Shankara Building Products Ltd
NSE:SHANKARA
Shankara Building Products Ltd
NSE:SHANKARA
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Earnings Call Transcript
Other Earnings Calls
Ladies and gentlemen, good day, and welcome to Shankara Building Products Limited Q4 and FY '25 Earnings Call hosted by TIL Advisors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sayam Pokharna from TIL Advisors. Thank you, and over to you, sir.
Thank you, Avirat. Good morning, everyone, and thank you for taking out the time to join us in this Q4 and FY '25 Earnings Conference Call of Shankara Building Products Limited.
The investor presentation has already been uploaded on the stock exchange and on the company website. If you wish to be added to our mailing list, please feel free to write to us.
To take us through today's results, we have with us from the management team, Mr. Sukumar Srinivas, Managing Director; Mr. C. Ravikumar, Director; Mr. Dhananjay Mirlay Srinivas, Vice President; and Mr. Alex Varghese, Chief Financial Officer. We will begin with a brief overview of the quarter and the full financial year from Mr. Dhananjay Mirlay Srinivas, followed by a Q&A session.
Please note that any forward-looking statement made during this call should be considered in conjunction with the risks and uncertainties that we face. These risks and uncertainties have been detailed in our annual report.
With that, I would now like to hand over the call to Mr. Srinivas. Over to you, sir.
Good Morning. Dear investors, welcome to the Q4 FY '25 Earnings Call of Shankara Building Products. I will start with a comprehensive overview of our performance, highlight key developments and offer some perspective on the macro and business environment shaping our industry.
Let me begin by addressing the broader context in which we have operated this year, particularly the developments in the steel industry. As many of you are aware, the steel sector has faced significant headwinds throughout the year. Realizations have declined meaningfully, which has poised a challenge for our top line growth and weighed on our margins. Despite these challenges, Shankara has shown its resilience and recorded a strong 30% volume growth in FY '25.
Structural steel tubes and pipes, in particular, have continued to demonstrate healthy demand, and we have been able to capture this opportunity and deliver healthy volume growth in our business. In Q4, our steel volumes stood at 2.58 lakh tonnes, representing a 33% year-on-year growth.
For the full year, we surpassed our 8 lakh tonne annual volume target, achieving 8.43 lakh tonnes, a notable 29% increase over the last year. This volume growth stands out as one of the key achievements of FY '25 and is a result of our marketplace model, distribution network and strong market positioning.
Our expansion into new geographies has also yielded encouraging results. We are seeing strong traction in Western and Central India, particularly in Maharashtra, Gujarat and Madhya Pradesh. At the same time, we have maintained our leadership position in South India, both in retail and nonretail verticals. The ability to grow in new markets while consolidating our presence in the established ones is a reflection of our operational strength in the business.
However, while our volume growth has been impressive, an approximate 11% decline in steel HRC prices over the past year has inevitably weighed down on our revenue growth. Revenue from our Steel division was up 19% year-on-year in Q4 and 17% for the full year, with the difference between volume and value growth directly attributable to lower steel prices. This pricing environment has been a headwind, but our ability to drive volumes has helped offset some of the impact.
Turning to profitability. Our EBITDA margins improved to 3.2% in Q4 FY '25, up from 2.84% of Q3 FY '25. Consequently, we posted a 3.02% EBITDA for the full year FY '25 as against 2.95% EBITDA in 9-month FY '25. While the sequential improvement is encouraging, margins remain slightly lower on a year-on-year basis, both for Q4 and for the full year. This is primarily due to the inventory losses we incurred up to 9 months FY '25, which amounted to approximately INR 22 crores.
I am pleased to report that we did not witness any material inventory loss or gain in Q4 as steel prices stabilized during the quarter. This stability has provided a firmer footing for our operations as we move forward.
Another positive development has been our ongoing focus on working capital efficiency. Despite the growing scale of our operations, we have managed to keep the finance costs under control. In FY '25, finance costs peaked in Q1 and has been steadily brought under control since. This disciplined approach has enabled us to support our growth ambitions while maintaining financial prudence.
As a result, our net profit improved in Q4 to INR 28 crores, marking a 17% year-on-year growth. This is an early indication that our strategies are starting to bear fruit even in a challenging environment.
Now let me shift focus to our non-steel vertical. The macro environment for the building materials industry has remained subdued throughout FY '25 as is evident from the larger industry data. The year began with a slowdown related to general elections accompanied with lower government spending, softer retail demand and a heavy monsoon and subdued construction activities. These factors collectively impacted the pace of growth in our non-steel business, especially in the second half of the year.
