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Ladies and gentlemen, good day, and welcome to Q4 FY '24 Earnings Conference Call of Kamdhenu Group. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Satish Kumar Agarwal, Chairman and Managing Director. Thank you, and over to you, sir.
Good afternoon, and a very warm welcome to everyone present on the call. Along with me, I have Mr. Harish Agarwal, Group CFO; Mr. Saurabh Agarwal, MD of Kamdhenu Ventures Limited; and Strategic Growth Advisors, our Investor Relations advisors. We have uploaded our results and investor presentation for the quarter on the stock exchanges and company's website. Hope everyone had a chance to go through the same. We have delivered robust performance for both the steel and paint business in Q4 and FY '24. Coming to our steel business first. India witnessed 13% surge in domestic steel consumption in FY '24, totaling 136 million metric tonnes. This growth underscores a robust demand for steel across [indiscernible] sectors, highlighting relations, economic resilience and industrial expansions. Moving forward, sustained investment in infrastructure, urban development and manufacturing capacity are anticipated to uphold this momentum. With expanding industrial capabilities, coupled with the increased demand for the infrastructural and residential projects. India is positioned to become a key global player in the steel sector, thereby further driving economic growth. For the quarter gone by, our revenue grew by 5% to INR 176 crores. PBT grew by 54% to INR 22 crores and PAT grew by 56% to INR 17 crores. Despite the challenges we witnessed, including steel price volatility and fluctuating raw material cost, we continue to witness a strong volume growth. Total volumes, including franchisee sales volume have increased by 12% year-on-year in the quarter, growing by 9% for the full year. We have seen reduced realizations of TMT bar, which has led to lower revenues for the full year. Over the last couple of months, we have seen price improving, and we expect them to increase in the FY '25. Realization for the steel TMT bar are poised for improvement due to escalating infrastructure investments, driving heightened demand and -- for construction materials. Technological advancement ensuring super quality and compliance with stringent regulations further elevate the value proposition of TMT bars. Sustainable construction practices fostered a growing preference for environmental-friendly materials further improving realization for TMT steel. With a network of 8,500-plus dealers had a strong presence through our large number of franchisees, our brand reach continues to expand significantly while being asset-light model. We have also a strong brand name when it comes to providing superior quality products, further emphasizing the company's commitment to excellence.
Given this backdrop, we continue to maintain a dominant market share in the organized steel segment. This is further cemented by a strong growth of 13% in our royalty income, which reached an all-time high of INR 129 crores. We continue to see large growth opportunities due to [indiscernible] industry tailwinds, including a strong government push for infrastructure, which includes the schemes like Housing for All initiative and INR 11 lakh crore capacity outlay for FY '25 and lastly, a shift of consumer preference towards branded construction material. Given the favorable dynamics within our country, coupled with our robust brand, unique asset-light model and high-quality product offerings, we are well positioned for sustained growth through going forward. I would also like to mention that the company is raising INR 100 crores through issue of convertible warrants on preferential basis over the next 18 months. Of this, we have already received INR 24.27 crores. Through the capital raise, the company will look to remodel the franchisee business by acquiring its stake strategically in some of the franchise units, investing in the existing and new business franchise in India or our seeds for diversification. Incurred CapEx in existing manufacturing unit and are required to set up of new office premises and enhance the strengthened brand position and corporate image to leverage the overall brand premium. We are excited about the opportunities that lie ahead and are grateful for the continued support and confidence for our stakeholders. Lastly, the Board of Directors have approved a dividend of INR 2 per equity share, reaffirming our dedication to acknowledge and reviving the trust placed with -- in us by our shareholders. To conclude, we have successfully navigated through short-term challenges by leveraging our capabilities while maintaining unwavering efficiency and we'll continue to do so going forward. Now I would like to hand over the call to Mr. Saurabh Agarwal to give you an update on the paint business. Thank you.
