Kajaria Ceramics Limited (KAJARIACER) Q2 FY23 Earnings Concall Transcript

Kajaria Ceramics Limited (NSE: KAJARIACER) Q2 FY23 Earnings Concall dated Nov. 02, 2022

Corporate Participants:

Ashok Kajaria — Chairman And Managing Director

Pallavi Bhalla — Investor Relations

Rishi Kajaria — Joint Managing Director

Sanjeev Agarwal — Chief Financial Officer

Chetan Kajaria — Joint Managing Director

Analysts:

Rahul Agrawal — InCred Equities — Analyst

Sonali Salgaonkar — Jefferies — Analyst

Girish Choudhary — Spark Capital — Analyst

Omkar G — Fee Investments — Analyst

Sonia Talreja — Edelweiss — Analyst

Achal Lohade — JM Financial — Analyst

Amit Bhinde — Morgan Stanley — Analyst

Sujit Jain — ASK Investments — Analyst

Keshav — HDFC Securities — Analyst

Ritesh Shah — Investec — Analyst

Lavanya — UBS — Analyst

Manish Mahawar — Antique Stock Broking — Analyst

Harsh Pathak — B&K Securities — Analyst

Analyst — — Analyst

Amit Dede — Morgan Stanley — Analyst

Rajesh Ravi — HDFC Securities — Analyst

Shrenik Jain — LIC AMC — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Kajaria Ceramics Limited Q2 FY 2023 Conference Call hosted by InCred Equities. [Operator Instructions]

I now hand the conference over to Mr. Rahul Agrawal from InCred Equities. Thank you and over to you.

Rahul Agrawal — InCred Equities — Analyst

Thank you, Mike, and good evening, ladies and gentlemen. Seasons greetings to everybody at Kajaria and to everybody on the call today. We welcome you to the discussion call for Kajaria Ceramics Limited Second Quarter FY 2023 results. We have with us the promoters and the senior management of the company, led by Mr. Ashok Kajaria, the Chairman and Managing Director; Mr. Chetan and Mr. Rishi Kajaria, Joint Managing Director; and Mr. Sanjeev Agarwal, Chief Financial Officer. We would like to thank the management and the Investor Relations team at Kajaria for giving us an opportunity to hold the call.

I now hand over to Ashokji to start the proceedings, and we’ll take questions after that from participants. Over to you, Ashokji.

Ashok Kajaria — Chairman And Managing Director

Thank you, Rahul. Very good evening to everyone. It gives me great pleasure to welcome you to the quarter two FY 2023 and second half FY 2023 Earnings Conference Call of Kajaria Ceramics Limited. Joining me on this conference call are my sons, Chetan and Rishi, our CFO, Sanjeev; and Pallavi Bhalla from Investor Relations. The second quarter saw flattish volume growth, but a decent revenue grew 11%, considering the inflationary environment and softening in demand, which impacted our sales volume in the second quarter. I can say that the second quarter was one of the toughest quarter in terms of subdued demand scenario and disruptions in natural gas supply, followed by unprecedented increase in cost of gas.

This dampened our margins in quarter two FY 2023 as we were only able to take a 2% price hike each in the month of May and September 22. But now one can say that the worst seems to be over as far as gas is concerned. I believe that margins have rated slow and was expected to improve hereon, mainly due to relaxation in the gas price. Also, we have started using alternate fuel that is LPG from the month of November onwards at our Srikalahasti, Morbi and Jaipur plants, which will further help reducing the fuel cost going forward. The industry will witness gradual demand pick up post festive season, adoption of work-from-home,models in the IT and subsea sectors, increased aspirations are giving good growth in the housing sector across this.

Strong consumer confidence is also being witnessed, including in home buying in an inflationary and stable domestic economic environment. Steadiness of our company has been witnessed in the form of — our economy is being witnessed in the form of consistent GST collections of our INR1.4 lakh crores for the past eight consecutive months with INR1.5 lakh crores crossed in the month of October for the second time since inception of GST. However, persistent high inflation and RBI’s interest rate increase to combat the same is a matter of concern going forward. Export momentum has improved in Morbi after being impacted for a couple of months, and we anticipate that the export will touch INR18,000 crores in fiscal year ’22, ’23. Now, for this quarter’s financial performance.

In quarter two FY 2023, consolidated revenue from operations, increased by 11% year-on-year to INR1,078 crores from INR974 crores in quarter two FY 2022, mainly because of increase in realization and some change in product mix. Revenue from the Bathware segment was flattish. In quarter two to INR74 crores as compared to corresponding quarter previous year. Revenue from plywood segment grew by 17% from INR17 crores to INR19 crores in quarter 2. EBITDA margin for this quarter stood at 12.01% as compared to 18.54% in the corresponding quarter of the previous year, a sharp decline in margin was mainly because of the increase in gas cost price. 70% from INR37 to INR62 per SCM, and increase in advertisement cost by 40%. Consolidated PAT in quarter two FY ’23 is INR70 crores.

As on 30th of September 22, working capital day was eased by five days to 62 days as compared to 57 days as of 30th of June 22, mainly due to reduction in trade liabilities. And we hope by end of December, it should be back to 57 days. Let me now quickly talk about our expansion plans. We are adding 3 million square meters better size GVT capacity at our existing plant Secunderabad at UP, with a total investment of INR80 crores, which is expected to be commissioned by September 23.

Also, we are setting up a manufacturing facility outside India in Nepal through joint venture. We plan to add eight million square meters of GVT and ceramic tiles capacity with a total investment of INR250 crores, out of which our share will be INR125 crores, that is a 50% of the total project cost. The project cost is expected to be commissioned by March 24.

With this, I take this opportunity of thanking you for joining us today. Over to you, for Q&A, please.

Questions and Answers:

 

Operator

Thank you, sir. We will now begin the question-and-answer session [Operator Instructions] We have the first question from the line of Sonali Salgaonkar from Jefferies. Please go ahead.

Sonali Salgaonkar — Jefferies — Analyst

Sir, thank you for the opportunity. Sir, my first question is regarding the demand scenario right now. You did mention some softness. Can we understand whether the softness is coming more from the urban or the rural, and secondly, what is the kind of inventory level in the channels currently?

Ashok Kajaria — Chairman And Managing Director

See, two things are happening. The demand is not yet pickup. If you recall, July was very tough. September is slightly improved, but August — October also because of holidays of Puja and Diwali. It is not as good as what it should be. We are looking forward for a better situation, but I can tell you that we have a very cautious approach as far as the demand is concerned right now.

And when you ask the question whether it is urban or second tier or rural, I think all around it’s the same scenario because people are still getting off — the holidays, we are getting back to the system. So I think we’ll wait and see that how it will charge.

Sonali Salgaonkar — Jefferies — Analyst

Understood. Sir, my second question is, I missed some of your initial remarks. So sorry if I’m repeating what is the average gas price that we saw in Q2 and what is it right now? And you also did mention the alternative fuel LPG. So what is the kind of pricing differential or gas cost differential between LPG and the natural gas?

