Jyoti Resins and Adhesives Limited (514448) Earnings Call Transcript

But after Diwali, I mean 2Q also will be on the similar line. It is more about second half, when you would look to recoup entire volume guidance.

See, actually what happens to us is, as I mentioned that 75% to 80% revenue is generated from the 5 states. So remaining states are into the development. So in UP, we have started the 550 counters. So new 550 people of retailers now know our product and they are keeping our product. So I think that is a good start and that is the initial stage, initial placement state. So that is not a big volume generated from UP. So the registration program also into the pipeline. So we are onboarding so many carpenters into these newer states. We are hiring the people. So it is on the development stage. We are improving our CRMs, we are improving our customized programs. So we are on that stage to lead this. And this is a B2C, this is a network business. So it is not immediate effect we can get about. But if we go about the longer term, then if we have achieved this INR 300 crore of top line, so we are very confident about that from that -- from this level we can take our organizations to the INR 500 crore of top line.

Sir, only one comment. I mean, if 1.5 years back also it was the same thing that we are getting into new state and that time also the story was about UP and Delhi. Now 1.5 years later also the story is about UP and Delhi and the growth, I mean in F '24 it was a negative, slight negative revenue growth. In F '25 it is 10% growth. So sir, I mean, we have spent enough and more time in UP and Delhi. So if there is any milestone where we can be much more certain that, okay, those markets are like now turning around for us. Otherwise, I mean, it will be always that, okay, we are investing, of course, you would be investing in new states. But finally, the revenue growth has to be -- I mean, if I look at your revenue versus your top competitor, it is a very small proportion, small fraction of them. So taking away market share, should it be that difficult and what kind of revenue growth we should be looking at? I mean, I guess probably much faster revenue growth, especially F '24 and F '25, the growth was subdued. So probably we should be looking at much, much faster revenue growth in '26, '27. That is how probably investors would look at the company. So I thought I will just share with you.

See, you are very right on your view, you are as an investor, you are what seeing and what you are explaining, it is very right. But see, we need to see about the strong and steady growth also. As Jyoti Resins, as a Euro Adhesives, we have always look about the concrete and the strong steady growth. So you are seeing our balance sheets that we are delivering 30% of EBITDA. So no other any industry in a white glue has delivered that. So that is the first thing what I want to mention. So that is always -- it's a parallel things. If I just go away for the just burning the money, this hardcore earned money and just go for that. So it is not like that, what strategies we want to believe about that. We always want to focus into the core of the actual customers and what is the problem with that and how can that retain us and how can be there loyal to us as a brand level. And I believe when you go in a sub-level faster and you just spread a network like anything and you appoint so many channel partners, you appoint so many people, then the quality will be compromised. So we don't want to go about that as Jyoti Resins, we always believes about the profitability should be there and we have maintained that from so many years. We are debt free, we are not hiring, we are not taking the debts or any like startup business, what they are burning money like anything. So we are not into that path. So maybe you are right in that level, but we are trying our best that how can we leverage this network and how can we go more faster about that. But I'm very confident about the if the market will support, we will definitely reach our destinations for that. [ id="-1" name="Operator" /> We'll take the next question from [ Amit ].

So like, how much is the current confirmed orders and dealer stocking levels post Q1 marketing push?

Sorry, can you repeat the questions?

So the confirmed orders or dealer stocking levels post the Q1 marketing spreads?

Confirmed orders?

Yes, or the dealer stockings like the inventory level with the dealers?

See, we are working with the 13,000 dealers. So it is not possible to -- it's not like a B2B kind of business. So it is a current situation that we are getting the orders daily basis into this model. And we have kept our inventory into 52 depots of our PAN 14 states. So that dispatch goes from that depot. So it is a daily basis, daily, at least twice the delivery is there for that. So it's a different stock maintained by the different stockist.

Okay, sir. And so one more thing like about the market leader, can you just throw some light on like, what is the difference in like ours and them like, they are a big company, but like, what is their size? And what is our size as far as the adhesive is concerned?

So it's a -- I cannot guide you about the particular company or brand in this call, but I can give you the all over market.

Yes, the TAM, no?

