Borosil Glass Works Limited has informed the Exchange regarding 'Transcript of Institutional Investors and Analysts Conference Call'.
BOROSIL I cIN : L99999MH1962PLC012538
@ Borosil Glass Works Limited
Registered & Corporate Office : 1101, Crescemo, G-Block, Opp. MCA Club, Bandra Kurla Complex Bandra (E), Mumbai - 400 051, India. T +9122 6740 6300 W www.borosil.com
November 25,2019
.
The DCS- CRD BSE Limited Corporate Relationship Department 1st Floor, New Trading Ring, Rotunda Building, P. J. Towers, Dalal Street, Mumbai- 400 001
Dear Sir /Madam,
National Stock Exchange of India Ltd Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051
Scrip Code: 502219
Symbol: BOROSIL
Series: E Q
Sub: Transcript of Institutional Investors and Analysts Conference Call
We enclose transcript of conference call with Institutional Investors and Analysts which was held on November 14,2019.
You are requested to take the same on your records.
Thanking you.
Yours faithfully, For Borosil Glass Works Limited
~ e n e i a l Manager - Secretarial
Encl: as above
lBOROSIL"
An IS0 9001 Company
"Borosil Glass Works Limited Q2 FY2020 Earnings Conference Call
November 14,20 19
BOROSIL"
An IS0 9001 Company
MANAGEMENT:
Page 1 of 17
An IS0 9001 Company
Borosil Glass Works Limited November 14, 2019
Moderator:
Ladies and gentlemen welcome to the 4 2 FY2020 Earnings Conference call of Borosil
Glass Works Limited hosted by Edelweiss Broking Limited. As a reminder, all participant
lines will be in the listen-only mode and there will be an opportunity for you to ask
questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing "*" then "0" on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to
Mr. Kshitij Kaji fi-om Edelweiss Broking Limited. Thank you and over to you Sir!
Kshitij Kaji:
Good afternoon everybody. Welcome to the 4 2 FY2020 Borosil Glass Works Limited
conference call. First, I would just like to thank the management for giving us this
opportunity to host the call. On the call from the management we are joined by Mr.
Shreevar Kheruka, Managing Director & Chief Executive Officer of the company, Mr.
Rajesh Kumar Chaudhary who is a Whole Time Director & Group CFO and Mr. Swadhii
Padia who is the Chief Financial Officer. So, we will start of with management comments
on the quarter gone by and that will be followed by Q&A session, so fiuther without ado, I
will hand over the concall to the management. Thank you and over to you Sir!
Shreevar Kheruka:
Thanks, Kshitij and thanks Edelweiss for hosting this call. We would like to wish everyone
good afternoon. Thank you all for joining this call. As Kshitij mentioned my colleagues,
Rajesh Chaudhary and Swadhin Padia are joining and happy to speak with the investing
community again. Our board met yesterday and approved the W c i a l results for the
quarter and half year ended September 2019. Our results and an updated presentation have
been sent to the stock exchanges and have also been uploaded on our company's website.
I will briefly run you through the highlights of our performance and then open it up to
questions. We had a very good second quarter as well as half year and I would say industry
leading performance where we achieved a revenue of Rs.303.6 Crores, that is a growth of
21.2% over H1 FY2020. The consumer products business achieved revenue of Rs.207.5
Crores, a growth of 29.4% over H1 FY2019. During the first half of the year, the consumer
business has comprised almost over two-thirds of our revenue. Products under the flagship
brand Borosil recorded 143 sales of Rs.133.5 Crores, that is a growth of 48% over H1
FY2019. Our storage range as well as the Hydra range of To-Go products continued to
show good traction. The awareness around the h d l
effects of plastics for both personal
health and the environment is encouraging consumers to make a conscious choice in favour
of glass and high-quality steel.
In fact, our recently introduced steels of fiesh products are also receiving a very
encouraging response. Our range of kitchen appliances which we have been marketing for the last three years now, has been steadily gaining traction in the market and it has begun to
Page 2 of 17
Borosil Glass Works Limited November 14, 2019
grow into an interesting product category where we have decided to participate in the
premium niche end of the market. In the daily serving ware categov, our Larah range of
Opalware products registered a growth of approximately 6%. While the most recent quarter
has been a little bit below expectation, the flat performance is partly owing to the fact that
we had a particularly large one-time order in H1 of last year which did not repeat this year.
