take that decision once we cross, you know, 80% capacity utilization on the existing capacity.
Hrishikesh
Okay, thank you.
operator
Thank you. The next question is from the line of Yash Sontalia from Edelweiss Public Alternatives. Please go ahead.
Yash Sonthalia
Hi, thank you for the opportunity. I hope I’m audible.
Vishwanathan Venkatramani
Please go ahead.
Yash Sonthalia
Yeah, yeah. So firstly I want to understand on the sequential basis excluding the cost and product mix of new plant. Can you help me with the product mix margin? How sequentially margin, product mix and realization and utilization improve for the older plant both north and south.
Shobhan Mittal
Hello, Venkatji, do you have that calculation by any chance? Venkatji, you might have it.
Himanshu Jindal
Not readily, not readily, you know, but you know, just to tell you, I. Think yes,
Shobhan Mittal
he wants it to individual plant wise.
Himanshu Jindal
Yeah, yeah,
Yash Sonthalia
no, I’m okay with the both plant combined. Just wanted to understand excluding the impact of new plant and lower grade from that plant, how the business has improved sequentially with timber prices decreasing and premium mix increasing.
Vishwanathan Venkatramani
Okay, I’ll take that question. So if we look at the value addition part, split it into two parts, the older plants and the new plant. The entire production and sales at the new plant comprised of the industrial grade. There were no value added products in the new plant. So if we remove that and look at the value added contribution from the older plants, it was 50% of the total domestic volumes which is, you know, the same as we have achieved in the quarter four as well as the last financial year. And to look at the margin profile, yes, the new plant definitely disturbed the margins because it was operating at a low capacity utilization.
But since MDF is a continuous plant, you know, certain overheads like power and fuel cost are almost similar whether you’re operating at say 80% or 30%. So that makes a big difference. And as we see the improvement happening in the capacity utilization over the next couple of quarters, I think we will see a significant improvement in the economics of the new plant.
Yash Sonthalia
Clearly understood, sir. What I wanted to understand is sequentially how older plant gross margin and operating margin improved because the product mix and timber prices both were in the favor.
Vishwanathan Venkatramani
Yeah, I would say, like, you know, we have seen already some improvement in the gross margin as compared to quarter four because of the fall in timber prices. But we did not get the, you know, I would say the full impact of that in the margins, primarily because of operating inefficiency in the new plant because it was going through the stabilization phase in the first quarter, you know. So as we progress, I think we’ll see that happening from quarter two, quarter three onwards, Plant efficiency improving, you know, producing products which are in demand in the market, you know, because during the stabilization phase, you’re testing the, you know, quality of the entire range, right? From 1.5 millimeter to say 25 millimeter, just to ensure that the plant is operating correctly.
But now that phase is behind us, so we will be producing products for which there is a demand in the market, you know. So as the production scales up and that also brings in some operating efficiencies in raw material consumption, we’ll definitely see margins improving Both for Plant 3 as well as the existing plants.
Yash Sonthalia
Okay, maybe I will take that offline. And second question, like mentioned in the presentation, the newer plant produced initially a lower grade mdf and we also provided some discounts to liquidate the inventory. So when can we expect this to normalize? And when can we expect the overall production to start for value added? Because imports are already on the lower side. So maybe we can get grab the opportunity as soon, if I’m not wrong.
Vishwanathan Venkatramani
See, regarding the products, you know, like I mentioned, we’ll start seeing the improvements in quarter two. There might be a slight overhang of, you know, the trial production during quarter two. But it will definitely improve significantly from quarter three. And regarding the production of value added products, Ravanji, can you please take that question? When are we likely to start producing the value added grade.
Shobhan Mittal
In the. In line three?
Vishwanathan Venkatramani
In line three.
Shobhan Mittal
Correct. So I think we still need this quarter to stabilize the line. I think the Defend bucket guys are still, you know, they are meant to come back to settle the line. There needs to be some replacement of parts as well, which we are awaiting. So I think towards the end of the quarter two is when we will see, you know, stabilization of the line completely.
Vishwanathan Venkatramani
So probably we will start producing the value added category from quarter three.
Yash Sonthalia
Understood. And last question, like for last eight, 10 quarters, the industry is.
operator
Sorry to interrupt. Yeah, thank you. The next question is from the line of Patanjali Srinivasan from Sundaram Mutual fund. Please go ahead.
operator
So thank you for the opportunity. I hope I’m audible. Hello.
