Kajaria Ceramics (NSE:KAJARIACER) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Q2 FY 'twenty seven Investor Conference Call of Kajaria Ceramics hosted by Asian Market Securities. 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. Please note that this conference is being recorded. I now hand the conference over to mister from Asian Market Securities. Thank you, and over to you. Thank you. Good morning, everyone, and thank you for joining on this call. From the management side, we have Mr. Ashok Kajaria, Chairman Chetan Kajaria, Vice Chairman Prishi Kajaria, I'm Lee and Sanjeev, the CFO.

0:50 I will hand over the call to Ashok ji for the initial remarks, post which we will have a Q and A. To you, Ashok. Thank you. Thank you, Karan. Good morning, everyone. It gives me great pleasure to welcome you to the quarter 2F 'twenty seven earnings conference call of Kajaria Ceramics Limited. Joining me on this conference call is the senior management team of Kajaria Ceramics. In quarter two F 'twenty seven, we achieved 10% year to year volume growth led by better demand and gain in market share. However, export demand in first half of 'twenty seven remains subdued mainly due to elevated freight rates and limited fentanyl availability continuing to pose challenges for manufacturers in Mordi. Our consolidated revenue grew by 24% year to year INR 68 crores, supported by heavy volumes and the market's positive response to price hikes.

1:44 EBITDA margin for quarter 2F 'twenty seven stood at 19.5%. Our capacity expansion plants at Sri Kalashri 12,500,000 square meters increased from 10,000,000 square meters and Gelpur 11,000,000 square meters remain on track. These facilities are expected to strengthen our manufacturing capabilities and enable us to deliver high quality products at competitive costs. Looking ahead, we remain confident in our ability to sustain healthy growth, strengthen our market position and create long term value for all stakeholders. Now for this quarter's segment five financial performance. Tiles segment revenue grew by 23% year to year at INR1291 crores in quarter two F 'twenty seven compared to INR1051 crores in quarter two F 'twenty six.

2:34 Marchless segment registered a 22% growth in revenue, reaching INR124 crores in quarter 2F 'twenty seven compared to INR102 crores in quarter 2F 'twenty six. Revenue from the addition grew 69% to INR54 crores in quarter 2F 'twenty seven as compared to 32 crores in quarter two F 'twenty six. EBITDA improved in quarter two F 'twenty seven to 19.51 as compared to 17.94% in quarter two F 'twenty six. PBT for the quarter grew to INR $2.54 crores as compared to INR 181 crores in quarter two F 'twenty six. PAT for the quarter grew to INR 190 crores in quarter two F 'twenty seven as compared to INR 133 crores in quarter two F 'twenty six.

3:21 As of 09/30/2026, the working capital cycle marginally increased by two days to forty eight days compared to forty six days in quarter one F 'twenty seven because of higher turnover. With this, I take this opportunity of thanking you for joining us today. Over to moderator for Q and A, please. Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Praveen Sahai from PL Capital.

4:10 Please go ahead. Yeah. Thank you for opportunity, and many congratulations for a good set of numbers. First question is related to the realization of our subsidiaries. At the subsidiary level in the Q2, there is a down in the realization. So is that the mix of product which impacted this realization? So we went for more for volumes this quarter, and there might be a very minor shift in the realization, but nothing major to talk about. Okay. Okay. Second, sir, question related to the price hike. As Sukhaar has said, there is a price hike as well.

4:56 So can you give some indication, the quantum of this quarter, how much of the price hike has been taken? And if you can also elaborate on that, the segment wise, like the GVT, PVT, how has the price hikes happened? Basically, in our North and South plants, we increased the prices by roughly 12% to 13%, and it was across all product categories, be it ceramics, be it PBT, be it GVT, and the Murbi price increase was commensurate with the price increase at the Murbi level, which is 18% to 19% across all product verticals. Okay. So this is a YTD price size or you're having on the No, this is still date. This is still date since the gas prices went up in the country.

5:46 Right, right. Got it, sir. And on the capacity expansion, sir, Sri Sula has the expansion all done, that's a 10 MSM and commission? It is. No, no, it's not done. It's just chartered. Basically, earlier we were putting a 10,000,000 square meter plant, but then we have increased it now to 12,500,000 square meter, and it will only be commissioned by June of next year, end of June of next year. All right. Just one clarification, and this is last question for me, about the gross margin. Because if there is good improvement in the pricing, then why it's not reflected in the gross margin?

6:37 No. Our EBITDA margins have improved. No? Yes. Yes. Definitely, sir. That's below the gross margin. That's improved. That's really commendable. But at the gross level, it's not reflecting. It's more or less safe. There's not a difference. Okay. Thank you, sir. I'll fall in the queue. Thank you. Thank you. Thank you. Next question is from the line of Sonali S. From Jefferies. Please go ahead. Sir, thank you for the opportunity. Congratulations on a good volume growth. Sir, my question is on the volume growth. 10% despite the price hike, great number. Any color you want to give us on that as to which end user segment, which region exactly?