Despite these headwinds, our non-steel vertical posted a 20% year-on-year sales growth in Q4 and a 26% increase for the whole year. Within this segment, categories such as plumbing, fittings and sanitaryware has emerged as our key growth drivers. For the first time, non-steel contributed more than 10% to our total top line in FY '25, standing at 10.6% for the full year. This diversification strategy is priority for us, and we are committed to scaling this business further in the years ahead.
We're also happy to report that our e-commerce initiative taken 2 years ago is beginning to yield positive results. We are registered on popular platforms like Amazon and Flipkart, apart from our own e-commerce store, www.billpro.store. Sales have grown substantially in FY '25 from the previous year from almost INR 5 crores in FY '24 to INR 15 crores in FY '25. This figure may seem small -- we seem a small percentage in the overall picture. However, we see a huge opportunity in this vertical in the coming years.
In light of the current environment and our growth strategies, we would like to reiterate our volumetric guidance for the next year. We are targeting to surpass the 1 million tonnes in FY '26. We are equally focused on devoting our energies to scale the non-steel business, both in existing categories and through the addition of new product categories and brand partnerships.
I would also like to update you on the progress of our demerger implementation. In Q4, we achieved a significant milestone with the shareholders' approval at the meeting held on 12 February 2025. The next key milestone is the NCLT meeting scheduled for 26th May 2025, which is expected to be the final NCLT hearing.
Subject to regulatory approvals, we anticipate concluding the entire demerger proceedings by the first half of FY '26. This development is pivotal for our long-term strategy as it will enable us to unlock greater value for all stakeholders and streamline our operations in both businesses.
To sum up, our strategy remains clearly focused on being omnichannel with all efforts directed towards achieving higher volumetric growth across retail, nonretail, steel and non-steel verticals.
Our scale has been the cornerstone of success in our industry and Shankara's extensive market presence through 124 stores and fulfillment centers positions us strongly to capture future opportunities. This scale, coupled with our diversified portfolio and our one-stop value proposition is what sets Shankara apart in today's competitive landscape for the building materials marketplace and distribution industry.
Thank you for your attention. We are now ready to open the floor for any questions you may have.
[Operator Instructions] The first question is from the line of Viraj Mehta from Enigma.
Congratulations for a good set of numbers. Sukumar, my first question is on the inventory side. I'm a little surprised when you say that we did not have any inventory gain this quarter. If you look at numbers of some of -- I wouldn't say direct competitors, but some of the manufacturers for whose products we supply in the market, they all have seen -- all the manufacturers have seen decent inventory gain. So why have we not seen any inventory gain, especially in March?
See, actually, in March, the actual prices of steel started moving up in March itself in that quarter. So the first 2 months, markets were still quite subdued and pipe demand still was -- I mean, the pipe prices did not really increase. See, a lot of the primary manufacturers had started seeing the increase a little earlier, probably from February itself towards the month end.
So our real steel prices started increasing only in the second half of March. I think that sort of negated the negativity of the first 2 months. So therefore, I mean, even if we have gains, it's a very insignificant number to really be reporting.
Okay. So then is it fair to assume that a large part for us, whatever inventory gain we have will happen in Q1?
Definitely, in Q1, we are seeing the price increase in the month of April. More or less, the prices are stabilizing in this month, that is in February -- I'm sorry, May. And we hope that the prices will stabilize going forward.
Right. See, the whole reason it's not as if one wants to understand the gain part of the quarter. But what we as investors wanted to understand is we were part of the value chain while taking the losses of the inventory. I hope we are part of the value chain when the gains in the inventory also come. That's my only question.
Definitely, definitely.
Sir, my second question is on the volume part. You did 8.43 lakh this year. You're guiding only for 1 million next year. Even larger manufacturers are guiding for 20%, 25% growth. When we are expanding territories, shouldn't our aspiration be more than at least like some of the very large competitors or manufacturers as such?
See, Viraj, see, if I were to give targets internally, obviously, my targets are much higher. So we have guided for about 20% volume growth, mota-moti. Definitely, we are aspiring for a much better volume growth than that.
Right. And in this -- you talked about flats being larger portion going forward. What would be flats for this year? And what would be your guidance for next year for flats?
Just a moment. I will....
Flats during the year, we did around 140,000 tonnes we did. So we are expecting approximately around 2 lakhs in FY '26.
Right. And is it fair to assume, Sukumar, that flats are larger or higher margin business. So as proportion of flats increase, the margin in the steel division should improve for us?
