Finolex Industries Limited (FINPIPE) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Finolex Industries Limited Q4 FY '21 Earnings Conference Call hosted by Investec Capital Services India Private Limited. [Operator Instructions] Please note, that this conference is being recorded. I now hand the conference over to Mr. Ritesh Shah. Thank you. And over to you, Mr. Shah.

Thank you, Nirav. It's a pleasure to host Finolex management today for Q4 conference call. We have with us Mr. Sanjay Math, Managing Director; and Mr. Anil Whabi, Director, Finance and CFO. I'll request Mr. Math and Mr. Whabi for initial remarks. Post which, we'll have a Q&A session. Over to you, Math sir. Thank you so much.

Thank you, Ritesh. Good morning, all, ladies and gentlemen. I heartily welcome you on behalf of Finolex Industries Limited with this investor conference call. Hope you all are safe, and thank you for your continued interest in Finolex Industries. We are happy to talk about the fourth quarter results for the 2021. Finolex Industries ends the year of '21 on a historic high, surpassing performance of previous years. During this quarter, higher volumes on the resin front and better realizations have resulted in the highest ever revenue and net profit for annual as well as for this quarter -- quarterly basis. There has been outstanding improvement in all our operating parameters. Give you some performance indicators for Q4 of this financial year 2021. For the highlights for this quarter, total income from operations was INR 1,249 crores, up 62.5% against INR 767 crores in quarter 4 last year. EBITDA margin has stood at INR 424 crore in this quarter, up by 305% against INR 105 crores in the quarter 4 of last year. Profit after tax was at -- is at INR 297 crores for this quarter, up by 433% against INR 56 crores in the quarter 4 last year. So you can see the performance in quarter 4 has been exceptionally high. I will give you the highlights for the entire year 2021. The total income from operations is INR 3,463 crores in the year '21, up by 16% against INR 2,984 crores last year FY 2020. EBITDA margin stood INR 1,062 crores in this year, up by 122% against INR 478 crores last year. Profit after tax is at INR 728 crores for the year 2021, up by 124% against INR 324 crore for financial year last year. So during the year, the company generated INR 940 crores of cash from the operations. Now getting to the segmental performance. EBIT margin in the resin segment was INR 328 crores in this quarter, up by 947% last year. And EBIT margin in pipes and fittings segment is INR 69.5 crores, up by 11% last year. So we continue to be a net debt-free company, with a net cash surplus of INR 825 crores as at 31st March 2021. And with these numbers, I'll leave it to you for questions. I am accompanied by my colleagues from the finance department, our CFO and Director Finance; Mr. Anil Whabi, and Mr. Niraj Kedia is also accompanying him. So any financial questions, they will answer. So I will leave this session open to questions for the floor. Thank you, gentlemen.

[Operator Instructions] The first question is from the line of Ritesh Shah.

Yes. I'll just start with a question till have a question in the queue. Sir, my first question is -- first, congratulations on a good set of numbers. My first question is, given we have a sizable quantum of cash on books, how should one look at what the capacity is right now, the capacity expansion plans over the next 3 years? And secondly, do we have any stated dividend payout policy in place? That's the first question, and we'll open up the queue post this.

I will talk about capacity. At present, our capacity is 370,000 tonnes on the pipes and about 28,000 tonnes on fittings. We are quite well covered for the next 2 to 3 years in terms of our volumes that we will be selling in the market. I think this year, there is some contraction, which you have seen already. The capacity utilization has remained low because of that contraction. So there is excess capacity at present available, and there is nothing like we are falling short of capacity. But as the market really goes up and we have signs of getting up, I think we are definitely going into capacity expansion. On the front of dividend, I think Whabiji, can you give an answer on this?

Ritesh, if you have noticed, normally, our payout ratio is somewhere between 40% to 50%. And this year, we have proposed a 100% normal dividend and 100% special dividend. And if that is agreed, then the dividend payout ratio will be about 34% for this year.

The next question is from the line of Aditya from Axis Capital.

Mr. Math and Mr. Whabi, congratulations on a great set of numbers. Sir, I just wanted to understand from you, April and May have been quite impacted because of COVID 2.0. So how has been the agri demand there? And what is our outlook in terms of piping demand going forward? And in the same breath, if you can help us understand what is the agri, non-agri mix? And how do you see that going forward? That would be helpful, sir.