7:29 Or... And how do you expect the volume growth going ahead, if any outlook? So basically, Sonali, the volume growth has been across all the regions. It is not to any specific geography. All the regions of country have grown. And going forward, also, are very positive looking at a double digit volume growth in the coming six months in the future also. Got it. And on the end user segment, all the end users have done well, right? Exactly. It has gone up in detail sales also, project sales also. So everybody has performed well. All the segments have performed well. Okay. Got it. So secondly, on the margins, again, great quarter of margins. We did notice that the current fuel cost has increased definitely. That's because of the ongoing Middle East conflict.

8:16 But any thoughts on the margins, how do we expect it going forward? And what will be the levers, if at all, for margin expansion from here on? I would say we expect margins to remain stable going forward also around the same numbers what we have given in the quarter. And any extra benefit we might get, we would like to pass on to the market to gain more volume share. Got it. And just to confirm, earlier, the promoters out of goodwill had not taken the salary. Are we continuing with that? Yes. We intend not to take any salaries right now. Got it. Alright, sir. Thank you, and all the best, and good festive seasons for the team. Thank you. Thank you. Thank you.

9:08 Next question is from the line of Kesha Vlahuti from HDFC Securities. Please go ahead. Hi. Thank you for the opportunity. Firstly, congratulation on double digit volume growth. So whether this trend will continue? And secondly, should we expect more benefit of unification strategies so this volume growth can further speed up in upcoming quarters? How should we see? As I just mentioned in the last conversation, we definitely expect the volume growth to continue double digits over the two quarters also in the last part of the financial year. And what was the second part? No, as the unification is strengthening, our volume is also increasing. So it took a little time to get it all organized, but now as has happened, and we can see the results from here on.

10:00 Understood. Got it. And as you highlighted, you have taken more price hike in Modi. My understanding is because fuel prices have increased more in Modi, so you have taken a higher price increase. Again, if the gas prices, you know, starts to cool off, then possibly Modi would be the reason where, you know, more price cuts will happen. So possibly, will that make the, you know, Modi manufacturer more competitive in the domestic market? You're looking at the trend, the gas prices are not gonna come down. Like, we just got the news that the propane prices have increased in Modi yesterday. So there's no there's no visibility on any gas gas prices going down. Got it. Got it. And one last question, I can see your other expense this quarter was INR 138 crore. So going forward, should we expect INR 120 crore what you were indicating or possibly this is the new normal?

10:53 This will going to be remain the same. And this quarter also this increase is because of advertisement expenses only and we are going to increase our ad expense going in. Understood. Got it. Thank you. Thank you. Next question is from the line of from HSBC. Please go ahead. Thank you for the opportunity, and congratulations on a great performance. My question is relating to the Nepal JV. Wanted to understand a bit more in detail. So whatever in... Whatever income you would be getting from this JV would be reflecting in your income from associates. Right? Is that the correct understanding?

11:40 Yes. This is showing down the line as income from JV. This is not something Yeah. This quarter, you've reported about INR 2.5 crores of income from associates. Is it largely relating to the Nepal JV? And do you think this run rate will continue? Very This is Kajaria. See, all the JV, we are having majority stake except for Nepal. So all the JV, we are consolidating line by line. So everything is being reflected in top line and bottom line including everything. So the other income is mainly related with the JV, with the with the with the with Netal.

12:25 So that... It's a very small part of the... Our joint venture. Also, I'm trying to understand this run rate that you have kind of, you know, booked in this quarter. Does it have further room of improvement from here, or does it have lot room? That will depend only on... That is related with the Nepal only. So that will depend on Nepal. Nepal is performing well. I think the market... The profit has also gone up. The utilization is also gone up. So it will take up some time to to be fully efficient to operate at full capacity. But every quarter, you will see some improvement in Nepal. But even if it is so, it will be a small portion of the total profitability.

13:13 Yeah. Sure. Appreciate it. Secondly, on the Nepal side again, could you please also tell us what is the current utilization so that we get a sense? And in terms of the industry dynamics, like, what is happening in India, is Nepal any different from what's happening in India, or it's, you know, also reflecting... These trends are also reflecting in your Nepal JV? Just to give you a brief color, we utilized 35% capacity in the current quarter in Nepal, and we put up a 5,000,000 square meter capacity of a mix of ceramic and GVT tiles around September 24. And the total market size is INR 2,500 crore. So going forward, we expect the capacity utilization to be better as we keep on moving ahead. Now with the stable government coming in, things are looking much more positive and better. Okay. 85% is what you mentioned, right? Is capacity utilization currently.