However, the B2C part of the business has remained quite strong and if we exclude the one-
off order, our growth percentage is comparable to what we have achieved in the Borosil
branded products.
I will be the first to say that we should not try to compute percentages with such exclusions;
however, this is what gives me and my team the confidence that we are still on track to
achieve our annual sales target for Larah. We have continued to invest in advertising and
sales promotion for our brand to strengthen long term equity of our offerings and although
we did not entirely spend our budget owing to some market conditions in the first half of
the year, we still anticipate we will be exhausting advertising and sales promotion budgets
in the second half of the year. We witnessed a growth in our consumer products division
across all regions and across all formats whether it be general trade, large format stores,
B2B, CSD as well as e-commerce. So, what I would like to say is that it was a broad-based
growth that we achieved. We registered healthy growth whether we look at channel or we
look at category of products.
In the scientific and industrial products division, our growth was 6.6% over the same period
last year with revenue of Rs.96.1 Crores. The Lab Division clocked a sale of Rs.75 Crores
with a growth of 9.4% though Borosil continues to enjoy strong market leadership in the
segment, the market growth has been tepid.
We have seen some of our customers being impacted by US FDA audits and plant closure
as a result of those orders. In addition to that, subdued funding to government laboratories
and tighter monitoring of budgets in pharma companies is resulting in some moderation of
sectoral growth. Our strategy to build additional avenues of growth through international
markets and entry into benchtop instruments through LABQUEST are extremely important
initiatives to sustain growth in the scientific products +vision. We have recognized that
both these pillars of growth need some seeding time a i ~ d have to be built systematically;
however, what I can also share is that our e x p d turnover in scientific has shown a good
traction in this year. Also our LABQUEST range of products has been accepted in more
customers in the first half of the year including premium A plus pharma accounts.
Klasspack's range of ampoules and vials is our thud pillar of growth. This vertical has
faced a few challenges over the last few quarters. We have decided to strategically focus on
meeting the specification requirements of certain potential high-quality long-term
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BOROSIL"
An IS0 9001 Company
Borosil Glass Works Limited November 14, 2019
customers. Quality assurance inspection equipment has been installed and production runs
to meet the unique specifications have been taken. Consequently, it became necessary to
restrict supply or lose some potential business in the short run. Sales of Klasspack in the
first half of the year were at Rs.21 Crores which were lower than last year by 2.3%.
Coming to margins, EBITDA fiom operations was at Rs.47.8 Crores which was about 32%
over the same period last year. The EBITDA earned by Vyline, which is a related company
was not included in the Rs.47.8 Crores I mentioned at a moment earlier, is anothsr Rs.7.4
Crores. When the amalgamation happens, this will get added to our EBITDA margins.
Larah has recorded a significant improvement in EBITDA margin to 26% from 19.2% in
the fist half of the year, this is d i n e with the objective of improving the margins in Larah
owing partly to scale beneffi and also through improvements in yields at our manufacturing
facility. We believe there is further room for improvement with rationalization of packaging
costs as well as logistic cost with the new warehouse. The EBITDA margin in Klmspack
while improved was still at approximately 8%. Work is in progress for stabilizing the
production lines and reducing wastage. We expect to be able to revert to normalized
EBITDA margins at Klasspack of about 12% during the next year.
As far as PAT is concerned Borosil registered a PAT of about Rs.35 p r e s which is a
growth of 36% over the same period last year.
In other development as you all know a scheme of amalgamation and demerger is subject to
an approval by the NCLT. The next hearing of the court is scheduled on November 21,
2019. We are hopeful that during the course of this hearing we should get a final approval.
Once done, this scheme will become effective with October 1, 2018 as the appointed date.
The scheme is a simultaneous amalgamation as well as a demerger. Upon implementation,
the consumer division and the scientific division together with operations of Vyline will get
demerged into Borosil Limited which currently houses the Opalware business under the
brand Larah. Borosil Limited would then apply for listing on the NSE and BSE and the
process could take about two to three months, although it is not in our direct control.