See, the first -- I mean, when we start this very quick growth in flats, it will be marginally better than pipes. But yes, in the big picture, maybe going forward over the next year, definitely, the margins will improve as we focus and go deeper into flats. Currently, the bulk of the growth in flats is happening in HRC, which is also quite competitive. And I think once we move into a lot of the value-added products in GP, et cetera, I think we will see a better value accretion or margin accretion.
Right. On non-steel, sir, we have seen growth for this year in '20. So the non-steel growth has kind of significantly reduced, obviously, because of higher base -- but like where do you think we can be in terms of non-steel? And in how many stores like do you want to increase non-steel to over next 1 year and 2 years, respectively?
So we did see a dip, as you said, in the second half of the year, I think because of the market conditions and how we saw construction activity going on. For the coming year, we are looking at 25% plus growth in non-steel overall. We are looking at increasing store count probably in Andhra Pradesh, Telangana. We're looking at North Karnataka as well and certain pockets in Kerala and Tamil Nadu.
So definitely, maybe around 4 to 5 stores is what we're looking at an increase in non-steel for the coming year, which should definitely help us achieve our growth ambitions.
And what would be your margins in non-steel this year?
So we did around 10% gross margin we did in FY '25.
Sorry, I couldn't -- your voice was a little muffled, sir.
In FY '25, we did around 10% gross margin.
And EBITDA for non-steel?
EBITDA is coming around 6 percentage.
Okay. And sir, just my last question for Sukumar is, sir, when we cross 1 million tonnes in terms of your aspirational margin, especially for steel division, I understand non-steel will probably improve a percentage here and there, but it really can't move the needle for us. The needle mover has to be steel. Where do you think the steel margins will stabilize over the next year, 1.5 years from absolute bottom today of like 2.5% to 3%?
We hope to stabilize. We are definitely targeting 3% plus. So I would say closer to 3.5% in the year.
Okay, sir. And just one request, sir, when the demerger happens, I hope we actually have consultants with whom we are working because in some of the cases, the unlisted NPV doesn't get listed for 6, 9 months because this is the main business which will get delisted, like in most of the cases, 10% business gets delisted, so the investor doesn't really bother too much. But in our case, the main business will get delisted. I hope the relisting is quicker and faster and there are no long delays regarding the same.
Yes. We've got a good consultant on board, and it's one of the big 4. And secondly, we are also very aware of this fact. So once the NCLT order is passed, I think we've done a lot of the background work and keeping it parallel ready. So I mean, we are fully aware of this fact that listing of demerged entities is taking some time. So we would be moving very, very fast.
The next question is from the line of Jatin Damania from SVAN Investments.
Sir, majority of the questions have been answered. But just on the bookkeeping, if you can help us in terms of understanding how was the institution and steel retail business for FY '25?
In FY'25, institutional sales were around INR 1,225 crores, which is contributing to around 22% of the total revenue, where in channel, we did around INR 1,528 crores, which is contributing around 27%. Balance INR 2,943 crores is retail, which is around 22%.
So, if we add probably institution and the channel, then there is hardly any growth in terms of the institution business. So, in terms of the margin, when we say that probably we want to aspire a 3% margin, what are the things that probably we will be doing differently so that we will probably get a 3% odd margin in the steel business?
Okay. I think the first key thing in the steel business for margins is in our retail itself. So what you have seen last year is about 58% of the steel business comes in retail in the South. So overall, it looks like 52%, 53%. So number one, retail is very, very critical for margins in the steel business.
Number two is institutional sales. So I think in institutional sales, the flat products that we have talked about it a little earlier. So that is where one of our key growth drivers would be, which also finds huge traction with the enterprise business or the institutional sales. I think these two would be our key margin drivers in the coming year.
And the growth that we are aspiring institutional will continue to grow at around 10-odd percent for '26, '27, and the remaining growth will come from the steel business. Is it fair to assume that?
Yes, yes.
And on the margin front, the institution gives us a 1.5% margin, and the retail gives us a 4% margin.
Sorry, I didn't get your question.
So I'm saying on the cost, the volume, or the revenue front from the institution. This year, we reported almost 8% growth. So going ahead, I mean, the growth will be in the lower double digits. Is it fair to assume that?
Yes, yes.
On the margin front, how does the margin differ because the institution is on the lower end of the margin? So, is 1.5% or 2% is a reasonable margin for an assumption, or could it be a little higher?
