Kajaria Ceramics Ltd
NSE:KAJARIACER
Earnings Call Analysis
Q2-2024 Analysis
Kajaria Ceramics Ltd
Kajaria Ceramics Limited showcased resilience with a 6.23% increase in volume, rising to 26.7 million square meters in Q2 FY '24 despite a weak domestic tile market. This period also saw a 4% climb in consolidated revenues to INR 1,122 crores year-on-year. Thanks to a reduction in fuel costs, EBITDA margins experienced a significant leap from 12% last year to over 16%.
Management anticipates a positive shift in demand aligned with the growth of the real estate sector, laying the foundation for stronger volume growth in the latter half of FY '24.
Kajaria Ceramics completed key projects, adding 3 million square meters of GVT capacity in Sikandrabad and modernizing ceramic tile capacity by 1.92 million square meters at Gailpur. These actions, enhancing production efficiencies and energy savings, signal a robust push for growth.
A 25% boost in tiles exports to approximately INR 16,000 crores in FY '23 and projections of reaching INR 20,000 to INR 21,000 crores in FY '24 positions India, and by extension Kajaria, on a path to become a leading global tile exporter by FY '25.
Kajaria Ceramics recorded a substantial 55% jump in Profit After Tax (PAT) reaching INR 108 crores for the quarter. Additionally, working capital days were reduced to 53, down from 62, signaling a more efficient capital utilization.
With Q3 looking positive and Q4 expected to surpass it, the company's guidance on revenue is closely tied to volume growth. Management assures investors of maintaining EBITDA margins at the higher end of the 14% to 16% range given the current trajectory.
Fuel costs averaged about INR 38 across all plants and are anticipated to remain stable, with a possible minor fluctuation of INR 1. Regional cost variations exist, but the reliance on bio coal should prevent these costs from escalating significantly.
The expected full-year savings from power and fuel were projected at about INR 150 crores. The first half already promises better results, part of which will be passed onto the trade network, enhancing competitive positioning.
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Ladies and gentlemen, good day, and welcome to Q2 FY '24 Earnings Conference Call for Kajaria Ceramics Limited hosted by Equirus Securities. [Operator Instructions] Please note that the conference is being recorded.
Please note that certain statements made by the management may be forward-looking within the meaning of applicable laws and regulation. Actual results might differ substantially from those expressed or implied. Kajaria Ceramics Limited will not be in any way responsible for any action taken based on such statement.
I now hand the conference over to Mr. Pranav Mehta. Thank you, and over to you, sir. Pranav Mehta? Pranav?
Yes, can you hear me?
Yes.
Yes. Yes. So just 1 minute just a moment sir, I got dropped off the call. Yes. Good evening, everyone. Thank you for joining this call. Today, we have with us the management of Kajaria Ceramics Limited. From the management side, we have Mr. Ashok Kajaria, CMD; Mr. Rishi Kajaria, JMD. Mr. Chetan Kajaria, JMD; Mr. Sanjeev Agarwal, CFO; Mr. Nehal Shah, DVP Strategy; and Mrs. Pallavi Bhalla, GM Investor Relations.
Without wasting much time, I'll hand over the call to Mr. Ashok Kajaria for his opening remarks, after which we will open up the floor to question and answers. Yes, sir, over to you.
Yes. Thank you, Pranav. Good evening, everyone. We have already made the introduction, so I'll not do that again. We must acknowledge the ongoing challenges in the domestic tile market as the demand continues to remain weak. In quarter 2 F '24, our volume showed a modest year-to-year growth of 6.23%, reaching 26.7 million square meters. The consolidated revenue for the quarter amounted to INR 1,122 crores, reflecting a 4% increase compared to the same period last year. Our EBITDA margin strengthened, exceeding 16%, a notable improvement from 12% in quarter 2 F '23 primarily due to reduction in fuel costs.
While first half of '24, witnessed weaker demand than anticipated, we have observed a gradual uptick in volumes in September. Furthermore, we expect a favorable shift in the demand environment, driven by the positive impact of the healthy growth in the real estate sector. This outlook [ arches ] well for an improvement in volume growth in second half of FY '24.