Coming to medium term outlook, overall, we see a multiyear growth story ahead of us. We
have been talking about it far a quite few quarters now. In the consumer product division,
1
the penetration in the category is low and there is headroom for market growth. We are also
supported by a tailwind such as a shift away from plastics. In the medium to long term,
consumers will exercise the preference for brands. Borosil will therefore continue t o invest
in brand building in order to create a strong and loyal franchise. We currently reach about
14000 retail outlets and we will look at adding about 1000 to 1200 outlets each year. More
importantly our team will focus on generating more sales fiom the existing outlets by . making more products and SKUs available through these stores. Through quick feedback
Page 4 of 17
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Borosil Glass Works Limited November 14, 2019
loops, our new product development teams have planned to introduce several dozen new
products each year. This helps to have a healthy portfolio depth at both general trade and
modem trade level. Simultaneously slow-moving SKUs are culled fiom the portfolio. Over the last two years or so, e-commerce has become an important channel for us. A dedicated
team is ensuring that we continue to grow this channel rapidly. It has been providing us
accessed to consumers in Tier 2 and Tier 3 towns. In addition, it facilitates direct consumer
feedback which serves as a vital input to the organization.
In the Lab Glassware business, we will try to maintain our market share through focus on
providing the highest quality of service and availability to our customers. In parallel the SIP division will also build out new avenues of growth - as we have already discussed - in international markets, benchtop instruments and primary packaging for pharma companies.
Our blended revenue CAGR is expected to move into the high teens while achieving higher
numbers in the immediate term. EBITDA margins can expand further as the company gets
scale benefits and overheads are absorbed over as on a larger base. We expect to improve
EBITDA margins to between 15% and 20% over the next two to three years and thereby
continue our journey of improvement in ROCE.
My team and I look forward to building a valuable business, to be consumer centric serving
our customers needs with the best value for money solutions. While we invest in growth
and long-term branding, we will also sharply focus on operating efficiencies and deriving
leverage fkom our increasing scale to improve return on capital employed. Thank you for
you patient hearing. I am now happy to take questions that you may have.
Moderator:
Thank you very much. We will now begin the question and answer session. The first
question is from the line of Prakash Kapadia fiom Anived Portfolio Managers. Please go
ahead.
Prakash Kapadia:
Thanks for taking my question. Couple of questions. On the Opalware side, why is it that
despite lower prices growth has slowdown, in your opening remarks you did mention about
the one time order, so if you could give us some insights at thy consumer levels, are new
consumers not buying, is consumer looking at melamine and sleel shift is not happening
because growth definitely seems to have slowdown?
I
Shreevar Kheruka:
As far as Opal is concerned, as I mentioned trade growth is along similar lines as it has been
in the years before, if anything trade growth has accelerated. The one time order was quite a
large one last year, which has not repeated itself. So I do not see any slowdown per se as a trend. On the question whether they are not moving fiom melamine or steel - in fact as I went to a couple of large markets just before Diwali and I could not really find much
melamine available. So I do believe that there is no shift or change in customer perception.
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BOROSIL"
An IS0 9001 Company
Borosil Glass Works Limited November 14, 2Q19
However one thing is clear, footfalls across India have been lower this year compared to
last year. In general buying has been lower there is no doubt about it and that is impacting
all categories including Opal, but I cannot say that there is any change in customer trends as
far as Opalware is concerned.
Prakash Kapadia:
What you are saying footfall that is across the country or it is north where this is the largest
market for Opalware where we are specifically seeing this?
Shreevar Kheruka:
North definitely had an impact on footfalls, but so was the South. Kerala has been impacted by two floods, two years in a row. Kerala has seen a big hit in terms of sales again in all retail counters. Even FMCG in Kerala has been impacted that is what I told. Certainly our
consumer products sales in Kerala are down because of two years consecutive natural
disasters. In the North I think the problem was different where we had Diwali which was
more tepid than the years before.
Prakash Kapadia:
At these times where you know obviously, we are seeing testing time and challenges, what
is our game plan, is it stepping up new product launch, giving the consumer something new advertising more, so.. .
Shreevar Kheruka:
Innovation has been the key; we have Iaunched lots of new shapes and sizes in Larah. In
fact we could not even launch them all before Diwali. Some will be launched this month;
some will be in coming couple of months. So as far as Borosil is concerned, w e have
launched quite a few new products as I have already mentioned in the call. Innovation is
key. You have to give the customer some reason to buy. The customer has reduced buying of just regular use items, but if you have unique products then I think people would still be interested to buy that. So in my view we have to step up innovation,
Prakash Kapadia:
Thanks. I will come back in the queue if I have more questions.
Moderator:
Thank you. The next question is fiom the line of Rishabh &om Sunidhi Securities. Please
1 , Rishabh:
go ahead.