Ashok Kajaria — Chairman And Managing Director

See the cost in quarter two was roughly about INR61 per SCM. In quarter three, with all the combinations right now, we are looking at around INR55 per SCM. In our Jaipur plant, in our Morbi plants in Kalahasti we only be using LPG partly. Kalahasti is fully LPG and some gas. Morbi will be again some LPG and some gas. And Gailpur is very little of LPG right now and gas. So average price should come down to about INR55. And LPG prices directly are at about INR53 to INR55 per SCM depending on where the location is.

Sonali Salgaonkar — Jefferies — Analyst

Got it. Sir, thirdly, on the price hike, you did mention 2% price hike in tiles. Is there any price hike we took in either bathware or sanitary ware?

Ashok Kajaria — Chairman And Managing Director

Bathware the Price hike currently has not been taken because if you recall last year, as far as the sanitary ware was concerned the gas prices went up in Morbi on 4th of October, 1st of November. So major hike was on 1st of November, and then we took some price hike on 1st of April. But as far as bathware the key component is brass. Brass prices have been slightly coming down. So there is no question of any price hike at this stage. The last price hike is brass was taken on 1st of May this year.

Sonali Salgaonkar — Jefferies — Analyst

Got it. Sir, and my last question, would you like to reiterate your guidance that you had been giving earlier on the volume and revenue of FY 2024? And any sense on the margins in Q3 and Q4? Thank you.

Ashok Kajaria — Chairman And Managing Director

See we will continue to put our efforts and looking at the scenario where we are close to 15% volume growth. But as I said, it’s a cautious approach. We are seeing how the market is behaving. And we put our best efforts. That’s all I can tell you today as far as the volumes are concerned. As far as margins are concerned, going forward it will definitely be better than what we have seen in quarter two. And at least, I would say, two percentage points plus will be better quarter three and quarter four. Definitely, it should be 14% plus in quarter three, quarter four.

Sonali Salgaonkar — Jefferies — Analyst

Got it, sir. Thank you and all the best.

Operator

Thank you. We have the next question from the line of Girish Choudhary from Spark Capital. Please go ahead.

Girish Choudhary — Spark Capital — Analyst

Hi. Thanks. Sir, firstly, if I look at the volume, the absolute volumes the last five quarters, the range is more or less 24 million to 25 million square meters. For any reason, — didn’t have to do with market

Ashok Kajaria — Chairman And Managing Director

Fully or…

Girish Choudhary — Spark Capital — Analyst

Is this better now?

Ashok Kajaria — Chairman And Managing Director

Yes, better.

Girish Choudhary — Spark Capital — Analyst

Yes. So what — so if I look at the volumes franchise, the absolute volumes last five quarters, the range is more or less similar 24 million to 25 million square meters. So its stuck there. So any reason is it to do with market share or market demand or any other constraints which is limiting this volume? And also, when do you see this range moving higher?

Pallavi Bhalla — Investor Relations

Girish, your voice is not clear. Are you asking that the volume is in the range of 24 million to 25 million square meters

Girish Choudhary — Spark Capital — Analyst

Yes, yes. Correct.

Pallavi Bhalla — Investor Relations

And are we gaining market share or how we are pushing the volume?

Girish Choudhary — Spark Capital — Analyst

Yes. Why is this the range is more or less but is it to do more market share or market demand is weak or any other constraints, which is limiting with volume

Operator

Girish, if you go off the speaker phone, your voice is actually pretty low right now. Actually come closer to the microphone?

Girish Choudhary — Spark Capital — Analyst

Yes. Is this better?

Operator

Yes.

Ashok Kajaria — Chairman And Managing Director

Yes. Much better.

Girish Choudhary — Spark Capital — Analyst

Yes. So yes, sir, I was just asking about this volume range of 24 million to 25 million square meters. So it’s been stuck last four quarters to five quarters. So just the reasons for this? And when do you see this range moving up higher?

Ashok Kajaria — Chairman And Managing Director

See we can put our efforts, and we are putting our best efforts. You know that in spite of Morbi taking the plant shutdown from 10th of August to 10th of September, if the market have been good, why would we take a shutdown. So July has been very, very tough. September has been slightly better. Again, October because of the facilities has been tough. And I said we are putting our best efforts to see if we are close to getting — trying to do 15% volume, definitely, 25 plus every quarter in the quarter three and quarter four. That’s all we can share at this stage. But I can say that, no, no, I’ll do it. That’s one thing we can’t share at this stage.

We put our best efforts. That’s all I can tell you at this stage. And one of the big challenges, which was the gas price has narrowed down. So that’s a positive thing because quarter two, the gas was an issue. The price hike went up crazy, there was a gas cut. If you recall in the last investor conference, I said I don’t want to talk about anything because gas was a serious issue. But fortunately, that issue has subsided and you’re getting gas and the prices are also slightly come down because of combination of gas and out well.

Girish Choudhary — Spark Capital — Analyst

Got it. Sir, secondly, on the Nepal entry, if you could give some more rational on why Nepal, any color on the market size and the margin and return profile from this if?

Ashok Kajaria — Chairman And Managing Director

See, Nepal is positive for two reasons. Already, they have exports of INR500 crores from India. It’s a market of about 25 million square meters per annum currently. And there is an import duty — at Nepal on Indian products because that’s where the exports are there. It’s in the rate of almost 45%. And production there, once we do it, I think we’ll be able to capture part of the market share. Currently, we are doing INR25 crores of sales over there. And very shortly, we are making the government to talk about them, that how we can get the benefits, what kind of benefits we are giving. I think it should — or Nepal is just like putting a plant in Chennai or Bangalore, like Nepal is next our neighbor so, it should not be the issue on that front.

Pallavi Bhalla — Investor Relations

Okay. And any color on margin on return profile from this?

Ashok Kajaria — Chairman And Managing Director

Margin will definitely be better because right now, as I said, there is a 45% import duty. And the prices, what I’m selling at INR50 that there after everything is INR80 that difference is almost INR30 per square feet. So whatever — if we produce locally, whatever benefit you will get in much more than that.

Girish Choudhary — Spark Capital — Analyst

Okay. Sir, my last question, this quarter, we have seen other expenses for that line item has seen a sharp inflection 27% growth. Any reason for any one-offs growth?

Rishi Kajaria — Joint Managing Director

That is mainly because of advertisement.

Ashok Kajaria — Chairman And Managing Director

Advertisement went up last six months, result was close to about INR21 crores. And this first half that advertisement as went to the extend of INR50 crores, last year, overall, we spent about INR80 crores this year, we are planning to spend about INR100 crores.

Girish Choudhary — Spark Capital — Analyst

Okay. Thank you, sir.

Operator

Thank you. We have the next question from the line of Shrenik Jain from LIC AMC. Please go ahead.

