Marchés français ouverture 1 h 45 min
  • Dow Jones

    28 335,57
    -28,13 (-0,10 %)
     
  • Nasdaq

    11 548,28
    +42,28 (+0,37 %)
     
  • Nikkei 225

    23 490,15
    -26,44 (-0,11 %)
     
  • EUR/USD

    1,1837
    -0,0031 (-0,26 %)
     
  • HANG SENG

    24 918,78
    +132,68 (+0,54 %)
     
  • BTC-EUR

    11 073,36
    +20,34 (+0,18 %)
     
  • CMC Crypto 200

    263,25
    +1,79 (+0,68 %)
     
  • S&P 500

    3 465,39
    +11,90 (+0,34 %)
     

Edited Transcript of GRPL.NS earnings conference call or presentation 17-Aug-20 5:30am GMT

·62 min de lecture

Q1 2021 Greenply Industries Ltd Earnings Call Kolkata Sep 25, 2020 (Thomson StreetEvents) -- Edited Transcript of Greenply Industries Ltd earnings conference call or presentation Monday, August 17, 2020 at 5:30:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Manoj Tulsian Greenply Industries Limited - Joint MD, CEO & Executive Director * Mukesh Agarwal Greenply Industries Limited - CFO & Chief IR Officer * Sanidhya Mittal Greenply Industries Limited - Joint MD & Executive Director ================================================================================ Conference Call Participants ================================================================================ * Aasim Bharde IDFC Securities Limited, Research Division - Research Analyst * Achal Lohade JM Financial Institutional Securities Limited, Research Division - VP * Arun Baid BOB Capital Markets Limited, Research Division - Research Analyst * Bhavin Chheda Enam Holdings Pvt. Ltd - Analyst * Karan Bhatelia Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials * Kaustav Bubna Rare Enterprises - Equity Research Analyst * Kedar B * Ravindranath Naik * Shrenik Bachhawat JM Financial Institutional Securities Limited, Research Division - Analyst * Rishab Barar Citigate Dewe Rogerson Ltd. - Executive ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, good day, and welcome to the Q1 FY '21 Earnings Conference Call of Greenply Industries Limited. (Operator Instructions) Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir. -------------------------------------------------------------------------------- Rishab Barar, Citigate Dewe Rogerson Ltd. - Executive [2] -------------------------------------------------------------------------------- Good day, everyone, and thank you for joining us on the Greenply Industries Q1 FY 2021 Conference Call. We have with us today Mr. Sanidhya Mittal, Joint Managing Director; Mr. Manoj Tulsian, JMD and CEO; and Chief Financial Officer, Mr. Mukesh Agarwal. Before we begin, I would like to state that some statements made in today's discussion may be forward looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the result presentation that was sent to you earlier. I would now like to invite Mr. Manoj Tulsian to begin the proceedings of the call. Thank you, and over to you, sir. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [3] -------------------------------------------------------------------------------- Thank you, Rishab. A very warm welcome to everyone present, and thank you very much for joining us today to discuss Greenply's operating and financial performance for Q1 FY 2021. In the midst of this continuing pandemic, I hope and pray that all of you are safe and also taking care of your health as this will help us out to come out stronger. During the first quarter and as it continues into the second quarter, one of our priority has been on the safety and well-being of our employees. We have taken all possible precautions and allowed employees other than, of course, from the sales team who has to be on the field, and the plant team which, of course, has to be at the manufacturing locations, the flexibility to operate from home. This has actually grew productivity and at the same time it has delivered cost benefits, too. Looking at this unprecedented and difficult time, we also took a COVID policy for all our employees as an additional protection. The swift adaptation to this sudden changed environment was enabled by Greenply's inherent focus on technology and processes. In fact, this exercise has given us some good insights. We realize that for many team members, it is not necessary for them to consistently attend office, and they can work from anywhere and still be productive. We propose to implement this on a continued basis, and as a first step have actually discontinued some of our smaller branch offices already, and that's working well. Automation does result in significant savings that will sustain and deliver continued benefit over the long term, and we'll continue to explore avenues to do so. Since the company is already ahead in use of technology and digital platform, we could well use this period to be connected to all our stakeholders through virtual meetings and also organize a lot of training programs for our sales and other teams, which went very well. While this period has been a challenging one for most businesses, Greenply has looked at this entire period as an opportunity to reinvent itself, and we look at all systems, controls and processes and how the company can now work on the next phase of digitalization to be more cost-efficient and faster in all service aspects. We are sure that this will create value in the near and long term. Let me now touch upon some financial numbers, though the financial numbers are not at all good comparatives. Greenply, the stand-alone entity net sales for the quarter stood at INR 107.1 crore compared to INR 304.2 crore in Q1 FY '20, a decrease of almost 65%. In line with our focus on profitable growth and our earlier mentioned efficiency initiatives, our stand-alone gross margins increased by 49 basis to 41.2% on a Q-o-Q basis. Stand-alone EBITDA margin is at minus 4.7% compared to 11.1% on a Y-o-Y quarter. Strong collections during the quarter resulted in reduction in receivables on a sequential and Q-o-Q at the stand-alone level. We were able to reduce the stand-alone debt by more than INR 60 crore in last 1 year, out of which almost INR 40 crores between March and June '20. Our average realization in plywood also increased from INR 222 in Q1 FY '20 to INR 224 per square meter in FY '21, Q1. As we all know that business got impacted during the quarter due to the COVID-19 pandemic. April 2020 was a complete washed out month for us. The factory operations resumed sometime in the middle of May 2020. Factory in West Bengal again got impacted by the Amphan Cyclone for a brief period, and operations resumed in the first week of June 2020 in our West Bengal factory. The Gabon facility were less affected, as we had even mentioned in our previous call, and the capacity utilization was almost around 81%. Gabon sales was lower than expected because of logistics issues which we face there in Q1, but hope the same would be made good in Q2. Overall, we feel that we have done a decent job in Q1, looking at the continued uncertainty and with only around 6 week of working. As the environment opens up, we believe we are well poised to deliver [performance]. The strength of our brand, our well-entrenched distribution network and a healthy balance sheet only reinforces this conviction. Our energies will have a 3-pronged focus, namely enhancing efficiency; go digital; and work on distribution network, all with a focus on profitable growth, improving ROCE and creating value for our stakeholders. These initiatives will, of course, help us to strengthen our brand and prove our leadership in the categories in which we operate. To bring in a culture of holistic growth and to take everyone together in the journey of success in Gabon, the Board has approved the grant of ESOP to the eligible employees, subject to approval of the shareholders. It will be a pleasure to discuss your thoughts and news during the Q&A session. Thank you so much. And I would now like to hand over the call to our CFO for some detailed financial numbers. Over to you, Mukeshji. -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [4] -------------------------------------------------------------------------------- Good day, everyone. I thank everybody for joining us to discuss Q1 FY '20 financial performance of Greenply Industries. I pray that these difficult times for all of us pass quickly, and we all remain healthy as things stabilize. It is pertinent to note that the figures for the quarter are not fully comparable, as factories were running at extremely low capacity utilization in Q1 FY '21 due to lockdown and the ongoing pandemic. In Q1 FY '21, our consolidated top line was down by 62.0% compared to the year-on-year quarter and gross profit was down by 57.9%. Our Gabon subsidiary revenue was INR 25.1 crore in this quarter despite the pandemic, and although on a sequential quarter, sales contribution was on the lower side. We are confident that this business will be a strong growth contributor in the future. Consolidated EBITDA margin is at minus 2% compared to 11.9% on year-on-year quarter. Maintenance CapEx incurred in Q1 FY '21 in Indian business was around INR 25 lakhs and in Gabon, was around INR 45 lakhs. Consolidated debt has reduced to INR 230.7 crore in Q1 FY '21 from INR 267.4 crore in Q4 FY '20. Working capital days stand at 180 days in Q1 FY '21 versus 60 days in Q1 FY '20, which is temporary situation due to the pandemic and lockdown. As discussed by Manojji earlier, our emphasis continues to be on rationalizing cost and improving our financial ratios. I would like to hand over the call to the moderator to open the floor for the Q&A session. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) We take the first question from the line of [Vijay Karpe], individual investor. -------------------------------------------------------------------------------- Unidentified Participant, [2] -------------------------------------------------------------------------------- My question is for Sanidhyaji. Sanidhyaji, how has been the appointment of Manoj Tulsian helped the company? How has his experience and expertise helped us during such challenging times? -------------------------------------------------------------------------------- Sanidhya Mittal, Greenply Industries Limited - Joint MD & Executive Director [3] -------------------------------------------------------------------------------- So Mr. Tulsian's appointment in the company has really helped the company because Manoj Tulsianji has a very strong background. He's come from an EPC business where he really understands the construction industry. And before that, he's also worked for consumer business. So he has a great idea about our business, number one. Number two, his experience will really help us professionalize the whole culture and will help us achieve newer heights. -------------------------------------------------------------------------------- Unidentified Participant, [4] -------------------------------------------------------------------------------- Okay. And my second question is regarding the cost-cutting measures that you have taken during Q1? And have you taken any more cost-cutting measures in Q2? Can you also give us some details on the automation in which you are -- talked about in the opening remarks? And also, we use an outsourcing model as well, so has that helped us during such times because our overheads will be lower because of that? -------------------------------------------------------------------------------- Sanidhya Mittal, Greenply Industries Limited - Joint MD & Executive Director [5] -------------------------------------------------------------------------------- I think Manojji will be the right person to answer this question. So Manojji, over to you. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [6] -------------------------------------------------------------------------------- Yes. Okay. So the cost measures which we have taken are -- some of those measures will continue to give us benefit in the long run. We have done quite a bit of work in terms of improving our efficiency at the plant level. And I think those will all be permanent in nature. We have learned to work with reduced number of labor which is giving us higher productivity during this period. We have renegotiated most of our contracts, be it related to the IT platform, be it related to the rentals, be it related to any other consulting areas. So we have looked at every nook and corner of the company, every cost, and we have tried to renegotiate most of those contracts. I think those benefits, some of them will be permanent in nature. Some of them may continue for another 2 quarters. In terms of automation, Greenply already stands at a good platform. And I think this really helped us during Q1 when we were quickly able to connect to all our stakeholders through the virtual meeting platform doing all our internal trainings. We did our entire appraisal during this period, and we also -- we're in connect with all our trade community partners, our architects, our carpenters. And we also, in a way, told them that this is going to be the new normal in future, where gone are the days when you have to wait for our sales team professional to come and sit at your shop or at your office. And then only your orders can be processed or then only maybe a discussion on business can happen. And we are trying to push this because I think this is in the interest of everybody. And as I said in the opening remarks, that we have learned very fast that we can really be more productive by avoiding too much of this travel. And we are trying to push this even at the sales level that you can even work from a remote place, and you can easily get connected to the digital platforms. So in any case, on the SAP, we had moved to S/4HANA, and that is also helping us in a big way. Our sales force automation platform is already working well, and we are doing more additions to that, looking at the pandemic situation that a person -- anybody working in the sales force can actually log in from wherever he is, and there is a geo tagging. So we know exactly which all visitors he has visited. We can also look at -- slowly, maybe we'll move to the -- a level where he can even get the orders punched straight away from the dealer's end and which can get linked to our system main server. So on-time delivery punch -- order punching also in the system. So many initiatives. Actually, it's a long laundry list. Not that everything will happen in the next 1 or 2 months. We're also adopting a bar coding technologies where every piece of our sheet, which will ply, will go anywhere in the country, will be tagged with the bar code, and we'll come to know that this has been invoiced to which all dealers, what is the problem with any particular sheet, if there is anything in the country. So there are a lot of projects which we have worked upon. And yes, it will be now continuous journey for next 2, 3 years. Because the way the digitalization is happening in the country and the pace and the strength of the change, we don't want to miss out on the change. And the best thing is that Greenply has already been on a good platform. So to build up from here with new ideas and new thoughts and adopting these new technologies will be easier and faster. -------------------------------------------------------------------------------- Unidentified Participant, [7] -------------------------------------------------------------------------------- Okay. And anything -- has the outsourcing model helped us during such times? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [8] -------------------------------------------------------------------------------- No. See, first of all, if you really look at quarter 1, as I said, we only worked for around 6 weeks, if technically, you see. And within those 6 weeks also, there has been so many opening and closing of towns, districts, cities. So not much, not much that outsourcing -- in fact, even our in-house team has done a great job during this period. -------------------------------------------------------------------------------- Unidentified Participant, [9] -------------------------------------------------------------------------------- Okay. And one last question. Is there any oversupply of face veneers in Gabon? And is it true that 95% of the units there are loss-making presently? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [10] -------------------------------------------------------------------------------- Well, yes. In Gabon, I think the success story has been minimal. We are, I think, the only Indian company and maybe even Sanidhya can correct me, but I think we are the only Indian company right now, which is working well there and working profitably. So to some extent, I won't be able to say 95% or not. But yes, I would say the statement is quite a valid statement. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- (Operator Instructions) The next question is from the line of Shrenik Bachhawat from JM Financial. -------------------------------------------------------------------------------- Shrenik Bachhawat, JM Financial Institutional Securities Limited, Research Division - Analyst [12] -------------------------------------------------------------------------------- Sir, could you please me with the reasons for realization improvement in this quarter? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [13] -------------------------------------------------------------------------------- So a few steps I would say. We have, to some extent -- as I said, that we are clearly looking at this pandemic as an opportunity for us to collect many things. And what we have tried to do also is to collect the market operating price, the MOPs, and trying to move more towards the national pricing. So some of the earlier discounts which we were giving in certain pockets, we have tried to control them. And that has reflected in this improvement in the price. -------------------------------------------------------------------------------- Shrenik Bachhawat, JM Financial Institutional Securities Limited, Research Division - Analyst [14] -------------------------------------------------------------------------------- Sir, could you be help me with the volume and value mix for premium versus mid plywood in this quarter? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [15] -------------------------------------------------------------------------------- Mukeshji? -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [16] -------------------------------------------------------------------------------- Yes. So during the quarter Q1 FY '21, so our -- in the volume terms, premium contributed around 64% and outsourcing from Ecotec, Bharosa, Jansathi, and PVC contributed 36%, whereas in value terms, it -- premium contributed 73% and mid-segment and low end contributed 27%. -------------------------------------------------------------------------------- Shrenik Bachhawat, JM Financial Institutional Securities Limited, Research Division - Analyst [17] -------------------------------------------------------------------------------- Sir, I believe gross margins improvement would be function of the realizations improvement. Am I correct in the understanding? -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [18] -------------------------------------------------------------------------------- It's 1 more -- product mix also. So in the quarter, so as I said, that 73% is contributed by the premium. So -- and that is one of the reason why we had better realizations in Q2 as compared to year-on-year quarter. So volume terms, you will find that on quarter on the -- year-on-year basis in this quarter, it was almost same. But in value terms, it improves by 2%. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [19] -------------------------------------------------------------------------------- And also to add to that, I think to some extent, the raw material prices remained slightly softened during the first quarter. We feel that, that may continue for some time for sure. And some value engineering, as I mentioned, that we have done a lot of work on the manufacturing platform, so some value engineering also would start reflecting further. There's some very minimal gain which has come in Q1. But you would be able to see more of that going forward in Q2 onwards. -------------------------------------------------------------------------------- Shrenik Bachhawat, JM Financial Institutional Securities Limited, Research Division - Analyst [20] -------------------------------------------------------------------------------- Sir, so are there any reductions in the raw material cost like timber cost? If you could highlight some details on that. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [21] -------------------------------------------------------------------------------- No. So I think chemicals, we could see a drastic reduction. And on the timber price, it was slightly soft, and I hope that if it continues like this, then that will be advantage for the entire business. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- (Operator Instructions) The next question is from the line of Achal Lohade from JM Financial. -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [23] -------------------------------------------------------------------------------- Can you hear me? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [24] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Sanidhya Mittal, Greenply Industries Limited - Joint MD & Executive Director [25] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [26] -------------------------------------------------------------------------------- Please go ahead. -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [27] -------------------------------------------------------------------------------- Sir, my first question, I don't know if you kind of answered that already. How has been the month of July and August compared to last year? Have we improved the run rate? To what level has it improved? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [28] -------------------------------------------------------------------------------- In July, we are almost between 65% to 70%, and I hope the same will remain in the month of August, too. And then we have to see, because I think one very important thing more than these numbers is how fast the fear from the mind of people is removed and how fast we get, in a way, exit from this pandemic, either through a vaccination or through the herd immunity. But -- because if you really see still the market, the major markets like Mumbai, Calcutta, Delhi, Pune, Nagpur, Ahmedabad and even Chennai and parts of Tamil Nadu has not totally opened up fully. So only now in the month of August, we are seeing the glimpse of improved things happening. And the next important thing also, which for our businesses, which you all understand is even now the gated societies are not allowing labor to come in a mass way and work and allow to work them in a particular project site. So that mindset, I think, may still take another month or so for societies to allow that to happen. Once that happens, then I think the demand will further pick up. -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [29] -------------------------------------------------------------------------------- Right. So internally, what is the expectation if it go back to the normalized levels, would that happen in -- by December? Or you think it could very well go up to March? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [30] -------------------------------------------------------------------------------- Well, as I said, we, Indians, are always very optimistic people. And if you personally ask me, I was even assuming that from August onwards. I mean that was my assumption in the month of June based on all the public domain knowledge, that possibly by August, things will start getting into the normalizing phase. But as we are today in the midst of August, we still see that possibly another 2 months for things to happen. Though Russia has already announced a vaccination, okay? But for them also to come into production and to serve their own country and then maybe the rest of the world, it may go up to November, December. That is what some of the feeling we are also getting from some part of the country. That even India might be prepared with a vaccination somewhere around October or September end. And by the time it comes into production and this, it is like November. So any guesswork on the numbers is now totally related to how fast the situation normalizes. I think the business is there. The inquiries are there. People are willing to work, right? There is a demand. But the fact remains that when the labor is missing, then you're -- somewhere your secondary gets hit, right? -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [31] -------------------------------------------------------------------------------- Okay. (technical difficulty) how much would be Tier-1, Tier-2 kind of (technical difficulty) because that will give some color as to how things could evolve. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [32] -------------------------------------------------------------------------------- Your voice was not very clear. Can you repeat? -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [33] -------------------------------------------------------------------------------- In terms of the mix, how is the mix from metro normally? Not in the pandemic time. But normally, how much revenue comes from metro? How much is from Tier 1, Tier 2 cities and all? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [34] -------------------------------------------------------------------------------- See normally from the metros, we almost get around 50% to 60% revenues. Okay. So if you can see that with most of the metros not performing, if we have still reached to around a 70% number or a 65% to 70% number, I think that the team is working hard on the field. So we are reaching to the Tier 2, Tier 3 cities also, but everything gets converted immediately into a good volume. But for sure, we are creating a base for our long-term growth. So in a way, you can say that we are just -- all the initiatives what we are taking during this period is to make us future ready. And whenever the growth bounces back, I am sure that with the type of effort which we are taking in every area, we will bounce back faster than the others. -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [35] -------------------------------------------------------------------------------- And just to clarify, this metro, when you mean 50% to 60% it goes out of 4, 5 cities, right? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [36] -------------------------------------------------------------------------------- No. We take the extended metros also. So for me, even Pune is the part of the metro. -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [37] -------------------------------------------------------------------------------- So broadly like top 10 cities will be 50%, 60%? Or is that a fair understanding or? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [38] -------------------------------------------------------------------------------- Well, yes, yes, you can put around that number. 50%, 55%. -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [39] -------------------------------------------------------------------------------- Understood. Understood. And second part is, are you seeing supply disruption from the unorganized players or the smaller players? Is that helping in terms of the growth product or other recovery product? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [40] -------------------------------------------------------------------------------- Well, I definitely see that as an opportunity, okay. And that is one of the area, again, we have started working in. And then we are going to Tier 2, Tier 3 cities. We can see the glimpse of the -- that, that there is supply-side challenges which is taking place on the unorganized side and which for sure will allow us a strong foothold. See, we have a strong balance sheet. Our distribution network is good. And if you're able to expand further on the same, right, keeping our policies intact and coming out with some new products over a period of time, then I'm sure that we will be able to capture a good part of the unorganized segment market also. I mean -- meaning I'm saying, I would also say that the organized players, depending on the type of effort what they continue to put in. -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [41] -------------------------------------------------------------------------------- Right. So factually, you're saying that as of now, you are seeing supply disruption from the unorganized for Tier 2, Tier 3 towns. Is that fair? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [42] -------------------------------------------------------------------------------- Yes. Yes. We have felt so. Our market team has given us such feedback. -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [43] -------------------------------------------------------------------------------- Got it. All right. And in terms of Gabon, now I think my colleague asked about on -- sorry, someone else asked about this. A lot of units in Gabon are making losses. So can you help us understand, a, in terms of how are we different from others in terms of cost or pricing? And b, in terms of the revenue estimate, what we have earlier, we were talking about INR 320-odd crores at the peak revenue in a couple of years' time. If you could give some sense from a medium term perspective? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [44] -------------------------------------------------------------------------------- So I would tell that maybe we understand our business well compared to others. Okay. So we did a few things right in terms of establishing the team there, taking the team along, okay, and understanding the nuances of that place and quickly adopting to those nuances and still performing. Okay. Even I was very new to this business, but I could definitely give credit to the Gabon team and the management here that we did a few things right so that we could establish ourselves quickly out there. We will continue to perform. This, for sure, when I have looked at in the last 3 months on the numbers and the various discussions which we are having. I think I am confident that we will continue through well there. As far as the talking about these numbers of INR 300 crores and INR 330 crores, yes, for sure, we have capacity to go up to those levels. But this year, this pandemic year, of course, certainly has pulled us back. So the growth, what we were looking at during this year, I don't think we will be able to grow in Gabon. So because the -- Gabon, if you have seen the numbers and everything, last year, its dependence on India was quite high. And to tell you, in the first 6 months, we will do hardly any business with India. But the good part is that the team, again, was very proactive there to look and search for new markets. So we have created a good, strong foothold now in the European market and also in the Southeast Asian market. So we -- to some extent, our dependence on the India thing has come down. There's some signs of recovery now from the Indian market, some inquiries, again, they started coming to our Gabon facility. I think Q3, we will have supplies even in the Indian market on this. So looking at everything, I think this year, our Gabon facility will do well. Of course, it will not grow, but it may not have a massive de-growth also. -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [45] -------------------------------------------------------------------------------- Right. But in terms of your peak, the estimate -- I mean I'm not really looking at FY '21 right now. But if I have to look at, let's say, 2 years down the line, are you looking at the same numbers what you had probably looked at 6, 8 months back? Or you think there is a risk to that number? