Cera Sanitaryware (NSE:CERA) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the earnings conference call of Cera Sanitaryware 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Devresh Singh from Cera India. Thank you, and over to you, sir. Thank you, Neera. Good morning, everyone, and thank you for joining us on the earnings conference call for Cera Sanitaryware Limited for Q1 FY 'twenty seven earnings, which were announced yesterday.

0:47 We have with us today the management team comprising Mr. Vikar Kothari, CFO and Mr. Deepak Chaudhry, VP Finance and Investor Relations of Cera Sanitaryware. We will start with brief opening remarks from the management, following which we will open the call for Q and A. A quick disclaimer before we begin. Some of the statements made in today's conference call may be forward looking in nature, and a detailed note in this regard is contained in the results document that have been shared with all of you earlier. I would now turn the call over to the management for their opening remarks. Thank you, and over to you, Deepak. Thank you, Devishi. Good morning, everyone, and a warm welcome to all of you for joining us on Cera Sanitaryware Limited's Q1 FY 'twenty seven Earnings Conference Call.

1:42 I will begin by sharing a brief overview of the operational and strategic developments during the quarter, following which our CFO, Mr. Vikas Kothari, will take you through the financial performance in greater detail. CERA has made a strong start to FY twenty twenty seven with revenues growing by 19.5% year on year during the quarter. Both our sanitaryware and faucetware business developed a robust performance, contributing 4740% of our revenues, respectively. The quarter witnessed strong momentum across our core businesses with growth being predominantly volume driven. We continue to see healthy traction in the Project segment, while the Retail business carried forward the gradual improvement witnessed over the last couple of quarters.

2:35 Importantly, the growth during the quarter was broad based with both our retail and project businesses continuing to perform well. This reinforces our confidence in improving demand environment and the underlying growth opportunities across our key product categories. The demand environment continued to evolve positively during the quarter, supported by improving consumer sentiment in detail and sustained momentum in the project segment, backed by a strong market positioning across the mass and mid premium segments, diversified product portfolio and extensive distribution network, we believe Cera remains well positioned to capitalize on the significant growth opportunities within our core businesses. While the industry continued to witness elevated input cost pressures during the quarter, CERA remained relatively better placed than several industry participants, supported by its established sourcing arrangements and strong in house manufacturing capabilities.

3:38 Following the pricing revisions undertaken during March and May twenty twenty six, cumulative price increases now stand at approximately 12% in sanitaryware and 15% in faucetware. We are pleased to note that these pricing actions have been well absorbed by the market. Alongside these pricing initiatives, we continue to focus on operational efficiencies to mitigate cost pressures. This will enable us to protect margins while ensuring that we remain competitive in the marketplace. On the brand front, we recently launched a new integrated campaign, Your Moment of CERA featuring Preeti Sennan as a new brand ambassador. Her aspirational image and wide appeal across demographics make her a natural fit for the CERA brand.

4:30 We believe that the campaign marks an exciting new chapter in our brand journey as we continue to strengthen CERA's premium positioning and deepen our connected consumers. The campaign has been rolled out across television, digital and other media platforms, and we are confident it will further strengthen consumer engagement, enhance brand visibility and reinforce CERA's leadership position. One of the key developments during the quarter has been the extension of a dealer management system to the retailer loyalty program, marking another important milestone in CERA's digital transformation journey. The platform will strengthen our engagement with the channel partners by providing better visibility into secondary sales, inventory movement, and channel engagement.

5:19 It will also enable a simpler and more transparent loyalty program by providing a richer market insight for faster and better decision making. We believe that the extension of DMS to the retailer loyalty program will become an important enabler of improved execution, stronger channel management channel relationships and enhanced operational efficiency. We remain committed to adopting digital capabilities that strengthen our competitive positioning and support our long term growth ambitions. While the CERA brand will continue to remain the principal driver on our growth, we will continue to invest in strengthening our newer brands, recognizing that building enduring consumer brands requires sustained and consistent effort over several years before they establish a meaningful presence in their respective segments.

