Pokarna Ltd
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Pokarna Ltd
NSE:POKARNA
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Ladies and gentlemen, good day and welcome to Pokarna Limited Earnings Conference Call.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Suraj from CDR India. Thank you.
And over to you, Mr. Suraj.
Thank you, Randy. Good morning, everyone, and welcome to Pokarna Limited's Q4 FY '25 Earnings Conference Call.
We have with us today Mr. Gautam Chand Jain, Chairman and Managing Director; Mr. Paras Jain, Chief Executive Officer at Pokarna Engineered Stone Limited; and Mr. Vishwanatha Reddy, Chief Financial Officer.
Before we begin, I would like to mention that some of the statements made in today's discussion may be forward looking in nature and may involve risks and uncertainties.
I now invite Mr. Paras Jain to open proceedings of the call and share his perspective of the business and outlook. Thank you.
And over to you, Paras.
Thanks, Suraj. Good morning, everyone. Thanks for joining us today. It's always a privilege to connect with our investor community and share our performance, progress and perspectives.
I am pleased to report that Pokarna Engineered Stone Limited, our wholly owned subsidiary and the primary growth engine of our consolidated business, has closed FY '25 on a strong note both operationally and financially despite an exceptionally volatile global environment.
Let me begin with key consolidated financial highlights Q4 FY '25 versus Q4 FY '24: revenue INR 262.68 crores, up 62.5% year-on-year; EBITDA INR 104.59 crores, up 138.93% year-on-year; EBIT 92.90 crores, up 185% year-on-year; PAT INR 58.9 crores, up 280% year-on-year; EPS INR 19, up [ 280% ] year-on-year.
Now let's move to FY '25 versus FY '24: revenue INR 930.13 crores, up 35.34% year-on-year; EBITDA INR 347 crores, up 56.9% year-on-year; EBIT [ 302.86 crores ], up 69.57% year-on-year; PAT INR 187.54 crores, up 114.68% year-on-year; EPS INR 60.49, up 114.68% year-on-year.
This outcome reflects disciplined execution through focused sales strategy, cost control and operational efficiency at PESL. Our ability to scale premium product lines and optimized manufacturing continues to create tangible results.
Now let's move on to strategic and operational update. During the year, we capitalized our KREOS line, adding new technological capability to our platform. While it did not contribute to revenue in FY '25, we expect a gradual ramp-up starting H2 FY '26 as we introduce new design-led offerings. Our CHROMIA line remains under implementation; and will bring high-resolution design, printing capabilities upon completion. We are also seeing increased customer demand for low-crystalline silica products. This is a directional shift in the industry. And we have to develop and invest accordingly, developing a stable raw material supply chain and formulating solutions that meet both safety and design expectations. This is a structural transition and we are treating it with seriousness it deserves.
Tariffs and trade environment. Let me now address what remains the most significant overhang on the business. That is U.S. [ trade policy ]. Over the past couple of months...
[indiscernible]. Sorry for interrupting. Your voice is breaking. Just give me a moment.
[Technical Difficulty]
I'll start again from tariff and trade environment. Let me now address what remains the most significant overhang on the business: U.S. trade policy. Over the past couple of months, we've witnessed a chaotic and fast-evolving sequence of events. Sweeping tariffs were announced, covering nearly all products; categories; and most exporting countries, including India. These were subsequently deferred, creating temporary ambiguity. Just day before yesterday, the U.S. Court of International Trade issued a legal stay on the implementation, only for the U.S. government to immediately file an appeal and [ get a legal stay on this state ].
This environment is no longer just about duties. It's about deep uncertainty, and this uncertainty is paralyzing business decisions. Distributors are deferring orders. Fabricators are holding back inventory. Homeowners are delaying remodels. The lack of clarity has created real friction across the value chain. Until a stable resolution emerges, this disruption is expected to persist. At this time, any forward-looking assumption on U.S. trade actions will be speculative, and I will not offer projections where visibility doesn't exist.