As you know that from March end itself, there is a second wave of COVID. And April, most of the states went into lockdown. I think out of -- in India, somewhere around 20, 22 states were in lockdown. So the demand for resin as well as for the pipes has definitely contracted and got affected. So this quarter, there may be a very big setup -- setback on the agri pipes, whereas we are able to continue non-agri demand a little better than the agri setback. Going ahead, I think the numbers of the COVID cases are decreasing. And there is quite a bit of unlocking that is happening in most of the states, except the southern states where the numbers are still high, particularly Maharashtra, Andhra, Karnataka, Tamil Nadu, Kerala. These are the 5 states which are affected more and that is where the unlocking is still restricted, whereas in the northern part as well as on the eastern part, I think the unlocking is done already. So the growth should start. I think we see that the normal growth should be coming up in the next quarter. So hopefully, if there is no third wave, the conditions will be better. In terms of agri and non-agri mix, I think our non-agri growth has been better than the agri. Agri has been contracting almost all our -- in quarter 1, it's contracted by 40 -- 42%. And quarter 2, it was a little better. Quarter 3 was better for agri, 4.5%. But again, quarter 4, we have seen a contraction of minus 14%. Whereas non-agri has been doing quite better. If we look at that quarter 1 last year, we had minus 50% in non-agri also because there was no construction going on. But later on, it has picked up. And if we look at quarter 2, 3, 4 together, there was a growth of 10%. Quarter 3 and 4, it was 13%. And quarter 4 itself was about 22%. This momentum of non-agri is definitely what is seen, which should be continued if there is unlocking. And agri will depend mostly on the monsoon effect. Presently now, monsoon has already set in and almost 3/4 of the country is covered by monsoon. So possibly agri demand has not picked up, and it may remain subdued at the monsoon level, whereas non-agri, we are hopeful that it will definitely pick up.

Sure, sir. That's very helpful. Sir, just 2 follow-ups on that, if you can help us understand -- while you gave us a texture, if you can help us understand where are we vis--vis last year, that would be very helpful? Only in some qualitative measures. So last year, I think our total growth was impacted to the extent of almost 40%. So do we expect Q1 to be similar or -- just trying to get some color on that?

Aditya, yes, Q1 will suffer because all 3 months, there has been a setback in this quarter. So slowly as the market picks up, but with this onset of monsoon, agri is not likely to see the volumes that we should have seen. So obviously, there is an impact in Q1.

Understood, sir. Understood, sir. Sir, that's very helpful. My second question is in terms of our margins, more so with our resin margins, right? I mean on a steady-state basis, our resin margins have been close to about INR 11,000, INR 12,000, INR 13,000 per tonne, and that number has increased meaningfully over the last 3 or 4 quarters. Obviously, there has been some tailwind because of rising cost of inputs. But if you can help us try and get some understanding on how do you see this going forward, either in terms of EBIT per tonne or in terms of margin, then it would be very helpful?

See, Aditya, in case of resin, there is a volatility which plays its role. Last year, we did exceedingly well because the PVC prices moved up very sharply and they have been at the historic high for some time, so -- because of which, the EBIT margin per tonne also was much better. As the prices normalize, I suppose that then, again, it will move towards the normal levels of EBIT. But how long this will take, we do not know.

Sure, sir. Just to ask that question slightly differently. On a steady-state basis, do we expect a 17%, 18% EBIT margin on our PVC resin?

Aditya, it's very difficult to say. See, each part of this has a different dynamics. PVC moves in different direction. Then the inputs, EDC, ethylene, VCM can move in different directions. So it's difficult to say that steady state will be this. But you're right, somewhere around 15% has been our historic average.

The next question is from the line of Sonali from Jefferies India.

Congratulations on a great set of numbers. So my first question is, could you help us with the PVC to EDC spread in Q4 as well as FY '21 as a whole, please?

Yes, sure.

Whabi?

In PVC to EDC spread for Q4 is 877.

Sir, and what was it in Q4 FY '20?

It was 574.

Sir, and what is it currently as we speak right now?

Currently, at present, it is about 715 or so.

715? All right, sir. Sir, my second question is regarding the pipes' EBIT margin in Q4 FY '21. Now all your metrics have been outstanding in Q4, but there is a slight dip in the pipes' EBIT margin. Now if you are saying that the plumbing mix is advancing or garnering higher demand than our agri mix, how should we look at the EBIT margin and the reason for the contraction in the same?

Sonali, I think you are comparing on Q-on-Q basis. If you look at Y-o-Y basis, it has improved.

Sir, for Q4?

