Pokarna Limited (532486) Earnings Call Transcript
June 22, 2021
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to Pokarna Limited Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note this conference is for 60 minutes only. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, Mr. Desa.
Thank you. Good day, everyone, and a warm welcome to Pokarna Limited's Q4 and FY '21 Earnings Call. We have with us today Mr. Gautam Chand Jain, Chairman and Managing Director; and Mr. Paras Kumar Jain, the Chief Executive Officer, Pokarna Engineered Stone Limited. We will begin this conference call with opening remarks from the management, following which we will have the floor open for an introductive Q&A session. Before we begin, I would like to point out that certain statements made in today's call may be forward-looking in nature, and a note to this effect was stated in the con call invite sent to you earlier. I would now like to invite Mr. Paras Jain to commence the call with his opening remarks. Over to you, Paras.
Thanks, Gavin, and thank you, everyone, for joining us on our earnings call today. I hope all of you and your loved ones are safe and healthy. We are delighted to be back interacting with you all after a pause of a few quarters. I'm sure you all must be aware of the challenges we had to go over the past couple of years or so. The magnitude of the events were such that it merited our utmost attention and efforts. Any delay on our part would have significantly dented and altered the overall fabric of our business. We had to discontinue our earnings call since Q4 FY '19, as some statements from previous conference calls were misquoted in the proceedings before the U.S. VOC. And we didn't want any statements from the earnings calls were misquoted and represent -- misrepresented in the U.S. proceedings further. Our intent is always to keep our stakeholders abreast of key developments, and we will endeavor to continue to do so. Let me quickly take you through the consolidated financial performance for the quarter. Starting with the top line. Revenue from operations for the quarter stood at INR 92 crores as against INR 89 crores generated in the corresponding quarter last year, a growth of about 3.45%. While on an annual basis, the same stood at INR 295 crores as against INR 394 crores reported during FY '20, lower by 25%. EBITDA for the quarter stood at INR 22 crores as against INR 28 crores garnered during Q4 FY '20, lower by 21%. While on an annual basis, the same stood at INR 88 crores as against INR 136 crores generated during FY '20, lower by about 35%. During the quarter, Pokarna Engineered Stone Limited incurred a onetime inventory write-down of INR 462.15 lakhs on finished goods to cover risks arising from slow-moving items, discontinued products, excess inventories and net realizable value lower than the cost. Further, during the quarter, in accordance with Section 135 of the Companies Act, 2013, the group provided INR 6.10 crores towards CSR expenses. Now moving on to the bottom line. PAT for the quarter stood at INR 4 crores as against INR 3 crores reported during the Q4 FY '20, higher by 19%. While on annual basis, the same stood at INR 28 crores as against INR 71 crores garnered during FY '20, lower by about 60%. As you all are aware, a large part of the revenue and profitability growth was driven by Quartz business. Granite and Apparel business continue to face challenges as can be seen by the segmental performance reported by us. Now moving on to Quartz. While the past year has been quite challenging for the business, we believe that the worst is relatively over and we should see gradual pickup in the business over the coming quarters. A big positive for the business has been the commissioning of the new state-of-the-art facility in Telangana. The new facility is equipped with the most advanced Bretonstone Technology from Italy and is spread over 1,60,000 square meters and has a built-up area of approximately 60,000 square meters. It's a smart factory with several robots and rather high level of process automation, supporting a wide range of industry 4.0 application. It will more than double our production capacity, and it will be used mainly for production of super jumbo size slabs, which measures 347 x 201 centimeters and jumbo size slabs 330 x 165 centimeters. The new unit is also equipped with a battery of multi-axis robots to produce exotic natural looking as well as studio design and is also powered by a whole new generation of fabrication equipment to ensure world-class quality with maximum speed and precision. Our new facility also supports our ambition for sustainable production, and we have equipped it with the highest possible energy efficiency across the production process. We have also installed new generation water treatment technology that will deliver significant water efficiency with water waste being treated and reused on site to achieve 0 liquid discharge. Further energy-efficient LED lights and new generation roofing system maximizes the daylight without compromising on the indoor environment. Additionally, we also expanded our slab-polishing operations at the Visakhapatnam facility by installing one of the most advanced slab trimming, calibration and polishing lines from Breton to make our operations and product more efficient, and commissioning of this line is expected during the first quarter of FY '22. Operations of the new plants, when combined with the existing facility, will help us scale up our revenues and products -- product mix over the coming years. Demand for quartz surface continues to remain steady given the net nature of the product. We continue to witness good traction for our product both in domestic and international market. We are exclusive partners to IKEA for measurement, supply and installation of quartz worktop in India. We also have expanded our offerings in the recent time in Indian market. And we now, in addition to manufacturing quartz surfaces, also provide complete solution that is from factory-finished product to home-installation service across India. The recent initiative has helped us to transform into a B2C layer in India. While the demand side continues to be promising for the Quartz business, we are still facing logistics challenges. The logistic impediments following the outbreak of COVID-19 continue to compound by shortage of shipping containers, higher ocean freights and blank sailing. Given that large part of our business M&As from the international markets, smooth functioning of the logistics channel becomes an important factor for us. We are hopeful that the situation will improve over the next 2 quarters. To conclude, while CVD and AD imposition by the U.S. Department of Commerce and Ports and Pandemic Outbreak did pull us back by a couple of years. Business fundamentals remained strong and firm. Demand visibility remained steady. We are seeing good traction for our products, both in domestic and international markets. Secondly, the commissioning of new plant will help us achieve improved product mix, through-put and overall efficiency. Shipping side challenges, we should -- we believe will subside over a period of time and it would help us accelerate sales momentum. That concludes my opening remarks. We can now start the Q&A session.