Granite segment. Our granite segment remains under pressure, with current performance reflecting continued weakness in market demand. To navigate this, we are enforcing strict cost controls to protect margins and actively exploring new channels and revenue streams to rebalance the mix. While the near-term outlook remains cautious, our operational discipline here remains intact.
Looking ahead. Before we open it for questions, allow me to leave you with few grounded reflections. As we enter FY '26, we'll do so with our eyes wide open. What we achieved in FY '25 was the result of discipline, not [indiscernible]. And while we are proud of the outcome, we do not [indiscernible]. [ The way we are ] operating isn't changing in fundamental ways. This is not just another business cycle. It feels more like a shifting of tectonic plates beneath the surface of global trade, regulations and demand behavior, especially in our core market, the U.S.
The very framework of trade seems to be evolving in real time. Announcements are made then deferred and then legally challenged. And in the middle of all this, businesses like ours are [ left to make decisions with imperfect information ] and compressed time lines. It reminds me of something I learned early in my career. When the road ahead is unclear, speed is not your friend. Judgment is. You don't accelerate into the fog. You slow down, hold your line and focus on what's right in front of you. That's the future we are taking today.
Our focus will remain on doing the fundamentals well, serving our customers, running a tight ship, controlling what we can and preserving flexibility where we must. We will not overreach. We will not overpromise or offer rosy narrative. And we will certainly not confuse hope with strategy. I'm here to be a responsible steward of the business, especially when visibility is low and volatility remains high. Thank you for your trust, your patience and your continued interest in our journey.
We are now happy to take your questions.
[Operator Instructions] The first question comes from the line of Pranav Mehta with Equirus Securities.
Congratulations on a very good set of numbers. Sir, I wanted to understand on one thing. In 4Q results, how much of the contribution would be there because of the -- let's say, the preponing by the importers because of the [ embedding ] tariffs that were introduced in April? So do you think that the numbers would be having not preponing of these -- of orders by the importers, particularly in U.S. market?
So we actually are not privy to it, but there could be some bit of it. But I don't think they would be a -- large because in general the market has been in flat mode. So we don't expect that people would have just bought in anticipation of tariffs coming. Because what tariffs are coming, nobody could speculate at that point in time. So I don't think that there will be a lot of demand coming just because of the tariffs.
Okay, sir. And sir, we have seen that in 1Q CY '25 the imports into U.S. have been very strong on the quartz surface side. So have you seen that kind of intensity playing out in April and, to some extent, May year-to-month as well?
I think the intensity up to March was different. And the intensity following March is relatively different is our expectation, and that's what we are saying. And also one has to look at the average [ input price ] as well. It's not just the quantity but also the value around it.
Okay, sir. And sir, my second question was on this debt. So we have brought down debt considerably. Now with the new plant coming in, what kind of debt you are expecting for FY '26 and '27.
The repayment is [indiscernible] '25, '26.
[indiscernible]
This will add to the [indiscernible] that we'll...
He's asking the repayment...
What is the peak debt we are seeing [ in FY '26 ]?
Peak debt...
[indiscernible] right now it is [indiscernible].
[indiscernible]
[indiscernible]
The new line will probably come before the end of the year. Then that will add another 440 crores, out of which...
300 crores...
300 crores will the debt. So it will be 300 crores plus about 150 crores [indiscernible], [ so as said ], total debt this year-end may be around 450 crores.
Excluding working capital.
Mr. Mehta, please rejoin the queue for more questions. Next question comes from the line of Ankush Agrawal with Surge Capital.
Sir, you have highlighted that, Q4, you did saw a lot of prebuying. At least that is what your understanding is, but post tariffs getting implemented, what's the change in behavior? Are distributors holding onto fresh orders given, I think, in your business line there would be a large lead time between the order coming in and the actual delivery? And the taxation is not clear by the time the order is delivered. So how is Q1 playing out in terms of [indiscernible] buying that you're seeing?
