Q1 2027 Cera Sanitaryware Ltd Earnings Call

August 8, 2026

Speaker #1: Ladies and gentlemen, good day, and welcome to the earnings conference call of CERA Sanitaryware Limited. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Operator 2: Ladies and gentlemen, good day, and welcome to the earnings conference call of CERA Sanitaryware Limited. As a reminder, all participant lines will be in the listen-only mode, and there'll be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Devrishi Singh from CDR India. Thank you, and over to you, sir.

Operator: Ladies and gentlemen, good day, and welcome to the earnings conference call of CERA Sanitaryware Limited. As a reminder, all participant lines will be in the listen-only mode, and there'll be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Devrishi Singh from CDR India. Thank you, and over to you, sir.

Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded.

Speaker #1: And now, I hand the conference over to Mr. Devarishi Singh from CDR India. Thank you, and over to you, sir.

Speaker #2: Thank you, Nira. Good morning, everyone, and thank you for joining us on the earnings conference call for CERA Sanitaryware Limited for Q1 FY27, the results of which were announced yesterday.

Devrishi Singh: Thank you, Neeraj. Good morning, everyone, and thank you for joining us on the earnings conference call for CERA Sanitaryware Limited for Q1 FY27 earnings, which were announced yesterday. We have with us today the management team comprising Mr. Vikas Kothari, CFO, and Mr. Deepak Chaudhary, VP Finance and Investor Relations of CERA Sanitaryware. We will start with brief opening remarks from the management, following which we will open the call for Q&A. A quick disclaimer before we begin. Some of the statements made in today's conference call may be forward-looking in nature, and a detailed note in this regard is contained in the results document that had been shared with all of you earlier. I will now turn the call over to the management for their opening remarks. Thank you, and over to you, Deepak.

Speaker #2: We have with us today the management team, comprising Mr. Vikas Kothari, CFO, and Mr. Deepak Chaudhary, VP Finance and Investor Relations of CERA Sanitaryware.

Speaker #2: We will start with brief opening remarks from the management, following which we will open the call for Q&A. A quick disclaimer before we begin.

Speaker #2: Some of the statements made in today's conference call may be forward-looking in nature, and a detailed note in this regard is contained in the results document that has been shared with all of you earlier.

Speaker #2: I would now like to turn the call over to management for their opening remarks. Thank you, and over to you, Deepak.

Deepak Chaudhary: Thank you, Devrishi. Good morning, everyone, and a warm welcome to all of you for joining us on CERA Sanitaryware Limited Q1 FY27 earnings conference call. I will begin by sharing a brief overview of the operational and strategic developments during the quarter, following which our CFO, Mr. Vikas Kothari, will take you through the financial performance in greater detail. CERA has made a strong start to FY27, with revenues growing by 19.5% year on year during the quarter. Both our sanitaryware and faucetware business developed a robust performance, contributing 47% and 40% of our revenues respectively. The quarter witnessed strong momentum across our core businesses, with growth being predominantly volume-driven. We continue to see healthy traction in the project segment, while the retail business carried forward the gradual improvement witnessed over the last couple of quarters.

Speaker #3: Thank you, Devarishi. Good morning, everyone, and a warm welcome to all of you for joining us on CERA Sanitaryware Limited's Q1 FY27 earnings conference call.

Speaker #3: I will begin by sharing a brief overview of the operational and strategic developments during the quarter, following which our CFO, Mr. Vikas Kothari, will take you through the financial performance in greater detail.

Speaker #3: CERA has made a strong start to FY27, with revenues growing by 19.5% year on year during the quarter. Both our sanitaryware and faucetware businesses delivered a robust performance, contributing 47% and 40% of our revenues, respectively.

Speaker #3: The quarter witnessed strong momentum across our core businesses, with growth being predominantly volume driven. We continue to see healthy traction in the project segment, while the retail business carried forward the gradual improvement witnessed over the last couple of quarters.

Speaker #3: Importantly, the growth during the quarter was broad-based, with both our retail and project businesses continuing to perform well. This reinforces our confidence in the improving demand environment and the underlying growth opportunities across our key product categories.

Deepak Chaudhary: Importantly, the growth during the quarter was broad-based, with both our retail and project businesses continuing to perform well. This reinforces our confidence in improving demand environment and the underlying growth opportunities across our key product categories. The demand environment continued to evolve positively during the quarter, supported by improving consumer sentiment in retail and sustained momentum in the project segment. Backed by a strong market positioning across the mass and mid-premium segments, diversified product portfolio, and extensive distribution network, we believe CERA remains well-positioned to capitalize on the significant growth opportunities within our core businesses. While the industry continued to witness elevated input cost pressures during the quarter, CERA remained relatively better placed than several industry participants, supported by its established sourcing arrangements and strong in-house manufacturing capabilities.

Speaker #3: The demand environment continued to evolve positively during the quarter, supported by improving consumer sentiment in retail and sustained momentum in the project segment, backed by a strong market positioning across the mass and mid-premium segments, a diversified product portfolio, and an extensive distribution network.

Speaker #3: We believe CERA remains well positioned to capitalize on the significant growth opportunities within our core businesses. While the industry continued to witness elevated input cost pressures during the quarter, CERA remained relatively better placed than several industry participants, supported by its established sourcing arrangements and strong in-house manufacturing capabilities.

Speaker #3: Following the pricing revisions undertaken during March and May 2026, cumulative price increases now stand at approximately 12% in sanitaryware and 16% in faucetware.

Deepak Chaudhary: Following the pricing revisions undertaken during March and May 2026, cumulative price increases now stand at approximately 12% in Sanitaryware and 16% in faucetware. We are pleased to note that these pricing actions have been well absorbed by the market. Alongside these pricing initiatives, we continue to focus on operational efficiencies to mitigate cost pressures. This will enable us to protect margins while ensuring that we remain competitive in the marketplace. On the brand front, we recently launched a new integrated campaign, Your Moment of CERA, featuring Kriti Sanon as our new brand ambassador. Her aspirational image and wide appeal across demographics make her a natural fit for the CERA brand. We believe that the campaign marks an exciting new chapter in our brand journey as we continue to strengthen CERA's premium positioning and deepen our connect with consumers.

Speaker #3: We are pleased to note that these pricing actions have been well absorbed by the market. Alongside these pricing initiatives, we continue to focus on operational efficiencies to mitigate cost pressures.

Speaker #3: This will enable us to protect margins while ensuring that we remain competitive in the marketplace. On the brand front, we recently launched a new integrated campaign, "Your Moment of CERA," featuring Preeti Senan as our new brand ambassador.

Speaker #3: Her aspirational image and wide appeal across demographics make her an ideal fit for the CERA brand. We believe that this campaign marks an exciting new chapter in our brand journey as we continue to strengthen CERA's premium positioning and deepen our connection with consumers.

Speaker #3: The campaign has been rolled out across television, digital, and other media platforms, and we are confident it will further strengthen consumer engagement, enhance brand visibility, and reinforce CERA's leadership position.

Deepak Chaudhary: The campaign has been rolled out across television, digital, and other media platforms, we are confident it will further strengthen consumer engagement, enhance brand visibility, and reinforce CERA's leadership position. One of the key developments during the quarter has been the extension of our dealer management system to the retailer loyalty program, marking another important milestone in CERA's digital transformation journey. The platform will strengthen our engagement with the channel partners by providing better visibility into secondary sales, inventory movement, and channel engagement. It will also enable a simpler and more transparent loyalty program by providing richer market insights for faster and better decision-making. We believe that the extension of DMS to the retailer loyalty program will become an important enabler of improved execution, stronger channel relationships, and enhanced operational efficiency. We remain committed to adopting digital capabilities that strengthen our competitive positioning and support our long-term growth ambitions.

Speaker #3: One of the key developments during the quarter has been the extension of a dealer management system to the retailer loyalty program, marking another important milestone in Cera's digital transformation journey.

Speaker #3: The platform will strengthen our engagement with the channel partners by providing better visibility into secondary sales, inventory movement, and channel engagement. It will also enable a simpler and more transparent loyalty program by providing richer market insights for faster and better decision-making.

Speaker #3: We believe that the extension of DMS to the retailer loyalty program will become an important enabler of improved execution, stronger channel management, better channel relationships, and enhanced operational efficiency.

Speaker #3: We remain committed to adopting digital capabilities that strengthen our competitive positioning and support our long-term growth ambitions. While the CERA brand will continue to be the principal driver of our growth, we will continue to invest in strengthening our newer brands, recognizing that building enduring consumer brands requires sustained and consistent effort over several years before the establishment of meaningful presence in the respective segments.

Deepak Chaudhary: While the CERA brand will continue to remain the principal driver on our growth, we will continue to invest in strengthening our newer brands, recognizing that building enduring consumer brands requires sustained and consistent effort over several years before they establish a meaningful presence in their respective segments. This is particularly true in the premium category, where consumer trust and brand preference are built progressively over a considerable period of time. Therefore, our focus at this stage remains on strengthening the underlying fundamentals of our newer brands with a long-term perspective rather than evaluating the performance over shorter-term horizons. We remain confident that the investments we are making today will create meaningful long-term value as these brands progressively scale over the coming years.

Speaker #3: This is particularly true in the premium category, where consumer trust and brand preference are built progressively over a considerable period of time. Therefore, our focus at this stage remains on strengthening the underlying fundamentals of our newer brands with a long-term perspective, rather than evaluating the performance over a shorter-term horizon.

Speaker #3: We remain confident that the investments we are making today will create meaningful long-term value as these brands progressively scale over the coming years. From an industry perspective, the challenges across the operating landscape are creating a differentiated environment, with larger, more established players being able to leverage their scale and set up to deliver more efficient operations.

Deepak Chaudhary: From an industry perspective, the challenges across the operating landscape are creating a differentiated environment, with larger, more established players being able to leverage their scale and set up to deliver more efficient operations. Backed by established sourcing arrangements, strong manufacturing capabilities, and efficient supply chain, CERA has been better placed to manage many disruptions across the landscape while continuing to service its customers seamlessly. For the last few weeks and months, we have progressively reduced our dependence on the Morbi cluster by internalizing several key SKUs. This has further strengthened our ability to ensure consistent product availability and cater to consumer demand effectively. These industry developments have also created opportunities for us to strengthen customer relationships and expand our presence across markets.

Speaker #3: Backed by our established sourcing arrangements, strong manufacturing capabilities, and efficient supply chain, CERA has been better placed to manage many disruptions across the landscape, while continuing to service its customers seamlessly.

Speaker #3: Over the last few weeks and months, we have progressively reduced our dependence on the Morbi cluster by internalizing several key SKUs. This has further strengthened our ability to ensure consistent product availability and cater to consumer demand effectively.

Speaker #3: These industry developments have also created opportunities for us to strengthen customer relationships and expand our presence across markets. Our ability to ensure consistent product availability and reliable execution has enabled us to respond effectively to challenging market conditions.