We are pleased to announce the successful commissioning of the Sikandrabad and Jaipur modernization cum expansion projects. These projects hold great promise for our future growth. In August '23, we commissioned 3 million square meters of GVT capacity in Sikandrabad, followed by the expansion cum modernization of our ceramic tile capacity by 1.92 million square meters at Gailpur in September '23. These newly operational facilities allow us to produce larger tires while achieving energy efficiency due to advanced fill technology. The recent commissioning of these projects signifies a positive step towards forward for our growth trajectory.
On the export front, India is becoming an invincible production hub for global exports being the lowest-cost producer in the world. India's exports grew 25% to approximately INR 16,000 crores in financial year '23, which is likely to reach INR 20,000 to INR 21,000 crores in FY '24. As compared to INR 12,750 crores in FY '22. India exports accounted for 15% of the world's tile -- total tile exports. If the current trend of India tile exports continues, India may aim towards becoming the largest tile exporter in volume terms by financial year '25.
Now for this quarter's financial performance. In quarter 2 FY '24, the company achieved a 4% year-on-year increase in consolidated revenue from operations, reaching INR 1,122 crores compared to INR 1,078 crores in quarter 2 F '23. Despite the challenging market condition the Bathware segment performed, while registering a notable 15% increase in revenue during quarter 2 F '24, reaching INR 85 crores compared to INR 74 crores in quarter 2 F '23. The plywood revenue increased by 21% during quarter 2 F '24 to INR 23 crores as compared to INR 19 crores in quarter 2 F '23. Revenue from adhesive grew by 35% to INR 13 crores in quarter 2 F '24 as compared to INR 10 crores in quarter 2 F '23. PAT for the year grew by 55% to INR 108 crores in quarter 2 F '24 as compared to INR 70 crores in quarter 2 F '23. As of 30th of September '23, the working capital days decreased to 53 days from 62 days as of 30th of June '23 -- September sorry, as of 30th of June '23. Looking forward, we remain steadfast on our growth strategy. This strategy entails a continued emphasis on expanding our reach in smaller terms and introducing innovative products. We are confident that our strong foundation and unwavering commitment to excellence will sustain our sales in the quarter to come.
With this, I take the opportunity of thanking you all for joining us today in spite of your busy schedule. Over to you, Pranav. Thank you.
Yes. Operator, we can open up the floor for question and answers.
[Operator Instructions] The first question is from the line of Rahul Agarwal from InCred Capital.
First question, essentially, sir, anything you would like to put as a revised guidance for tile volume growth and revenue growth and margins for this year?
See, 2 things. As I said earlier, every quarter will be better than the earlier one, and that's what we are talking about. We are looking at a positive scenario for quarter 3 and quarter 4 should be better than quarter 3. As far as revenue guidance, it is linked to the growth of volume. So that -- and as far as margins are concerned, we are keeping that at 14% to 16%, but will be in the upper end, that much I can assure, because even if you see the 6% growth volume growth in this quarter, 7% in the first quarter. If we have been able to achieve this 16% margin, I think going forward, it would be slightly better. That's the way I look at it.
Got it, sir. And secondly, on the fuel pricing, if you could help us with the 2Q average and the outlook for second half of this year?
See, as far as the second quarter is concerned, the total, if you take all the plants, it's about INR 38 and going forward, it will be more or less same plus minus INR 1, because as you all know, Brent has slightly increased in the international market. So it would be plus minus INR 1. Plus INR 1 like that. But at the same time, since we are using bio coal, so we are confident that it will not go beyond that.
And sir, the regional breakdown, if it is possible, for the North, South and West?
See, right now, we are selling approximately 40% in North.
Gas is INR 40 in North. INR 38 in South, West is INR 33 and average is about INR 30 for quarter 2.
Got it, sir. And last question, sir, the savings from power and fuel, I think it was expected to be about INR 150 crores for the full year. How much was that in first half? Is it equal? Like is it INR 75 crores?
No, no, it should be slightly better than that. I would say slightly better, and part of it will be passed on to the trade, as I said earlier.
Yes, I'm aware of that, sir, in terms of passing on to the trade, but should be like INR 80 crores, INR 85 crores, is it?
Approximately.
