Shalimar Paints Limited
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103turns
10analyst exchanges
3executives
Management on call
Rasika Sawant
ORIENTAL CAPITAL
Ashok Kumar Gupta
MANAGING DIRECTOR, SHALIMAR PAINTS LIMITED
Mohit Kumar Donter
CHIEF FINANCIAL OFFICER, SHALIMAR PAINTS LIMITED
Key numbers — 40 extracted
Rs.111 Crore
October yes that is forward looking, but for September if I talk about we closed the topline with Rs.111 Crores which was in line with the previous quarter of this financial year which was Rs.110 Crores but f
Rs.110 Crore
e with Rs.111 Crores which was in line with the previous quarter of this financial year which was Rs.110 Crores but from last year if we talk about we have grown by 22% in the quarter. Last quarter we closed
22%
this financial year which was Rs.110 Crores but from last year if we talk about we have grown by 22% in the quarter. Last quarter we closed with Rs.91 Crores. If I talk about H1 that is we have clos
Rs.91
Crore
from last year if we talk about we have grown by 22% in the quarter. Last quarter we closed with Rs.91 Crores. If I talk about H1 that is we have closed with Rs.221 Crores that is 41% growth from the previo
Rs.221 Crore
quarter. Last quarter we closed with Rs.91 Crores. If I talk about H1 that is we have closed with Rs.221 Crores that is 41% growth from the previous year in half year against Rs.156 Crores. Cost is 75% becaus
41%
we closed with Rs.91 Crores. If I talk about H1 that is we have closed with Rs.221 Crores that is 41% growth from the previous year in half year against Rs.156 Crores. Cost is 75% because raw mater
Rs.156 Crore
we have closed with Rs.221 Crores that is 41% growth from the previous year in half year against Rs.156 Crores. Cost is 75% because raw material prices are better from the last year but yes from the previous
75%
.221 Crores that is 41% growth from the previous year in half year against Rs.156 Crores. Cost is 75% because raw material prices are better from the last year but yes from the previous quarters more
2%
vent-based commodity was on the higher side that is coming on the lower side but yes we are up by 2% during the quarter vis-à-vis the previous quarter so last year we closed gross margin of 22% wher
25%
er so last year we closed gross margin of 22% whereas in this quarter we closed gross margin of 25%. Employee cost as well as the other fixed costs are in line with the same vis-à-vis last quarter
11%
he other fixed costs are in line with the same vis-à-vis last quarter as well as the last year so 11% is employee expenses which was same in the last quarter and better off from the last year same qu
12%
penses which was same in the last quarter and better off from the last year same quarter that was 12% and fixed cost has remained 19% in previous quarter and 17% this quarter so it is better
Guidance — 20 items
“Ashok Kumar Gupta: Actually we do have, we have a plan of action for increasing our sales so currently if you observe we have been targeting growth of around 30% to 35% year-on-year and again looking at 30% to 35% growth over the last year that is the number for current year and in the next two years also we hope to continue with this growth momentum so our plan is that each year with this base figure of 21 - 22 we should be growing anyway between 30% and 35% year-on-year.”
“Going forward we would be increasing our capacity size 70% to 75%.”
“On the same note Sir if I look into FY2024 we are expecting may be grew around this Rs.30 Crores on the base of Rs.500 Crores so how much do you think from the Rs.650 Crores can accrue from infra market going forward say second half in the next year as well?”
“We are working on that, we are working with them, we are working closely with them and I am sure their contribution will grow significantly in the days to come but it is not only the numbers actually they are helping us in a number of ways.”
“Infra market sale is projected only what we get through them which could be limited but the assistance in the prices and the support we are getting from them is much higher because in many cases we will be billing directly to the customer as well.”
“My question was how is the hiring like quite different verticals in the sales and marketing, the R&D how that has been shaped like in a few quarters and how do you foresee the growth going forward like by the change of team that is happening since a few quarters so if you can give some color on the same it will be really helpful?”
“So when it comes to the infrastructure starting from dealers to distributors to new formats distribution and as you mentioned about depots going forward we will definitely edge because we are venturing into new markets and we are expanding our horizon, we are getting into new territories, we are expanding the footprint in the market place so with that whatever infrastructure requirement will be there be it in terms of depots, be it in terms of our stock funds we will create.”
“what this statement meant so if you could please help me understand this it will be great?”
“We will be spending I think close to some Rs.70 to Rs.100 Crores on that in the next couple of years and that should be sufficient to give us the first push in terms of upgradation.”
“For this capex we will be required to raise debt right because right now we are sort of burning cash so what would be our outlook on the debt and the balance sheet?”
Risks & concerns — 2 flagged
These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
— Rasika Sawant
When it comes to paint industry, painters and dealers play a vital role in terms of the brand recognition, brand education so they recommend which brand to use and which not to use so we understood our weak areas and weak links and we started working onto that.