So if you had followed my opening remarks: I said that the tariffs definitely brought uncertainty. And in general, the market, whether the distributors, whether the fabricators or the homeowners, all are deferring their purchases to some extent. That's what we are seeing in the demand, [ partly ].
Okay, but would it be possible for you to give some more color on the what's the quantum? Like, there's deferment. That is clear. That side is clear, but like -- if you can highlight. Because obviously, FY '26 guidance, you can't give at the moment. But for the coming quarter at least, if you can give some color on how things are looking.
I think it would -- premature to give it, but I can tell you that definitely there is going to be a good amount of deference.
Okay. And secondly, on CHROMIA, I think we were supposed to commercialize the plant by the end of Q4. That is still not -- that is still under implementation, so is it like strategically we have deferred it? Or is it taking more time [ there ]?
No, no. The line is already installed. We are just waiting for a few technicians -- for some practical reasons, who are not able to come, to give final touches. Because we have already done sample production, but it requires some more technical correction, which we are waiting for the technicians to come this weekend. And probably, next 10 days, that should be operational.
Mr. Agrawal, please rejoin the queue for more questions. Next question comes from the line of Naman Parmar with Niveshaay Investments.
So firstly, I wanted to understand. In the current quarter, there has been a margin expansion of around 30% to 40%. So you were guiding around 34% to 35%. So what will be the margin guidance going forward?
We -- if you have been following us: On the previous call also, we've maintained that around 35% is the margin to look at, but then it is subject to both contraction and expansion depending upon how the product mix plays out and how the hospitality or our cut-to-size business in general in the export market likely plays out. So in the quarter of Q4, we have actually had a good amount of cut-to-size exports also happening, which also led to the margin expansion, apart from the [ in-general ] product mix.
I mean, majorly, realization has increased in the current quarter because CHROMIA and KREOS line also not yet commercialized. So what was the reason for [indiscernible] margin?
CHROMIA -- and as I said, KREOS was capitalized, but we never -- we did not get any meaningful revenue out of it. And CHROMIA was not capitalized. So the existing product mix, the -- because -- see we have products which we sell at $5. There are products which we sell also at $13. So depending upon what mix of the product gets ordered and sold during that particular quarter can actually impact the margins. And also the cut-to-size business, which we have said in the past that -- I think I can say that the last quarter of -- was one of the best quarters for the cut-to-size exports what we did. So that was also an important contributing factor for the overall margin expansion.
Okay, understood. And secondly, on -- how is the demand outlook on the domestic side? Even though we are [ major ] towards export in U.S. only. But do you think there has been a pickup in the domestic side and...
Yes. Gradual, there is growth in the domestic market. And we have already started appointing a few distributors in the metro towns. And you'll see a better growth coming in this present quarter and also the present financial year.
Mr. Parmar, please rejoin the queue for more questions. Next question comes from the line of Dixit Doshi with Whitestone Financial Advisors Private Limited.
My first question is, let's say, just before the tariff as of, let's say, 1st of April 2025. We might be having some orders in hand and which will get delivered over next couple of months. So then on that product, how the tariffs will work, whether we will have to digest that impact, or the distributor. Or it will be evenly -- how things will work.
It's a business decision. It's not a general statement. Depending upon the product, depending upon the customer, depending upon the relationship, we'll have to figure out something because in these times, if you simply take a particular position, then it's very difficult. So we may have to...
But are we able to pass on some impact? Or do you feel that, that will lead to a margin pressure in the Q1?
It depends upon the relationship, the product and what level of orders they have placed. So there will be some absorption which will happen, but it does not necessarily mean it will be a complete absorption.
Mr. Doshi, please rejoin the queue for more questions. Next question comes from the line of Naman Parmar with Niveshaay Investments.
I just wanted to know on the tariff side. So after the 90 days, how much will be the tariff on the quartz surface product on the basis of reciprocal?