No. Institutional, the margins are better than channel when you're saying. So channel, the margins are very. So both together, we did a gross margin of approximately around 3% in FY'25.
So I think if we just take the institutional apart, the margins are certainly better than the combined margin, what is reported as the channel business -- sorry, as the enterprise business.
So the retail side, we can assume a 4% EBITDA margin. That's a sustainable number?
Yes.
Right. And sir, on the working capital side, I mean, definitely, we have around 30 days. But how do we see the movement in the working capital over the next couple of years?
So we would like to retain the same, around 30 days will be the total net working every cycle.
And last on the tile segment, definitely, the second half of last year was not that good. How do you see traction in the month of April? Have we seen any ramp-up? And going ahead with the non-steel revenue likely to grow at about 20%, 25%, what will be the overall contribution coming from the tiles?
So I think the subdued market conditions are continuing in the tiles business as it was in the second half of last year. We are taking reasonable efforts to grow. I think with the current situation and everything going on, we have taken muted growth in tiles, but we do see that there will be good growth there. We're looking at adding further product categories in the business as well. In maybe overall non-steel, we are hoping that tiles could contribute around 30% in the coming year.
The next question is from the line of Naitik from NV Alpha Fund.
Sir, if I look at our P&L statement in the last 2, 3 years, our finance cost has almost doubled, which has sort of weighed on our PAT numbers. Now my two questions here are, sir, one, why is this so? And second, sir, assuming our aspirational targets, we grow by more than 15% on a top-line basis for both next year and next year, then where do you sort of see this finance cost stabilizing?
Yes. I think one of the key factors of the interest going up in the last year, of course, it did peak up substantially in Q1. We've also taken a lot of effort to sort of bring it down and then hold steady in the subsequent 3 quarters.
I think the primary reason in that was there was a very clear slowdown post the general elections last year and around that period in the first quarter and probably there was an overhang in the second quarter as well as even to some extent in the third quarter, where overall, there was a tendency for government payments to have slowed down. So I think that has definitely improved in Q4. And so I think that is one of the primary reasons why I think it happened and what happened in terms of our working capital utilization going up, number one.
Number two, the processes to mitigate, of course, I mean, apart from the routine factors that we need to do, we are also looking forward to seeing how much of our receivables we can partly, let's say, outsource in the sense if we can take it out, get some of our customers on board with certain NBFCs.
We've been working on that for the last 3 to 4 months. I hope to see some sort of concrete fruition happening in the near future. So I think if that happens, it certainly will also help us considerably in sustaining or even lowering the working capital utilization, primarily the interest costs.
But sir, assuming this takes time or if it does not happen, then our interest cost will also increase in line with the revenue increase?
If you look at it even last year, compared to H1 to H2, there was a substantial increase in revenue in the H2 part. Still, we have managed to hold on to our cycle, and the interest costs have slightly come down over the quarter-on-quarter. I think we are trying our level best to sustain that. And we are working very hard. So we are quite confident that we can sustain it at the current levels.
Right, sir. Sir, my second question is, I wanted to just understand what sort of manufacturing capacity does our subsidiaries altogether have?
Manufacturing, we are having around 3 lakh metric tons per annum capacity.
Is it safe to assume out of the 1 million tons guidance you have given majority of it would be trading and very minuscule would be the manufacturing part, right?
Correct. Approximately 1.5 lakhs will come from manufacturing, and the balance will be from...
Okay. And sir, my last question is, can you also give what was the margins in the retail steel versus enterprise steel?
So, retail steel, approximately, we are having a gross margin of around 7%. And non-steel, we are having around 10%. On average, it is around 7% to 7.5%.
Okay, sir. And steel, for the enterprise segment would be 1.5%?
Enterprise segment gross margin was around -- 3% was the gross margin.
The next question is from the line of Apoorv Bandi from ICIC Securities Private Limited.
Sir, a few questions. Sir, my first question is that we have around 92 stores of BuildPro, right? So, do we have receivables in BuildPro as well, or are all the receivables on the manufacturing side of the business? Because my understanding is that BuildPro being the store format business, there would be very less or 0 receivables. Is it right?
No, BuildPro, there will be some receivables will be there because most of our customers are influencers like fabricators, plumbers, and small builders, where we are giving -- some credit we will be giving to those customers. This is a normal market practice.
Sir, can you please quantify that how much receivables on BuildPro and on manufacturing business?
I can come back to you on that.
Okay. And sir, when we say retail and non-retail, right, so what exactly do we mean? Like, does that mean in retail, we mean by the walk-in customers and non-retail, as in the builders, maybe you can explain that part?
