Greenlam Industries Limited (GREENLAM) Earnings Call Transcript & Summary

Good evening and a very warm welcome to all for the Investors and Analysts Meet 2023 of Greenlam Industries Limited. I'm Manasi Bodas from Strategic Growth Advisors. Today, we have with us on the dais management represented by Mr. Saurabh Mittal, Managing Director and Chief Executive Officer; Mr. Ashok Sharma, Chief Financial Officer; and Mr. Samarth Agarwal, VP, Finance from Greenlam Industries Limited. We will first take you through the presentation, which contains overview, key strategic initiatives and growth drivers. After the presentation concludes, we will be open to take questions from the audience. I would now request Mr. Saurabh Mittal to address the audience. Over to you, sir.

Good evening, friends, and a very warm welcome again from my side for the Analyst Meet and Investor Conference. Samarth and Ashok will take you through the business presentations. And I'll be happy to address your queries and questions post that. So I'll hand over the dais to Samarth now, and then following which, Ashok will take you through the numbers. Samarth?

Thank you, sir. Good evening to everyone. Thank you for taking out time from a busy results season and to hear us out. We'll just go through the presentation in a brief. The presentation is already uploaded on the Stock Exchange, and I hope you've got a chance to look at it. So we'll just start with the presentation on a brief note that what we have done and how the business -- we have structured the business for a multiyear and a sustainable growth outlook that we have. Yes, on the -- so over the last 18 months, we have done -- executed the projects. We have announced the projects in December'21. We have executed them. A couple of them has been on stream. One of them is under construction. These have been a record delivery in terms of times, where we have demonstrated how we have set up the plywood unit in Tamil Nadu, Tindivanam, and how we've done the laminate unit in Naidupeta, Andhra Pradesh. These commissioning demonstrates that the company is dedicated to look at maintaining capital efficiency and continuing to add shareholder's value and making a sustainable growth over the next period of time. Just to give a glimpse, the capacity that we have in the laminate business was about 15.62 million sheets. And over the last 18 months, this has increased by almost 57% to now 24.52 million sheets, which is by adding -- by acquiring and turning around a plant in Gujarat, which is in Prantij, which has a capacity now of 5.4 million sheets; and in Naidupeta, Andhra Pradesh, which has a capacity of 3.5 million sheets and boards. With the Naidupeta unit, we also introduced our second large size of laminates, which is 6 by 14. Earlier, we had 6 by 12 with Nalagarh. Now we have added 6 by 14. This Naidupeta plant and Prantij plant, both are proximate to the port, one on the Western side and one on the Southern side of the country, which gives us a leverage in terms of quicker turnaround times and in terms of quick delivery and servicing the customers. So just to give a brief of who we are and what we have done and where we started all this journey almost 3 decades back now. We laid the foundation of our first laminate unit in Behror, Rajasthan in 1993. The laminate business has been spearheaded by Mr. Mittal, sir. Over the last 2.5 decades, he has been involved deeply into the business, with a professional team running the show here. We have -- from a 2 manufacturing unit, we have now 5 units, one in Behror, Rajasthan; Nalagarh, Himachal Pradesh; Prantij, Gujarat; Tindivanam, Tamil Nadu; and Naidupeta, Andhra Pradesh. The products that we manufacture in the wood panel industry from a substrate, which is now plywood, to laminates, veneers, floorings and doors. Since we are a large exporter in the laminate business, the certifications that we have, the standards that we maintain in terms of our certifications, which goes to matching the European standards to the Asian standards, we have all our PEFC, FSC certifications in place, and we can be as good as any international player on the laminate business. So a true leader in the business, we have the largest capacity of laminate as of now. We are the largest exporter of laminates for the last 12 consecutive years. And we are the only manufacturer of real wood floorings in the country and the first organized manufacturer of engineered doors. Again, a first in the industry that we have been funded by International Finance Corporation for our project in Naidupeta, Andhra Pradesh. That's one of the first things that has happened in the wood panel industry. We have a very eminent Board, which has been very engaging, highly value-additive. We have added members in the Board, led by Mr. Shiv Prakash Mittal, sir, who is the Non-Executive Chairman; Mr. Saurabh Mittal, sir; Parul, ma'am; Sandip Das-ji; Matangi, ma'am; Yogesh Kapur-ji; Rahul, sir; and then Mr. Jalaj Dani, sir. So all these Board members are actively providing their inputs to the business as well. So on a growth journey, if you look at it in the '93 when we laid the foundation of the -- our first Behror plant, then in 2005 -- sorry, in 2002, we started the decorative veneer business. In '05, we started the first international subsidiary. Then in '09, we set up the Nalagarh unit, the second laminate plant of the group or the business. Then we have set up these subsidiaries in U.K. in 2012. Then the major event happened, which is the demerger in 2014, October 2014, precisely 9 years from today's date. Then in 2019, we have added another -- we have acquired another company in Switzerland. And we have incorporated Greenlam South, under which we are doing the large CapEx plans as of now. Then we have acquired HG Industries Limited, which is having the plywood unit and is actually on a verge of getting merged with Greenlam Industries. And then we issued our first listed NCDs in 2022 and acquired Prantij plant and successfully turned it around as well also. We raised equity in 2022 for -- to the extent of INR 195 crores. And then we have -- in 2023, again, we have commenced the production for the plywood as well as the laminate unit. So this is the journey that we have gone through in the last 3 decades, which is, again, setting up the show for the future to come. A glimpse of our major brands here, led by Greenlam Laminates. Under the laminate brands, we have Greenlam Laminates and NewMika. Then we have clads. Greenlam Clads brand for the interior and exterior clads. And then the Sturdo brands, which does the restroom cubicles and the locker solution. On the wood business side, we have Decowood Veneers, again, a flagship brand for natural, engineered and teak veneers. Then you have Mikasa, which handles the door, floor as well as the recently launched MikasaPly brand as well. Coming to the products. I'll take you through the individual products that we have and how these products are relevant and have created the business. The flagship business or the majority of the business that comes from is the laminate business. Laminate, as we all commonly use in all our day-to-day furnishers and our interior works, is -- comes in various thickness, sizes, finishes, textures and right from 3 feet-by-7 feet to a 6 feet-by-14 feet sizes that has been recently added. And over 10,000 SKUs that we do, which comes into various finishes, which is your matte, suede, gloss, your super gloss. And your thicknesses, which can range from 0.6, 0.7 mm to as high as 25 to 30 mm as well, which is used for manufacturing your cubicles, your restrooms, your locker solutions. It has various applications in your day-to-day interiors. You can use it in furnitures, you can use it for your facade claddings. You can use it for your interior paneling. And practically all your surfacing solutions, laminate has an answer to it. Coming to the clads, which is your interior and exterior clads. This is one of the more sustainable products and an alternative use for your facade cladding. A highly appreciated category creation in the industry, wherein your exterior -- your home exteriors can be beautifully facade with the -- using the laminate. So these are more sustainable. These are anti-graphite, these are anti-dust, pollution, UV rays-protective, comes with a large warranty from our side. And clad has been -- clad and the Sturdo business, which is your restroom cubicles, which is covered here, is a kind of a category creation itself. So these are being widely used in the international market, and these are being adopted now in the domestic market, and kind of opens up avenues for higher usage of -- an alternate usage of laminates in various forms and sizes. On the restroom cubicle side, we have