1 t Hi Shreevar and team. This is Rishabh. Congratulations on a great set of numbers. Just had
a couple of questions. Has Jaipur warehouse started for Larah and what could be the steady
state EBITDA margin in Hopewell once all the operational efficiencies fiom Jaipur are
made?
Shreevar Kheruka:
So, the warehouse has not started. We have had some delays and some for quite fUnny
reasons, some beyond our control fiankly. The warehouse structure is up and running. The
internal part of the warehouse has been fitted out as we speak. So we expect that fiom
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An IS0 Y V W L Company
Borosil Glass Works Limited November 14, 201 9
January, we will start moving and it will be fully operational by mid-March or April. I think
we could probably squeeze another 2%, 3% out of our margins over there. So a l l things
being equal some of our competitors have EBITDA margins in the early 40s. W e have
about 10% spend in advertising may be. I have always said that we have a 2%, 3% cost
disadvantage, owing to location. Specifically energy prices are higher at our location. If we
take both these factors out then we should be able to benchmark quite closely on our
competitors who are listed in this space. We can achieve low 30s provided there is no
further pressure on selling prices.
Rishabh:
Thanks for that and also just wanted to check, what is the current gross cash and n e t cash
position?
Shreevar Kheruka:
Swadhin can you answer this please. I'll just get back to you, let me just work that out.
Rishabh:
You touched upon your appliance division in your opening remarks, what kind of
contribution would you be seeing to the consumer business Erom the planned tradition and
what kind of margin and what kind of growth opportunities do we see in these?
Shreevar Kheruka:
You asked three questions there. Firstly, we do not really share the breakup of sales, but I
think I have mentioned appliances for the first time, because now it is a meaningful contributor, okay - more than double digit percentage. The second thing is as far as margin is concerned, the margins are lower on a gross margin level than our storage or other glass
categories. But the real question, or at least how we look at is what has been the margin
expansion since we launch appliances. I can tell you that we have had decent margin
expansion in appliances over the last three years. So, we are moving at the right direction
and I think this margin expansion will continue as we become bigger in this area. The
reason we have been bullish on appliances has also been the fact that it allows you to
expand distribution. Most Tier 2 and Tier 3 towns do not require use of glass products yet.
Not to say this will not happen in the future, it will. But at the moment, mixer grinder is
much moie widely used than glass. So using appliances we have been able to increase our
distributions specifically even in Tier 2 and Tier 3 towns which will
ive us substantial
benefit in the future and I think as far as the margins are concerned, like have already told
you they are not the same as we have in glassware, but they are increding and finally the
F
capital employed in appliances is very, very low. It is basically working capital that is
employed, we are not manufacturing them. So in terms of return on capital employed I
think it is comparable to our other product categories. With the upside of being able to
increase distribution in the future and the ability to innovate in appliances in the future, I
think it is going to start looking interesting now as we look forward.
Rishabh:
Thank you.
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BOROSIL"
A n IS0 9001 Company
Borosil Glass Works Limited November 14, 2019
Swadhin Padia:
Regarding your question about the gross cash and net cash. Gross will be around Rs. 100
Crores and net will be around Rs.60 Crores.
Rishabh:
So, working capital loan is about Rs.40 Crores.
Swadhin Padia:
Yes.
Moderator:
Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment
Managers. Please go ahead.
Pritesh Chheda:
On the demerger and the merger, so what is left to get merged into the operation is Vyline
right?
Shreevar Kheruka:
The scheme is uploaded and people can read it. It is a fairly complex scheme. Vyline,
Fennel Investments and Gujarat Borosil will all be merged into Borosil Glass Works Ltd
and then immediately the consumer and scientific products division and all the relevant
assets including manufacturing plants of the same will be demerged into Borosil Limited
which is 100% subsidiary of Borosil Glass Works (which currently houses the Larah
business). BGWL which will then house only the solar business (that of Gujarat Borosil)
will be renames Borosil Renewables Ltd. Upon demerger Borosil Limited and Borosil
Renewables will have mirror shareholding. Then Borosil Limited will be listed separately
on BSE and NSE. Borosil Renewables will continue to be listed. That is the overall
scheme.
Pritesh Chheda:
And investments will be in Borosil Limited?
Shreevar Kheruka:
Borosil Limited will have some cash which is what we just discussed gross Rs 100 crore
and net Rs 60 crore.
~ r i t e s h Chheda:
Okay, second from the results perspective, what is driving the growth rate in Borosil
glass, 47% growth rate that we had seen in the half year in consumer business?