Thank you, and good afternoon, everyone. I would like to give you a brief update on the paints business for the year gone by. The Indian paint industry is witnessing rapid growth driven by urbanization, rising disposable income and the increased infrastructure projects. The industry is currently valued at INR 75,000 crores and is expected to reach a size of INR 125,000 crores by financial year implying a CAGR of 9.4%. With the growing demand for premium and ecofriendly products, our ability to provide a wide range of solutions which is ever evolving in nature should help us stay competitive and grab market share in the evolving landscape. For the full year financial year '24, we have seen a strong turnaround in our performance. Revenue grew by 12% year -- Y-o-Y and stood at INR 292 crores. In terms of profitability, I'm pleased to share that our company has turned EBITDA positive compared to last year's EBITDA stood at INR 12 crores -- INR 22 crores. In addition, we have exceeded expectation by achieving an EBITDA margin of 8%, surpassing our FY '25 target a year earlier. This can be attributed to achieving a strong economy of scale, coupled with operative leverage playing out. Profit after tax stood at INR 14 crores, which was minus INR 11 crores last year, a delta of INR 25 crores. Coming to way forward. For FY '25, we have aspired to grow our business by over 20% and further improve our EBITDA margin. This growth was driven by both value and volume. On the value side, we will continue to make effort when it comes to increasing our average selling price by improving our sales mix with a higher focus on value-added products. On the volume front, we will further penetrate the regions where we have been building a strong dealer distribution network. We believe we can rapidly scale up due to us having a winning combination of our unique dealer-driven approach and our ability to deliver higher quality products at accessible prices. At Kamdhenu Paints, our unwavering focus remains on catering to undeserved -- underserved smaller towns through our extensive distribution network, which stands at 4,300-plus dealers. With economy expanding and the strong government focus on rural development, we expect a surge in demand for paint-related products due to the rise in the infrastructure projects. To conclude, as a mark of conclusion of our inaugural year as a separately listed entity, it's evident that we have embarked on a journey marked by numerous positive developments. These early successes has set a promising trajectory for our company and its brands, indicating the potential for substantial growth in the times ahead. As we look to the future, we are acutely aware of the objectives yet to be achieved and the challenges that lie ahead. However, we are fortified by the unwavering support of our stakeholders whose dedication has been instrumental in our journey thus far. With the continued backing and our commitment to excellence, we are confident in our ability to realize our objectives and propel our company and its brand to new heights of success going forward. With this, I would hand over the call to our group CFO, Mr. Harish Agarwal, for the financial year. Thank you, all.
Thank you, sir. First, I would like to take you through the financials of the steel business. First, highlight for Q4 FY '24. Our steel volume from franchisee route have stood at 8.96 lakh metric tonnes in Q4 FY '24, compared to 8.05 lakh metric tonne in Q4 FY '23, a year-on-year growth of 11%. Royalty income through franchisee stood at INR 35 crores in Q4 FY '24 as compared to INR 30 crores in Q4 FY '23, a growth of 16% year-on-year. Total revenue stood at INR 176 crores in Q4 FY '24 as compared to INR 167 crores, registering a growth of 5% year-on-year. Our profit before tax stood at INR 22 crores in Q4 FY '24 as compared to INR 14 crores in Q4 FY '23, a growth of 54% year-on-year. PBT margin stood at 12.6% for Q4 FY '24, which was 8.63% in Q4 FY '23. Profit after tax stood at INR 17 crores for Q4 FY '24 as compared to INR 11 crores in Q4 FY '23, a growth of 56% year-on-year. Now I would like to share the highlights for whole year FY '24. Our steel volume from franchisee route stood at 32.56 lakh metric tonne in FY '24 as compared to 29.82 lakh metric tonne in FY '23 with year-on-year growth of 9%. Royalty income through franchisee stood at INR 129 crores in FY '24 as compared to INR 114 crores in FY '23, a growth of 13% year-on-year. Total revenue stood at INR 725 crores in FY '24, registering a marginal degrowth of 1% year-on-year. Our profit before tax stood at INR 67 crores in FY '24 as compared to INR 55 crore in FY '23, a growth of 22% year-on-year. PBT margin stood at 9.2% for FY '24, which was 7.5% in FY '23. Profit after tax stood at INR 50 crores for FY '24 as compared to INR 41 crores in FY '23, a growth of 22% year-on-year. ROCE and ROE for FY '24 stood at 28.5% and 21.1%, respectively. We continue to remain debt free as on 31st March 2024. Let us go through the numbers of Kamdhenu Ventures Limited Paint Business now. Kamdhenu Paints reported strong performance during the fourth quarter and full year ended fiscal '24. First, to give you the highlights for Q4 FY '24, revenue for the quarter stood at INR 85 crores as compared to INR 71 crores in Q4 FY '23, a strong growth of 20% year-on-year. EBITDA witnessed a multi-fold jump and stood at INR 7 crores for Q4 FY '24 as compared to INR 0.1 crore in Q4 FY '23. EBITDA margin stood at 8.5% for Q4 FY '24. We also turned PAT positive. Profit after tax for Q4 FY '24 stood at INR 4 crores, which was minus INR 3 crores last year, a delta of INR 7 crores year-on-year. Coming to the highlight for complete financial year 2024. Revenue for the FY '24 stood at INR 292 crores as compared to INR 260 crores in FY '23, a growth of 12% year-on-year. EBITDA stood at INR 23 crores for FY '24 as compared to INR 0.4 crores in FY '23, highlighting a strong turnaround in the business. EBITDA margin stood at INR 7.7 crores -- 7.7% for full year FY '24. Our PAT stood at INR 14 crores, which was minus INR 11 crores in FY '23. Average selling price per kg for FY '24 stood at INR 90, higher by 14% compared to last year. With this, I would like to open the floor for question and answer.