[Operator Instructions] The first question is from the line of Saurabh Patwa from HDFC Mutual Fund.
Congratulations for a decent performance in difficult times. Sir, just some bookkeeping kind of a question. What would be the amount, which we would have capitalized expenses, which you would have capitalized including interest and as our plant was under commissioning in FY '21?
The new plant, we have capitalized about INR 470 crores.
So how much of this would be the interest? So interest also, which was bearing -- which was linked to this project that also you would have capitalized, right?
INR 12 crores is the interest portion, which is capitalized.
INR 12 crores. And how much was this number in FY '20, sir, if you can...
Sorry?
How much was this number in FY '20 because the project was started...
This is altogether -- '20, we just started. So there was not much. Largely, during this current year only.
Okay. And any other expenses which you would have capitalized?
Other than interest, nothing. Basically, the actual installations and...
Exchange fluctuation.
Of course, yes, exchange fluctuation was another major amount which has been capitalized.
Okay. And sir, just 1 more thing, sir. What would be the number of -- what would be the charges that you would be paying for the -- which for the creditors for the CapEx, the machine manufacturing basically?
Sorry, can you please come back, your question is not clear?
Sir, in the annual report, we have mentioned that the creditor for capital expenditure were covered by a letter of credit. So that amount was INR 187 crores, and I think a similar amount reflects in current numbers as well. So what is that letter of credit charges?
Letter of credit, no charges. That's the bank charge, normal, our bankers whatever normally they charge.
Okay. Okay. And what would be that number, sir?
I don't even remember, frankly.
No, but what is the -- like you want to understand...
No. No. So because this is a very...
Out of the letter of credit, how much is towards machines or you want to understand the charges paid on letter of credit?
Both of them, sir. Both of them.
The credit -- letter of credit for Breton was together around INR 260 crores altogether.
[Operator Instructions] The next question is from the line of Pranav Mehta from Equirus Securities.
Sir, I wanted to understand on how things are panning out in the U.S. market? And apart from that, in this quarter, you must have faced the challenges of logistics. So how much of it was into the other expenses? Because if you see our EBITDA margins have been impacted significantly in this quarter because of all these reasons. And the other thing, which I wanted to understand is on the competitive intensity from India and from across the globe in servicing the U.S. market and whether we are also looking out for reducing our exposure to -- from U.S. market to other quartz-consuming countries or not?
Yes. So like as I mentioned during my opening comments, during this Q4, typically, we had 2 nonrecurring items. One was the inventory write-down, which we did to cover the risk arising from slow-moving items, discontinued products and excess inventories so that the net realizable values, which are lower than cost can be adjusted. So we took a hit of about INR 4.6 crores during the quarter. At the same time, we also -- during the quarter at the group level, which includes both Pokarna and Pokarna Engineered Stone Limited, we took a hit of about INR 6.1 crore towards the CSR expenses. So if both these items are adjusted and looked at the EBITDA, we don't think that the EBITDA margins have dramatically changed. The profile is very much comparable, apart from we're seeing a high level of inflation in several raw materials. So that answer -- so if you just adjust for these 2 items, which I made out, you will see that the numbers have not changed. Because if you look at adjusted EBITDA for FY '21, it's about 40% at the -- for the Quartz business and 39%, it was in the last year. And similarly, 19% is now versus the 9% last year. Now coming at the consolidated level, if you look at the adjusted EBITDA, for the year, it is about 36% versus 32% of the previous year. So I think it's important that these 2 items are pragmatically looked into and then the EBITDA is adjusted. Now coming to your question on the competitive landscape in the U.S. market. And so we believe that the U.S. market continues to be a strong market, and that's what is everybody from the industry also believe, including all the publicly traded enterprises. And our focus will continue to be India. So we don't -- sorry, to be the U.S. market. So we don't expect dramatic shift happening in the near future from India -- from U.S. to any other market. While as I mentioned that we have started taking steps of building the brand momentum within India, but that's again a long-term play. So the focus will continue to be the U.S. market.