Deepak Chaudhary: Our ability to ensure consistent product availability and reliable execution has enabled us to respond effectively to challenging market conditions. We remain focused on capitalizing on these opportunities while maintaining a disciplined approach to growth. Building on the launch of a new brand campaign, we are entering into the next phase of our brand-building journey. During FY27, we plan to invest approximately INR 85 crores towards brand-building and marketing initiatives. These initiatives will span television, digital, social media, and on-ground activations to further strengthen consumer engagement and enhance brand visibility. Our focus will remain on deepening consumer connect and reinforcing CERA's position across key markets. Overall, we have made a strong start to FY27 and believe that the company is well-positioned to build on this momentum.

Speaker #3: And we remain focused on capitalizing on these opportunities while maintaining our disciplined approach to growth. Building on the launch of our new brand campaign, we are entering the next phase of our brand-building journey.

Speaker #3: During FY27, we plan to invest approximately ₹85 crore towards brand-building and marketing initiatives. These initiatives will span television, digital, social media, and on-ground activations to further strengthen consumer engagement and enhance brand visibility.

Speaker #3: Our focus will remain on deepening consumer connect and reinforcing CERA's position across key markets. Overall, we have made a strong start to FY27 and believe that the company is well-positioned to build on this momentum.

Speaker #3: Supported by improving demand conditions, a strong balance sheet, continued investments, and strengthening digital and channel capabilities, we remain confident of sustaining our growth momentum and maintaining our FY27 revenue growth guidance of 18 to 20 percent.

Deepak Chaudhary: Supported by improving demand conditions, a strong balance sheet, continued investments, and strengthening digital and channel capabilities, we remain confident of sustaining our growth momentum and maintaining our FY27 revenue growth guidance of 18% to 20%. Our focus will continue to remain on disciplined execution, strengthening our market leadership, and creating sustainable long-term value for all our stakeholders. With this, I would now like to hand over the call to Mr. Vikas Kothari to take you through the financial performance of the quarter.

Speaker #3: Our focus will continue to remain on disciplined execution, strengthening our market leadership, and creating sustainable long-term value for all our stakeholders. With this, I would now like to hand over the floor to Mr. Vikas Kothari, to take you through the financial performance of the quarter.

Speaker #2: Thank you, Vikas, and a very good morning to everyone. I will now take you through a brief overview of the company's financial performance for the quarter ended 30th June, 2026.

Vikas Kothari: Thank you, Deepak, and a very good morning to everyone. I will now take you through a brief overview of the company's financial performance for the quarter ended 30 June 2026. Revenue from operations for the quarter stood at INR 486 crores as compared to INR 407 crores in Q1 FY25. Before I proceed further, I would like to highlight a change in the presentation of our financial statements. Turnover discounts, which were earlier reported as an expense, are now presented as a deduction from revenue from operations. Accordingly, the reported revenue for the current quarter has been reduced by 2.5%, and the revenue for the corresponding quarter of the previous year has been reduced by 3%. The previous quarter's revenues have been restated to be comparable in line with the current quarter's disclosure.

Speaker #2: Revenue from operations for the quarter stood at ₹486 crore, as compared to ₹407 crore in Q1 FY25. Before I proceed further, I would like to highlight a change in the presentation of our financial statements.

Speaker #2: Turnover discounts, which were earlier reported as an expense, are now presented as a deduction from revenue from operations. Accordingly, the reported revenue for the current quarter has been reduced by 2.5%, and the revenue for the corresponding quarter of the previous year has been reduced by 3%.

Speaker #2: The previous quarter's revenues have been restated to be comparable in line with the current quarter's disclosure. It's important to note that this change has been driven by the evolution of certain dealer incentive schemes. For the current scheme structure, presenting the eligible incentives as a reduction from revenue better reflects the substance of these arrangements, and accordingly, as per the requirements of IND-AS, we have realigned the presentation.

Vikas Kothari: It's important to note that this change has been driven by the evolution of certain dealer incentive schemes. For the current scheme structure, presenting the eligible incentives as a reduction from revenue better reflects the substance of these arrangements, and accordingly, as per the requirements of Ind AS, we have realigned the presentation. This reduces the turnover but does not have any impact on absolute profitability or cash flows of the company. EBITDA, excluding other income for the quarter, stood at INR 49.2 crore as compared to INR 53.1 crore in the corresponding quarter of the previous year. EBITDA margins stood at 10.1% in Q1 FY27 as compared to 13.1% in Q1 FY26. The moderation in EBITDA margins during the quarter was primarily due to certain one-time and transitional factors that are not expected to recur beyond Q2.

Speaker #2: This reduces the turnover but does not have any impact on absolute profitability or cash flows of the company. EBITDA, excluding other income, for the quarter stood at ₹49.2 crore, as compared to ₹53.1 crore in the corresponding quarter of the previous year.

Speaker #2: EBITDA percent in Q1 FY27, as compared to 13.1 in Q1 FY26. The moderation in EBITDA margins during the quarter was primarily due to certain one-time and transitional factors that are not expected to recur beyond Q2.

Vikas Kothari: These included a one-time provision towards the long-term settlement of the company's workers pertaining to the previous period, September 2025 to March 2026. Lower absorption of fixed costs due to reduced production amid temporary gas supply uncertainty. Additionally, while input costs increased significantly, price hikes have so far been reflected mainly in the retail business, with project contracts expected to transition to revised pricing post Q2, supporting the margin recovery in the subsequent quarters. Gas costs during the quarter remained elevated, with the weighted average cost at INR 48.43 per cubic meter in Q1 FY27 as compared to INR 33.17 per cubic meter in Q1 FY26. During the quarter, gas consumption was sourced 69% from GAIL and 31% from Sabarmati. Overall gas costs accounts for approximately 3.3% of the revenue during the quarter. Input costs, particularly brass, continued to remain elevated during the quarter.

Speaker #2: These included a one-time provision towards the long-term settlement of the company's workers pertaining to the previous period, September 25 to March 26; lower absorption of fixed costs due to reduced production amid temporary gas supply uncertainty; and, additionally, while input costs increased significantly.

Speaker #2: Price hikes have so far been reflected mainly in the retail business, with project contracts expected to transition to revised pricing post-Q2, supporting the margin recovery in the subsequent quarters.

Speaker #2: Gas costs during the quarter remained elevated, with the weighted average cost at ₹848.43 per cubic meter in Q1 FY27, as compared to ₹33.17 per cubic meter in Q1 FY26.

Speaker #2: During the quarter, gas consumption was shown as 69 percent from Gain, and 31 percent from Sabarmati. Overall, gas costs accounted for approximately 3.3 percent of the revenue during the quarter.

Speaker #2: Input costs, particularly brass, continued to remain elevated during the quarter. In response to the sustained cost pressures, we implemented calibrated price revisions across our sanitaryware and faucetware portfolio over the last two quarters.

Vikas Kothari: In response to these sustained cost pressures, we implemented calibrated price revisions across our Sanitaryware and faucet ware portfolio over the last two quarters. These pricing actions have helped offset a part of the increase in the input cost while enabling us to maintain our competitive positioning. While the retail segment reflected these pricing actions, the project business remained relatively insulated due to the nature of pre-booked orders. Going forward, we remain focused on protecting margins while maintaining our competitive positioning. The revenue mix for the quarter was broadly as follows: Sanitaryware accounted for 47%, faucet ware 40%, tiles 11%, and wellness 2% of the total revenue. On a YOY basis, Sanitaryware revenue grew by 14%, faucet ware by 25%, tiles by 22%, and wellness declined by 7%. Our core categories, Sanitaryware and faucet ware together accounted for 87% of the total revenues.

Speaker #2: These pricing actions have helped offset a part of the increase in input costs, while enabling us to maintain our competitive positioning. While the retail segment reflected these pricing actions, the project business remained relatively insulated due to the nature of pre-booked orders.

Speaker #2: Going forward, we remained focused on protecting margins while maintaining our competitive positioning. The revenue mix for the quarter was broadly as follows: sanitaryware accounted for 47 percent, faucetware 40 percent, tiles 11 percent, and wellness 2 percent of the total revenue.

Speaker #2: On a year-over-year basis, sanitary ware revenue grew by 14 percent, faucet ware by 25 percent, tiles by 22 percent, and wellness declined by 7 percent.

Speaker #2: Our core categories: sanitary wear and faucet wear together accounted for 87 percent of the total revenues. Capacity utilization during the quarter stood at 61 percent for sanitary wear, and 96 percent for faucet wear.

Vikas Kothari: Capacity utilization during the quarter stood at 61% for Sanitaryware and 96% for faucet ware. For a product mix perspective, 44% of the sales were from the premium segment, 37% from mid segment, and 19% from entry-level products. Geographically, Tier 3 and Tier 1 cities accounted for 38% each, followed by Tier 2 at 24% of sales. Profit after tax stood at INR 45 crore as compared to INR 47 crore in the corresponding quarter of the previous year. Earnings per share for the quarter stood at INR 35.15 as compared to INR 36.08 in Q1 FY26. On the working capital front, we delivered a significant improvement during the quarter through continuous focus on inventory management and overall working capital discipline. Inventory days decreased from 80 days to 68 days. Receivables reduced from 38 days to 30 days, while payables increased from 43 days to 48 days.

Speaker #2: From a product mix perspective, 44% of the sales were from the premium segment, 37% from the mid segment, and 19% from entry-level products.

Speaker #2: Geographically, Tier 3 and Tier 1 cities accounted for 38 percent each, followed by Tier 2 at 24 percent of sales. Profit after tax stood at ₹45 crore, as compared to ₹47 crore in the corresponding quarter of the previous year. Earnings per share for the quarter stood at ₹35.15, as compared to ₹36.08 in Q1 FY26.

Speaker #2: On the working capital front, we delivered a significant improvement during the quarter through continuous focus on inventory management and overall working capital discipline. Inventory days decreased from 80 days to 68 days, receivables reduced from 38 days to 30 days, while payables increased from 43 days to 48 days.

Speaker #2: Consequently, our net working capital cycle improved from 75 days to 50 days on a year-over-year basis. This is another lever we are pushing to drive greater overall efficiency in a challenging landscape.

Vikas Kothari: Our net working capital cycle improved from 75 days to 50 days on a YOY basis. This is another lever we are pushing to drive greater overall efficiency in a challenging landscape. As of 30 June 2026, our cash and cash equivalents stood at INR 943 crores. For FY27, we have planned a capital expenditure outlay of approximately INR 43 crores. The investments will primarily be directed towards our faucet-ware brownfield capacity expansion, manufacturing efficiencies, digital initiatives, and strengthening our operational infrastructure. Alongside these investments, we also have a comprehensive brand building and promotional program planned during the year to further strengthen consumer engagement and support our long-term growth ambitions. We will continue to follow a disciplined capital allocation approach while investing in initiatives that strengthen both our manufacturing capabilities and our brands.