Yes. In Q4 also, on Y-o-Y basis, it has improved.

Okay. Sir, I'll get back to this because Y-o-Y -- sir, wasn't it 9.9% in Q4 FY '20, the PVC price?

So I think on EBIT per tonne.

Okay. Got it. Got it. Sir, my third question is, if we could just broadly give about our strategic view on our evolving plumbing mix versus our agri mix. So currently, I think we are 70% in agri. For the past 2 quarters, we have been speaking about foraying more into plumbing. So any kind of update the kind of distribution we have enhanced for that would be quite helpful?

Sonali, if you see, in '18, '19, this -- in terms of value, the ratio was 70-30. Now FY '21 we have ended, the ratio is 63-37.

Okay. 63-37 this year. Great, sir. Sir, and any color on any -- or any updates in terms of how much we have evolved and what regions we are boosting our non-agri, in what categories, et cetera?

So we are trying to address in all the regions. So it will take time, yes.

Sure. Sir, my last question is for CPVC volumes and revenue in FY '21 versus FY '20.

See FY '21 volume was 9,635 tonnes.

Sir, what's it, FY '20?

FY '20 was 9,229 -- 99.

Okay. Sir, and revenue?

Revenue is -- FY '21 is INR 297 crores.

Okay. FY '20 revenue?

And FY '20 was INR 290 crores.

Sure. Sir, and just one last question regarding our vision. Where do we expect our non-agri mix to go, say, over the next 5 years?

See, the growth is seen to be more in non-agri compared to agri. So our mix has to be changing continuously. I think how fast we can get into more non-agri is the question. This ratio will definitely be improving. Now as Whabiji said, on the revenue basis, it is at present, 63-37. Crossing 60-40 is the next target that we are looking at. And that is on the revenue side.

Got it, sir. Sir, and what about the retail touch points?

It continues to be more than 21,000.

Sure. Sir, any indication how much we have added in FY '21?

No, I don't have that number.

The next question is from the line of Chirag from HDFC Asset Management.

Congratulations for a fantastic quarter and year as well. I have a few questions. One, if you could tell us for the fourth quarter and for FY '21 the prices for PVC, EDC, ethylene and VCM?

Yes. Sure. We can give you. The fourth quarter EDC prices, 1,483 for PVC; EDC, 605; ethylene, 963; and VCM is 1,152.

1,152?

1,152. PVC/EDC delta, 877; and PVC to VCM delta, 331.

And for the full year?

For the full year, EDC was 1,094 -- PVC is 1,094; EDC is 384; ethylene, 768; VCM, 835; PVC/EDC 711; and PVC/VCM, 260.

And would you have us for the fourth quarter of '20 as well?

Yes. The PVC, 883; EDC, 308; ethylene, 688; VCM, 758; PVC/EDC, 574; PVC/VCM, 125.

Perfect. Sir, the second question was in terms of profitability, you mentioned the average for [ PVID ] per tonne when you look at PVC resin, actually, over the last 5 years, if you were to exclude FY '21, has been closer to 12,000, not closer to 15,000. In fact, the peak has been 15,000 in FY '17. So where do you think this is -- I know this is a very volatile segment and these prices can change very substantially. But if you could help us understand both in the resin business as well as in the pipe business, what do you think are sustainable margins?

Chirag, for the PVC resin segment, as you know, it's difficult to state. And you are right, historic average has been around 15,000. So hopefully, in coming years also, it should remain. So but it is difficult to say because you do not know how -- what way the prices will move in each quarter. But if you see it -- for the year, it averages out to around that figure.

But the average for the last 5 years, excluding FY '21, has been actually 11,500 or 12,000.

Yes. But after that, if you see, you are aware that the duties were raised on PVC resin. So after that, it has inched up. From 12,000, it has moved closer to 15,000. So -- but the pipe segment is relatively stable. So there, you know that the margins have improved on an average from INR 8 a kg, which we had a few years back. It has gone up to INR 10 and beyond.

And do you think that level of INR 10 is sustainable?

We hope it would.

And why has it moved up in pipes? In resin, we understand because of commodity price movement. In pipes, why has it moved up? Is it...

No, no, it is because of higher focus, as we discussed just a little while back. In higher growth in non-agri, it does help. Fittings volume growth does help. More CPVC business. So all these things coupled together has helped.

Sure. And lastly, what were the inventory gains for the full year in either of the segments, if any?

It is difficult to state. But in our case, inventory gains may not be high because pipe -- in pipe segment, we do not carry large inventory of PVC resin.

