HINDWAREAPNSEQ4 & FY22May 27, 2022

Hindware Home Innovation Limited

9,377words
157turns
12analyst exchanges
5executives
Management on call
Rakesh Kaul
WHOLE TIME DIRECTOR AND CEO, HINDWARE HOME INNOVATION LIMITED
Rajesh Pajnoo
CEO, PIPE BUSINESS
Sudhanshu Pokhriyal
CEO, BATH BUSINESS
Sandeep Sikka
GROUP CFO
Naveen Malik
CFO, HINDWARE HOME INNOVATION LIMITED
Key numbers — 40 extracted
Rs. 700 crore
s Manufacturing Business of the erstwhile HSIL via slump sale for a total consideration of around Rs. 700 crore as of 31st March 2022. The transaction has been consummated from the closing hours of 31st March
29%
o operate. For the complete financial year of FY22, in terms of top line we delivered a growth of 29% over FY21 with consolidated revenue from operations of Rs. 2,294 crore. Margin though was slightl
Rs. 2,294 crore
s of top line we delivered a growth of 29% over FY21 with consolidated revenue from operations of Rs. 2,294 crore. Margin though was slightly benign, largely on the expected lines given the elevated input commod
27%
elevated input commodity inflation. In terms of absolute profitability, consolidated EBITDA grew 27% and amounted to Rs. 204 crore. Consolidated PAT, after considering results of JV, for the year st
Rs. 204 crore
odity inflation. In terms of absolute profitability, consolidated EBITDA grew 27% and amounted to Rs. 204 crore. Consolidated PAT, after considering results of JV, for the year stood at Rs. 202 crore, register
Rs. 202 crore
ounted to Rs. 204 crore. Consolidated PAT, after considering results of JV, for the year stood at Rs. 202 crore, registering a growth of 268%. The reported PAT also include the exceptional items comprising rec
268%
AT, after considering results of JV, for the year stood at Rs. 202 crore, registering a growth of 268%. The reported PAT also include the exceptional items comprising recognition of fair value gain of
Rs. 66.11 crore
The reported PAT also include the exceptional items comprising recognition of fair value gain of Rs. 66.11 crore from its investment in HPL (Hintastica Private Limited), on account of loss of control of subsidi
Rs. 34.75 crore
ment in HPL (Hintastica Private Limited), on account of loss of control of subsidiary and gain of Rs. 34.75 crore on account of slump sale of the water heater business undertaking by the Company to Hintastica Pr
2.2 Billion
intastica Private Limited, a wholly owned subsidiary. As you are aware Groupe Atlantic France, a €2.2 Billion Euro Company with a dominant presence in manufacturing, developing, and distributing eco-friendly
Rs. 68.3 crore
ing, developing, and distributing eco-friendly heating products and hot-water solutions, invested Rs. 68.3 crore for a 50% stake in the water heater business, subsidiary of Hindware Home Innovation Limited (at
50%
distributing eco-friendly heating products and hot-water solutions, invested Rs. 68.3 crore for a 50% stake in the water heater business, subsidiary of Hindware Home Innovation Limited (at that time
Advertisement
Guidance — 20 items
Sudhanshu Pokhriyal
opening
“This transaction ensures we have better control over the supply chain, provides us with requisite scale to deliver consistent growth going forward and you will see the contribution to our margins from Q1 FY23 onwards.”
Sudhanshu Pokhriyal
opening
“Going forward we believe we will be able to further strengthen our leadership position by continuing work on our strategy.”
Rajesh Pajnoo
opening
“The brand and products both continue to gain popularity across markets and we plan to gradually introduce this product category to other markets.”
Rakesh Kaul
opening
“However, we believe we will be able to see the benefits of this strategy over the coming quarters.”
Sudhanshu Pokhriyal
qa
“We have had a pretty strong growth within retail as well as project segment.”
Sudhanshu Pokhriyal
qa
“In fact we created our institutional team in Q4 of FY21 and that team has really started delivering us stupendous results in project business as well.”
Sudhanshu Pokhriyal
qa
“At this point in time our contribution of our project business in fact is about 26%-27%.”
Sudhanshu Pokhriyal
qa
“Secondly our guidance has been that we would be outperforming the market in both sanitaryware and in faucets we continue to hold the guidance.”
Sudhanshu Pokhriyal
qa
“We have done this in this year, and we have independently outperformed in this year, and we intend to do that in the coming year as well.”
Sudhanshu Pokhriyal
qa
“We intend to expand our vendor base for our sanitaryware business within India as well as in China and continue to source from there.”