Speaker #2: As of 30 June 2026, our cash and cash equivalents stood at ₹943 crore. For FY27, we have planned a capital expenditure outlay of approximately ₹43 crore. The investments will primarily be directed towards our faucetware brownfield capacity expansion, manufacturing efficiencies, digital initiatives, and strengthening our operational infrastructure.

Speaker #2: Alongside these investments, we also have a comprehensive brand-building and promotional program planned during the year to further strengthen consumer engagement and support our long-term growth ambitions.

Speaker #2: We will continue to follow a disciplined capital allocation approach while investing in initiatives that strengthen both our manufacturing capabilities and our brands. Overall, our financial position remains strong, supported by a healthy balance sheet, prudent financial management, and efficient working capital practices.

Vikas Kothari: Our financial positions remain strong, supported by a healthy balance sheet, prudent financial management, and efficient working capital practices. Backed by improving demand conditions and our strong market position, we remain confident of executing our long-term growth strategy while continuing to create sustainable value for all our shareholders. With this, I would like to go to the moderator for opening the lines for Q&A.

Speaker #2: Backed by improving demand conditions and our strong market position, we remain confident of executing our long-term growth strategy while continuing to create sustainable value for all our shareholders.

Speaker #2: With this, I would like to go to the moderator for opening the lines for Q&A.

Speaker #1: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone.

Operator 2: Thank you very much. We now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. First question is from the line of Praveen Sahay from Prabhudas Lilladher. Please go ahead.

Operator: Thank you very much. We now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. First question is from the line of Praveen Sahay from Prabhudas Lilladher. Please go ahead.

Speaker #1: If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use the 'hands up' function while asking your question.

Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and 1 to ask a question.

Speaker #1: First question is from the line of Praveen Sahay from PL Capital. Please go ahead.

Speaker #3: Yeah, thank you for the opportunity. My first question is on the, you know, the growth of the 19 and a half percent, and especially in the major two segments, which are 14 percent and 25 percent.

Praveen Sahay: Thank you for the opportunity. My first question is on the growth of the 19.5% and especially in the major two segments, which are 14% and 25%. Can you give a color on the volume growth as well? I understand 12% and 16% price hike there, which is a mix of institution and the retail there would be different. How has been the volume growth for these two major segments in Q1?

Speaker #3: Can you give some color on the volume growth as well? Because I understand the 12 percent, 16 percent price hike there, which is a mix of, you know, institutional and retail—there would be a difference.

Speaker #3: So, how has the volume growth been for these two major segments in the first quarter?

Speaker #2: So, thank you, Praveen. Regarding the growth part, especially when we talk about the last few quarters, the growth that is coming is volume-driven growth, which is continuing month on month.

Vikas Kothari: Thank you, Praveen. Regarding the growth part, especially when we talk about the last few quarters. The growth which is coming, it is a volume-driven growth, which is continuing month-on-month. If I have to make a breakup of the total growth. In case of Sanitaryware, the 14% growth was there, and this 14% was largely driven by volume, which contributed around 10%, and price contributed around 2%. Since we have taken the price increase in May, effectively, the impact of price increase will be reflecting in the coming quarters. In Q1, it was 2% impact of price, and the mix has a favorable impact of 2%. This has constituted the overall growth of 14% in case of Sanitaryware. In case of faucetware, we have shown a substantial growth of 25%, which is further broken down into volume.

Speaker #2: So if I have to make a breakup of the of the total growth, so in case of sanitary wear, the 14 percent growth was there, and this 14 percent was largely driven by volume, which contributed around 10 percent.

Speaker #2: And price contributed around 2 percent. Since we have taken the price increase in May, the impact of the price increase will effectively be reflected in the coming quarters.

Speaker #2: So in Q1, there was a 2% impact from price, and the mix had a favorable impact of 2%. So, this has constituted the overall growth of 14% in the case of sanitaryware.

Speaker #2: In the case of faucetware, we have shown substantial growth of 25 percent, which is further broken down into volume. Again, it's a volume-led growth: 18 percent was on account of volume, 4 percent was the impact of price, and a favorable mix contributed 3 percent.

Vikas Kothari: Again, it's volume-led. 18% was on account of volume, 4% was the impact of price, and a favorable mix of 3%. This way, I think the overall growth of 14% and 25% has been constituted, and the similar patterns we are seeing in the coming months also.

Speaker #2: So this way, I think the overall growth of 14 percent and 25 percent has been constituted. And we are seeing similar patterns in the coming months also.

Speaker #3: Good to hear that. Second question related to this is: if you can give some color on the sanitary and the polyplex, because those numbers are also included in these 10% and 18% of the volume growth.

Praveen Sahay: Good to hear that. Second question related to this is if you can give some color on the Sanitaryware and the Polipluz because those numbers are also included in these 10% and 18% of the volume growth. Can you give some color on that as well? Is that the product mix changes because of Sanitaryware's contribution rising?

Speaker #3: So, can you give some color on that as well? And is that product mix changing because of sanitary contribution rising?

Speaker #2: So, just to give you an overall understanding with respect to Sanitary and Polyplex, our overall approach will remain unchanged as far as Sanitary and Polyplex are concerned, since these are new initiatives.

Vikas Kothari: Just to give you an overall understanding with respect to Sanitaryware and Polipluz. Our overall approach will remain unchanged as far as Sanitaryware and Polipluz is concerned since these are the new initiatives. Right now, talking about the numbers in terms of volume growth or mix, it's difficult to tell. But the overall projections, what we have given during the year, those projections will be there. Right now, these businesses are still in the build-up phase, and therefore what we believe is that it is more appropriate to evaluate their progress over a longer time period horizon rather than updating on the quarter-on-quarter basis.

Speaker #2: So, right now, talking about the numbers in terms of volume growth or mix, it's difficult to tell. But the overall projections that we have given during the year—those projections will be there right now.

Speaker #2: These businesses are still in the build-up phase, and therefore what we believe is that it is more appropriate to evaluate their progress over a longer time period, rather than updating on a quarter-on-quarter basis.

Speaker #3: Correct, sir. Last question, sir, related to, you know, like counting change. So basically, whatever the discount in the expenses, now you are booking in the sales.

Praveen Sahay: Right, sir. Last question, sir, related to the accounting change. Basically, that's whatever the discount in the expenses now you are booking in the sales and ultimately, that's actually improving your margin profile. The guidance of a 13.5% to 14% adjusting for these changes, what we had made margin guidance.

Speaker #3: And ultimately, that's actually improving your margin profile. So, the guidance of 13.5% to 14%, adjusting for these changes, is in line with what we had made for margin guidance.

Vikas Kothari: The impact on absolute terms would be not there because once you are taking an expense and reducing it from the revenues, your EBITDA margin remains the same in absolute terms. There would be a very slight impact on the EBITDA margin percentage because your turnover is reducing and the profits are remaining the same. Assuming that the reduction would be in the range of 2.5% to 3%. Earlier if you were talking about 13.5% to 14% on INR 100, now you'll be talking about INR 13.5 to INR 14 on INR 97. That small change will be there. Apart from that, we remain on the guidance that we have given, 13.5% to 14%. You can adjust it for the slight change.

Speaker #2: The impact in absolute terms would not be there, because once you are taking an expense and reducing it from the revenues, your EBITDA margin remains the same in absolute terms.

Speaker #2: There would be a very slight impact on the EBITDA margin percentage, because your turnover is reducing and the profits are remaining the same. So assuming that the reduction would be in the range of 2 and a half to 3 percent, so earlier if you're talking about 13 and a half percent to 14 percent on 100 rupees, now you'll be talking about 13 and a half to 14 rupees on 97 rupees.

Speaker #2: So that small change will be there, but apart from that, we remain on the what the guidance that we have given, 13 and a half to 14 percent, which can adjust it for this slight change.

Speaker #3: No. So the percentage terms guidance is intact. The absolute number will vary.

Praveen Sahay: No. The percentage terms guidance is intact. Absolute number may vary.

Speaker #2: Correct. That will be impacted. If I'm talking about the 14 percent on 100 rupees earlier, now I'll be talking about the 14 percent on 97 rupees, let's say.

Vikas Kothari: That will be impacted. If I'm talking about the 14% on INR 100 earlier, now I'll be talking about 14 on 97, let's say. 14 divided by 97 comes to something like 14.4%.

Speaker #2: So, 14 divided by 97 comes to something like 14.4 percent.

Speaker #3: Got it. Got it, sir. Thank you. Thanks a lot. All the best.

Praveen Sahay: Got it. Thank you. Thanks a lot. All the best.

Speaker #2: Yeah. Yeah.

Vikas Kothari: Yes.

Speaker #1: Thank you very much. A request to all the participants: kindly limit yourself to two questions per participant, and you may rejoin for a follow-up. Next question is from the line of Ritesh Shah from Invest Tech India.

Operator 2: Thank you very much. A request to all the participants, kindly limit yourself to two questions per participant and rejoin for the follow-up. Next question is from the line of Ritesh Shah from Investec India. Please go ahead. Ritesh, may I request you to unmute your line and proceed with your question, please. Ritesh Shah, can I request you to unmute your line and proceed with your question? Due to no response, we move on to the next participant. Next question is from the line of Varun Jalosaria from 360 ONE. Please go ahead.

Operator: Thank you very much. A request to all the participants, kindly limit yourself to two questions per participant and rejoin for the follow-up. Next question is from the line of Ritesh Shah from Investec India. Please go ahead. Ritesh, may I request you to unmute your line and proceed with your question, please. Ritesh Shah, can I request you to unmute your line and proceed with your question? Due to no response, we move on to the next participant. Next question is from the line of Varun Jalosaria from 360 ONE. Please go ahead.

Speaker #1: Please go ahead. Ritesh, may I request you to unmute your line and proceed with your question, please? Ritesh Shah, can I request you to unmute your line and proceed with your question?

Speaker #1: Did you have no response? We'll move on to the next participant. The next question is from the line of Varun Jalaswarya from 361 Capital. Please go ahead.

Speaker #2: Yeah. Hi, sir. Thank you for the opportunity. I just wanted to understand how much was the one-time settlement in the staff work that you booked?

Varun Jalosaria: Yeah. Hi, sir. Thank you for the opportunity. I just wanted to understand how much was the one-time settlement in the staff costs that you booked and what is the nature of it, the settlement?

Varun Julasaria: Yeah. Hi, sir. Thank you for the opportunity. I just wanted to understand how much was the one-time settlement in the staff costs that you booked and what is the nature of it, the settlement?

Speaker #2: And what is the nature of it—the settlement?