Shrenik Jain — LIC AMC — Analyst

Hello. Thanks for the opportunity. Sir, first, I wanted to understand that the JV realization has fallen 22% quarter-on-quarter. So what is the key reason for this?

Pallavi Bhalla — Investor Relations

JV realization

Ashok Kajaria — Chairman And Managing Director

JV realization?

Shrenik Jain — LIC AMC — Analyst

Have fallen by 22% quarter-on-quarter.

Ashok Kajaria — Chairman And Managing Director

What do you mean the realization as fallen, that value, the value?

Shrenik Jain — LIC AMC — Analyst

The realization per SQM.

Ashok Kajaria — Chairman And Managing Director

No, no.

Pallavi Bhalla — Investor Relations

No, no.

Ashok Kajaria — Chairman And Managing Director

No, no. No, in Morbi also plants were shut, because Morbi a lot of plants were shut, even our plant were shut. That number lines was also shut. The realization is from INR330 to INR324, it’s 1% and 2% — 1.5%, minus 1.71% not what you are saying.

Shrenik Jain — LIC AMC — Analyst

Okay. So can you just help me understand that gross margins have fallen by 300bps quarter-on-quarter versus, 1Q, while our power and fuel costs have reduced.

Ashok Kajaria — Chairman And Managing Director

Only power and fuel, only power and fuel and some expenses more advertisement expenses went up.

Shrenik Jain — LIC AMC — Analyst

Okay.

Sanjeev Agarwal — Chief Financial Officer

Yeah. Advertisement, yeah.

Ashok Kajaria — Chairman And Managing Director

And if you look at the scenario, the price increase has been overall price impact has been close to about 10% to 11%, that’s how we have been able to be there, because if you compare quarter two last year to quarter two this year, the impact is close to 10% because of the price hike, revenue. Revenue has been 11% more volumes have been flat. So that means the price hike has been close to about 10% to 11%, whatever we took last year is there yes, we took some price hike in May in September. September, of course, a month, but May price has been there. So overall, has been close 10% to 11%.

Shrenik Jain — LIC AMC — Analyst

Okay, sir. And sir, if you look at data correctly, the 2Q, 2022 data for the production volume and revenue for Own and JV has been revised. So could you throw some light on why the base data has been revised?

Pallavi Bhalla — Investor Relations

Which data you’re talking about?

Shrenik Jain — LIC AMC — Analyst

2Q 2022 tile production volume and revenues for Own and JV 2Q FY 2022.

Pallavi Bhalla — Investor Relations

Yes, it slightly got revised because of the change. The thing is we have acquired South Asia right now. And earlier, we used to outsource from South Asia, Ceramic Limited. Now it is a part of a subsidiary Joint Venture. So one change is this and rest is more or less same.

Shrenik Jain — LIC AMC — Analyst

Okay. Sure. Got it. Thank you so much.

Ashok Kajaria — Chairman And Managing Director

Thank you.

Operator

Thank you. We have the next from the line of Omkar G from Fee Investments [Phonetic]. Please go ahead.

Omkar G — Fee Investments — Analyst

As far as the gas problem is concerned, what are the long-term solutions for this gas issue? What are the steps you are taking for that?

Sanjeev Agarwal — Chief Financial Officer

Mr. Omkar, your voice is not very clear. If you will go off the speaker phone and come closer to the headset?

Omkar G — Fee Investments — Analyst

Oh, Is it clear?

Sanjeev Agarwal — Chief Financial Officer

Yes. Yes.

Omkar G — Fee Investments — Analyst

I was asking, what is the long-term solution for this gas issue? What are the steps you are taking for that?

Sanjeev Agarwal — Chief Financial Officer

Long-term solution is the gas, gas, gas. But short-term solution is a combination of various sectors like we are using partly LPG, but you see gas prices cannot sustain, what it was for the year 2022, 2023, the prices have to come down and all indications are that going forward, starting from April next year, the prices will come down, so ultimate solution is gas, gas, gas. But right now, just to because gas is an issue right now, quantity is also an issue. So to that, we have done a combination of gas and LPG.

Omkar G — Fee Investments — Analyst

Okay. As for the real estate sales are concerned, they are quite slow. The issue, what’s the exact cash flow, is it the inflation or like what is affected?

Sanjeev Agarwal — Chief Financial Officer

[Foreign Speech] Can you be more, clear in the voice?

Omkar G — Fee Investments — Analyst

Hello.

Sanjeev Agarwal — Chief Financial Officer

[Foreign Speech] boliye.

Omkar G — Fee Investments — Analyst

I was asking about the pressure you are seeing on the margin. Is it only because of the gas issue? Or is there something else also? And as far as the demand is concern there is something problematic in terms of demand also?

Sanjeev Agarwal — Chief Financial Officer

All right. Two things you have to understand. One, you asked first the pressure in margins. Pressure on margin is strictly because of gas price. I have given you a certain number that the impact of quarter two versus quarter two this year is something like INR110 crores. So that’s point number one. Number two, as far as the demand is concerned, I also said that demand has been very, very sluggish. July/August has been very tough. September slightly, again October is because of facilities which is up. So we are having a cautious approach, we have assured about 15% volume growth. We are putting our best efforts to do it. But we can only put efforts, we can’t see anything beyond that at this stage.

Omkar G — Fee Investments — Analyst

Thank you.

Operator

We have the next question from the line of Sonia Talreja from Edelweiss. Please go ahead.

Sonia Talreja — Edelweiss — Analyst

Good evening sir and thanks a lot for the opportunity. Two Questions from my end. So also firstly, just wanted to understand with you how has been the product mix for us? Is it that we have sold good amount of ceramic tile versus GVT this particular quarter? We can get some sense on quarter-on-quarter this product mix change, that would be really helpful?

Ashok Kajaria — Chairman And Managing Director

Okay. So first question, I’ll answer you as far as the volume mix is concerned ceramic is 46%. Polish 35% — 26% and GVT is 28%. As far as the revenue mix is concerned, Ceramic is 40%. PVT is 27%, and GVT is 33% for quarter two.

Sonia Talreja — Edelweiss — Analyst

Sure. Got that. And sir, this was the same was how much in, let’s say, last year same quarter?

Ashok Kajaria — Chairman And Managing Director

More or less — revenue last year of quarter two was 38% Ceramic, 31% Poly certified and 31% GVT.

Sonia Talreja — Edelweiss — Analyst

Understood. That was helpful. And my second question is related to our capex with the Nepal plant coming up and this new expansion, which you’re doing at Secundrabad how much would be the revised capex spending for this year as well as the coming 2 years?

Ashok Kajaria — Chairman And Managing Director

The total capex is INR250 crores – Secundrabad is INR80 crores, out of which this year should close to about INR50 crores next year, it should be next — first half of next year will be about INR30 crores.

Sonia Talreja — Edelweiss — Analyst

Sure and same thing with Nepal, would be largely spent everything next year?

Ashok Kajaria — Chairman And Managing Director

Nepal, this year should be close to about INR30 crores for next year it should be INR95 crores.