The next question is from the line of Sonali Salgaonkar from Jefferies.
Sir, my first question is regarding the CapEx. Any revision in the guidance for the CapEx or we hold to our guidance of last quarter?
The CapEx guidance remains the same. I think this year, we should be spending close to about INR 370 crores in financial year '23-'24 and going forward, I think it should be about INR 200 crores, INR 250 crores every year for the next 3 years.
Understand. Sir, secondly, on the export front, you actually gave a very good summary of how India is selling well as a low cost producer. Sir, any updates on the Q2 exports how much have we grown and which are the new markets that Modi is currently targeting?
You see total first 6 months exports are from India is about INR 10,000 crores plus.
Okay. Got it, sir. So any relevant pricing actions in Q2 that we have seen in either tiles or sanitary ware?
[indiscernible].
Relevant pricing action, pricing -- price, hike or reduction.
The prices, as I said earlier, also the prices per se don't get reduced, but we pass on certain benefits to the traders or the dealers to sell more. Basically, that's what has been -- market. Sorry. What exactly the question in Bathware?
No, any relevant pricing actions across your product portfolio? Any segment where you have increased or probably rolled back the prices?
No, I don't -- right now, there's been no price increase in any segment. No, not -- no change as such.
Okay. Got it. Sir, and just one last question. In your starting commentary, you said that demand is a bit weak. So if you could help us understand where is this weakness primarily coming from? Is this urban driven or Tier 2, Tier 3 rural driven?
See, all of you have been saying that we are seeing has been good for the last 2 years, which we accept. Now what has happened is, firstly, as I said earlier, they have sold their own inventory, what was there. Second year, their new construction started. Our demand has started coming now. As I said, September has been better than last 5 months, and things are looking positive. First they used steel and cement and all kinds of things for making the building, cables and all that. Now a time has come that they have been using the finishing and where the tiles, and sanitary ware, ply and all kinds of things will come and paints and all that all will come in. So that's a scenario, which is now emerging, and I think it should be better from here. Now we are seeing the demand coming in the real estate sector. So going forward, things are going to be much better.
I understand. Sir, if I'm correct, your revised volume guidance was 11% to 13%. Is that right for the full year?
No, no, no. We are not saying that. What we are saying is, see, first quarter, we did the volume growth of 7%. Second quarter we did 6%. What we are honestly saying is with the market looking up, we should -- third quarter will be better -- definitely better than first and two and fourth quarter be better than third. So if you average it out, I think it would be close to about 9%, 10%. I think that's what we should look at.
9%, 10%. Understood.
Next question is from the line of Shubham Agarwal from Axis Capital.
My questions have been answered.
[Operator Instructions] The next question is from the line of Onkar from Shree Investment.
My question was regarding the volume growth, earlier you targeted was around 15% to 20% at the start of the year. So now you are revising it to 9% to 10%. So any comments on that?
We never give a guidance of 15% to 20%. What we gave a guidance of 13% to 15% in volume terms at our May conference when we did our annual results. And all of you are also aware of what is happening in the industry, it's not that Kajaria has to do something, which is beyond expectations. Results have started coming from many multinationals. They're all saying that the markets have been very tough. So we are, whatever is the current scenario, looking at that with whatever we have revised, we just shared it.
So just now you shared that now the things have started input for the tile sector, as earlier, I mean, the cable and wire sector or other sectors are doing well. So how confident are you about this recovery, which will be taking place? As the results from other players have been very strong. Other players in the other industry industries to real estate, I'm saying.
Don't make a general statement, talk about a specific industry where the results have been good. We are also aware of what is happening.
I'm talking about infrastructure, I'm talking about cables and wires.
As I said earlier, cables and wires are being used at the time of construction. Post construction tiles, sanitary ware, paints, ply, all these things coming. As far as [indiscernible] is concerned, you said they are also using an agriculture, don't forget agriculture is doing very well in India. So don't mix that. See, you should compare an apple to an apple, I would say that.
So I was asking about the same thing. How confident are you that since the allied industries are doing...
What we are saying is, in the consolidated 6 months, we had a volume growth of about 67%. And going forward, it will be better than that. Things are looking -- now things are looking better. And next 6 months are going to much better than the first 6 months.