Speaker #3: What happens is, at the company, for our own workers, there is a wage agreement which is negotiated with the unions every four years. For the staff, you'll find that the negotiation for the merit increase keeps on happening on a yearly basis.

Vikas Kothari: What happens is, like for the company's own workers, there is a wage agreement which is negotiated with the unions every four years. Like for the staff, you'll find that the merit increase keeps on happening on a yearly basis. That typically averages in the range of 10% to 11%. For the workers, you'll find that the increase is not in the same manner as the staff. Typically, every four years, a settlement is entered into with the union, and that prevails for a period of four years. Let's say you have an increase of something like 15% to 20% every four years

Speaker #3: So, that typically averages in the range of 10 to 11 percent. For the workers, you'll find that the increase is not in the same manner as for the staff.

Speaker #3: Typically, every four years, a settlement is entered into with the union, and that prevails for a period of four years. So, let's say you have an increase of something like 15% to 20% every four years.

Speaker #3: So, that happens once at the end of the fourth year. At the beginning of the first year, once the four years have ended—so, suppose you have a 20 percent increase—it will remain constant for the next four years.

Deepak Chaudhary: That happens once at the end of the fourth year, the beginning of the first year, once the previous four years have ended. Suppose we have a 20% increase, it will be remaining constant for the next four years. Effectively for the next four years, the wage for the staff would remain at, if it was earlier INR 100, it will remain at INR 120. There will be no further increases apart from another 2%-3% kind of increase, which happens on a regular basis, inflationary kind of a thing. As of now, you can expect something like 15%-20% kind of an impact on the basic wages. On an overall basis, we will find a 15%-20% increases. The impact for a year-on-year basis would be 5%, but as of now, it will be an increase of 20% over the wage which was being paid to the workers earlier.

Vikas Kothari: That happens once at the end of the fourth year, the beginning of the first year, once the previous four years have ended. Suppose we have a 20% increase, it will be remaining constant for the next four years. Effectively for the next four years, the wage for the staff would remain at, if it was earlier INR 100, it will remain at INR 120. There will be no further increases apart from another 2%-3% kind of increase, which happens on a regular basis, inflationary kind of a thing. As of now, you can expect something like 15%-20% kind of an impact on the basic wages. On an overall basis, we will find a 15%-20% increases. The impact for a year-on-year basis would be 5%, but as of now, it will be an increase of 20% over the wage which was being paid to the workers earlier.

Speaker #3: So effectively, for the next four years, the wage for the staff would remain at—if it was earlier on ₹100, it would remain at ₹120.

Speaker #3: There will be no further increases, apart from another two to three percent kind of increase, which happens on a regular basis—an inflationary kind of thing.

Speaker #3: So as of now, you can expect something like a 15–20 percent kind of impact on the basic wages on an overall basis. So you'll find a 15–20 percent increase.

Speaker #3: The impact on a year-on-year basis would be 5 percent. But as of now, it will be an increase of 20 percent over the wage that was being paid to the workers earlier.

Speaker #3: So, the negotiations are still going on. It is more or less being settled in May. And the kind of increase that we are envisaging would be in the range of ₹1 crore per month.

Deepak Chaudhary: The negotiations are actually going on. It is more or less being settled in May, and the kind of increase that we are envisaging would be in the range of INR 1 crore per month. INR 6.3 crore was the effect which has come in for the previous period because the last wage agreement had ended in the month of September 2025 and that will be giving effect on a retrospective basis. It will be INR 6.3 from the period of September 2025 to March 2026, which has been given effect in the current quarter. INR 6.3 was for the previous period and INR 3 crore was for the current period. For the current year, we anticipate that the wage cost would be going up by something like INR 12 crore for the full year for this particular period.

Vikas Kothari: The negotiations are actually going on. It is more or less being settled in May, and the kind of increase that we are envisaging would be in the range of INR 1 crore per month. INR 6.3 crore was the effect which has come in for the previous period because the last wage agreement had ended in the month of September 2025 and that will be giving effect on a retrospective basis. It will be INR 6.3 from the period of September 2025 to March 2026, which has been given effect in the current quarter. INR 6.3 was for the previous period and INR 3 crore was for the current period. For the current year, we anticipate that the wage cost would be going up by something like INR 12 crore for the full year for this particular period.

Speaker #3: So, ₹6.3 crores was the effect which has come in for the previous period, because the last wage agreement had ended in the month of September '25.

Speaker #3: And we are giving effect to that on a retrospective basis. So, it will be 6.3 from the period of September '25 to March '26, which has been given effect in the current quarter.

Speaker #3: So, 6.3 was for the previous period, and 3 crores was for the current period. So, for the current year, we anticipate that the wage cost would be going up by something like 12 crores for the full year.

Speaker #3: For this particular period, and because 6.3 has been affected for the previous period, the total impact on the profit and loss for the year would be ₹18.3 crores.

Deepak Chaudhary: Because INR 6.3 has been affected for the previous period, the total impact in the profit and loss of the year would be INR 18.3 crore.

Vikas Kothari: Because INR 6.3 has been affected for the previous period, the total impact in the profit and loss of the year would be INR 18.3 crore.

Varun Jalosaria: Just to understand this quarterly run rate would now be the similar one which is in Q1, excluding the INR 6 crore which was a one-time settlement, right?

Varun Julasaria: Just to understand this quarterly run rate would now be the similar one which is in Q1, excluding the INR 6 crore which was a one-time settlement, right?

Speaker #2: I mean, just to understand this, quarterly run rate would now be the similar one which is in month Q, excluding the ₹6 crore which was a one-time settlement, right?

Speaker #3: You're talking about the margins?

Deepak Chaudhary: You're talking about the margins?

Speaker #2: No, no. I'm saying for the staff work, this would be around ₹72 crore kind of a quarterly run rate.

Varun Jalosaria: No, no, I'm saying for the staff cost, this would be around INR 72 crore kind of a quarterly run rate.

Varun Julasaria: No, no, I'm saying for the staff cost, this would be around INR 72 crore kind of a quarterly run rate.

Deepak Chaudhary: Correct. If you're talking about the staff cost, if you exclude INR 6.3, you can expect the same to be replicated for the remaining three quarters. Apart from the fact that in certain quarters there would be incentive coming in for the staff. On an overall basis, if you take the previous year, increase it by mostly 8% to 10% kind of a thing, 10%, because staff is increased by a certain percentage, wage is not increased by the same percentage. Effectively, it will be in the range of 8% to 9% for the whole year and add INR 18.3 onto that. That will give you the whole year projection kind of a thing. We believe it will be coming in the range of INR 300 crore for the current year.

Speaker #3: Correct. If you're talking about the staff cost, to exclude 6.3, then you can expect the same to be replicated for the remaining three quarters.

Speaker #3: Apart from the fact that in certain quarters, there would be incentives coming in for the staff, but on an overall basis, if you take the previous year and increase it by mostly 8% to 10% kind of a thing—10%—because staff has increased by a certain percentage; wages are not increased by the same percentage.

Speaker #3: So, effectively, it will be in the range of 8 to 9 percent for the whole year. And add 18.3 onto that, so that will give you the whole year projection, kind of a thing.

Speaker #3: We believe it will be coming in the range of ₹300 crore for the current year.

Speaker #2: Okay. Understood, sir. And, sir, on the—

Varun Jalosaria: Okay. Understood, sir. Sir, on the-

Varun Julasaria: Okay. Understood, sir. Sir, on the-

Speaker #1: Sorry to interrupt you, Varun. Can I request you to come back for a follow-up, please? Thank you. I request all participants to kindly limit themselves to two questions per participant, and you may rejoin for a follow-up.

Operator 2: Sorry to interrupt you, Varun. Can I request you to come back for a follow-up, please? Thank you. I request all the participants, kindly limit yourself to two questions per participant and rejoin for a follow-up. Next question is from the line of Shubhi Gupta from Trinity Asset Managers. Please go ahead.

Operator: Sorry to interrupt you, Varun. Can I request you to come back for a follow-up, please? Thank you. I request all the participants, kindly limit yourself to two questions per participant and rejoin for a follow-up. Next question is from the line of Shubhi Gupta from Trinity Asset Managers. Please go ahead.

Speaker #1: Next question is from the line of Subhi Gupta from 3Nature Asset Managers. Please go ahead.

Speaker #4: Good morning. My first question is that we are internalizing some SQs that we were outsourcing, as you mentioned. If you could just talk a bit more about that.

Shubhi Gupta: Good morning. My first question is that we are internalizing some SKUs that we were outsourcing, as you mentioned. If you could just talk a bit more about that. My second question is that I think our target for flagship stores this year is about 60, if I'm not wrong. If you could just update me on the progress on that as well. Thank you.

[Analyst 2]: Good morning. My first question is that we are internalizing some SKUs that we were outsourcing, as you mentioned. If you could just talk a bit more about that. My second question is that I think our target for flagship stores this year is about 60, if I'm not wrong. If you could just update me on the progress on that as well. Thank you.

Speaker #4: And my second question is that, I think our target for flagship stores this year is about 60, if I’m not wrong. If you could just update me on the progress on that as well.

Speaker #4: Thank you.

Speaker #3: You are right. Like, we have been talking about internalizing certain SKUs. Like, typically, both in the case of sanitaryware as well as in the case of faucets, we manufacture most of the complex SKUs in-house, and the simpler ones are outsourced.

Deepak Chaudhary: You are right. We have been talking about internalizing certain SKUs. Typically both in the case of Sanitaryware as well in the case of faucets, we manufacture most of the complex SKUs in-house and the simpler ones are outsourced. In case of Sanitaryware, recently there have been some issues in the context of Morbi being not operating up to its full efficiency. Availabilities in case of Morbi, we were initially in Q1 facing some challenges, and it was anticipated that the challenges may happen in the Q2 onwards also. On an overall basis, we have been quite comfortable in respect of the kind of SKUs that we have volumes that we've been able to get from Morbi, from our outsourcing partners. As of now, we are quite comfortable in respect of availabilities, both in context of Q2 as well as for the entire year.

Speaker #3: In the case of sanitary ware, recently there have been some issues in the context of Modi not operating up to its full efficiency. So, availability in the case of Modi was initially in Q1, placing some challenges, and it was anticipated that challenges may happen in Q2 onwards also.

Speaker #3: But on an overall basis, we have been quite comfortable with the kind of SQs that we have, and the volumes that we have been able to get from Modi and from our outsourcing partners.

Speaker #3: So, as of now, we are quite comfortable with respect to availabilities, both in the context of Q2 as well as for the entire year. We don't see too much of a challenge.

Deepak Chaudhary: We don't see too much of a challenge. As in anticipation that there could be challenges, we had already taken the process of internalizing some of the higher selling SKUs from these outsourcing partners to make them internally within our manufacturing plant. We have already taken that exercise and in case we are having problems from the outsourcing arrangement, we are now very geared up to produce these SKUs in-house.

