Astral Ltd

NSE:ASTRAL

Q1-2026 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to Astral Q1 FY '26 Conference Call hosted by Nuvama Wealth Management Limited. [Operator Instructions] Please note that this conference is now being recorded.

I now hand the conference over to Ms. Sneha Talreja from Nuvama Wealth Management. Thank you, and over to you, ma'am.

[Sneha Talreja, analyst]

Thank you, [indiscernible]. Hello, everyone, and good evening. Thank you all for joining the conference call. Today, we have with us Mr. Kairav Engineer, Executive Director; and Mr. Hiranand Savlani, Executive Director and CFO.

I'll hand over the call to Mr. Kairav for his initial opening remarks, post which we can open the floor for Q&A. Over to you, sir. Thanks a lot for the opportunity.

[Kairav Engineer, executive]

Thank you, Sneha, for hosting the call. Good afternoon, everyone, and welcome to the Q1 FY '26 Earnings Call. I will go over all the different business verticals one by one. We'll start with the Pipes business. Volume was flat in Q1 due to low demand, early monsoon and low government spends. Now it looks like the volume has started picking up July onwards, and we are confident of a double-digit growth this year as per our initial guidance.

PVC antidumping duty can be announced in this quarter, and it will aid in volume growth and value growth as well once it's announced. We expect some uptick in PVC prices. So one can say safely that the PVC has more or less bottomed out. The Kanpur plant will be commercially ready -- will be ready for commercial production in Q3. It will commence in phased manner, starting with our tank and PVC products first. And it will assist in the growth of our North markets, especially markets of U.P., Bihar and certain pockets of the Eastern NCR.

OPVC orders have started coming in now. The products have settled. All regulatory approvals are in place. And we expect that once the government spending starts again in a proper manner, we expect good orders in the OPVC lines as well. In the new product pipeline, we are working on multiple new products at the moment, multiple several high-tech systems, several systems that will be the first ones to come to India. And we will gradually announce the same as we are -- as we get ready to launch them one by one.

Our Hyderabad plant has now settled and is gearing up, and in coming quarters, one can see good volume benefit from our Hyderabad plant. As far as Bathware goes, the response is very positive for Astral Bathware products. Our project order book is healthy, and our order book is growing quarter-on-quarter. We achieved 27% growth in Bathware in quarter 1, and we'll try to maintain a similar growth momentum in the coming quarters as well. We are launching some very good and high-quality products in our Bathware business. They will not only aid in growth, but also in the terms of brand premiumization.

As far as the Adhesive business goes, the India business is performing good for us. We grew by 9% in the first quarter. And with our July numbers in the first 4 month basis, we are close to our guidance of 15% to 16%. Margins are within our guided limits of 14% to 16% in the Adhesive business. U.K. business has stabilized and is picking up with 7% growth in quarter 1 and a 5.5% EBITDA. We have appointed a new person to lead the U.K. business and comes with a very rich industry experience. You will see a good turnaround in the U.K. business in the coming quarters.

As far as the Paint business goes, the growth journey has started. For the first time after acquisition, we have delivered a 20% growth in the paint business, and this is mainly due to the Astral brand paint launches in certain territories across India. We will aim for a similar growth trajectory even in the Paint business in the coming quarters.

Now coming to the acquisition of Nexelon and the question of the CPVC plant, we had been doing R&D for 3 years, and I'm very happy to announce that we have developed our in-house technology to manufacture CPVC resin along with the technical assistance from our technical partner in the project. We are going to put up a 40,000 metric tonne capacity that has a total investment of INR 150 crores, where Astral share in the investment will be INR 120 crores for 80% equity.

Our first step in the backward journey, as you all are aware, was the compounding of CPVC, which we started doing a few years ago. This is now the second step in our backward journey. By doing this, we will be able to grow our volumes and increase our margins at the same time. This plant will commission by Q2 FY '27. Q1 was slow for all building material industry, but Q2 is showing good promise, and we are confident of achieving our guided numbers of double-digit growth in this financial year.

Now I will hand over to Mr. Hiranand Savlani, who will go over some financials.

[Hiranand Savlani, executive]

Welcome to all for this earnings call of Q1 FY '26. Result and press release are in front of you. So I want to just highlight the key sales number and the margin number. The Plumbing division last year was INR 1,013 crores, which this year is INR 953 crores, registering a degrowth of 5.85%. Adhesive India business, last year, it was INR 239 crores; this year, it is INR 261 crores, so registering a growth of 9.15%. Adhesive business U.K., last year, it was INR 89 crores; this year, it is INR 96 crores, so close to about 7% growth. Paint business, last year, it was INR 41.5 crores; this year, it is INR 50 crores, so registering a growth of INR 20.72 crores. Bathware business last year, it was INR 26 crores; this year, it is INR 33 crores, so close to about 27% kind of growth.

As far as EBITDA is concerned, Plumbing division last year, it was INR 181 crores. Again, this year, it is INR 156 crores. So last year, 17.93%, now this year it is 16.41%. Adhesive business India last year, it was INR 38 crores; this year, it is INR 36.6 crores. So percentage term, last year, it was 16%; now this year, it is 14%.

Adhesive business. U.K., last year, it was INR 2.2 crore -- INR 2.46 crores; and this year, it is [indiscernible]. But if I remove the ForEx effect, the EBITDA comes to 5.4%. Paint business, last year, it was INR 4 crores; this year, it is INR 70 lakh. Last year percentage was 9.64%; this year, it is 1.4%. So overall, EBITDA on a consolidated it was 16.36% last year. Again, that this year is 14.25%. So close to about 2% growth in the EBITDA level. The biggest reason for drop was that is the inventory loss, which all the industry players are suffering because of the drop in the polymer price which was in the tune of INR 25 crores kind of. If we remove that effect, I think EBITDA is more or less in the similar line what was last year.

And as you know that in our industry, particularly for Astral, the Q1 is always loaded with more PVC volume than the CPVC volume because in the Q1, the agriculture demand will always be there. And this year, monsoon was early. So because of that, the construction activity slowed down the CPVC volume and the value-added products were low. So because of that, you can see there is a drop into the EBITDA. But if I remove that effect of inventory losses, still it is much, much better off than the industry.

As Kairav communicated, we are very happy that now U.K. is coming to the growth path again back after almost last 3, 4 quarters, we were suffering the challenges. But now, it has delivered a growth of 7% and the EBITDA margin of 5.4%. Similarly, our new businesses are also contributing now in a good way. Bathware has contributed 27% revenue, and similarly, Paint, first time after acquisition has delivered a 20% kind of top line growth. And we are confident that in the coming time, we are expecting the Paint to deliver good number, at least 20% kind of top line growth for the full year.

Now coming to our acquisition of CPVC resin plant. This is the game changer announcement, which Astral had done yesterday for entering into CPVC resin manufacturing business. But before that, I want to take you to the year 2016 when Astral went into the backward integration for making its own compound, and we stopped purchasing CPVC compound from Lubrizol. You must be aware that with this decision, Astral has not only improved the volume, but Astral had improved the EBITDA margin of between 3% to 4%. And all these numbers are there in the history. And I can give you some numbers, which you can verify from our earlier balance sheet and from the press release.

In October 2016, when we came out from the Lubrizol and started our own backward integration of compound, that time in FY '16, our EBITDA was 12.38%. In FY '16, EBITDA was 12.38%, which went up to 14.6% in FY '17. So almost 2% -- more than 2% jump in 1 year. In FY '18, it further jumped to 15.39%. In FY '19, it further jumped to 16.46%. And now we are stabilizing between 16% to 18%. So you can understand that jump of 3% to 4% in EBITDA because of just backward integration in the compounding technology.

Now as Kairav communicated, we are moving to the second round of backward integration, which we were thinking for long, but we were working for last 3 years and which we have completed now. What was the rationale of going into the CPVC manufacturing plant. The first rationale was, as you know, Astral is a quality product, and I'm sure you must be knowing that in recent times, a lot of deterioration is happening into the CPVC piping industry. Many players are supplying the quality which is below the mark in the market and that is where lot of failures are coming.

And Astral always believe in the quality. So to maintain the consistency of the quality, these steps were needed that why not we develop our own manufacturing of CPVC regime so that we can have a consistency of the quality. Today, Indian manufacturers are also manufacturing CPVC regime, but we all know that the quality standards are not as per the international level. So because of that, lot of people are facing challenges. Though there is a little lower price regime, but still their quality is not up to the mark. So considering that in mind and considering our long-term security of the quality, we thought that why not we should think on that side. So we were working for last 3 years on R&D. We have done a lot of R&D on that, and we have done lot of trial batches in our pilot plant. After successful of that, we have decided to come into this business.

