Shankara Building Products Ltd (NSE: SHANKARA) Q3 2025 Earnings Call dated Feb. 04, 2025
Corporate Participants:
Dhananjay Mirlay Srinivas — Director
Sukumar Srinivas — Executive Director
Analysts:
Sayam Pokharna — Analyst
Viraj Mehta — Analyst
Rahul Dhruv — Analyst
Love Gupta — Analyst
Deepak Poddar — Analyst
Unidentified Participant
Keshav Garg — Analyst
Ketan Chheda — Individual Investor
Ralit — Individual Investor
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Shankara Building Limited Q3 and Nine Months FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing start and zero on a touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Sayam Pokharna from TIL Advisors. Thank you, and over to you, sir.
Sayam Pokharna — Analyst
Thank you, Rutuja. Good morning, everyone, and thank you for joining us in this Q3 and Nine-Month FY ’25 earnings conference call of Shankara Building Products Limited. The investor presentation has already been uploaded on the stock exchange and on the company website. If you wish to be added to our mailing list, please feel free-to write to us.
To take us through today’s results, we have with us from the management team, Mr. Sukumar Srinivas, Managing Director; Mr, Sri Ravikumar, Director; Mr Dhananjay Srinivas, Vice-President; and Mr Alex, Chief Financial Officer. We will begin with a brief overview of the quarter and the nine-month performance from Mr Dhananjay, followed by a Q&A session. Please note that any forward-looking statement made during this call should be considered in conjunction with the risks and uncertainties that we face.
With that, I, I would now like to hand over the call to Mr Gananjay. Over to you, sir.
Dhananjay Mirlay Srinivas — Director
Thank you thank you, Sayam. Good morning, dear investors. Welcome to the Q3 and nine months FY ’25 earnings call of Shankara Building Products Limited. We sincerely appreciate your presence today as we delve into our performance during this period. I would like to provide you with a comprehensive overview of our achievements, challenges and strategic initiatives. Let me begin by highlighting some key aspects of our performance for Q3 FY ’25. We achieved a significant milestone in our steel segment, recording our highest-ever quarterly sales volume of 2.15 lakh tonnes. This represents a 37% year-on-year growth, showcasing our strong market position and operational efficiency. For the nine-month FY ’25 period, we maintained this robust momentum with a 27% volume growth, reaching a cumulative of 5.84 lakh tonnes year-to-date.
This performance was driven by substantial growth in all our verticals in South India, complemented by encouraging traction in West and Central India. However, as many of you are aware, the steel industry has been navigating through a challenging period characterized by depressed realizations. We experienced a blended 6% decrease in realizations in Q2, followed by a further 3% reduction in Q3, resulting in an approximate total decline of approximately 10% in steel prices year-to-year — year-to-date. This reduction has impacted our performance in two significant ways.
It has limited our top-line growth, which could have been higher by another 8% to 10% and it has compressed our margins due to inventory losses. The impact of these inventory losses was evident in our Q3 EBITDA margins, mirroring the effect we saw in Q2. So-far in Nine-Month FY ’25, we have observed an adverse impact of approximately INR22 crores on account of inventory losses. Despite our best efforts to operate efficiently in the face of such headwinds, our EBITDA margins for the quarter stood at 2.84%, lower compared to 3.42% in Q3 FY ’24 and relatively flat compared to Q2 of FY ’25.
It is important to contextualize our performance within the broader macro-environment, which is in particular challenging this financial year due to multiple factors. We witnessed a slowdown in government spending across infrastructure-related projects following the initial election-related disturbance in Q1. This impacted both our steel and non-steel marketplace business. This was further compounded by factors such as heavy monsoon, steel prices and a general weakness in retail demand. Despite these challenges, I want to assure you that our primary focus remains on scaling volumes. We are fully geared to meet our annual target of 0.8 million tonnes for FY ’25 and are setting our sides for 1 million tonnes in FY ’26. This ambitious — this ambition underscores our confidence in our operational capabilities and market positioning.
On a more positive note, I’m pleased to report that our non-steel product segment is performing well. This quarter, we achieved record sales of INR154 crores in this segment, reflecting a 19% year-on-year growth in Q3, an even higher 29% growth in nine months FY ’25. The product segment is now creating critical mass and has exceeded 10% of our top-line for the first time in the nine months of FY ’25, marking a notable milestone in our diversification strategy. Within the segment, our key categories such as plumbing, fitting, and tiles are all performing strongly. Additionally, we are seeing encouraging growth in electricals and paints, a bit a lower base. The response to our own brand has been particularly gratifying and we have expanded its product range to include quad sinks and adiesels beyond the initial offering of plans. We have started expanding the footprint of after the initial launch in Kerala.