Speaker #3: But as an anticipation that there could be challenges, we had already started the process of internalizing some of the higher-selling SKUs from these outsourcing partners.

Speaker #3: To make them internally within our manufacturing plant, we have already undertaken that exercise. In case we encounter problems with the outsourcing arrangement, we are now well geared up to produce these SQs in-house.

Speaker #4: Sure, sir. And the second question about the flagship stores?

Shubhi Gupta: Sure, sir. The second question about the flagship stores.

[Analyst 2]: Sure, sir. The second question about the flagship stores.

Speaker #3: As we had already given guidance, if you're talking in respect of sanitary, we had given guidance that the number of stores will be going up from 35 to something like 50 stores by the end of the current year.

Deepak Chaudhary: Stores, as we had already given a guidance in respect of Sanitaryware, we have given a guidance that will be going up from 35 to something like 50 stores by the end of the current year. We are online with that. We'll continue to kind of scale up the stores and we should end up with something like 50 by the end of the current financial year.

Speaker #3: So, we'll—we are on line with that. We'll continue to kind of scale up these stores, and we should end up with something like 50 by the end of the current financial year.

Speaker #4: Okay, so this internalization — do we need some additional investment for this, or no?

Shubhi Gupta: Okay. Sir, this internalization, do we need some additional investment for this or no?

[Analyst 2]: Okay. Sir, this internalization, do we need some additional investment for this or no?

Deepak Chaudhary: Small amount of investments are required because the kind of casting lines which are required are different for different kind of SKUs. Kind of tooling investments or small investments which are a part of the routine also. We do that on a regular basis also. That kind of investment is required, but we don't require a kind of massive investment in terms of setting up manufacturing capabilities or getting additional machineries. The current facility by itself with some change in the lines which are required for specific SKUs, that needs to be done.

Speaker #3: A small amount of investments are required because the kind of casting lines which are required are different for different kind of SQs. So kind of 2, 3 crores of investment or small investments which are a part of the routine also.

Speaker #3: We do that on a regular basis also. That kind of investment is required, but we don't require a massive investment in terms of setting up manufacturing capabilities or getting additional machinery.

Speaker #3: The current facility by itself, with some changes in the lines which are required for specific SQs, that needs to be done.

Speaker #4: Okay. Thank you.

Shubhi Gupta: Okay. Thank you.

[Analyst 2]: Okay. Thank you.

Speaker #1: Thank you.

Speaker #3: Thank you.

Operator 2: Thank you. Next question is from the line of Ritesh Shah from Investec India. Please go ahead.

Operator: Thank you. Next question is from the line of Ritesh Shah from Investec India. Please go ahead.

Speaker #1: Next question is from the line of Vitesha from Investec India. Please go ahead.

Speaker #2: Yeah, hi. Thanks for the opportunity. Two questions. First is with respect to the change in management key KMP recently. Who is going to take over the responsibilities with respect to sanitary and polycarbonate exposures, especially with the targets that we had set for both these initiatives, both from a short-term and a longer-term view?

Ritesh Shah: Yeah. Hi. Thanks for the opportunity. Two questions. First is with respect to the change in management we see recently. Who's going to take over the responsibilities with respect to Sanitaryware and Polipluz? Could you please refresh us with the targets that we had set for both these initiatives for, let's say, for the short term and longer term view?

Speaker #3: Yeah, thank you, Vitesh. So, regarding the recent resignation of Mr. Baliga, just to update, he is leaving due to his personal reasons.

Vikas Kothari: Yeah. Thank you, Ritesh. Regarding the recent resignation of Mr. Baliga, just to update that he's leaving due to his personal reasons. His responsibilities were limited to the Sanitaryware and the Polipluz new initiatives what we have started one and a half years back. Now we have identified our existing national head under the succession plan to lead these businesses going forward. However, Mr. Baliga will continue to support the company till 30 September to ensure the smooth transition. Overall, we do not see any sort of major challenges as far as his exit is concerned since both the businesses have dedicated operating teams, the established business processes, and a strong second line of management. As such, we do not expect this transition to have any impact on our execution.

Speaker #3: So, his responsibilities were limited to the sanitary and the Polyplas new initiatives, which we started one to one and a half years back. And now, we have the existing national head, under the succession plan, to lead these businesses going forward.

Speaker #3: However, Mr. Baliga will continue to support the company till 30th September to ensure a smooth transition. So overall, we do not see any sort of major challenges as far as his exit is concerned.

Speaker #3: Since both the businesses have dedicated operating teams, established business processes, and a strong second line of management, we do not expect this transition to have any impact on our execution.

Speaker #3: We are moving or progressing in the same way that we were doing earlier, and now it will be led by the existing national head.

Vikas Kothari: We are moving or progressing in the same way that we were doing earlier, and now it will be led by the existing national head.

Speaker #2: And, sir, on the targets?

Ritesh Shah: Sir, on the targets?

Speaker #3: And on the targets also, like I told you, the targets remain intact—what we had given initially for Sanitary and Polyplas. However, on a quarter-on-quarter basis, it is difficult to give the numbers because these are still young initiatives.

Vikas Kothari: On the targets also, like I told, the targets remain intact, what we have given initially for Sanitar and Polipluz. However, on quarter-on-quarter basis, it is difficult to give the numbers because still these are young initiatives and we are moving in a right direction, and we see that the targets what we have given are approachable.

Speaker #3: And we are moving in the right direction. And we see that the targets we have given are approachable.

Speaker #2: Sure. So my second question is, you did indicate about taking certain SQs in-house. Given the issues that were in Modi because of external reasons, sir, how should we look at this with a longer-term time frame?

Ritesh Shah: Sure. Sir, my second question is, you did indicate about taking certain SKUs in-house given the issues that were in Morbi because of external reasons. Sir, how should we look at this with a longer-term time frame? Like is this something which is a change in strategy wherein we are looking to increase the insourcing part and reduce outsourcing? How should we look at it? Thank you.

Speaker #2: Is this a change in strategy, where we are looking to increase the insourcing part and reduce outsourcing? How should we look at it?

Speaker #2: Thank you.

Speaker #3: So, that is a continuous process. On a continuous basis, we keep on trying to see, because the SQ profile also keeps on changing on a regular basis.

Deepak Chaudhary: That is a continuous process, like on a continuous basis we keep on trying to see because the SKU profile also keeps on changing on a regular basis. Now if you see the recent past, you'll find that that happens on a very frequent basis. Like earlier if you had a certain set of SKUs which used to have extremely long life cycle. Now you'll find that the life cycle of the SKUs have also started coming down. It's a continuous process. If you talk about the kind of mix which is there, typically on a long-term basis, the idea is always that the plant should be manufacturing more complex pieces and the simpler pieces should be outsourced. Whenever the need arises that you have a situation like the current situation which had developed in the recent past in respect of the war situation.

Speaker #3: And now, if you see the recent past, you find that happens on a very frequent basis. Earlier, if you had a certain set of SQs which used to have an extremely long lifecycle, now you'll find that the lifecycle of the SQs has also started coming down.

Speaker #3: So it's a continuous process. But if you talk about the kind of mix which is there, typically on a long-term basis, the idea is always that the plant should be manufacturing more complex pieces.

Speaker #3: And the simpler pieces should be outsourced. But whenever the need arises that you have a situation like the current situation, which had developed in the recent past in respect of the war situation...

Speaker #3: So, it is always possible for us to internalize the outsourcing SQs in-house, like we did in the current situation. So, to answer your question on a long-term basis, more complex SQs would be in-house.

Deepak Chaudhary: It is always possible for us to internalize the outsourcing SKUs in-house like we did in the current situation. To answer your question, on a long-term basis, more complex SKUs will be in-house but whenever the need arises, we can make a slight shift in the overall mix as required.

Speaker #3: But whenever the need arises, we can make a slight shift in the overall mix as required.

Speaker #2: Would it be possible to provide a volume and a value number for the outsourcing aspiration for both Faucetware as well as Sanitaryware, please? Thank you.

Ritesh Shah: Would it be possible to put a volume and a value number for outsourcing aspiration number for both faucetware as well as sanitaryware, please? Thank you.

Speaker #3: See, that keeps on evolving on a long-term basis. We have been kind of maintaining a 50/50 in-house and outsourcing kind of ratio. In the case of Sanitaryware, it has slightly skewed more towards outsourcing in the recent past.

Deepak Chaudhary: See, that keeps on evolving. On a long-term basis, we have been kind of maintaining a 50-50 in-house and outsourcing kind of a ratio. In case of sanitaryware, it has slightly skewed more towards outsourcing in the recent past. That is also because of the fact that apart from the items that we are manufacturing, sanitaryware would always involve certain items which will always be outsourced because it also involves a lot of bought out parts like cistern, seat covers, and the flushing mechanism, which will always continue to be outsourced. We don't want to venture into those manufacturing. Same thing in the case of faucetware also. There are certain SKUs which are from polymer or ABS and which are chrome-plated later on. These items also will continue to outsource. We don't intend to enter into manufacturing of those SKUs.

Speaker #3: That is also because of the fact that, apart from the items we are manufacturing, sanitaryware will always involve certain items that will always be outsourced, because it also involves a lot of bought-out parts, like cisterns, seat covers, and flushing mechanisms, which will always continue to be outsourced.

Speaker #3: We don't want to enter into those manufacturing areas. Same thing in the case of FaucetWare also. There are certain SKUs which are made from polymer or ABS and which are chrome-plated later on.

Speaker #3: So, these items will also continue to be outsourced. We don't intend to enter into manufacturing of those SKUs. So, apart from these SKUs, we find that the mix will keep on changing on a dynamic basis.

Deepak Chaudhary: Apart from these SKUs, you'll find that the mix will keep on changing on a dynamic basis. There are certain SKUs which will always keep on outsourcing, but apart from that, mix will keep on changing. The idea would always be more complex in-house, simpler ones outsourced.

Speaker #3: There are certain SQs which will always keep on outsourcing, but apart from that, mix will keep on changing. But the idea would always be more complex in-house, simpler ones outsourced.

Speaker #2: Sure. Thank you so much. All the very best. Thank you.

Ritesh Shah: Sure. Thank you so much. All the very best. Thank you.

Speaker #1: Thank you. A request to all the participants: kindly limit yourself to two questions per participant. Next question is from the line of Rahul Majedia.

Operator 2: Thank you. I request all the participants kindly limit yourself to two questions per participant. Next question is from the line of Rahul Majethia from Stratton Oakmont Capital. Please go ahead.

Operator: Thank you. I request all the participants kindly limit yourself to two questions per participant. Next question is from the line of Rahul Majethia from Stratton Oakmont Capital. Please go ahead.

Speaker #1: From Stratton Oakmount Capital, please go ahead.