Secondly, when there is a narrow gap between CPVC and the PVC. At that time, normally, the CPVC volume pick up. Because now today, if you see the CPVC and PVC price gap has narrowed down. So there are high probability that there will be a conversion of many consumers from PVC to CPVC. That is going to increase the volume for the industry in a big way in the coming time. Because the way polymer prices dropped, there are high probability that may customer will move from PVC to CPVC in the coming time.

The reason is that when Astral launched CPVC in the beginning of the journey, Astral adopted CTS standard, okay? That is the copper tube size standard. And in PVC, the standard is ASTM. So the gap between ASTM and the CTS standard is almost 20% to 30% kind of weight difference. So the pipe will be lighter weight in CPVC versus heavy weight in the PVC pipe. So because of that end use level pipe, I think the value coming down for the CPVC. So that is going to help in a big way in the coming time. If this gap is going to become narrow, that will increase the volume substantially. In that case, if Astral has their own manufacturing plant, Astral can take the highest advantage of that, not only in terms of volume, we are definitely going to gain good market share, but also to improve our margin. Because today, if you see the CPVC market, the other places are there, you can see their margins also. Their EBITDA margins are in the range of 25% to 30%, which is a huge margin.

So even if we conservatively pick up that margin, we can even downgrade that margin also, then also, it is going to be a big saving to Astral to manufacture it. And another biggest advantage to Astral is that if you compare the investment, if you compare the investment, what Lubrizol has done the announcement of CPVC plant, you see the Japanese players investment, even the current local player, which they have done the investment into the CPVC plant, compared to that, the technology which Astral has developed, our investments are very, very low.

We are going to invest INR 150 crores and going to put up the 40,000 metric tonne capacity. So that is going to be a very big benefit to Astral in terms of return. Now if you consider 20%, 25%, even conservative EBITDA margin also, you can work out your payback period. Payback period will be much, much faster. Now not only payback period, but Astral's investment in CPVC plan, for us, it is a zero investment. The reason is that today, Astral is holding close to about 3 months raw material inventory because we are dependent on imported CPVC. So because of that, we have to hold a higher raw material.

So on an average, our inventory will be 90 days inventory. So on an average roughly about, you can say, 12,000 metric tonnes raw material is going to be there in the system. So if I convert into the current price, then the raw material itself is contributing INR 120 crores to INR 130 crores of investment in working capital. Now if I start my own manufacturing plant, then the inventory is not required because it will be near to my plant. So there is no need to hold that much of inventory. So my inventory level is going to come drastically drop, which will make my plant free.

So it is a big, big advantage for the long term. That's why I used in the beginning, it's a game changer for Astral. So this is the biggest advantage why Astral took a decision and not overnight we have taken this decision. After working 3 years, matching the quality what we originally did in 2016, did a lot of -- hundreds of trials we took, and then we took the compound decision. Similarly, here also last 2 years, we have taken a lot of trials in our pilot project. And then after a successful trial, we have taken to this decision.

So today, we can proudly say Astral's investment will be lowest in the industry, not only investment low, but our costing will also be lowest in the industry because the way we have done the hard work in the backward side for the last 2.5 years to 3 years, that has given us a lot of opportunity to reduce the cost. But that, today, I'm only just saying, but after 1 year once this plant will be commissioned, that time you will see that will be converted into the actual number.

So now this rationale, we have taken this call. If you have any questions, I will be happy to answer everyone. And rest, I think Kairav has covered about all the other businesses. So now we are opening up the floor for the Q&A. Thank you so much.

[Operator]

[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital.

[Shravan Shah, analyst]

Sir, just continuing on the CPVC resin manufacturing. So 2 things to understand. First, let's say, from third quarter of FY '27, once the plant will be operational, on a full year basis, as you have mentioned, the margin to improve. So for us, as a Plumbing division, how one can look at the margin improvement? So currently, whatever 16.5% is there in the first quarter, can we see the margin moving to a 20% plus once it will be on a yearly basis? That is first. And second is, why 40,000 metric tonnes? Will this suffice the entire requirement by FY '27 or FY '28? Or can we also have a plan to increase the capacity to 100% of our requirement?

[Hiranand Savlani, executive]

So coming to your first question, the margin expansion will definitely be there. Exactly how much will be there, the market situation will decide because we have to take a call at that point of time that how much we want to pass on to the market to gain the volumes very fast, and secondly, how much we want to retain to improve our margins. So we are going to split the profit into volume growth as well as into the margin growth. So that will be decided once the actual production will be ready with us, and actual working will be there at that point of time. But definitely, margins will be much, much better than what you are seeing today.

Now regarding your second question, 40,000 metric tonne plant will not be definitely sufficient for us because the way we are expecting the growth in the coming time, we may be requiring more capacity in the future. But right now, I think to start with 40,000 metric tonnes is more than enough and the balance we can source from our Japanese partner with whom we have tie-ups. And at a time when if it is required, at that time, we will think for the further expansion. But let us first establish 40,000 and whatever the number which we have done homework and when the actual number will come, we want to see that how the realistic number are there. Based on that, we will take that decision. But definitely, I can say that the margin will definitely expand.

[Shravan Shah, analyst]

Got it. Got it, sir. Second, sir, on the volume front. So obviously, the quarter was muted. There also, if you can explain in terms of the -- for us, CPVC in terms of the growth and the industry growth and now July 30% growth that we are seeing. So double digit when we are seeing the guidance for FY '26, the ask rate is 13%. But does that mean once the ADD will come, this double-digit could be even 15%, 20% kind of a number is also possible?

[Kairav Engineer, executive]

So there are 2 things. One is that double-digit can be anything. It could be 10 also, 12 also, 15 also, 20 also. There are many different parameters at play. ADD is not the only parameter. Once the ADD comes, price will settle at a certain level. After that, we need BIS for the price to even move further up. And also, we need the government spending to increase in the system. And we also need the building materials segment as a whole, especially on the construction front, at the developer level, the demand should also go up. So it's a combination of multiple factors.

But looking at what we are seeing the trend as for the second quarter, we are confident that double-digit growth as per our initial guidance during our Analyst Day, whatever we have guided, that much we can achieve at the end of this financial year.

[Hiranand Savlani, executive]

And I'd add to that. If all will be in favor, like suppose anti-dumping comes, BIS comes, then you are right, we can go up to 15% also, will not be a big parameter.

[Shravan Shah, analyst]

Okay. Okay. Got it. Lastly, sir, CapEx for Q1 and for full year and maybe next year, if you can help because now the additional CapEx of INR 120 crores is there?

[Hiranand Savlani, executive]

So like this year, we have guided around INR 300 crores kind of CapEx because Kanpur plant, building is ready, now machinery delivery will start. The Q1, we have spent only INR 50 crores on the CapEx. Next year, I think normal CapEx will be there because we are not going to expand any capacity for next 2, 3 years in the pipes category, so will be hardly any CapEx. This INR 120 crores, yes, definitely, it will be there, but that will be over a period of 12 months. So some CapEx will come this year and some will come next year. Because first building level stage, the investment will be there, then the machinery level will be there. So over a period of 12 months, we are going to pass this INR 120 crores.

[Shravan Shah, analyst]

Okay. And lastly, if you can allow me, U.K. Adhesive, now post the ForEx 5.2% margin, can we now see this will be the kind of a minimum and we can see an improvement in the margins?

[Kairav Engineer, executive]

So historically, U.K. has been 8% to 10% EBITDA company historically. So margins will eventually settle in that 8% to 10% range -- EBITDA range for the U.K. company. Because along with margin, there also, we are going to focus on the top line growth as well.

[Operator]

The next question is from the line of Sujit Jain from Bajaj Life.

[Sujit Jain, analyst]

Yes. Kairav and Savlaniji, encouraging commentary. A few points, you can note them down and give me one liners. If I look at data for the last 14 consecutive quarters, our volume growth versus Supreme, which is 3x our size, we have lagged consistently. Overseas Adhesives business, as we've seen at least for many years, 10 consecutive quarters, it has been weak. 7% growth, but there could be some currency depreciation for this quarter.

Paints when I look at, its encouraging commentary, but when we acquired the company, it was close to INR 200 crores. And last year also, it closed at INR 197 crores. When we acquired, it was INR 215 crores. So even if you do 20% growth, it will be INR 220 crores or slightly higher than that this year.

Finally, our ROE has been consistently coming down. So if you can address all of this?

[Hiranand Savlani, executive]

So let me address one by one. Your first comment on the volume comparison with our competitor. Look at the competitor's number, if you see, the major chunk of volume came from the Jal Jeevan mission. Okay? In Jal Jeevan, Astral was not there because we are not manufacturing HDPE pipe. So 2 years, there was a huge spending by government of India, particularly pre-election, sizable spending, because government wanted to showcase the water that we have done so much of work. So sizable growth has come from that segment. So because of that, if you are comparing, then definitely, yes, volumes were very high, but our presence was not there into that segment.