Fair enough, sir. And sir, last question from my side was what is the CapEx for this year?

For FY '21?

FY '22.

FY '22, about INR 100 crores. Right now -- as Mr. Math also mentioned, right now, the expansion on pipe side has not been taken into consideration. So normal replacement and these investments will be there. So about INR 100 crores. The moment we see signs of improvement, we will go for expansion.

The next question is from the line of Praveen Sahay from Edelweiss Financial Services.

Yes. Many congratulations on a great set of numbers. So sir, my question is on the degrowth in the volume. So definitely, the agri has not done well. So my question is how much is this volume degrowth is driven by the price? Because the prices have shot up significantly, and definitely, there is one part is a lockdown and the COVID. So how much of this is -- you treat as the price has gone up, and that's why there is a restriction from the bank?

Praveen, this is actually difficult to state. Both the factors have played their role, the prices as well as the disruption -- pandemic disruption. So both have played their role. But it is difficult to pinpoint how much would it be for one.

So -- and on the pricing, as we know that the PVC resin prices is close $16, $17 per metric tonne now come down to some $13.50 or so. So where you see this stabilization to go? Like -- because the economies or opening -- factories are opening in the western world so...

We are looking at various reports coming from ICIS. I think this year, there will be some softening coming up, but it is not going to be at the level of the normal long-term average of 1,000 to 1,250. I think it will stabilize somewhere about 1,200 to 1,300. That is what is the prediction given by the ICIS. So these prices will be remaining about 20% to 25% higher than the long-term average. What is the prediction?

Any specific reason for this prediction, sir? Or you are looking at some dynamics changing in the global world?

And then it all depends upon -- still there is a contraction in all over the world. I think the COVID waves have not receded. I think many countries are still under partial lockdowns. So until recent rates are in problem and most of the integrated producers are producing to the level of intra-region trades. There are some of the issues which are there on the trade side. If rates have gone up -- container rates have gone up. So that is one part which is also affecting the overall pricing of CFR level. And there are people who are taking up some of the long-term shutdowns taking the advantage of this COVID situation. So there is a little bit of imbalance between supply and demand. Although the supply-demand imbalance is not so much that it will be disproportionately this price hike is supported. At the same time, there is some shortage on supply side than the demand side.

So you expect this spread of PVC/EDC also to be in the range of around $700?

That we cannot say because -- you see, all the imports are slowly adjusting to the final PVC price. For example, EDC has also moved up last year. VCM also has been moving up. VCM is -- today also, if you see, VCM is about $1,100. So it is not like the long-term average for VCM is about $700, $750. When PVC is about $900, $950, okay? So as PVC moves, the VCM also moves. And then EDC also moves up. These individually will be correcting themselves in terms of the input prices. So what is important for us is not that. It is -- the importance is the margins between the PVC/EDC delta and VCM/EDC delta.

Right. Right. The next question is, sir, related to the CPVC. So how much of the volume you are targeting to go in this business? Because this [ 9,906 -- 9,100 ] metric tonne you are doing, so how much like can...

I think last quarter, in quarter 4, we have done 3,692, about 3,700 tonnes. If we see that kind of a momentum maintaining, we'll cross 14,000 tonnes. So -- but that is our hope that we continue to operate in that range. Unfortunately, Q1 has given us a setback because of the pandemic and the activities have been stalled. But that is what we can see that there is a continuous growth in CPVC. Q4 total growth was about 42%. Q2, Q3, Q4 total growth was 25%. And Q4 itself is 67% over the last year. So you can see that the growth has been from 25% to 40% to 60% in these last 3 quarter season. Q1 being very low because we did not have any business in Q1 last year, and that is where it was minus 62% in Q1. And -- so the overall year, we have grown just hardly about 3.6%. But the momentum, you can see...

You have capacity to go above, right? You have a capacity to go up in this segment?

We have a capacity to go up, yes.

So any number can you put in?

Sir, sorry to interrupt you. May I request you to come back in the question queue. The next question is from the line of Pranav Tendolkar from Rare Enterprises.

Sorry to missed this if it was already revealed. But sir, can you just tell us what was the volume growth and pricing growth in 2 categories? That is agri and non-agri. Is that possible in terms of, say, tonnage?

Volume growth, that number is not right now available.

Okay. Okay. So that is one. Sir, also, what I've noticed is that your working capital is much better than other players. And so is there a different business strategy than other players that you think is beneficial for you?