Right, sir. And sir, just a related question. The new CapEx that you have started, so how much would be the improvement in, let's say, the realization of the products, the jumbo size that you are talking about compared to your, let's say, Visakhapatnam plant? Any number you can share that would be quite helpful.
It's difficult to give absolute number to this type of things because what we have come up in Hyderabad is a new generation of equipment. So the products are yet to be completely made out and tested. So it would be like crystal gazing and giving a number at this point in time.
Okay. But sir, is the U.S. market moving towards the large -- very large slab than the Quartz product?
See, there is a market for every size. It depends upon which channel you are servicing. But as with any product, any improved version is always acceptable with more fan following, but we have to see how it goes on over a period of time.
Sorry to interrupt, you, Pranav. I request you to come back in the question queue. [Operator Instructions] The next question is from the line of Pritesh Chheda from Lucky Investment Managers.
Yes, sir. My question is on the output side. So when we had the first machine at Vizag, it was INR 100 crore per quarter run rate, so about INR 400 crore on that factory. Combined this Telangana and Vizag factory, what can be the possible value output on the Quartz side? And when do you think you could be able to achieve those quarterly run rates for Quartz business?
See, basically, the run rates are factors of various mixes. It also depends upon the product mix. And then also within the products, it also depends upon the color mix and all because we cater to several -- we have 2 different sets of business: one is the cut-to-size business and the slab business. So the run rates typically get impacted as to how this ratio changes and also within that, which product gets sold. So if you look at what I mentioned to you in the opening remarks, I would let you make your predictions using that. That's where I said that we'll double our capacity.
Okay. So I was also referring to your presentation where it was mentioned that Quartz new capacity at Telangana is more than the capacity at Vizag. So can we assume that on a longer run, the output will be more than what you would have generated at the Vizag facility?
Yes, I think you can answer that way.
Okay. Okay. And my second question is, since it is capitalized, has the Vizag facility -- sorry, the Telangana facility started operation? And at what level does it become EBITDA breakeven, the Telangana facility?
See, the Telangana facility has already started the operation. That is how when we declared the commercial production. So we could declare the commercial production only once it was commissioned and started working. So with this COVID-related lockdown challenges and other logistical challenges...
Hello? Sir, can you hear us?
I can hear you. Management line is off.
Ladies and gentlemen, please stay connected while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead. Pritesh, may I request you to repeat your question once again for the management, please?
Yes. I was asking the EBITDA breakeven level for the...
Yes. So at over 60% capacity utilization, we achieved that.
Okay. And lastly, on the clarification on the debt side, sir. So I was confused between the letter of credit. So I think the letter of credit has to be outside the balance sheet, right? And you would have a certain debt on the balance sheet for the facility. If you could just clarify that?
See, the letter of credit is issued by the bankers to our suppliers. And when it falls for due, obviously, the debit is transferred to bank. So the credit now will be banker instead of the suppliers.
That would typically become a loan on our books.
So what is the loan today, and we have to eventually include this INR 187 crore of letter of credit plus the loan which is there on the balance sheet, right?
No, no, the total loan is going to be only INR 250 crores.
No, like he's comparing last year...
You're right. Obviously, yes.
Sorry, I didn't -- so it is...
You are right. Whatever was there previous year, if you add this letter of credit amount to that, that becomes a loan.
Okay. For the previous year, March '21 debt on the book is INR 250 crores?
For the new plant -- for the new -- hello, yes?
No, no, company level debt, sir, what is the total company level debt on March '21 balance sheet?
Consolidated?
Yes, yes, sir. Consolidated, sir.
The payments which are happening during this quarter will not be included in the March balance sheet, no?
INR 226 crores. As of March '21, INR 226 crores.
So it was INR 226 crores as on March '21. And I think you should add another INR 250 crores. This whole thing is being paid now, no?