So non-retail would typically be our channel, our enterprise, large builders and developers, and the trade business. Retail would classify as our influencers, like contractors, fabricators, plumbers, walk-in customers, that would be the breakup -- architects, all of that would be a breakup between retail and non-retail.
That is why slowly but steadily, the definition of the business is going more towards the marketplace model, and we are trying to break that up into a steel and the non-steel.
Sir, like do you have any numbers on the split of the business? How much part is retail and how much is non-retail in BuildPro?
Retail around INR 2,943 crores...
I think 52% overall is retail and the balance is non-retail.
And sir, my next question is on the -- how do we mitigate the steel price risk? Because given the margins are around 3% of kind of that, right? So the substitution can be very much higher. So, how do we mitigate that part?
See number one, obviously, our inventory management is very critical.
Number two, there is a section of steel products, which are not that sensitive at a marketplace to quick volatility in pricing, which is some of our value-added tubes, some of our special categories, where, of course, it's still a small percentage of the overall business, but that is something which we need to focus on more to mitigate steel valuations.
The third thing would be is in our retail business. In fact, even last year, whatever we have been able to mitigate largely because of the retail business in steel, where any price reductions are not instantly passed on. We do have a lead time or a lag time before it gets passed on to the customer. So these are broadly the areas which we keep working to mitigate the steel prices.
Okay. And sir, my last question is on the –- in the FY '25, the finance cost was around INR 52 crores, and the depreciation was around INR 17 crores. So, can you please split it into how much was from building products and how much was from BuildPro?
How much from building products and BuildPro?
For that I will come back to you. I don't have the breakup at percent with me.
The next question is from the line of Dixit Doshi from Whitestone Financial Advisors Private Limited.
Most of my questions have been answered. I just wanted to understand one thing. So you are saying that in terms of price fluctuation in steel business, the retail business may happen with some lag. And in the institutional and channel partner business, how does it work? Because there, our EBITDA margin itself is hardly 1.5%, 2%.
So I mean, fluctuation in the prices can be more than 5% also monthly basis. So, how does that work? Or is it some back-to-back arrangement with the institutional and channel partner business?
For institutional sales this year onwards, we are planning to buy back-to-back. We are trying to fix up the price with our suppliers. And hopefully, these things will help us to mitigate this fluctuations.
And quite often, even with the suppliers, if there's a dramatic fall, I think to some extent, we get some what is called a price fall clause. We do have certain arrangements with some of our key suppliers where we get a sort of a cushion on excessive falls.
Okay. And in terms of receivables, this around INR 800 crores of receivable, I assume that you did mention that you do give some credit period to the retail part also. But will it be predominantly institutional and channel business?
Yes.
And in terms of inventory, it will be predominantly our retail stores where we are holding the inventory?
Yes, retail and to a certain extent, for channel.
For channel. Okay. And these 92 stores, all of those are, I mean, co-ow, or there are franchisees as well?
No, completely all are company-owned.
The next question is from the line of Nishant Bhatt from Equities Works Limited.
Am I audible, sir?
Yes.
I would like to congratulate the team for a good set of numbers. Clearly, the organization is very resilient at these subdued times.
One point I wanted to ask is regarding the same-store sales growth. You reported around 14% same-store sales growth in FY '25. I think it's in your investor presentation. Could you share how gross profit per store grew in the same cohort? Has the gross margin per square feet improved? And to what extent is that driven by product mix versus pricing?
One second. Broadly, the gross margin last year in the non-steel at the store level was around 10%. So there has been substantial growth in the stores. But I think that is broadly it.
What was the second part of your question, please?
My question was regarding your same-store sales growth, right? It is somewhere around 14% as of now. The contribution has it come from the product mix or the pricing? Like, is it driven by the product mix or the pricing as of now? Because I've been seeing that your ticket size has been increasing. That is a trend which has been happening since the past 3 quarters, right?
Yes. This should be a mix of both. There would be increase because of product mix and because of price.
The next question is from the line of Deepak Poddar from Sapphire Capital.
Am I audible, sir?
Yes.
Sir, just wanted to understand, first, you mentioned that we have seen some increase in steel prices in the month. So what's the extent we have seen the increase after 11% decline you mentioned we have seen last year, right?
Increase of steel prices in the last couple of months, kitna hua?
Last couple of months, especially in March only, it went up around 4%.
And what about April?
As of now, April, it went by around 3%, and May looks flat.
