Prince Pipes and Fittings Ltd (PRINCEPIPE) Q4 FY23 Earnings Concall Transcript

Prince Pipes and Fittings Ltd (NSE : PRINCEPIPE) Q4 FY23 Earnings Concall dated May. 26, 2023.

Corporate Participants:

Anand Gupta — Deputy Chief Financial Officer

Parag J. Chheda — Joint Managing Director

Shyam Sharda — Chief Financial Officer

Nihar Chheda — Vice President – Strategy

Analysts:

Pranav Mehta — Equirus — Analyst

Manish Mahawar — Analyst

Chirag Lodaya — Valuequest — Analyst

Keshav Lahoti — HDFC Securities — Analyst

Dhananjai Bagrodia — ASK — Analyst

Sandesh Barmecha — Haitong Securities — Analyst

Praveen Sahay — Prabhudas Lilladher — Analyst

Mitul Shah — Reliance Securities — Analyst

Rajesh Ravi — HDFC Securities — Analyst

Abhishek Ghosh — DSP Mutual Funds — Analyst

Udit Gajiwala — YES Securities — Analyst

Shrenik Surendra Bachhawat — LIC Mutual Funds — Analyst

Achal Lohade — JM Financials — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Prince Pipes and Fittings Limited Q4 FY ’23 Earnings Conference Call hosted by Antique Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking. Thank you, and over to you.

Manish Mahawar — Analyst

Thank you, Ranjan. Warm welcome to all the participants on 4Q FY ’23 earnings call of Prince Pipes and Fittings. From the management, we have Mr. Parag Chheda, Joint Managing Director; Mr. Nihar Chheda, Vice President, Strategy; Mr. Shyam Sharda, CFO; and Mr. Anand Gupta, Deputy CFO on the call.

Without further ado, I would like to hand over the call to Mr. Parag Chheda for opening remarks, post which we will open the floor for Q&A. Thank you and over to you, Parag, ji.

Parag J. Chheda — Joint Managing Director

Yeah. Thank you, Manish, and good morning to all. I thank each one of you for joining us for our quarter four and FY ’23 earnings call. The presentation and the press release have been issued to the stock exchanges and uploaded on our website. I trust you have had the time to go through the same.

I will initiate the call with a brief overview of the industry and then discuss the company-level performance. The year saw an unprecedented volatility in input costs in PVC prices, which led to significant inventory losses, adversely affecting our profitability in H1 FY ’23. Since April ’22, PVC prices corrected by a record, by INR66 per kg and bottomed out at approximately INR76 per kg by end of November. The persistent fall in PVC prices led to sustained destocking amongst our channel partners, adversely impacting volumes. Since December ’22, the trend reversed and prices have stabilized till March ’23, leading to a much improved operating performance.

We have delivered a healthy performance in quarter four FY ’23, led by stable input prices and an improving product mix with significant improvement in overall margins and profitability. The substantial improvement in profitability was on account of focus on operational excellence, inventory management, cost efficiency measures, and marketing trust.

The Company sold 44,317 metric tonnes of volume and achieved revenue of INR764 crores during quarter four. Despite notable lower Y-o-Y revenues, EBITDA grew by 6% Y-o-Y to INR148 crores with margins significantly expanding to 19%. PAT grew by 7% year-on-year and 169% quarter-on-quarter to INR94 crores.

We continued to expand our product portfolio with the launch of state-of-the-art products in the piping division, which is in line with our growth strategy of bringing innovative and global products to the Indian market. Our roll out of modern plumbing products is on course with encouraging response from our channel partners.

I’m glad to share that to further strengthen our position in East India, we have planned greenfield expansion in the state of Bihar. The expected capacity of the piping plant would be around 35,000 metric tonnes initially. This shall entail an investment of approximately INR150 crores, which includes land and adequate infrastructure, meeting the requirements of any further expansion. We plan to commence production by quarter four of FY ’25.

Positive industry sentiments continued to be optimistic across centers. The uptick in the real estate industry continues to be strong. The Indian residential real estate market experienced a record breaking sales in FY ’23, rising by 36% from the previous year, according to the research by ANAROCK Group. The new fiscal is expected to witness a strong foundation with more buyers and lower home rate loan — loan rates, which augurs well for us.

According to another report by IMARC, the India’s real estate market is expected to exhibit a growth rate of 9.2% during 2023 to 2028. Affordable PVC rates supported by a positive demand momentum across sectors of real estate, agriculture, and infrastructure showcase promising long-term trends for a multi-polymer pipe solution player like us.

Just to give you an update on the progress of our Bathware segment, vendors and designs have been finalized and our core team including key state heads and service engineers have already been appointed. We are also set to launch the entire Bathware range towards the end of quarter one FY ’24 and are excited to deliver quality products, backed by a superior customer experience.

Further, we continue to focus on fiscal prudence and remain long-term active. We have seen a continuous improvement in debtor days from 60 days in March ’22 to 56 days in March ’23. Inventory days have remarkably improved from 85 days in March ’22 to 57 days in March ’23. Overall working capital days have improved from 68 days in March ’22 to 57 days in March ’23.

I would like to highlight that we are migrating to a global ERP system from a legacy system. The implementation is witnessing certain transitioning challenges, and this will have a material impact on our performance in quarter one FY ’24.