The next question is from the line of Sneha Talreja from Nuvama.
Just 2 questions from my end that's related to you, one is employee costs, you've seen sudden increase in employee cost jump. Any specific one-off? Or will it be now the new run rate?
We have made some provision for the increment in the quarter.
I'm sorry, sir, we were not able to hear you.
We made some provision of increment in the Q2.
Okay. So probably this run rate basically can continue for full year considering this increment will stay here.
Yes. So next quarter is going to be similar to Q2 slightly -- maybe very slightly higher than the Q2.
Understood sir...
One thing you can [indiscernible] in selling cost in Q3 and Q4 what we have shown in Q2.
Understood, sir. And secondly, sir, I just wanted to understand what has been the ad spend for first half as well as second quarter?
So we spent roughly INR 108 crores last year, we spent INR 60 crores in the first 6 months, our target is to increase this and have a total spend of INR 130 crores to INR 140 crores for the financial year ending '23-'24.
Okay. So the second half with volumes improving there you will see an aggressive, that's right.
Yes.
The next question is from the line of Achal Lohade from JM Financial.
[Technical Difficulty]
Not clear. You're not audible. You are not audible sir.
Sir your voice is not audible. Please, switch to the handset.
I'm on handset only, is it audible now?
No, sir, your voice is not audible.
It's not clear.
Mr. Achal, please go ahead.
Is it better?
No.
I will fall back in the queue.
The next question is from the line of Dhananjay Kumar Mishra from Sunidhi Securities.
Just wanted to know whatever demand we have done -- growth we have done in terms of volume 6%, 7%. So where -- from where this demand is coming, whether it is coming from replacement market upgradation or more coming from new builders? So do you have any estimate of that? And what kind of growth in both the segment is happening as of now?
As you said, the first 6 month was 6% to 7%. And then next 7, 6 months will be definitely better than that in terms of volume terms. And the growth is coming from everywhere in good proportion, mainly from Tier 2, Tier 3 cities. The new houses are being built, let us move for renovation basically. That's the overall scenario. Dealers are making more showrooms and data stores in Tier 2, Tier 3 city. So we're looking at a much higher volume growth in the smaller towns.
Okay. Okay. So -- and then the incremental demand will be coming once the -- as you said that we are expecting good demand once the project will come in completion stage, right?
Right.
The next question is from the line of Akash Shah, UTI Mutual Funds.
Am I audible?
Yes, sir you can go ahead.
Ashokji, just wanted to ask so we have -- we are sort of increasing our footprint in international market like let's say, Dubai and also we had set up a JV to sell products in U.K. market. So any sort of thoughts whether are we willing to ramp up our export sales? Or it would still remain small in the overall scheme of things?
See, overall, we are very, very strong in the domestic market. Export will always be a small percentage of our overall sales. By doing -- by opening a showroom in Dubai, by opening a showroom in London, we are trying to see how we can get some share of the export market and increase our export sales. It will be a slow and gradual process, but we are putting our effort to get some share of the market.
Sure. And we would -- we will be selling product -- I mean, tiles in our own brand name, right?
Absolutely. It will be Kajaria product, be it sold in Dubai or London.
Okay. Okay. Sure. And just sorry, I missed that part. So we had the gas cost region wise. So what was the number for West and South?
West is INR 33 and South is INR 38 and North is INR 40. And average is INR 30.
[Operator Instructions] The next question is from the line of Amit from Elara.
Yes. Sir, just wanted to understand that you highlighted that your strategy is to get...
[Foreign Language]
Sir, am I audible now?
Yes, yes.
So I was saying that I just wanted to know, you've been talking about getting into smaller towns aggressively and you also highlighted Tier 2 and Tier 3 market. I just wanted to know if you could share what would be the, I mean, revenue split like, if possible, or the dealer split like, if possible, in those for us -- for our existing current dealers or our current revenue?
See, currently, macro is about 15%, 16%. Tier 1, what we call it is about 30%. Tier 2 would be about 30%, and Tier 3 will be the balance. Tier 4 will be hardly 2%.
Okay. Okay. And so our expansion plan, are we looking at Tier 4? Or are we seeing Tier 3, Tier 4 also...?