No, no, one thing...
Out of that, INR 80 crores less, no?
INR 104 crores is already covered.
So INR 104 crores means, out of INR 250 crores, INR 146 crores add to INR 226 crores.
Okay. So your total debt, including letter of credit INR 372 crores?
Yes.
The next question is from the line of Abhishek Tandon from Bowhead Investment Advisors.
My question is regarding the Quartz business. So if my understanding is correct, our key raw materials are quartz, sand and polymer resin. So what would be their individual contribution to our total raw material cost?
See, we've been not taking this question for a long time because there are specific competition sensitivities around this question of the raw material cost breakup. But what we can say is that typically, resin is one of the most important factors, which impacts the cost.
Okay. Okay. Also, sir, what would be your current capacity utilization level?
From the -- at the Unit 1, we are at the optimum capacity utilization level. At Unit 2, as I said, which is a new plant which has got commercialized, so we are at the beginning of the capacity utilization. So it's going to take up at least 12 to 18 months to reach the peak capacities.
But then you must not forget the COVID lockdown. Both of our states continuously have COVID lockdowns. So the working hours are restricted, the number of people are restricted. From time to time, there is a different number of people attending and hours of working too.
The next question is from the line of Jigar Mistry from Buoyant Capital.
Sir...
Jigar, sorry to interrupt, your voice is not coming so clear.
Is this better?
Little bit. Can I request you to speak a little louder?
Is this better?
Yes, go ahead.
Yes, yes, please go ahead.
All right. Sir, a couple of questions from my side. One is that the sort of imports into the U.S. from India has more or less completely recovered in 2H CY '20, right, the calendar 2020 second half June to December? The focus on revenue at this time is sort of catch up, would you entirely place it on the availability or rather the inavailability of logistics channel?
Sorry, your question...
Would you please come a little louder and clearer?
Sir, my question is that the exports sort of quartz from India to U.S. has fully recovered by the second half of calendar 2020, right? Whereas, Pokarna's revenues were still below their peak run rate. Would you attribute this entirely to the inavailability of logistics?
See, I don't know from -- how do you make the statement that the quartz exports recovered because there are several...
I think USGS publishes the data.
No, you have to look at it in a very pragmatic way because just looking at the absolute number, it doesn't make sense because you should also compare how many exporters were there in the corresponding previous period to understand what is the recoverability percentage. Now coming to your question, while the quartz restarted into the U.S., the pandemic has still not gone out. So there has been a quarter-on-quarter improvement, if you see. So in spite of all the COVID-related challenges, we are coming back to the numbers which are closer to the numbers which we usually achieve. So it is because of predominantly the COVID-related challenges and added to that was the logistical impediments which I mentioned in the opening remarks. So it's not completely to the shipping challenges, it is also to COVID plus shipping is what would be the right way to say that.
And the third, more number of big players now in India. Obviously, the volumes, if you look at what was coming only from us, now is coming from more than 75 people.
There are over 130 exporters, including third-party exporters and all.
Understood. And sir, second question was Wilsonart, which is one of the largest customers for Pokarna, as I understand. They acquired a company in Eastern Europe, Technistone, which has about 1 million square feet in capacity. Now how big is this client for us? And would them acquiring this new company, would it sort of create problems for our supplies to Wilsonart?
See, basically, the news what you're talking about is the old news. And in spite of all that, the numbers continue to be what they were. So we don't see that just because there is a consolidation happening at some players, it impacts us. So...
And I don't think we should talk about any specific customers on conference calls because we cannot diverge the business that we do with various customers.
No, that is true, sir, but I understand this is a large sort of...
We're not the only customer, no? They have various other customers.
That's what I answered that this is an old news, it's not a new news. And in spite of that quarter-on-quarter performance has been stable and reasonable. So I don't see that makes any impact on us or on them.
The next question is from the line of Sachin Kasera from Svan Investment Managers.
Congrats for a good set of numbers in a very challenging environment. My question was, sir, you mentioned that there are basically 3 issues which are interplaying as far as the ramp-up is concerned. One, you mentioned the production rate is because of COVID in India; second was the logistics; and third is, obviously, demand rate issue also in the U.S. So next, how would you say between the 3 in terms of what is impacting the most and impacting the least as of now? And how do you see these issues, which of these you seeing easing out in the next 1, 2 quarters and which you think will take a little longer?