And may look flat. Okay. That's great. And sir, is there any kind of metrics or any kind of sensitivity so that we can understand how will steel prices impact your inventory loss and gain? I mean, a 1% steel prices gain increase can impact how much in your inventory gain. Some kind of metrics would be quite helpful. I mean, to help us understand how your inventory loss or gain can behave going forward?
We can work that out, but as you see, it's difficult in this industry because it's varying sizes and varying price of material, and it's very inconsistent, but we can definitely work out something.
No, come again. I didn't get, sir. So what's the sensitivity you're mentioning?
We don't have one yet. We will work on the metrics for you because of the current complications of the industry, I think this would be a first of its kind.
Fair enough. And this year, we are looking at 3.5% kind of EBITDA margin at a company level? That's what you mentioned because majority is steel only rate for us as of now.
Yes, we are working on that.
Okay. And what would be our ultimate aspiration for this margin? I mean 4% aspiration.
3% to 3.5%.
3.5% is for sure. And as the mix of the non-steel gains space, we would definitely maybe in a couple of years, look at 4%.
A couple of years, 4 and this year, 3.5%, closer to 3.5.
Yes.
[Operator Instructions] The next question is from the line of Utkarsh [indiscernible] from Eco Quantum Solutions.
Can you please give me a breakup of the interest cost and the depreciation between the two businesses?
Interest cost, now when you're seeing both the business, retail and channel enterprise -- you're asking for steel and non-steel or retail and...
Retail and the marketplace business.
Marketplace and manufacturing, right. Just give us a second.
So marketplace, the total interest cost for the year was approximately around INR 42 crores, whereas in manufacturing was around INR 10 crores. That is the breakup of manufacturing and marketplace breakup of the finance cost. And depreciation, you are seeing marketplace is around INR 8 crores and manufacturing is around 8.7%, almost INR 9 crores.
Okay. And also, if possible, can you share the operating cash flow of the 2 businesses?
Yes. Operating cash flow of the 2 business. I will let you know. Overall, it is around INR 90 crores is the overall operating cash flow. So the breakup, I will give it to you later. I don't have the figure with me right now.
Okay. Possible, please share it on this call. And just one last thing, but also the breakup of steel and non-steel in the marketplace business.
Okay.
[Audio Gap]
We will get back to you on these two details through TIL.
[Operator Instructions] The next question is from the line of Naitik from NV Alpha Fund.
My question is what percentage of our revenue is still dependent on APL? And second question on the same line is, is it safe to assume most of the revenue dependent on APL comes from the channel and enterprise segment?
APL will come approximately around 42% is APL.
The bulk of it comes from channel and enterprise and less from retail.
Right. And sir, my second question is if you could give us the figure of bill discounting for the full year '25?
Sorry, that wasn't clear. Can you please repeat?
The bill discounting done in '25?
Yes. In March, we are around INR 400 crores was the total bill discounting. And around -- I mean, borrowing was approximately around INR 72 crores. Around INR 470 crores is the total borrowing as on end of March.
And just one clarification. You mentioned earlier that you're working with NBFCs on dealer financing. So if you can just explain how would this -- it will help us reduce our interest cost on discounting or it will give the option for people to borrow directly from the NBFCs without us being involved?
Yes. So what will happen is this particular limit will go to our dealers where they will be bearing the interest cost. So my overall debt will start reducing it.
The next question is from the line of Viraj Mehta from Enigma.
Sir, just one last question, sorry. Sir, we saw APL Group selling a significant stake, which they held in our firm, which they bought through preferential allotment a couple of years back recently, as recently as Friday. In your view, does it change any relationship that we have with them because we sell a large proportion of their products as you answered in the last question?
Yes. Now let me just quickly trace back as to why they took this preferential allotment about 3 years ago. So I think the primary objective of that was to bind ourselves together better. We have, in this 3 years, our offtake from APL itself has grown by more than 3x or almost close to 4x. And today, we are also the largest MOU holder or we have signed the largest MOU holder for the year of '25, '26.
So objective number one was to cement our businesses further so that we have a greater volume understanding with each other and a better participation understanding with each other. I think the objective has been very clearly fulfilled and demonstrated.
Second, I think at that time, there was also a need to infuse some working capital into Shankara. This was just post the COVID period. So I think the INR 100-odd crores that came from APL at that time of preferential allotment also was very useful for Shankara. I think as these objectives have been met, I think we don't see any significant change in their divesting of their holding in Shankara.
So that does not change anything in the relationship, pricing, nothing?
Nothing at all.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Sukumar Srinivas. Thank you, and over to you, sir.
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