We — and we have a limited presence in Bangalore. To further enhance our volume proposition as a one-stop solution for all building material needs, we have been consistently expanding our supplier partnerships. We are now working with a majority of leading brands across all product categories, ensuring that we can meet the diverse needs of our customers. Geographically, we continue to perform strongly, not only in our established stronghold of South India, but also in new markets in West and Central India. As you may recall, we adopted a non-retail first approach in these markets — new markets with plans to expand into retail subsequently. I’m pleased to report that the growth from these new markets has been impressive with Maharashtra emerging as a significant win for Shankara beyond our traditional southern states.
Moreover, we are seeing encouraging growth beyond our traditional tubes and pipes dominated product segments, particularly in lower categories such as flats. We have grown about 37% year-on-year in Nine-Month FY ’25 in flags. Our strategy is clearly focused on being omnichannel with all efforts towards achieving higher volume-atic growth. We aim to avoid constraints associated with any particular vertical and are pursuing our growth across all fronts. Our intensive market presence through 126 operational fulfillment center, including our stores ensures we are available and accessible in our chosen markets, getting to all categories of customers regardless of size. This comprehensive approach is what catch apart in today’s competitive landscape, where scale has become the new for success in the building materials marketplace and distribution industry.
On the financial management front, we have maintained tight control of working capital, allowing us to moderate financial costs while still delivering revenue growth. Over the last two quarters, the conscious effort of our team have led to reduction in financial costs. We continue to optimize our working capital. Mentioned. Lastly, I want to update you on the progress of our demerger. We have scheduled a shareholder Extraordinary General Meeting EGM on February 12 to vote on the demerger proposals. Subject to the results of this meeting and subsequent regulatory processes, we anticipate completing the entire demerger process by H1 FY ’26.
In conclusion, while we navigate through challenges in the current market environment, our diversification strategy focused on volume growth and expansion into new markets and product categories position us well for sustainable long-term growth. We remain committed to creating value for our shareholders and look-forward to your continued support. Thank you for your attention, and we are now ready to open the floor for any questions you may have ask.
Questions and Answers:
Operator
Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press Tar and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants who wishes to ask a question may press star and one now. The first question is from the line of Viraj Mehta from Enigma. Please go-ahead.
Viraj Mehta
Yeah, hi, sir. Thanks a lot for initial remarks. Sir, my first question is regarding the slowdown in the sales growth of the non-steel business. On a such a low-base, we have growth — we have grown less than 20% this quarter and which is an aberration for us. So how should an investor think about that piece? Because in the past, you have always grown multifolds of that in terms of percentage terms. So what is it? Like is the base catching-up? How do you think about that?
Sukumar Srinivas
I don’t think it’s a base that is catching-up. What has happened, the overall environment has been pretty subdued. So I think if you see our competition in the industry or the fellow competitors in this industry are a single-digit kind of numbers in terms of growth. I think relative to that, our performance has been pretty good. We have achieved a 20% plus in this quarter two. So I would still say that there is no such impact. I think it’s a general environment issues that have led to a slight slowdown in-quarter three. I think we will catch-up on that in the coming quarter.
Viraj Mehta
Right, right, sir. And my second question is a broader question on steel. So you talked that you have had INR22 crore of inventory loss in this year and because the steel prices obviously have fallen. But sir, if I look at the historicals of our company, whenever steel prices go up, we don’t seem to get the inventory gains part. So how does the channel work? Like when there are inventory gains, we just don’t get it, like how does that piece work? Can you explain please?
Sukumar Srinivas
I wouldn’t say that is really true. I mean, whenever there is a significant increase in the price of steel, there is a gain too. And so I won’t just say that it’s — I mean it’s a sort of a zero-sum game when it goes up and we face all the — I mean, take only the downside, I think it sort of balances out in a period of time. So I think it plays out both ways.
Viraj Mehta
So assuming, let’s say, next year, we see INR5,000 increase in steel prices on an average. Would it be fair to say that at least some part of it we will get as inventory gains next year if I’m saying if all again.
Sukumar Srinivas
Yes, whatever the inventory you have at the start of the period whenever these gains happen, see very small increase in prices do not have too much of an impact on the inventory gain because the market is still competitive. Though the price — whatever is sitting on inventory, yes, we will gain some of the gains, I mean whatever happens in terms of the inventory the price increases.