Now regarding your second question on Paint side. Yes, we have communicated in the past also that we were working on the strategy because we wanted to launch the Astral brand, and we were doing a lot of homework at the back office level. So I think now we are trying to settle down because we have worked out certain strategy, and now that is going to play in the market. That's why we are confidently saying that we will be able to deliver 20% kind of growth because now the senior person has also joined, having rich experience from the similar industry. So that is going to help us in the coming time.

Because the moment you launch the new brand, a lot of spending will be there. And on a INR 200 crore top line, if you are spending even INR 10 crore for any marketing expense or anything, it works out to be 5%. So because of that, margins are also under pressure. Secondly, you also know that the industry is also passing through the challenge of one of the competitor who has created a lot of issues in the market, which I don't want to discuss in everything. But that has also created the pressure on the margin for the entire industry. So that has also affected and that also given us the more time to take that kind of strategical decision.

So now I think we are ready. We have a team which is also ready. That's why we can confidently say that this year, we will be able to grow minimum 20%. So we will be near to INR 240 crores kind of run rate this year. And going forward, we will give again the guidance for the next year. But I think now things are settling down, and we will definitely going to grow. And once the volume will pick up, definitely, the margins will also improve a lot in the coming time. What was your third question? I missed that part.

[Sujit Jain, analyst]

This was regarding overseas adhesives, this 7% growth. If I look at, at least 10 quarters' data, that is weak, but even for this quarter, 7% growth in sales could be on the back of currency depreciation in that geography. So this business has continuously been in the WIP mode. So when do we finally get our act together here?

[Hiranand Savlani, executive]

So I told you that this year, we are confident that we'll be back to the normal. I'm very happy to share you that because top line growth was missing for last 4, 5 quarters. So because of that overheads were very high. So there was a tremendous pressure on the EBITDA margin. But the last quarter, our -- you can say the gross profit margin was highest in the last 4 years. So there is an improvement, but it is not converted fully into the EBITDA. EBITDA has come to the 5.4% only. But in the coming quarters, we are confident that it's going to definitely help us into the improvement into the EBITDA also. And at the same time, top line growth also.

We have appointed a very senior person, having very rich experience of more than 25 years of the industry to take charge of our U.K. business, and he has just taken a charge. And that is the reason that today, Mr. Sandeep Engineer is not on the call because he is with him in U.K. to make him understand the entire company and how we have grown up this company and what is going to be a strategy for the growth. So all these things are going to be discussed over there, and we are confident that you will see in the coming quarter, things will improve.

Question was continued pressure on ROE. Yes, definitely, you are absolutely right. We are also very worried about that thing also. The reason is that in last 3 years, if you see, we have spent close to about INR 1,500 crores of CapEx. This INR 1,500 crore of CapEx, unfortunately, when we have spent, at that time the market scenario is not in our favor because polymer is going down, because of the continuous pressure is coming on the realization side, and the building material is passing through a challenging time. So actual utilization of this INR 1,500 crores has not been there in the system.

Now in next coming 2 to 3 years' time, you will see CapEx will be on hold and the utilization will improve. So that definitely, it is going to help to improve our ROI and ROCE more. We are quite confident the moment we will stop that CapEx cycle, it is definitely going to help us to improve our markets. And all this...

[Sujit Jain, analyst]

When I look at data, you start -- yes. When I look at data, you start the year with a CapEx guidance and you end up doing at least 2x or higher CapEx by the end of the year. So I think the capital efficiency is something you should really focus on.

[Hiranand Savlani, executive]

No, I fully agree with you because a lot of decentralization exercise was going on. And when you enter into the market, at that time, you realize that the certain things are needed. So because of that, you have to change your CapEx plans also. But I can assure you that particularly in the Pipe division, this year will be the last year for the CapEx. After that, 2, 3 years will be only maintenance-related CapEx. And then you will see a lot of improvement. But ultimately, company has already spent money. So then benefit always for the CapEx comes at a later stage. And it is unfortunate that the market condition was not in our favor.

Now if the polymer not have dropped by 25% kind of level in the last 2 years, then this situation could not have arrived because overhead keeps growing every year. But if your top line doesn't grow, then it always gives you the pressure on the margin and because of that, the return ratios are getting disturbed. If polymer could not have pollen so high, then this situation might not have arrived. But we -- your point is valid and we respect that part. And we'll give you confidence that in the coming quarter, you will see continuous improvement into that side.

[Operator]

The next question is from the line of Sneha Talreja from Nuvama Wealth.

[Sneha Talreja, analyst]

Just 2 questions from my end. Firstly, in your opening remarks, you mentioned about improving demand scenario. Wanted some update on that? Is it on the retail level, project level, building material side? Where is the improvement, which is actually seen? Is it on a pan-India level, certain geographies? Some flavor here will be helpful.

Secondly, on the CPVC resin plant, I just wanted to understand your procurement strategy because you will be, of course, procuring PVC and chlorine both from outside. Given there will be some time QC implementation on PVC, how are you -- how are you seeing procurement strategy for both PVC as well as where are you looking at procuring chlorine from? I think these are the 2 from my end.

[Kairav Engineer, executive]

So I will tell you on the demand side, basically. See demand side, pan-India demand definitely has not opened up. It is certain pockets and geographies are doing better and certain pockets and geographies are still in the improvement space. Looking into this festive period, especially Raksha Bandhan, Janmashtami and the long weekend of 15th August, we are hopeful that once all these festive times pass, September is looking to be very promising in terms of demand as of today's trend. I may be wrong, things may change. But as of today's trend, we feel that from September, the market has to open because this year, Diwali is in the middle of the October month. So most of the home improvement activity usually starts 2 months prior to the Diwali period -- 2 or 1.5 months prior. So we feel that after this festive period, from the third week of August, things should improve pan-India basis in terms of demand.

Second question, you are talking about the procurement of PVC for our CPVC plant. I'm very pleased to tell you that in the 3 years of the R&D that we have done, we have worked with very different types of PVC grades, and we have done the chlorination of different types of PVC grades, domestic as well as international. So we are confident of using different type of PVC grade as per our wish and desire and as per the market pricing to make our CPVC. So we are not limited to a single PVC supplier for our CPVC plant. We have done R&D for very different type of grade, for different PVC that's coming from China, coming from Korea, coming from U.S., coming from the local manufacturers, lot of R&D has been done. So on the PVC procurement front, we are not afraid or scared of the antidumping scenario at all.

Now as far as the chlorine procurement goes, chlorine is right now in the negative and surplus is available. We have to procure the liquid chlorine. So we will procure the liquid chlorine. There are many chlorine people in the state of Gujarat who are ready to give the liquid chlorine to us. So even the chlorine procurement, there is no problem at all.

[Hiranand Savlani, executive]

Sneha, I can add what Kairav said that the demand scenario, we have given the July numbers. So we are not communicating investor that 30% volume has come, so that will be the benchmark in the going forward. This is what the July number, even if I give the base effect also, then also it looks better. Even if I consider the last year little negative effect of Q2 volume, then also it is looking better. But we have to wait for some more time. Because we cannot just jump in on the 1-month basis and say that, no, no, now going forward, everything is looking rosy. .

So I request every investor that give us some time, we will be the most vocal company. We will be communicating to you regularly on every con call, and we are meeting every investor in the conferences also. So we will communicate what is the ground reality. But July was looking promising and August so far is going good. But yes, rightly Kairav said that festive seasons have started. So we have to wait and watch. Whether it is going to give the effect in the coming time or not, that will be only assessed at the end of the September.

If for the entire quarter, the numbers are looking good, then we will communicate in our next con call, but we cannot say on the basis of 1 month that these are the number which is going to be for the rest of the year. Let us wait for some time.

Secondly, PVC side, absolutely, we don't see any problem. You all are aware that India is going to increase the capacity of PVC local manufacturing in a substantial manner. Both our big giant companies of India are increasing the capacity in a big way, whether it is the Reliance or it is the Adani. So absolutely nothing to worry on the PVC procurement side. Chlorine is also amply available in the Gujarat state. So we have done all this homework because last 3 years, we were working on that. This is not the decision which Astral has taken overnight. So we are quite confident that these kind of things is not good.

Even if there is a challenge at the local level, we are prepared. For the international PVC also, we have done all this trial in our pilot plant. Next question.

[Operator]

The next question is from the line of Praveen Sahay from PL Capital.

[Praveen Sahay, analyst]

Sir, 2 questions from my side. One is related to the employee expenses for the quarter, which has -- I can see that's increased. So what's the reason for that? Or we continue to be at this level?

[Hiranand Savlani, executive]

So Praveen, we have communicated earlier also that because of continuous falling polymer, the top line is getting eroded. So because of that, the percentage terms, it is going up. Absolute level, it is going very negligible, but absolute level -- percentage level, it is showing very high. Because we have entered into the multiple new businesses, so because of that, we have to appoint the new people not only on the ground level, but at the senior level also.