just now launched a latest collection and a refreshed -- complete refreshed collection of our restroom cubicles. A couple of samples have been placed at the back. We would love for you to see those samples and catalogs. These restroom cubicles have been designed by the eminent British designers and comes in different shapes and from an application perspective. Also, these -- along with these restroom cubicles, we do provide shower panels. We do provide standing benches, stand-on platforms, benches, vanities, et cetera, which can now be made using our compact laminate. So that can be one of the larger usage, again, a category creation there, where you can make higher usage of laminates across the industry. Coming to melamine-faced chipboard. Right now, we don't have the motherboard production facility, that is under construction, when we do with the particle board coming up in the Naidupeta. Right now, we only do a lamination on the chipboard. We buy a chipboard and do a lamination and sell it as a complementary product to an OEM segment. And melamine-faced chipboard is one of the largest used product in the furniture industry, in the office fabrication, in any of your ready-made furnitures, all your office interiors, your kitchen works, your furnitures can use melamine-faced chipboard, which is pre-laminated particle board also, as we call, and being extensively used now. Coming to the wood category, again, veneers led by decorative Decowood Veneer brand, is again the largest in the industry that we have. Decowood Veneers comes under 3 subcategories, which are natural veneers, engineered and teak. Again, an alternative to laminates, which is an expensive, obviously, it is a natural wood, which is applied on your furniture or your premium housing, premium offices, your premium areas where decorative veneers can be used as a furnishing or a surface product. On the engineered wood flooring. Again, we are the only manufacturers of engineered wood flooring in the country, wherein we use the entire -- the top layer of the product is the veneer. The bottom layer is made out of the pinewood. It's a real wood flooring that is an alternative to the flooring requirements, keep your floors cool, keep your -- and gives you a very aesthetic look of the floors. This is one of the premium -- used in the premium housing and the premium condominiums, the flooring segment here. Coming to the engineered wooden doors and frames. Again, we are the only organized manufacturer of this category in the country, where we manufacture those which are used in hospitality, used in education, used for your -- any public areas, your interiors, your house doors, et cetera. So we have -- unlike a traditional doors, which are made on the site, we are doing it in off-site where we manufacture the entire door at the factory. We're using CNC machines and these are made to order sizes and that can be installed at the projects. So these are largely B2B business, wherein these are not retail where we are present and where 5- or a 10-door order can be taken, but these are large project businesses, where we take larger-size orders. Coming to the recently launched product, which is plywood. This facility is based in Tindivanam, Tamil Nadu, the single largest location manufacturing of plywood's with a capacity of 18.9 million sheets. This comes in various size, again, and thicknesses. And can be, again, a substrate product, which can -- which is giving us migration from a surfacing solution company to a substrate company now. So with this and with the particle board getting added in next year, we will be an integrated player, wherein we provide substrate solutions as well as the surface solutions also. So on the plywood, again, this has been -- the quality has been very well received. We manufacture 100% calibrated plywood. And again, plywood is a very, very widely used material in the wood panel space. So coming to the green credentials. Again, as I said, that we being the largest exporter of laminates in the country, and we export to length-and-breadth geographies across the world. Our certifications do match any level of international players, wherein either it's a European standards or an American standards and a couple of certifications like we are certified. Our products are largely certified for IGBC Green Building. We have Greenguard Gold and, again, Greenguard certification and so on and so forth. So these certifications make the product comparable to any of the international players that you have. Now again, one of the important slides there, wherein you find the -- you will find the capacities consolidated. We have 5 manufacturing units, led from North which is in Nalagarh, Northwest, which is Behror, Rajasthan. Then on the West, which is Gujarat; and then Southern, there are 2 factories, one is in Tindivanam for plywood; and then one in Naidupeta for laminates and particle boards. Out of this, 4 of the factories or 4 of the plants produce laminates. Except for Tindivanam, all of them has laminated production facilities. We have the largest capacity in the country for laminates, which is 24.5 million sheets per annum. Again, for the decorative veneers and veneers floors and doors, the capacities are 4.2 million square meters for veneers, 1 million square meters for floors and 120,000 doors per annum. And door, floor and veneers are in Behror only, which is in Rajasthan plant. Rest of the plants are largely laminates and one is in Tindivanam for plywood. So particle board plant that we announced shall come up by quarter 4 of this financial year. This is again based out of Naidupeta. We have our corporate office in Delhi. And we have 2 experience centers that we have created, one in Kolkata which is the eastern part of the country; and one in Ahmedabad. So these experience centers kind of displays all the products and the applications that we have and gives customers a one-roof display of all the interior requirements that you would have. And so this is -- all this infrastructure is supported by 9 regional distribution centers, which are strategically located across the country. And our staff or our employees, which are there almost in 200-odd countries present on ground, which are working in terms of generating the business. And this is largely supported by the overall employee strength, which is roughly about 6,500-plus as of 30th September. So photographs, pictures of our manufacturing units. The first one in Behror on top of left. The right one is Nalagarh, Himachal Pradesh. The last -- the left on the bottom row is Prantij, Gujarat. The middle on the bottom row is Tindivanam, Tamil Nadu. And the right one on the bottom row is the Naidupeta plant. So all of them -- yes. Coming to the global footprint. As we are widely present in Indian length and breadth, we are equally widely present in the international market as well. We have 8 operating subsidiaries and 15 regional offices that we have, almost 130 people working on ground for us across geographies and exporting, which are helping us in exporting the products to more than 100 countries across the globe. So as you can see, right from America to Africa to South America to Middle East, Europe, U.K., Asia, we are widely present across geographies, and the material is either sold or redistributed across. And all these sales happens predominantly in our own brand. We don't do large part of white labeling. So mostly, we have built those distribution globally as well, wherein we are selling under Greenlam's brand. And people know the brand, the product is established. The market opportunity is pretty large. That way, as exports have been almost 50% of our laminate business over the last so many years, I think that market also remains very important and strategically important for us, for our growth. Just to give you a summary on the market sizing, what we estimate, again, no numbers here in terms of any reports and all, but largely from our own estimates, we say that the domestic market of laminate is roughly INR 12,000-odd crores, with INR 3,000 crores exports happening from India and INR 9,000 crores is the domestic consumption. Out of this INR 9,000 crores, again, we kind of -- we believe that INR 3,000 is the unorganized segment and INR 6,000 is the organized segment to which we are a part of. In terms of the market share, if you look at it, 15% is largely the share in the domestic organized market and 25% is the exports from India happening. So we're the largest exporter and holding almost 25%, 30% of the market share for the exports happening from India. I think more than this is the opportunity, which is on the international scale. Internationally, we estimate that the laminate market is roughly $8 billion. That is poised to grow to roughly $10 billion to $11 billion as we move ahead. And that market presents a large opportunity, wherein we have invested in, for the last so many years in terms of building the infrastructure, that can -- so that the leverage can be taken in order to exploit those markets, make a -- reach more deeper and kind of address or kind of make more meaningful inroads in each of those markets as we grow. So roughly, what we export as of now is $115 million is the international revenue that we derive from the laminate international markets. So these figures are mostly on the March side -- as of 31st March, we've updated as on September. So the last 5-year summary of the financial numbers, how we have grown consistently over the years since '19 to '23, except for the COVID year where the degrowth was, which I believe was there for across the industry. But apart from that, if you look at it, the margins have been quite stable, except for, I think, 2022, where we saw a dip on account of raw material fluctuations that we had. It's quite a significant raw material fluctuation actually. And if you look at the ROCE, again, these ROCE have been computed without taking into account the capital that is deployed for the projects that we have undertaken in the last 18, 19 months. So except for that project capital employed, the ROCE has been pretty healthy across a 17%, 18% band. And return on equity also. We raised equity last year in FY '22-'23. And hence, you find that the base is higher in terms of the equity. And hence, the ROE numbers look to be a little subdued as of now. But as this capital gets on to -- we sweat this capital more by way of manufacturing, we believe that our numbers and the ratios are -- can significantly improve from this from hereon. So coming to the fact that whatever we have invested or we're investing, how the prospects look like and what is the address or the market that we're looking at. Just to give you a glimpse that we have been a surface solution provider. We are now looking to become an integrated player in the wood panel industry, where we provide the substrate as well. So plywood is already there, particle board is -- shall come in some time. So with this, the building blocks of the wood panel, which is your plywood, MDF, particle board, laminates, so all these categories where the entire wood panel industry stands, we want to be a meaningful player in terms of the substrate as well as the surface solutions and become a mark of respect and a mark of recall, where Greenlam becomes the flagship recall brand across segments and across categories that we operate at. So again, from a domestic addressable market. Earlier, if you look at it, our opportunity was only laminates and veneers, roughly INR 14,000-odd crores kind of addressable market, which now, by the addition of plywood, stands at roughly about INR 44,000 crores. Plywood we believe is -- continues to be the largest market size as of now. While the MDF and particle board is also growing, but I think plywood, since being an age-old product, has been the category leader till now. But -- and as we see that the more evolvement of online furnitures or more organized carpentry goes on, you would see that the share of the other substrate product will also rise. And with the experience in the decorative space that we have, I think we have a -- we are very well poised to take on this opportunity and grow as we move ahead. And once the particle board also comes on stream, I think the addressable market will be roughly about INR 49,000 crores, INR 50,000 crores, which was roughly INR 14,000 crores. So now you can look at the kind of opportunity we are looking at it and the kind of the depth in the business that we have and the ability to address these market opportunities in a meaningful manner that will help the company to grow forward. So what we are doing with our earnings? I mean where the earnings are deployed? How we are looking at it? So if you remember, in December '21, we undertook one of the largest investment cycle of our history with almost INR 1,200 crores of CapEx being deployed, which will kind of double up the gross block that we have as of now. And these investments are poised to really provide a future of the growth in the space that we operate. So that's the largest investment that we have done as of now, which will broad-base our revenues, move from the laminates, move from the surface to the particle board to plywood, which is your substrate products, extending beyond 2 locations now to 5 and entered the Western India and the Southern India also. These manufacturing units being strategically located across country helps you to kind of service the entire nation across geographies. And not even the domestic space, but also on the international front, where the proximity to port will help you in terms of servicing the customers and do the -- catch up on the international market opportunity that you have. So why we are optimistic and what makes us so confident about these investment, these large growth phase that we have? It is largely -- the India story seems to be poised for a multiyear expansion. We believe that this is going to go for a while. The manufacturing across segments across has just started. We're seeing CapEx cycles across. I think this will drive some sort of demand there. Again, the demand for residential and the commercial space has risen, be it the residential houses or the commercial applications, which is your hospitality, education, IT, health care, et cetera. So we are seeing a surge the real estate that way. Post-GST, I think there's a move towards the -- more the organized sector. People are moving or liking brands or more the organized sector. There are higher compliance issues, which are making life difficult for the unorganized segment. And that creates -- largely creates a way for the organized companies to grow higher. Particle board sector is kind of an inflection point, we believe. We saw what happened to MDF about a decade back when MDF was started. We believe that with the online furnishing -- or sorry, furniture market, more organized carpentry, more mechanized carpentry happening, I think even the particle board is at the same similar kind of an inflection point and will grow as the category expands, meaningful player comes in and the offering becomes more qualitative rather than being quantitative as of now. So Indian consumers are also recognizing brands and are willing to pay price for a quality product. They recognize, they understand that branded players, large players offer quality, and price points can be a secondary matter for them. And they also want that there should be a single shop where you can have all the products which are made available. So that kind of things helps you in terms of leveraging your product portfolios. Yes, so that's on the domestic front that we have. On the international markets. Again, international opportunity is very, very large. We have been present in the international markets since 2005. We had made meaningful infrastructure, people and play there. And that kind of leverages us in terms of making a meaningful revenue from the international markets. As you see, almost 50% of the laminate comes from international market laminate business. And that market is something which is very wide in terms of their -- its size. However, that opportunity is yet to be catched up. And for us, for players like us, where we exploit those markets more, make our reach more efficient, more deepen and kind of expand geographies and all. And also, India, as a manufacturing hub, has been recognized as a large laminate exporter -- quality laminate exporter, wherein Indian players are more respected. They are predominantly the first recall or an option with the international plays or substitute for the international markets. Then cost of production in the international market is unfair. They are finding it difficult to sustain. We have seen a lot of geopolitical issues around. We've seen inflationary issues in the large economies, which makes a dent on the local manufacturing. Again, giving a flip to players like us to make more meaningful inroads. Larger size of laminates that we have introduced. Again, that's a category we have been unable to service earlier. But now with that 6 by 14 size, and a combinations therein, I think we are poised to reach out to a large segment of customers which were missing earlier. And with the 2 plants located, one in West -- close to the Western ports and one in the Southern ports, the Naidupeta is very close, about 70, 100 kilometers from Chennai or from Kattupalli ports and all. That makes your lead time very, very short, quicker turnaround time, faster servicing and the easy access to the -- to shipping