Unfortunately, I don't think we can predict when the COVID will get over. We can only talk about our productivity, again, subject to that COVID was not only in India, throughout the world, and especially U.S. was the most affected. So let's hope for the best. Let's hope that we come out of this pandemic, and then our normal working resumes everywhere. So we are confident of the product and the customer network that we have, which can absorb the production that we are going to make.
Sure, sir. Sure. Sir, second question was regarding this letter of credit. So when will this letter of credit gets converted into loan with the bank? Is there any date fixed for that or any month -- particular month...
Most of it will be converted by this quarter end. It's already converted, I would say, now since we're almost in the back end. So mostly, it is all converted now.
And would you be able to share what is the rate of interest we have to pay on this bank loan once it is converted?
Can we share? 6%.
The next question is from the line of Anish Jobalia from Banyan Capital Advisors.
Hope my voice is...
Anish, sorry, but we're unable to hear you probably.
Yes. Is it audible now, a bit better?
Yes, better than before.
Yes. Yes. Okay. So sir, I just wanted to understand your 1 commentary which state that you expect to reach peak capacity in the new plant in the next 12 to 18 months. So I just wanted to understand what is giving us this confidence if you could give us more color around that, especially like if you look at our track record, I mean if you look at the past numbers, our first plant a few years, I would say -- my best guess is like around 6 to 7 years for us to kind of ramp up and reach peak utilization. And also given that in this last 1 to 2 years, there are more players who are coming up in the domestic market, especially with the Bretonstone Technology. So the competitive intensity seems to be increasing by exporting from outside of -- from India. So it would be really helpful to get your thoughts on what gives us this confidence to ramp up in such a short period of time for us for this new plant?
See basically, capacity ramp up is a function of various demand and the supply side and also definitely the operational issues. So while your observation that initial first plant had a little longer ramp-up time, why will second plant not have a little longer time. So there are various factors which actually impacted the business. If you go back and look at the history, that we were getting into a new product segment. So we had also relatively a very clean slate to write upon. So it took a little time for us to understand the industry dynamics. And then we were making -- and then we had a little challenges with our CDR and all that coming into core at that point in time. But -- and then added to that, if you look at between 2009 to 2011, there were a little -- the global recession, especially impacting the U.S. financial markets, brought in a lot of structural changes in the category. And then since 2013, if you look at our thing, we have been gradually improving except for this COVID. So -- and when we make a statement that we are confident of doing something between 12 to 18 months, we make it with a lot of responsibility because we have the visibility of what we are doing and what we want to do. So we are pretty confident when we make that statement.
Right. But like could you provide some more color around what is causing, I mean, the confidence behind it, like I mean just to improve our conviction about the ramp-up -- I mean just from that perspective...
Whatever I had an answer, I gave. I think rest I would leave you to judge it. Thank you.
Okay. And my second question is about our debt repayment. So we'll be taking debt and we'll be capitalizing by the end of this quarter. So what are our debt repayment obligations over the next 3 to 4 years?
I think...
It's there in current liabilities.
See, basically, our complete annual report will be out soon and the current liabilities repayment schedule with detail. You can analyze from there. Thank you.
The next question is from the line of Devang Patel from NAFA Asset Management.
Sir, the increase in logistic costs that you mentioned earlier, could you mention what is the percentage increase and what kind of impact it has had on the margins?
Basically, the logistic costs typically impact us on both the import side and the export side because we do also import certain raw material from different parts of the world. So if you look at the overall scenarios, the freight rates have been all the way down 300% to 400% also on certain specific trade lines. And on the export side, while we cover it and pass it on to the customer; on the import side, it typically gets absorbed as a cost and we don't have the ability to pass it on. So it typically impacts about 1% to 1.5% on the margins.
Both put together, that is the impact we've had. And this is a year-on-year comparison, you're saying?
Yes. Yes.
Okay. And quarter-on-quarter, has there been any change?
The situation for last 9 months has been relatively same.
Okay. And the CSR expenses of INR 6.1 crores, this would be cumulative for how years? And what would be the amount for FY '21?
FY, sorry...
For the last year?
The consolidated level is for the 5 years. And what was your second part of the question?
So about INR 1.2 crores would be the spend for the last year within this or that is additional?
INR 6.1 crores includes INR 1.2 crores of the last year.
Ladies and gentlemen, the next question is from the line of Dixit Doshi from Whitestone Financial Advisors.
Sir, first question is regarding this new plant. So you mentioned that we are capitalizing around INR 470 crores. So when you were, let's say, over 2 years or 3 years whenever we will hit the peak utilization, what kind of top line it can generate?