I think this is a question which Trump and Mr. Modi can only answer. I am not privy to it because it's something between the countries to negotiate and settles. And I don't think even both of them probably would be knowing at this point in time where we are heading, so I think -- when I know -- and you'll also be knowing the same thing because it's going to be from the newspaper and the media.
Next question comes from the line of Dixit Doshi with Whitestone Financial Advisors Private Limited.
So one clarification. You mentioned that KREOS has started, but it will start contribution into the revenue from H2, nothing in H1...
Yes.
It could be there but marginally. I'm saying meaningful contribution.
Okay. So even for CHROMIA also it will be more like H2 only.
See -- but basically these are all different products being differentiated. It does not mean the volume growth will come additional. These are just additional products which we'll be making on these 2 machines. On the products which we already make, the volume will remain more or less same.
Yes.
So maybe -- the margins may differ a little bit. The offering to the market will be different products coming from these 2 machines.
Okay. And as of now, due to all this uncertainty, we are still keeping our CapEx plan on -- I mean there is no postponement we are planning.
[Technical Difficulty]
Ladies and gentlemen, the management line has been disconnected.
Yes. So I was asking. Say, due to all the uncertainty prevailing currently, still we are keeping our CapEx plan on, right, the 440 crore. As of now, we are not planning any deferment.
No, no. CapEx is already committed. [ LCs ] have been opened. Machines have been ordered. And the machines will start flowing in next quarter, so we cannot defer.
Okay, okay. And one last question, bookkeeping side. This year, if we see year-on-year, the right-of-use asset has gone up significantly from 18 crore to 45 crore. So why is that?
Can you please come back? You are not audible.
[ Right ].
Can you hear me now?
Yes. You're audible now.
Yes. So I was asking. In the balance sheet, the right-of-use asset has gone up significantly year-on-year from 18 crore to 45 crores. So any particular reason for this?
No, no. This is not a [ write-off ]. Actually we have rented a new property, and as per the accounting norms, we are supposed to capitalize. We have rented a new corporate office. And the commitment on the new...
Rental...
Rental...
Rentals...
Rentals are...
[indiscernible]
As per our new norms, we have to capitalize that.
It's a long-term lease, basically.
Mr. Doshi, please rejoin the queue for more questions. Next question comes from the line of Rahul Kumar with Vaikarya.
Can you tell us if -- currently, whatever orders you are supplying, with 10% tariff which is applicable during this interim period, who is absorbing that, buyers, you? Can you give us that sense?
Tariff is implemented for the people or the customers who import the material, not on us, so the customer is obliged to pay the import duties when they import the materials.
Right. So your realized price before this tariff and now, so far, is same. Volumes may be affected because of the uncertainty you are facing?
Yes.
And who are the other countries who supply your kind of products into U.S.? Like, who are your key competitors?
The tariffs are almost on all countries who export such products.
Right. And who are these other countries?
[indiscernible] -- there are many countries. The countries include Vietnam, Thailand, where the tariffs are even higher than India.
And is it -- get manufactured in U.S., your kind of product? Or any kind of tariff -- like, what is the differential in terms of manufacturing costs or any other parameters which will be difficult for them to manufacture back in the U.S.?
This product is manufactured in different continents, like Asia, Europe, North America and also in South America. I think probably Australia and Antarctica are probably not manufacturing it. And they're importing if they are using that product. So there are products also in -- there are also manufacturing plants in America. And these were even in the pre-tariff regime and are continuing to expand in the post-tariff regime as well. So there is definitely, I believe, a cost-of-production difference between producing in America and India. That is -- or any other part of the world, for that matter. That is a reason the import quantity into U.S. is higher than the local production capacity. Now how much the cost differs is completely a privy information which we are not privy to because every manufacturer has its own cost of production depending upon what their operational efficiencies are.
Mr. Kumar, please rejoin the queue for more questions. [Operator Instructions] Next question comes from the line of Ankush Agrawal with Surge Capital.