~hreebar Kheruka:
As I had mentioned it is a broad based growth, we are growing across all our product categories as well as across all our channels. I cannot say any single channel or any single product has driven this, it is a very broad based growth and principally it is our team that
4
1
is driving the growth.
Pritesh Chheda:
Okay, lastly, I just want to know on the Klasspack side for the growth and the margins,
why such deviations?
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An 150 YUUL Company
Bo~.osil Glass Work Limited November 14, 2019
Shreevar Kheruka:
Frankly it is a story of two separate things. One is that we have had a substantial growth
in A plus customer which means top pharma accounts. Our sales to them have increased
substantially. At the same time, we have chosen in many cases to give up, let us call it the
C class pharma customers that we had, who were either not profitable for us to sell to or
have been challenging in terms of working capital cycle with them. So this has been one
of the driving factors for sales to not have grown. As far as margins are concerned,
EBITDA margins have improved somewhat by couple of percentage points, but it is not up to our expectation. That is coming mainly fiom - we have upgraded our plant and equipment in order to cater to these A plus pharma customer which also include things
like camera inspection and much more rigid inspection techniques which have resulted in
higher wastage. This has been a smaller contributor to out issues at Klasspack, because
we are getting better and better every month in that. I would still say we need to increase
the sales, our key challenge is to further increase our sales to the pharma A plus
customers. We see that is happening, we absolutely think that is going to happen in the
coming few months. When that happens, we will achieve the EBITDA guidance w e have
given.
Pritesh Chheda:
Lastly just two more questions one I just want to confii, the final share count post the merger, demerger will be about Rs. 1 1.54 Crores shares?
R K Chaudhary:
Rs. 1 1.40 Crores.
Pritesh Chheda:
And would you be able to take the question on consolidated numbers as to why the float
glass margins are declining?
Shreevar Kheruka:
There will be call later today, on Gujarat Borosil, at 5 p.m. so that is a detailed
discussion, so the team will be able to explain that.
Pritesh Chheda:
Thank you.
Thank you. The next question is h m the line of Sridhar Rallabandi an
Moderator:
Sridhar Rallabandi:
Inve tor. Please go ahead.
i
Thanks for taking my call. Congratulations on the good results. I have two questions,
what is the capacity utilization of plants across the various segments that you have got
and do you have any capex plans coming up within the next two years?
Shreevar Kheruka:
As far as the capacity utilization is concerned, it is a very difficult question to answer, because we have many different product categories and in most cases, we are able to
increase our sales without really adding any new capex. For many of our production
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Borosil Glass Works Limited November 14, 2019
units, the same unit can produce multiple product categories, so you can always switch
from one to the other, so it is a very challenging question to answer, but safe to say
except for Jaipur, where we have a plant which only produces Opal glass under the Larah
brand, where we are today probably about 80%, 85% capacity utilization, the rest of the
plants have enough capacity because the capacity is fungible across various product
categories. Coming to the next question on capex plans, frankly at the moment w e have
done a lot of things in the last few years in terms of expanding into new categories and
new ventures. At the moment we do not have any aggressive capex plans. That being said
we will see through the end of this year, how things pan out and then take a call. The only
place where there could be substantial capex could be in Larah, but at the moment there
is no clear plan to do that.
Sridhar Rallabandi:
Okay, just one more question, the share of Klasspack with BGWL is now 77% where is
the rest of the 23% owned?
Shreevar Kheruka:
We had acquired this company from the family in Nasik, who used to own 100% of it,
they continue to own 23% of it. At that time we acquired 60% and they owned 40% and
then over a period of time we have increased our shareholding to 77%, and they
continued to own the balance.
Sridhar Rallabandi:
And regarding the Opalware traction, are you happy with the traction you are achieving
or you are seeing it should be better than this?
Shreevar Kheruka:
Frankly I would have like to see a higher growth number than this. We had said that IS%, 20% is what we would have like to see, but like I said that one off order that we got last
year, did not repeat. Yet I am still reasonably confident we should be able to achieve it
through the end of the year; it is going to be tough, but I think we can do it.
Sridhar Rallabandi:
Many thanks.
Moderator: 1;
Arpit:
Thank you. The next question is from the line of Arpit from Systematix Portfolio
Management Services. Please go ahead.
I I
In the consumer business are you seeing sign5cant
growth, I just wanted to understand if
you can give some color that one of the key drivers of growth which products you are
seeing more growth, the initiatives you have taken in the last few quarters, how is that
panning out, so if you can just give some color on that?