Typically, we said that we are going to double the capacity. So I think the peak run whatever you have seen, you can see something closer to that.
So if I see our FY '19 and '20 performance, the Quartz business peak sales is around INR 320 crores. If I assume that the capacity is doubling, so it will do a similar turnover, then it is not even a onetime asset turnover. It's hardly 0.7 asset turnover.
See, historically also, we have been saying the same thing that at maximum basis, the asset turnover can reach to 1.1. It wouldn't be there. So it's a heavy CapEx business. So it's definitely not where you'll have multiple numbers of turnover on the...
Yes. So in this INR 470 crores of project, we can do onetime assets and 1.1x?
That's the best case scenario.
That's the best case scenario, okay. And you mentioned that at 60%, we will be above breakeven. So it's at EBITDA level or PBT level?
EBITDA we spoke about.
Okay, EBITDA level. Okay. Now coming to the next question. So whatever products we will be selling to -- mostly these new products will be sold to our existing customer or we have to acquire the new customers since the products are different from the older plant. And for that, have we started hiring the new sales team and all that?
The product typically is same. It's not that we are changing the product. It is just that product gets a little more beautiful, a little more functional in terms of the outlook. So the customer base is going to be same. And also, as with any business, we have to keep looking for the new customers to be added. So that process is on and the work is going on in that direction.
Okay. And sir, in terms of employee cost and depreciation, I assume that this new plant has a lot of robotics and all. So what kind of employee cost and depreciation will go up from FY '21 level?
See, basically, employee cost is not really a very big cost in our overall working because most of our plants are fully automatized, even while Visakhapatnam plant may not have the new generation of robots, but for that, rest all the operations are automatic. So we don't really are a heavy employee cost business. Depreciation will be there definitely with when the capitalization has happened. So that is definitely a number which would come on to the balance sheet in the end of the financial year, of course, that the quarters also.
Sorry to interrupt you, Mr. Doshi. I request you to come back in the question queue. The next question is from the line of Varun Goenka from Nippon India Mutual Fund.
Just 2 more industry-specific questions. One, during this whole chaos of U.S. regulation on this duty imposition, India had lost market share to Vietnam and Spain and all that. So how are we seeing this whole industry structure now in terms of both regaining market share? A lot of currency changes have happened. Brazilian currency had depreciated. So how is the U.S. importing from Brazil now? If you could -- and concurrently, there is a housing boom happening in U.S., where there is shortage of inventory, a lot of lumber prices have gone up. If you could just give us a more top-down view of how the industry has maybe changed over the last 2 years, given so many moving parts?
Yes. So with the uncertainty surrounding the imposition of CVD and AD duties on quartz from India, the buyers definitely had to look for some alternate channels. And then with the Chinese duties being coming in and they're moving some of their manufacturing facilities to other parts of the world. So when it happened on India, typically, there was a relatively small time that the shift could happen to Vietnam and Philippines for that matter. So that was a time where if you look at my opening remarks also, we mentioned that due to COVID and due to the U.S. deals things, we are typically a couple of years behind our original target. So now -- but with the things becoming more certain with India in terms of the cash deposit rates on the CVD and AD, the demand, if you look at the month-on-month or quarter-on-quarter shipment numbers, it seems to be gaining back the traction, point number one. Point number two is that the overall market size in the U.S. also has expanded for the product. So it's not just that it was the same size, which was consuming from a different market. Now even the penetration of the product, the acceptance level of the product also has expanded. So there is enough space for various geographies to get new shares in all geographies to get back their lost share, I can say that. And then again, every country, every producer has certain specific inherent advantage, which if they focus on and which they create a mission, they can always improve. So I think U.S. as a territory has a large potential. And we don't see that AD or CVD limitations cost during those intermediate period would be a debtor for the future. And now coming to the Brazil question. Brazil typically is not one of the largest producers of quartz. They typically produce quartzite, which is a natural stone, which is mined and processed. So quartzite being imported from Brazil because of the currency depreciation, typically does not impact the engineered quartz side of the business.
And -- so when you say -- okay, in terms of landed cost, any change of India vessels, relative competitiveness?
See, basically it can be about 5% delta here or there. But apart from that, the -- had it been China typically on the West Coast, it is cheaper, but then the challenge on the East Coast remains. India is cheaper on the East Coast, but expensive on the West Coast. So I think it sort of offsets and doesn't really impact.
Okay. Okay. Got it. And any meaningful development in our non-U.S. efforts or relationships with retailers in the U.S.?