No, no, we have been following cash and carry model for a very long period.

Correct. Correct. Correct. I know that. So I'm just asking that is that beneficial, in the sense, if you just provide some working capital, will not that be helping our volumes to...

So earlier, if you look 3 years back, it's -- entire business was on cash and carry basis. But then of late, we have started providing credit in non-agri part of the business.

Okay. Perfect. Perfect. Perfect. Sir, over last one year, I agree that there was some pent-up demand. But do you see any structural changes in the demands that have also contributed to increasing volume, so something like homebuilding going up or something like infrastructure going up or any structural changes that you see will -- that will sustain over the next one year?

No. See, this -- of course, because of pandemic, this also has been affected. But if you look at the medium term, we are sure that because of large unmet demand in housing the activity will pick up, and there will be volume growth. In agri pipes, in irrigation, past few years, I have not seen the growth that it should have. So there also, with all these government initiatives and the change in farm practices, we should see growth. But we see that in housing, the growth will be better. That's what we feel.

The next question is from the line of Rajesh Sarvi from HDFC Securities.

This is Rajesh Ravi here. Sir, congratulations on great set of numbers. I have a few queries. First is in terms of the pricing trend that we are seeing currently across agri and non-agri price, what sort of price increase we have seen in first quarter?

See prices, as PVC prices move down, obviously, the pipe prices also have come down in tandem. So PVC prices have corrected by about 20% in the international market, and the prices are correcting in India as well.

Okay. And in terms of the -- at retention level, do you see that sustaining through or the price -- the cost pass-through, which cooling off of the PVC prices, is that the PVC pipe price impact higher. How is the scenario...

No, no, no. When the volumes are low, obviously, in the falling prices situation, there will be a complete pass-through to gain some traction in the volumes.

Okay. And how is in the non-agri portfolio, sir?

Both -- in both.

No. Because there, the demand is -- as you said, that we are seeing good demand. I mean when I assume the industry is...

But historically, also the pipe -- yes, PVC price movements have been passed on into the market completely. So that is what is happening now also.

And if we see 4Q versus 3Q, your realization like for your pipes and fitting realization increased by INR 20 a kg versus third quarter. And if I see even the resin realization from INR 102 to INR 122. So there has been a similar increase in both the resins as well as pipes realization. Whereas margin level, there is from INR 16 a kg, EBIT margin has come down to almost INR 11.5. There is a INR 5 contraction.

Yes. But you are looking at Q3 only. If you look at Q2 or earlier quarters, it was around INR 11.

Yes. I agree. So I'm saying the Q3 was having some exceptional gains, which is getting...

It was literally for some lower cost. And there have been some provisions in the Q4 which have increased the cost. So it is the effect of that.

Okay. And lastly, in terms of now that the PVC prices coming down and that getting passed through, what sort of recovery you're looking in the agri demand?

See, Q1 is almost lost because of the pandemic disruption and monsoon season. So Q2, there is hardly any volume in the agri. So hopefully, from Q3 onwards, if the situation is normal, we should see pickup in agri pipes.

Sorry to interrupt you. I request you to come back in the question queue for a follow-up question. The next question is from the line of Tarang Agrawal from Old Bridge Capital Management.

Just a question on the non-agri front. Sir, if you could give some flavor on what's really -- any geographical location or what industry segment has driven volumes in FY '21? And some peek into what is driving your bullishness on those specific areas in the non-agri business for the year to come by?

See, non-agri business, we are doing all across India. And not specifically that every -- any region has been shown an extra growth over the last year. I think our distribution in geographical terms has remained almost same in non-agri. The growth has been in retail rather than on the institutional sales. So we have -- by increasing the touch points from 18,000 to 21,000, and I think it has now started showing results on our non-agri growth in retail.

The next question is from the line of Achal Lohade from JM Financial.

Yes. Congratulations for the great set of numbers. My first question is in terms of the geographical mix. If you could -- at the aggregate level, for us, how much would be south and west and north and east? If you could highlight for FY '21, sir.

See, traditionally, we have been strong in west and south, which account for almost 75% of our business.

Right. Okay. Would you be able to -- possible to give a breakup? Like 40, 35, 50...

No, I don't have those numbers.

Okay. No problem, sir. Secondly, in terms of the -- what we hear is that some of the agri pipes also go into plumbing. So is it the case with us as well? So is there any guesstimate here how much of that is already -- you -- do you consider that as part of agri or non-agri?