out your products across. And also, as I've already said also, we are equally well certified in terms of the quality and the certifications, as any other European or an American player would be. So on the investment side, again. What Greenlam has achieved in the last 8 years since the demerger, we're kind of looking to replicate that in a much shorter time now. We have charted out a 5-year growth strategy in 2021. We are on that stream and kind of achieving that in time. We'll position ourselves as an integrated surface and a solution -- surface as in a -- sorry, a surface and a solution provider. And I think the brand that comes in will be a much more respected brand that will command a premium in the markets. So where we were present were only laminates, floors and the veneers. Now with the investments, we would have particle board and the plywood also coming up. So plywood has already started. Particle board will again be there by the next year. So coming on to the business update. On the laminate front, the Pradesh plant that we acquired in June 2022 with a capacity of 3.4 million sheets was upgraded to 5.4 million sheets in May 2023. That plant has been turned around in a record time and now operating almost at 100% capacity utilization. Again, this plant being near to the Western Port, also opens up our opportunities for exports from that plant. This has strengthened the company's ability to service products and segments, which were not there earlier. So we were not on the commodity side, so we can have a large meaningful play on the commodity side as well. However, having said that, this plant not only manufactures commodity laminates, but also on the mid and the premium side also. So practically, we are not differentiating amongst our plants that what is being manufactured at what place. Gradually, and over the time, all these plants kind of manufacture as per the need of the hour and as per the product that is required. On the plywood, again, which is in Tindivanam, Tamil Nadu. This is the single largest location plywood unit, with a capacity of almost 18.9 million sheets -- sorry, million square meters per annum, my apologies. This is -- commenced operation in June 2023 now. And the brand name under which the plywood has been launched is MikasaPly. Again, in the mid- to the premium segment, you can all see the plywood samples outside on the back of the hall. So again, this belt again -- this plant, again, is being near to the agroforestry belt. So since plywood requires a lot of wood or agroforestry wood, that is being serviced from your Tamil Nadu, Andhra and Karnataka belt, where you get the agroforestry wood and then convert that to a plywood. So that kind of helps us in achieving the raw material mileage also. This plant is closer to those belts and all. And the southern market is the largest market for any product, we believe, in the wood panel space, including plywood. Even for laminate also, the largest market for us is the Southern market only. And we believe it is one of the more faster adopting market for mechanized furniture market for more organized carpentry, which helps you in terms of position yourself as a meaningful player in those markets. Just one thing to note that the plywood that we produce is 100% calibrated, which is a must and an essential -- and which gives you a better surface finish, which is a very must for any kind of mechanized manufacturing that you do. And this -- the product has been very well received by the channel partners. That's the feedback from our end. I think we would love to hear any channel checks from your end as well. On the laminate side, so this is the fourth laminate plant that we've added in Naidupeta, which has a capacity of 3.5 million sheets and boards. Why we say boards because we are making a larger-sized laminates also here, which is 6 by 14. And this -- the investment that was done till the time of the commercial production was INR 238-odd crores. With this manufacturing facility coming up again near to port kind of servicing, helping us and servicing the customer of higher churn of inventory, faster -- lower lead times, both in imports as well as exports, and a quicker inventory churn. So we believe that this will play a very vital role in, again, expanding the international footprint and servicing the international market as well as servicing the domestic markets from this plant. So we have now, from the north plant, we can strategically look at service the northern part, the southern plant can help in servicing the southern, western being the -- from the Prantij. So I think healthy mix in terms of the manufacturing presence that we have. One more thing to note here is that both Prantij plant and Naidupeta plant has been built with a vision to keep in mind that both these units can take multiple rounds of brownfield expansion. We have additional space in both of these units. As you are aware that both Nalagarh and Behror, we, right now, cannot do any further expansion because of space constraints. Howsoever said so, the Naidupeta and the Prantij plants has space, which can undertake multiple rounds of brownfield expansion as we move ahead. And the capital outlay that will be required will be very low in terms of your CapEx plans, which will help you in eventually looking at better returns in the longer run. As we have seen in Nalagarh, we started with 3 press, we've now at 6 press, we've done a brownfield expansions in that unit. Similarly, we can do in Naidupeta also and in Prantij also. So that way, the future needs of the laminate capacity has been taken care of. And with the minimal capital outlay, we can add capacities in a quicker time, which can help us in expanding more. So on the particle board side, this plant is right now under construction. Right now, we have a melamine faced chipboard unit in Behror, wherein we only do a lamination, as I said earlier. But with the motherboard production facility coming up in Andhra Pradesh, we will be able to leverage and provide a higher value proposition to the consumers, especially the OEM segment, the organized carpentry and the mechanized furniture fabricators, wherein largely the ranges that we can offer, the color, the decors, being a large laminate player, will be significantly value additive, and we are very confident that with this investment, we'll be able to leverage the particleboard as a product category. The capacity that we are putting up is roughly 2,31,000 CBM per year. And this will be a state-of-the-art European technology that -- and a continuous press line that will put up in Naidupeta, which can be an equivalent to any international particleboard player that you might see. So again, particleboard being agroforestry product is made out of agroforestry wood. This plant, again, being based in Andhra Pradesh, is closer to the agroforestry belt of Andhra, Tamil Nadu and Karnataka, which helps you in kind of leveraging the raw material from these belts, which is very important as the wood is the major consumed RM in the particle board. Further, we would also looking at taking plantation activities in the nearby region, which can help generate sustainable RM sourcing as we move ahead. So again, coming to the demand drivers, these are largely where the change in the urbanization that is happening, the rapid modernization, demographic dividend that is there. We believe these demand drivers kind of takes you forward in terms of generating the demand for housing, which, in turn, turns around your demand for the products of our category and the commercial spaces as well. Higher demand in construction and hospitality, education, health care, IT offices. So these all are related areas wherein the products -- our products, including laminates, veneers, floor, door, particleboard or plywood can be effectively used. Again, government is also looking to push some furniture parks in the southern states, which can be impetus to leverage more on the wood panel industry. And again, as a significant export opportunities in the export market is a fairly large market, where it is yet to be exploited and you have larger meaningful inroads to be made in those areas. So in the end, I think what we started in 2021 is guiding us to move ahead. And we have embarked on a journey, which we call as Next Orbit, which will make us larger in terms of our product offerings, in terms of our portfolio, more profitable, more sustainable growth for more decades to come. And that's where the foundation of Greenlam, which was late 3 decades ago, and which is being reinvented now to give you a meaningful growth for the future. So I think with this, we start with the financial numbers. And I'll hand over to Ashok, sir, to take you through the financial numbers.