But now base effect is going to play its role in -- from the coming quarter onwards. And there, you will see there will be a drop in the employee cost. So it is only a problem of temporary because new businesses contribution, the moment will start growing up like Bathware, we communicated that we have grown 27%; Paint, we have grown 20%. So if this kind of contribution will keep coming in the coming quarter, this employee cost will definitely going to come down in the coming quarters.

[Praveen Sahay, analyst]

Okay. And next question, sir. By year-end, how is our capacity going to be? Right now, which is 387,000. Where you are seeing at the end of the year?

[Hiranand Savlani, executive]

So I think another 25,000 kind of will be added in the Kanpur in the first phase. And when -- if needed, we will add more also. But buildings will be ready for all the plant, like Hyderabad also, we have completed the building. Only as and when needed, we will add the machineries. So that CapEx will be very low.

[Operator]

The next question is from the line of Pujan Shah from Molecule Ventures.

[Pujan Shah, analyst]

Sir, my first question pertains to the current CPVC procurement. So as of now, as we don't have any backward integration for the CPVC resin, so from where do we procure the CPVC right now? And what will be the -- after the backward integration, what percentage of our total consumption will be used as a captive consumption there?

[Kairav Engineer, executive]

So right now, we are procuring our CPVC from Sekisui Japan, okay, and some from DCW in the local level. So we are procuring from multiple sources. We are procuring good quality CPVC resin. And after this planned completion, it will be, basis on the demand scenario, at that point in time, we will be able to answer that how much of our internal demand does this 40,000 tonne resin suffice because 40,000 is just the resin. On top of that, I have to do the compounding.

So when you do the compounding, another weight is added. So that 40,000 when converted to compound becomes almost 46,000 or 47,000 tonnes. So once this plant is complete and 40,000 is on a 100% utilization basis, the number is there. So we have to see that when the plant commences and how much yield we are getting and how the plant stabilizes, because CPVC plant, to stabilize also takes some time. It does not happen directly because this process is a very volatile process. So basis on that, we will be able to give you an answer that how much of our internal consumption this plant is going to provide.

[Pujan Shah, analyst]

Got it, sir. And my second question is, as we are investing -- so we are investing INR 120 crores out of INR 150 crores of the total CapEx. So 20% share will be, I think, invested by a Japanese company. So what are the things they have been bringing on to the table to just we are sharing that our 20% share to them. So why we aren't going...

[Kairav Engineer, executive]

20% is not by any Japanese company. 20% is our technical partner, okay? He's Indian national also, and he has worked on this particular technology along with our team, and he's -- for the balance 20%, he's bringing his own capital into the business.

[Pujan Shah, analyst]

Okay. Got it. And my last question would be on the OPVC side.

[Operator]

Sorry to interrupt, Mr. Shah, but I request you to rejoin the queue for the follow-up questions. The next question is from the line of Keshav Lahoti from HDFC Securities.

[Keshav Lahoti, analyst]

Sir, as you have highlighted your Adhesive 4 months' growth, possibly can you do the same for the Pipe division also? And secondly, in June, the growth has -- it is not at the cost of margin. Like nothing has changed from the strategy front, nothing cost cut, price cut, any such strategies has been adopted by Astral?

[Kairav Engineer, executive]

No, no. Margin is always our priority to us. So we are not going to cut the -- for this type of growth, we are not going to cut our margins and do the business. So whatever margin for the Piping business, we have guided 16% to 18%, we have always guided the investor community that we will be -- we will try for the 16% to 18% EBITDA in the Piping business. I think we will stick to our guidance of 16% to 18% for the annual basis. .

[Keshav Lahoti, analyst]

Okay. And first 4 months, Plumbing growth?

[Hiranand Savlani, executive]

And I think -- no, no, for the sake of growth, even if margins are 1% or 2% lesser, we don't mind it. As far as the demand is there in the market and we feel that we are able to get the good growth by dropping 1% or 2% margin, I think we will be happy to do that thing. It is not as a thumb rule that we want to work on this, and we don't want to sacrifice the order below that margin. But if we see that there is a demand in the market, then we are ready to sacrifice our margins also and we'll be giving the first priority to the volume, not to the margin. But unnecessary cutting the price and disturbing the market, that is not the mindset of the Astral. But if we surely see that there is a growth, by reducing 1% or 2% margin if we are getting the extra growth, yes, definitely, we will try first to do that.

[Keshav Lahoti, analyst]

Got it. Sir, in first 4 months, Plumbing volume growth, what I'm trying to understand, how is the June base? Is it more to do with base impact how much the 30% growth number?

[Hiranand Savlani, executive]

So this 30%, we consider Y-o-Y basis. So last July, we are comparing the 30%.

[Keshav Lahoti, analyst]

Right, right. So what I'm trying to understand is, is it the base was very weak, so the number is looking 30% growth or possibly as you highlighted Adhesive growth for the first 4 months, can you do the same for the Plumbing volume growth for the 4 months? What is the year-on-year...

[Hiranand Savlani, executive]

No, I don't have a particular month number handy with me. But post con call, definitely, you call me, I will share that number to you.

[Operator]

The next question is from the line of [ Praneeth ], who is an Individual Investor.

[Unknown Attendee]

So I was wondering in terms of CPVC manufacturing, why would -- so what is the time line of becoming operational? I joined the call a little late, so don't mind my question later. So -- and I understand that the yield is going to be higher. At the present rate, what is the yield you've been expecting during R&D phase? And how are you expecting it to change over time? Like I understand 40,000 capacity is not going to happen instantaneously. So how is that going to happen?

And in terms of PVC, are we going to continue to -- because there's a domestic supply chain inherently like with DCW or Chemplast? So would it not be with them? Or is that competitive prices internationally that we are expecting you to capitalize on? Could you give us some perspective on PVC procurement and things like that...

[Kairav Engineer, executive]

So CPVC, we will commence in the second quarter of FY '27, is what our initial plans and commentary is. As far as the yield goes, we are not sharing the yield data because it is proprietary to our R&D technology. So exact yield data, we will not share.

As far as the PVC sourcing for this manufacturing of CPVC goes, we are -- like I said, we have worked with several different PVC manufacturers from across the world. So we are comfortable in sourcing whichever grade is available at the competitive price to ensure that our end product remains competitive and the benefits get passed on to the parent company.

[Hiranand Savlani, executive]

And secondly, I can add here that we have a very healthy relation with all the names you gave, whether it is a DCW, whether it is a Reliance, whether it is a Chemplast, they all are our trusted supplier, and we have a very healthy relationship of years. It is not 1 or 2 years. Last 10 years, we are working with them. So I don't see any challenge into that side. They all are our trusted supplier. And at the same time, lot of international suppliers are there with whom also we are working for so many years. So we don't see any problem into that side.

[Unknown Attendee]

So the price is going to be the primary factor that would depend on sourcing because R&D is done with all the grades?

[Kairav Engineer, executive]

So it is not just price, but we will ensure that we manufacture this product at a competitive price and at the desired quality to ensure that at the end of the day, the parent company gains the market share and volume without sacrificing on margin.

[Hiranand Savlani, executive]

Secondly, you see -- today also, if you see the price now for PVC, whether you pick up any company in India, all are having the same price. They follow the same price across the board. You source from any company, all the 3 companies, PVC price is common. Now if you compare with the international price also, the price gap will not be more than INR 1 or INR 2 because PVC is not that product, it's a commodity. So your gap will be INR 1 or INR 2. Whether I buy imported material, whether I buy local material, the gap is not going to be more than INR 2, and that is how the local players are adjusting their price.

They are always giving the price on import parity base. So it is not going to be a big gap. And CPVC margin, it is already in public domain of the other companies. You can check all are working on 25% plus EBITDA margin -- 25%, 30%. Some are working on more than that also. So INR 1 or INR 2 price is not going to affect the CPVC margins or maybe CPVC costing.

[Unknown Attendee]

Understood. And in terms of inventory management, you mentioned that it is going to be not a high impact in terms of cash because of the reduction in inventory days. So to what extent do you think you'll get down to the 90 days from which could it be 30? Or how would it be once the manufacturing process comes in? Because at the end of the day, it will be blended processing, right?

[Hiranand Savlani, executive]

Yes. So right now, I'm talking about CPVC. PVC inventory, we are not keeping for 90 days because it's a local supply. So don't -- we don't need 1 week or 2 week inventories more than enough. Whatever the higher inventory, which we have to keep, that is for the CPVC because that is more inventory dependent on the import. So because of that, we have to keep the high inventory. Now support 90 days inventories are there in the system today, and if my local plant is there, and it's our own plant will be there, I think we can easily manage in 1 week inventory or max to max 2-week inventory. There is no need to keep higher inventory because the supply they assure. So if I reduce my inventory by 2.5 months, even if I'm considering higher than...