Next, sustainability and green initiative continue to be a core focus area, as our Chennai plant achieved Gold Rated Green Factory Building certification by the Indian Green Building Council. As you know, earlier our Jaipur plant had achieved Platinum Rated Green Building Certification by IGBC. Our sustainability practices have reduced our carbon footprint, increased recycling, and accelerated the use of solar and renewable energy.

On an overall basis, with industry potential being promising, Prince Pipes will continue to take obvious steps towards innovation in building a robust portfolio on a ground execution of our growth strategies and capitalize on opportunities, where the Prince brand can bring its expertise, knowledge, and service quality.

Thank you for your time share. I will now hand it over to my finance team to take you through the key financial highlights.

Shyam Sharda — Chief Financial Officer

Thanks, Parag, bhai, and good morning, friends. I’ll be taking quarter four FY ’23 financial [Technical Issues]. For quarter four FY ’23, revenue stands at INR764 crores. Sales volume reported at 44,317 metric tonnes. EBITDA margin for quarter four FY ’23 was healthy at 19.4%, an improvement of 380 basis point over last year. For quarter four FY ’23, EBITDA came in at INR148 crores compared to INR140 crores in Q4 FY ’22, growing by 6%. Profit after tax reported at INR94 crores compared to INR88 crores in Q4 FY ’22, an improvement of 7% Y-o-Y.

For the full year FY ’23, revenue is at INR2,711 crores compared to INR2,657 crores in FY ’22. Sales volume has increased to 157,717 metric tonne in FY ’23, as compared to 139,034 metric tonne in FY ’22, reflecting an increase of 13%. Profit after tax stands at INR121 crores, as compared to INR249 crores in the previous fiscal. We have witnessed an improvement in net working capital [Technical Issues] 57 days, as of March ’23 as [Technical Issues] March ’22.

As we had guided in our earlier calls, we have normalized our inventory. Inventory days for the year improved to 57 days from 85 days last year and 61 days in December 2022. We maintained our net cash position at INR158 crores, as of March 2023. We continue to remain long-term debt free during the quarter.

And with this, we would like to open the floor for questions. Thank you.

Questions and Answers:

 

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from the line of Pranav from Equirus. Please go ahead.

Pranav Mehta — Equirus — Analyst

Yeah. Good morning, team. Thank you for taking my question and congratulation on good operating profitability numbers. I wanted to understand on your point that you highlighted that due to migration to global ERP, you are facing some challenges in 1Q ’24. So if you can throw some more light on this, how 1Q would be impacted, and after that, let’s say, 2Q and 3Q might see better growth coming in because of the demand, which you could not serve in 1Q and because of that overall your FY ’24 numbers might not be that impacted. That was my first question. And my second question was, was there any inventory gain during this quarter?

Nihar Chheda — Vice President – Strategy

Yes. Thank you, Pranav. Inventory gain for the quarter was INR25 crores. Coming to your first question, we are having migration from a legacy ERP system to a global ERP system, and we had planned this in the month of April because that tends to be a lean month, because in March, you typically have restocking in the channel. However, due to some technical sort of glitches, this has actually spilled over into May. So I will not be in a position to quantify it because we are still trying to make up for it in the second half of the quarter.

As we stand most operations have normalized, and I would say we are 70%, 80% close to normal today. And of course, I think the silver lining in all of this is, demand continues to be extremely strong across segments, across agriculture and building material and across geographies, North, South, West, East India. So we are confident of growth going forward. And yeah, that’s where we are today.

Pranav Mehta — Equirus — Analyst

Okay, sir. And sir, your move towards the Eastern market, so earlier, I believe that you were doing it through kind of outsourcing arrangements. So going forward now, East being a focus area, you’d be putting up your own capacities and lowering the outsourcing mix is what your strategy is?

Nihar Chheda — Vice President – Strategy

Yeah. So we will — we feel that it’s the right time to invest, and we have always said that outsourcing is only a stepping stone, especially only for entry product, which is the SWR pipes for East market. But now we feel that it’s time to have range [Phonetic] selling and have an overall basket of goods, PVC, CPVC across segments.

So to answer your question, outsourcing will — we will transition out of it. So it will not be an overnight move from outsource to in-house because we have to scale up in-house capacities, which takes some time. So maybe in a couple of quarters after in-house manufacturing, we would then be completely dependent on our in-house capacities.

Pranav Mehta — Equirus — Analyst

Okay. And sir, just to pertain [Phonetic] and added question on this, you are going up with the CPVC and fittings and even overhead water tanks in Eastern market? Have you finalized what products you would be launching?

Nihar Chheda — Vice President – Strategy

Yeah. So tentatively, we would be starting off with pipes, both PVC and CPVC, as well as water tanks.

Pranav Mehta — Equirus — Analyst

Sure, sir. Thank you very much.

Operator

Thank you. [Operator Instructions] And the next participant is Chirag Lodaya from Valuequest. Please go ahead.

Chirag Lodaya — Valuequest — Analyst

Yeah. Thank you for the opportunity and congratulations on good set of numbers. Sir, my first question was on channel inventory in the system. Given the weak outlook of PVC or volatility in PVC prices, and on top of it, SAP integration, ERP transition etc, how is the channel inventory at this moment?

Nihar Chheda — Vice President – Strategy

So I would say, channel inventory is low on account of two reasons. I think one, end product demand continues to be strong; and second, of course, we had challenges in the month of April and first half of May in terms of being able to service that demand. So I think overall at industry level, channel level should be low to moderate, and it would be slightly lower in our case because of the challenges in the first half of the quarter. So I think this time, channel inventory is not directly correlated to pricing because demand is robust.