Yeah, so see, it's a INR 7,500 crore of market per annum, and we are into INR 300 crore of top line. So we are planning to grab at least INR 500 crore is the first benchmark we want to achieve. And then after that INR 1,000 crore, we want to reach about that. So it is a thought process that as a brand, as a Euro Adhesives, we want to be present ourselves at least 25% of market share in each state. So this is the journey what we want to go for next years.

And sir, this INR 7,500 crores TAM is for India or for the global level?

INR 7,500 crores.

Yes, this is for India or for the global?

For the India. [ id="-1" name="Operator" /> We'll take the next request from the chat box. I request Yash to unmute and ask the question.

Yes. Sir, have you ever explored the export markets? Why don't we look at exporting our products?

So the reason is always it is about the vision. And our vision is to make our Euro Adhesives retail segment brand. So it is already a huge market share lying into India in our current states. So we don't want to lose our focus, even 1% focus into that. So we are more focusing into the develop these remaining 9 states that we can penetrate more and we can go for the at least 25% of market share. So if once Euro Adhesives is a brand and now people, the carpenters are accepting us as a white glue brand, then that is a continuous sales what we are getting for that. And that is a B2C networks beauty about that. And we want to continue our journey into that only.

Yes. But sir, I've also noticed that brands like yours in general in categories like yours, which are highly competitive, have done very well in markets like for example, Bangladesh, Sri Lanka, Nepal, because there competition is very low. And the markets are also kind of developing as we go forward. I just wanted to know if you've explored these markets, have you explored these opportunity opportunities yet? Or you still haven't got there? You're still just focusing on local?

No, we have we have thought about that, obviously. And we have discussed internally also. But all the vision is about this domestic market, and there is a market share that what you are thinking about that, that should be into the thought process when the market share is limited, and you have covered entire the market, then definitely we should go about that growth also. But right now, if the nearest market shares are pending at doing this so much, and we can grab this opportunity in this way. So we don't want to lose our focus into that. And right now, Euro is at that level because of the first strength is the focus, we have remained into the white glue. And we have a direct connection with our users, our retailers, and that's why we are getting this type of EBITDA. So we don't want to do for the going for the overheads. And after one or two or three years of continuous journey, and then we came to that positions can no, no, now we want to focus into the more domestic. So we are -- we have that vision that we want to go for the domestic only.

Right. And, sir, as a percentage of cost, what is our logistics cost? Let's say to move material from our factory to our distributors in other states.

It is very to very state wise, but it is generally 2% to 2.5% of the revenue.

Yes. So one of my -- the reason I asked you this particular question is, why are we expanding the brownfield in the same state? Why are we not doing that in a different state? Some sort of cost optimization.

We have put into the central and western part. So that is the first reason. Gujarat, Maharashtra, Karnataka is the western and central part. If we grow in the east part after the coming years, maybe more will generate the volume, then we will require to set up the plant into the nearest area. Right now, it is not the requirement for that because it is generally 2% to 3% of the transportation cost for that.

And do you give state-wise break-up sales?

Cannot give you into this call because it's a competitive information. So it's not possible for me to give the break-ups.

At least if you can tell me your top three states make up for what percentage of your sales, whatever those states maybe?

5 states what I already mentioned, Gujarat, Rajasthan, MP, Maharashtra and Karnataka. It is a 75% to 80% of our revenue.

Great. And sir, as far as our balance sheet is concerned, we have INR 150 crores of cash in our balance sheet. And like you said, the CapEx is not more than INR 15 crore, INR 20 crore, right? The cost of CapEx?

Brownfield will be below INR 10 crore, what we are going to plan for the next 6 to 12 months.

And the greenfield?

Greenfield around INR 45 crores. But that will be coming not on an immediate basis, that will be done into part-to-part for that. So within two years that INR 45 crore will be investment.

And my last question, what kind of raw material do you stock up? For how many months do you stock up your raw material in general? Like when does raw material volatility sort of start impacting us? And where do you source your raw material from?

Yes, sure. We do the contract with our existing vendors and that is a three-month contract. So if the raw material is procured for the three months actually. Not in our inventory, obviously, but...

Exactly, exactly. Hello?

Yes, three months of the contract we do.

So every three months you basically fix a rate every three months, right? Is what I'm understanding. Hello?

Yes, yes.