[Kairav Engineer, executive]

There are many benefits. As to Hiranand said, I want to add that there are many benefits that we will still explore once we make our own resin. We can also do the compounding and pelletizing on site, which aids in better efficiency. So we can get rid of the compounding processes across our plan to further enhance the secrecy of our recipes and raw materials and we can ship directly the finished compound to our factory. So a lot of synergies can be unfolded, which we will work on once this plant is stabilized.

[Operator]

The next question is from the line of Shravan Shah from Dolat Capital.

[Shravan Shah, analyst]

Sir, just one thing. So this quarter, obviously, the prices were low realization on the Plumbing side. Just to understand, so if I just do a math, obviously, though PVC share was higher and that's why the prices were lower. But still from FY '25, the current realization is close to 8% lower. So given -- let's assume the ADD does not come right now, just for assumption. So at current prices versus the Q1 average, how it is and how one can look at? Unless the CPVC share goes up, obviously, it will help us to improve the realization. But still on a full year basis, if somebody -- if we remove the ADD, still, I think we will still see a kind of a 5% on a Y-o-Y basis decline on the realization front. So your comment will be helpful.

[Hiranand Savlani, executive]

I think it is very difficult to predict the balance 9 months because first quarter is over now, and balance 9 months when ADD is going to come, when BIS is going to come, when the polymer prices are going to go up, I think this is very difficult to predict at this stage because the market is volatile. And what is going to be the CPVC price in the coming time? So it is very, very difficult to say that what is going to be there by the year-end? So every quarterly, we'll keep updating you.

Now if you see that Q1, Q1, the polymer price dropped and then the later stage, PVC price has gone up and now it is stable. So maybe Q2 will be better in terms of realization versus Q1. So very, very difficult to say when prices are going up and when prices are going down. So it is volatile. So I think once the things will settle down, yes, definitely, we will be in a position to predict it. But at this stage, giving a year-end realization number will be really challenging for us.

[Shravan Shah, analyst]

True, true. No, what I wanted to understand is currently, PVC prices versus for us in Q1, how much is higher?

[Hiranand Savlani, executive]

14% down is there compared to the last Q1.

[Shravan Shah, analyst]

Q1 FY '26 versus currently is 14% down.

[Hiranand Savlani, executive]

Yes. Q1 FY '25 versus Q1 FY '26 is 14% down.

[Kairav Engineer, executive]

See Q1 to this quarter, there is no change.

[Shravan Shah, analyst]

Okay. Okay. That's what I've asked. So from last quarter...

[Kairav Engineer, executive]

Yes, yes. This quarter, we don't foresee any inventory losses.

[Shravan Shah, analyst]

Okay. Okay. Got it. Got it. And then for industry in Q1, CPVC volume growth would be how much and for us would be how much?

[Hiranand Savlani, executive]

To be very frank, nobody is giving the CPVC data in the market. So very, very difficult for anyone to predict how much is the volume. How much is what? Everyone is talking percentage and all this thing, but there is no one who is giving the exact number. So very, very difficult. If you compare with the -- what we are comparing and what the players are giving the commentary, that is misled.

[Kairav Engineer, executive]

If you look at the import data -- we have checked the import data. If you look at the import data, then I think the type of the CPVC data that we are getting from the market, from the commentaries, I don't think such data without any proof, we have to think that they are absolutely correct.

[Shravan Shah, analyst]

Got it. But for us, the combined plumbing volume is kind of a flat 0.5% growth. So in that...

[Kairav Engineer, executive]

Yes, yes. It is flattish in Q1 because of overall demand sluggishness was there, but we will cover up in the subsequent quarter. So nothing to worry about. And the CPVC side, we have not degrown or lost any market share, so nothing to worry about that. Majorly, the PVC destocking happened because of the falling PVC prices, nothing, no problem on the CPVC side.

[Operator]

The next question is from the line of Utkarsh Nopany from BOB Capital.

[Utkarsh Nopany, analyst]

So my first question is regarding your pipe realization. So if we see, it was down at a much higher pace on a Q-on-Q basis compared to our peers despite we have a low exposure to the agri pipe segment and we have a high exposure to the CPVC pipe portfolio. So I wanted to know whether this is because of steep decline in the CPVC resin prices in the June quarter? And if you could also quantify what has been the sequential change in CPVC resin prices in the June quarter period?

[Hiranand Savlani, executive]

I think CPVC price would definitely down. There is no doubt about that thing. But I think what is the actual price had dropped from where to where, nobody is having the authenticated data because everyone is buying from the different, different stores and every player's pricings are different. Like local players are selling it -- even local payers are not selling at the same price. So they are selling at a different price. Japanese are selling at a different price. Lubrizol is selling at a different price. So very, very difficult for anyone to compare that from where to where it has gone down.

[Utkarsh Nopany, analyst]

So for you only, what has been the change in the CPVC procurement as for the June quarter on a quarter-on-quarter basis?

[Hiranand Savlani, executive]

So we don't share all this internal information that this much is down or this much is up, because we don't share all this individual numbers. [indiscernible] was down. And that is the reason you are seeing that realization drop was there.

[Utkarsh Nopany, analyst]

Okay. Sir, my second question is on your CapEx side. So how much CapEx we have incurred in the June quarter? And what is our guidance for FY '26? And why we are acquiring 80% stake in the proposed CPVC resin plant? Why we are not acquiring 100% stake?

[Hiranand Savlani, executive]

So I think this answer, Kairav has already given. I think you have not listened that thing, that this 20% is with the technical partner. I can't leave technical partner alone, because he has given us the technology and he has helped us in our R&D functions and all this thing. And he was working with us for the last 2, 3 years, and he wanted to invest in that plant. So he has taken 20% stake.

[Kairav Engineer, executive]

And, you know, we need someone -- see CPVC, like I said, is a volatile polymer, and we have to ensure the chlorination process has to happen under certain parameters. And it is a process that needs a lot of care that has to be taken to ensure the quality of the final product. And we will require this partner to run the factory on a day-to-day basis and to be with us. For further expansion and for further support, we require his services at the moment. So he's with us.

[Utkarsh Nopany, analyst]

Okay. And sir, on the CapEx side, what is the guidance for FY '26? And how much we have spent in the June quarter?

[Hiranand Savlani, executive]

I think, Q1, we have spent INR 50 crores. So we have given the guidance of INR 300 crores to INR 350 crores and we stick to that.

[Operator]

The next question is from the line of [ Sanya Kothari ] from AUM Capital.

[Unknown Analyst]

Congratulations on successfully navigating a challenging polymer market this quarter. I just have a couple of questions. With the acquisition of Al-Aziz Plastics, how will its product mix complement Astral's existing portfolio? And what synergies are you expecting in the next 12 to 18 months?

[Kairav Engineer, executive]

So Al-Aziz makes multiple products. It makes electrofusion fitting for water supply, for gas. It makes a PPR fittings. It makes some PPH products. It makes very different variety of products. Like I said in my opening remarks that we are working on several new systems to be launched in the Indian market. Some of these systems will utilize the fittings that are manufactured by Al-Aziz. So we are going -- we have good long-term plans with the fittings of Al-Aziz. On top of that, a lot of Al-Aziz fittings are used in the industrial application and a lot of them are used in water supply application as well.

So once the government demand starts, again, the demand for Al-Aziz product will start. So we can utilize Al-Aziz product for clean water supply, for gas supply, for wastewater supply, lot of different product categories and product lines, we can manufacture using these fittings. And we are under the process of manufacturing a lot of new innovative product lines which we will announce as we are closer to the launch date for each one of them.

[Unknown Analyst]

Okay, sir, what percentage of revenue do you target from this acquisition, say in FY '26 and '27?

[Kairav Engineer, executive]

See, it is very hard to quantify right now, madam, because they are only making fittings. And in that also, a lot of range expansion is going to happen. And on top of that, I have to develop some of the piping products to go with the fitting. So it's very hard because it will all sell as a system. So very hard to quantify right now that what percentage of top line will this happen. But like with our double wall corrugated systems that we acquired, the Rex company. Like it has become a substantial revenue driver for Astral, we foresee that even the Al-Aziz product will become a substantial revenue driver for Astral in the coming quarters.

[Unknown Analyst]

Okay, sir. Sir, these backward integrations and acquisitions, I can see that you are diversifying beyond plumbing. So what percentage of the revenue do you target from non-plumbing segments say, for next 2 years, sir?

[Hiranand Savlani, executive]

So backward integration is not diversion. It is the same plumbing product, only we are doing the backward integration. So it is not altogether different products we are doing. It's a part of the plumbing only.

[Unknown Analyst]

Okay. Sir, any guidance for the revenue growth...