14:03 And the pricing trends and things, is it also similar to what's happening in India? Or it's like more stable in Nepal at this point in time? The pricing in most areas, but there are very limited players in Nepal. The fluctuation is not that high. So it's a stable pricing structure out there. And also your investment in Nepal, can you please remind us that number? Was it like INR180 crores or it was higher? It was roughly around INR200 crores, the total investment, including the JV stake. Okay. Total investment was INR200 crores. Perfect. Secondly, I had a couple of questions on the cash flow for this first half. There is a loan that is given out about INR 155 crores.

14:53 What is this rating to? Normal corporate loan. Normal corporate loan. But extended to which entity? SBFit 700. Oh, the one we can SBFit seven What question? Is No. When I when I look at the cash flow statement, as a part of your cash flow from investing activity, there is a loan given of $1.55 crores. I was trying to seek more understanding around this. So that is that is in the normal course of business. We are trying to maximize our return on treasury. So we have earlier given to Bajaj and K and B Housing Finance. So we have given to other NBFCs, and we'll continue to do so that other safety will be the priority. And we cannot disclose the... Each and every day where we are investing.

15:40 No. That's fine. So this loan is extended to MBFCs? Yes. Okay. Maybe I'll get more understanding separately. And lastly, on the there is also a drawdown of debt of about INR 178 crores. Can you please help us understand why there is an increase in the borrowings? Because we also have already have a good cash sitting in our balance sheet. So I'm just trying to understand. Please repeat the question? Can you please repeat the question? Sorry, I did not catch that. Please repeat the question. Okay. What I'm saying is in the financial activities, there is a proceeds from current borrowings of INR 178 crores. So just trying to understand why did we have to raise loans? I thought we already have a good cash bank balance that is sitting at the balance sheet for us. That has been for many quarters because some of the JVs are having loans also from the bank, bank limit. So that is mainly for that.

16:41 So even in Kajaria also, we have working capital. We invest our fund in fixed deposit. Sometimes it happens that we need the fund. So we utilize the working capital. So that is the optimum utilization of fund. That is why we need some working capital. That is for Kajaria Ceramics loan. For our joint ventures, we have some certain loans. Next question is from the line of from. Please go ahead. Hi, team. Thanks a lot for the opportunity. First question is with respect to gas pricing. Could you quantify the gas pricing at North South in our, you know, Western operations?

17:29 Yes, gas prices have not changed much for this quarter. But going forward, gas position is very tight because of this America Iran war. And I foresee with the knowledge which I have gathered from Gail and others that situation will be tough going forward as of today. That's the situation as of today. But till today, the prices have not changed. But spot prices have gone up drastically. As you all might be aware, the spot prices have gone up drastically in the international market. Understood, sir. That was helpful. And secondly, with respecting Nezar, is there any gas availability issue there or that's not a, frankly, issue? No No We we run it by coal gas. Coal gas. Understood. And thirdly, with respect to... You know, we are seeing a, you know, renewed CapEx enhancement from your front.

18:22 Just wanted to understand the reasoning behind it. We, you know, understand that, you know, you're still targeting double digit growth for the second half. And, you know, you are seeing strong demand momentum. Plus, right now, the gas price is also favorable for us versus Morvi. Other than that, what are the structural changes because of which, you know, you are putting renewed CapExes in your own plant versus relying less on Morbi? See, if we have to grow by double digit, we need to increase our volumes, right, increase our capacities. And we are putting up both our plants, both our brownfield expansions in our North and our South plant. So with these two expansions, we feel that we can further penetrate the market. And we further have a gas advantage here as compared to Modi. Understood.

19:08 Can I just lastly get the numbers for the distribution? Where is our total distribution network standing at? And what is the aim for the year So total dealers, we don't have distributors, we have dealers. We have about 1,800 dealers all over India. Out of that, about four fifty are our exclusive that only sell Kajaria and rest are they sell other brands as well. And the dealer network is more or less consolidated, might reduce 100 and increase 100, but that's it. Understood, team. Understood. Thanks. Thanks a lot, and all the very welcome. Thank you. Thank you. Thank you. Next question is from the line of Ritesh Shah from Investec India. Please go ahead.

19:59 Congratulations on a good set of numbers. Sir, first, wanted to have some color with respect to Morbi. Usually, you help us with numbers on a monthly exports. How is it faring? Any full year numbers that you would like to indicate? That's the first question. So this year, the Morbi exports are down. It should be roughly around INR 12,000 crores for the whole financial year because of the rising container cost. And the domestic industry should be roughly INR 48,000 crores due to the price hike also. Roughly total industry should be at 60,000 crore. Is useful. So secondly, you indicated Nepal, we are on coal gas. Would it be possible for you to indicate the source of coal and rupees per SCM, basically the consumption cost that we have?