Risks & concerns — 9 flagged
Supply chain disruption which got further accentuated as Russia-Ukraine war boost up the prices even further in turn exerting more pressure on the profitability.
— Naveen Malik
While profitability for the quarter was under pressure, we are optimistic about our future performance.
— Naveen Malik
We had undertaken price hikes in calibrated manner during the year and the quarter to counter the impact of higher input costs.
— Rakesh Kaul
Despite the margin pressure, the business remained positive for yet another quarter and for the year and reiterates our strategy of focusing on franchising and e- commerce platforms.
— Rakesh Kaul
The challenge for the Quarter 4 starting from the end of the Quarter 3 were massive price hikes in the entire industry, the ocean freight from imports moving from $800 to $9000 per container which astronomically increase the price.
— Rakesh Kaul
Now it is for us as investors and analysts I think its little difficult to put a finger on that where are the margins for this particular business heading in a steady state.
— Sonal Minhas
The price increases happened during the course of the year, so the complete impact of the price increase is not yet into the revenue.
— Sudhanshu Pokhriyal
Right now, it is difficult for me to comment.
— Sandeep Sikka
But the impact of this will come in forthcoming quarters as such.
— Sandeep Sikka
Advertisement
Q&A — 12 exchanges
Q
To begin with I want to understand a couple of things about the building products business, breakup of B2B and B2C sales for Q4, the Tier-I, Tier-II, Tier-III breakdown and also the capacity utilization since you also have now the manufacturing facility with Somany Homes and also what are the future plans for the growth of the building products business?
Sudhanshu Pokhriyal
So, we have had a pretty good year and we have outperformed all of our listed peers who ever have declared their results. We have had a pretty strong growth within retail as well as project segment. In fact, our strategy of spending on distribution, we have started with the distribution in sanitaryware in the business which is not usually the way the go to market is in sanitaryware industry and has really paid off. Our growth in both the projects as well as retail has been excellent. In fact we created our institutional team in Q4 of FY21 and that team has really started delivering us stupendo
Q
My question was related to the manufacturing undertaking. If I look at the disclosures for AGI Greenpac and discontinued operations classified there, we have a Rs. 26 crore operating profit in the manufacturing business while there is a one off of Rs. 38 crore GST refund. So, adjusted for that I think we have a loss on the manufacturing side this quarter. Can you just elaborate a bit on that and how that is likely to shape up going forward once it is combined with our Company?
Sandeep Sikka
A dwelling point to understand actually if you see last year, we had one big COVID event wherein most of the plants or many manufacturing facilities got impacted. Since our sourcing model from AGI Greenpac was on a cost-plus basis and as per the accounting standard during those periods when the plant closure happened the labor was not available. So, all the abnormal cost was retained in AGI Greenpac itself which impacted their profitability during Quarter 1. If you see those losses are to that account so if you see our old transcripts also our product acquisition formula which is a finished go
Q
I had a question on the building material business, if we take out the pipe’s contribution from the overall top line, I see that the balance building material business to my understanding has not grown that much quarter-on-quarter. Also, I think if I compare this to March last year, we were at roughly Rs. 310 crore which we grown to around Rs. 345 odd crore So, I hope my numbers are correct, but I think given the numbers are part of the disclosure, just wanted to understand from you like your comments on this.
Sandeep Sikka
If you see on a quarterly basis we have grown by around 10% in sanitaryware and faucets. This is an overall view of what we did last year. Yes, from March to March you’ve grown by 10% and compared to December this year it has grown too. On a full year of basis, we have grown at around 37.4%. My question was more around are you happy with the growth on the balance building material business? Are you seeing any challenges or there is a friction in the market? Just want to understand that if at all there is. I would request if you can further clarify your question? So, if I take out the pipes bus
Q
Just a clarification, so I understand that the balance sheets seem to have given the reflection of that asset that we have purchased, the asset from HSIL, the sanitaryware asset. Do the P&L also reflect the benefit of manufacturing?
Sandeep Sikka
No. If you see the notes to the accounts, the transaction got consummated after the close of business as of 31st March 2022. The assets transfer took place but all the profits which were there relating to those plants and on this manufacturing facility. They will start coming to us only with effect from 1st April 2022. The margin change which was manufacturing margin will start getting reflected from next quarter, right? This quarter itself like Q1 of this financial year. What is the gross debt now in the balance sheet and the net debt number because now the balance sheet seems to be reflected
Q
My first question is regarding our building products division, the EBIT margins. If we see year- over-year, there has been some amount of correction in the margins. Can you please help me with the reason what has specifically happened?