[Operator]

Ma'am, sorry to interrupt, but I request you to come back for the follow-up questions. The next question is from the line of Sunil Shah from SRE PMS.

[Sunil Shah, analyst]

Hiranand bhai, I just wanted to understand about the Plumbing and the Adhesives, that has been our core business for many, many years now. And the new one is on the Paints and Bathware. Just wanted to understand the penetration of these 2 lines, the Bathware and the Paints in our distribution reach. The question is, Plumbing, we are throughout the country, all across the country. Similarly, maybe even Adhesives. But what about Paints and Bathware. Just by increasing our...

[Kairav Engineer, executive]

Bathware also, sir, we are -- sorry to interpret you. I'll just finish on the Bathware side first because they are 2 different segments. So Bathware also 70% of our channel is selling Bathware. We had done an internal survey. And we are -- in Bathware also, we are present across multiple thousand outlets in India. And our distribution reach is going up. We are present in 3 geographies majorly now in the Bathware side: North, West and South. East, we have to still ramp up. East, we will ramp up in the coming year or so. Because to ramp up East, we have to onboard a lot of manpower. So that we have decided that once the West, North and South stabilize, we will gradually enter the East geography as well.

So Bathware also, our aim -- and if we are not entering the different geography, then committing a 25% to 27% growth for the year is also not possible. So Bathware also, our focus is -- but see, Bathware again, if you -- we have to look at the Indian market because in the Indian market, there are hardly handful of companies that have more than INR 500 crore top line in the Bathware business. Bathware business, it takes the time and the lot of end-user conviction to reach that scale of 500, 600 top line players. So our first goal is to cross the INR 500 crore top line in the Bathware business in the coming years, and to enter the club of being a manufacturer that does INR 500 crores to INR 600 crores of annual Bathware sales. Post that, we will look to ramp up in a more aggressive manner.

[Sunil Shah, analyst]

Sure. Just if you can talk about Bathware right now since we are discussing that. So 70% of our distribution reach has -- is selling our Bathware products.

[Kairav Engineer, executive]

Not our Bathware product -- not our Bathware product. I said they deal with the Bathware product. It could be of any brand.

[Sunil Shah, analyst]

Okay. Okay. So I'm saying that, that 70%, we have seen 1 full year of that penetration already happen in FY...

[Kairav Engineer, executive]

See, not everyone is going to stop selling whatever they are selling and pick up my product overnight. That is why I'm saying it takes years of conviction and convincing and customer preference building to succeed in the Bathware space. You look at all the other players, and you see -- you make a list of all the companies in the bathware space in India, you will only figure out that a handful of companies have crossed the INR 500 crores to INR 600 crores top line level. .

Because in this space, it's a slow burn, it takes some time to convince the customer, it takes some time to convince the retailer. It is a finished product, it is in front of the wall product. It is not a behind the wall product. Or it is not a commodity product, where tomorrow, if I say I will give you 5% extra discount, you stock 2 trucks of material, someone will go ahead and stock 2 trucks of bathware. It does not work like that.

So this industry, you have to work with the influencer, you have to work with the homeowners, you have to work with the architects, you have to work with the plumbers. It takes some time to develop the preference and to penetrate. But looking at what we have accomplished in our 3 years of journey, I am very hopeful that we will cross this INR 500 crores, INR 600 crore threshold, and we will become one of the Indian players who has crossed that mark.

[Sunil Shah, analyst]

Sure, sir. Sure.

[Hiranand Savlani, executive]

Sunil bhai, I can add a little here. See, every distributor normally when he join, he watch the other distributor. Okay. So one distributor will take a lead in Ahmedabad hypothetically, then he will do some sale, then the other distributors are watching him, okay? The moment certain level of volume he will reach, other will be tempted to join with Astral, and then the third person will join. So this journey like that -- because nobody wants to take a risk to hold the inventories and do the business for the new business.

So whatever the most trusted distributors are there, whom we are convincing that so many years you have worked with Astral, you give us a chance and you see that whether product is working or not. So slowly and gradually, distributors are putting trust in Astral and they are growing. And the initial journey as Kairav say will always be slow because I can give you an example. If I go to any good contractor or maybe the good developer like Godrej, he will select me, Astral Bathware Fitting, for one of his projects, and he will give me 2 or 3 towers, that, "Okay, I want to test your product, how it is functioning, how is the aesthetic look like." This tower will take 3 years to complete. And till that time, he's not going to give me the other order because he will watch my product. He will see the functioning of my product.

So after that, he may be in his second tranche, he may be giving me 100 towers or maybe 50 towers or something like that. But in the beginning of the journey, he will give me a few towers. So the waiting period will be long for the same builder for the next order. So that is the reason we always communicate every investor that the initial journey will be slow. Then the second level of growth will be very fast because he is convinced with my product. And if he is repeatedly coming to be, then he may be giving me 50 tower, maybe 100 tower, maybe 500 towers also.

So initial journey will be slow in this business, and that is why we are repeatedly communicating investors that this will take time. The best part is that, that plumbers' connect with Astral is very high. So because of that, plumbers are pushing this product into the retail level and that is picking up very fast. And that is why we are seeing that -- you tell me which company has given in 2, 3 years' time, triple-digit number? Very, very -- any -- hardly any company will be there. So that is the strength of brand Astral.

So maybe another 1 year or so, we have to work slow. And then all of a sudden, you will see there will be a fast growth. Because I explained to you that the next level repeat order to a 3 year, anyway, I have to wait for that builder. Before the tower will not be completed, he will not be giving me the repeat order.

Similarly coming to the Paint sales. Now, coming to your second question on Paint. Paint, when we took over a lot of systemic changes were there, lot of lacunas were there, we implemented SAPs and all so that we can have a right way of reporting structure and MI structure in the organization. And then we started appointing the distributor -- sorry, dealers for the paint for Astral brand. Because now [indiscernible] is restricted to the south market only. The other market where we are entering, we are entering with the Astral Paint.

Now the moment I am entering into any -- smallest of the smallest markets, 1 or 2 dealer meet I do, it is costing me too much because my top line is not there. So because of that, I have to add the more team. That's where my employee costs are going very ballooning. Secondly, I am spending a lot of money on dealers' meet, distributor meet, gifting them and doing lot of -- little bit of branding activity. So because of that, my EBITDA is getting eroded, but now I think we have already entered into Gujarat, Rajasthan, some part of Maharashtra and M.P. also.

So hopefully, now certain level of dealers we have already appointed in brand Astral and that is why you are seeing there is a growth in this quarter. And from here on, the same people are going to give me the growth in the coming quarter. And at the second stage, we will appoint more dealers in more states. Because if I'm going to open up the entire pan India, then I have to bleed like anything. Because I have to need more and more people to -- because it's a retail business, it is not a distributor-led business. It is a direct-to-dealer model. So that will kill my employee cost.

So because of that, in a gradual manner, we are working, and we have a clear mindset that we don't want to make losses, okay? We may be a little positive EBITDA and keep growing one by one geography. And that is the reason we are not going big way into the pan India. Otherwise, it is going to be a cash burn for us, which is not the mindset of the management. That's why it is going slow. But yes, now certain states, we have already opened. That's why you are seeing the number. And we are confident that in the coming quarter also by year-end, we are targeting minimum 20% kind of growth -- minimum, I'm telling you, it can be higher also.

[Sunil Shah, analyst]

All the best, and we look forward to the old growth rate and old ratios once again.

[Kairav Engineer, executive]

No, no, sir, we are also ready. Everyone -- see, at the end of the day, we are also working for growth only. It is not that -- no one likes to not grow. So we are also working. And the CPVC plant also, we have -- whatever we have decided, we have thought about it for years, and we have deliberated and talked about it and all these -- whatever initiatives that we have taken are to further drive the growth of the company only.

[Operator]

The next question is from the line of Rahul Agarwal from Ikigai Asset.

[Rahul Agarwal, analyst]

Sir, just extending the discussion further on these categories. I think a lot of product categories need investment on branding as well apart from manpower. I think more and more, we are adding B2C products. Apart from Paints, Bathware, I think the core categories of Adhesives also has that -- stuff like Tanks will also need some kind of branding because a lot of retail demand is out there. Just from a sales and promotion perspective, typically, the business is spending about 3%, 3.5% of top line into branding. Should we expect more spending into this line item and get further brand spend to further ramp up these sales? That's the first question.

[Hiranand Savlani, executive]

Rahulji, you see how the Astral worked out the branding strategy. Because when we entered into the Adhesive business, multiple brands were there, okay? So because of that, we have to spend a lot of money on the branding side. So what we did, we consolidated that business into the one brand, one type, okay? Earlier, if you see, there were a multiple brand for individual category wise of chemical, you can say. And that we consolidated and make it a one-brand bond type. And now today, you see whatever the branding we are doing, that is in the name of bond type, so that our branding costs come down substantially.