20:46 I can get back to you. We can get back to you with these numbers after the call, with the exact consumption cost and the rupees per SCM numbers. Right. Sure, sir. Sir, my third question, usually, we do indicate region wise cost. I think last quarter, we had indicated INR 64 for North, 85 for West and INR 73 for South. Can you give similar numbers for Q2 as well as on spot? So the gas price for quarter two for North was roughly $70.56 South was $63 West was $75 and the average is at $70 basically for the second quarter. Sir, you indicated West was INR 75 crores and South was INR 63 crores? The North was around INR 70 crores and South is around INR 63 crores and West is around INR 75 crores, average is around INR 70 crores per SEM.

21:35 Correct. So sir, does this imply that there was a reduction in West and South from Q1 to Q2, that is 85 to INR 75 and INR 73 to INR 63? You're right. There was a little reduction, but that prices are going to go back going to increase on quarter three. Because basically more on propane and the propane price have increased. I'll just tell you one thing about the gas thing. The gas cost presently is a delivered basis, but we are working very hard on reducing our firing cycle, and it will take to four months. So hopefully and we are also in the process of getting some cheaper gas also. So we hope from January, we will get some significant reduction in our gas cost.

22:24 That will be partly because of some cheaper gas might be and the reduction in firing cycle. So we are very hopeful that we'll get some our gas will be or competitive will be very competitive going forward. Perfect. Sir, just last question. Given the West costing is higher as compared to North and South, think Kajaria is in a very good position right now given, I think, 80% plus of our capacity is outside of West. So we will continue to show good volume growth because of this cost curve gap for West versus rest of the country. Is that a fair assumption? It is not 80%, it is the capacity, but the selling volume are much more because that includes our outsourcing also.

23:14 But you're right, North and South, that is why all our expansions are coming in North and South, and we get a better advantage than other people. And these expansions the cost of production in these expansions will be much cheaper than our... Higher capacity. Yes. Sir, last question, Sir, last question, would it be possible for you to give some color on the spot pricing given it's a very volatile situation or a dynamic situation right now? I'm just trying to understand the incremental price increases, which will be required, say, specifically in North? See, spot prices are very high. They are currently in the range of almost $28 to $30 per SCF.

24:05 But right now, what we are getting gas is the normal prices from Gale, which is for North, which you asked. And even for expansion, we are talking to them to cover our gas requirements. So as Kajaria is concerned, as just said by my colleague, gas prices will not go up, but we are also trying to optimize our gas consumption by firing cycle and also trying to source a cheaper gas only from the existing sources. Thank you. Okay. Kajaria, just a follow-up. Based on the current prices, is there a need for further end product price increases? Is it required? No, no. Currently, no. No. Currently, no. You see, when we just talked about, as Kajaria, we have to increase volumes, right? And this has been our problem for the last two years, which we have been trying to address, but unfortunately not able to address. So what has happened, if you realize that after February 20, the gap between Morbi to Morbi, suppose a manufacturer is at Morbi and his dealer is buying from Morbi exclusively and a dealer from Kajaria, the gap has minimized from the earlier 40% to currently about 20%, 25%. So that has been the big change. We want to continue that change for all time to come.

25:18 And for this, we will be doing one more thing like our fixed cost is going to be much the increase in fixed cost in the next two increase in revenue. So we'll get operating leverage in fixed cost also. Thus, the new plants we have put up, their product will be much more cost efficient, that will give us some operating leverage as well as improvement in margin. Third, they will also help in reduction in freight in the logistic costs. So that will also help in improvement in EBITDA margin because, see, next year, we are not taking anticipating any price increase. So we have to increase our margin because of cost cutting, cost optimization, reduction in fixed costs and logistic costs and other improvements.

26:08 And the expansions we are doing, which are itself are much more cost efficient. The products are will be much we'll be making much cheaper products than our existing capacity. Thank you. Next question is from the line of Anuparek from Anandsati Shares and Stockbrokers. Please go ahead. Yes. Good morning, team. I just need one small clarification. So we have produced 22.9 MSM tiles from our own and JV plants against our production capacity of 20.7 MSM.

26:53 So just wanted to know as to what would be the peak production, quarterly production run rate for us based on the existing capacity of 20.7 MSM? It's going be the same. Don't have any capacity expansion right now. So whatever got produced this quarter will be produced in this the other quarter as well. All our plants are running at optimum capacity, more than its production capacity. Understood. And sir, also, we have sold tiles of 24 MSM in Q2 FY 'twenty seven versus a production of 22.9 from our own and JV unit. So just wanted to know by when our quarterly sales volume would be at par with the quarterly production volume for our own and JV units.