Tier 2, Tier 3 will be the stress. That's where the major construction is happening and partly into Tier 4 as we go along.
Okay. And in terms of our distribution current mix, what would it will -- should be similar to the revenue mix, right? That...
Yes, yes, it will be similar to the revenue mix.
The next question is from the line of [indiscernible] from Niveshaay Investment Advisory.
Am I audible?
Yes.
Sir, if you can give the set of revenue between tiles, Bathware and adhesives and their respective margin?
So can you please repeat your question, it's very soft, your voice.
Sorry. Is it okay now?
Yes.
So can you please share the split of revenue between tiles, Bathware and adhesives and their respective margin?
For the last 6 months.
Yes.
So tiles is 90%. Bathware is 7%. Adhesives is 2% to 3%, plywood and adhesives together is 2% to 3%.
Okay. And their respective margins?
So tiles got 16% EBITDA. The bathware got 9% EBITDA and plywood is negative 2%, 3%.
Okay. Sir, how do we see the bathware demand coming up? I mean you did give some good guidance on tiles.
So bathware Industry -- bathware market for us, first half grew about 16%. The next 6 months are very much, much better than the first 6 months. So we are looking at a blended growth of 20% plus for the entire year.
Okay. This is in the bathware alone?
This is bathware segment, yes, bathware and sanitary are combined.
All combined, we will see a volume growth of 9% to 10%, right?
No, tiles is about -- tiles we are talking about 9% to 10%. For bathware we are talking about a 20% plus value growth.
Okay. And sir, can you please share the dealer numbers as on 30th September?
For?
Number of dealers. I mean, you had guided 150 additions this year. Are we on track on that?
We are very much very much. Right now, the current state of dealers is about 1,950, 1-9-5-0. We started with 1,840 current state is 1,950.
Okay. Sir and majority are in T2 and T3 cities?
No, no, no, they are in metro, all over. Entire...
How can they only be into Tier 2 and Tier 3. Sorry, sir, I missed can you repeat?
They are all over India, Kajaria is sitting all over India, macro, Tier 1, Tier 2, Tier 3 and partly Tier 4. The addition will also be all over. But out of 110 dealers, which we added, you can see about 35 are exclusive Kajaria.
The next question is from the line of Lavanya Tottala from UBS.
Most of my questions are answered. Just wanted to check on other expenses. Even other expenses saw a spike in this quarter. Is there anything one-off or with higher outflows, it is at a higher rate?
We don't -- we can't hear you properly.
Yes, yes, mainly because of individual expenses.
Okay. So it will be higher for the next half also with increased ad spend?
It would be similar to what we have shown in Q2. Not -- there will not be the same increase in Q2, Q3, what we have showed in between Q1 and Q2.
The next question is from the line of Ronald Siyoni from Sharekhan.
I just wanted perspective to all the Indian tile exports market. So as you said that India is poised to become the largest tile exporter by FY '25. So is it that only the lower gas prices compared to globally is what domestic exporters are getting benefits of? Or are there any other benefits compared to other Southeast Asian countries? I mean to say, during COVID and after -- just before the COVID, the global gas prices were much higher. So versus what are the pros and cons with respect to this cost versus the Southeast Asian exporters?
See, gas prices, what they are today are also there internationally. Indian manufacturers are paying whatever is international prices. Last year, if I take you back in financial year, not calendar year '22, gas prices either be at 10x, 8x and 10x and India was about 1.5x, 2x but right now, everywhere the prices have come down more or less 2x or [ X x 1 ]. India purchase has become very competitive, and the credit goes to Modi, because there are almost 600 manufactures there. And out of that, you can say about 120 are focusing mainly on exports, because we are a very competitive producer as a country. So that's why your exports have picked up. And looking forward, I think we have a feeling that it should go further up as the time passes.
Okay. So this is a very sustainable trend that exports will continue because the gas prices are comparable.
Exactly.
The next question is from the line of Nikhil Agarwal from Vt Capital.
I had a couple of questions. In quarter 2, your ad realization for subsidiaries has gone up and outsourcing has gone down quite significantly. So any reason behind that?