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [46] -------------------------------------------------------------------------------- No, I don't see a risk to that number, because I think in my previous call also I mentioned that there's -- some of these U.S.-based companies who were earlier looking at the Southeast Asia market, right, for their veneer import have tried to discontinue the same because some of those material was of Chinese origin and even U.S. is a very strong market for our product. And we have sent first container, which is still yet to reach there. And if it works well, then I think that becomes another opportunity for us to create a market over a period of time. So I think the team is doing a lot of work. And I'm sure that the only thing -- as I said, that whatever growth we perceived for this year, we are actually behind by, let's say, 12 months. So the numbers will very much happen, and we have some more plans also, which we are just now -- right now, we are just on the drawing board, but we are confident that facility will continue to do well for us. -------------------------------------------------------------------------------- Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [47] -------------------------------------------------------------------------------- Got it. Just a clarification on the Gabon pricing. How has prices behaved in last, let's say, 2 or 3 quarters? Have they come off or have they remained fairly stable? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [48] -------------------------------------------------------------------------------- No, the prices are fairly stable. In the last 2 quarters, if you ask me, the prices are fairly stable. -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- (Operator Instructions) The next question is from the line of Karan Bhatelia from Asian Markets Securities. -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [50] -------------------------------------------------------------------------------- Sir in the presentation, you've mentioned that external sales from Gabon is 9,841. So can I like get the breakup as to how much was to India and how much was to Europe, Middle East and Southeast Asia? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [51] -------------------------------------------------------------------------------- Well, exact numbers, Mukeshji can give. I would say, Mukeshji, if I'm not wrong, only maybe around 10% of -- out of this would be to India. 10% or 15%, around 15%. Mukeshji, can you share the numbers? -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [52] -------------------------------------------------------------------------------- Yes. So in the Q1 FY '21, we sold to Greenply India around 938 CBM. Okay. And total sales was 6,653 CBM in Q1 FY '21. And whereas in corresponding quarter FY '20, our sales to Greenply India was 1,627 CBM and total sales was 11,468 CBM, whereas external sales in Q1 FY '20 last year was 9,841 CBM. And in this quarter, it is 5,715 cubic meters. -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [53] -------------------------------------------------------------------------------- Correct. And sir, then what is this number in the presentation, 9,841? -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [54] -------------------------------------------------------------------------------- This Q1 FY '20. External sales Q1 FY '20 and sales to Greenply was 1,627. Total was 11,468. This is face veneer sales. -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [55] -------------------------------------------------------------------------------- Okay. Okay. Got it. Got it. And okay. If you guys give me a broad breakup of how much was to Europe, Middle East and Southeast Asia? And where are we seeing increased traction? -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [56] -------------------------------------------------------------------------------- Okay. So for this Q1 FY '21, our total sales, whereas external was 5,715 and Greenply India was 938 CBM. So total was 6,653 CBM. So 42% in the value terms contributed by Europe, 5% other customers in India, 17% to Greenply India, 34% to Southeast Asia and 1% to other countries. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [57] -------------------------------------------------------------------------------- We are not there in Middle East. We are not there in that market. -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [58] -------------------------------------------------------------------------------- Okay. And sir, (foreign language) do we see more players entering into the Laos market post some ban on Laos and Myanmar? And how our competitive intensity is shaping up there? As in, how many number of players currently will be there? How many are currently operational? And how many are expected to commence the production in next 1 or 2 quarters? -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [59] -------------------------------------------------------------------------------- We are in Gabon? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [60] -------------------------------------------------------------------------------- Laos. Gabon? -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [61] -------------------------------------------------------------------------------- Gabon, Gabon, Gabon. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [62] -------------------------------------------------------------------------------- Gabon? Okay. -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [63] -------------------------------------------------------------------------------- So Gabon in last 6 months, we have not seen any players starting their manufacturing facility. Okay. So like a few players from India, they have their manufacturing units. A few from China, they have their manufacturing unit in Gabon. Okay. So we have not seen any new players coming in, in last 6 to 9 months. -------------------------------------------------------------------------------- Sanidhya Mittal, Greenply Industries Limited - Joint MD & Executive Director [64] -------------------------------------------------------------------------------- And in fact, the smaller Indian players were only dependent on the Indian market. They are also facing a lot of challenges because of the poor demand there. -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [65] -------------------------------------------------------------------------------- So all these players, what we are referring, they basically -- they are dependent on India and Southeast Asia, whereas from our revenue, maximum is being contributed from European market. So we started this new machine in November 2019. So this new machine was basically to supply to the European market. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [66] -------------------------------------------------------------------------------- Some facilities, I think are still there from the Indian houses only, but they have not yet even commenced those facilities, and we are not sure whether they would be willing to do that or not. Because if the business was India-centric, then all those people have suffered there big time. Okay. And we were able to de-risk ourselves because we quickly moved to the other territories. And as I said that the response is good. The business is regular. Even during this pandemic period, we have a consistent flow of orders. So that is all keeping us floating above the water and helping us to do well. -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [67] -------------------------------------------------------------------------------- Also, sir, if you can somewhat throw some light as to how are the realizations in this market? And some color on the margin profile and on the working capital? Just trying to understand why are others not getting so aggressive in the overseas market. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [68] -------------------------------------------------------------------------------- In the overseas market? -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [69] -------------------------------------------------------------------------------- Yes. So we have like somewhat trimmed down our dependents to a great extent from the Indian market, right? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [70] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [71] -------------------------------------------------------------------------------- So why are others not focusing so much on the Southeast market and the European market? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [72] -------------------------------------------------------------------------------- I will not -- we can't exactly comment on that. But I think, for sure, maybe the team structure how they would have made their mindset itself of mainly looking at those units like a backward integration, whereas we didn't look that -- our business there purely from a mindset of a backward integration. Okay. So we started with some dependence on the India business, but we quickly assessed, and as Mukeshji also said, then we set up our second line also because we went to the markets in search of demand and regular business. So that was a de-risking strategy which worked well. And as I said that now we have already ventured into the U.S. market also. We're seeing an opportunity because of whatever is happening between U.S., China. And we are trying to explore that also. I'm sure that if that works out, then we have good amount of business traction coming even from U.S. markets. -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [73] -------------------------------------------------------------------------------- Got it. So it's almost 3 quarters that we are trying to de-risk on the Indian side. So are we seeing better realizations from the newer geography? Or the margin profile is different? Or are there light on the working capital? So what is the key advantage? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [74] -------------------------------------------------------------------------------- Well, see, the advantage clearly is that, as I said, that we are the one player who had a sustainable business model there. Okay. It is not too much about margin profile differences because the prices in India also came down last year significantly in the Indian market and which affected the margin of our Gabon facility. But it is more about -- you have a facility, right? It's working well. We have all the tie-up which is being done in that. Now the only way to keep working on it and improving the financials and the performance of that business. The team is working on that and we will continue to work on that. It's a good investment which we have made, and we will only make it better. -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [75] -------------------------------------------------------------------------------- Correct. And sir, on the 2 joint -- 2 equity partnerships of less than INR 5 crores, so how are things shaping up there? There is like commenced operations? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [76] -------------------------------------------------------------------------------- No, no, no. Because of the pandemic thing, things have got delayed there also. So I think one facility will only start sometime in, maybe November or December, and which will stabilize by February, March. And the other one may go up to Q4. In Q4, it may start. -------------------------------------------------------------------------------- Karan Bhatelia, Asian Markets Securities Private Limited, Research Division - Associate Analyst of Consumer Discretionary and Building Materials [77] -------------------------------------------------------------------------------- But our investment is done, right? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [78] -------------------------------------------------------------------------------- Yes. We had a minuscule -- we had a very minuscule investment. -------------------------------------------------------------------------------- Operator [79] -------------------------------------------------------------------------------- (Operator Instructions) The next question is from the line of Bhavin Chheda from Enam Holding. -------------------------------------------------------------------------------- Bhavin Chheda, Enam Holdings Pvt. Ltd - Analyst [80] -------------------------------------------------------------------------------- Yes. Good contribution from Gabon, which report good margins. Two questions. One is on the capital expenditure plans. What is the sustainable CapEx in India and Gabon? And what is any growth CapEx, if any? And second thing on the -- is this margin improvement sustainable? Because I see the ad spends were lower in this quarter, though they would surely pick up going forward. So obviously, the operating leverage would also pick up. So any guidance on the margins part? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [81] -------------------------------------------------------------------------------- So on the margin part, for sure, the type of efforts what we are taking. And as I said, that we are not leaving any area untouched in terms of making the business efficient. And my own part experience says that it will convert into improvement of margins. So this year being -- the sales in quarter 1 being so low and it's not even comparable, as you rightly said that once the sales volume picks up, we will definitely see an iota of improvement of margins in our business. And also at the same time, if you really see on the working capital side also, we are working extensively. Quarter 1 has been very good for us that way that we were able to reduce our borrowings by almost INR 40 crores in 1 quarter. And we are confident that we will be able to sustain these debt levels and maybe the debt levels can further come down the way we are working in the market and the way we are -- the way the activity is going on in the market at this point of time. So the idea is purely to continue to work on improvement of margins. And so that brings a lot of improvement in the ROCE, both one from the working capital side, the improvement; and second, from the margin profile. And as I said, that whatever activities we are doing, whether it is on the IT front or whether it is on the plant front or whether it is on the sales force front, these all activities we are only trying to target from a perspective of being future ready. So we want to be the leader when the next wave of growth comes in the country with a profitable business. -------------------------------------------------------------------------------- Operator [82] -------------------------------------------------------------------------------- The next question is from the line of Kaustav Bubna from Rare Enterprise. -------------------------------------------------------------------------------- Kaustav Bubna, Rare Enterprises - Equity Research Analyst [83] -------------------------------------------------------------------------------- Yes. So I had a question on your outsourcing model. Is it correct that manufacturers from -- you all have tied up with manufacturers from the more middle to low-segment plywood? Is that correct? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [84] -------------------------------------------------------------------------------- Yes. Yes. -------------------------------------------------------------------------------- Kaustav Bubna, Rare Enterprises - Equity Research Analyst [85] -------------------------------------------------------------------------------- So I had a question on that. Let's say, because of COVID and all this economic impact which has been caused due to it, what if those manufacturers are in trouble and have to shut down? Does Greenply come to their rescue? Or do you just let that business die out and find new manufacturers? How does that work? And also, how many manufacturers are you tied up with right now in that model? And how you -- how do you expect that to grow, et cetera? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [86] -------------------------------------------------------------------------------- Well, first thing first. I think we have not seen any signs of distress. I mean 2 of the facilities where we have a meaningful investment also, I just mentioned in the call sometime back that those facilities will only come up -- improve scale operations maybe starting from Q4 and Q1 of next year, right? And financially, there is no problem. So most of the work has been done. And there's already assurance from Greenply to feed them. So Greenply -- as long as Greenply is able to feed them, I don't see any challenge in terms of these units getting into any level of distress. And the same stands to even for our other partners. We work with 3 or 4 more partners in the country. They are well off. They have not seen any sign of real distress in terms -- because they are our partners and they have been getting regular businesses from us. And they have -- their cost structure to their facility structure, everything, is where even Greenply has invested some of its mindset and some of its intelligence to make them efficient. So once a player is efficient and they work with some of the very structured companies like Greenply, for them, we don't see that they will face any type of challenges. See, the unorganized players when we are talking are those players who doesn't have a balance sheet at all. So maybe they were making money, but you understand, they were the players who do a lot of business not only on bills but without bills also. And because of that, neither they have a balance sheet nor they have any profit shown into their books because they also don't want to pay tax. So unfortunately, in a situation like this, even if the government comes out with so much of plan for MSMEs and others -- this, ultimately, the bank will look at some documents, right, some collaterals. So they are not being supported even through the banking segment. And that is where they have will face a lot of challenge, and they are facing a lot of challenge. Plus, they work in a very unorganized way. Their labor continuity, their processes, their procurement, everything is so unorganized, and it's purely and purely -- the mindset is only to be in business to make money. Okay. And possibly, they don't even understand what is long-term sustainable business models. Some of them who really understand that over a period of time, they start growing and become better. But most of them, they only look at the short-term approach of making money today. So they definitely are into a lot of trouble. -------------------------------------------------------------------------------- Kaustav Bubna, Rare Enterprises - Equity Research Analyst [87] -------------------------------------------------------------------------------- Okay. Then just one question on your growth. Could you give some more detail about this United States opportunity? From -- what are the demand dynamics over there and what's the addressable opportunity for us? And you were also talking about the senior management is drawing up some further growth plans, which are still not confirmed. But could you just give us some indication which direction you're going? Is it new -- is it some new segment? Is it existing segment capacity increase, et cetera, et cetera? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [88] -------------------------------------------------------------------------------- So let me put it in 2, 3 different perspectives. First, let's close the Gabon thing what you are talking about. See, this U.S. thing which I've spoken about is early days. Okay. The opportunity is huge in U.S. The opportunity is so big that I can totally dedicate my entire Gabon facility to these U.S. manufacturers if they finally expect -- they accept our material, okay, and the pricing and everything. So such big is the opportunity out being there, right? But these are early days. As I said that our first consignment has not reached also. They will do their trials and you know how U.S. market works, right? But for us, we feel that once we are quality-oriented, once we are service-oriented, if the business is there, for sure, we will have an opportunity to grab a portion of that slice. And that further de-risks us and we reach to more continents. So why I mentioned about U.S. is only because I see that as a big opportunity. If we are able to succeed in the initial few supplies, then this business will open up for us. And then our capacities can be used properly. Because then we are dependent on not any single market. Europe, in any case, as I said, even during the pandemic, they continued to give us orders month-on-month basis. So we got orders even in the month of April, May, June, July, August, September. So we have a visibility. The only thing is, earlier, they used to give us orders for maybe a period of 3 months or 4 months. Now they are giving order for a month on a consistent basis. So that is about the Gabon facility. Coming to the India facility. If you really see, directionally, there are 2 things where we are focusing at this point of time. And as I said, we have really used pandemic period as a good period to correct many things. So the 2 areas where we really want to focus, one on the P&L in terms of margin improvements and look at every cost, look at every way of how we can make our business efficient. As I made a remark even in my opening call that, as an organization, we are very forward looking. And we don't mind, even after this pandemic settles down, for some of our team members to continue to work from home. So we are those -- the front movers in terms of adapting to any new mindset, which shows some ways of improvement in efficiencies. And we can give a better atmosphere to people. -------------------------------------------------------------------------------- Kaustav Bubna, Rare Enterprises - Equity Research Analyst [89] -------------------------------------------------------------------------------- So there is the India business... -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [90] -------------------------------------------------------------------------------- Sorry? -------------------------------------------------------------------------------- Kaustav Bubna, Rare Enterprises - Equity Research Analyst [91] -------------------------------------------------------------------------------- So the point is in the India business going ahead -- I asked this question last quarter also. What's your focus? I mean is it on growing the business, incurring new CapEx and finding growth revenues? Or is it on reducing debt, improving margins and just having a steady state, stable cash-generating business? What is the direction you are looking at? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [92] -------------------------------------------------------------------------------- Okay. So as I said, the first thing, what we are doing is we are right now concentrating on margin improvement and improvement in working capital management, which means we are working on strengthening our balance sheet and also the profitability from the existing business. Once it is done, then we will continue to look at opportunities, one, both growth in terms of organic and inorganic growth. In terms of organic growth, we'll continue to look at new product introductions, which is like in the last 1 year, we have introduced the Absolute, which is a product which caters very well to the OEM demand. We are the first one to introduce E0 as a product, which is emission-free product. Now during this pandemic period, when everybody has become more cautious about their health and safety and more and more people are working from home, our emission-free product, I think, would be a buzzword going forward because this is that product, which actually is with zero-emission on the chemicals which it releases while the furniture or the plywood is there at your home. So when more people are working from home, this will be a big hit. This is our own thinking going forward, and more and more people would love to have this product in their home. So one, on the product side, we'll continue to look at opportunities within our category, and we will look at also segments which are related segments going forward. And the next thing would be when you have a strong balance sheet, you can wait for an opportunity for a good inorganic growth also at any point of time, the moment you get a good opportunity. But ultimately, it is all about value creation for the stakeholders. So whichever way, we will always look at improving our ROCE going forward, and we'll try to be asset-light and debt-light. -------------------------------------------------------------------------------- Operator [93] -------------------------------------------------------------------------------- (Operator Instructions) Next question is from the line of Arun Baid from BOB Capital. -------------------------------------------------------------------------------- Arun Baid, BOB Capital Markets Limited, Research Division - Research Analyst [94] -------------------------------------------------------------------------------- Sir, you just mentioned that your focus is more on your margins and the working capital improvement. Sir I'm not talking about FY '21 because this is an abnormal year. But broadly, what kind of trajectory we are looking at our margins, say, in FY '22, FY '23? And you also mentioned that the focus is on getting the debt -- being debt-light. So when can we expect Greenply to be a debt-free company? I'm talking on a consolidated basis, sir, as a vision. So that as investors we can monitor how the steps are moving towards that? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [95] -------------------------------------------------------------------------------- Well, in terms of margin, I would say that by FY '23, okay, we will be -- this is a pandemic year, FY '21. But for sure by FY '23, our internal vision is to grow at least the margin by 400 basis points, if not more. And I'm sure some of those things will start reflecting even in this year also. Despite being a pandemic year, we feel that some of those will -- even on a lower turnover also, we will try to manage our margin of last year, which is a big statement, which again, I am making at this point of time. But I mean yes, there has to be some semblance in sales. It's not that we just end up doing a 50%, 55% of last year as sales. And for sure, I will not be able to protect the margins in double digit. But yes, if we are at a decent level, then this year also, we will be able to protect our margin of last year, which itself means that when the growth comes, the margin improvements would be visible. -------------------------------------------------------------------------------- Arun Baid, BOB Capital Markets Limited, Research Division - Research Analyst [96] -------------------------------------------------------------------------------- And so on debt front, sir? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [97] -------------------------------------------------------------------------------- See, on the debt front, I think, again, by -- on the steady state of affairs of business, assuming that there are no inorganic opportunities, we are... -------------------------------------------------------------------------------- Arun Baid, BOB Capital Markets Limited, Research Division - Research Analyst [98] -------------------------------------------------------------------------------- No. I'm not talking of this year. I'm not talking of FY '21. So beyond. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [99] -------------------------------------------------------------------------------- No, that's what I'm saying. That by FY '23, if -- on a steady state of affairs with the same line of business and this, for sure, we will be at a negligible debt, if not 0. And we will use the strength of our balance sheet. As I said, we'll keep our ears and eyes open, and there are so many good businesses nowadays we find, which runs into distress because of poor managing skills, right? If we have a very strong balance sheet, then we will just keep our ears and eyes open to tap that opportunity if it comes between. But on a steady state of affairs, I am sure that by FY '23 end, we will be debt-free or very negligible debt. -------------------------------------------------------------------------------- Arun Baid, BOB Capital Markets Limited, Research Division - Research Analyst [100] -------------------------------------------------------------------------------- Okay. And sir, you just mentioned that this year, we'll be having similar kind of margins as FY '20, assuming some kind of sales. So what would that number be? At what number you would say that we'll be at that 10%, 11% margins, which was last year? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [101] -------------------------------------------------------------------------------- See, even with the -- I would say, with a 15% to 20% drop in sales compared to last year, we would be able to manage our margin profile. -------------------------------------------------------------------------------- Arun Baid, BOB Capital Markets Limited, Research Division - Research Analyst [102] -------------------------------------------------------------------------------- And sir, just one more follow-up was that, sir, how... -------------------------------------------------------------------------------- Operator [103] -------------------------------------------------------------------------------- Sir, sorry to interrupt. May I please request you to requeue for the question. We take the next question from the line of Ravindranath Naik from Sunidhi Securities. -------------------------------------------------------------------------------- Ravindranath Naik, [104] -------------------------------------------------------------------------------- Hello? Am I audible? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [105] -------------------------------------------------------------------------------- Yes. Yes, absolutely. -------------------------------------------------------------------------------- Ravindranath Naik, [106] -------------------------------------------------------------------------------- Sir, one question. What is your contribution from OEM supply? What is the contribution of sales has come from OEM? And what is the outlook there you are looking at? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [107] -------------------------------------------------------------------------------- Mukeshji, do you have the exact number? Volume contribution? -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [108] -------------------------------------------------------------------------------- So Ravindraji, so contribution from -- we are like we discussed that we supply and we try to supply our revenues through our dealer distributor. So we are supplying to OEMs directly, not much, maybe 8% to 10%. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [109] -------------------------------------------------------------------------------- Because we don't track the number that way. So honestly, we'll not be able to give you the exact numbers. But I think Mukeshji, this is also a good point, and we should try and see how we can assimilate that data for future and create some better insight in terms of our OEM business. -------------------------------------------------------------------------------- Ravindranath Naik, [110] -------------------------------------------------------------------------------- The reason I'm asking that, one of your competitor actually, the MDF actually demand is growing due to the OEM demand. So if something can come up to you, then that would be helpful for the company in terms of growth in the long term. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [111] -------------------------------------------------------------------------------- Okay. So let me answer it then to your exact point. For sure, I think this will help the plywood business also, for the simple reason that when you see a substitute against the China imports, there were 2 things. One, the China imports, yes, people were going and buying truckloads of material and container-loads of material from China. Again, let me tell you that whatever we may speak, the dependence of any country on China is extremely high, right? So it's just not going to die down in a day. But for sure, people have become more conscious, and there will be an opportunity for transfer of business from China to India, I mean, which means to the Indian OEMs. Now look at the scenario in a slightly different way, okay. Earlier also, these people who were going and buying these Chinese furniture, they were buying it for their residential use also in a big way, right, whether they were in the luxury segment or the mid-segment. But now when it will come to the OEMs in this country and like -- I mean that's just -- let's assume people like you and me, when we will now buy these furniture, even the ready-made furniture for our homes, for our permanent home, we would not like to get too much into the MDFs. There would be a lot of opportunity for plywood-based furniture also which will come up. So for sure, first thing, there is no negative for us. There's only going to be positive for us, and that is why our team is working extensively with these OEM partners directly and indirectly both to tap this opportunity and grow the business. -------------------------------------------------------------------------------- Ravindranath Naik, [112] -------------------------------------------------------------------------------- Okay. And secondly, sir, region-wise, can you -- in the first quarter, although you have achieved June, July, you have achieved a 55% to 60% of sales last year, sir, which region is contributing more to your growth or contribution is more? If you can give North, South and West in terms, that would be helpful, sir. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [113] -------------------------------------------------------------------------------- Well, like any other business, because I heard many other commentary that this is really surprising that even we have done well in South, okay. South has contributed extremely well in this overall number. And then the rest of the country, whether it is North, East, West and/or central, we divide our business into 5 zones. Rest of the zones have all almost performed in a similar way. So South has clearly been the leader. And I have heard this about many other businesses also. -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [114] -------------------------------------------------------------------------------- So Ravindraji, just to add what Manojji said. So from South India in quarter 1, we had a revenue of around 43%, 44% and North and West was around 10% to 12%, and East was around 15% to 20%. And central, again, around 15%. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [115] -------------------------------------------------------------------------------- Well, as I said, other than South, most of the divisions are in and around the same side -- same set of numbers. South has clearly been the leader. -------------------------------------------------------------------------------- Operator [116] -------------------------------------------------------------------------------- The next question is from the line of [Viral Shah] from PhillipCapital. -------------------------------------------------------------------------------- Unidentified Analyst, [117] -------------------------------------------------------------------------------- Actually my question has been answered. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [118] -------------------------------------------------------------------------------- Thanks, [Viral]. -------------------------------------------------------------------------------- Operator [119] -------------------------------------------------------------------------------- The next question is from the line of Aasim Bharde from IDFC Securities. -------------------------------------------------------------------------------- Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [120] -------------------------------------------------------------------------------- Just a follow-up to an earlier comment on OEM. Did you say that out of your current plywood sales, 8% to 10% is to OEMs directly? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [121] -------------------------------------------------------------------------------- No, no, no. Not directly. Mukeshji, you can clarify it again. -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [122] -------------------------------------------------------------------------------- Directly and through our dealers also. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [123] -------------------------------------------------------------------------------- The channel partners, yes. -------------------------------------------------------------------------------- Mukesh Agarwal, Greenply Industries Limited - CFO & Chief IR Officer [124] -------------------------------------------------------------------------------- Yes. So it is mix of direct as well as our channel partners. -------------------------------------------------------------------------------- Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [125] -------------------------------------------------------------------------------- Okay. So put together this is about 8% to 10%? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [126] -------------------------------------------------------------------------------- Yes, yes, together -- and this number is not a sacrosanct or truly worked out numbers. We are using some estimation also in this because we have not worked out those numbers in that fashion. But I think more or less, what Mukeshji is saying will be in line. -------------------------------------------------------------------------------- Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [127] -------------------------------------------------------------------------------- Okay. Okay, sure. And just if you could just talk about this Absolute product that you talked about that is catered towards the OEMs directly. What kind of potential do you see going forward, maybe over the next 5 years plus? And would it be a good competitor to MDF and particle board? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [128] -------------------------------------------------------------------------------- Well, see, that is the pure idea because -- let me explain. This product is not that we are the only one in the country which is selling this product. There are other companies also which is doing it. We also introduced this because what happens is that this is a calibrated ply. And when there is a calibrated ply for OEMs, when they use it in their machine, then it becomes much easier for them to actually give the right shape to their furniture. So this is something where we are maintaining an Absolute, this is an 16 mm ply, and it's a full calibrated ply. So that gives a good opportunity for us to go through these OEMs and tell them that, look, this is fully calibrated ply. And then second thing, it is not MDF. This is ply, so which gives much lasting years rather than the MDFs. And that is where we are seeing some traction. We're already seeing some good traction in the last 2 months in South, and even to some extent in West. I think if we work well, this can become a good category, keeping in mind that there will be a lot of substitute which will happen to China imports. -------------------------------------------------------------------------------- Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [129] -------------------------------------------------------------------------------- Okay. And just final question, what is the price differential between your normal mid-market plywood and this direct-to-OEM plywood? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [130] -------------------------------------------------------------------------------- Well, it is not that -- we have a full basket of products, okay, and spread under different categories and different brands. So if you will really see that it is not that this Absolute would be something much cheaper or much expensive. You have to just look at those categories. And I think within those categories, it is not expensive. It is almost at par. So it's -- and we have to also understand, when you look at these China imports -- let me also put some light on this, that as I said, I don't know whether it got noticed or not. But when you do imports from China, they are expensive. And the second, no one knows whether they are using MDF, they are using particle board, what is exactly that they are using in those ready-made furniture. So I think this Indian OEM operations will always be cheaper compared to these China imports, especially on the furniture category. And that is where I think it is a change of mindset. This pandemic, for sure, is going to give that mindset to people to start operating in India because a lot of buzz has now been made about this Atmanirbhar in this. And also the way even there is some tension which has prevailed between even India and China. So there's a good opportunity overall. -------------------------------------------------------------------------------- Operator [131] -------------------------------------------------------------------------------- The next question is from the line of Kedar from Composite Investments. -------------------------------------------------------------------------------- Kedar B, [132] -------------------------------------------------------------------------------- Sir, my first question is regarding the working capital situation. So has there been any increase in the credit period we extend to our distribution channel through Q1? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [133] -------------------------------------------------------------------------------- It has no -- if that would have been the case, then our receivables would not have come down by almost around INR 80 crores. So we have actually slightly become strict only on that. And trust me, if we would have continued to do the business the way we were doing in the previous year, I would have definitely given you another sales because that would have been a push sales. So as I said, that this year we are taking as a year of correction for ourselves to be future ready. -------------------------------------------------------------------------------- Kedar B, [134] -------------------------------------------------------------------------------- Okay. And the current number there, we have been able to sort of optimize. So I'm guessing that, that is what the company will strive towards going forward and try to keep it sustainable. Is it correct? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [135] -------------------------------------------------------------------------------- 100%. -------------------------------------------------------------------------------- Kedar B, [136] -------------------------------------------------------------------------------- Okay. Sir, and second question is regarding the distribution on the renal channel that we have. So is that -- are those distributions exclusive to us? Or do they distribute other brands as well? How does the market work on that front? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [137] -------------------------------------------------------------------------------- Well, there are very few players in the country in this business who are like a single-brand outlet. Okay. Most of them operates on a NBO basis. And most of them also continue to have some portion of the unorganized selling also. -------------------------------------------------------------------------------- Kedar B, [138] -------------------------------------------------------------------------------- Okay. Sir so in that situation, if they are stocking, obviously, other brands as well, so any idea on how the other organized players in the market have been working in terms of their credit terms? Is it that the entire industry is trying to move towards a more optimized operation? Or are we alone in trying to optimize the operations right now? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [139] -------------------------------------------------------------------------------- Well, difficult to say. For sure, I think what we have to see is how we can improve further. Okay. And we have a strength, and you see something which we need to understand that there is a lot of inherent strength in the brand. Okay. And we need to perform to the potential of the brand. So I would not be able to comment on the other players. Some of the players are already quite disciplined also. Let me not back -- let me not take away that also that some of the players, I believe, are already quite disciplined with this business in terms of their working capital management. And maybe we are slightly late, okay, but we are also catching up fast. -------------------------------------------------------------------------------- Operator [140] -------------------------------------------------------------------------------- The next question is from the line of Kaustav Bubna from Rare Enterprise. -------------------------------------------------------------------------------- Kaustav Bubna, Rare Enterprises - Equity Research Analyst [141] -------------------------------------------------------------------------------- I just had one. I missed that part on calibrated plywood. I just wanted to know, as for the manufacturing process of low-pressure laminates where in the laminate panel -- the MDF or particle board is used in the manufacturing process in itself. It's not like HPL where you stick the laminate on top of the plywood. Can the same manufacturing process be used? And just like how MDF and particle board are stuck with the laminate in the manufacturing process in itself, can the same be said with calibrated ply also? -------------------------------------------------------------------------------- Sanidhya Mittal, Greenply Industries Limited - Joint MD & Executive Director [142] -------------------------------------------------------------------------------- I would like to answer this question. So I think that is not possible in the case of plywood because the impression of the lower layers of the veneer usually comes on the LPL. So that is not possible on plywood. However, calibrated plywood has its own use. It is majorly used as the carcass of the furniture. So major ready-made kitchen manufacturers in the country would want to buy calibrated plywood from us. -------------------------------------------------------------------------------- Kaustav Bubna, Rare Enterprises - Equity Research Analyst [143] -------------------------------------------------------------------------------- Okay. Got it. Who -- are there any -- who else does the -- does Century and all do this? What's your competition there apart from imports? -------------------------------------------------------------------------------- Sanidhya Mittal, Greenply Industries Limited - Joint MD & Executive Director [144] -------------------------------------------------------------------------------- Apart from imports, our competition is some of the slightly more unorganized players whose focus is only this segment. Again, that was only price-driven and not technology or not product-driven, but we have really worked on the pricing as well as the calibration technology. So we are being able to offer a very good product at a very attractive pricing. Plus you see after GST's come in, OEMs also get the input credit for the material they buy. So now slowly, the OEM is also interested in dealing with the organized players. -------------------------------------------------------------------------------- Operator [145] -------------------------------------------------------------------------------- The next question is from the line of Ravindranath Naik from Sunidhi Securities. -------------------------------------------------------------------------------- Ravindranath Naik, [146] -------------------------------------------------------------------------------- Sir, just joint venture reported a loss in this quarter. What is the outlook there? And second thing is that depreciation is low. What is the reason for that? If you've covered that then please clarify me. And the interest rate reduction, because you've paid some date during the quarter. So will it reflect in the coming quarters? Those are the 3 questions, please. -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [147] -------------------------------------------------------------------------------- So on the first thing, the loss of the JV is for our Myanmar facility. And since there were hardly any operations because of COVID. We hope by the year-end, at least, we will be at a breakeven level on that facility. And the second question? -------------------------------------------------------------------------------- Ravindranath Naik, [148] -------------------------------------------------------------------------------- Depreciation. There is a... -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [149] -------------------------------------------------------------------------------- Depreciation is because the -- as the plant didn't operated in the month of April and also part of May, okay, we have applied the shift-based depreciation mechanism. And because of that, it is lower, but I think from -- starting from Q2, it will come back to your Q4 levels. And as you said, yes, interest for sure will start now reflecting from Q2 onwards. You can see a downward trend in the interest expenses. -------------------------------------------------------------------------------- Operator [150] -------------------------------------------------------------------------------- The next question is from the line of [Vijay Karpe], individual investor. -------------------------------------------------------------------------------- Unidentified Participant, [151] -------------------------------------------------------------------------------- My question is, a majority of our sales come from the South. So will it be a good idea of setting up a unit over there in the South? -------------------------------------------------------------------------------- Manoj Tulsian, Greenply Industries Limited - Joint MD, CEO & Executive Director [152] -------------------------------------------------------------------------------- No, very interesting but see, we cannot only remain strong in South, okay? We have to be strong in other territories also. And I'm sure the other territories will catch up with South also which are in the next 12 to 15 months, the type of effort that we are putting. So we have not really thought about that at this point of time. Maybe only when we really need those capacities or something, then we will see whether if we need those much of extended capacity, then for sure, we will look at that as -- also as an option, but nothing immediately. -------------------------------------------------------------------------------- Operator [153] -------------------------------------------------------------------------------- Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for their closing comments. -------------------------------------------------------------------------------- Sanidhya Mittal, Greenply Industries Limited - Joint MD & Executive Director [154] -------------------------------------------------------------------------------- I would like to thank you all for taking the time to participate in this call. As we said, Greenply's established understanding and position in this space, combined with our well-developed systems and processes, has helped us not only combat a difficult environment, but also build a platform for the future. We look forward to speaking with you in the next con call post our Q2 FY '21 result announcement. Thank you. -------------------------------------------------------------------------------- Operator [155] -------------------------------------------------------------------------------- Thank you. On behalf of Greenply Industries Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.