Thank you, Samarth. Good evening, friends. I'll take you through the financial statement for the quarter and for the half year. So in this quarter, for the first time, we have crossed the INR 600 crores of sales in a quarter. So on a year-on-year basis, our revenue has increased by 16.5%; on a quarter-on-quarter basis, it is increased by around 17%. On a half year basis, the growth was 13% and stood at INR 1,118 crores. On EBITDA front, we could be able to grow our EBITDA by around 41% on a year-on-year basis and by 17% on a quarter-on-quarter basis. On a half yearly basis, EBITDA grew by around 35%. Our PAT was higher by around 35% on year-on-year and around 22% on quarter-on-quarter basis. On a half yearly basis, PAT has grown by 33%. A glimpse about the balance sheet, which is -- borrowing has gone up since we are investing into the new project. But -- so I'll move on to the segment. Laminate and Allied segment, which is our biggest segment. Here, our revenue has gone up by 13% on a year-on-year basis and 12.5% on a quarter-on-quarter basis. And on a half yearly basis, it has gone up by 11%. Gross margin was up by 730 basis points on year-on-year, and it is down by 40 basis points on quarter-on-quarter. EBITDA for the quarter stood at INR 87 crores, which is around 52% higher than the last quarter -- last year same quarter. And on quarter-on-quarter, it is up by 25%. EBITDA margin stood at 16.4% in this quarter as compared to 12.1% in Q2 last year, a growth of 430 basis points. And on a quarter-on-quarter basis, it has grown up by 160 basis points. Capital employed in this quarter has gone up to INR 778 crores since we -- our Naidupeta laminate plant has come on the stream on 29th of September. So there is only 2 days of commercial products which has started. So there is no sales or revenue or profit, which has been added in this, but the capital employed has gone up. This is in terms of quantitative details, so we are at 94% of capacity utilization. Our production was around 5 million sheets, which is highest so far. So this capacity utilization in this -- since the Naidupeta unit has come for the 2 days only, so we have a capacity utilization we have calculated without that. And sales for the quarter was 4.93 million at an average utilization of 1,034 in comparison to 1,059 last year same quarter. In comparison to quarter 1, the average realization has gone down by around 4.8%. I'll move on to another segment, Veneer and Allied segment, which consists of decorative veneer, Mikasa doors and Mikasa floors. In this, the net revenue stood at INR 57 crores, a growth of 23% over last year same quarter and around 35% on a quarter-on-quarter basis. On a half yearly basis, the growth stood at 15%. The gross margin has also gone up from 37.4% last year same quarter to around 43%. And in comparison to quarter 1, it stood nearly at the similar level. EBITDA loss has come down to INR 1.4 crores in comparison to INR 3.2 crores last year same quarter and from INR 1.6 crores in the quarter 1. At the half yearly level also, the loss has come down to INR 2.9 crores as compared to INR 5.6 crores last year. Capital employed has also come down from INR 193 crores last year to INR 180 crores this year. This is in terms of decorative veneers' quantitative details, wherein the production has gone up by around 5.9% in last year and 58% in comparison to quarter 1. Sales for the quarter was 0.39 million square meters, which is similar to last year. However, from the quarter 1, it has gone up by around 43%. Moving on to the newest segment, Plywood and Allied segment, which, particularly, this was the first quarter in which the full production was available. So we are in the process of ramping up the production as well as the revenue in this segment. For this quarter, our revenue was INR 15 crores. And practically, this is the revenue for the H1. Gross margin was around 40%-41%. And there was an EBITDA loss of INR 10 crores. Since this was the first quarter, so the initial expense of sales promotion as well as the entire segment has to ramp up in terms of that. Capital employed in this segment is INR 175 crores. And the capacity utilization for this quarter was 16%, with an average realization of around INR 239 per square meter. In terms of operating parameter, which is net working capital, this quarter, our net working capital days was 60 days in comparison to 69 days in the quarter 2 last year and 72 days in the quarter 1 of this year. On a half yearly basis, our net working capital days has come down from 72 days to 64 days. So with this, even the -- in the increase of revenue, we are able to manage our working capital with a lesser amount of nearly at the similar level of working capital. In terms of debt position, which has gone up significantly in comparison to last H1, from INR 75 crores net debt to around INR 670 crores net debt, but this is predominantly on account of -- primarily on account of investments, which we are doing into the newer project. Return ratio in terms of ROCE and ROE. The capital employed, which you can see, 1,380, which is minus the Naidupeta particleboard unit, we have added the plywood capital employed as well as the capital employed on account of laminate -- Naidupeta laminate also unit into this. With this, the ROCE comes to 18% for this quarter as compared to 16% last quarter. And for the half year, it is 16.4% as compared to 15.3% last year. Return on equity stood at 15% on the expanded capital after we raised the capital in the last year, INR 195 crores. This is what all from the financial side from our side. Now I would like to open the house for the Q&A. Thank you.