Sandeep Sikka
So, if you see this overall growth in margins expansion has good for Sanitaryware, faucets and tiles. The EBIT margin has grown by almost 1.64%. There has been some drop in the margin on the pipes business because of the fluctuations. Could you please share the numbers as in what was the pipes margins in 4Q FY21 versus 4Q FY22? I am giving you year-on-year rather than the quarter because quarter has been too much of a up and down. I need year-over-year itself for 4Q FY21. Basically, last year this is when I am talking margins for sanitaryware, faucets as well as pipes. These are excluding the
Q
It might be repetitive. What were the gross margins and EBITDA margins for pipes divisions specifically?
Sandeep Sikka
I have given the EBIT margins last year, so we do not disclose gross margins and the EBITDA margins. So, because the segmental reporting is an EBIT level, we have already disclosed EBIT level numbers for both sanitaryware & faucets and pipes separately.
Q
My question was on the debt. A little while back you clarified on the debt for Brilloca. I wanted to understand on a consolidated level, when I look at the balance sheet right now, we have I think Rs. 140 odd crore of debt and if I look at the presentation and the disclosure that you have for pending consideration to be settled for the manufacturing business that we are taking over; I think Rs. 590 odd crore need to be paid. That would get added to the Rs. 140 crore that we have right now, right?
Sandeep Sikka
Yes. And we would end up with around Rs. 725-730 crore of consolidated debt? Not that because we will earn some profits also. It is not that we are getting 100% via debt. So, if you see we had said that the total acquisition size was odd Rs. 700 crore. We had almost around Rs. 100 crore in our kitty. So, incremental debt was Rs. 600 crore. The parent Company was using a debt of odd Rs. 130 crore-140 crore. I am giving broader numbers here. When I gave a figure of Rs. 550 crore to 560 crore as of 30th June, 2022 target bank utilization, which is both the term loan as well as the working capital
Q
How much price increase we have undertaken in building products over the period of last year and any price increase we are planning for the upcoming month? And also, since I want to understand the working capital as well. Can you bifurcate this is the sales days and the payable days and the inventory days we are sitting up on it.
Sandeep Sikka
If you see the full weighted average impact during the financial year for sanitaryware and faucets is odd 15% but if you see the price hikes, there has been four price hikes on the sanitaryware, another two to three price hikes on the faucets and this was SKU-by-SKU. But if you quantify this whether I think the overall price increase should be ranging between 25% to 30% of the impact if you take on a particular set of 7 days as compared to the 7 days of the previous financial year. But the impact of this will come in forthcoming quarters as such. As Sudhanshu already told like since the price
Q
Just wanted to ask you on the pipe division itself. If you can give what was the geographical revenue mix for pipe divisions if possible?
Sandeep Sikka
Rajesh can you take that question. See since we are just 3 years old into the market precisely, but we have been able to target PAN- India markets. Predominantly when it comes to CPVC category, we are very strong in Southern part of India, Northern part of India and Western to a certain extent, East it is a little bit new, we are yet to open because we have our capacity constraints at the moment otherwise geographically, we are there PAN-India. Great. First of all, congratulations on having a fabulous growth on the volume side. So, what kind of, where we will be targeting to increase our prese
Q
I have a follow-on question. If all else was equal and I am just trying to put FY23 in perspective. Because of the debt increase on one side and the margin attribution to the manufacturing business coming on the other side. Can we believe that FY23 the margins would squeeze because of the manufacturing?
Sandeep Sikka
We will have addition to the EBIT margin because many people, they are comparing the margins of AGI Greenpac which got impacted with COVID margins. So, if you net off that since our model for sourcing from this was on a cost-plus basis at the EBIT level which was 4.5% for this working value for the sanitaryware & faucet and 3.5% for the pipes. That EBIT will definitely get added so it will value accretive, it is not that it will erode the EBIT value.
Q
We would like to thank the management of Hindware Home Innovation Limited for giving us the opportunity to host the call, also to all the participants for attending the call. Thank you and over to you sir.
Sandeep Sikka
Thank you. I thank everybody who are attending the call. I think it got disconnected in the middle for few seconds, but I hope we have been able to answer most of your queries. If you have any other queries you can get back to CDR India and we will be happy to respond to the same. Thank you very much.