Chirag Lodaya — Valuequest — Analyst

And do we expect any inventory losses in Q1 due to weak PVC prices currently?

Nihar Chheda — Vice President – Strategy

It’s early to say, but sitting today, does not look like, there would be any inventory loss.

Chirag Lodaya — Valuequest — Analyst

Okay. And just lastly, what would be the timeline for East plant? Will we be starting in early FY ’25 or H2? And second, Telangana plant utilization, if you can give color?

Nihar Chheda — Vice President – Strategy

So we would be — we are today — sitting today targeting East plant to be operational by quarter four of FY ’25. That is our internal target that we are working with today. Of course, the land and all of that is still to be acquired. So this is what we are targeting, and we are confident of this timeline. And Telangana capacity utilization would be around 40% today.

Chirag Lodaya — Valuequest — Analyst

Okay. Thank you, and all the best.

Nihar Chheda — Vice President – Strategy

Thank you.

Operator

Thank you. Next question comes from the line of Keshav Lahoti from HDFC Securities. Please go ahead.

Keshav Lahoti — HDFC Securities — Analyst

Sir, can you give some more idea about how is your storage tank revenue in FY ’23? And in FY ’24, what are your plans for storage tank and Bathware division? And what sort of cash burn we should expect in Bathware in FY ’24?

Nihar Chheda — Vice President – Strategy

So storage tanks, we have done around INR30 crores of net sales in FY ’23, and we have always believed that it’s going to be an organic path. And we are very confident of the kind of distribution network that we’ve — the cross-selling of water tanks that we’ve been able to do in our current distribution network. And for FY ’24, we would like to double our sales of water tanks. And I think now we are at that stage, where we can take this aggressive growth now that the seeds have been sown, the initial product acceptance of water tanks. I think this year, we would like to double revenue from water tanks.

Coming to Bathware, we will be launching next month, in June. We are on track for that. We also have a dealer conference scheduled in the middle of the month, next month, where we will be launching our products to our pan-India distributors, and then slowly roll out to new distributors in the market in North and West. So that is on track for next month. The cash loss from Bathware would be in the range of INR15 crores per annum.

Keshav Lahoti — HDFC Securities — Analyst

Okay. And how is your margin in storage tank division?

Nihar Chheda — Vice President – Strategy

I think margin in storage tank division is similar to the pipe and fitting business, so around 12% to 14% operating margin.

Keshav Lahoti — HDFC Securities — Analyst

Okay. That is great to hear. When you talk about better margin due to better product mix, I understand it is due to the launch of new product and due to the higher growth in CPVC. Is my understanding correct? And what was your CPVC portfolio growth in FY ’23?

Nihar Chheda — Vice President – Strategy

So our value-added products include CPVC, PPR, the entire fitting range across polymers, be it PVC, CPVC, and PPR, and some of the new products that we have launched, like low-noise polypropylene pipes, as well as polypropylene surface drainage channel. So it will take some while before they start showing up on the revenue. So majorly, this has been driven by better fittings sales, as well as better CPVC and PPR order book.

Keshav Lahoti — HDFC Securities — Analyst

Okay. Would you like to give some idea about your CPVC growth in FY ’23?

Nihar Chheda — Vice President – Strategy

See, we’ve always — we’ve never shared segmental numbers, but we have grown across segments and CPVC is a key focus area for us, especially after the FlowGuard Plus tie-up. So we are on the right path of growth, and we have done well in terms of cross-sell, CPVC and our deep distribution network.

Keshav Lahoti — HDFC Securities — Analyst

Okay. Thank you, sir. That’s it.

Operator

Thank you. Next question comes from the line of Dhananjai Bagrodia from ASK. Please go ahead.

Dhananjai Bagrodia — ASK — Analyst

Hi, sir. Just wanted to ask regarding Jal Se Nal. How much of our sales percentage is going towards that and how is that shaping up for us?

Nihar Chheda — Vice President – Strategy

So Jal Se Nal, I think still we continue to see on-ground demand from Jal Se Nal. It’s not a very significant part of revenue today, but the important point is that it’s consistent every quarter. We are seeing some on-ground execution, as far as JJM projects are concerned, which is a positive for us, and I think this will continue to contribute. I think we have just seen the tip of the iceberg, as far as demand from JJM is concerned.

So we don’t directly sell to the government. We sell through our channel partners because we don’t want to take the credit risk on our books. So the distributors sell to local municipal government contractors for JJM. So my understanding from my sales team and my distributors is that there continues to be — this is not just policy on paper, but we are seeing on-ground demand from this program of the government. I am not in a position to quantify it because we don’t directly sell to the government. It’s through the channel.

Dhananjai Bagrodia — ASK — Analyst

Okay. But just I guess, the follow-up is, let’s say now, they are saying that this will be done now in — by FY ’25. So then would we see then a significant drop since — would we see a significant drop in our revenues post that?

Nihar Chheda — Vice President – Strategy

No, we will not see a significant drop post that. Firstly, I believe this program will continue into multiple years post that as well because there are different markets that are adopting this at different stages. But I’ve always maintained that JJM is never going to be a primary growth driver for Prince. It’s [Technical Issues] added bonus. So we are not dependent on JJM for growth. It will primarily come from growth in distribution network, growth in real estate, growth in agri market because of affordability. So Jal Jeevan Mission is only a bonus driver, not a primary driver.