6:13 This is particularly true in the premium category where consumer trust and brand preference are built progressively over a considerable period of time. Therefore, our focus at this stage remains on strengthening the underlying fundamentals of our newer brands with a long term perspective rather than evaluating the performance of a shorter term horizon. We remain confident that the investments we are making today will create meaningful long term value as these brands progressively scale over the coming years. From an industry perspective, the challenges across the operating landscape are creating a differentiated environment with larger, more established players being able to leverage their scale and set up to deliver more efficient operations. Backed by established sourcing arrangements, strong manufacturing capabilities and efficient supply chain, CERA has been better placed to manage many disruptions across the landscape while continuing to service its customers seamlessly.

7:12 For the last few weeks and months, we have progressively reduced our dependence on the multi cluster by internalizing several key SKUs. This has further strengthened our ability to ensure consistent product availability and cater to consumer demand effectively. These industry developments have also created opportunities for us to strengthen customer relationships and expand our presence across markets. Our ability to ensure consistent product availability and reliable execution has enabled us to respond effectively to challenging market conditions, and we remain focused on capitalizing on these opportunities while maintaining a disciplined approach to growth.

7:59 Building on the launch of a new brand campaign, we are entering the next phase into the next phase of our brand building journey. During FY 2027, we plan to invest approximately INR85 crores towards brand building and marketing initiatives. These initiatives will span television, digital, social media and on ground activations to further strengthen consumer engagement and enhance brand visibility. Our focus will remain on deepening consumer connect and reinforcing CERA's position across key markets. Overall, we have made a strong start to FY twenty twenty seven and believe that the company is well positioned to build on this momentum. Supported by improving demand conditions, a strong balance sheet, continued investments and strengthening digital and channel capabilities, we remain confident of sustaining our growth momentum and maintaining our FY twenty seven revenue growth guidance of 18% to 20%.

8:58 Our focus will continue to remain on disciplined execution, strengthening our market leadership and creating sustainable long term value for all our stakeholders. With this, I would now like to hand over the call to Mr. Vikas Kothari to take you through the financial performance of the quarter. Thank you, Deepak, and a very good morning to everyone. I will now take you through a brief overview of the company's financial performance for the quarter ended 06/30/2026. Revenue from operations for the quarter stood at INR $4.86 crores as compared to INR $40.07 crores in Q1 FY 'twenty five. Before I proceed further, I would like to highlight a change in the presentation of our financial statements.

9:50 Turnover discounts, which were earlier reported as an expense are now presented as a deduction from revenue from operations. Accordingly, the reported revenue for the current quarter has been reduced by 2.5% and the revenue for the corresponding quarter of the previous year has been reduced by 3%. The previous quarter's revenues have been restated to be comparable in line with the current quarter's disclosure. It's important to note that this change has been driven by the evolution of certain dealer incentive schemes for the current scheme structure presenting the eligible incentives as a reduction from revenue better reflects the substance of these arrangements.

10:41 And accordingly, as per the requirements of in AS, we have realigned the presentation. This reduces the turnover, but does not have any impact on absolute profitability or cash flows of the company. EBITDA excluding other income for the quarter stood at INR 49.2 crores as compared to INR 53.1 crores in the corresponding quarter of the previous year. EBITDA margins stood at 10.1% in Q1 FY 'twenty seven as compared to 13.1% in Q1 FY twenty twenty six. The moderation in EBITDA margins during the quarter was primarily due to certain one time and transitional factors that are not expected to recur beyond Q2.

11:37 These included a onetime provision towards the long term settlement of the company's workers pertaining to the previous period September 25 to March 26, lower absorption of fixed costs due to reduced production amid temporary gas supply uncertainty. Additionally, while input costs increased significantly, price hikes have so far been reflected mainly in the Retail business with project contracts expected to transition to revised pricing post Q2, supporting the margin recovery in the subsequent quarters. Gas costs during the quarter remained elevated with the weighted average cost at Rs.