Sonia Talreja — Edelweiss — Analyst

Understood. Sir understood. And sir, when you mentioned Secundrabad lab. So is it that we are adding those large lab size, which we have recently launched in South, which are doing very well. Is my understanding correct or is it, is a larger size you gave?

Ashok Kajaria — Chairman And Managing Director

Yes, you’re absolutely right. The same — we are putting the same technology plant, which we put in [Indecipherable] that same technology is going to put in Secundrabad by next year. And we be the only plant in both South and North India to have this technology. All the other plants are only in the West of India in Morbi. We’ll be the only plants in South and north to a this technology.

Sonia Talreja — Edelweiss — Analyst

Sure. And one more thing. So we are also basically outsourcing this large platform to Western units for the other markets, right? Is my understanding correct?

Ashok Kajaria — Chairman And Managing Director

No, no, we’re not outsourcing the big start from Western market.

Sanjeev Agarwal — Chief Financial Officer

We thought so, but then we said at our own plant and our own plant is surprising us everywhere. We’re not outsourcing the big plants at all.

Sonia Talreja — Edelweiss — Analyst

Not at all. Okay. Understood. Thanks a lot. All the very best.

Sanjeev Agarwal — Chief Financial Officer

Thank you.

Operator

Thank you. We have the next question from the line of Achal Lohade from JM Financial. Please go ahead.

Achal Lohade — JM Financial — Analyst

My question was if you look at the gas cost, in the first quarter FY ’23, which is the previous quarter, it was INR55 – and you said for the second quarter, the blended cost is INR62 per SCM.

Ashok Kajaria — Chairman And Managing Director

Right.

Achal Lohade — JM Financial — Analyst

But if I look at the per square meter in terms of the power and fuel cost and the production volume, it seems to have gone down 16% Q-o-Q. Can you help us understand this?

Ashok Kajaria — Chairman And Managing Director

See, two things happened. What numbers you gave is absolutely correct. First quarter, the gas price was INR55 SCM. Second quarter was INR62. Also, I said there was a gas cut, GAIL has cut gas with the extent of 30%, so there was a production cut also. So that also impacted. And going forward in the next quarter, that is the third quarter, we around same as quarter one, that is about INR55 in the combination of gas and LPG.

Achal Lohade — JM Financial — Analyst

Okay. So you mean, basically, you’ve substituted because I don’t see a significant impact on the production numbers. That means we started using the alternate fuel in the second quarter itself?

Ashok Kajaria — Chairman And Managing Director

Yes, yes, we have started using in third quarter, only from the month of November. Kalahasti started in the month of October and Morbi and Gailpur in the month of — will start in the month of November.

Achal Lohade — JM Financial — Analyst

Okay. Maybe I’ll take it off-line. But the second question I had with respect to gross margins here, gross margins, I’m looking at basically the sales minus the RM cost. I see that the gross margins have come up by 480 bps Q-o-Q quarter-over-quarter. Is there anything to do with the product mix? Is it to do with — any one-offs? Anything to explain this gross margin reduction, sir?

Ashok Kajaria — Chairman And Managing Director

No, no, please clarify, which quarter to which quarter?

Achal Lohade — JM Financial — Analyst

First quarter to second quarter, sir?

Ashok Kajaria — Chairman And Managing Director

Okay. First quarter to second quarter.

Pallavi Bhalla — Investor Relations

Can you repeat your question, Achal?

Achal Lohade — JM Financial — Analyst

So if you look at the first quarter, the gross margin was 62.9%, I’m doing sales minus the RM cost, including closing stock, etc., adjustment. And that has come down to 58.1% in the second quarter. Now this could be possible if there was higher outsourcing. But if I look at the owned mix actually owned plus JV, it is higher Q-o-Q. So can you help us understand this gross margin contraction because that has driven the reduction in the EBITDA margins as well, while the fuel cost has come down?

Pallavi Bhalla — Investor Relations

See, the thing is if you see it separately, then you have to separately see the revenue and the raw material costs. So if you take the revenue of only JV and your own manufacturing and subtract the raw material costs, there will be a decline. It’s mainly because of the increase in raw material costs. But if you do more total revenue and then deduct only raw material — only the raw material used in own and JV, then the calculation number will be a little heavy. I suggest if you just go back and do it, you have the revenue data for own and JV as well. And then deduct only the raw material, you’ll get the correct number.

Achal Lohade — JM Financial — Analyst

Sorry. I’m a bit confused. I’m doing at a consolidated level, Pallavi. So would that change anything? I’m looking at consolidated numbers only when I’m talking about these numbers.

Pallavi Bhalla — Investor Relations

Yes, yes, it will change because you see your outsourcing number has gone down from 6.4 — sorry, I’m talking Y-o-Y, but outsourcing number has gone down. So if you —

Achal Lohade — JM Financial — Analyst

Ideally, it should lead to margin increase because the cost pertaining to own manufacturing are coming below that raw material costs, right, especially the fuel cost and the employee cost?

Pallavi Bhalla — Investor Relations

Raw material costs has also gone up. If you see per square meter, we can take this separately because –

Achal Lohade — JM Financial — Analyst

Yeah, yeah. Sure, sure Pallavi, we’ll do that. And just last question, if I may, with respect to Bathware, in terms of the Y-o-Y growth, it is kind of flattish — the run rate in the last three, four quarters has been between INR70 crores to INR80 crores. How do you see this? Where are we in terms of the SKU distribution, etc. the plans for next couple of years, sir?

Ashok Kajaria — Chairman And Managing Director

Last year, INR275 crores and this year, we’ll add up close to INR370 crores, but — in next two quarters, you will see a good turnaround.

Achal Lohade — JM Financial — Analyst

Okay. So, where we are talking about a 30%, 40% kind of a jump in the second half?

Ashok Kajaria — Chairman And Managing Director

Yes, yes, yes.

Achal Lohade — JM Financial — Analyst

And what is driving that, sir? If the overall — there is sluggishness in the real estate – can you help us understand?

Ashok Kajaria — Chairman And Managing Director

If you see quarter two was sluggishness in all plants. So things are becoming better. And as said, we will try to do whatever the numbers we are talking about.

Achal Lohade — JM Financial — Analyst

Understood, sir. Cool, cool. Thank you so much, and I’ll come back in the Q4 follow-ups. Thank you.

Operator

Thank you. We have the next question from the line of Amit Bhinde from Morgan Stanley. Please go ahead.

Amit Bhinde — Morgan Stanley — Analyst

Hello, sir. I wanted to understand that we have been increasing the capacity of the – site on the – one side. And also, in one of your notes to the account, you have mentioned that one of the subsidiary is also changing from the ceramic PVT to GVT. So, more and more conversion is happening towards GVT owned and successor. So would it mean that on the outsourcing side, you would have ceramic more and the pricing trend and realization trend and on – the JV products, would go down in the future, and there will be a sharp increase on the owned and subsidiary realizations?