Dhananjai Bagrodia — ASK — Analyst

Sure. And any roughly guidance for next year in terms of volumes?

Nihar Chheda — Vice President – Strategy

So I think ex of quarter one, I think we should have 12% to 15% volume growth. I am optimistic about demand across segments. So quarter one, of course, will be an anomaly because of the ERP migration. However, even in quarter one, end-product demand continues to be robust, and that will start reflecting in our primary numbers from the second quarter.

Dhananjai Bagrodia — ASK — Analyst

Okay. And how is agri sales picking up now? Are we seeing any rural — how is that coming along?

Nihar Chheda — Vice President – Strategy

Yeah. Agri sales is strong, primarily driven by affordability. So as we had envisioned in the previous couple of quarters that this agri season should be strong. I think we are seeing that play out in the marketplace.

Dhananjai Bagrodia — ASK — Analyst

Fantastic. Thank you.

Nihar Chheda — Vice President – Strategy

Thank you.

Operator

Thank you. Next question comes from the line of Sandesh Barmecha from Haitong Securities. Please go ahead.

Sandesh Barmecha — Haitong Securities — Analyst

Hello, sir. Thank you for the opportunity. Sir, just two questions on my end, sir. Sir, despite reporting relatively weaker pipe volume growth compared to our major peers, our debtor days has moved up from 43 days in this — last quarter to 49 days in Q4, FY ’23, whereas the collection period for the most of our peers has gone down. So can you please throw some light on this? And how do we see our collection period in FY ’24?

Nihar Chheda — Vice President – Strategy

So I think historically if you see, the — I think four days or five days here or there does not make a material impact, but historically, if you see our trend is doing lower significantly. So I’ve always believed that control on debtor days is not something that can be achieved overnight, and it’s a process of multiple years. So four years or five years ago, our debtor days used to be closer to more north of 75 days, which now has come to where it is. So this is not something that can be done overnight.

However, we — for us internally, this is a KPI for us, for the senior management to be able to control debtor days because that’s the true testament of your brand equity. So while we acknowledge that this cannot be done overnight, this is a key for us going forward. And over the next two years to three years, we want to have a stronger control on this, which will be visible in the cash flow that we are generating.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. So — okay. So if you can give some sense that, so what was our volume growth in agri, plumbing, and infra in Q4 FY ’23 on year-on-year basis? And also if you could put some sense on what kind of volume growth are we seeing in April and May this year compared to last year?

Nihar Chheda — Vice President – Strategy

Yeah. So Sandesh, as you are aware, I think, as company policy and industry norm, we don’t give out segmental numbers. What we can say is our focus is on building material because that’s the value-added part of our portfolio, and growing in building material has always helped us not only improve our margins, but also improve our brand equity in the marketplace, and our focus will continue to be on building materials.

While agri will be key from an operating leverage and a cost absorption point of view, and also to help us enter into rural markets and then cross-sell other products in rural markets. But growth has been — in Q4, we have seen growth across segments. And coming to the first quarter, we have seen strong agri growth and strong demand in agri, as well as plumbing and drainage.

Sandesh Barmecha — Haitong Securities — Analyst

Okay. So what will be our capex plan for FY ’24 and ’25, sir? And just to add to that, before I answer this question, we have also seen good growth in Infrastructure and double wall corrugated pipes used for underground drainage, where we are replacing cement pipes to DWC pipes, as everyone is aware. I think that segment also is doing well, and we are bullish on this, and we would also be manufacturing this segment in the Bihar manufacturing facility. To come to the capex answer, I think I’ll hand it over to Anand.

Anand Gupta — Deputy Chief Financial Officer

So next year, what we are planning is as East is coming up, so INR75 crores to INR80 crores will go towards the capex in East, mainly towards land building and utilities for the Phase 1, what we are planning. And for the rest of the maintenance capex will be in the range of INR80 crores to INR85 crores for the rest of the [Indecipherable].

Sandesh Barmecha — Haitong Securities — Analyst

Okay. Thank you so much, sir. Best of luck.

Anand Gupta — Deputy Chief Financial Officer

Thank you.

Operator

Thank you. The next question comes from the line of Praveen Sahay from Prabhudas Lilladher. Please go ahead.

Praveen Sahay — Prabhudas Lilladher — Analyst

Yeah. Hi, sir. So firstly, if you can give the advertising expenses for the year and the Q4?

Nihar Chheda — Vice President – Strategy

Can you repeat your question.

Praveen Sahay — Prabhudas Lilladher — Analyst

So advertisement expenses for FY ’23 and Q4 FY ’23.

Nihar Chheda — Vice President – Strategy

Yeah. Just give us one minute.

Anand Gupta — Deputy Chief Financial Officer

So for FY ’23, it was INR41 crores, the advertisement expense, for the full year. And for the last quarter, it is around INR12 crores, Q4.

Praveen Sahay — Prabhudas Lilladher — Analyst

And the total capacity of 3 lakhs — more than 3 lakhs, is it an installed capacity or a production capacity?

Nihar Chheda — Vice President – Strategy

It is an installed capacity, Praveen. So production capacity is around 80% of the rated capacity. So the 3 lakh plus, what we put out, is the rated installed capacity.

Praveen Sahay — Prabhudas Lilladher — Analyst

And on this transition to the global ERP system, is there any cost also involved to that and how much is that?