— Kuldip Raina
Q&A — 10 exchanges
Q
Congratulations on a great set of numbers Sir, so Sir what I broadly wanted to ask is you guys have any internal projections for say two or three years down the line in terms of revenue, bottomline whatever numbers that you guys have projected internally? Ashok Kumar Gupta: Actually we do have, we have a plan of action for increasing our sales so currently if you observe we have been targeting growth of around 30% to 35% year-on-year and again looking at 30% to 35% growth over the last year that is the number for current year and in the next two years also we hope to continue with this growth
Manan Poladia
Right Sir also based on current capacities what is the utilization level? So overall it is around 55% to 60%. Going forward we would be increasing our capacity size 70% to 75%. Having said that we are also planning to install certain equipment which will enhance our capacity so we are not paying too much attention to the capacity part of it because we have capacities for future, we are booking aggressively for future and the important part is in case our sales, our volumes, our incomes continue to grow around 30% to 35% I think we are set for a good future. Right Sir thank you for that. I have
Q
Thanks for the opportunity. Firstly congrats on a good set of numbers. My first question is Sir in the current quarter of Rs.111 Crores how much did we accrue from our partner infra market?
Ashok Kumar Gupta
Infra market is around Rs.5 Crores to Rs.6 Crores. Okay the majority 97% to 98% majority accrued from our own expansion and price hikes also may I know the volume growth this quarter? It is around 10% to 12% that is year-on-year. 10% to 12% so there is some product mix change as well for us in Q2? Ashok Kumar Gupta: Kuldip, what is the volume growth year-on-year for the quarter? So for the quarter it was 12% and if you look at year-on-year it is 22%. So there is some product mix change in line. Continuing on the first participant’s questions you were actually saying you are looking at 30% to 3
Q
My question was how is the hiring like quite different verticals in the sales and marketing, the R&D how that has been shaped like in a few quarters and how do you foresee the growth going forward like by the change of team that is happening since a few quarters so if you can give some color on the same it will be really helpful? Thank you. Ashok Kumar Gupta: Definitely we will make it completely colorful so there are four different parts of hiring. One is the senior leadership team which normally consists of people who are team leaders in each of the function, second is hiring for sales and m
Kevin Gandhi
Okay Sir thank you that was helpful. Thank you.
Q
Thank you Sir. Sir could you please help me understand how things are standing out within the quarter for both the segments for industrial and decorative in region wise in the East and if they are growing anywhere else? Ashok Kumar Gupta: Okay let me give you a brief of what is happening but before I give a brief my Director of Sales Mr. Kuldip is on the call I think he can explain to you in detail both on the industrial front and decorative front and each other’s role for different fronts and how things are shaping. Kuldip please.
Kuldip Raina
In terms of between the two segments decorative and industrial if you see our growth on a half yearly basis are almost the same but we found a very great attraction during Q2 in industrial business because due to extended rain and all the decorative business was a bit impacted and there were two reasons to this. If you look at every year between monsoon and Diwali if you have the longest period of time decorative sales will peak but which happened the other way around this time in terms of the shorter period between Diwali and monsoon ending so there was a little bit of lull in terms of decora
Q
Thank you for the opportunity Sir. Congratulations for good numbers. Sir the first question is so you just mentioned 6000 to 6300 dealers so I would like to understand how many of them are active because you have mentioned that around 3000 were active in the past so what would that number be right now?
Kuldip Raina
Dealers number as you mentioned out of 800 there are 500-560 who have come up new across the table so we are currently at 3300 to 3500 because in the industry you will see that there is a depletion also every year at least 4% to 5% gets depleted as far as the number is concerned so effectively if you see out of 800, 500 to 550 are active dealers. Okay got it. Sir second question is so we were planning to do some balance capex and technology upgrades and have we finalized the plans for that and the capex amount that we require? Ashok Kumar Gupta: We have worked something on that so we are looki
Q
Good evening Sir. Picking up from one of the last questions you mentioned that we are hopefully targeting to reduce the cash burns and I wanted to understand some more on that perspective from the cash flow I see like on the balance sheet we have much like our cash and bank balance is down by almost half and investing in cash flows are also a bit higher so can you just let us know what has happened on that front?