Secondly, in our new businesses like Bathware or Paint, what we have done? We have given the brand Astral to them, which is already established brand. No need to explain anyone what is Astral. So today, all our market products are carrying Astral brand. Similarly, paint is also getting Astral Paint. So they are getting the big advantage of the parent brand. We will not get a separate brand so that we have to do the separate branding for that. And that is why in the coming time once the volume will start picking up there, our branding costs are not going to go up, it is going to come down.

So that is why we have worked so much of time on that and work out the strategy in such a way, considering next 20 years in mind, that -- so that in future, we should not do the branding for the individual category. So we don't see branding costs to go up in the coming time. It is going to be within control and once this volume will start picking up, then it will come down. Last 2 years, the polymers were on the down cycle. Otherwise, you could have seen now also the branding costs have come down.

[Kairav Engineer, executive]

Yes. In absolute terms, we are spending less and less on branding than what we are spending 2 years ago. So in absolute terms, we are not -- in the rupee amount, it's not that the budgets are going up. So don't worry on that side. We have kept all this parameter under check.

[Rahul Agarwal, analyst]

Perfect. Got that. And just one clarification on the large discussion on CPVC resin. I'm assuming that 100% of this resin will be used captively and there will be no sales outside. Is that understanding correct?

[Kairav Engineer, executive]

Yes, yes, 100% captive use. 100% active use -- and we might actually have to buy some resin from the other supplier outside also because in the initial phase, this might not suffice our demand. So whatever we are making this 40 KT will be 100% captive use.

[Rahul Agarwal, analyst]

Got it. And a subquestion to Hiranandji. Just from an accounting perspective, sir, these resins will be a segment 3 kind of accounting or it will be included in plastic product...

[Hiranand Savlani, executive]

That we will decide. We have not given the thought on that side because you have just done the announcement of the plant. So at a later stage, we will communicate to you.

[Rahul Agarwal, analyst]

So just technically speaking, if it's 100% captive, do we need to really report...

[Operator]

Sorry to interrupt, and I request you to come back for the follow-up question.

[Rahul Agarwal, analyst]

Yes, it was just a follow-up, but anyway...

[Hiranand Savlani, executive]

Technically, we have to show separately.

[Operator]

The next question is from the line of Rishab Bothra from Anand Rathi Shares and Stock Brokers.

[Rishab Bothra, analyst]

Just wanted to understand, are there more surprise elements in coming quarters as last few quarters, we have seen Paints, Bathware, now this Al-Aziz, and currently, the backward integration. So is there something else also going there?

[Hiranand Savlani, executive]

I don't think so right now, anything on the card. But if any opportunity will come, definitely, we will look into that because if we want to grow, then definitely, we have to be like that, because the kind of growth company is foreseeing, then lot of cash flow will be generated. So naturally, we have to invest somewhere.

And you see the history of Astral, we are continuously generating good cash flow from the new businesses. Right now, it looks like that because it's the beginning of the journey. You see the Adhesives, what the cash flow we have generated from that. Now Bathware also will start generating the cash flow. And Paints right now, it is looking weak but once the volume will start picking up, the Paints will also generate the cash flow. So we don't see any problem what we have done so far. But any new business or any new acquisition, initial journey will be like that only. I remember in 2014, when we acquired Resinova Adhesive business, similar kind of things were there. Everyone was worried about what is going to be there.

At that time, Resinova's margin was 6% EBITDA. It is not that today I'm telling you. You can go back in 2014 number, and you check. We already reported at that time also the margins and everything. The margin was 6%, 7%. Today, we are happily delivering 14%, 15%, 16%. So that business has not only given the growth, but it has doubled the margin percentage also. So initial journey for any new business will always be challenging. Once it will settle down at a certain level of volume, economy of scale will be there, then definitely, it is going to generate cash for us. But then for any new business, we have to keep patient and we have to give some time because we are not here for 1 quarter or 2 quarters. We are looking for any new business for the next 10 to [Technical Difficulty]

[Operator]

Mr. Rishab, does that answer your question? As there is no response, we'll move to the next participant.

The next question comes from the line of Sujit Jain from Bajaj Life Insurance.

[Hiranand Savlani, executive]

Sorry, we were not able to hear you, earlier conversation. Can you repeat the question?

[Sujit Jain, analyst]

The 3-year R&D that you've done in the company on CPVC, how much is the total R&D spend that you've done for the CPVC project?

[Kairav Engineer, executive]

We have not done much spend. It is negligible. Maybe INR 4 crores, INR 5 crores at maximum, we have spent in the R&D side. We had set up a pilot plant, a small pilot plant, which was manufacturing 50 to 100 kgs of batch every day. So very small amount of spend that we have done in this side, R&D side. .

[Sujit Jain, analyst]

And the other thing is this company, which is going to invest 20%, this was incorporated in just December 31, 2023. So if they have done something -- I mean, this is a curious thing basically that we have communicated that we did something on our part for 3 years, but that amount is not big. So see, Kairav, from here on, can we also see, let's say, your U.K. business head, let's say, this partner in some of your calls, this company has become big. Can you also get to hear your other heads and your other partners so that we also kind of come to know what capabilities they bring from their...

[Kairav Engineer, executive]

Which part? U.K.? U.K. side, we are going to take the 100% control of the U.K. business. So there is no partner in U.K.

[Sujit Jain, analyst]

I'm not saying that. At least once in a year, if you put the U.K. head, your Paints head, your Adhesives head in front of us...

[Kairav Engineer, executive]

Yes, U.K. head, we have just recruited, okay? And the Paint side, also the new team is there. Next year, in the analyst meet, we will try to bring as many senior as possible, so everyone can meet them in one platform.

[Sujit Jain, analyst]

So that they face the question rather than you for their performance.

[Kairav Engineer, executive]

No, no. Definitely, you have a valid point. So next year, we will promise to bring our senior people to our analyst meet that we have -- annual analyst meet that we have in Bombay. We will bring our senior from the different division where people can interact with them and where people can ask them direct question.

[Hiranand Savlani, executive]

And in the past, we have already invited our U.K. partner also in one of the analyst meet and people have interacted with him also. And similarly, even when the Resinova was acquired, the Resinova promoter was also there in the analyst meet. .

[Sujit Jain, analyst]

Yes. And Kairav, can you stick to a format? Let's say, an acquisition when it becomes, not 1 year, 2 year, but let's say, 3 years old. After that, a clear guidance for each acquisition in terms of sales growth, margin, cash conversion and ROCE and progress on that quarter after quarter. Can you stick to this format?

[Kairav Engineer, executive]

Yes, yes. We can definitely work on that. That is not a problem. Well accepted. .

[Sujit Jain, analyst]

Because this will -- yourself -- you yourself will come to know your own history of acquisitions, where you are...

[Kairav Engineer, executive]

Honestly speaking...

[Sujit Jain, analyst]

Otherwise, there will be no check in terms of where things are headed in terms of ROCEs of each individual component.

[Kairav Engineer, executive]

No, no, I agree that -- we agree to it. But as you said, sir, that in India, whenever you do an acquisition -- or whenever you do any acquisition, once you do the acquisition -- see, someone is selling the company because they are not being able to manage it, okay? Then only they will sell the company. So when you are buying a company, there is a lot of things. You have a legacy manpower, you have the different attitude of people working in the company that we have to change, lot of change management is there, you have to bring in your softwares, you have to bring in -- we run on SAP. So we have to introduce SAP. We have to introduce best practices for HR. We have to introduce best practices of plant. See, lot of things go into play. So it is not that today we buy a business and tomorrow, they start working as for our whims and fancies.

So in India, people management and change management is a really tricky thing that one has to take on when you do any acquisition. So some staff and some companies you acquire, people are more receptive to change. Some companies, people are less receptive to change. For example, U.K. company, they were very receptive to change because U.K. traditionally has that mindset that people -- there is no emotion attached to the business. But when you acquire an Indian company, a lot of people are attached with the old promoter, still old promoter is existing in business, he still comes to the office. So a lot of people are still going to him with the problem and grievances. So all these things are in -- we have to manage in a very delicate manner. But your points are well accepted, we will create a standardized format.

[Sujit Jain, analyst]

It will help you in terms of tracking your own data. That's the basic point behind it.

[Kairav Engineer, executive]

No, no. I agree. I agree. Yes, yes. You are correct. You are correct.

[Operator]

The next question is from the line of [ Aditya Das ], an individual investor.

[Unknown Attendee]

So my question is regarding the fact that our market share in the Piping business is still relatively in the higher single digits, I think, and the other new businesses that we have, say Paints and Adhesives, have comparatively even lower market share. And so the opportunity to grow in terms of the longer-term business opportunity is huge. So I understand that quarter-to-quarter, we might have some disappointments because of the polymer prices not meeting our expectations and going down. So we are technically reporting inventory losses. But that is something which is of short-term nature.