See, basically, as a product, we have like -- within India, as I was mentioning, we have now meaningful presence in certain pockets within India, and that presence is growing. So India is -- after the U.S., India is an important geography where we are concentrating our efforts on creating the brand Quantra. And we have a unique business model, which nobody has in the country. We do a complete factory finished product, installed at the consumer place across India. So that is where our focus is today on developing the Indian market apart from catering to the existing U.S. market.
Sorry to interrupt you. I request you to come back in the question queue for a follow-up question. [Operator Instructions] The next question is from the line of Rohan Gupta from Edelweiss Financial Service.
A couple of questions. First is on this capacity utilization. And you mentioned that over 12 to 18 months in respective of the uncertainties of the COVID, we are looking at almost fully utilizing the new capacity. While you also mentioned that the focus will remain on the U.S. market. So just wanted to understand, sir, in terms of the revenue growth visibility and the higher capacity utilization is all coming from the U.S. market export opportunities where you are more into contract dealer -- their dealers or is it coming from the domestic market or any other markets that we are actually in?
There has been a lot of echo in your sound, so -- while you're talking. So I believe that your question was about the capacity utilization and the strength we have to maximize or comment on the capacity. I think I just answered this question a little while ago. We have fair visibility of the U.S. market. And when we say that we are looking at ramping up capacity, of course, U.S. is definitely one of the important markets whose visibility is factored into that statement.
Okay. Sir, second question is on the new capacity margins. So you mentioned in the presentation that this is a high -- large size quartz and the product is on a higher end. So can one expect that those turnover may be similar to the -- what your existing capacity offer, but the margin profile on these new capacities will be higher than the earlier one?
See, as I -- again, I think I answered this question before as well that the new robots and all that typically haven't been fully put into utilization because of the limited training Italians had to go back because of the pandemic-related lockdown and all. So once we are able to completely achieve the outlooks using the new equipment, what we have installed, we'll be able to better comment on how much improvement in the value realization will happen because of the additional investment in the robots and all. So today, we have very little -- limited visibility on improved realization, equipments are still not tested to the complete capabilities.
So rather than production efficiency, I was talking more on the product realization, sir?
Yes. Ultimately, the production will only give the product realization. If I don't produce a better product, how can I get a better realization. That's what my point was.
The next question is from the line of Devender Singhal from Kodak Mahindra Asset Management.
Sir, my question was same as previous one, in terms of when you basically would only be coming up on the realization part only in due course of time. So is it fair to assume that [indiscernible] if things all go well, then the capacity utilization could actually be higher than what you are looking at, let's say, 100%, 110%, it could actually 130% depending on how the regulation pan out to be? That was the first question.
See, usually capacity utilized -- there are different factors in this industry one has to be aware in terms of capacity. One is definitely the product mix as to what you are producing. Are you -- when I say 130%, typically, I may be producing a very large percentage of basic products or mid-range products. And if I may say I'm doing about 80%, 85%, it can have a higher level of concentration of the products, which are at a higher category of realization and they also require a little more time to produce it. So typically, it's very difficult to predict which quarter you'll have which products coming in. So it can be fluctuating between 85% to 100% is what we believe in reasonability.
Sure. Second, sir, you have had a pretty high margins in the past also. Is there something to make us understand that the margins would actually be lower than that what you have been achieving in the past in your current facility?
Yes. There is -- margins, to some extent, are in our control and beyond a certain extent, they are out of our control, typically with the current inflation surrounding the raw material prices, especially those with the chemicals. So certainty of margins being maintained at the previous levels is always as a question mark. So as we have always mentioned in the past that between 30% to 35% EBITDA is what we believe is visible or realizable. And -- but then again, this is with the rider that we cannot comment on how things pan out on the chemical side of the raw materials. And of course, today, the shipping cost as well.
So considering the situation where we are today, I mean, this is the brand one we can hope for on a normalized basis going ahead?
I think that's fair understanding.
The next question is from the line of [ Ayush Agarwal from Mittal Analytics ].
I would just like to build upon the previous participant's question on the exports that India is going into the U.S. on the Quartz business. So if you can just throw some light on the competition that has come up in the last 2, 3 years because initially you see calendar year '17, '18, Pokarna used to have a really high share in the exports that India used to do. But now that has been going on, as you rightly mentioned that there are more than 130 exporters now. So if you think if you build on the competition and why you not see losing more market share to them? And how does Pokarna stand out in the U.S. market?