Pallavi Bhalla — Investor Relations

Your voice is not clear. Can you come again, Girish?

Amit Bhinde — Morgan Stanley — Analyst

Yeah. Amit here from Morgan Stanley. So my question was, you are adding capacity in GVT, one of our subsidiary is converting the PVT capacity to GVT. So kind of the strategy in changing towards opportunity more ceramic towards JV plants and doing higher value products in the owned and manufacturing. So – so does that imply that in future pricing rise in the owned and subsidiary would be higher, and there would be a slowdown or a downtick in the prices in the JV realization? Hello?

Operator

This is the operator. Can you hear us at the management end?

Ashok Kajaria — Chairman And Managing Director

There is no strategy as such. Right now, what we are doing, we have been talking a long time for exports. So we are changing one of our units, JV Cosa Ceramics at Morbi from PVT to GVT to look at the export market. So that’s the only thing which we are doing – nothing much – nothing existing.

Amit Bhinde — Morgan Stanley — Analyst

Right. All right. Got it. Thank you. That was my question.

Operator

Thank you. We have the next question from the line of Sujit Jain from ASK Investments. Please go ahead.

Sujit Jain — ASK Investments — Analyst

Sir, if I were to look at your power cost as a percentage of sales coming at 25%, and 70% jump in terms of your gas cost Y-o-Y. Is that the reason – so that accounts for then close to 7% increase in the realization you should have done, but you ended up doing something like 10% or 11%. And to that extent, the drop in margins is mainly because of that, that – the increased gas cost has not been – you’ve not been able to pass it on basically.

Pallavi Bhalla — Investor Relations

Yes.

Sujit Jain — ASK Investments — Analyst

That is the main reason, right?

Ashok Kajaria — Chairman And Managing Director

Yes.

Sujit Jain — ASK Investments — Analyst

That is one. And second thing is, typically, you have added 12 million to 13 million square meter every year in line with your aspiration of growing your volumes of at 13% to 15%. I just want to know, FY ’23, how much you would have added? You would add —

Ashok Kajaria — Chairman And Managing Director

By FY ’23, we already — 12 million already sometime in the middle of May and we also will add some volume by outsourcing. That was the whole idea. So, that’s how the idea was to add 50 million square meters roughly. And then we have now added Southeast — South Asia, which is about 4.75 million square meters and we have let go one plant the X1, which was about 2.4 million square meters.

Rishi Kajaria — Joint Managing Director

3.1.

Ashok Kajaria — Chairman And Managing Director

3.1 million square meters.

Sujit Jain — ASK Investments — Analyst

So net addition would be 12 million square meter in FY ’23?

Ashok Kajaria — Chairman And Managing Director

Net addition — capacity-wise, will be net addition will be about INR30 million plus as far as FY ’23 is concerned and some outsourcing, which depends on how the situation is because outsourcing is open. If the demand is right, we outsource because the demand is not quite used less outsource.

Sujit Jain — ASK Investments — Analyst

And the $3 million already announced and the Nepal capacity will get commissioned in FY ’24. To that extent, you’ll have 11 million square meters?

Ashok Kajaria — Chairman And Managing Director

At ’24 will be commissioned, you will get the benefit only in ’24-’25.

Sujit Jain — ASK Investments — Analyst

That is okay. But I’m saying, directionally, you’ll be adding a similar capacity 12 to 13 million square meter in FY ’24?

Ashok Kajaria — Chairman And Managing Director

We will try to do that. Let’s see the situation. Situation on the ground is very tough. See, aspiration is one thing and the reality is also another. So we will balance that that much I can assure. The situation improves we will definitely work on that.

Sujit Jain — ASK Investments — Analyst

Right. And to support this aspiration of eventually in the long run, 14%, 15% kind of volume growth, what is the kind of distribution growth that you are envisaging? And what is the kind of yield for distributor growth that you’re envisaging to support this 15% kind of growth?

Ashok Kajaria — Chairman And Managing Director

I think you missed out last thing I said that in next three years, will add close to 400, 450 dealers. And this year, we should be adding about 200 dealers across India. And next two years, every year, we should add about 125 dealers across India. So we are looking at a scenario where 450 dealers should be added in our basket in the next three years. Otherwise these volumes could not come.

Sujit Jain — ASK Investments — Analyst

Can you repeat these numbers, I’m sorry.

Ashok Kajaria — Chairman And Managing Director

What I said last time, I repeat again, that in the next three years, Kajaria should add 450 dealers across India. In the year ’22-’23, we will add 200 dealers. Year going forward, we should add a minimum of about 25 every year for the next two years. And just for your information, we have already added 75 dealers in the first six months of this financial year.

Sujit Jain — ASK Investments — Analyst

And yield per dealer, is there something that you’re working on?

Pallavi Bhalla — Investor Relations

Yield per dealer — return from dealer.

Ashok Kajaria — Chairman And Managing Director

Return from dealer is not the point. The point is, whenever you make the dealer within two to three months or four months, you have to make good showrooms of this. See, once the showroom is made, his need is met. [Foreign Speech] So the movement that showroom is made right now, he maybe running a shop, he maybe running a distribution network or somebody else. The movement the good showroom is made his job is done.

As far as he is concerned, he still is secured. I give you a small example other day on 26th of September, I opened a showroom at Rewari, 12,000 square feet on one floor. Now can you imagine in a place like Rewari, which is a small area, you — somebody will make a 12,000 square feet showroom. If you see that showroom you will not believe it is a kind showroom and it is better than car show.

Sujit Jain — ASK Investments — Analyst

Right. And one last question. What is your current base of dealers?

Ashok Kajaria — Chairman And Managing Director

1,700 dealers across India, that was on 31st of March. We have added another 75 dealers in the first six months,

Sujit Jain — ASK Investments — Analyst

Got it. Thank you and all the best.

Ashok Kajaria — Chairman And Managing Director

Thank you.

Operator

Thank you. We have the next question from the line of Keshav from HDFC Securities. Please go ahead.

Keshav — HDFC Securities — Analyst

Hi. Thank you for the opportunity. Sir, I just want to understand, as per market assessment Kajaria took price hike in September, while the industry has not taken a high. So what was the idea behind that? And in terms of H1, how has Kajaria taken total price hike versus the industry.

Ashok Kajaria — Chairman And Managing Director

[Foreign Speech] See, the gas costs have gone through the roof as we just said, [Foreign Speech] of course, it’s a calculated one, going very gradually. I left to us, we should have taken more, but we can’t because of the market situation.And as you rightly put it, if others have not taken it, we had no choice because the cost of gas has gone up and as I said, second quarter is one of the toughest that we have seen over a period of time, where gas prices went up to the roof that’s was done. So looking at that that was done, and I’m happy to tell you that all, the price hike which has been taken since 1st of April 21 till date has been absorbed in the market.