Viraj Mehta
All right. And sir, my last question is on debt reduction. Our interest cost still continues to remain reasonably high at almost INR12 crores, INR13 crores a quarter. What are our debt levels today and how do you plan to decrease it over next year or so or with higher-growth at least if the debt remains constant, like what are your — what is your thinking around that part, please?
Sukumar Srinivas
We are level — I mean, our first thought is that if we can hold the debt constant with an increase in the volumes, that is what we are really striving very hard. Even if you see between Q2 and Q3, the overall interest levels have remained more or less static despite the volumes having gone up significantly. So we are very working very hard to hold this as our current — as the current strategy, let’s say. The focus is on that.
Viraj Mehta
Thank you so much, sir, and best of luck.
Sukumar Srinivas
Thank you, Viraj.
Operator
Thank you. The next question is from the line of Rahul Dhruv from Pegasus Growth. Please go-ahead.
Rahul Dhruv
Yeah, hi, good morning. Sir, I wanted to talk about the credit discounting number. I mean, what — I think we’ve been discussing that number for the last two quarters. There was a slight reduction last quarter. Can you talk about what is the figure as of this quarter and what do you see going-forward?
Dhananjay Mirlay Srinivas
For credits for acceptance is around INR400 crores. So comparing with the last quarter around INR460 crore, we have reduced around INR60 crores, we have reduced in this quarter.
Rahul Dhruv
So that basically means that this has now become a permanent part of our funding structure. Should I assume that because that basically means that we will also be retaining a high-interest cost going-forward.
Sukumar Srinivas
See, one of the key strategies we are working to reduce the interest cost is we are trying to take-out a lot of our we are looking at it outside the channel financing or a debt financing strategy, which we have started working from the last quarter itself. So once that really gains traction, we will be able to further reduce the interest cost from the debt side on our debtor side.
Rahul Dhruv
So I’m just trying to understand structurally last year compared to last year to this year, that number has kind of gone up.
Sukumar Srinivas
Yes, yes, yes, yes. But of course, the attempt is very sincerely on to try and reduce it despite the growth.
Rahul Dhruv
Okay. So the reason why I’m saying this is that, I mean, any distribution model typically has systems in-place to make sure that there are no inventory losses because you’re purely buying and selling, right? I mean, you want to make sure that the inventory losses are practically nothing, but you’ve had INR22 crores of loss over there and I don’t know whether it’s actually at the operating level or after interest, but typically, there has to be a system because I’m trying to say, looking at it from the investors perspective, you’re building a beautiful distribution business on the building materials side, but a big part of your revenue, which is around whatever, 89% 90% right now is steel and that’s where you’re every two or three years you have this big thing and I remember you know, tracking the stock long-time back as well. I think there was one March ‘2 quarter in I think in March ’23, I think it was where there was a huge loss. So I’m just saying that what we are having is a major variation in the steel business and there has to be a way of if you are a pure retailer or a distributor to make sure that there are no such major variations, right?
Sukumar Srinivas
Yes, I mean to sir, yes, partially you are right. I mean there is I mean we are subject to the you know the steel prices going up-and-down. So that is an area where we do not have much cover that we can take.
Rahul Dhruv
Yeah, I mean, I’m probably trying to reiterate the same thing over here. I’m saying that if you basically, you know, the same way that you have taken a conscious decision of not going for increase in the network and you’re still at 90%.
Sukumar Srinivas
What really will help us as we diversify more-and-more into the non-steel, this whole — I mean this steel fluctuation, price fluctuations will get mitigated. To a certain extent, it will certainly — today the non-steel is about 10%, but our target in the next five years is to take it up to 20% 25%. I think as the share increases, we will be able to mitigate some of the of the steel prices.
Rahul Dhruv
Okay. Okay. So should we expect these kind of variations to come through again in the future as well.
Sukumar Srinivas
It’s very difficult to predict and we still driving that what’s really typically likely to happen. But I think broadly, we have seen some last quarter was certainly better compared to Q2. I am hoping that this quarter will more or less stabilize, right? As of now, there is some talk of some increases from JMW, et-cetera for this month and it all depends on this global steel cycle, etc. However, I would say that it’s more or less plateauing out now as far as the steel pricing goes on the bottom side.
Rahul Dhruv
So that means the creditor discounting will effectively move away from next year. That’s what you expect?