- Shreevar Kheruka:
Like I said before. Our growth has been quite broad based, In general a11 our regions we
are in high double digit growth percentages. So I cannot see that any one region as far as
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An IS0 9001 Company
Borosil Glass Works Limited November I#, 2019
trade is concerned, has grown at very high percentage compared to another region, all are
in the same ballpark. Second is even if I look at the e-commerce channels, they all are
growing quite well. If I have to pick, our new product introductions have grown faster
than traditional categories. There is no doubt about that. New products have done
exceptionally well and I think that is to do with quality of product. Starting from there to
improvements in our distribution and of course our people are quite passionate about
selling these products, So if I have to really choose I would say that the biggest
contributors come from some of the new verticals that we have launched whether it be
storage or appliances in the last few years. It is not that our traditional product lines have
not grown. Traditional product categories also have grown well. So I am quite pleased
about the quality of our sales performance. It is quite reassuring that it is not owing to any
one factor and it is owing to broad variety of factors which means that it is repeatable and
we should be able to sustain our numbers.
Arpit:
Larah obviously growth has been little tempered, so how much of that you attribute to the
slowdown or do you think there is some scope for us also to push growth faster?
Shreevar Kheruka:
There is some scope in Larah. We have definitely underperformed in a couple of regions
where we would like to perform better. So that is on us. Overall the market has been
slower. Specifically large format stores have not grown as much and we have also in fact
held back on some sales because of working capital. We do not want outstandings to go
haywire, so we have also held back. Could growth be better? Yes I think so. I cannot put
a number on how much the lower footfalls have contributed, but I would have expected at
least 15% growth in spite of the one-time order loss.
Arpit:
You see that is happening in the second half right, your confidence?
Shreevar Kheruka:
f es, my confidence is based on my team's confidence, so my team is confident, I guess I
am confident.
Arpit:
Romil Jain:
My colleague Romil has a couple of questions.
One more question on the distribution sides, modem retail 1. com and CSD, they
contribute almost 40%, 45% so just want to understand what kind of arrangements for
working capital is there, we have some pricing power, they are more aggressive, some
color on that please?
Shreevar Kheruka:
So in general, e-commerce is not an issue at all. E-com pays in 30 or 45 days. so e-com I
do not see much of a challenge. There are some large format stores groups who I would not like to name on the call, but I am sure people know who are fairly cash trapped and it
Page 11 of 17
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Borosil Glass Works Limited November 14, 2019
is a challenge for them. For those companies we have certain terms which we do not
wish to deviate from. So in that sense we have not been able to hlfill or place our
products in their stores primarily because we are not confident about having too much
outstanding over and above our credit period to them, so we held back. I am talking
specifically about large formats stores and that was also just couple of chains. So that has
definitely impacted growth. Ever since we have been reading about the slowdown and
cash being difficult people are not getting loans and basically cash flow being a
challenge, we have been conservative in terms of whom we sell to. I am quite happy to
see in spite of two years now of fairly high growth, we have not seen any substantial
increase in any challenging accounts or let us put it another way, our receivable days
have not increased too much at all, well within control.
Romil Jain:
Last question on advertising, so just wanted to understand what kind of proportion in
advertising is there on the consumer business as well as on the Larah business, so where are we kind of marketing more and if you can just give number on a percentage to sales?
Shreevar Kheruka:
We have already maintained that we invest about 10% of our revenues on marketing.
That is for both, consumer plus Larah meaning the entire consumer division. This first
half has been slightly lower than that 10% number, but that also is because in many cases
we felt that when footfalls are so low, just advertising may not give incremental sales. So
we decided to hold back, but through the end of the year I still think we will end up in our
budgeted ballpark. So, I have not changed our thought process towards advertising at all.
We will see tactically if things pickup in the next four, five months maybe we will do
another burst at that time.
Romil Jain:
May be two, three years down the road our numbers can start coming down?
Shreevar Kheruka:
Of course, so the 10% is for now. We have given guidance that once the company
achieves a certain scale, may be like Rs.1000 Crores of revenue in consumer, the
percentage may reduce to between 5% and 7%. So I think we can expect a 3% to 5%
reduction in the advertising as a percentage of our revenues in the
ture.
Romil Jain:
1
Thanks so much and all the best.
f ' b
Moderator:
Thank you. The next question is from the line of Naitik Mody from OHM Portfolio.
Please go ahead.