Nikhil, there is some [indiscernible] from our end. And some numbers got added in the subsidiary instead of -- sorry, instead of a subsidiary, it got added in the outsourcing part. So now we have corrected the number. And going forward, this is going to be the trend.
Okay. Okay. So the quarter 2 numbers that are reported, those are correct, right?
Yes. So every number in this earnings release are corrected. And now this is going to be the trend.
We have regrouped the number of the previous quarter. To make it comparable with the Q2.
Okay. Okay. Got it. And one more question. It was like on the gas cost, your gas cost as a percentage of the top line and the percentage of operating expenses, they have increased quarter-on-quarter. While you said that your average cost was 38% in quarter 1, it was 39%, if I'm not wrong. So like what could be the possibility?
No. So it has gone up slightly because of some increase in the power costs in one of our units in Rajasthan, there are some changes in the duty and it has increase the power cost slightly and gas costs is more or less same.
So if we look at the -- yes, if you look at production as well. The capacity utilization in Q2 is higher than Q1. So that's the reason power price has gone up quarter on quarter.
Okay. Got it. Your capacity utilization in Q1 would be around -- Q2 would be around 95% plus if I'm not wrong?
Yes.
[Operator Instructions] The next question is from the line of Mohit Agarwal from IIFL.
Sir, just one question. Can you quantify the volume growth for the month of September? And if possible, could you give some color on October 15 days also, the demand side?
September was roughly about 9%. And from October, then things should be a little better.
The next question is from the line of Jenish Karia from Antique Stock Broking.
Am I audible?
Your voice is low, can you please come closer to the handset?
Is it better now?
Yes, please go ahead.
Yes. So last year, we were saying that Morbi would take annual shutdown. So are we -- is there any shutdown planned during the third quarter from Morbi?
We would not know. You should ask somebody in Morbi. We would not know that.
Okay. I thought you might be aware because we have JVs. No problem. Secondly, sir...
Our JV is not taking any shutdown. Last year also when they had shut down, we didn't take any shutdown.
Sure. So that's great. Secondly, sir, if you could just reiterate the CapEx guidance for FY '24? And where would we be spending it in the second half?
So we spent roughly INR 50 crores in the Gailpur modernization, INR 51 crores. SKD was INR 100 crores plus. The Nepal project will be INR 91 crores, and Kerovit global is roughly INR 80 crores and our corporate office will be around INR 50 crores and INR 26 crores will be the CapEx maintenance and miscellaneous with be INR 125 crores, that's INR 370 crores for this financial year.
Okay. And next year would be INR 200 crores, INR 250 crores each?
Yes. Correct, next 3 years around...
Next year no major expansion plan as of now for next year.
The next question is from the line of Ritesh Shah from Investec.
Sir, my first question is on this data pertaining to ceramic world review. What it surprisingly indicates is that India production and consumption actually in volumetric terms declined for CY '22 Sir, any thoughts over here that you would like to share? Is there something that one should read across?
No, you are correct. What ceramic world review says, but it is actually for the calendar year. And when you look at this financial year, because in India, we do it financial year, that's where we have upgraded the export data also as per the Ministry of Commerce. And if you look at the financial year, we have been flat on domestic volumes and exports have grown from INR 12,500 to INR 16,000 crores.
Overall industry has been very tough last year. For calendar year '22, if you can see the ceramic world review data worldwide it has degrown by 9.6%, because the coal prices went up in certain parts of the world, 8x, 10x, 2x, depending on where you are. So that was the reason, but I think everything has come back 2x or maybe maximum of 1.5x. So that's a scenario. So the industry overall, the world should also do better.
Right. And sorry, just to dig into it. Basically, it indicates 15% decline, even if it is CY,how should one this number? Is that something realistic? Or is it -- one should just roll the fact?
Whatever we have given, we can't argue on that. But after seeing the data when we went to the fair in September, they considered on emerging people also. They also felt that the industry has -- in spite of the shutdown last year, please note that they have shut down one month. And some of the units have, some of the units have not. They felt that per se, the production has been flat. You can say that. And some of the production has been diverted to exports, because production -- part of the production was domestic was flat, exports have grown up. So some of that production went to exports.