[Operator Instructions] We have our first question from the line of [ Richa ] from Equitymaster.
Sir, my question is regarding the volume, like you said that we have grown in the steel segment by 9% and the industry growth was 13%. So you just highlight what were the challenges because this was -- the performance was also lower than the guidance that you had shared at EBITDA level [indiscernible] from the steel segment.
Actually, your voice is not clear. Your voice is blurred.
Sir, is it better now? Am I audible now?
Yes, Ma'am can you please use your handset?
Richa, please repeat the question.
Sir, my question was related to the volume growth, right? You said that we had 9% kind of growth as compared to industry growth of 13%. So there was some kind of underperformance with regards to industry as well as our own guidance that you have shared in terms of EBITDA terms. So if you could just talk about the performance, what were the challenges that we faced during this year?
[Foreign Language] industry growth 13% [Foreign Language] Kamdhenu [Foreign Language] volume growth [Foreign Language] 9% [Foreign Language]
[Foreign Language] EBITDA [Foreign Language] that was around INR 80 crores, if I'm not wrong, INR 80 crores [Foreign Language]. And at EBITDA level also, we are lower. So if you could just highlight the challenges that we face during the year.
[Foreign Language] normal industry [Foreign Language] manufacturing units [Foreign Language] normal growth [Foreign Language] 11% [Foreign Language] Kamdhenu [Foreign Language] own production [Foreign Language] 29% growth [Foreign Language] own manufacturing [Foreign Language] 11% [Foreign Language] particularly North India [Foreign Language] April onward [Foreign Language] 16%, 17% [Foreign Language] growth [Foreign Language] industrial growth [Foreign Language] 9 to 10 percentage [Foreign Language] 16%, 17% [Foreign Language]
Okay. I have 1 more question. Sir, if you could give us -- give me an idea of how big is this TMT market, TMT bar market, retail TMT bar market. And [Foreign Language] organized, what would be the breakup between organized and unorganized. And over the years, do you see any kind of shift towards the organized players? Or is it more or less the same over the years?
[Foreign Language] main producers [Foreign Language] Steel Authority of India [Foreign Language], Tata Steel, JSW [Foreign Language] Kamdhenu. [Foreign Language] that varies 22% to 23% in the branded organized market -- retail segment [Foreign Language] particularly retail segment [Foreign Language] retail segment [Foreign Language] 22%. [Foreign Language] almost 65 lakh tonne [Foreign Language] next 5 years [Foreign Language].
We have the participant disconnected. We'll move on to the next participant. We have our next participant from the line of Mr. [ Pradeep Rawat ] from [indiscernible] Capital.
Congratulations on good set of numbers. So I have a couple of questions. Can you share your outlook for the demand scenario in the steel business? And what is the trend for the raw material prices and your outlook for the same?
[Foreign Language] steel segment [indiscernible] 8% to 9% maximum outlook [Foreign Language]. [Foreign Language] raw material [Foreign Language]
coking coal and iron ore [Foreign Language] as per demand and supply [Foreign Language] asset-light model [Foreign Language] semi-finished [Foreign Language]
Okay. Okay. So what would be the sustainable margin given that the price fluctuation won't have much effect on our margins? So what would be the sustainable margins that you foresee?