Vishwanathan Venkatramani
Yes, please go ahead.
Pathanjali Srinivasan
Yeah, so I have couple of questions. One is what is our expectation in terms of break even for the thin MDF line? Sir, at what level of utilization will we be able to break even at.
Himanshu Jindal
So roughly 41
Himanshu Jindal
today?
Shobhan Mittal
Yeah, yeah.
Himanshu Jindal
40% capacity utilization. You should be able to see money coming in.
Vishwanathan Venkatramani
See normally for MDF the breakeven happens between 55 to 60%. But as we have mentioned in earlier calls, since the fixed expenses for Line 3 are much lower than the older plants, we have just added some employees at the plant level. No addition in the sales or the corporate teams. So the fixed cost will be much lower for the new plant. And hence that’s why Himanshu JI mentioned a lower breakeven point for the new plant.
Pathanjali Srinivasan
Yes sir, but just following up on that, I think we mentioned that the full year we are targeting around 35% utilization. So would it be correct to understand that this year we won’t break even at this plant?
Vishwanathan Venkatramani
Yes, it’s a possibility.
Pathanjali Srinivasan
Okay sir. And just one more question. This foreign currency, that loss that we reported this quarter, are we like hedging? Not hedging it. Any reason why we are not doing that? And also will it be a continuing thing or is it like going to like go away from the subsequent quarters?
Himanshu Jindal
You see the ethics loss which happened in this quarter was exceptional. So you are aware of the tariff wars and the consequence of this on the euro dollar. Largely on Euro dollar which is why you are seeing fluctuations now. I think you know what we need to understand and appreciate. We have a 10 year loan on the new line which is largely what we have as crosscheck today. Now the repayments of this is to be made every six months, right for the next six next 10 years to get a hedge in place for a full tenure.
Either markets are not there, B even if someone wants to sell it to us, it’s going to be ultra expensive. Right? Even if there is something possible. So I think the company here has been following a very, very, you know, I think the right approach which is not to hedge the entire exposure but to hedge tranches which are going to be due in the short term because of this extreme volatility, you know, you are seeing a consequence on our P and L. I think what we need to also appreciate, I think you know See, when we talk about foreign currency versus inr, the INR loans are basically, you know, you know, there is a very single straightforward interest rate that you need to look at.
Correct. But when you look at a foreign currency loan, you are looking at two aspects. One, the interest rate itself, which in case of euros have generally been between 0 to 3%, currently at around 2%, 2.5% for us. On the contrary, on the currency side, when you study the fluctuations over the year, you’ll find that obviously this is correlated to the inflation differentials and the interest rate differentials. Correct. So that’s even for the borrowings that Green Panel took in the past. For us, it was roughly 3% on an average for the full tenure of the loan.
So 2, 3% on interest, 2, 3% on currency fluctuations. That translates to not more than 6% of overall expense getting booked under various heads. So I think for this reason, I think commercially it makes sense for us to keep things where they are. As of now, as you’re already aware, you know, Euro is already cooling off post the EU deal. The EU US deal, which happened very recently. It’s come down already to 1.14. So we will keep monitoring and if there is a need and there is an opportunity, we’ll try and see what we can deploy in terms of hedges.
But for now at least the volatility which was there till 30 June was unleashed.
Pathanjali Srinivasan
Sure, sir, got it. Thank you.
operator
Thank you. The next question is from the line of Pritesh from Lucky Investments. Please go ahead.
Pritesh Chheda
Sir, can you tell me what is the contribution margins at the current pricing in your India? So at what contribution margins are you operating?
Himanshu Jindal
Rishikesh, this is, you know, see, you know, you see our gross margins already which was 47%. Beyond that there is power, there is fuel, there is stores, there is consumables, etc. Coming into play. I don’t think we report so much granular details on contribution. You know, there is a wide variety of products that we service various markets, you know, various strategies that we deploy. So for those reasons, I don’t think contribution is something that we mention in the public domain. But gross margins is very clearly a proxy of what we are doing.
Pritesh Chheda
I have the gross margin number. It’s okay. My second question is on the industry number of the capacity or let’s say the market which was mentioned at 2.4, 2.6 million CBM. Can you tell me what will be the industry capacity utilization? And in that if you have to tell us what will be the so called unorganized name that you keep mentioning in the call? So what will be the unorganized share of the capacity? So I want to know what will be the industry capacity utilization? What will be the unorganized share of the total capacity?