27:41 We are already selling more than what we are producing. So whatever we are producing, we are already selling that and we are outsourcing more and selling. So right now, our overall capacity is about 88,000,000 square meter, and we said we'll be selling about 130,000,000 square meter. The rest 42,000,000 square meter will be outsourced from Morby. And going forward, our expansions will help for next year. And sir, going forward, how what would be the outsourcing volume, expected share of the outsourcing volume in FY 'twenty eight? See, outsourcing going forward will go down. So we are looking at about from 130,000,000 we are looking at about 145,000,000 square meter of sales.

28:29 With that, we have 88,000,000 right now, and we are adding about 22,500,000, which will actually get about 90,000,000 to 20,000,000. So rest will be all outsourcing. So outsourcing room 42,000,000, 42,000,000 will go down to about 36,000,000, 37,000,000 roughly, roughly. Little bit here and there. You, sir. All the best. Thank you. Next question is from the line of Tananjay Mishra from Sanfum Broking. Please go ahead. Mr. Mishra, your line is unmuted. Please proceed with the question. Mr. Mishra, can you please speak?

29:20 Due to no response, we will take the next participant. I now request mister Rahul Gupta from Morgan Stanley to please proceed with the question. Hi. Thank you for taking my question. So just one clarification. I understood you clearly given north and south margins are relatively better. You wouldn't need to take price hikes to maintain blended margins despite spot gas price moving higher. Is that correct? Yes. We just said that we're not taking any price hike because our gas prices are stable right now in our North and South plants, which is a little bit up, but we don't need to take any price increase. As we just discussed that we need to go more for volumes and looking at everything, are okay.

30:07 Yes. But just to understand it better, this wouldn't impact the margins. We are focusing on volumes, but given nonmolby plants operate at higher margins, fuel chasing volumes wouldn't come at the expense of margins, right? No, it will not. That is why the blended margin will remain as where we are. Next question is from the line of Rashaan from Antik Stock Broking Limited. Yeah. Thanks for the opportunity. I'm from. So just wanted to understand how I'm so sorry to interrupt Rashaan. Can you can you please speak on your headset phone? We are not able to hear you properly.

30:53 Yeah. Yeah. Is it better now? Yeah. Yes. Please go ahead. Yeah. So congratulations on a good set of numbers. So I just wanted to understand how the unorganized market is kind of playing out now in terms of the price hikes that they have taken. And you also mentioned in your opening remarks that you might have had some market share gains. So can you talk a bit more on that? So it's tough going for the unorganized market because the price increase has gone up. And most of them don't have a stable distribution network. So and they're not used to selling at such high prices also. So it's tough going for them right now. Approximately, what would be the prices that they would have taken versus the organization?

31:44 Can you repeat the question? I'm asking what would be the prices that unorganized players might have taken versus the organized players? No. If I you see, it's not a question of unorganized, organized. It's a question of people sitting at Morby. The gas prices went up from INR50 on February 28 to INR91 today. So they had to take a price hike of almost 35% to 40% as far as Morbi is concerned. That applies to us also of the Morbi plant, that applies to outsourcing of the Morbi plants also. So overall, they have taken this increase because of the much higher gas prices. In North and South, as already said by Rishi that our gas prices have not gone up so much. So we have taken about 12% to 13% price hike compared to 35% plus what they have taken at Mobi.

32:37 That is why the difference from the Mobi player and the branded players have come down. And that's what I said earlier also that gap which was earlier before February 28 was almost as high as 40%. It has come down now to 20% to 25% between Kajaria and the MobiPFs. Understood. That's helpful. And what would be your top line guidance for FY 'twenty '7? Pardon? You're not audible. Yes. I'm asking, what would be your top line guidance for FY 'twenty seven? See, next year, there will be this year, I mean, we can say the volume only because price is I mean, it's difficult to say. But as in the last call, the Chairman has guided that we should be for the remaining nine months, we should be our endeavor will be to have a 10% of volume growth.

33:36 Understood. Any color for FY 'twenty? Sorry? Next year. Any color for FY 'twenty? That will come back later on. It's too early to talk about next year. No. Next year also, the volume growth will remain in double digit, but the value will not be the same will not be much higher than what it was this year because there was some inflation in this year, which will not be there in the next year. Next question is from the line of Lavish Soyant from Berman Capital. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. So my question is regarding the Mobi overall in the industry level. We have seen disruption in Mobi where gas prices have increased and availability has also been a problem. So how much of that has actually impacted the industry supply at the Mobi level? And how much of these capacities have been online offline, sorry?