Market share from the [indiscernible].
That is helpful. Sir, second is we have given our volume guidance. But given we have bunching up of festivities this time of the year, we have Diwali Chhath Puja altogether, so do you hear or do you worry about concerns around labor availability, which can actually put it a concern on volume growth? And given there are multiple state-level elections, are there any historical trends from which basically has labor availability been a problem? Or is that okay, life goes on?
If I take you back for the first 5 months, except for the month of July, where there was excessive rainfall in North. There were no major holidays. Still we couldn't do what we'd we like to do. But as you know, in the last 6 months of the year, if you take it historically for the last 10 years, at least, the growth has always been better. Whatever you plan happens. So holidays have always -- will always come Diwali will always come either in October and November, Chhath will be there always, elections per se are beneficial. Whenever local elections are there, national elections are there, there is more work in the system. They try to clear more projects so that work can take place. So basically, it's positive, positive, positive.
Sure. And sir, lastly, if you could give some comments on the pricing and discounting trends of what we saw in Q2? And how do you see that in Q3.
Whatever has happened, has happened in Q2 because the cash prices were like that. Slightly gas prices have went up by INR 5 on 1st of September, 24th of August and 1st of September and -- in Morbi. But if you look at that, nothing much would happen in quarter 3, nothing much would happen as far as the pricing is concerned. We are not looking at any changes. We'll continue with whatever is going.
[Operator Instructions] The next question is from the line of Akash Shah from UTI Mutual Fund.
Sir, we have recently seen that in plywood, there is a -- I mean the company would be able to give a bit higher loan to the subsidiary. So any sort of threshold limit that we have I mean the broad amount that we will invest in plywood business?
So currently, last year, we did INR 77 crores turnover in plywood. This year trading, this year we are looking at INR 100 crore plus. And the loan limit, we are not exactly know. We look at a positive future going forward and it also should come down as we go ahead. So we'll take it as it comes, basically.
Sure. Sure, sir. So as of now, the plan is to invest in this business as we see a huge opportunity in this business.
Yes. Because the plywood industry itself is INR 27,500 crores in the country, organized is only INR 7,000 crores, unorganized is INR 20,500. As the GST coming in, we see a lot of shift in the unorganized to the organized tiers so it's a big sized industry, and we are open on gaining some market share as we keep on moving forward.
The next question is from the line of Onkar from Shree Investment.
I just wanted to know what the capacity utilization currently are working at?
Capacity utilization in the quarter 2 was 98%.
98%.
Yes.
You said 98%, right?
98%.
[Operator Instructions] The next question is from the line of [ Ahluwalia from RoboCapital ].
Sir my question relates to the Brent. So when can we expect the impact of natural gas to be corrected?
No. Natural gas is linked to Brent. And as you -- we are all aware, Brent prices have gone up recently it has touched as high as $97. The prices of gas for us in north would have been much higher, but fortunately, since we are using biofuel, we are saved by that. So that's what I said, the current price for the quarter 2 was INR 38 average. For quarter 3, we are looking at almost scenario, plus INR 1 max because otherwise, it would have been much higher. So that's a scenario. So that's where we are at.
The next question is from the line of [ Udit Gadiwala ].
Sir, just one question. Sir, earlier you had mentioned that there are no new capacities coming up in Morbi. But of late, we are seeing some signs of fresh investments coming in over there from the smaller or the unorganized players. So do we see this as the hindrance or you would attribute the same for the export group?
No, no, other information also says that almost 25, 30 plants are coming in Morbi. But mainly, they will be for exports. You are absolutely correct, there are 25, 30 plants coming. Good sized plants are coming, I was told, and mainly for exports because export market is really picking up, so they want a greater share and better share of that pie.
Ladies and gentlemen, that was the last question for today. I will now like to hand the conference over to Mr. Ashok Kajaria for closing comments. Please go ahead, sir.
Thank you very much for all the people, who have joined us today and spending their valuable time. I hope we have been able to answer a few of the questions that they have put to us. And any further questions can be sent to our team of Sanjeev, Nehal and Pallavi for more answers. Thank you very much for joining us today. Thank you.
Thank you. On behalf of Equirus Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.