Nihar Chheda — Vice President – Strategy

So the cost has already been factored in — over the — in the FY ’23 numbers. The exact number, we don’t have handy with us. We can maybe connect offline, but it’s been factored in the FY ’23 financials.

Praveen Sahay — Prabhudas Lilladher — Analyst

Okay. And the last question, sir, on the raw material procurement. Apart from the CPVC compound, do we have a long-term supply contract with the global supplier or we are also dependent on some trading procurement of raw material?

Nihar Chheda — Vice President – Strategy

So CPVC, we have a contract with Lubrizol, and for PVC, we have contract — annual contracts with Reliance and Chemplast Sanmar.

Praveen Sahay — Prabhudas Lilladher — Analyst

Domestic players only.

Nihar Chheda — Vice President – Strategy

Yes. Import is — it’s an industry norm. Import tends to be spot and local tends to be contracture.

Praveen Sahay — Prabhudas Lilladher — Analyst

Okay. Thank you, sir. Thank you for taking my question. All the best.

Nihar Chheda — Vice President – Strategy

Thank you, Praveen.

Operator

Thank you. Next question comes from the line of Mitul Shah from Reliance Securities. Please go ahead.

Mitul Shah — Reliance Securities — Analyst

Sir, thank you for the opportunity and congratulations on a strong performance. Sir, first question, just clarification on ERP related costs we incurred everything in FY ’23 or something will come in FY ’24 also? Hello?

Nihar Chheda — Vice President – Strategy

So I would say majority of it has been factored into FY ’23. So maybe around 90% has been factored into FY ’23. So it will not be a material impact on the FY ’24 numbers.

Mitul Shah — Reliance Securities — Analyst

Sir, would you like to quantify any number in terms of the cost efficiency benefit from this new system in FY ’24 or maybe in ’25?

Nihar Chheda — Vice President – Strategy

The benefit from the system?

Mitul Shah — Reliance Securities — Analyst

Yeah.

Nihar Chheda — Vice President – Strategy

So…

Mitul Shah — Reliance Securities — Analyst

With this new system, there would be certainly some cost efficiency, some efficiency.

Anand Gupta — Deputy Chief Financial Officer

Yeah. Efficiency will be in terms of integrating the whole value chain in the organization starting from the procurement to supply chain. The integration will give us the visibility of production planning, of demand planning, and inventory management. These are the areas we are focusing on this. And for the long term, these capabilities need to be built in the organization’s efficiency.

Mitul Shah — Reliance Securities — Analyst

Sir, second question on EBITDA margin. Adjusted for this inventory gain of INR25 crore, our EBITDA margin stands at 16.1%. So what do you think is a sustainable EBITDA margin going forward? Would that be such 16% plus is sustainable or long term could be somewhere around close to 15%?

Nihar Chheda — Vice President – Strategy

So I think we’ve always been conservative with EBITDA margin guidances. So we stick to 13%, 14%, 15% sort of guidances, while fully knowing that there are enough and more levers for improving this. And we are constantly putting in efforts towards improving pricing power, improving product mix, decentralizing the manufacturing footprint, as well as operating leverage [Phonetic] benefits. So I think these three or four levers have helped us sustainably improve operating margin. And while we guide conservatively, we still have aspirations to grow this. But from a long term guidance, I think 13% to 15% is what I would stick to.

Mitul Shah — Reliance Securities — Analyst

Sir, lastly on the — how is the raw material inventory right now at our plants because as prices are coming down, there might be some inventory loss if prices will go further down. So how is the raw material inventory level?

Nihar Chheda — Vice President – Strategy

So I think our overall inventory is around 60 days. So typically it is — inventory would be around 35 days to 40 days, raw material, and another maybe 25 days to 30 days of finished goods. But I don’t see a material inventory loss sitting today. So of course, it’s early days. We have to see how it plays out. But long term, I think any inventory gain or loss would even out over four quarters.

So I don’t think we are going to see any kind of major volatility that we saw in the past two years, both upward and downward. So even if there is any inventory gain or loss in a certain quarter, I think across the span of four quarters, it should even out, which was actually the case in our industry before pandemic. There would be inventory gain or loss in certain quarters, but in the 12 months, it would even out.

So I think we are back to that kind of a stable pricing regime. And I think India is in a sweet spot because India demand is strong, while global demand is weak, which means that in PVC, we don’t see a very strong upside, but neither do we see a very strong downside because of local demand being strong. So that’s our view.

Operator

Thank you. Mr. Shah, we request that you return to the question queue for follow-up questions. Next is Rajesh Ravi from HDFC Securities. Please go ahead.

Rajesh Ravi — HDFC Securities — Analyst

Hi, sir. Good morning and congrats on good set of performance, healthy recovery. Coming to the inventory side itself, you mentioned that sustainably 13% to 15% EBITDA margins. Sir, could you share for full year, what was the inventory loss we booked at company level in FY ’23 and what was this number gain, in FY ’22, please?

Nihar Chheda — Vice President – Strategy

So in FY ’23, for the nine months, Q1 to Q3, inventory loss was in the range of INR150 crores, and for quarter four, inventory gain was around INR25 crores. Full year would be around INR120 crores, INR125 crores loss, inventory loss for FY ’23.

Rajesh Ravi — HDFC Securities — Analyst

Sorry, because first six months, if I recollect, you had mentioned around INR85 crore of loss and INR25 crore in Q3, and we have set off again in Q4, INR25 crore. So INR80 crore, INR85 crore?