See, what we produce is we consider for agri. But you are right, some of it does go for applications in housing as well, especially in states like Punjab or elsewhere, or many cases in South as well. So some part of it does go into other application.

Right. And any benefit of this Jal Jeevan mission of the government in terms of projects or in terms of retail sales in your opinion given our distribution base in the rural?

See, it has just started. So there will be volumes in the coming years.

Yes.

Understood. And just one data point, sir, if you could help us with the fitting volume and revenue for FY '20, '21?

In the fittings volume for FY '21 is 20,054.

And for FY '20?

Same number, 20,666. This is because in Q1, we had a big setback, whereas later on, I think there has been an improvement in fittings.

Understood. And how much of that would be CPVC, sir, in both the years?

CPVC separately on fittings, we have not got the numbers. CPVC by itself, we have given the number, no?

Yes. Sure. Sure. And just last question, if I may, sir. With respect to -- given the high prices, we hear that farmers have postponed the demand. But the question here is that, is that the demand lost forever? Will that come back in a big way in the next year? And what is the typical replacement cycle in case of agri pipes?

I think agri pipes is also a durable item. The life of the agri pipe is about 25 years. So it is not necessarily that it needs to be done when the high prices are there. So when the price correction is seen, definitely the demand has to come back. The irrigation demand, in India, it is only about 40% of the land is irrigated and 60% is still rented. There is a lot of land yet to be irrigated. So agri demand has to be there for years to come. I think we are not really worried about demand not going to be there. It may be a temporary phase because of the higher price possibly or because of the pandemic, people have postponed that decision, right? It doesn't mean that it will not come back when the pandemic is over and the prices are almost getting corrected to the long-term average.

The next question is from the line of Chirag from HDFC Asset Management.

Sir, just a quick data point. If you could tell us PVC, EDC, ethylene and VCM prices for last year, FY '20, and the current prices as well?

Yes, I'll give you. Last year, PVC was 884, average; EDC 324; ethylene 774; VCM 738; PVC/EDC delta 559; and PVC/VCM delta 146. This is FY '20. I think you have the FY '21 numbers.

Yes. We have the FY '21. And just the current prices as well, sir?

Current prices are somewhere around PVC 1,380; EDC 665; ethylene 835; VCM 1,055; PVC/EDC delta 715; and PVC/VCM delta 325. This is as of 24, I'm not talking about today's data, okay?

The next question is from the line of [ Kashyap Pujara ] from [indiscernible] Partners.

Congratulations for a good set of numbers. I just had one question on the CapEx front. While you mentioned the CapEx is only INR 100 crores, I just wanted to check the broader view of the management given that we have made landmark profits on the PVC front. And historically, our capacity has been close to 240,000 to 250,000 tonnes. So is there a thought process now to kind of expand capacity there or kind of go backward integrated and do the EDC to VCM route for the capacity, which -- for 50% of the capacity, which is VCM to PVC. So just wanted to understand what are the broad thoughts on expanding on this front?

On the pipes and fittings business, we have already told you that present capacity we have is sufficient enough for the next 2 to 3 years. And this particular segment does not require too high time for setting up additional capacity. So as we see growth in that segment and we feel that there is a limitation coming in servicing the market, we will definitely get into it. And then we will decide where to do it. Whether it is in the west or whether it is in the north or south or east, whatever, depending on the -- as of the demand in that particular region. So that is definitely on the annual, it will come. About the resin capacity, we -- last time also we said that we are still not able to get any kind of assurance on the feedstock business. The feedstocks, particularly ethylene-based feedstocks are not easily available. And there is no surety of the feedstocks over a longer period of 10 to 15 years where there could be a contracted feedstocks availability. And that is where it is still under hold.

Okay. Fine. So basically, all programs on the -- basically building out all-weather port or maybe the VCM to -- EDC to VCM or any incremental capacity, all those things are kind of on hold. We won't be doing any of those...

Even if we make all-weather port, we should get the assurance on the feedstocks. Otherwise, the present operation doesn't call for any other investment on the all-weather port at present.

The next question is from the line of Rahul Agrawal from InCred Capital.

Congratulations for a great set of results. Some of the questions partially got answered. I just want to clarify. On the capacity, you said it's about 370,000 tonnes for pipes. And so that 28,000 tonnes of fittings is included in that. Is that correct?

No, sir. Fittings is separate.

And is that in-house or is it outsourced?

[ 370,000 ] tonnes of fitting, yes.

Entire 30,000 is outsourced or in-house capacity?