Sukumar Srinivas
Yes.
Rahul Dhruv
Okay. Just one last thing, sir, and this is on your — on your quarterly presentation, I — we’ve been tracking the historic numbers and the variables that you’ve been giving out and they keep kind of changing over a period of time, not in terms of the numbers, but in terms of what you give out. Till sometime back, you used to have a EBITDA number for steel, non-steel, retail, non-retail, all of that used to be given out. Now suddenly for the last two quarters, we don’t have those. I think we had a similar period between September ’20 and March ’22 also where a lot of those numbers were not given out. So I’m just trying to say if there could be some consistency into what you give so that people can track it properly.
Sukumar Srinivas
Sure. Your point is well noted.
Rahul Dhruv
So would you be giving out the steel and non-steel margins for the last two quarters?
Sukumar Srinivas
I mean, we will work it out with the — I mean with our IR and we’ll definitely do that from the future.
Rahul Dhruv
Okay. Thank you very much.
Sukumar Srinivas
Welcome.
Operator
Thank you. The next question is from the line of Love Gupta from Counter Cyclical Investments. Please go-ahead.
Love Gupta
Hi, thank you for the opportunity. So last quarter, you mentioned that you would be approaching about INR50 crore EBITDA at like 3%, 3.5% margin. So what were the particular reasons that you fell short and by when can we see you achieving such numbers?
Sukumar Srinivas
I think last quarter, if I just add that, you know the inventory hit, I think we have achieved a 3.5% EBITDA. Even for the whole year, if you look at the nine months, we’ve almost lost close to INR22 crores by way of the inventory hits. I think if that had not happened, I think we are very much on-track with a 3.5% EBITDA, up higher than the three that we have normally guided. So I think, I mean, we keep our fingers crossed certainly, but the company is working towards the same. And if this quarter is a fairly steady period, we are fairly confident we’ll be back-in the 3 plus kind of EBITDA this quarter itself.
Love Gupta
Okay. And also what were the inventory losses for this quarter in particular?
Sukumar Srinivas
The last quarter?
Love Gupta
Yeah, Q3.
Sukumar Srinivas
Last quarter was about INR10 crores.
Love Gupta
Okay. All right. Thank you.
Operator
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go-ahead.
Deepak Poddar
Yeah, am I audible, sir?
Sukumar Srinivas
Very much.
Deepak Poddar
Yeah, yeah. Thank you very much for the opportunity. Sir, just first up on the interest cost. I mean you mentioned we want to keep the debt level constant, right? So ideally, the interest cost that we are seeing right now that will remain stable going-forward?
Sukumar Srinivas
It should be fairly stable.
Deepak Poddar
It should be fairly stable, right? Okay, okay. Understood. And on the EBITDA margin on the retail front, I mean, currently we are at about maybe what 5%, 5.5% kind of a EBITDA margin in retail, right? So what sort of aspiration we see that in retail business over next maybe what one to two years?
Sukumar Srinivas
In a couple of years, definitely, we would like that to go by at least one percentage point.
Deepak Poddar
In two years, we are expecting at least 1% improvement, right?
Sukumar Srinivas
Yes. Yes.
Deepak Poddar
And what will drive that? Will that be as a mix of…
Sukumar Srinivas
It’s purely from the mix of products in the non-steel that gains more rejection.
Deepak Poddar
Okay. So can you also suggest what was the — I mean steel versus non-steel margins in this quarter on in the nine months?
Sukumar Srinivas
I think — yeah, I’ll just give it to you. Quick just give me.
Deepak Poddar
Yeah.
Dhananjay Mirlay Srinivas
Actually, yeah. The steel EBITDA margin was coming approximately around — hello, is it audible? Yes, yes, please. Yeah, steel EBITDA margin was coming around a 2 percentage, whereas non-steel was around 4.5 percentage.
Deepak Poddar
Okay. 4.5 percentage. Okay. Non-steel is 4.5% and steel is 2 percentage.
Dhananjay Mirlay Srinivas
Yes, 12.5% — sorry, steel was around 2.5% and non-steel was around 5.5%.
Deepak Poddar
5.5%. And you mentioned that we want to increase the share of non-steel from 10% to 25%. So in how many years we are targeting that?
Sukumar Srinivas
We are targeting that in the next four years, four to five years.
Deepak Poddar
In four to five years. Okay. Understood. And then what sort of retail growth we are expecting? I mean if we have to see next two years?
Sukumar Srinivas
Sorry?