Himanshu Jindal
Venkatji, you want to take this?
Vishwanathan Venkatramani
Yeah, sure. So of the total industry capacity which we estimate at 4.25 million cubic meters, the organized share is 65, 66% and unorganized share is between 34 to 35%. Okay, but you know, as far as the demand is concerned for the domestic markets, we estimate that last year the industry did approximately 2.8 million cubic meters which I think would translate into capacity utilization of somewhere between 60 to 65%.
Pritesh Chheda
And 50,000 CBM import which means 50,000 into 12, so about 6 lakh. 6 lakh on 4.2 million. So let’s say that’s another 15% which can be serviced via India capacity. And do you believe somewhere in your assumption that some of these unorganized capacity via BIS etc will find it difficult to operate and hence you have a certain volume growth number assumption made for you for your company? Is that, is that the suspended you guys have in your mind? Okay.
Vishwanathan Venkatramani
Imports were not as high as 50,000 per month. If you look at financial year FY25 they were probably in the range of 20,000 to 22,000 cubic meters per month. So approximately I would say about 10% of the domestic demand. So that what the imports part was supplying. And as far as you know, the unorganized segment which is still not under bis, it’s not, you know, we are not really aware of how much volumes they are contributing in total or through the commercial grade. So I think that impact will be visible over the next few quarters.
Always assuming that BIS is implemented for the MSMEs from August onwards, I think probably the date is 11th or 12th August when it’s supposed to be implemented for the MSME and the smaller category. So assuming that’s implemented on that date, so I think probably over the next two quarters we will understanding how much they were contributing in total or through the commercial grade.
Pritesh Chheda
Without quantifying, do you believe that you will grow faster? I am just concluding my question.
operator
May we request you return to the question queue for a follow up question?
Pritesh Chheda
My friend, I am just concluding what? I am having a conversation. It’s not a question. So are you, are you assuming somewhere that you will grow faster by virtue of the unorganized losing share in the whole process?
Vishwanathan Venkatramani
See like shubanji mentioned that we are not depending on, you know, what exactly others will do to grow our volumes. We are looking at, you know, the measures that will be implemented by us to ensure that we achieve the guidance given. So yes, to some extent it’s correct. The reduction in imports fall in imported inventory. Implementation of BIS for the MSME and the smaller category will definitely help us in achieving the guidance. But we are not solely relying on those. We are also taking our own steps to ensure that we achieve the volume and margin guidance.
Pritesh Chheda
Okay, thank you very much and all the best. Thank you.
Vishwanathan Venkatramani
Thank you.
operator
Thank you. The next question is from the line of Tanmay from Locust Investment Group. Please go ahead.
Tanmaiy Mohta
Hi, am I audible?
Himanshu Jindal
Yes, please.
Tanmaiy Mohta
Hello? Yeah, so I actually had two questions. The first part of the question was on the timber prices which are falling. So just wanted to understand that this is more of a demand or a supply side sort of reduction in prices. And how do you think this is going to sustain going forward? And is there still that differential between the north and South Trident? And if yes, then what is the sort of potential? And my second question was on the tariff. So I just wanted to understand that with the tariff being imposed on India, is there any.
Do you think there will be some amount of inventory dumping into India or. And the war in Thailand which has just sort of come about and a lot of our suppliers to the Middle east are from Thailand. So do you see any change in our sort of business mix because of that?
Tanmaiy Mohta
So on the raw material side, basically the availability of timber is increasing. You know, plantations are coming to our point of harvesting and timber availability is increasing. So that is resulting in increased availability and let’s say lesser pressure on the pricing between the north and the South.
There still continues to be anywhere between 20 to 25% of price difference on timber price not being the higher one. And with regards to, you know, I think the tariffs may not affect us directly because, you know, and also the, I mean we still have to see, during the summer months in the Middle east there is less activity in which ways. So we still have to see how the situation in Thailand affects supplies to the Middle East. Maybe that will result in some gain to us, but that’s yet to be seen. You know, we. It’s not evident just yet.
Shobhan Mittal
Got it, got it. Thank you. Thank you and all the best.
operator
Mr. Parth, your line has been unmuted. Please go ahead with your question.
Unidentified Participant
Sorry, I couldn’t hear you. Yeah, so sir, I had a few bookkeeping questions. You wanted to understand what was the.
operator
Timber cost in north and south in Q1.