Speaker #2: Hi, thanks for taking my question. We've delivered great revenue growth, but it hasn't translated into operating leverage from our side. Is this margin dilution a result of a deliberate and aggressive pricing strategy to capture market share from the unorganized players?

Rahul Majethia: Hi. Thanks for taking my question. We've delivered a great revenue growth, but it's not translated into operating leverage from our side. Is this margin dilution a result of the deliberate and aggressive pricing strategy to capture market share from the unorganized players, or is it just because of the raw material and fuel cost inflation? What's the extent of our pricing power to pass these inflated costs to the dealer network in the coming quarters?

[Analyst] (Stratton Oakmont Capital): Hi. Thanks for taking my question. We've delivered a great revenue growth, but it's not translated into operating leverage from our side. Is this margin dilution a result of the deliberate and aggressive pricing strategy to capture market share from the unorganized players, or is it just because of the raw material and fuel cost inflation? What's the extent of our pricing power to pass these inflated costs to the dealer network in the coming quarters?

Speaker #2: Or is it just because of the raw material and fuel cost inflation? And what's the extent of our pricing power to pass these inflated costs to the dealer network in the coming quarters?

Speaker #3: Thank you, Rahul. You find that, in the recent past, we started showing top-line growth. In the current quarter, we view that as something like 19.5%.

Deepak Chaudhary: Thank you, Rahul. You'll find that in the recent past, we have started showing a top-line growth. In the current quarter, we grew at something like 19.5%. In spite of that, our revenues kind of dropped by, you can say, 3%. We were something like 13.5% earlier. We were 10.13% in the current quarter. This has been primarily because of a certain number of one-time impact which has come in this current quarter. You can say it is one-time and transitional kind of a thing which has happened in the current quarter. I'll just run you through. The main idea of what I'll be communicating right now would be that over the years, full year for FY27, we expect that the margin that we were predicting earlier, 13.5%, 14%, will be meeting those margins on a full year basis.

Speaker #3: In spite of that, our revenues kind of dropped by, you can say, 3%. We were something like 13.5% earlier. We were 10.13% in the current quarter.

Speaker #3: This has been primarily because of a certain number of one-time impacts that have come in this current quarter. We can say it is a one-time and transitional kind of thing which has happened in the current quarter.

Speaker #3: So I'll just run you through. The main idea of what are we communicating right now would be that over the year, full year for financial year '27, we expect that the margin that we were predicting earlier, 13 and a half percent, 14 percent, will be meeting those margins on a full year basis.

Speaker #3: The impact on the margin that we’ve seen in Q1—10%—is only because of certain one-time factors which have happened during this quarter. So, I’ll just try to run you through those one-time factors which have impacted profits in the current quarter.

Deepak Chaudhary: The impact of the margin that we see in Q1, 10% is something only because of certain one-time factors which have happened during this quarter. I'll just try to run you through those one-time factors which have impacted profit in the current quarter. First was the long-term settlement, which impacted revenues by INR 6.3 crore because it was in respect of the previous September 2025 to March 2026. This was one time and is not expected to recur in the future periods. If I see the impact of this, INR 630 lakh, INR 6.3 crore, it has a 1.3% impact on my margins. Apart from that, we operated with one single kiln during the month of May and June and also for part of March, but we're talking about Q1. Sorry, April and May, we operated with a single kiln.

Speaker #3: First was the long-term settlement, which impacted revenues by ₹6.3 crores because it was in respect of the period September '25 to March '26.

Speaker #3: This was a one-time occurrence and is not expected to recur in future periods. If I look at the impact of this ₹630 lakhs, or ₹6.3 crores, it has a 1.3% impact on my margins.

Speaker #3: Apart from that, we operated with one single kind during the month of May and June, and also for part of March. But we're talking about Q1.

Speaker #3: So it was mostly—sorry—April and May, we operated with a single kind. It was only in the month of June that we started off with the second kind.

Deepak Chaudhary: It was only in the month of June that we started off with the second kiln. The fixed costs were being incurred for as it is, but only one kiln was under operation. You can say as production was impacted to the extent of 30%, 35%, we produced only 65% to 70% of what we would have normally produced. This had an impact of something like INR 3.7 crore gross on account of under absorption of fixed costs. This impacted our margins by something like 0.75%. This is again one time and is not expected to recur in the future period.

Speaker #3: Now, the fixed costs were being incurred as they are, but only one kiln was under operation. So you can say our production was impacted to the extent of 30 to 35 percent.

Speaker #3: We produced only 65 to 70 percent of what we would have normally produced. This had an impact of something like ₹3.7 crore on account of under-absorption of fixed costs.

Speaker #3: This impacted our margins by something like 0.75%. This is, again, one-time and is not expected to recur in future periods. What we have also done during this period is, because the validity of projects typically is for one year, we tried to foreclose and deliver as much of the materials as possible to the outstanding orders, because the prices of brass and even gas were on the uncertain side, and we were anticipating that they may go up further in the subsequent period.

Deepak Chaudhary: What we have also done during this period is that because the validity of projects typically is for one year, we tried to foreclose and deliver as much of materials possible to the outstanding orders because the prices of brass and even gas was on this uncertain side, and we were anticipating that it may be going up further in the subsequent periods. We tried to foreclose as much of the orders as possible, and that is why you'll find that during this period, the proportion of project to overall revenues has gone up from 37% in the previous quarter to 43% in the current quarter on a quarter-on-quarter basis. On account of this increased closure, we have had an impact of something like INR 4 crore in terms of profits. This is translating into something like 0.8% on our overall margins.

Speaker #3: So we tried to foreclose as many of the orders as possible, and that is why you'll find that during this period, the proportion of project to overall revenues has gone up from 39% in the previous quarter to 43% in the current quarter on a quarter-on-quarter basis.

Speaker #3: Now, on account of this increased exposure, we have had an impact of something like ₹4 crore in terms of profits. This is translating into something like 0.8% on our overall revenues, our margins—on our overall margins.

Deepak Chaudhary: Apart from this, the price increase that we have taken, it has not reflected on the project side. Also what has happened, because the price increase in the month of May, even on the retail side, it takes some time for the price impact to take effect. What happens is whenever a price hike is imminent to be announced, you will find that the dealers kind of rush in to put in orders, and these orders are dispatched whenever they are put in before a particular cutoff date, they are dispatched at the same old pricing. Because the price increase was taken in the month of May, we had a kind of backlog in orders, wherein even for the retail, we dispatched at the old prices and not at the new prices.

Speaker #3: Apart from this price increase that we have taken, it has not reflected on the project size. Also, what has happened is that because the price increase was in the month of May, even on the retail side, it takes some time for the price impact to take effect.

Speaker #3: What happens is, whenever a price hike is imminent to be announced, you'll find that the dealers are kind of rushing to put in orders, and these orders are dispatched when they put them in before a particular cutoff date.

Speaker #3: They are dispatched at the same old pricing. So, because the price increase was taken in the month of May, we had a kind of backlog in orders, wherein even for retail we dispatched at the old prices.

Speaker #3: And I'm not in the new prices. So, you'll find that from the month of July onwards, all these dispatches have now started happening for the retail portion at the revised prices only.

Deepak Chaudhary: That you will find that from the month of July onwards, all these dispatches have now started happening for the retail portion at the revised prices only. This kind of delayed price increase effect, you can say, will lead to a kind of improved margins in the future by 1.5%. If I see on an overall basis, I will just summarize the various one-time factors which had impacted in the current quarter. LTS had an impact of INR 6.3 crore or 1.3%. One kiln under absorption of fixed cost had an impact of INR 3.7 crore or 0.75% in terms of margins. Impact due to increased closure of old projects, which took our project share also higher, about INR 4 crore or 0.8%. The delayed price increase effect as 1.5%.

Speaker #3: So, this kind of delayed price increase effect, you can say, will lead to a kind of improved margins in the future—by 1.5%. So, if I see on an overall basis, I'll just summarize the various one-time factors which had impacted in the current quarter.

Speaker #3: FDS had an impact of ₹6.3 crores, or 1.3%. One kind under-absorption of fixed cost had an impact of ₹3.7 crores, or 0.75%, in terms of margins.

Speaker #3: The impact due to closure of old projects increased, and the closure of old projects occurred. Project share was also higher, about ₹4 crores or 0.8%. And the delayed price increase effect was 1.5%.

Speaker #3: So if I add all of them, you will find that it is leading to a kind of one-time impact of 4.35%. And the current EBITDA was 10.1.

Deepak Chaudhary: If I add all of them, you will find that it will reduce to a kind of one-time impact of 4.35%. The current EBITDA was 10.1. Effectively, if this one-time impact was not there, my EBITDA would have been in the range of 14.5%. We anticipate that for the whole year, that there will be still some impact in the Q2 also because projects, as I mentioned earlier also, they have a kind of validity of 6 months to 1 year. Once the projects with the old prices start getting closed and we start having new projects coming up, dispatches for the new projects starts happening, we find that this change will start reflecting in the project segment also. Going forward, we anticipate that there would be an impact of all the one-time impact of all these factors will not be there.

Speaker #3: So effectively, if this one-time impact was not there, my EBITDA would have been in the range of 14 and a half percent. So we anticipate that for the whole year, there would be still some impact in the Q2 also because projects as I mentioned earlier also, they have a kind of validity of six months to one year.

Speaker #3: And once the old projects with the old prices start getting closed and we start having new projects coming up, as dispatches for the new projects start happening, we'll find that this change will start reflecting in the projects segment also.

Speaker #3: So going forward, we anticipate that there would be an impact of all the one-time impact of all these factors would not be there. Projects will start delivering the kind of margins that they're supposed to from basic post Q2.

Deepak Chaudhary: Projects will start delivering the kind of margins that they are supposed to, from basic post Q2. For the whole year, we are confident that the kind of margins that we talked about earlier, 13.5% to 14%. As mentioned earlier also, adjusted for the kind of reductions that we are doing in terms of turnover, we should be able to deliver for the full financial year.

Speaker #3: So for the whole year, we are confident that the kind of margins that we talked about earlier, 13 and a half to 14 percent, as mentioned earlier also, adjusted for the kind of the kind of reductions that we are doing in terms of turnover, we should be able to deliver for the full financial year.

Speaker #1: Right, thanks. And my second question is more regarding the greenfield sanitaryware expansion plans. So, we have previously deferred our ₹130 to ₹150 crore greenfield expansion plan due to subdued demand expectations.

Rahul Majethia: Right. Thanks. My second question is more regarding the greenfield Sanitaryware expansion plans. You've previously deferred our INR 130 to 150 crore greenfield expansion plan due to subdued demand expectations. Yet you've just posted nearly 20% top-line growth. Does this Q1 volume performance trigger a revival of the greenfield CapEx execution? If not, how close are we to maxing out our current Sanitaryware capacity utilization? Do we need to rely more on outsourced manufacturing to meet the higher demands? That would be all.