So sir, in our Q3 Con Call, we had sort of indicated that for FY '26, even though we don't -- we won't necessarily have a new nameplate capacity, but due to some operational efficiencies like reduction in cycle time, we've been able to increase some throughput. And that will give some flip to top line. So are we still on that, like -- and if you can quantify what kind of increased throughput we can expect.
Yes. I told you at -- in one of my opening remarks. Considering the current uncertainties, we are not providing any projections into the future. I think, once we have more clarity on what -- how the tariff environment is going to pan out and the -- how the demand scenario is going to pan out, we'll probably talk and give more color on your question...
Yes, I got it. I'm not saying like how much we will be able to sell but how much we will be able to increase the throughput, like that you can cater as the demand comes. Like, what revenue we'll achieve obviously is very uncertain, but based on your internal improvement that you're targeting...
[indiscernible]
It all depends on the market. This question is very vague.
I'll tell you why it is vague also. See. The throughput is the function of how efficiently we can produce. If I get a short-cycle orders versus a long-cycle orders, the throughput is going to completely change. So I don't want to give a theoretical number and, again, create a confusion for the next call. So I would rather not make any comment on it. And I hope you understand that. Thank you so much.
Okay, yes, yes...
Mr. Agrawal, are you done with your question?
Yes, yes, I am.
Next question comes from the line of Dixit Doshi with Whitestone Financial Advisors Private Limited.
Just one question. So just to understand. Let's say the 10% tariff remains even after the 90 days and that remains the final. And once the uncertainty [ overs ] -- so obviously the distributors and the -- and [indiscernible] retailers will have to take some price hikes. So assuming, let's say, the import price is 100, what would be the, I mean, retail price? I mean, is it 3x, 4x? If you can broadly touch upon.
It depends upon the product. And also, if you have been following some of the U.S. building material companies like, for example, let's say, Home Depot. Home Depot is -- announced that, "We are not going to make any price increase." So it's not that price increase will typically be done by all and in every -- across every product. It is a very specific thing to a particular industry, product and segment. So that is one. Secondly, the product is sold for the end consumer. If -- suppose the same product which is probably sold in $5, $6 a square foot in export market. By the time it lands at the consumer home, it can be anywhere between $40 to $50. And if the product goes up to, let us say, $10, $12 [ on FOB ], it can be around $120 [ for ] the installed, but then you have to understand there are several layers by the time, why it becomes $60 or $120. Because there is a distributor. There is a fabricator. There is a component which everybody has to take care. And then there are taxes involved, the installation and everything, so basically -- so...
[ Wastage ], transportation...
The end value, from $6 to $60 or from $10 to $100, which is probably 10 to 12x, is all depend upon which market you are operating, from whom you are buying. Because -- what you're buying directly versus whether you're buying from a Home Depot and what type of material you're buying. So it can be, on an average, 8 to 10x.
Okay, so -- I understand. Also my question was due to, let's say -- if the -- if it is a 10% tariff, then it might be possible that for -- to earn the same amount of profit, a 2%, 3% hike on the end product -- end retail price will be sufficient to compensate. So that's why I am asking.
This is something which is very tricky to answer because everybody has their own cost metrics and to what extent they are going to pass on. So it's not that just -- because when you are saying a 10% tariff, if you do a 3% increase, it does not necessarily mean that you're going to get 10% out of it.
Okay, okay...
But at the end of the day, [ you don't lose ] what dollars you are earning today. So if you are losing $1 and you say that, "I [ want to cover ] only $0.30," then that $0.70 is still lost.
I think, in our opinion -- let's not discuss tariffs because this is not in our hands, nor our importers' hands. So we'll have to cross the bridge when we come across whatever the tariffs will come. We don't know how the importer will absorb, how much price addition we will do or we will not do, so let's not discuss what is not in our control...
I think it's more a speculation. We can build the excess model around it, but probably [ it's not really the right picture ] to do it.
[Operator Instructions] Ladies and gentlemen, as there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.
Thank you so much. And we look forward to connecting again for the next quarter. Have a great day.
Thank you. On behalf of Pokarna Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.