Deepak Poddar
The retail segment growth.
Sukumar Srinivas
See, we are now more or less talking about a marketplace kind of a model. If you see our presentation for the last couple of years. So we are taking the stores, so we are coming out-of-the classification what we had earlier done on channel, enterprise and retail. So we are now calling it all as a marketplace apportion. Definitely in this, there is a focus today, our retail is around 50% to 53% of the total sales. So we would like to sustain that going-forward.
Deepak Poddar
No, we would like to sustain this mix. I mean, in retail versus not.
Sukumar Srinivas
Yes, yes, yes.
Deepak Poddar
But what sort of growth we are looking at? I mean if you have to see next two years CAGR, what sort of growth we are looking at in the retail — retail segment?
Sukumar Srinivas
The same percentage will be what will reflect the total numbers.
Deepak Poddar
Okay. I mean just…
Sukumar Srinivas
Once the demerger is done, another thing is the numbers will come out because there will be two separate entities where the numbers will also maybe come out very much more clearly.
Deepak Poddar
Okay, okay. And sir, any range we can put to it? I mean, 15% 20% or 20%, 25% kind of growth we are targeting in this segment.
Sukumar Srinivas
Yes, if we are looking at an overall top-line growth of around 20-odd percent, 20%. So you will see the same reflection happening in the retail part of it also.
Deepak Poddar
Okay, okay. So overall, we are looking at 20% kind of a growth, right, on the revenue side, not on the volumes we have already given.
Sukumar Srinivas
So this is revenues what we are talking about, yes.
Deepak Poddar
Okay. Okay, fair enough. I think that would be from my side and all the way back to you. Thank you so much.
Sukumar Srinivas
Thank you.
Operator
Thank you. Participants who wishes to ask question may press star and one now. The next question is from the line of Manishal from Ventures. Please go-ahead.
Unidentified Participant
Hello, sir. Sir, just wanted to understand the competitive intensity of the landscape of yours as well as other B2B companies and brick-and-mortar store business model. So sir, since there are many competitors who have entered in this space through the supply-chain management business model who are basically consolidating the supply-chain. We’re basically consolidating the demand and then distributing the same amongst the smaller players and they have scaled-up like anything and those are profitable as well. They have little-to-no investment, no PP, no investment in inventory. So just wanted to understand how do you — how do you think that will still have the edge in this competitive environment in our B2B segment?
Sukumar Srinivas
See, I think one of the key things some of the newer players who have come into this line have — even if they have not kept sufficient inventories, they have been very liberal with their kind of credit period that they are offering. So many of them who are doing about, let’s say, IN 10,000 to INR15,000 crores of top-line, they are looking at almost one-third, INR3,000 crores INR4,000 crores kind of debtor level. So I think that is one area we have not really been that liberal in terms of you know, giving it out. So this is something that is differentiating us from some of the new players. They have gained traction, no doubt. But we also see that there is some — of course, many of them are lining up for IPOs and so on in the near-future. So we’ll have to see what is the further — I mean, how they move their businesses prior to an IPO. But to some extent, we feel that this competitive intensity has slightly come down in this last couple of months.
Unidentified Participant
Okay. Okay. Sir, but do you think that those — those companies have had some effect on our business as well because at the end-of-the day, their gain is somebody else’s loss, right? So they have scaled-up like anything and we have — we have been struggling in terms of a bit of that type of growth. So just wanted to understand from that perspective.
Sukumar Srinivas
See, despite handling a conventional business with reporting balance sheet with all the impact of being a listed company and so on, we have still registered a 37% volume growth this year. I think that is pretty good compared to the industry standards where the overall steel industry has grown by about 6% to 8% over the year. I think growing at 37% or 35% top-line, I mean, volume growth is quite significant. So — and we don’t have also hear it.
Operator
I’m sorry to interrupt you, sir. We cannot hear you. Sir, we are unable to hear you. Hello.
Sukumar Srinivas
Hello. Can you hear me now?
Operator
Yes, please go-ahead.
Sukumar Srinivas
Yeah. So I don’t know, I line, but taking over the last question about the growth, I think we have done a 37% volume growth this year. I think that itself has been quite significant. So I don’t know — I mean, I mean this is quite, quite remarkable to us, I mean, given the competitive environment. So I think we have done pretty well in terms of our growth.
Unidentified Participant
Okay, sir. So that’s it. Thank you so much. All the very best.
Sukumar Srinivas
Thank you.