[Analyst] (Stratton Oakmont Capital): Right. Thanks. My second question is more regarding the greenfield Sanitaryware expansion plans. You've previously deferred our INR 130 to 150 crore greenfield expansion plan due to subdued demand expectations. Yet you've just posted nearly 20% top-line growth. Does this Q1 volume performance trigger a revival of the greenfield CapEx execution? If not, how close are we to maxing out our current Sanitaryware capacity utilization? Do we need to rely more on outsourced manufacturing to meet the higher demands? That would be all.

Speaker #1: Yet, we have just posted nearly 20% top-line growth. So, does this Q1 volume performance trigger a revival of the greenfield capex execution? And if not, then how close are we to maxing out our current sanitary ware and relying more on outsourced manufacturing to meet the higher demand?

Speaker #1: That would be all.

Speaker #2: Yeah. So regarding the greenfield part, as we are seeing, there are continuous improvements happening as far as demand is concerned, especially in the case of sanitaryware also.

Vikas Kothari: Yeah. Regarding the greenfield part, as we are seeing the continuous improvements which are happening as far as the demand is concerned, especially in case of Sanitaryware also. The growth is coming, like I projected the numbers also. We have this 14% growth. Prior to this quarter, it was roughly 10% growth was there. This is a positive sign in terms of reviewing the greenfield project, which was kept on hold for a certain period. However, to say that this Q1 was a type 1 one-off where the capacity utilization in case of Sanitaryware was 61%, because of all the geopolitical concerns, we stopped one plant. Operating from July onwards, our both plants are operating from June onwards, means the operational utilization is roughly around 80% of the total capacity. Still, we have certain capacities left.

Speaker #2: So the growth is coming. Like I projected the numbers also. So we have this 14% growth prior to this quarter. It was roughly 10% growth before.

Speaker #2: So, this is a positive sign in terms of reviewing the greenfield project, which was kept on hold for a certain period. However, to say that this Q1 was a type of one-off, where the capacity utilization in the case of sanitaryware was 61% because of all these geopolitical concerns, and we stopped one kiln.

Speaker #2: Operating from June onwards, July onwards—so both plants are operating from June onwards. That means the operational utilization is roughly around 80% of the total capacity.

Speaker #2: Still, we have certain capacities left. So we will review in terms of the greenfield expansion also. By end of this year, we will be taking a — if we see and we expect that the demand will continue in a similar fashion, then accordingly, we will take the needful decision. Once the decision with respect to the construction of this greenfield is there, we will proceed.

Vikas Kothari: We will review in terms of the greenfield expansion also. By end of this year, we will be taking if we see and we expect that the demand will continue in the similar fashion, accordingly, we will take the needful decision. Once the decision with respect to the construction of this greenfield will be there. The project will take around 18 months from the date of its start. I think we think that this positivity is continuing, this is somewhat enable us when we take the decision in terms of the start of the greenfield projects.

Speaker #2: So, the project will take around 18 months from the date of start. And I think this, we think that this positivity is continuing, and this is somewhat enabling us when we take the decision in terms of the start of the greenfield projects.

Speaker #1: Thank you. I'll request to come back for a follow-up.

Operator 2: Thank you. Rahul, I request you to come back for a follow-up.

Operator: Thank you. Rahul, I request you to come back for a follow-up.

Speaker #4: Next question is from Anupada from Anand Rathi. Please go ahead.

Operator 2: Next question is from line of Anupama from Anand Rathi. Please go ahead.

Operator: Next question is from line of Anupama from Anand Rathi. Please go ahead.

Speaker #5: Yeah. Hi, sir. So as we said, the impact of the project business will be coming from Q3 onwards. So can you guide on the EBITDA margin for H2 FY27 and FY28?

[Company Representative] (Anand Rathi): Yeah. Hi, sir. As you said that the impact of the project business will be coming from Q3 onwards. Can you guide on the EBITDA margin for H2 FY27 and FY28?

[Analyst] (Anand Rathi): Yeah. Hi, sir. As you said that the impact of the project business will be coming from Q3 onwards. Can you guide on the EBITDA margin for H2 FY27 and FY28?

Speaker #3: I didn't get it. Are you talking about the current financial year and the next financial year?

Deepak Chaudhary: I didn't get it. You are talking about the current financial year or next financial year?

Speaker #5: Yes. For FY27 and.

[Company Representative] (Anand Rathi): Yes. For FY27.

[Analyst] (Anand Rathi): Yes. For FY27.

Speaker #3: FY27, as I just mentioned, is in the range of 13.5% to 14%. We are standing by that guidance for the current financial year.

Deepak Chaudhary: FY27, as I just mentioned, it is in the range of 13.5% to 14%. We're standing by that guidance for the current financial year. For the next financial year, we would want to hold back for the end of the year because as we keep on going further into the period, it becomes kind of speculative. As of now, we are confident that we'll be able to deliver the kind of numbers we're talking about, both in terms of the top line being in the range of 18% to 20% and EBITDA margins in the range of 13.5% to 14%. Beyond that, we would not want to go right now. We'll talk about it maybe once we start ending the year, and then we will be able to have a better idea about how the demand is progressing and holding up.

Speaker #3: For the next financial year, we would want to hold that for the end of the year, because as we keep on going further into the period, it becomes kind of speculative.

Speaker #3: So, as of now, we are confident that we'll be able to deliver the kind of numbers we're talking about, both in terms of the top line being in the range of 18 to 20 percent and EBITDA margins in the range of 13.5 to 14 percent.

Speaker #3: But beyond that, we would not want to go right now. We'll talk about it maybe once we start nearing the end of the year, and then we'll be able to have a better idea about how the demand is progressing and holding up.

Speaker #3: Then we'll be able to guide better with respect to next year.

Deepak Chaudhary: We'll be able to guide better in respect of the next year.

Speaker #5: So, and for H2 FY27, I was asking.

[Company Representative] (Anand Rathi): Sir, for H2 FY27, I was asking.

[Analyst] (Anand Rathi): Sir, for H2 FY27, I was asking.

Speaker #3: For the full year, we are still projecting the 19 and a half to 18 to 20 percent kind of growth for the revenue. And for the full year, 13 and a half percent.

Deepak Chaudhary: For the full year, we are still projecting an 18.5% to 20%, 18% to 20% kind of growth for the revenue, and for the full year, 13.5%. Quarter on quarter basis becomes extremely difficult because it is totally a factor of what one-time events keep on happening. Like for this particular quarter, if you had asked me in Q4, I would not have been able to predict that we'll be having margins which will be going by this extent. We had a few items which we knew that will be coming up, long-term wage settlement, et cetera, was there, which we had been telling you also, that some impact would be there on the margins in the Q1. Same thing we are saying for Q2 also. There would be some impact coming in the Q2 also because projects have not yet converted with the revised pricing.

Speaker #3: Quarter-on-quarter basis becomes extremely difficult, because it is totally a factor of what one-time events keep on happening. Like for this particular quarter, if you had asked me in Q4, I would not have been able to project that we would have margins which would be lowering by this extent.

Speaker #3: We had a few items which we knew that will be coming up, long-term wage settlement, etc., was there, which we had been telling you also, that some impact would be there on the margins in the Q1.

Speaker #3: The same thing we are saying for Q2 also. There would be some impact coming in Q2 as well, because projects have not yet converted with the revised pricing.

Speaker #3: But for the whole year, we'll be able better able to guide we should be ending with the 13 and a half percent to 14 percent, which we're saying right now.

Deepak Chaudhary: For the whole year, we'll be better able to guide. We should be ending with the 13.5% to 14%, which we are saying right now.

Speaker #5: Okay, understood. So by what timeline, then, can we expect to return to the historical average of 16% EBITDA margins?

[Company Representative] (Anand Rathi): Okay. Understood, sir. By what timeline, then, we expect to return to the historical average of 16% EBITDA margins?

[Analyst] (Anand Rathi): Okay. Understood, sir. By what timeline, then, we expect to return to the historical average of 16% EBITDA margins?

Speaker #3: That is difficult to say because we can go on a year-on-year basis only. Once we are at the end of the year, then again looking at the way that the demand situation is continuing, the kind of growth that we have been able to take, the kind of operational efficiency that we have been able to bring, and the kind of competitive intensity which is prevailing in the market, based on all these factors, we'll be able to guide you better at the end of the year.

Deepak Chaudhary: See, that is difficult to say because we can go on a year-on-year basis only. Once we are at the end of the year, then again, looking at the way that the demand situation is continuing, the kind of growth that we have been able to take, the kind of operational efficiencies that we have been able to bring, and the kind of competitive intensity which is prevailing in the market. Based on all these factors, we'll be able to guide you better at the end of the year. As of now, the visibility is there only for the current year. Based on the various factors which are prevailing right now, we'll stick with what we have given you for the current year.

Speaker #3: But as of now, the visibility is there only for the current year, and based on the various factors which are prevailing right now, we'll stick with what we have given you for the current year.

Speaker #4: Thank you very much. Anu, I'll request you to come back for a follow-up. Next follow-up question is from the line of Varun Jalasariyam from 361 Capital.

Operator 2: Thank you very much. Anu, I'll request you to come back for a follow-up. The next follow-up question is from the line of Varun Jalosaria from 360 ONE Capital. Please go ahead.

Operator: Thank you very much. Anu, I'll request you to come back for a follow-up. The next follow-up question is from the line of Varun Jalosaria from 360 ONE Capital. Please go ahead.

Speaker #4: Please go ahead.

Speaker #1: Yeah. Hi, sir. Sir, I just wanted to understand the gross margin trend. Given that raw material cost is still rising—I mean, both copper and zinc are at all-time highs.

Varun Jalosaria: Yeah. Hi, sir. Sir, I just wanted to understand the gross margin trend, given that brass cost is still rising, and in both copper and zinc is all-time high. How are we looking at the gross margin, and do we intend to take any further price hikes in the coming quarter?

Varun Julasaria: Yeah. Hi, sir. Sir, I just wanted to understand the gross margin trend, given that brass cost is still rising, and in both copper and zinc is all-time high. How are we looking at the gross margin, and do we intend to take any further price hikes in the coming quarter?

Speaker #1: So, how are we looking at the gross margin, and do we intend to take any further price hike in the coming quarter?

Speaker #3: Gross margins have been impacted in the current quarter because input prices have gone up. We have taken a price increase, but it takes a little time for that to get reflected on the top line.

Deepak Chaudhary: Gross margins have been impacted in the current quarter because of the fact that input prices have gone up, we have taken a price increase, that takes a little time to get reflected on the top line. On an immediate basis, it will impact on the kind of gross margins we have had. Especially in the faucetware segment, the gross margin has been severely impacted. The brass prices are continuing to go on an uphill side only. Currently, we have reached, you can say, a range of INR 900. If it continues to rise, we may have to take a further price increase. The price increase that we've taken earlier would start coming in on the retail segment from July and from the project segment from the next quarter, let's say Q3 onwards.