[Foreign Language] industry growth [Foreign Language] 9% to 10% [Foreign Language] 16% to 17% annual growth [Foreign Language] overall margins [Foreign Language] ultimately [Foreign Language] EBITDA [Foreign Language] EBITDA 8.74% [Foreign Language] brand-building expenses [Foreign Language].
Okay. So my other question is regarding the EBITDA margin on our own facility as of now.
[Foreign Language] as a R&D unit [Foreign Language] technical staff [Foreign Language], commercial staff [Foreign Language], quality control [Foreign Language].
[Operator Instructions] We have a follow-up question from the line of Richa from Equitymaster.
Sir, my question is that we have a franchise model, which makes us asset light. I just wanted to get a sense of...
Sorry to interrupt, Ms. Richa, but you are not audible. Your voice is breaking.
So my question is I just keep it short. I'm not sure there's some network issue. If somebody wants to set up a capacity, greenfield capacity of 1 lakh metric tonne of this TMT -- bar, what kind of CapEx is required for that?
Ma'am, if someone needs a capacity of 1 lakh tonnes per annum -- though right now, this capacity is very much less, and it is not practically viable. At least you have to install a monthly capacity of 12,000 to 15,000 metric tonnes. That means at least you need to install a capacity of 2 lakhs metric tonnes annually. And for the installation of 2 lakh metric tonnes capacity unit, you need approximately INR 70 crores to INR 80 crores apart from the land because land is where we have been -- wherever you want, the land is not included in this cost, but the entire plant and machinery requires at least INR 70 to INR 80 crores. Land is INR 20 lakhs -- INR 20 crores, then the total CapEx would be INR 100 crores. Apart from that, you need at least INR 30 crores to INR 40 crores of working capital also.
Okay. And sir, [Foreign Language] based on market [indiscernible] or market demand [Foreign Language] premiumization [Foreign Language]? And if yes, what kind of work are we doing to improve -- to move towards land-added products?
[Foreign Language] value-added products [Foreign Language] steel segment [Foreign Language] as a commodity [Foreign Language] across India, single story, 2-story, 3-story [Foreign Language] this year onwards, [Foreign Language] through architects, builders, structural engineers [Foreign Language].
And sir, what are the factors that help us structure or get a royalty per tonne to increase from our franchisee players. So like you said, it varies from INR 350 or INR 400 to INR 450. So how much time does a particular franchisee take to reach its optimum capacity? And over what period can we increase this royalty volume?
[Foreign Language] 30%, 40% material [Foreign Language] almost 70% -- 60% utilize [Foreign Language]. Normally, steel segment [Foreign Language] within 200, 300 kilometers [Foreign Language].
So let's hope like [indiscernible] projections [Foreign Language] INR 300 -- close to INR 400. So going forward, do you think that there would be a meaningful increase in that? Or some kind of indication if you can give on that front? Or is it likely to be in the same range?
[Foreign Language] INR 500 [Foreign Language]
Okay. And sir, my last question is, if you could share any target for your dealer expansion in your dealer network as well as any kind of trajectory for branding expense? Will it be as a percentage of sales or volume, if you have any kind of budgeting -- if you can share any kind of budgeting on that front? Dealer network and branding expense, on these 2 fronts.
[Foreign Language] 8,500 [Foreign Language] almost INR 59 crores [Foreign Language] strengthening [Foreign Language] 68 lakh metric tonnes [Foreign Language]
Okay. Okay. [Foreign Language] 8,500-plus dealers [Foreign Language] active [Foreign Language]. 8,500 is registered? How much would be active?
[Foreign Language]
[Operator Instructions] We have a next question from the line of [ Payal Shah ] from [indiscernible] Securities.
I have a few questions on our paint business. First would be, what will be our FY '25 and FY '26 revenue EBITDA margin outlook? Anything that you can give on FY '25 and FY '26? That would be helpful.
[Foreign Language]
[Foreign Language]
Harish ji [Foreign Language].
No, we are expecting a turnover of around INR 380 crores in FY '25 as against INR 292 crores in this year. And we are also expecting EBITDA of 9.5% against the 8% in this year. So we have the plan to achieve this target, and we have given this target to our team. And we are hopeful that we shall be.
Okay. Sir, that's quite helpful. My second question is, what will be your target split between value and volume growth for the paint business going forward?