Operator
Thank you. Thank you. Participants who wishes to ask a question may press star and one now. The next question is from the line of Keshav Garg from Counter Cyclical PMS. Please go-ahead.
Keshav Garg
Sir, I’m trying to understand that, sir, last year we raised INR100 crore of equity. And despite raising that much money, we — our interest cost has still gone up significantly year-on-year by almost 50%. So I mean, and sir, consequently, our profit-after-tax is down. So then what’s the point of this growth in top-line, volume growth when it is not percolating down to the bottom-line?
Sukumar Srinivas
See, this year the bottom-line would have been substantially better by at least another INR20 odd crores had the inventory losses not hit us. So we are also preparing the base so that the volume growth is going to be substantial. A B, we have also said that we will sustain and try and hold the interest cost going-forward. So on a higher-volume, the fact that we have taken a big jump compared to last year to this year-on the basic volume growth. So therefore, I think we will be able to hold it steady for the future.
Keshav Garg
Sir, now post COVID, when steel prices were going up, I never heard inventory gain word from management commentary during the con-call. But now when steel prices are going down, I think everything is due to the inventory loss. Sir, so I mean when on the upside, I mean we just take it in our stride, then sir, the point is that volatility in steel prices are a fact of life. It’s not that it’s happening for the first time. So since we are holding a large inventory all-the-time, so then it is part — very much part of the normal business risk for us.
Sukumar Srinivas
Correct. So immediately after COVID, the prices did go up, but that much of that advantage of the prices going substantially was taken by the companies itself, number-one. And in future, we shall also highlight that wherever there has been any significant gain, we will also highlight that.
Keshav Garg
Right. Now, sir, regarding our manufacturing business, where I understand we bid INR1,000 crore of revenue in nine months and our EBITDA was only INR16 crore, 1.6% and ROCE was 3%, sir. So I’m unable to understand because, sir, if you see then pipes and tube business, if you see all the listed companies, they are doing very well. The margins are in double-digits and the return on capital is over 20%. So why is it that our steel tube manufacturing business is — seems like to be operating in some other planet?
Sukumar Srinivas
Yeah. So that is one of the primary reasons for the demerger because it was weighing down the marketplace business. That is number-one. There has never been much of a focus on the manufacturing business because we’ve always been more focused on the marketplace. So that is one of the driving sources of trying to improve our efficiencies into demerging both the entities. So our first aim right now is to try and improve capacities. That is what we are working at and trying to focus with a much more focused management bandwidth internally. So I think you will start seeing that improving over the next years.
Keshav Garg
Sir, and lastly, sir, as things stand today, I understand there has been a INR1, INR2 hike in steel prices recently. So can you confirm that? And sir, so-far are we seeing inventory gain or loss in our inventory inventory so-far in the 4th-quarter?
Operator
So we are unable to hear you in-between.
Sukumar Srinivas
Hello, can you hear me now?
Operator
Yes. Now we can.
Sukumar Srinivas
Yeah. Hello.
Keshav Garg
Yes.
Sukumar Srinivas
Can you hear me?
Keshav Garg
Yes.
Sukumar Srinivas
Yeah. So you are talking about whether there has been a gain in this quarter, correct?
Keshav Garg
Right.
Sukumar Srinivas
So it’s not yet come onto the ground. It’s been holding stable. Let us see, if there is a increase in the steel prices, then we will come — it will reflect in the coming — coming way further down the quarter.
Keshav Garg
So-far, is it inventory gain, inventory loss or breakeven?
Sukumar Srinivas
It is currently stable?
Keshav Garg
Right, sir. And sir, what kind of guidance you want to — you would like to give for the next year FY ’26, sir, will we steel prices remaining the same assuming, then sir, what kind of top-line and what kind of EBITDA and profit should we expect?
Sukumar Srinivas
See, top-line, we would like to sustain the 20% plus. The EBITDA, we would definitely mean 3% plus. And I think these are the basic two points that you’re looking at.
Keshav Garg
And sir, just one clarification, this 3% EBITDA margin that we are talking about, it is exclusive of lease rentals or inclusive of lease rentals?
Sukumar Srinivas
Inclusive of lease rentals.
Keshav Garg
Sir, I would request you to kindly give this number post lease rental because it’s a proper operating expense lease rental for us. So I mean, so post lease rental, what kind of margin should we expect?
Dhananjay Mirlay Srinivas
Yeah. Whatever properties the company will be having, they’ll be agreed for rent for the resulting company. At that time the lease rental will get captured.