Thank you, sir. Now we will start question-and-answer session. [Operator Instructions].

I'm Mihir from Ambit Asset Management. So my first question is, we've seen some uprun in CapEx costs in almost all your projects, all your 3 projects, which we've seen, anywhere from the tune from 20% to 30%. So what's driven that? And how do you look at incremental return on capital employed on your incremental gross block because of that? So has the capacity and your revenue projections still remain the same? Or how do you look at it?

So I'll take that question. So one is on the -- if you see -- if you go one by one, in laminates project, we are, right now, at about 94% utilization without the Andra Pradesh factory, which just started end of September. And if you add the Andra Pradesh capacity, we are hoping that in the next 6 to 9 months, we'll again come to 95%, slightly shy of 100% utilization. So we are building additional space at the Naidupeta plant in terms of physical space and also building additional utilities or higher capacity of utilities like the resin plant, boilers, storage space. So our guess is, maybe in not so far future, we'll have to add some more capacity of laminates. So we're kind of getting ready in a way for that. So that's added to the incremental capital expenditure. So when we put the next line of presses or next lines of presses in the Andra Pradesh plant, the incremental CapEx will be not so high, it will be a smaller CapEx. We have demonstrated that in the past also in both Behror factory, Rajasthan, and Himachal. So that's on the laminate story. On the particle boards, we had started with the lamination line and the main production line of particle boards. We've added certain features in particle boards with different kind of densities, some different dimensions of particle boards, doing some value-added categories in particle boards, which have been very successful in Europe, which is with textured products with larger widths. So that's added to some additional capital expenditure in particle boards. And there, too, we have space in Andra Pradesh plant to add one more board line and one more lamination line. So I think it's a mix of capability building, some capacities getting altered and certain other infrastructure costs getting added. Like earlier, we have planned for a 33 KVA line, and now we're going for 132 KVA line. So some infrastructure is being expanded. Considering the positive future, we think about the business and the plant. If you go for the plywood factory, again, there has been some capability building in terms of some process in improving the quality of plywood. When you cut the plywood, all the layers of veneer will look in a uniform color and you can probably see that, which today, no other branded player has in the market. And there is some more additional infrastructure being built in terms of housing, et cetera, in the plant location. As far as the revenue potential, the justification of return ratios, we don't think that's going to get altered in any manner.

I'll just ask in an altered manner. So your particle board CapEx has kind of gone up. Would you still envisage 1x asset turns on your incremental CapEx? Or would it still be only a INR 600 crore incremental revenue? Because you said that you added value-added products, so is there a revision in that guidance?

So particle boards with the capacity we're installing and the value mix -- the value mix, return in terms of getting the right percentage of the value mix of products might take some time. But with the kind of capacity we are putting in, we can expect, on a near full capacity, INR 700 crores to INR 750 crores of revenue because particle boards, about 80% to 90% particle boards is sold as laminated boards and not as bare boards. So I think -- I hope that answers your question.

Sir, congratulation on great set of numbers. Just a follow-up on the last question. So what sort of return ratios you're looking at now particle board, whether the margin which you are saying would be like 20%, 25%, will it also increase because of change in dimension? And third year would be the right way to look at the ramp-up plant of particle board?

So 20%, 25% EBITDA margin, we think, is sustainable. If the value mix contribution expands, it can inch up also. And I think third year should be a fair expectation for the board line to ramp up. I think that's a fair expectation.

Okay. So what is your sense on the import of particle board, how big it is?

I don't have that data with me. Ashok-ji, if you have that data with you...

So the last what we have seen, it was in the range of around INR 300-odd crores for the period. Exactly, we need to see the -- because the situation keeps changing. One thing which you need to understand in this -- in the particle board, most of the import what happens is happened for the bare board in terms of the door, which is most like a commodity and like. And our intention is to sell more and more the prelam board than the bare board in terms of that. Where the competition is not from the imported, it is in terms of you need to improve, you need to penetrate -- we need to penetrate in terms of deeper into the consumer segment kind of a thing in terms of that. So it is not a like-to-like comparison because anybody who will import the particle board, ultimately, this needs to be prelaminated and get sold or consumed into the market.

Got it. Good to hear that the Prantij plant is operating at optimum utilization. So earlier, you have guided that the margin from this plant would be less versus your normal margin. But in your number, we can't see any impact, so whether the plant is performing better than your expectation?

So you could say that partially, that I think we've done better than we communicated. But that doesn't happen always. So -- and also certain product mix has also got altered in that time. We also enhanced the capacity, as you are aware. So even production has went up there, yes.

Understood. Lastly, I forgot to say my name. I'm Keshav Lahoti from HDFC Securities.

Sir, why the particle board plant is coming in South, why not in other locations? Because as you rightly said that there is a lot of import of the motherboard, the chipboard, if we call it, at the South ports. And -- so why is that? And secondly, on the plantation -- so first answer this thing, I'll...

[indiscernible]

On the plantation side, like you mentioned that you'll be doing the plantations as well, taking [indiscernible], so on that.

So I think we tried to explain this in the Next Orbit presentation. So multiple reasons why the plant is first coming up in South India. So eventually to serve the entire country, one plant may not be enough at some point. But initially, it's coming up in South India. Of the first plant is coming South India, considering several factors. Availability of raw material being one the most important factors. So Andhra Pradesh, Tamil Nadu and Karnataka have meaningful agroforestry plantations, which can be used for particle board production. Particle boards can also be produced out of waste wood, fire wood, chips of various wood species. You don't need only one specie to produce a particle board. Unlike maybe in MDF, you can mix wood and you can use that. So [indiscernible] availability of raw materials is there. South India constitutes about 45% to 50% market consumption of particle boards, considering the number of furniture plants, making office workstations, cabinets for the IT offices, shop fit-out furniture plants, kitchens. So there's a good consumption of -- maximum consumption is in that region. So I think raw material availability and consumption of boards, I think these were the 2 large factors besides the fact that we wanted to put up a plant where from one location, you can do compact laminates, you can do laminates and you can do prelam particle boards. So most large projects of offices or even this convention center, people want compact laminates for bathroom partition, they want laminates for paneling like you see this here. And they need a same color matching of the office workstation. So the idea was to also combine a location where we could do all. So considering raw material, proximity to port, export potential, South India market, South being the largest market for laminates and for particle boards, that's how we kind of chose South India to be the location.