Naitik Mody:
Could you give us some sense on the Borosil Glass Works growth in terms of value and
volumes?
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Borosil Glass Works Limited November 14, 2019
Shreevar Kheruka:
The value had been already shared in the presentation.
Naitik Mody:
I am saying how much of growth has been through price increase and how much has been
the volume growth?
Shreevar Kheruka:
In f a t this year it is prdty much all in volume frankly. We have not really increased
prices across the board. If anything, in order to facilitate sales, there may have been a
couple of percentage of reduction in pricing. So I think almost all the growth is volume
growth.
Naitik Mody:
In terms of competition within the Larah product category, are we sort of gradually
closing the gap for the leader in terms of the end consumer price?
Shreevar Kheruka:
I think it is already closed. I do not t h i i the gap is more than 1% or 2% and I have
maintained this, you can prove me immediately wrong by going to a store. It will have
some other brand at a higher price than us and then you go to another store in a different
location or another store 100 meters away from that store that you will find a different
pricing. In terms of the MRP obviously various brands are priced the same. But discounts
being offered may be different. So it is very challenging to say who is higher and who is
lower because it differs from store to stores. It is different from product to product. But I
would say if I take overall gross basis the total revenue divided by total tonnage, I think
we are more or less there. I do not think this is much of a gap any more.
Naitik Mody:
Okay and how is the competition you are facing fkom Cello?
Shreevar Kheruka:
Cello is the strong competitor. They are very well entrenched in the market for many years, they have a big range of products, they have deep pockets. So there are a strong
competitor. Overall even LaOpala is the same way right, they are very strong, they have
been the in the market for long time in the Opal categories. So we are fortunate in the
sense, that we have two good competitors which are companies who have been around ,for a while, so in that sense it is better to have organized competition th unorganized. are quite happy, we are all working towards expanding. Rs.150 Crores. Rs.200
j ~ e
Crores of revenue per player does not make for a very large market. So I think it is in our
r
joint interest to expand the market and that is good for everybody our customer also, our distribution also and for us also. I do not t h i i we are stuck there. Our chief competitor is
frankly plastic and melamine and that is who we want to substitute not each other.
Naitik Mody:
Is it not that Cello has been the reason probably for slowdown of growth for us?
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Borosil Glass Works Limited November 14, 201 9
Shreevar Kheruka:
I do not like making excuses because our competitors will keep doing what they need to
do in order to achieve whatever their objectives are. We cannot go by that and w e cannot
blame others for our slowdown if at aU there is any. We have to find ways to overcome
that.
Naitik Mody:
Okay and lastly on Klasspack, what can normalize margins be?
Shreevar Kheruka:
12% EBITDA is what our initial target is, once we hit that then we will have to relook.
May be we could achieve mid-teens over a couple of years.
Naitik Mody:
Thank you.
Moderator:
Thank you. The next question is &om the line of Binoy Jariwala from Sunidhi Securities.
Please go ahead.
Binoy Jariwala:
Could you just help me how was the festive season and can you sustain this 40% growth
in consumer business?
Shreevar Kheruka:
Last year we did 40% plus too and somebody asked the same question last year. It
seemed impossible, but this year we are still doing it, so never say never. We want to
sustain it of course, but practically I do not think it is feasible that over two, three, five
years, you can sustain this growth rate. We have given a guidance of 15% to 20% which
was the mid-term guidance. I think we can certainly sustain that in the shorter end of the
curve we will be higher. May we can we do 25% for the next three years, I would hope
so. I think 40% plus is perhaps pretty aggressive and I am not sure that we can do that. As
far as festive season is concerned, I do not need to tell you. You can read in the papers. It
has been pretty average, it has not been great, but I guess we will see which companies
can outperform even when the market is not that great. We are quite small. we should be
able to perform better than the market.
Binoy Jariwala:
So, this 25% growth that you are hopeful for the next two, three years or so, is for the
Shreevar Kheruka:
intire consumer business right which includes Larah? ! I In Larah, we will have a problem of capacity at some point where we will not be able to
! I
grow beyond our current capacity unless we find some alternative model. I think the
overall business can grow at that rate, but in order to grow Larah at that rate we will have
to fmd an alternative model which I do not know the answer to at this stage. For the
Borosil branded consumer business definitely 25% can apply. Larah may be for another year-and-a-half we can grow at that pace at which point we will run out of capacity. Then
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Borosil Glass Works Limited November 14, 201 9
we will have to find some solution for that, which I do not have an answer to at that
moment.