Keshav Garg
Thank you, sir. Thank you very much.
Operator
Thank you. Participants who wishes to ask a question may press R and one now. Anyone who wishes to ask a question may press star and one. The next question is from the line of Ankit Shah from Audacity Capital. Please go-ahead.
Unidentified Participant
Yeah, hi. Am I audible?
Sukumar Srinivas
Yes.
Unidentified Participant
Yeah, congratulations on great set of numbers. My question was regarding the team versus. So are we expect…
Operator
That clearly, sir.
Unidentified Participant
Sorry, yeah, hi, is it better?
Operator
Yes.
Unidentified Participant
So my question is regarding the demerger timeline. So is there any further delay expected or from H1 FY ’26 or…
Sukumar Srinivas
See we don’t currently NCL NCLT Bangalore does not have a full-time bench. So anyway, the positive side is on 12th, we have the AGM to shareholders meeting. So after the approval, we file it with the — with the NCLT. So see to some extent, we are at the mercy or the of the court having adequate numbers. So I think if they have a full-time bench, things move faster. The positive lining is they do have listing benches from other NCLT from either Chennai or Hyderabad, etc. So I mean, if all goes well, we have been quite clearly told that in the quarter of the next year. So once that happens, I mean we hope that it will not get further delayed.
Unidentified Participant
Okay, okay. Thank you.
Operator
Thank you. The next question is from the line of Ketan Chheda, an Individual Investor. Please go-ahead.
Ketan Chheda
Hi, can you hear me?
Sukumar Srinivas
Yes.
Ketan Chheda
My question was with respect to the finance cost, the — in Q1, we mentioned that in the upcoming quarter we would be able to mitigate and contain this cost. But right now, while it has come down to some extent, it’s still significantly higher as compared to our previous year. So what I would want to understand is going-forward, do you expect the quantum in absolute numbers, the finance cost to remain at similar levels or it will go down to our earlier levels.
Sukumar Srinivas
Yeah. Currently, if you see, we have reduced it by about INR3 crores from the quarter one to quarter two and a further around INR1 crore to quarter three. So going-forward, you will see that broadly with this — and this has happened despite a substantial increase in the sales, the value and the volumes. So I think if we would probably our first target is to try and hold-on to this cost going-forward despite an increase in our growth.
Ketan Chheda
Okay, which means in absolute terms, it probably will not come down as a percentage of the top-line, it will, but in absolute numbers, it is likely to stay around these levels?
Sukumar Srinivas
Yes.
Ketan Chheda
Okay. Okay. Thank you so much.
Operator
Thank you. Participants who wishes to ask a question may press star and one now. The next question is from the line of Keshav Garg from Counter Cyclical PMS. Please go-ahead.
Keshav Garg
Sir, now 90% of our business approximately from steel and sir, now steel prices are at multi-year lows and then our working capital is exploding and our interest payment is exploding. So sir, once steel prices go up, then sir, I don’t know-how much our interest cost will go up because the inventory will go up proportionately. So I mean, I mean, do you have any — I mean a clarification on this point?
Sukumar Srinivas
See, if you look at a number of days of working capital despite the last year, we started at about 36 days, which has come down to around 33, our target is to bring it down to 30, number-one. So that itself where we are trying to sustain the existing working capital despite the growth. So that is the point. So we will try and sustain the same going-forward.
Number two, we are also working very hard with multiple NBFCs and banks to work on our debt financing. So if a substantial portion of our debt gets financed by the where the interest will be passed on to our customers and the debtors that itself should sustain or even bring down the interest cost as we go-forward. So this is called dealer financing basically.
Keshav Garg
So by this step, how much is this expected to go down? So firstly, what is our cost of debt today, so cost of debt, including the interest that we are paying on our payables and acceptances, what is that percentage?
Sukumar Srinivas
Approximately around 9% to 9.5% is our percent cost of debt.
Keshav Garg
Right. So by how much can we reduce it?
Sukumar Srinivas
The — because once this dealer finance is initiating and keeping the inventory in control, we try to retain around 9 percentage debt.
Keshav Garg
So it’s not that significant. Sir, in any case, now the point is that if we see from 4th-quarter of last year where our revenue was INR137 crore to now this last quarter, when revenue was INR1,437 crore, it’s an increase of only 4% in our revenue. But whereas our interest cost has increased from INR9 crores to INR12 crores, so which is like a 33% increase on 4% increase of revenue. So then I don’t understand that how come our debt — working capital days is under control as you said, because sir, with 4% of increase in revenue, if interest cost is going up by 33%, then surely say it seems that the working capital days would have gone up.