Speaker #3: So, on an immediate basis, it has impacted the kind of gross margins we have had, especially in the faucet segment. The gross margin has been severely impacted.

Speaker #3: The brass prices are continuing to go on an uphill side only. Like currently, we have reached, you can say, a range of ₹900.

Speaker #3: So, if it continues to rise, we may have to take a further price increase. The price increase that we have taken earlier will start coming in on the retail segment from July.

Speaker #3: And from the project segment from the next quarter, let's say Q3 onwards, if we take a further price increase, there would be some delay again in it actually reflecting on the top line.

Deepak Chaudhary: If we take a further price increase, there will be some delay again in it actually reflecting on the top line. There would always be a couple of quarters or one quarter where the retail would take 2, 3 months, where the retail takes a certain time to get impacted, and longer period for project to get impacted. We continue to watch the increased raw material prices, and based on that, we'll evaluate whether we need to take a further price increase in case of faucetware or in the case of Sanitaryware.

Speaker #3: So there would always be a couple of quarters, or one quarter, where retail would take two or three months to get impacted. Retail takes a certain time to get impacted.

Speaker #3: And longer period for project to get impacted. So we continue to see the watch the increased prices. Sorry, the raw material prices. And based on that, we'll evaluate whether we need to take a further price increase in case of faucet pair or in the case of sanitary wealth.

Varun Jalosaria: Sir, can our gross margin expand from here? It's come down to 45% and 46%, which used to be 50%+. Is there any scope that this coming quarter or maybe Q2 onwards, we can see an increase there, expansion there?

Varun Julasaria: Sir, can our gross margin expand from here? It's come down to 45% and 46%, which used to be 50%+. Is there any scope that this coming quarter or maybe Q2 onwards, we can see an increase there, expansion there?

Speaker #1: Sir, can the gross margin expand from here? It's come down to 45-46 percent, whereas it used to be above 50 percent. So, is there any scope that in the coming quarter, or maybe from Q2 onwards, we can see an increase there?

Speaker #1: Expansion there?

Deepak Chaudhary: The current quarter, 46%, as I mentioned, was an aberration. From the next quarter onwards or maybe from Q3, if the sales starts seeing a kind of uptrend, from Q3, if the brass prices continue to hold at the current levels, the gas prices also continue to hold at the current levels, it will be back at the levels of 51%, which we typically used to have. This is where, again, Q1 46% is kind of an one-off margin, mostly impacted because of faucetware, where the brass prices have gone up exponentially, but the prices are taking a little time to get affected.

Speaker #3: Again, the current quarter—46 percent, as I mentioned—was an aberration. From the next quarter onwards, maybe from Q3, we'll again start seeing a kind of uptrend.

Speaker #3: And from Q3, the brass prices continue to hold at the current levels, and the gas prices also continue to hold at the current levels.

Speaker #3: We should be back at the levels of 51 percent, which we typically used to have. So this is, again, Q1—46 percent is kind of a one-off margin.

Speaker #3: And mostly impacted because of faucet ware, where the brass prices have gone up exponentially, but the prices are taking a little time to get affected.

Speaker #1: Okay. And on the faucetware expansion, given that we've reached 96 percent utilization, is there any plan to prepone the expansion that we planned in the full Q4?

Varun Jalosaria: Okay. On the faucetware expansion, given that we've reached 96% utilization, is there any plan to prepone the expansion that we planned in the 4Q, given that the input demand-

Varun Julasaria: Okay. On the faucetware expansion, given that we've reached 96% utilization, is there any plan to prepone the expansion that we planned in the 4Q, given that the input demand-

Speaker #1: Given that we've seen good demand,

Deepak Chaudhary: Before 4Q, it is not possible because we've already undertaken the expansion, we should be expecting that increased capacity to come into effect from the fourth quarter. Before that, in Q2 and Q3, it is not possible. We don't anticipate any challenges in respect of material availability because both the in-house and the outsourcing have been functioning on a normal basis in the case of faucetware. We have a lot of scope for taking procurement from outside also. As well as in-house, we have been functioning at 96%. We can go beyond 100% also. It is possible to go beyond 100%. We don't anticipate any availability challenges in respect of materials for faucetware till the time that this expanded capacity comes into effect.

Speaker #3: Before full Q2, it is not possible because we have already undertaken the expansion, and we should be expecting that increased capacity to come into effect from the fourth quarter.

Speaker #3: So before that, in Q2 and Q3, it is not possible. But we don't anticipate any challenges in respect of material availability, because both the in-house and the outsourcing have been functioning on a normal basis in the case of faucetware.

Speaker #3: So we have a lot of scope for taking procurement from outside also. As well as in-house, we have capacity—we have been functioning at 96%.

Speaker #3: We can go beyond 100 percent also. It is possible to go beyond 100 percent. So, we don't anticipate any availability challenges in respect of materials for faucetware.

Speaker #3: Till the time that this standard capacity comes into effect.

Speaker #1: Okay. At this brass cost, last quarter, what was the average? And is it like 900 versus last quarter?

Varun Jalosaria: Okay, sir. This brass cost last quarter, what was the average at this INR 900 versus last quarter?

Varun Julasaria: Okay, sir. This brass cost last quarter, what was the average at this INR 900 versus last quarter?

Deepak Chaudhary: The prices have been going up on a continuous basis. I'll just give you the kind of trend which has been there on a month-on-month basis. Like December, it used to be in the range of INR 665. January, it went up to INR 747, February, INR 758. March was the same range. April, it was INR 800. May, it was INR 860, you can say, June, it has gone up to INR 880.

Speaker #3: The prices have been going up on a continuous basis. I'll just give you the kind of trend that has been there on a month-on-month basis.

Speaker #3: Like December, it used to be in the range of 65. In January, it went up to 747. February, 758. March was the same range. April, it was 800.

Speaker #3: In May, it was 860, you can say. And in June, it has gone up to 880.

Speaker #1: Okay. Okay.

Varun Jalosaria: Okay.

Varun Julasaria: Okay.

Speaker #3: And currently, in July, you can say it is in the range of 900.

Deepak Chaudhary: Currently in July, you can say it is in the range of INR 900.

Speaker #1: Okay. So it's continuously going up, so we may need another price hike. That's what I want to understand here.

Varun Jalosaria: Okay. It's continuously going up, so we may need another price hike. That's what I wanted to understand here.

Varun Julasaria: Okay. It's continuously going up, so we may need another price hike. That's what I wanted to understand here.

Speaker #3: Yeah. We are evaluating that situation. But if it continues to go beyond 900, as of now, we are taking a price increase, which is protecting us up to this current range.

Deepak Chaudhary: Yeah. We're evaluating that situation, but if it continues to go beyond INR 900. As of now, we have taken a price increase which is protecting us up to this current range. If it keeps on rising beyond the current range, let's say it goes up to INR 950, INR 1,000 kind of a number, we may have to again think of some further price rise.

Speaker #3: But if it keeps on rising beyond the current range—let's say it goes up to 951,000, that kind of number—then we may have to again think of a further price rise.

Speaker #1: Okay. Thank you so much, sir. Thank you.

Varun Jalosaria: Okay. Thank you so much, sir.

Varun Julasaria: Okay. Thank you so much, sir.

Deepak Chaudhary: Yeah, thank you.

Speaker #3: Yeah. Thank you.

Operator 2: Thank you. Next follow-up question is from the line of Rahul from Stratton Oakmont Capital. Please go ahead.

Operator: Thank you. Next follow-up question is from the line of Rahul from Stratton Oakmont Capital. Please go ahead.

Speaker #4: Thank you. Next follow-up question is from Rahul of Stratton Oakmont Capital. Please go ahead.

Speaker #1: Hi. No, I just have a last question regarding our discretionary advertising and promotion spend. So like especially related to this kriti sana national brand campaign, are there any more ideas on the table or are we do we have any plans to expand our discretionary ANP spend?

Rahul Majethia: Hi. I just have a last question regarding our discretionary advertising and promotion spend. Especially related to this Kriti Sanon national brand campaign, are there any more ideas on the table, or do we have any plans to expand our discretionary A&P spend? If yes, then in what direction? That will be all.

[Analyst] (Stratton Oakmont Capital): Hi. I just have a last question regarding our discretionary advertising and promotion spend. Especially related to this Kriti Sanon national brand campaign, are there any more ideas on the table, or do we have any plans to expand our discretionary A&P spend? If yes, then in what direction? That will be all.

Speaker #1: And if yes, then in what direction? That will be all.

Speaker #3: Yeah. As of now, the budget is, as I mentioned earlier in our opening remarks, ₹85 crore. So this includes the kind of spend that we'll be doing for TV, digital, social—everything.

Deepak Chaudhary: Yeah. As of now, the budget is, that I mentioned earlier in my opening remarks, INR 85 crores. This includes the kind of spend that we'll be doing for TV, digital, social, everything. As we go forward, if we feel that the need is there, even for the current quarter, that option is always available. It is not that this is hard cast in stone that will be at INR 85 crores only. As of now, the budget is INR 85. If we feel that we need to increase the budget, that can always be done as we go forward. Thanks. That is all. Thanks.

Speaker #3: As we go forward, if we feel that the need is there, even for the current quarter, that option is always available. It is not that this is hard cast in stone that it will be at ₹85 crores only.

Speaker #3: So, as of now, the budget is 85. If we feel that we need to increase the budget, that can always be done as we go forward.

Speaker #1: Thanks. That will be all. Thank you.

Speaker #4: Thank you very much. Ladies and gentlemen, we'll take that as the last question. I will now hand the conference over to management for closing comments.

Operator 2: Thank you very much. Ladies and gentlemen, we'll take that as our last question. I'll now hand the conference over to the management for closing comments.

Operator: Thank you very much. Ladies and gentlemen, we'll take that as our last question. I'll now hand the conference over to the management for closing comments.

Speaker #1: Thank you, everyone, for attending this call and for showing interest in CERA Sanitaryware Limited. Should you need any further clarification, or would like to know more about the company, please feel free to reach out to me or to CDR India.

Deepak Chaudhary: Thank you everyone for attending this call and for showing interest in CERA Sanitaryware Limited. Should you need any further clarification or would like to know more about the company, please feel free to reach out to me or to CDR India. Thank you once again for taking the time to join the call. Thank you. Bye.

Speaker #1: Thank you once again for taking the time to join the call. Thank you. Bye.

Speaker #4: Thank you very much. On behalf of CDR India Limited, that concludes this conference. Thank you for joining us. We will now disconnect the lines.

Operator 2: Thank you very much. On behalf of CDR India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

Operator: Thank you very much. On behalf of CDR India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

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Q1 2027 Cera Sanitaryware Ltd Earnings Call

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