Nihar Chheda — Vice President – Strategy

So inventory loss for the 12 months is around INR125 crores. So we were in the range of INR150 crore for the first nine months and around INR25 crores of gain in the fourth quarter.

Rajesh Ravi — HDFC Securities — Analyst

Okay. And sir, for last year, what was the similar number, gain?

Nihar Chheda — Vice President – Strategy

This is for FY ’23.

Rajesh Ravi — HDFC Securities — Analyst

No, no. FY ’22, the corresponding inventory gain, how much was that booked into the numbers?

Nihar Chheda — Vice President – Strategy

I actually would not have that handy. I will request you to maybe go through the con call transcript. Else, we can connect offline. But I don’t have the FY ’22 exact number.

Rajesh Ravi — HDFC Securities — Analyst

Sure. And sir, the CPVC prices, which we understand is cooling off recently because of the cool-off in PVC prices, but we understand that the fall is gradual compared to PVC. So in your case, with Lubrizol, do you also need to have any inventory losses required or it is like on a cost basis, you need not do any inventory cost adjustments over there?

Nihar Chheda — Vice President – Strategy

No, there is no sort of — see, firstly, for CPVC, we don’t carry much inventory, just-in-time inventory because we get the material from Lubrizol facility in Dahej. So there is no — we work on just-in-time inventory. So even if there is any inventory loss, it’s not very significant. And the pass-through for CPVC is not as immediate in PVC both in terms of upward and downward. So I don’t really see it as an inventory gain or a loss, but PVC prices have cooled off across the industry. And we don’t see major cool-off going forward because of the duty structure, but there has been a reduction in CPVC prices across the industry.

Rajesh Ravi — HDFC Securities — Analyst

Okay. And this PVC, you mentioned you are buying domestically, you have long-term contracts with Chemplast and Reliance. So broadly, how much would be your import mix in the — your resins purchase, raw material purchase?

Nihar Chheda — Vice President – Strategy

So it tends to be slightly dynamic based on the procurement strategy, but roughly around 40% of PVC — 40% to 45% is local for PVC pipe and balance is import.

Rajesh Ravi — HDFC Securities — Analyst

Balance is import. Okay. And sir, with these big facilities coming up in the CPVC side, DCW doubling its capacity, even [Indecipherable] more than doubling its capacity. How would that change the CPVC market for you?

Nihar Chheda — Vice President – Strategy

Our plant in East — I’m sorry, I am not able to hear you.

Rajesh Ravi — HDFC Securities — Analyst

No, no, no. What I am saying that the CPVC market with two big players — resin suppliers adding significant domestic capacities in India, how will that shape up the CPVC market? And even Lubrizol had some plans to set up another factory in India.

Nihar Chheda — Vice President – Strategy

Yeah. I think this is very good news for the Indian CPVC industry. With local manufacturing coming in, CPVC is bound to become more and more affordable, and which will improve the penetration of CPVC. So with these two new local players coming in, I think one is — before coming to pricing, I think one good part is availability will improve. So overall industry will grow.

And now with Lubrizol also putting up their local manufacturing in Dahej with Grasim, I think that’s going to help us not only in terms of affordability, but also sufficient growth — supply security for growth. So I think this overall bodes well. I think we are — the Indian CPVC pipe industry was yearning for such kind of local raw material availability, which I think should do well. We are seeing the kind of important affordability of a polymer has now that PVC prices have cooled-off, we are seeing the kind of growth that the polymer can actually have. So I think something similar coming in — in CPVC will only help industry grow and will only help the top three or four players like ourselves to lead that growth.

Operator

Thank you. Mr. Ravi, we request that you return to the question queue for follow-up questions. Next question comes from the line of Abhishek Ghosh from DSP Mutual Funds. Please go ahead.

Abhishek Ghosh — DSP Mutual Funds — Analyst

Yeah. Hi, sir. Thanks. Thank you so much for the opportunity. Just few questions. If you look at the margin for the fourth quarter of FY ’23, even if one was to adjust for the inventory gains, the margin trajectory seems to be still much higher than what your long-term guidance is. So how should one look at it? Is it led by product mix or is it a fourth quarter phenomenon? How should one look at it? If you can articulate over the next couple of years, how should one look at the annual margin profile?

Nihar Chheda — Vice President – Strategy

Sure. So Abhishek, firstly, across product mix and pricing power have been key to the profitability for us, not only over the past year, but if you see the past four years or five years, the way our margin has structurally improved from maybe a 9% to 10% to now where we are in the 13% to 15%, and in some quarters, above 15%.

So structurally this has been driven by the four levers that we look at internally, one is product mix; second is pricing power; third is de-centralizing manufacturing footprint through Jaipur, Telangana, and now the Bihar facility; and the fourth is operating leverage. So I think these four will continue to be the drivers for profitability going forward.

As you are aware, we’ve always been conservative with guidances. So I would like to stick to being conservative on margin guidances, but we are still hungry and aspirational for better margin profile over the long term. It cannot be achieved overnight, but we are fully clear in terms of the levers that are available to us, which have worked for us in the past and which we are working for in the present and the future.

Abhishek Ghosh — DSP Mutual Funds — Analyst

Okay. Thank you. Just in terms of agricultural and infra demand and also housing, so agri, would it be back to pre-crisis demand, as far as the season is concerned for the industry?