Ashok Kumar Gupta
Two things one is the cash burn so going forward we are hoping that cash burn will not be there. The second part is where does the cash which we have in the balance sheet it goes so basically we have generated cash to do some working capital and about Rs.5 Crores to Rs.10 Crores which has gone primarily for capex and other some Rs.45 Crores to Rs.50 Crores which has gone to payment of term loan and all the money has gone for working capital only. But the inventory days are I think reducing so I am not really clear as to how? So in absolute terms inventory is higher but yes in terms of days it
Q
Thank you for taking my question. My question is a followup on what the last participant asked on the debt profile of the company and we get half yearly numbers so if I look at the September 2021 which is last year same quarter end’s debt figure it was about Rs.150 odd Crores in the interim over the last three quarters we have raised about Rs.252 odd Crores we have ended the quarter again with a net debt of about Rs.14 odd Crores now there is clearly some gap which has been on account of working capital that you rightly mentioned so what is the main components of this working capital especiall
Mohit Kumar Donter
Let me take your last question first so our interest cost because the surplus funds have been parked in FD and that is not in the other income line item but yes as you rightly mentioned that the majority of the interest part is in terms of OCD’s interest it incurs that is at 9% coupon rate and the second one is our term loan which is with IDFC and few ECLGS loans right at the weighted average of around if I talk about it is around 11.5% to 12% so majority of the interest line is only on account of the term loans and very minimal charges for FD charges and the other charges. Interest across you
Q
Thank you. A good set of numbers Sir congratulations. My question is this 30% to 35% growth numbers how much is that constrained by availability of capital primarily the reason I am asking this question is because in the last five to six years we had got multiple rounds of equity which helped us in both capex as well as our working capital funding but obviously there cannot be multiple new rounds of equity release so will that affect the 35% aspiring growth that is question number one, essentially what I am asking is the growth at which you are expecting the gross margin to expand which will g
Ashok Kumar Gupta
So you are right that we had multiple rounds of funding. Now here again I will compare paint industry is capital intensive so if you see anybody in the industry normally they do not invest in hundreds they invest in thousands and we have been investing which can be lower number as compared to the industry peers most of the people have been investing couple of thousands, Rs.2000 Crores, Rs.3000 Crores, Rs.5000 Crores and we have been talking of Rs.100 Crores to Rs.200 Crores. We have may have 2-.3 series of funding but Rs.50 Crores and pay around Rs.190 Crores and followed by this current fundi
Q
Sir just wanted to understand currently out of 3800 dealers you said you added 800 this quarter so how many would be exclusive or rather even finally dealers of Shalimar Paints,?
Kuldip Raina
I would say when it comes to exclusive dealers there are very few. Today the industry if we look at the paint industry 70% to 75% is MBO (multi brand outlets) only so in our case also the thing is same that most of them I would say 95% of these dealers which have been opened up are MBO (multi brand outlets) and not exclusive in nature. If not the primary the secondary brand here in terms of difference so from the dealer would we generate the second highest revenue for restocking three or four brands? So I will say 10% of our dealer base if you look at we enjoy a dominant share of that particul
Q
Thank you very much everyone. I am really grateful that you all have attended this meeting and we really had a fruitful discussion and a valid discussion. Thank you very much. Be safe and stay safe.
Opening remarks
Rasika Sawant
Thank you and welcome to the Q2 and H1 FY2023 Earnings Conference Call of Shalimar Paints Limited. Today on this call we have Mr. Ashok Kumar Gupta, Managing Director along with the senior management team. This conference call may contain forward looking statements about the company which are based on beliefs, opinions and expectations as of today. Actual results may differ materially. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. A detailed safe harbor statement is given on page number two of Company’s investor presentation, which has been uploaded on the stock exchange and company’s website as well. With this I hand over the call to Mr. Mohit Kumar Donter for his opening remarks. Over to you Sir!
Mohit Kumar Donter
Thank you very much Rasika. Good afternoon everyone. I thank you very much all the investors who attend this call. So this is the time on quarterly interval when we all meet and we share the insights about the organization, how we have performed in the quarter as well YTD (year to date), so I am happy to share quarterly as well as half yearly results of your company with you. The quarter was very good. The momentum was good in the topline as well as on the raw material side during the quarter though the raw material prices are significantly increasing from beginning of the year, but yes now I believe these are softening and coming down after September and October yes that is forward looking, but for September if I talk about we closed the topline with Rs.111 Crores which was in line with the previous quarter of this financial year which was Rs.110 Crores but from last year if we talk about we have grown by 22% in the quarter. Last quarter we closed with Rs.91 Crores. If I talk about H1
Kuldip Raina
So the quarter as Mohit said has been good for us and our growth has been ahead of the industry growth as a result of which in terms of if we look at what action we have taken during the quarter we have worked aggressively on dealer expansion, we have worked aggressively on painters who kind of influence the sales in the paint industry which worked in our favor and as a result of which our emulsion sales grew by at least 94% and which helped us kind of protect our bottomline also in spite of the inflationary trends in the market place the inflation has been to the tune of 6 to 8% whereas the prices which were passed on to the market was in the tune of 3 - 3.5% only but still with this emulsion saliency going up by at least 8% to 10% we were able to protect our bottomline as such. Apart from this we have been able to as I said worked very aggressively around painter fraternity which we were able to kind of grow in terms of numbers we were able to grow by at least 50% to 60% in new paint