Shobhan Mittal
Himanshu, you should have the average consumption rate for quarter one.
Himanshu Jindal
I can give it to them. So the consumption rate on an average was around 6 in quarter one. North and south differential was around 50 paisa each. So north was a little expensive, south was not. With the new season and the new quarter beginning, I think the prices are already coming off. There’s still a long a huge differential versus where we were in the quarter.
Unidentified Participant
Got it. And sir, you mentioned there’s just one last question. You mentioned that there is 7 to 8% pricing differential between industrial and commercial grade MDF. So wanted to understand how would the margins look like for like between the two. Like what would be the margin differential between the two?
Himanshu Jindal
Venkatji, you want to take that up? The commercial versus the industrial.
Vishwanathan Venkatramani
Sure. So the price difference like mentioned was between 6 to 8%. But you know, like we have spoken on earlier calls, the density of the product is also lower, you know, as compared to the industrial grade since we were primarily competing with imports in that product category. So taking both those factors into consideration, I would say it was probably, you know, the margin difference was somewhere between 2 and a half to 3, 3%.
Unidentified Participant
Perfect sir, that helps. Thank you for answering my question sir.
Vishwanathan Venkatramani
Thank you.
operator
Thank you. The next question is from the line of Bhargav from Ambit Asset Management. Please go ahead.
Bhargav Buddhadev
Yeah, good afternoon sir and thank you very much for the opportunity. So my first question is that is it fair to say that we will have the highest unutilized capacity? And the related question is that given that the timber, the prices in south are lower versus Pan India and assuming that our fixed cost as the utilization ramps up also is sort of lower than here and I also include the freight cost, given that we have a capacity in south, is it fair to say that we’ll be the most competitive in terms of supplier in south which obviously is the largest market for md?
Shobhan Mittal
Well it’s safe to say that because with a singular location, with such a large capacity of course fixed costs are very economical.
And you know, being having this surplus capacity once we start increasing volumes this is going to substantially improve product costing overall on the contribution side. And you know we’ve been mapping now given, given the different timber pricing in the north and the south and we regularly map the freight aspect, the raw material aspect and decide which geographies are better served and more profitable for the company. So we play, let’s say we play this, you know, we keep this very fluid and dynamic. So in A month maybe a certain geography is still being served from the north.
But the next month if it becomes more competitive from the south because of lower timber price and freight being competitive then we have the option to shift it to the other plant. So. Yes. And as volumes go up, this competitiveness for us will increase.
Bhargav Buddhadev
And sir, how much supplies in south would be from our other plants which are not in south as of now.
Shobhan Mittal
Sorry, can you repeat that?
Bhargav Buddhadev
No, I’m saying that the supply which green panel does in South India, I’m sure that they don’t do just from their south plant given that the new capacity is just on board.
So it would be coming from the other pan India plants in the region.
Shobhan Mittal
No. So no. So there is pretty much apart from the flooring products and plywood MDF is the south is 100% being serviced from the south plant only.
Bhargav Buddhadev
Okay, okay.
Vishwanathan Venkatramani
Prior to the new plant which has a capacity of two 31,000 cubic meters, we already had a capacity of 444,000 cubic meters in South.
Shobhan Mittal
Yes, yes.
Vishwanathan Venkatramani
So the major supplies for or I would say like Shobanji clarified, apart from flooring, the entire MDF business for South India is met with the south plant.
Bhargav Buddhadev
Okay. Okay. And so lastly, is it fair to say that in one q can we expect that the gross and the EBITDA margins would have bottomed out and from year on it should only improve given that the scheme in the second quarter is lower versus the earlier quarter and as the capacity utilization ramps up the operating level should also kick in.
Shobhan Mittal
Are you answering that?
Himanshu Jindal
Yeah, I’ll try and take it. So Bhargav, you’re right. I think your presumption is right. I think this is the way to look forward.
Bhargav Buddhadev
Great, thank you very much and all the.
Himanshu Jindal
Thank you.
operator
Thank you. The next question is from the line of Shukumar Prachapati from Ambit Investment Advisors. Please go ahead.