34:40 So Modi, overall, is a lot of plants are shut down because firstly, exports are not happening, and they're not able to settle the domestic market so easily. The prices the costs have increased. So Modi, overall production has a huge cut. So can you quantify how much would that be? It's difficult to quantify, but overall, all our sources are telling us that a lot of plants are shut down. There are about 400 to 500 plants in Morvi. Out of that, about 40% to 50% are not working. Understood. Understood. And sir, can this sustain disruption that you're seeing that you're seeing that propane prices have also gone up yesterday? So can this sustain disruption lead to permanent closure of facilities in Mobi? No. No.

35:28 Okay. Okay. And sir, actually, secondly, I wanted to ask what are the drivers of the volume growth that we are seeing? You mentioned that both B2C and project demand is recovering. So just I wanted to understand whether the demand that the volume growth that we are seeing, is it more customer pull driven? Or is it more dealer driven where the dealers have started restocking after a weak Q1? So we have taken several initiatives to make sure volume goes up. Like we're going deeper down in the Tier two, Tier three cities, making more exclusive showrooms, working on more deeper penetration by putting people in places where the market is. So a lot of background work has been done to ensure that the volume growth is driven in the current and the future quarters as well. Got it. Got it. So you are saying that it is more Kajaria specific, where we are winning market share from others, where the industry is not performing as well as what we are doing. Would that be the right way to do so? It's a mix of both. The market is also increasing, and we're also taking market share.

36:31 As we just mentioned, in terms of our dealer network, in terms of projects, in terms of architects, we are penetrating everywhere. So how much will be our outperformance as compared to the market? Let's say, we were growing at 10%, how much would the market growth be? We would say about five to six would be the market growth and the rest would be we are taking the market share from the market. Got it. And sir, just one last question on the project side. I think for the last few quarters, the expectation has been that project demand will continue to will pick up. However, we've not seen that happen to an extent. So where are we in that trajectory of project demand picking up? And what can we expect going forward?

37:19 So project demand overall in India is picking up. Everywhere, there's a huge a lot of projects are coming up, a lot of construction is happening. So we foresee that, yes, Kajaria going forward will be able to take a good share of the market as well. So the volume growth which we are foreseeing will be a blend of both our retail network as well as project network. So so double digit, would that more be driven by project? Or would that more be driven by direct sales? A combination of both. Yes, sir. I understand that. But what would be the major driver? I mean, would project demand be higher than the direct sales? That's what I'm trying to understand. Got it. Got it. Great. Thank you, sir. Thank you for answers.

38:09 Thank you. Next question is from the line of Varun Jalasaria from three sixty one Capital. Go ahead. Hi. Thank you for the. Sir, I just want to understand the propane pricing in Mobi currently. How is it? How much cheaper it is versus the natural gas today? The current scenario, gas was not selling because propane was cheaper. Now what has happened in the last two, three days, propane prices have gone up by 12.5 per SEM this thing, I meant, per SEM. And gas prices have slightly come down by 5.5. As a result, the gap is minimized because gas was not selling. So still propane prices are cheaper by about five percent. Gas price propane prices are cheaper by 5% than gas, but looking at the current scenario of Brent, which is about $116 as of now, the propane prices will further go up in the next fifteen days. So it will more or less be in line with the gas prices.

39:08 Okay. Because, see, we were hearing that in September, a lot of these movie players took some discounts and priced reduction because propane was around 20%, 25% cheaper. So I mean, is it the case that POP And sorry, propane prices were cheaper by only 15%. The gap has minimized now. Propene has already gone up twice in the last thirty days, and the gap is now reduced to 5% only. Okay. Okay, sir. And sir, in this quarter, any price hikes specifically for this quarter versus last quarter have we taken compared to, say, last quarter in June and from then? We have not taken any price hike last quarter. The Q2 as Q2, and we don't intend to take any price hike in this quarter as well as of now. Okay. Okay, sir. And on the sanitary and the faucet business, we had a 21% Y o Y growth. So how much would be kind of price led and how much would be volume, any indication on that?

40:05 It could be a combination of about 50% would be price hike and 50% would be volume like. Okay. And sir, on the adhesive expansion, what can be the peak revenue on this INR 9,000? Roughly around INR 60 crores to 65 crores if you upgraded the twelve hour shift capacity. INR 50 to INR 55 sorry, 65 This is annual, you're saying? No. As I said, we are going in a bigger way. Like last year, it was about 125 crore. This year, we are looking at about $2.40 crores roughly. And going forward, this expansion and many more expansions will come because it's a freight oriented thing. So it has you have to be near where the demand where the market is. And looking at that scenario, we are looking at next year to about INR400 crores next year, roughly.