Nihar Chheda — Vice President – Strategy

So it’s tough for me to exactly sort of quantify, but yeah, I think we are seeing a very strong demand in agriculture, and that was bound to happen because affordability is back and the base for agri has been low over the past two years. So maybe at the end of the quarter, I would be able to quantify, whether we are back at pre-pandemic levels, but all sentiments and all signals point towards very strong agri demand.

Abhishek Ghosh — DSP Mutual Funds — Analyst

And overall for the industry, the infra demand that you all have spoken about, is it more driven by HDPE pipes or PVC pipes are also going into that?

Nihar Chheda — Vice President – Strategy

It’s a combination of both, HDPE — majorly HDPE as well as PVC.

Abhishek Ghosh — DSP Mutual Funds — Analyst

And would it be fair to assume that infra today as an overall piece for the industry would be more like 10% to 15%, which would be single digit three years back? I’m just trying to understand that what is the proportion of infrastructure demand that is helping the overall industry to grow.

Nihar Chheda — Vice President – Strategy

Yeah. I think of course infrastructure as a — so there is no sort of official data on this, but in terms of our guesstimate as an industry player and interacting with other stakeholders, demand from infra has only gone up because of the government’s focus towards not only providing piped water access, but also the Swachh Bharat Mission and — which has helped the DWC demand. So we see this only growing from here. So I think around 10%, 12% of total industry is a fair estimate, which was much lower three years from today. And I think this will be much higher three years going forward.

Abhishek Ghosh — DSP Mutual Funds — Analyst

And just one last question. You’ve launched a few new products in the last two years to three years. Do you track in terms of what has been the volume or the revenue contribution from these newer products? How have they been tracking vis-a-vis your expectation? Any update on that would be helpful?

Nihar Chheda — Vice President – Strategy

Sure. So I think we’ve — the kind of products that we’ve launched are into — so one, of course, we do track the performance, but some products like maybe water tanks and HDPE, which are slightly more commoditized, of course, it’s a number game and we have to deliver numbers. And like I said in water tanks, we will be targeting a doubling of revenue in FY ’24. And similarly in HDPE, we are looking at growth, but base is very small.

But there are products like low noise PP pipes and surface drainage channels, which is more of a concept selling, and more than numbers or volumes, we have to — as we are trying to position [Technical Issues] as the innovation leader, we have to first do the concept selling with builders, with engineers and architects across the country of having the acceptance of these kind of products because here we are not competing with other pipe players, but we are competing with conventionally used products like cement pipes or cast iron pipes or RCC drainage channels. So a lot of concept selling has to be done.

I think we did a similar exercise maybe in 2017-’18 when we launched DWC, and we were replacing cement pipes with corrugated pipes. And the market in India, we have always been late with our adoption cycle and it’s more of a concept selling, where we have to explain the product life cycle benefits, the installation cost benefits that the end user has. So these kind of products take some time. We have to be patient. But over four years, five years, then this gives a disproportionate return, not only in terms of numbers, but also the brand image that we are able to build in our value chain.

Abhishek Ghosh — DSP Mutual Funds — Analyst

Thanks. Sir, just one — just one question, one last one from my side is, your 1Q FY ’24 will get impacted because of the implementation and — ERP implementation and hence you’ll have — that will have a bearing, as far as the growth is concerned in FY ’24. But on a two year basis, in FY ’25, do you believe that you can clock a 15% to 20% CAGR volume growth? Is that something that you see because of the various initiatives that you’ve taken?

Nihar Chheda — Vice President – Strategy

Yes. So looking at the kind of demand environment that we’re seeing today and the capacity expansion that we are planning, I think this sort of growth is definitely possible. The kind of revival that we are seeing in real estate and with affordability back in PVC, we are optimistic about growth going forward.

Abhishek Ghosh — DSP Mutual Funds — Analyst

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

Nihar Chheda — Vice President – Strategy

Thank you, Abhishek.

Operator

Thank you. Next question comes from the line of Udit Gajiwala from YES Securities. Please go ahead.

Udit Gajiwala — YES Securities — Analyst

Yeah. Thank you for taking up my questions, sir. Most of them have been answered. Sir, just last one, we are seeing a lot of players going for a capex into the Eastern belt. So is it that the demand we are going to take from the unorganized segment over there or what is that structurally that is changing on that front?

Nihar Chheda — Vice President – Strategy

So East, for us, while we are only now putting up in-house capacity, we have put up outsourced capacity in the year of 2014 in Bihar, and then a couple of years ago in Jharkhand. So we have already seeded the market, and we have the early-mover advantage in East India. And we have seen a very strong demand over the past three years to four years in terms of volumes in East India. So now we feel it’s the right time to put up in-house capacity because we want to do range [Phonetic] selling of plumbing pipes and water tanks and underground drainage pipes. So I think now the market is right for us to be able to cross-sell this, the rest of our portfolio, while growing the PVC pipes in East.

And we are — East typically has seen a delayed urbanization cycle relative to West and South, which is why now we are seeing maybe a better growth in East India because that market has been under-developed relative to the rest of the country. So yeah, which — this is why we feel it’s the right time to enter into East.

Udit Gajiwala — YES Securities — Analyst

Understood. Understood. And lastly, on Bathware, would you want to give some revenue targets for, say, ’24-’25 for this segment?