Shivkumar Prajapati
Yeah, hi, thanks for having having me again. My first question is on the penetration level of ready made furniture. Furniture given MDF demand is you know 60, 70% comes from this readymade furnitures. So just want to understand like do you have any data handy to you know so that we can understand what’s the penetration level in different states Assuming like year one would be having a higher penetration levels and second one is the co working space companies say office or efc. These, these players are trying to enter into the furniture manufacturing businesses. So did you receive any queries from their side?
Shobhan Mittal
So unfortunately you know this penetration data, it’s not so easily available but definitely larger cities have a higher penetration of ready made furniture making and you know, acceptability compared to the tier 2 and tier 3 cities where Carpenter making is still very, very prevalent.
But any concrete data is not really very easily available, especially differentiation between cities or zones in India. So that is the situation and. Sorry, what was your second question?
Shivkumar Prajapati
The second question.
Shobhan Mittal
The co working spaces. No, no. So we, I mean you know we’ve not as of now we, you know, we’re dealing with certain large format OEMs. But any new who’s planning to enter? I mean no, we’ve not received any specific queries as such.
Shivkumar Prajapati
Okay. So body. Thank you.
operator
Thank you. The next question is from the line of Ritesha from Investech. Please go ahead. Mr. Ritesh, your line has been unmuted. Please go ahead with your question as there is no response from the current participant. Moving on to the next question. The next question is from the line of Keshav Lahati from HDFC Securities. Please go ahead.
Keshav Lahoti
Hi, thank you for the follow up. So this quarter ad spend has been bits, you know, on the lower side. How should we see going forward? So what sort of ad budgets you have for this year?
Shobhan Mittal
So the major reason for you know, the, the lower AD spends was on account of IPL as well, so which we have discontinued, which was a substantial number for the previous year. And apart from that the numbers will continue to be consistent compared to last year. There’s not going to be too much of difference going forward for the remaining of the year.
Keshav Lahoti
Consistent as a percentage or in absolute term. You’re talking
Himanshu Jindal
in absolute term.
Shobhan Mittal
In absolute term. In absolute terms.
Keshav Lahoti
Got it. That is helpful. That’s it from my side.
operator
Thank you. The next question is from the line of Yashwantalia from Edelweiss Public Alternatives. Please go ahead.
Yash Sonthalia
Hi, thank you for the follow up. So on the BIS norms, we are hearing from different places that some the norms are being diluted by many players and they are able to supply the products very easily. And the grades, what we are expecting is not coming. So what’s your take on it and how can it impact your new plant?
Shobhan Mittal
So I think this is completely contradictory to the information that we have because firstly there has been no change in the BIS norms in terms of grade. You know, that has been ongoing so far and based on the new norms that will come in which are still under publication stage and hopefully will go into effect in the next, you know, hopefully couple of months, those will tend will actually be more segregated and more stringent than they are today.
So I don’t see. I don’t understand where this point of dilution comes from or how some manufacturers are commenting that it’s been diluted.
Yash Sonthalia
Interesting.
Vishwanathan Venkatramani
Okay. It could also be due to the fact that, you know, BIS was not applicable to MSME and smaller players, you know, from the date it was applicable to the outside the organized category. So with expected implementation of BIS for the MSME and the smaller players from August 11 or 12, I would say, you know, we should expect full implementation and also expectation that, you know, there would not be any violation of BS qcos from the date it’s implemented.
Yash Sonthalia
Very clear. And my last question, like we always allude to schemes we provide to the distributors, sometimes 3%, sometimes 5%. So just want the clarity like last quarter, if we are seeing 5, 3% in this quarter, 5%, these are always incremental or the change of the scheme we provide 3 to 5, 5 to 3 on the average basis.
Himanshu Jindal
So these change every. Every month, every quarter. So I don’t think that’s a top up to what happened in June.
Vishwanathan Venkatramani
And 5% that was mentioned for the first quarter, it was not applicable to the entire quarter. So I think it was probably there for a period of about 45 to 60 days.
Yash Sonthalia
Very clear, sir. Thank you for answering all of my questions and best of luck for the coming quarters.
Vishwanathan Venkatramani
Thank you.
Himanshu Jindal
Thank you.
operator
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Himanshu Jindal
So thank you.
Shobhan Mittal
Thank everyone for joining us. Call and if anyone has further questions, feel free to reach out to us. We will look forward to speaking to everyone next quarter. Thank you.
Vishwanathan Venkatramani
Thank you and have a good day.
operator
Thank you. On behalf of Green Panel Industries, that concludes this conference. Thank you for joining us. And you may now disconnect your line.