Our main focus is on the value-added products, premium product, water-based emulsion products. So we are focusing on the top line with the target of having margins in that product. So we are not focusing on the quantity. We are focusing on the value-added product and which increase the top line and bottom line.
Okay. Sure. And sir, my last question is, are you seeing any competitive pressures when it comes to pricing? And how do we plan to gain market share if such competition continues?
We are focusing on the Tire 2, Tire 3 cities for the market expansion point of view. And with regard to cost control, we have innovative products where costing is less than their results. So we are focusing on the premium product with the help of our R&D team, and we are making cost control on those products.
We have our next question from the line of [ Rajvi Shah ] from Bright Securities.
I have a few questions on the sales business. The first one is, are we expecting raw material volatility for the paint business? And would we be able to easily absorb that in [indiscernible] gross profit?
So what is the second question? When is the raw material cost, then?
Yes. So like do we expect like the raw materials volatility to be absorbed in our gross profit?
Now prices are almost firmer and it was fluctuating in the past, but now prices are more or less firmer. And we are not seeing any much fluctuation in the raw material prices. In case this volatility increase, the raw material prices, then obviously, market will take a call and increase the selling price.
Okay. So my next question was what are the active initiatives to gain more market share in decorative paint market?
We are increasing our dealer network. We are introducing new products. We are also -- have some value-added products, which will increase our market share.
Okay. And I just had 1 more last question. There has been a slowdown in overall consumption. Has this affected our paint business?
Can you repeat the question?
Yes. There has been a slowdown in overall consumption. So has this also affected our paint business?
Which slowdown you are talking? There is no slowdown in the economy. No slowdown in the market, real estate.
Like on overall paint business.
No, no, there is no slowdown in the paint business. Every year, [indiscernible] of around 8% to 9%. And we are also increasing our market share. So there is no slowdown in the paint market or real estate market, which have main consumption.
We have our next question from the line of [ Ruchi Gupta ] from Value Consultancy.
I have...
Sorry to interrupt, we are getting a lot of disturbance from your end.
So I have questions regarding the steel business. So just wanted to know when can we expect to deploy INR 25 crores that -- cash that we received post our fundraise?
Yes, we are expecting to deploy this fund in this quarter. In the Q1, we will deploy that. We are working on that.
Okay. Okay. My another question is what are the current and peak level realizations for TMT steel bars. And when can we expect it to reach the previous peak of realization?
Yes, it is increasing. But right now, last year, average is around INR 49,000. INR 49,000 was the last year average price, which was INR 52,000 in the FY '23.
[Operator Instructions] We have our next question from the line of [ Atul Daga ] from [indiscernible] Securities.
So I have questions for the steel business. We haven't added many franchisees in the recent past. What would our goal when it comes to adding franchises going forward?
You are talking about the number of franchises?
Yes, yes.
Yes. We are not focusing on increasing the number of franchisee. In fact, we are focusing on the increase of the capacity by units. So capacity has increased in the last 1 year, and we are also expecting to increase the existing level to 50 lakh metric tonnes in this financial year. So we are making a regiment for expansion of capacity within the existing unit. So we are giving more opportunities to our existing units rather than adding the new unit. If they are not able to increase their capacity due to any reason, so we are looking for increase of the new unit in that particular reason. But our focus is on increasing capacity of existing units. That is why it has not increased.
Okay. Sir, coming to my next question. How much franchisee capacity would you be looking for FY '25?
It would be increased to 50 lakh metric tonnes from the existing 40 lakh metric tonnes, 41 lakh metric tonnes to 50 lakh metric tonnes.
50 lakh metric tonnes, okay. So sir, what is your aspirational targets for revenue and PBT tax going forward? Any guidance for the next couple of years?
Yes. For steel business?
Yes, yes.
Yes. We are targeting double of the revenue in next 5 years. In this year, we achieved around 32.5 lakh metric tonne of steel through the franchise route. In the next 5 years, we are targeting to make it 68 metric tonne through the franchisee route only.
As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you.
I would like to thank you, everyone, for being part of this call. We hope we have answered your questions. If you need any more information or clarification, please feel free to contact us or Mr. Deven Dhruva from SGA, our Investor Relations advisor. Thank you.
Thank you. On behalf of Kamdhenu Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.