What I want to understand from you is where do you see the business, say, 5 years from now, 7 years from now? And what is the volume growth or probably top line growth that we can sustainably expect from this business considering that we have a lot of new businesses as well? That's my first question.

[Hiranand Savlani, executive]

So see, volume growth, we are expecting minimum double digit in the next 5 years. That is what internally we are working. Now with this recent announcement of this backward integration, there are high probability that our volume may go towards this higher direction. So once this plant will be ready and all these numbers will be in our hands and we will work out our strategy, and based on that, we will communicate to all of you that what will be the new strategy for Astral.

But the way we have understood, the way we have worked out the number, it is very, very promising. But it is too early for us to give you that number. Let us first be ready with the plan. When the commercial production start 1 or 2 months, we work on that and we work out our exit saving. And based on that, I think we will revise our numbers. But right now, without that also, we were working for a minimum double-digit kind of growth margin. But with this announcement, we are expecting that the number will be much, much higher. So give us some time to work out our strategy, and based on that, we will communicate to you.

Now coming to the new businesses. You are right. The new businesses base is very low. So there is high probability that on these new businesses, we can grow much faster. Like Bathware last 2, 3 years' numbers -- this is the third year now, you have seen that how the numbers are moving. So we are confident that new businesses will be giving us much higher than the other businesses, which are the established business.

Pipe, we are struggling for last couple of years because of this -- you rightly said the polymer issues are going on, but that is also all said and done. It is going to get over by this year. And post that, we don't see there will be a further erosion from here on. We don't know 100%. We are not a 100% right predictor also, neither we are expert into that side also. But looking to our so many years of experience, it looks that this is a year where we see the bottom will be there. And then PVC price, we are saying that now it is trying to settle down. And if something goes positive in our favor, like we said, the antidumping duty or BIS, then in that case, it will be another bonanza to us. And then in that case, it is going to help us in a much better way, in a much positive way.

So all said and done, we are of the view that growing double digit will not be a challenge to Astral, and now base effect will also start playing, so it will be on a higher side also. And with this next year second half will be -- once this plant will be ready, then it is going to give us a much better positioning and it is going to give us most booster dose to push the volume in a big way in the market. So keep finger crossed. We know last couple of years, we are passing through this challenge, but we will not be disappointing any of our investors once we will be ready with this plan.

[Unknown Attendee]

No, no. I totally appreciate the fact that even when compared to peers, we are holding our EBITDA margins relatively quite well. And also, it is clear that -- through our margins that, some of our peers might be pushing some of the products into the market, and we are not. So that strategy is quite clear. And...

[Kairav Engineer, executive]

I will only say one thing, sir, that quality has been in our DNA since day 1. And we are the ones who will always advocate for the good quality product for our Indian consumer at the fair prices. Giving a subpar quality is never in our ethics or DNA and at Astral, we will never engage in such practices. So for us, not only margin, but the good quality product, well-certified product and a product that is clean and beneficial for the human health consumption is a priority and a social responsibility as a corporate.

[Hiranand Savlani, executive]

Secondly, I can add what Kairav said that we are in a category like pipe, where the failure doesn't come immediately. Today, I'm installing the pipe, it is not going to blast tomorrow. It is not going to leakage tomorrow. It is going to give the effect over a period of time. Maybe once the building will be ready, building normally takes 2 to 3 years to complete, and then the people will start using that pipe. So normally, failure comes at a later stage.

So many of the competitors whosoever is doing the shortcut route and playing with the quality, they will suffer at a later stage, may not be on an immediate basis. But Astral's philosophy is very clear. We don't want to do any shortcut route. Sometimes it may happen. Sometimes we also get frustration that what is happening in the ground? Why somebody is selling at a 7%, 10% cheaper? But we have to understand that this kind of quality is going to give pain over a longer period of time. It may not be 1 year or 2 years down the line, but maybe 4 years, 3 years, 5 years down the line, lot of failures you will see and which we are communicating since long that these kind of practices, particularly in the plumbing and pressure pipe will not work because all these pipes are behind the wall.

And it has already started. Many competitors have started [ failing ] right now. Many of their projects are getting failure, but it will exaggerate it over a period of time. It is not going to happen tomorrow. So keep patience, trust. Ultimately, the good quality product is going to survive for a longer period of time. And the brand, which is giving the quality product at the right price, it is going to survive for the long-term period. This shortcut route can give benefit for a shorter period of time. But long term, it is going to be a real pain to anyone.

[Kairav Engineer, executive]

See, today, I am looking at long term and my family is looking at long-term business, okay. I'm 36 years old. I will work till at least 70, 75, if health permits. So I am going to be in this market for another 35, 40 years. So whatever I will do and whatever I will guide to the fellow investor and the fellow -- different community members present here will always be 100% true and genuine because we are here for the long term. We are not thinking of any short-term gain. We are not looking to exit any business. We are always here for long term and always trust the regulatory body of India, like BIS, who is certifying these products, you are very well aware of such regulatory body. They will always certify the good quality products. So we are here as a quality player for the long-term basis.

[Unknown Attendee]

Absolutely. Well noted and fully appreciate your views on this. My last question would be -- so recently, a lot of building materials company are also complaining of overall demand slowdown in the construction sector as such. So apart from the polymer and PVC price decrease that we're already seeing for 1 or 2 years now, is this also something that you are witnessing in the piping sector as well?

[Kairav Engineer, executive]

So some demand slowdown is there. Definitely, demand slowdown is there. That is why the quarter 1 was flattish, because real estate side, some slowdown is there, demand issue is there. And government side also, the spending is on the lower end. So I think with this festival period, once it's over, we are hopeful that some demand revival will come from government as well as private sector. And since Diwali is there in the month of October, a lot of home improvement work should happen from the third week of August till Diwali. So we are hopeful that some sort of a demand revival scenario should happen in the coming 2 to 3 months.

[Operator]

The next question is from the line of Varun Julasaria from 360 Capital.

[Varun Julasaria, analyst]

I just wanted to check, like on the Bathware side, what is the kind of penetration in the display showrooms that we have currently and...

[Kairav Engineer, executive]

I don't have this number on hand, but after the call, you can get in touch with Hiranandji. Hiranandji will provide you with the latest numbers.

[Hiranand Savlani, executive]

I think till 1,000 number, we were giving to the market, but now every day new counters are getting in the system. So we don't track on a daily basis. But I think till 1,000 mark was reached, till that time, we were giving the investor the number. But now every day, new counters are getting added. So I have also not checked recently what is the real number. But definitely, I will collect from the team and pass on it to you.

[Varun Julasaria, analyst]

So these are all full display showrooms? Or just the counters there...

[Hiranand Savlani, executive]

No, it will be a dealer's point where they give us one section for the display. One wall, they are giving it to us to do the display activity, that is how they work. But exclusive showrooms are also there. So that is our distributor. They do the exclusive showroom. There, all the Bathware products will be displayed, and that will be exclusively for Astral product. So these kind of also many stores are being already there in the system. Otherwise, on the dealer point, they give us one wall, and there they do the display.

[Varun Julasaria, analyst]

Okay, sir. Then I'll connect -- and what was the losses that we incurred in the Bathware in the first quarter? And are we...

[Hiranand Savlani, executive]

So see, now -- to be very honest, because earlier, it was a separate plan. So we were able to now exit number, but now the same plant is manufacturing a lot of plumbing related product also. So it is very difficult for us to work out the Bathware-related profit or loss, because it is clubbed with the Plumbing product. Because there, we are manufacturing a lot of brass ring -- I can say, thousands of everyday rings are getting produced over there, which are being used in the Plumbing product. So all this, our brass, elbow, T, coupling, all this brass items for PVC and CPVC, all are manufactured at the same plant. So very difficult to know exact number of profit or loss for the Bathware. It is clubbed with the Plumbing product.

[Varun Julasaria, analyst]

Okay, sir. I'll connect with you offline for the showroom numbers.

[Hiranand Savlani, executive]

I think you can take the last question.

[Operator]

Sir, there are no questions.

[Kairav Engineer, executive]

Okay. Okay. So thank you, everyone, for joining us on this call, and we are committed to working hard and delivering growth. I know the last couple of quarters have been very challenging, but they have been challenging for everyone in the industry, the entire building material industry is going through a tough phase. But good things are looking in the near future. We hope that good things are there in store from the industry, and we will continue to deliver best on our promises as possible. Thank you, everyone, and have a good day.

[Hiranand Savlani, executive]

Thank you, everyone, and thank you, Sneha for hosting this call. And if any question is not answered, we request that you can directly call on my mobile number. Thank you so much.

[Operator]

Thank you. On behalf of Nuvama Wealth Management Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.