Q
1. This transcript has been edited for readability and does not purport to be a verbatim record of the proceedings. 2. Figures have been rounded off for convenience and ease of reference. 3. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Hindware Home Innovation Limited (Formerly Somany Home Innovation Limited)
Management
Speaking time
Sandeep Sikka
51
Pritesh Chheda
21
Sudhanshu Pokhriyal
14
Moderator
13
Sonal Minhas
13
Nikhil Gada
10
Rahul Picha
9
Rakesh Kaul
7
Rajesh Pajnoo
5
Puneet Khanna
5
Advertisement
Opening remarks
Vinit Gala
Thank you. Good afternoon, everyone. On behalf of Monarch Networth Capital, I welcome you all to the Q4 and FY22 earnings call of Hindware Home Innovation Limited. We are pleased to have the Senior Management Team of the Company represented by Mr. Rakesh Kaul – CEO and Whole-Time Director, Mr. Rajesh Pajnoo – CEO of the Pipes Business, Mr. Sudhanshu Pokhriyal – CEO of the Bath Business, Mr. Sandeep Sikka – Group CFO and Mr. Naveen Malik – CFO of Hindware Home Innovation Limited. I would like to handover the call to Mr. Naveen Malik for his opening remarks. Over to you sir.
Naveen Malik
Thank you. Good afternoon, ladies, and gentlemen and a very well welcome to Hindware Home Innovation Limited’s Q4 and FY22 earnings call. I am joined today by Mr. Rakesh Kaul – Whole-Time Director and CEO Hindware Home Innovation Limited, Mr. Sudhanshu Pokhriyal – CEO Bath Business, Mr. Rajesh Pajnoo – CEO, Pipe Business and Mr. Sandeep Sikka – Group CFO. I would like to remind all participants that some of the statements or comments made on today's call may be forward-looking in nature. These may include but are not necessarily limited to financial projections or other statements of the Company’s plans, objectives, expectations, or intentions. The Company disclaims any obligation to update these forward-looking statements to reflect future events or development. Kindly refer to Slide No. 2 of the earnings presentation for a detailed disclaimer. Before I begin the discussion for our quarterly performance, I would just like to discuss two significant recent developments. First, our Comp
Sudhanshu Pokhriyal
Thank you Naveen. Good afternoon, everyone, and a very warm welcome to all of you. Before discussing the performance of the year, I would like to talk a bit about the acquisition of the building product manufacturing business. This transaction ensures we have better control over the supply chain, provides us with requisite scale to deliver consistent growth going forward and you will see the contribution to our margins from Q1 FY23 onwards. Our Sanitaryware and Faucet segment continues to outperform the market and registered one of the best performances during the year and the quarter. In FY22 revenue stood at about Rs. 1,190 crore registering growth of 38% and in Q4 FY22 revenue grew by about 12% year-on-year to Rs. 345 crore. We have been able to deliver strong quarter-on-quarter results on the back of new product innovations, strengthening our distribution network in Tier-II and Tier-III markets, enhance the brand salience, a booming the real estate and renovation market demand. Goi
Rajesh Pajnoo
Thank you Sudhanshu and good afternoon, everybody. In FY22, our Plastic Pipes and Fittings business reported the sales of Rs. 606 crore. registering a growth of 51% year-on-year and in Q4 FY22 business grew to Rs. 205 crore, registering a growth of the 36% year-on-year. I am happy to report that we continue to be the fastest growing brand in India in this segment owing to the widespread popularity of our brand and the high quality of our product. Aligned with our Company’s exponential growth strategy, we continue to tap into newer geography. Thus, the Board of Directors had approved an investment of ~Rs. 180 crore towards setting up a new manufacturing plant for the plastic pipes in Roorkee, Uttarakhand with an initial manufacturing capacity of 12,500 metric tons per annum. Our capacity expansion at existing Isnapur plant that is in Telangana is expected to be completed by 31st December ‘22. With this our capacity will increase from 35,000 metric tons to 48,000 metric tons per annum. I
Rakesh Kaul
Thank you Mr. Pajnoo. Good afternoon, everyone and thank you for our Q4 and FY22 Earnings Call. For FY22, Consumer Appliances business revenue came in at Rs. 431 crore and for the quarter our revenues stood at Rs. 121 crore. The quarter performance was largely subdued given the challenging operating environment. Elevated raw material prices and overall inflationary trend moderated the demand sentiments during Q4. E-commerce sales were also much lower during the quarter in line with the overall trend where in the e-commerce industry in general, actually, saw a dip in demand due to supply chain constraints, higher costs and lower demand. We had undertaken price hikes in calibrated manner during the year and the quarter to counter the impact of higher input costs. However, we believe we will be able to see the benefits of this strategy over the coming quarters. We will continue to focus on introducing innovative led products in the market to ensure we cater to the increasing needs of our
Advertisement
← All transcriptsHINDWAREAP stock page →