41:01 Because with the bigger tiles coming in, adhesive market is growing faster. So that's a big change, which has happened in the last five, seven years. See, apart from tile, see, as I said, in the next year, the tile will be I mean, there will be no incremental value growth as far as sale is concerned because the volume growth will be equal to almost equal to the value growth. But we are very confident about our two segments, which are Bathware and as I said, they will give you a much more improvement as compared to tile in terms of value and with add to the revenue growth next year and going forward. And so these margins for these businesses are also similar? No. Margin in Bathware has been lower this year. I mean, it used to be earlier at 14%, 15%.

41:51 But because of the new plant, we had put up where the capacity utilization is much lower. The margin is very low in bus fare. It will improve this year partially. And next year and onwards, it will be matching nearly matching the tile margin. And the adhesive also margin is very good. So both the segment will not only add to the top line, but also be margin accretive. And in adhesive, there is some outsourcing also. So it will be, I mean, more margin accretive, ROCE accretive also. So there can be some potential margin improvement because of the business, right? I mean, that's what I'm just trying to understand, right? Yes, these will be margin accretive, but we are not guiding more than what we are already having around 19%.

42:45 So we should comfortably have that kind of margin going forward. Next question is from the line of Akash Shah from UTI Mutual Fund. Yeah. Hi. Good morning. Am I audible? Yeah. Yeah. Hi, sir. Thank you for the opportunity. Just just wanted to ask, sir, how how should we work with the employee cost? I mean, going... As of now, it is it is close to $1.41 crores per... In q one. So should we sort of assume the similar similar run rate going forward as well? And, sir, the the reason I asked this question is actually right.

43:38 We are operating at sort of peak margin if we look at last ten years. So sir, any thoughts there? So we have done some increments in plant and general in white collar also, but that have been incorporated in this cost. And next quarter, you will get a similar cost. Sorry? You are saying similar would be the run rate for the full year? Same. Yes. Yes. Whatever we have shown in there, how much we have shown to do? One one. 141. So it should be near to 141 over $1.42. Thank you. Next question is from the line of from Swan Investments.

44:29 Please go ahead. Yes. Hi. I have one question. So if I go back in time and understand the realization between our own manufacturing versus outsourced. Sir, last two quarters, we witnessed a change where your outsourced realizations have surpassed your own manufacturing realizations. So can you help us understand what has changed? Is the sourcing now different from outsourced? And what exactly are we outsourcing? See, it's not a question of our own our personalization because the prices, as we said earlier, the prices in Borvi has gone up by almost 35% plus. In our own plants, which are in North and South, the prices have gone up by 12% to 13%. So of course, when you talk about numbers that realization will be higher, so it's like that. It's not a question of Mainly because of inflation, we are not seeing any incremental margin Yes, on just the price side, that's all, in that part of the world.

45:26 Got it. And sir, what typically do we outsource any PVT and ceramic and GvT? We outsourcing mainly aggressive ceramic and PvT. This differentiation between ceramic, GVT, PVT, now we don't discuss this anymore. It is all tiles which you're selling because we're selling more. But one thing I would say that GVT is more prevalent and thus industry is growing towards GVT and it is more margin accretive. So going forward, our ratio of GVT will go up every Like the both the expansions we are doing, they are GVT. So ceramic, we don't intend much expansion. So every year, you will see there will be a mix change towards GVT, which will be more relevant to the market and margin expansion. Ceramic market is coming down as we talk.

46:23 Every year, it is coming down. Next question is from the line of Ritesh Shah from Investec India. Sir, one clarification. You indicated both the incremental expansions. Will it be 100% GBT? Yes. Yes. Yes. Sir, will it have larger sizes than what we are doing right now? Anything different on the product mix? No. So what we are basically trying to do is make bigger volumes at a lesser cost so that we can penetrate the market more, sell these volumes and get better margins.

47:09 But these parts are capable of making bigger tiles as well. Basically, we want to focus on the size of fourtwo, which is the most prevalent size which is sold in the market. That is why we are going for higher expansions, higher capacity. See, earlier, all our expansion used to about 5,000,000 to 6,000,000 square meter. This is the first time in the history of Kajaria where we talked about a volume of 11,000,000 square meter and 12,500,000 square meter. So we're talking for very big expansions. The idea is to produce it cheap and selling the volumes. That helps. Sir, second question is, I think we indicated upon reduction in freight or some benefit of logistic costs. Is it possible to give some numbers over here? I'm just trying to understand the incremental margin levers that the company has, which can actually take us upwards of 19%?

48:01 So this is very difficult to quantify. It is just a soft issue that when we have our own plants, so we don't have to also, so we'll be there will be some savings. But we are I'll not be guiding you from more margin. Even we do at 18%, 19%, that's a good margin. We are not ready for margins rather we'll be focusing more on selling volumes. So we are our focus will be on absolute EBITDA rather than percentage EBITDA. Perfect. And just a clarification, Ashut, you indicated a number of 4020%. I couldn't reconcile it. If you could provide some more details around it, that would be great. Yes. If I take you back before February 28, the Kajaria plants in North and South were 40% higher than the MORBI plants, MORBI to MORBI and Kajaria dealer.