Yes. And so let's say raw material, because I think in the last two years, raw material prices have fallen a lot, right?

It's not much fallen, it is almost steady for that. Not much fallen. It is about the 1% or 2% max variations, not more than that.

So in the last four years, what kind of volatility have you seen in the raw material costs? Have they varied too much? Has it been a volatile sort of commodity, your raw material?

See, our main raw material is the VAM, vinyl acetate monomer. And the volatility was there into COVID period and within this '21 to '23. And after '23, it is go back down to the routine rates. And it is not volatile if we go about the history of past 10, 15 years. So it is about to INR 65 to INR 75 per kg around. [ id="-1" name="Operator" /> We'll take the next question from [ Prashant Shah ]. We'll take the next question from [ Reesha Mehta ].

Yes, I have just one question. So currently, our addresses can cater to wood, PVC and acrylic surfaces. So do we have any plans to kind of increase the usage of our product, maybe by launching more products just so that we can increase the addressable market within the adhesive space?

So no, because currently, what I explained that there is a huge market still lying into the white glue. So we want to cover that first. And that is a journey, what we want to take this brand at that level. So we don't want to diversify any products and that is the range is the epoxy adhesives, the rubber adhesives. So there are the very small, small volumes in the particular, the end users level. So we don't want to stuck into that categories. And we are the white blue categories what we have selected, and it is a still a INR 7,500 crore of market. So we want to cover that first.

Can you just talk about like, how big is the market for these rubber adhesives or epoxy adhesives that you spoke about?

I don't have the exact figure about that. But the usage wise, when we do the survey about the sites, it's a very small part of that the [Foreign Language] tube, that is the stone or the -- any other materials sticking about that is the epoxy adhesives range. And different is the tiles adhesives are there, then about the construction chemicals are there, the paints are there. These are the different products categories nearby this white blue category. But we want to continue our journey into the white glue only. So we don't want to stuck into the other products for right now, at least.

Would it be fair to say that all these other category of non-white glue products would be -- the market size would be maybe less than INR 7,500 crores?

Yes, yes, because the higher volume as compared to that is into the white glue. If we compare about that. The paint industry is different. And the first thing is the users and end users are the different actually, if we talk about the tiles and adhesives, then it is the plumbers not the carpenters. So we are targeting to the carpenters only right now. [ id="-1" name="Operator" /> We take the next question from [ Jinesh Vakhari ].

So sir, I had 2 questions. So basically, first one is on the guidance that you gave for sales and promotion that is 7% to 8% of the revenues for the full year. So sir, if I look at the first quarter that has gone by, so your advertisement spend that you have specifically shown in the P&L is around 18-odd percent of the revenues. So sir, can this trajectory, so you said you have not fully capitalized those expenses in the P&L and it will continue in coming quarters. So sir, just to know how this can be at 7%, 8% for the full year. So if you can bring -- throw some light on that part.

So can you tell me what figure you are looking about...

Sir, I'm just looking at INR 1,382 lakhs that you have shown under S&P.

That is actually different. That is about the point redemptions and sales promotion offers redemptions. That is the expense for that. So for that other expenses is the advertisement and brand activities are into that. So you need to see about that.

So sir, sales and commission would also constitute of the same thing that you are highlighting?

No, that is the commissions what we are passing through our stockist and channel partners.

So the advertisement expense have not been shown separately.

That is the other expenses. And that is the guidance by the auditors. So that is into the other expenses.

All right. All right, sir. And sir, second question was on the thing that you just highlighted about the redemption in the provision the adjustment you are doing in the revenue part. So just wanted some clarity on that. So if I understand, once we are selling the goods to the dealer, so we will be booking some revenues on -- we'll be booking the revenues and the proportionate the provision or the scheme that we are offering to them, we will be creating a liability for the same. So sir, how the redemption then be impacting the revenue part? So sir, that I couldn't get your point on that. So if you can please explain this thing.

So Vinay ji has already explained into the detail into this call. But I suggest if you go offline with the Vinay, he can guided us into the more detail. I suggest you do that. We discuss into this call. So that's why.

And sir, last thing on your capacity expansion plan. So post this brownfield, you will be having around 35 liters per day of capacity. So 3,500 tonnes per day of capacity. So that capacity...