Keshav — HDFC Securities — Analyst

Okay. Understood. Sir as you have only taken the price hike and now you have done 20% growth in H1, so you sort of need 10% growth in H2 to lead to guidance of 15%. So I think is it a fair assumption like your volume guidance is intact, you might do 15% growth this year and also next year, you will be doing 15%, as of now, no, nothing worry on this front.

Ashok Kajaria — Chairman And Managing Director

[Foreign Speech] So if you look at the first quarter number and margin in number two and say that, no, no, I have done a good job, believe me, it’s not a good job because July to September has been very, very tough. So we are having our best efforts. We are putting our best efforts to achieve whatever we have assured. And I can sincerely tell you on behalf of the company and all our people will put our best efforts. But let’s see how things shape up. What supports that we are taking because we don’t want to make any mistakes for the heat of it that I have to mix certain norms, I think that’s not necessary. As the market demands, I can assure you that we’ll fulfill the requirement of the market.

Keshav — HDFC Securities — Analyst

Okay. Understood. One last question from my side, sir, how is the channel inventory now?

Ashok Kajaria — Chairman And Managing Director

Channel inventory, people are not keeping much. See, on an average, a dealer keeps about 30 to 40 days of inventory because of the range of products. Today, Kajaria, by itself has almost 2,800 to 3,000 products. At least he has to keep almost 25%, 30% of that rate to satisfy this customer. It doesn’t keep more than that, but at least INR500 to INR600 to INR700 depending on the dealer size. We have to keep that inventory.

Keshav — HDFC Securities — Analyst

Thank you. That’s it from my side.

Ashok Kajaria — Chairman And Managing Director

One minute, one minute. Please go ahead for the next question.

Operator

Thank you. We have the next question from the line of Ritesh Shah from Investec. Please go ahead.

Ritesh Shah — Investec — Analyst

Hi. Thanks for the opportunity. I have couple of questions. Sir first question is, can you give some details on the regional gas prices. Usually, you do indicate on Northwest and South. If you can help those numbers, that would be great.

Ashok Kajaria — Chairman And Managing Director

So for quarter two FY 2023, the North is roughly about INR60 in SCM. South is about INR69 in SCM versus about INR69 and the cumulative is about INR62 per SCM. Am I clear?

Ritesh Shah — Investec — Analyst

You indicated that the LPG price was around INR53 to INR55. Now if you look at the numbers what you have indicated, it is higher than the LPG price. So sir, how should one understand our competitiveness versus other players who are purely on LPG, is that the right way to look at?

Ashok Kajaria — Chairman And Managing Director

LPG has just started. So this impact will come in this quarter. Last quarter, we hardly had any impact from this quarter we should start being the impact of LPG.

Ritesh Shah — Investec — Analyst

Sir, my question is, how should we look at our competitive positioning on the cost curve versus the peer set, which is entirely on LPG. So one can contest that the number of players who are on LPG are very few, probably that number might increase by a few hundred units going forward might not really impact us more. But if one had to look at it from a cost of positioning, how should one understand this?

Ashok Kajaria — Chairman And Managing Director

So we understand that we are [Indecipherable] propane, but we’ve also taken a shutdown of the plants because they were not able to sell and we are expensive. And as we go forward, our costs will go down as well. We are working on the alternate sources of fuel, and it will go down as we go along.

Ritesh Shah — Investec — Analyst

Okay. So we are betting on a higher consumption of LPG even for us, which will bring us at parity or make us as competitive as a peer side?

Ashok Kajaria — Chairman And Managing Director

No, that’s one point temporary. But as I said earlier in one of my points that people are expecting by April, the gas prices will also come down.

Ritesh Shah — Investec — Analyst

Sure. That’s very helpful. Sir, my second question on export trends. If you could give some numbers on monthly exports out of Gujarat, I think that would be quite useful. And earlier, you had given a number on a full year basis, would we still turn to that same number of around INR15,000 crores, INR16,000 crores?

Ashok Kajaria — Chairman And Managing Director

Yes. So, I think it’s still clear that yes, by end of financial year Gujrat will export almost about INR17,000 crores to INR18,000 crores of materials. And exports is going on pretty big from there.

Ritesh Shah — Investec — Analyst

That’s useful. And sir, last question, we have been adding capacity can you indicate the amount of cost savings that we’ll have probably from logistics or operational adds like employee costs, marketing, how should we look at that specific variable?

Sanjeev Agarwal — Chief Financial Officer

No manpower addition.

Ashok Kajaria — Chairman And Managing Director

Yes. So we’re not increasing any manpower in the company. And we are looking at how the numbers are. We also look at advertising costs very judiciously. We will not make — we’ll make sure that there’s no any extra further costs, extra additional costs.

Ritesh Shah — Investec — Analyst

I was trying to quantify what sort of impact will have. So we are very competitive given a good part of our additions are coming in, we are not adding any headcount. There might be an element of logistic cost savings given we are getting into Nepal. So just trying to quantify what — is there a number that we are looking at that we are targeting?

Ashok Kajaria — Chairman And Managing Director

See, Nepal is completely separate. So don’t attach that to it, but right now, we can’t very difficult to quantify. As we go along, we’ll definitely get an impact for now.

Ritesh Shah — Investec — Analyst

Thank you so much for the answers.

Operator

We have the next question of the line of Lavanya from UBS. Please go ahead.

Lavanya — UBS — Analyst

Hi, sir. Thank you for the opportunity. So most of my questions were answered, but I just wanted to check, so because of shift to propane LPG, usually this needs some additional capex for the plant. So as we are shifting a portion of our North and some plants. So did we have — did we put any capex here?

Chetan Kajaria — Joint Managing Director

Hi, This is Chetan Kajaria. So the capex is minimal. There’s literally no capex in shifting from gas to propane.

Ashok Kajaria — Chairman And Managing Director

We are using LPG base

Chetan Kajaria — Joint Managing Director

Using LPG currently.

Lavanya — UBS — Analyst

Okay. So that would need only minimal capex, not much at all?

Chetan Kajaria — Joint Managing Director

Correct.

Lavanya — UBS — Analyst

Okay. Got it. And also on the Bathware, can you help me with the capacity utilization at this point of time? And I understand that the new capacity which we are planning, that is actually to come in this month or next month. So what is our utilization at this point in quarter two?

Chetan Kajaria — Joint Managing Director

Our quarter two utilization is almost about 88% and the capacity expansion in faucet will be — it’s a very small investment, which we are doing so that we are looking at – to come by January. And the sanitary ware plant will only come by next year by March ’24. We’re going to start working it from January, and it’s going to only come after 15 months.

Lavanya — UBS — Analyst

Okay. Got it. And I just missed the advertisement expense in this quarter and first half. Can you just help with that number, please?

Ashok Kajaria — Chairman And Managing Director

So in the first half, we spent roughly INR50 crores in this financial year ’22, ’23, and we look at a similar number going forward for the remaining six months.

Lavanya — UBS — Analyst

Okay. So for the quarter two, the expense was….

Ashok Kajaria — Chairman And Managing Director

The quarter two was INR31 crores, quarter two.