48:50 With this gas price hike there and 35% price increase at MORBI, What we have done in North and South is 12% to 13% price increase. So the gap has minimized to 20% to 25%. Earlier, it was 40%. So that's a big change, which has happened. And after learning from this, we have also decided that in the future, we'll try to maintain this kind of a thing. So it's not a push sale, it becomes a normal shape. So that's the whole idea. And that's why they are looking for a bigger volume growth. Perfect. And sir, if we just look at sequential number that you indicated on cost, it effectively means our cost curve is declining in West and South. So despite this cost curve declining, what we are seeing is they will try to maintain the pricing at the current levels.

49:40 Is that a fair assumption? No, but why do you mix West and South West as the costs have gone up higher because of the gas prices. South, we have our own plant where the gas prices are competitive, not as we have our own plants where the gas prices are competitive. But in West, that means Morbi, everything is based on Morbi prices. So the difference remains the same for all the plants. Okay. And sir, would it be possible for you to give some color around biofuels, how much is it for different regions and where do we plan to take it? Or is it something which is already optimized? It is already optimized. Biofuel is in North is roughly about 30% because you are not used to not allowed to use coal. So biofuel is roughly about 30% of the cost at three plants, which is Gelpur, Sikhadarabad and Manufana.

50:30 And the new expansions will have the same ratio in Okay. The And sir, West and South, there is no biofuel? There is. In South, there is biofuel as well. West is, there is no biofuel. South, there is. West is using coal in spray dryer. Sure. This is helpful. Thank you so much. On top of biofuel, which we're presently having in our North and South plant, will continue for our other expansions also. Next question is from the line of Tananja Mishra from Centrum Broking. I hope I'm audible. I understand.

51:15 So just just wanted to know this Kalahati Brownfield expansion. Earlier, we are doing 10,000,000. Now we are doing 12,500,000. I hope it is single unit. But earlier we were having a CapEx of 210 k. Now this... We could take out. So how come CapEx cost increased by 60% when all... That's... In terms of volume, it is increasing 25%. So I'll explain to you what happened was earlier we were making only a five lakh square feet shed for one production line. But then later we realized that when we increase our production capacity, we had also gone to China, we also went to Italy and we also understood that it is better to increase our capacity. And then for that, we have to increase our share as well so that when the next expansion comes here, the cost will be much lesser because the share is already made. Only the machinery will be the extra cost.

52:03 And after we increase our capacity of 10,000,000 to 12,500,000 square meter, we also went for a larger warehouse with racking systems. So the machinery cost increased by about 25% with the capacity. The extra cost was on the shed and the new warehouse capacity. Okay. So any incremental CapEx will be on lower side in terms of cost, Much lower. Only the machinery cost will be there. The shed is already made. The back end is already made. The warehouse is already made. So it will only be the machinery cost. So it will be half the cost of this expansion. So at current share, what we are making, can we reach 20, 25 going forward in terms of capacity? Yes. In the same share, we can double our capacity. So from 12,500,000 square meter, we will be able to produce 25,000,000 square meter in future.

53:01 Next question is from the line of Karan Batilia from Asian Market Securities. Please go ahead. Karan, your line is unmuted. Please proceed. Yeah. Hi. Good morning. Thanks for the opportunity. Asamji, I wanted to understand your views on slabs and surfaces market. How is that market shaping? How is the Mobi expanding? And how are we shaping for these two categories? Karend, may I request you to please tell me your line?

53:56 Yeah. Repeat my question. Sir, I just wanted to understand how is Kajaria's and surfaces market shaping in Murbi? And how at Kajaria we see this category growing? And how are we shaping ahead for this? So we already have two customers North and South plants. And the slab and surface market is increasing, but not at a very high pace. So we have these equipments which can produce both slabs and the regular tiles, and we do it as and when we need to. But yes, going forward, we are also concentrating on these tiles because that will give you a better value realization. Got it. Got it. And since there are no follow ups, any closing remarks that the senior management want to make?

54:48 No, I think we have seen a very positive scenario from here on. Karim, thank you. Thank you very much for organizing this. I think it was good set of questions which came from the investors. On my behalf, on behalf of the entire group, I would like to thank you and wish you a very, very happy Diwali to all of you and look for a future interaction more and more. Thank you. Thank you. Thank you. Thank you very much. On behalf of Asian Market Securities, that concludes this conference. Thank you all for joining us today and you may now disconnect your lines.