3,500 tonnes per month, we are...

Per month, sorry, Sorry, my mistake, per month of capacity. So sir, post that capacity expansion you are talking about, so how does you look at the utilization level ramping up post you commission that in FY '26? And what is the incremental capacity that you are looking to put up? So some guidance on that part. So the utilization of the existing capacity would also help.

Yes. So see, right now, it is a 2,000 tonne current capacity, and we are considered as a 90% efficiency. So we are increasing this to 3,500 tonnes. So it will be almost if you consider the revenue-wise, right now, we are generating INR 300 crores of revenue with existing plant after investing this INR 8 crores to INR 10 crores into the brownfield after this INR 3,500 capacity, we can go our revenue to the INR 650 crores from here. So almost double from here.

Understood. Understood, sir. So that is at around 80%, 90% utilization level that you are aiming on the full capacity?

Right. [ id="-1" name="Operator" /> We'll take the next question from Vijay Shah. We take the next question from Smith Gala.

As you sir mentioned that the quarter 1 demands were affected because of the onset of early monsoons. So generally, the setting early monsoon onset will also mean an offset of monsoon early. So can we not target the volumes improving in Q2 itself?

Definitely, we should target. see, our efforts are at the best level in the ground level. But in building construction material in real estate, there is always up downs, you can see over the last years, so many years, there is always up down. Sometimes the market is like that if you see the result of the quarter 1 with this segment, all the companies has not much generated good revenue into the existing current quarter 1. So the reason is overall the demand, but that is not the reason or that is not the excuses I want to give that because of this, it is open. We are into that -- into the growth journey. We are trying our best. But our strategy is always look about the strong fundamentals growth only, not about the primary sales. We are focusing more into the secondary and tertiary sales. So it always takes time to set up this network. If you see about our journey, that is 18 years of journey what we have invested into to set up this network because it is a B2C model, right? So I suggest to look about the longer term generally, not quarter-to-quarter. And we are on to that path, and we'll definitely reach our destination within 2, 3 years for that.

Okay. And second question, if I break up the other expenses, which were around INR 25 crores for the quarter, I assume that I break up them into INR 5 crores for marketing and INR 20 crores depending on the top line. So is the INR 5 crore run rate to continue for the coming quarters and INR 20 crores will depend on the top line?

Can you see the number again? The other expenses -- it is INR 7.45 crores of quarter 1.

I'm considering all other expenses, excluding employee, I'm including them in the other expenses. So the total comes to INR 25 crores. And I'm considering INR 5 crores will be the run rate for marketing and advertisement spend for the coming quarters as well. It was for this quarter, INR 5 crores was the run rate and INR 20 crores will depend on the top line.

So it will depend upon the situations also. But you can consider it's 8% of the all over marketing spend. That includes 4% of the trade marketing and 4% of the brand communications. So maybe...

This quarter -- the run rate of the expenses shall continue going forward, right? There should not be an increase or a decrease for marketing spend.

It is not increase or decrease, but that is very -- a little bit vary -- see as an example, this is August month is a very festive season month. So we are not able to do that type of trade marketing into this current situation as Friday, 15 August or Jan. So that festival affects into the India market. People are not into the towns and like that. So after that, we need to cover into the September month. So it is quarter-to-quarter, we can consider about this will be the same, almost what we have done. But for the trade marketing, I think most of we have investment done into the quarter 1. So it will not that much investment into the quarter 2 for trade marketing, particularly.

Okay. And can you just again give a volume guidance for the year?

See, we are targeting ourselves as 15% to 20% growth at least for the volume every year. And as I mentioned that we are on that journey, Yes, definitely, we have not achieved that one quarter 1 is minus 3%. But still 9 months is there and we are trying our best to cover that. [ id="-1" name="Operator" /> We take the next question from [ Harish Shah ].

[Foreign Language]

[Foreign Language] Outdoor marketing is now, into that journey. So quarter 2, quarter 3 you will see.

[Foreign Language]

See, this product is always about the finishing part. [Foreign Language] [ id="-1" name="Operator" /> We'll take the next question from [ Prashant Shah ].