See, from the beginning, if you have been tracking us, we've always mentioned that we don't go beyond volumes, we are more of a realization-focused company, margin-focused company. So we don't compete with everyone who sells product out of India, and that's not our business model as well. So we are very select. We are very focused on what we want to do. Our products are well researched and are designed from time to time in line with the fashion and trend. And there's a product life cycle, which we have. And the moment we realize that the product is reaching to its life cycle, and we typically phase it out. So we don't focus on just increasing the volume, we rather maintain the volumes but increase the realization that has been our business model from all the way. And we'll continue to focus on that. And competition -- see, today, in the past, we were competing with China. The China volume came to India. So while you see that A, India [Foreign Language]. So it's not that I have -- my profile has significantly changed. So I was competing with Chinese in that market. Today, I compete with our fellow Indians in the same U.S. market. So we don't see that the competition intensity has dramatically changed.
Right. That's really helpful. The second question is on the container ratios. How have you seen that evolving with time and where do we stand currently regarding the containers availability?
See, today, East Coast on the U.S. has relatively eased out. West Coast situation continues to be challenging. So you can say that 30%, 35% of the problems are solved, but still a large chunk of the problem is yet to be solved.
The next question is from the line of [ Ashok Patel from Molecule Ventures ].
Yes. My first question is out of the INR 470 crores of CapEx, which we have done, how much is pertaining to Bretonstone equipments?
This I already told. Breton, I have told that is INR 260 crores. But in addition to Breton, there are a lot of other companies where the equipment is bought.
Okay. And now going forward, sir, if you want to do incremental CapEx on the same site, would our cost structure will be much lower than what we incurred for the first line of CapEx?
It all depends on what kind of expansion we do. And if you look at the full project cost, from the time we bought the land and we've constructed the building and the machines that we bought, there is a difference of almost 25% even today itself. But then when we do expansion, it all depends on what additional equipment we are going to add. It is not going to be the replica of the same investment. So it will depend on what kind of expansion we are going to do. So very difficult to quantify today how much we will have to invest to expand.
Sure. And sir, next question is that how is the traction and outlook with IKEA India in our branded sales?
See, IKEA in India, again, if you track IKEA closely, they currently have only 2 stores, one in India and another is Mumbai and the other -- sorry, Hyderabad and Mumbai. The others are just coming up. So as IKEA expands within India, the traction will multiply. So, so far, we have to just follow what IKEA does.
Okay. And sir, going forward, once the LOC gets classified into the borrowing, what would be our consolidated cost of debt for the firm?
The cost of debt -- are you asking cost of debt?
Yes. Yes, sir. Yes. Yes.
Cost is interest that we are paying to bank is 6%.
Okay. And that won't change even once the LOC gets reclassified into the borrowings?
No, we have taken foreign currency loan. And as we are net exporters, more or less 95% of the -- our turnover comes from exports. So we have natural hedge. So we don't see any interest rates with a drastic change.
Sure. And sir, my last question is that pertaining to the freight cost in Q4 FY '20, can you please quantify how much -- how higher they were compared to the Q4 FY '20 Y-o-Y?
See, we just mentioned that in the previous discussion that we have both import and the export costs. Export cost typically gets passed on, but the import cost is there more predominantly to our raw materials, we'll not be able to pass that on completely. So as I was mentioning in the previous discussions as well that about 1% to 1.5% on the EBITDA margin gets impacted because of -- during this quarter because of the increased freights and all.
The next question is from the line of Anil Jain from Equipassion Capital.
I just have a bookkeeping question. As you mentioned that Telangana unit has already been capitalized in March '21. So can I know the -- what is there as capital work in progress on 31st March '21, INR 64.8 crores?
No, no, no, Hyderabad.
More or less, whatever we have finished, this all now petty things, I think, about INR 2 crores, INR 3 crores.
No, no. But on March balance sheet, it is showing INR 64.8 crores.
[indiscernible] our Visakhapatnam facility...
That is what, sorry?
We are also doing expansion in Vizag. That's what you see, the number is from the Visakhapatnam plant.
Okay. Okay. What is that expansion for?
Polishing line, trimming line, calibrating line.
Okay. Okay. At existing plants?
Yes.
Okay. And any other CapEx plan for the FY '22?
Right now, I don't think. Then it depends when we keep going forward.
Ladies and gentlemen, that will be the last question for today. I will now hand the conference over to the management for closing comments.
We thank you, and we pray all of us stay safe and be well. We look forward to interacting with you again in the future. Thank you.
Thank you very much. On behalf of Pokarna Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.
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