Lavanya — UBS — Analyst

Okay. Got it. Thank you. Thank you so much

Ashok Kajaria — Chairman And Managing Director

Thank you.

Operator

Thank you. We have the next question from the line of Achal Lohade from JM Financial. Please go ahead.

Achal Lohade — JM Financial — Analyst

No, thank you. My questions got answered. Thank you.

Operator

Thank you. We have the next question the line of Manish Mahawar from Antique Stock Broking. Please go ahead.

Manish Mahawar — Antique Stock Broking — Analyst

Yes. Sir, just in terms of the domestic market, what’s our expectation for this FY ’23 growth or market size?

Ashok Kajaria — Chairman And Managing Director

See the market size should be roughly INR21,000 crores for the year ending ’22, and around INR22,000 crores for year end in ’23.

Manish Mahawar — Antique Stock Broking — Analyst

Okay. So we are expecting a 5% growth for the domestic industry for this year, right, around

Ashok Kajaria — Chairman And Managing Director

Right.

Manish Mahawar — Antique Stock Broking — Analyst

And we will grow around maybe we are anyways guided for 15% volume growth definitely our revenue growth will be better than the volume growth, right, for this year?

Ashok Kajaria — Chairman And Managing Director

Correct.

Manish Mahawar — Antique Stock Broking — Analyst

Okay. And in terms of the second quarter, I think a couple of times you narrated it was a really tough quarter in terms of July and September month. So just wanted to understand, and we are hoping for a better second half and recovery from November onwards because October, you already highlighted, I think because of festival, there was a slowdown. So what was the specific reason for this slowdown or a tough quarter in July and September, particularly in the second quarter?

Ashok Kajaria — Chairman And Managing Director

See, as you know, the entire building sector had seen a slowdown. Cement results are with you. [Indecipherable] results are with you. So I don’t have to explain that much. It was a tough quarter. Demand was sluggish. And cost of everybody had gone up in cement, cost of coal and for they were using went up. In our case, gas prices went up. So that was the scenario. Things are stabilizing, but at as far as India is concerned, and going forward, everybody is positive. I think we should also look at the positive scenario.

Manish Mahawar — Antique Stock Broking — Analyst

Okay. And in terms of export, I think you’ve already highlighted INR17,000 crore to INR18,000 crores of export this year, right? So any specific reason export should pick up or any particular geography where we see the market is seeing a demand?

Ashok Kajaria — Chairman And Managing Director

We are very competitive as you can see, and the biggest exporter was China, of course, because of its capacity. And as we all know, there is a lockdown because of COVID, that was even up over there. So today, India has become one of the key players as far as the export market is concerned. And last — first six months of this year, the exports has been close to about INR7,500 crores. next six months, we are looking at a scenario where it would be about — close to about INR10,500 crores. We are — as a country, we are very concretive and that credit goes to [Indecipherable] because they are doing good exports from there. They are literally selling to almost 90 to 95 countries across the world.

Manish Mahawar — Antique Stock Broking — Analyst

Okay. All right. And there is some benefit of Europe also, right? Europe because higher energy cost has some impact that has also supporting the Indian export market?

Ashok Kajaria — Chairman And Managing Director

You have said the right word. Europe will be a big market. Europe was looking at just for share with everybody. Europe was looking at putting antidumping. The initial studies, they have put antidumping of only 10% on India, more or less and 48% on Turkey. So that market will open up in a big way for India in the next month or so.

Manish Mahawar — Antique Stock Broking — Analyst

Okay. Understood. And lastly, sir, just in terms of LPG, propane or gas, right? I think you already said our future in terms of the gas, right? So LPG and propane are is more of a temporary I think in terms of a spread available, so that is a temporary opportunity for industry as such, right, sir?

Ashok Kajaria — Chairman And Managing Director

Yes, that’s what I said. I also said that by April onwards, the gas companies are looking at the scenario, they’re already talking about it, that by appall the gas prices should come down. If they come down, then you don’t require LPG, you don’t repair propane. This is all the stuffed up arrangement, which you have no growth rate, yes.

Manish Mahawar — Antique Stock Broking — Analyst

Okay. Understood, sir. Thanks and all the best sir.

Ashok Kajaria — Chairman And Managing Director

Thank you.

Operator

We have the next question from the line of Harsh Pathak from B&K Securities. Please go ahead.

Harsh Pathak — B&K Securities — Analyst

Yes, hi. Hi, good evening and thanks for the opportunity. I wanted to understand with regards to our Nepal expansion, how well would be secured on the raw material availability and gas supply arrangements, if you can throw some light there, please?

Ashok Kajaria — Chairman And Managing Director

So there’s already a plant running in Nepal. We are not the first one to experiment. So raw materials already there in abundance plus we will also experiment partly in evidence partly has been imported from India. And what was your second question?

Harsh Pathak — B&K Securities — Analyst

Yes. And the gas supply availability?

Ashok Kajaria — Chairman And Managing Director

The fuel out there will be cool, what we’ll be using.

Harsh Pathak — B&K Securities — Analyst

Okay. And since we would be importing some materials from India, so any import duty based on the raw materials?

Ashok Kajaria — Chairman And Managing Director

Yes. Yes, so there is some import duty on the raw materials. That is why the cost is high in imports, and that will get a benefit of producing locally.

Harsh Pathak — B&K Securities — Analyst

Okay. Sure. No, I was more asking on the — from the raw materials front.

Ashok Kajaria — Chairman And Managing Director

No, no. There will be some duty, but we will talk to the government and see what benefits we can get out of that – that duty is not that very big. It’s not very big. It’s not very huge marginally.

Harsh Pathak — B&K Securities — Analyst

Sure. And any plans to cater to the northern or the Northeastern markets from this plant? Any pre-trade agreement that we would enjoy any – any – some light you can throw there please?

Ashok Kajaria — Chairman And Managing Director

Nepal production, Nepal itself and Katmandu is a big market, we will try to sell the entire production there itself.

Harsh Pathak — B&K Securities — Analyst

Okay, sir. So these are my questions, sir. Thank you. Thank you very much.

Operator

Thank you. We have the next question from the line of Rahul Agarwal. [Phonetic] Please go ahead.

Analyst — — Analyst

Yes, thank. Sir, one question on the background of the joint venture partner there in Nepal. How is the group balance sheet strengths? I mean, what do they do and how comfortable are you doing business with them?

Ashok Kajaria — Chairman And Managing Director

So we have done all the background check on them. It’s a solid group. They also own cement companies. They are also involved in — it’s a big group, and they’ve done all the due diligence and we are comfortable with the group. We have only done everything after doing the due diligence of the group.

Analyst — — Analyst

Okay. And secondly, on the non-tile business, the generally bathware and plywood, the EBIT there is pretty low, it’s almost zero. Any particular reasons or the growth in sanitary ware being flat, is that the only reason there?