Sukumar Srinivas
So now what is happening is when the net working capital calculation is happening, so some of the exceptions also been added in that. So that is the thing we are trying to come out slowly. And last secondary Q4 to Q3 is also slightly generally Q4s are a little better in terms of fund cycles, et-cetera, compared to Q3 or Q1. Q1 is generally the slightly more sluggish period. So you do have a point, but I think we are working hard to bring it down to control.
Operator
Thank you. The next question is from the line of Ralit, an Individual Investor. Please go-ahead.
Ralit
Hi, good afternoon, everybody. Two questions to understand. Am I audible?
Operator
Sorry to interrupt you? We cannot hear you that clearly.
Ralit
Can you hear me now? Can you hear me?
Operator
Now it’s better. Please go-ahead.
Ralit
Yes. So sir, the point is for the quarter — for the Q3 that has gone by, our interest cost is approximately INR12 crores, which is approximately 30% of the operating profit. So 30% of the operating profit is going into interest. So question number-one, what is our group we have a debt, the whole group we have a debt and then do we have any plan to reduce it? Because if we look at the financial year ’24, the interest cost of approximately INR50 crores, which was more than 33% of the operating profit. What. What is our debt year and what is our plan to reduce that debt number?
Sukumar Srinivas
Our growth level debt as on quarter-end, Q3, it is around INR500 crores,
Ralit
INR500 crores, okay.
Sukumar Srinivas
So we are working hard to reduce that.
Ralit
Okay, okay.
Sukumar Srinivas
With additional growth, whatever is going to happen, we are trying to reduce it.
Ralit
But additional growth, even if we grow by 6%, 7%, 8%, I think all of that money would be required for the business to reduce that debt, do we have some plan?
Sukumar Srinivas
Yeah. So I think one is dealer financing is what we are really working hard on.
Ralit
Okay. Okay. Okay. Because in the interest cost, I’m an individual investor and hardcore believer when the company was rested since then because I’m also believer of the discretionary spending that has been come up — that will come up in the next few years. So I’m — and everywhere I go, I try to find out if there is a store, Shankara store or not. So I’m either worried how — how do we — how investor like us would get a profit because the debt interest is eating lot of our profits.
Sukumar Srinivas
True, very true. I think dealer financing, we are working on INR100 crore at least to start with as a program. So if that is really kicks off ground, I think to that extent, the debt will start coming down.
Ralit
Can we expect some reduction in the next FY ’26?
Sukumar Srinivas
Some reduction hopefully in this quarter itself and definitely tangible results from Q1 next year.
Ralit
From Q1 ’26?
Sukumar Srinivas
Yeah.
Ralit
Okay. We have a long-term view, three, four years. We can expect in the next three, four years, it will drastically come down.
Sukumar Srinivas
We are also — I mean, as a management, we are also equally concerned about how to improve profits. So we are also working for the company and we are also very, very clear that all the stakeholders should benefit. So there is a very, very serious attempt at all levels to bring this down.
Ralit
Yeah. I see quite good. Thank you very much. We are committed with you too. Thank you. Thanks.
Sukumar Srinivas
Thank you so much.
Operator
Thank you. Thank you. The next question is from the line of Ketan Chheda, an Individual investor. Please go-ahead.
Ketan Chheda
Hi, thank you for the opportunity again. My question is again on the finance cost. Is it possible for you to break it in terms of like how much is our finance cost for the marketplace business versus how much is for the manufacturing business.
Sukumar Srinivas
So I think once the demerger is done, those figures will become much more clear and you will have a very clear you know what goes where.
Ketan Chheda
But like if certain — if you cannot quantify, can you give some kind of indication or direction like whether it is more than half, less than half, something like that, some level of qualitative indicator, if not absolute numbers.
Sukumar Srinivas
Out of INR40 crores, approximately INR10 crores will be manufacturing and INR10 crores to INR15 crores will be manufacturing and then on INR25 will be for marketplace.
Ketan Chheda
Okay. So marketplace has a higher proportion of the financing costs. Thank you. Right. Okay. Thank you so much. Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr Sukuma for closing comments.
Sukumar Srinivas
Yeah. Thank you very much for this very active participation from all the investors. Thank you so much and we look-forward to address your issues and work hard to give good shareholders interest to our heart. Thank you so much.
Operator
Thank you. On behalf of Shankara Building Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.