Export potential you said...

Export for laminates because -- and even chipboard, it depends in certain countries which don't have motherboard manufacturing because countries in Middle East, Africa, where there is no wood available, they end up importing the particle boards from Europe or from Southeast Asia. And we already export laminates to those markets. So there could be a potential of chipboard exports at some point.

Can we match the [indiscernible] numbers on...

So our model will be really more laminated particle board and not plain boards. And we already have partners in those markets selling our laminates. So many partners in this region use our laminates and compacts, and they're importing prelam particle boards or prelam MDF from European companies. So it will be a laminated model, not a plain board model.

And going forward, are we thinking to integrate ourselves with some kind of an OEM like Merino is doing with IKEA in that maybe -- just to start with the cut boards, not the full furniture. Would we be thinking on that side as well?

So our initial plan will be to sell laminated boards to furniture makers or to OEMs. We are not looking at integrating with them as yet, but we would be shipping them prelam particle boards. At some point, you can do components of particle boards, which could be cut workstation with edge banding, et cetera, which we are aware of. But at the moment, that's not our plan. Not in the immediate future.

So just the domestic market, we'll be focusing on?

Yes, Domestic market, prelaminated particle boards, value-added particle boards, that will be the focus for us.

And the gross margins and the EBITDA in that particle board, sir?

So we said 20%, 25% is the mathematics, which is coming out now in terms of EBITDA margins. Gross margins also will be in the range of what we're achieving now in the band of 50% -- 45%, 48%, 50%, which will keep fluctuating basis the raw material costs and prices, et cetera.

Is the plant coming at the right time?

Well, I think it's never the right time for the plant. We need -- India has no meaningful producer of particle boards. One of our competitors is also setting up a plant. And we also believe because of lack of good-quality boards in particle boards, because of lack of proper company promoting prelam particle boards, has given market share of prelaminated MDF because there's no good boards available in particle boards. So I think considering the long-term opportunity, our presence in the segment, really some timing, you can't time these things. So we think it's okay.

And the Century number, if I look at the prelam particle board, I think the current quarters are showing 7%, 8% EBIT kind of a margin. So the margins have been dropping, maybe the quality of those particle boards are not that too good. So -- but then we are guiding for a 20% -- kind of 20%, 25% range. So do we see -- because I understand that the product category is at a very nascent stage. So do we really see that kind of -- because of the raw material, if I talk both in the North and South, yes, there is some kind of a difference in the raw material at present.

I'm not sure Century's margins, I think...

No, I'm sure about that. So it is 7%, 8% -- particle board.

Yes, they keep on fluctuating in terms of that, and that business is also not a small business for them also as well as in comparison to us also. So I don't think it will be an apple-to-apple comparison. And again, as we said that our intention to sell more and more prelam board in terms of that, and that comes with our expertise into the paper-related business in terms of that. So I think this is not an apple-to-apple comparison. And again, on a quarter-on-quarter basis, margin may differ in terms of that. We -- what we believe on a longer-term basis, the margin which we have -- which we have projected, we will be able to achieve that margin in terms of that.

It also depends on the kind of plant one has. So I'm not so aware what the margins were recently. But -- so ours is a continuous press, which, with our understanding, consumes less power, has better yield, the ability to produce various dimensions are higher, which means for the furniture maker, they can achieve better yields, lower wastage. I think this is a multilateral line and a Chinese line as far as whatever I know, but I could be wrong. That's the sense I have. So I think not completely comparable.

Yours is a German line, right?

It's a European -- German line, that's right.

Okay. And sir, coming to the raw material side, how is the South at the moment? So there are 2 things, right? So in MDF versus the plyboard, so plyboard would be of 7-odd years of a cycle of a poplar or eucalyptus versus an MDF 4 to 5 years. And in particle board, is it 2 years, if I'm right?

So plywood now, you can peel timber at even 3- to 5-year cycle. Usually, farmers don't wait for a 7-year cycle. And you have newest spindle-less peeling machines, which could peel lower-girth logs or timber. As far as particle board is concerned, like I said earlier, particle board doesn't necessarily need only fresh timber. All the waste of wood, fire wood, discarded fruit-bearing trees, which complete their life cycle, so all kind of woods can be used. So if you ask specifically for number of years, so even 2 years is good enough for particle boards to get the raw material.

And sir, what about the Melia Dubia, which is that a new thing which can catch up in India? Do you think so?

Melia Dubia is like a form of a pine specie, which is low in density. So yes, if it is available, it depends on the cost, and you can do it. In plywood, you can't use the complete Melia Dubia because the density and weight reduce. In particle boards and MDF, you could do it. So it depends on the cost and availability. So he's saying Century's margins were 21% to 20% EBITDA. So I don't know where you got your figure. Yes, particle board we're saying, yes. Yes, particle board. I was surprised. Maybe you mix with laminates and particle board maybe. Just check this space, please.

Sir, my question is again on the particle board side. So how are we looking to compete with the MDF side? Because MDF also, we are hearing not many capacity coming on.

So like we were saying earlier, particle boards, about 80% to 90% particle boards are sold as prelaminated particle boards. We don't sell bare boards. So particle board consumption or value of market in India is about INR 5,000 crores. The major usage of particle boards is office furniture, trolleys, TV trolleys, study desks, panel inserts, a lot of government segment uses particular board, school furniture, shop fit-outs. So I think particle board has a space in itself. So we'll probably take market share from unorganized companies, from imports. India still ends up importing a lot of furniture. Even workstations are being imported from Malaysia, Thailand, Vietnam because of lack of good-quality boards, lack of furniture making in India. So I think that's one story of the particle boards. Prelam particle board is about 25% to 30% lower priced than prelam MDF, yes? So -- and for most of the interior application where the product doesn't come in contact with water or high humidity, although you have high humidity range also in particle boards. So prelam particle boards or particle boards are good enough. But the idea is not to de-sell MDF and sell particle boards. At the end, all the 3 panel products, plywood, MDF, particle boards, have their own market share on specific areas where consumers, fabricators, architects, designers want to use. So if you want to create a comparison, we believe for most applications, prelam particle board will win versus prelam MDF.