Ashok Kajaria — Chairman And Managing Director

Yes. Because of the growth in the sanitary swag that’s where the EBITDA margin is very less. And as the volume increases — division has made good numbers earlier. As the volumes increase, the numbers will definitely come.

Analyst — — Analyst

The ad expenses were also high for that division as well, is it?

Ashok Kajaria — Chairman And Managing Director

A little bit, not that high. A little bit high, 1 million. But we need to build brand otherwise — to gain — to grow at about 30% year-on-year, we need to have the digital branding so that the people are confidence in buying care ware as a product.

Analyst — — Analyst

Sure. And lastly, on the revenue breakdown, given in the investor presentation, I saw adhesive [phonetic] revenue added of INR10 crores for the quarter and about INR17 crores second half. Anything major we are doing here? Or is this going to be a small number going forward?

Ashok Kajaria — Chairman And Managing Director

Adhesive, we’re doing. Now adhesive, we want to go in a gradually in a positive manner, because the bigger the tiles, they use adhesive instead of cement.

Sanjeev Agarwal — Chief Financial Officer

So we are looking at taking this vertical seriously and hiring senior people from the industry. Last year, we did — this year was a thing around INR50 crores of turnover in adhesive divisions. And next year we should also grow in a similar high expansion growth in the entire vertical.

Analyst — — Analyst

This is purely restricted to adhesive use for tiles in it or is there anything else?

Sanjeev Agarwal — Chief Financial Officer

There are some cleaners out, but it’s mainly for tiles, grouts and adhesives.

Analyst — — Analyst

Okay, okay. All right. Good. Thank you so much. I’ll come back in the queue.

Operator

We have the next question from the line of Amit Dede from Morgan Stanley. Please go ahead.

Amit Dede — Morgan Stanley — Analyst

Hello sir. I just wanted to understand what is your optimal level of blending that you can do on LPG and gas that we are using right now?

Sanjeev Agarwal — Chief Financial Officer

You’re not audible, can’t hear you properly.

Amit Dede — Morgan Stanley — Analyst

Okay. Can you hear me now? Is it better?

Operator

Yes, Mr. Dede [Phonetic] will request you to finally come on the handset more instead of the speaker phone?

Amit Dede — Morgan Stanley — Analyst

Sure. Hello. Can you hear me now?

Ashok Kajaria — Chairman And Managing Director

Yes.

Amit Dede — Morgan Stanley — Analyst

Is it better? Yes. So I just wanted to understand what is the optimal level of blending that you can achieve with LPG gas and any plans for the six months, like 10% or 20%, how much lending would you’d be guided in?

Pallavi Bhalla — Investor Relations

Still not clear.

Ashok Kajaria — Chairman And Managing Director

We couldn’t understand your question.

Amit Dede — Morgan Stanley — Analyst

How much percentage of blending of LPG are you looking at for the next six months?

Ashok Kajaria — Chairman And Managing Director

No, no. See, right now, what we are talking about, wherever we can pick in LPG, we’ll pick in. LPG installation itself takes about 30 to 45 days. And whatever we are doing, I think it will be more or less finished by end of the financial year ’23 and looking at as I kept on saying it, scenario sales that by April next year, gas prices should come. So, it’s a very small thing that we are talking about right now.

Amit Dede — Morgan Stanley — Analyst

Got it. Thank you.

Operator

We have the next question from the line of Rajesh Ravi from HDFC Securities. Please go ahead.

Rajesh Ravi — HDFC Securities — Analyst

Yes. Hi, sir. Good evening. I have a few questions. First, on the demand front. See in second quarter, as you mentioned, has been a tough one, has been flattish and even October has been a festive month. So — and second, if I look at export numbers so far, the momentum is still subdued, and even what we hear is plastic pipes companies talking about that because of the demand slowdown in the US market, the resin demand has come off. So because US is a big market for Indian tiles industry and even Europe, where we are getting an advantage on the cost front for sure. But amid all this war and inflation, are you seeing that exports outlook may remain subdued and that may impact the volume growth for the industry as a whole?

Ashok Kajaria — Chairman And Managing Director

No, industry, as I said, US is one market. There are 90 to 95 countries where India is exporting, number one. Number two, you are as a country, very, very competitive please make a note of that. And that is why the exports will pick up. And I’m seeing a figure of INR18,000 crores for this year, next year this figure could go as high as INR20,000 crores, INR25,000 crores, because we as a country have become very competitive.

Rajesh Ravi — HDFC Securities — Analyst

Okay. And domestic, what triggers you’re looking at sir for healthy volume growth, at least this financial year?

Ashok Kajaria — Chairman And Managing Director

Market should start looking better if a number – there are no traders, no such words as trigger.

Rajesh Ravi — HDFC Securities — Analyst

Okay. And second, on the Nepal expansion, I think earlier you mentioned with market size is around 25 million square meter, Nepal?

Ashok Kajaria — Chairman And Managing Director

Yeah. Market is about 25 million square.

Rajesh Ravi — HDFC Securities — Analyst

Okay. And would you be capturing a sizable market share. I mean, you would be targeting everything into Nepal? And by what timeframe, do you look at full eight MSM sales in Nepal?

Rishi Kajaria — Joint Managing Director

So yeah, the market size is about $25 million, which is growing. And we are putting an eight million square meter plant. We do plan to capture large share in the market. And we plan — right now the plan is to sell locally in Kathmandu-only, Nepal-only as a country. So there’s a lot of replacement of imports and the Morbi materials, which is already going there with our production there and without any duty impact, I think we will capture larger size of the market.

Rajesh Ravi — HDFC Securities — Analyst

Okay. I mean eight MSM production can be achieved over the next two — I mean FY ’25-FY ’26 itself, you’ll be able to achieve those numbers?

Rishi Kajaria — Joint Managing Director

We’ll be able to sell the entire 800 square meters, first maybe little less, second year — by second year we should definitely — production.

Rajesh Ravi — HDFC Securities — Analyst

And last question, this LPG propane. What percentage of your total fuel mix, energy power mix would be coming through this propane in Q3 approximately, any number that you have?

Ashok Kajaria — Chairman And Managing Director

I think — cumulative combination should be around INR55.

Rajesh Ravi — HDFC Securities — Analyst

No, INR55 you mentioned, which is at almost a great 10% fall. No, I’m saying on a percentage of your total electricity, what portion could we…?

Ashok Kajaria — Chairman And Managing Director

Very hard to say at this moment. Close to about 15% to 18% only.

Rajesh Ravi — HDFC Securities — Analyst

Okay, okay. Great sir. All the best. Thank you.

Ashok Kajaria — Chairman And Managing Director

Thank you.

Operator

Thank you. That was the last question. I would now like to hand it over to the management for closing comments.

Ashok Kajaria — Chairman And Managing Director

Thank you, Rahul. I think it was a good interaction, wonderful questions asked by the people. Thank you very much for them for participating in this. And on behalf of myself and my entire team, I thank you, everything for organization. Thanks a lot.

Operator

[Operator Closing Remarks]