Nihar Chheda — Vice President – Strategy

No, we’ll stick away from revenue targets. I think focus has to be on product range, branding, and more importantly, setting up a distribution network. We do have internal targets, but I don’t want to play the number game. I think I want to focus on brand and distribution and the results will be there for everyone to see.

Udit Gajiwala — YES Securities — Analyst

Understood. Understood. All the best. Thank you.

Nihar Chheda — Vice President – Strategy

Thank you.

Operator

Thank you. Next question comes from the line of Shrenik Surendra Bachhawat from LIC Mutual Funds. Please go ahead.

Shrenik Surendra Bachhawat — LIC Mutual Funds — Analyst

Hi, thanks for the opportunity. Most of my questions are answered. Just one question. So in this earning season, we saw the other pipe players delivering healthy double digit volume growth, while ours was minus 2%. So can you just explain us why is there a huge gap in other players’ and our volume growth?

Nihar Chheda — Vice President – Strategy

So I think, see, Shrenik, there is — a few quarters of plus or minus volume growth does not really concern us. We have to see the long term. There has been periods, multiple quarters, where we have industry-leading growth. So I think these things tend to happen in the marketplace. So we are not taking it lightly. We have to see the balance of pricing power, as well as operating leverage, and there has been some course corrections that we’ve done in the month of April. However, this is not something, which is very concerning.

I think from — we have seen very strong demand from this quarter itself, and unfortunately, because of the ERP migration, it will not be visible in the primary numbers, but from the second quarter of this financial year, I think we will be back — I’m confident that we’ll be back on a strong growth track.

Shrenik Surendra Bachhawat — LIC Mutual Funds — Analyst

Thank you very much.

Operator

Thank you. Next question comes from the line of Achal Lohade from JM Financials. Please go ahead.

Achal Lohade — JM Financials — Analyst

Yeah. Good morning. Thank you for the opportunity. Couple of questions. One is, with respect to CPVC, is it possible to get some sense about the market share, what we would have had in FY ’23?

Nihar Chheda — Vice President – Strategy

So I believe we are around 10% of the market. And in terms of contribution, it is around 20% to 25% of our overall portfolio.

Achal Lohade — JM Financials — Analyst

This is in volume term or value term?

Nihar Chheda — Vice President – Strategy

I think — so this, I am saying in value term, but I think should be fairly similar in volume terms as well.

Achal Lohade — JM Financials — Analyst

Understood.

Nihar Chheda — Vice President – Strategy

In terms of market share.

Achal Lohade — JM Financials — Analyst

Right. And with respect to PVC, can you help us understand what would be the market share in PVC segment for us?

Nihar Chheda — Vice President – Strategy

I think overall if you see, I think all polymers put together, we would be at maybe a 6.5% to 7.5% market share, and CPVC specifically, we would be at around 10%. PVC standalone, maybe we can connect offline. I don’t have an off-hand number.

Achal Lohade — JM Financials — Analyst

Understood. Secondly, with respect to the capacity, if you could help us understand the March ’23 specific number, what is the rated capacity, installed capacity? And how would that be by March ’25? Why I’m asking, because you have talked about the East expansion, but I presume, there would be a brownfield expansion at the existing facilities as well. So can you give us some sense with respect to the capacity in March ’23 and March ’25? And I presume the capex, what Anand mentioned, is INR150 crores each FY ’24 and ’25; half of that for East and half for maintenance, if I’ve got the understanding, right.

Nihar Chheda — Vice President – Strategy

Yeah. So that is for FY ’24, the capex guidance. Today — to answer your capacity point, today we are at 315,000, East will be 35,000. So that put together plus the brownfield that would happen across plants, that I’ll not be able to quantify what will be in FY ’25. But to give you answer, FY ’25, we should be at 315,000 plus 35,000 of East, plus whatever minor brownfield we do at our existing facilities.

Achal Lohade — JM Financials — Analyst

Understood. Another question I had with respect to the channel financing, as to what has been the quantum of channel financing, as of March ’22 and March ’23, and how do you see this evolving over next couple of years?

Anand Gupta — Deputy Chief Financial Officer

So Achal, it has been evolving very well for the organization. So more than 100 customers onboarded already in this program, and sanction limit to our channel partners is in excess of INR100 crores right now. And we are taking this as a lever of controlling our receivables. This is one of the primary things, which we are focusing, in the areas, where we are not very strong in channel financing and the distributor, where the white space is there, we are filtering it out, and we are focusing on de-expanding the channel from — channel finance limits to our existing distributors. So in terms of outstanding, it — we are utilizing around 65% to 68% of the sanction limit. So that is how the position is right now.

Achal Lohade — JM Financials — Analyst

How much would that be, Anand, in March ’22?

Anand Gupta — Deputy Chief Financial Officer

It was around INR40 crores to INR45 crores in March ’22, and it is around — it was around INR45 crores to INR50 crores. I do not have the number handy, but it was in that range only. And it’s around 65% to 68% of the sanction limit to the distributors is the current outstanding right now.

Achal Lohade — JM Financials — Analyst

Got it. That’s very helpful. Thank you so much. Wish you all the best.

Anand Gupta — Deputy Chief Financial Officer

Yeah. Thank you.

Operator

Thank you. Ladies and gentlemen, that was our last question for today. We have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Nihar Chheda — Vice President – Strategy

Yeah. Thank you all for joining us today. Thank you, Manish.

Operator

[Operator Closing Remarks]