And sir, at what utilization we will be generating EBITDA margin of 20%, 25%?

So we said...

Yes, this we said that this is the highest margin, which is at the optimum level of, let's say, above 90%.

Initial in first 2 years, what kind of margins we are looking to achieve or utilization we are looking to achieve?

So the initial year, we have targeted a 50% utilization, at that it breaks even at the EBITDA level. And then going forward, as and when we keep moving up, the EBITDA margin will keep increasing.

And sir, on the plywood side, right now, we are EBITDA negative. So at what utilization we will be, let's say, PBT positive?

At around 45%, 50% we become the EBITDA positive. So you can see that around 60%, 65%, we will be at PBT positive.

But plywood, as you know, probably we're just focusing on South India right now. And we're also building a brand in the network as we talk right now. So initial costs are higher than...

And so on the brownfield side, since we will be utilizing the incremental capacity in the next 6 to 9 months, so what kind of capacity addition we will be looking at that point of time? And what would be the CapEx requirement?

So I'm assuming you're talking for laminates. So laminates typically, we add one line at each time unless we have to add more lines. So each line, you can assume will cost anything between INR 30 crores, INR 35 crores, one line of laminates, which would be press, impregnator, plates, et cetera.

And in terms of million sheets, how much it would be?

So it depends on sheets and boards and the realization. So what the data we give out is we say sheets/boards. So if the capacity is to produce boards then the number of units will lower, but the value will be very similar.

So how much more press line we can put over there?

So in Andhra Pradesh, we have enough land. We can add -- we have right now 3 lines we've installed. So you can add anything between another 3 to 5 lines. In Gujarat factory also, we have enough land. We can add anything between 3 to 5 lines there also.

Okay. And sir, lastly, on the export side. Since we have added maybe new product category 6 by 14, so how much this will help to improve our export outlook in the coming years?

Right. So until now, we only had a dimension -- our maximum dimension was 6 feet by 12 feet. For certain applications and certain markets where people want full height cubicles, they don't want like opening, so they need a 6 feet by 14 feet. So several markets needed a full height cubicle or several customers who needed both the dimensions and we could only give one dimension, so this will help in expanding that category. I can't put exact value on how much 6 by 14 we will end up selling right now. But clearly, I think this will open up several customers and also add revenues to the customers we were exporting to.

Just a word of a small correction that we don't -- it's not that within 6 to 9 months, the entire capacity of laminate will be 100% used in terms of that. We have added increased capacity in Prantij in the quarter 1, and we have just now added the 3.5 million sheets/board, which is 3 presses in terms of that. It will take some time in terms of getting utilized. It's not going to be we will be 100%. The 94% of the utilization, which we have shown, is without the Naidupeta plant. So it is going to take time in terms of that, within 6 to 9 months. It's not going to be utilized 100%. Probably we believe that in the next year, we will be near to that utilization, kind of thing.

And so on the debt part, lastly. So once the particle board comes on stream and once it starts utilizing, so what will be the debt repayment schedule over the next 2, 3 years since we have a net debt of INR 690 crores as of now?

So see, currently, we have a rate of INR 670 crores as of the September. And we believe that by March, it should peak out around INR 800 crore, INR 850 crore -- INR 850-odd crores ballpark plus, minus something. And from next year onwards, the repayment starts. So the repayments are also staggered and not built up equated with every year that happens. And I think at the peak level, it goes to about INR 100 crores, INR 120 crores for the next -- starting, I think, '26 onwards, '24, '25 -- '26 onwards for 3 years. And then it kind of tapers down as the large part of the portion of the debt repays off.

So initially, it will be INR 100 crores to INR 120 crores, FY '25, FY '26?

'26-'27.

'26-'27. So what will be for FY '25-'26, the debt repayment schedule?

I'll check.

And in the 50% of our debt is there for the longer duration, the debt which is coming from the IFC as well as from the debt for the equipment, that is for the duration of around 10 to 12 years of repayment. So next year is close to around INR 60-odd crores payment is there. INR 60-odd crore payment is there. As of now, we are servicing around INR 25-odd crore repayment every year. Next year, in the FY '25, it goes to around INR 60-odd crores.

I request participants to mention your name and company name before asking the questions.

Udit this side from Yes Securities. Sir, firstly, you mentioned about the export opportunities in your presentation. Could you please clarify what is the cost differential right now between you and the regional players in the countries that you are servicing?

So if you would compare like-to-like us and the regional market leader or the brand leader, depending on the geography, I think we'll be lower by anything between 15% to 20%.

And is this difference currently because of all the geopolitical or the cost difference will sustain over, say, 5 to 7 years kind of...

So it's a function of several things. One is that the brands are stronger. They have local production, maybe better supply chain, better specification, more people on the ground. So they're able to command better pricing, although gradually, the gap is only reducing. So I think that's one large reason on the pricing. Second is many regional international companies, barring few, have become subscale because they've not added capacities over several years. And also, it's about third-gen, fourth-gen running businesses, not interested to run the business. The investors have bought companies who want to again go and sell in 5 to 7 years. So we believe many large international companies, which were large at one point, have kind of become static or stagnant, and they have not added capacities. The cost of putting a factory internationally has also gone up. The ability to get approvals of norms of pollution has also increased. In the laminate business, you need a certain amount of manpower despite optimum automation. So the manpower costs have also gone up. So across multiple factors, the international companies or factories or plants haven't really expanded. And we think as we keep adding more resources, better inventory on ground through our own warehouses, through distribution partners, adding people to work with architects or IDs in several markets, the brand is getting stronger and pricing power is also improving.

Right, sir. And sir, secondly, on your annual guidance, you had given a 25% growth guidance for this fiscal. Any changes to that and...

We had said 20% to 25%. So I think we should be somewhere in the vicinity as we see things now, yes. So right now, we're at 13%. So I think we should be somewhere 20% plus/minus.

And same on margin, sir, for this fiscal, if any number on the blended...

CFO gives the margin, I don't give the margins.