Binoy Jariwala:
My last question was how should we look at the margins in the standalone consumer
business?
Shreevar Kheruka:
We do not share that sony, but they are definitely improving substantially, but we do not
break that up.
Binoy Jariwala:
Thank you.
Moderator:
Thank you. The next question is from the line of Naveen Bothra an Individual Investor.
Please go ahead.
Naveen Bothra:
Regarding the last year Diwali was in November and this year it was in October, so is
there any spillover to this quarter festival sales and all these things, all have been booked
in the September quarter?
Shreevar Kheruka:
Defmitely that is a very good question. I think almost 10, 15 days of festival sales have
come forward, so to that extent, the growth is slightly higher meaning, the growth number has had the benefit of these earlier Diwali sales. Once 43 ends, then the normalized growth numbers will be seen, but I think that is absolutely right,
Naveen Bothra:
Festival sales had already become in second part?
Shreevar Kheruka:
Not all, but may be 10 days of festival season.
Naveen Bothra:
Second question regarding overall advances have gone up in the asset side current and
noncurrent loans, so if you can throw some light on this whether it is investment in
Klasspack or in the Larah division?
Shreevar Kheruka:
Rajesh, can y$- L-ke this?
R K Chaudhary:
You are talking about the loans
Naveen Bothra:
Yes, total loans last year were about Rs.269 Crores and this year it is Rs.297 Crores at the
current and noncurrent both.
R K Chaudhary:
The regrouping basically, if you add both the number together then we will find the
numbers are more or less similar.
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A n IS0 9001 Company
Borosil Glass Works Limited November 14, 2019
Naveen Bothra:
It is Rs.28 Crores higher than last year, because Rs.205 Crores was the last year noncurrent and this Rs.64 Crores was the noncurrent and this year it is Rs.45 Crores in
noncurrent, total Rs.205 Crores and Rs.252 Crores in current assets, Rs.28 Crores higher
than last year?
R K Chaudhary:
This is an ICD to our subsidiary, Borosil Limited ( Larah).
Naveen Bothra:
Not to Gujarat Borosil?
R K Chaudhary:
Not to Gujarat Borosil.
Naveen Bothra:
Thank you, about the inventory level also has gone up by Rs.25 Crores, so these are the
likely to be normalized inventory?
Shreevar Kheruka:
As you mentioned because of Diwali being a bit earlier this year, we had to build up more inventory* so I think we will normalize it by March
Naveen Bothra:
Thank you.
Moderator:
Thank you. The next question is from the line of Naitik Mody from OHM Portfolio.
Please go ahead,
Naitik Mody:
Thanks again. What is that you are doing differently and able to generate growth in the
Larah group product category whereas the leader is not growing?
Shreevar Kheruka:
I cannot comment on the leader. I have no insights in terms of what their strategies are. I
can tell you that for us I think we do not have anything different it on the product offering
or any special source from a product point of view. But definitely we have a strong team,
a loyal team that works very hard and they have good relationships. We just do the basics
and we try and stick to the basics. I t h i i that is giving us results and that is all I can say.
I really got not other answer to that question, because this has been asked before even
internally in our board and really the only answer I have is! we have a good company
culture, we put our customer at the center of whatever activities we do in our company
1
t
and I think that is playing out.
Naitik Mody:
Thank you.
Moderator:
Thank you. The next question is &om the line of Romil Jain from Systematix Portfolio
Management Services. Please go ahead.
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BOROSIL"
An IS0 9001 Company
Borosil Glass Works Limited November 14, 2019
Romil Jain:
Just a followup. I just wanted to know how much is the import content right now, s o from
whatever products we are kind of importing and selling and how will it look like?
Shreevar Kheruka:
I do not have an answer at the moment, but I think this question is best answered at the
end of the year, because six months are done. It's better to take this question u p at the
end of the year then we can show you a representative number.
Romil Jain:
Okay, thanks.
Moderator:
Thank you. As there are no fiuther questions fiom the participants, I now hand the
conference over to the management for closing comments.
Shreevar Kheruka:
Thanks all for participating and asking good questions, very appreciated. I hope with your wishes and blessings we will continue to have a good run in the coming quarters
ahead and I look forward to taking to you all in three months time.
Moderator:
Thank you. On behalf of Edelweiss Broking Limited that concludes this conference.
Thank you for joining us and you may now disconnect your lines.
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