I have basically 2 questions. You have already informed that this quarter, the revenue -- I mean, the volume has degrown by 3%. So I guess that is primary sales. In terms of secondary sales, what has been the trend? What has been the degrowth?

No, that is the secondary sales only. Tertiary sales is the end user sales. Secondary is that to the retailers and primary is to the distributor.

Yes. So I mean, what I understood was that same -- I mean, the previous year, first quarter, we had INR 69 crores and this quarter, we had INR 75 crores. And the difference is basically because there has been a volume degrowth of 3%, price increase of some amount and then there has been an excess redemption. So I thought this INR 75 crores or the 3% volume degrowth is primary sales or is it secondary sales? Because secondary sales will not be captured in our P&L. Is my understanding correct?

No, no, no. So the invoice is generated to the retailers. It obviously goes to the sales. So we don't need to confuse about this primary or secondary. That is the main difference is because of that redemptions came aggressive into the quarter 1. So that is the difference that INR 75 crores and INR 70 crores is INR 5 crores is a difference to that. So all over, we have mentioned that we are less by 3% for that. So we want to be transparent to the investors. So we are guiding at that level. So you can understand more easily for that.

So basically, 3% volume degrowth is in the secondary sales.

In the secondary sales we can say.

So by project, I mean, what would be the inventory levels at the secondary level because, I mean, we would have added new distributors. So some would -- there would have been some inventory added there and there would be increased primary sales. But otherwise, at the channel level, how are we seeing the inventory? Is there a stress? Or are we comfortable with the inventory level at the dealer level and distributor level?

So, most of our sales is by the stockist consign sales agents. As an example, what I'm talking about is 52 stockist is that is the inventory in our books, in company books. So that is the stock transfer from factory to that 52 branches. And then that 52 branches dispatch the stocks to the retailers, then it is go to the revenue. Yes. So that goes to the revenue. So there is a different, different stocks into the different branches. It depends upon the volume of that particular branch. So if we go to the newer state, newer branches, then it is not much higher inventory into that because of the volume is still low for that branch. So this is -- doesn't affect in our existing transactions for that.

So I mean, what I was understanding is that the inventory at the branch level is reported in our books, the inventory at the retailer level is reported or that the inventory at the stockist level is reported in his books. Is that correct?

No, inventory into the stock level reported to our books. And when stock is delivered the material to the retailers, then it goes to the sales.

Okay. Okay. Fair enough. Understood. And at 31st March, our receivables was around INR 125 crores, INR 128 crores. What would be the number at this quarter end?

I have not the exact number for that, but I think that is reduced because the reason is that at that time, actually in B2C segment, March month is always the month where we push the material to the retailers because that is a loyalty program of the entire year and the volume growth that take. So we have delivered that INR 80 crores of top line into the quarter 4, that was the highest till date. So that was the reason that we increased that debtors into that particular 31st March. But right now, it is reduced to -- I think it is about the INR 105 crores to INR 110 crores.

Okay. And I have some questions regarding the points reduction, but I'll reach out separately to Vinay. [ id="-1" name="Operator" /> We will take the last follow up question from Mahek Singhvi.

I wanted to ask in a dealer network, do we have any branded or non-branded lam and plywood companies like do we have dealers that deal in lam and ply and also in our adhesives?

can you repeat this question actually you are not correctly audible for that?

Do we have any dealers or stockists that are dealing in lam and plywood also?

So all of the stock are there who has the network. So I think almost all the stockist has the disbutorship of plywood or laminate company. So they are into this business, we hire them as a stockist because we can utilize their network.

Okay. So instead of dealing with the stock, have we tried to directly contact the plywood companies, branded or nonbranded for that matter?

No, we have not directly with the plywood or company like that because they have already the different networks into the different states, different cities. So we go with the city and the state base only. So we are dealing with the distributor of the plywood and laminate dealers -- distributors. [ id="-1" name="Operator" /> That was the last question for the day. Sir, do you have any closing comments?

Thank you very much all the investors and analysts to keeping trust with our brand. We will keep continue our best efforts at the ground level, and we will try our best to take this strong and steady growth for the coming quarters. Thank you very much. [ id="-1" name="Operator" /> Thank you, sir. Thank you for the management for your valuable time, and thank you to all the participants for joining this call. You may all disconnect now.