12:26 48.43 per cubic meter in Q1 FY 'twenty seven as compared to INR 33.17 per cubic meter in Q1 FY 'twenty six. During the quarter, gas consumption was sold 69 from Geel and 31% from Sabarmati. Overall, gas cost accounts for approximately 3.3% of the revenue during the quarter. Input costs, particularly brass, continued to remain elevated during the quarter. In response to these sustained cost pressures, we implemented calibrated price revisions across our Sanitaryware and Faucetware portfolio over the last two quarters.

13:15 These pricing actions have helped offset a part of the increase in the input cost while enabling us to maintain our competitive positioning. While the Retail segment reflected these pricing actions, the project business remained relatively insulated due to the nature of pre booked orders. Going forward, we remain focused on protecting margins while maintaining our competitive positioning. The revenue mix for the quarter was broadly as follows: Sanitaryware accounted for 47%, Faucetware 40%, Tiles 11% and Wellness 2% of the total revenue.

14:01 On a Y o Y basis, sanitaryware revenue grew by 14%, faucetware by 25%, tiles by 22%, and wellness declined by 7%. Our core categories, sanitaryware and faucetware together accounted for 87% of the total revenues. Capacity utilization during the quarter stood at 61 for sanitaryware and 96% for faucetware. For a product mix perspective, 44% of the sales were from the premium segment, 37% from mid segment and 19% from entry level products.

14:50 Geographically, Tier three and Tier one cities accounted for 38 each, followed by Tier two at 24% of sales. Profit after tax stood at INR 45 crores as compared to INR 47 crores in the corresponding quarter of the previous year. Earnings per share for the quarter stood at INR 35.15 as compared to INR 36.08 in Q1 FY 'twenty six. On the working capital front, we delivered a significant improvement during the quarter through continuous focus on inventory management and overall working capital discipline.

15:40 Inventory days decreased from eighty days to sixty eight days, receivables reduced from thirty eight days to thirty days, while payables increased from forty three days to forty eight days. Consequently, our net working capital cycle improved from seventy five days to fifty days on a Y o Y basis. This is another lever we are pushing to drive greater overall efficiency in a challenging landscape. As of 06/30/2026, our cash and cash equivalents stood at rupees $9.43 crores. For FY '27, we have planned a capital expenditure outlay of approximately INR 43 crores.

16:31 The investments will primarily be directed towards our process where brownfield capacity expansion, manufacturing efficiencies, digital initiatives and strengthening our operational infrastructure. Alongside these investments, we also have a comprehensive brand building and promotional program planned during the year to further strengthen consumer engagement and support our long term growth ambitions. We will continue to follow a disciplined capital allocation approach while investing in initiatives that strengthen both our manufacturing capabilities and our brands. Overall, our financial positions remain strong, supported by a healthy balance sheet, prudent financial management and efficient working capital practices.

17:27 Backed by improving demand conditions and our strong market position, we remain confident of executing our long term growth strategy while continuing to create sustainable value for all our shareholders. With this, I would like to go to the moderator for opening the lines for q and a. Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question.

18:13 Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and 1 to ask a question. First question is from the line of Praveen Sahib from PL Capital. Please go ahead. Yeah. Thank you for opportunity. My first question is on the, you know, the growth of 19.5% and especially in the major two segments, which are, you know, 1425%. Can you give a color on the volume growth as well? Because I understand 12%, 16% price hike, there was a mix of institution and the retail there would be a different.

19:06 So how has been the volume growth for these two major segments in the first quarter? So thank you, Praveen. Regarding the growth part, especially when we talk about the last few quarters, so the growth which is coming, it is a volume driven growth, which is continuing month on month. So if I have to make a breakup of the of the total growth, so in case of Sanitaryware, the 14% growth was there, and this 14% was largely driven by volume, which contributed around 10% and price contributed around 2%.

19:52 Since we have taken the price increase in May. So effectively, the impact of price increase will be reflecting in the coming quarters. So in Q1, it was 2% impact of price and the mix has a favorable impact of 2%. So this is... This has constituted the overall growth of 14% in case of. In case of, we have shown a substantial growth of 25%, which is further broken down into volume. Again, it's the volume led. 18% was on account of volume. 4% was the impact of price and a favorable mix of 3%. So this way, I think the overall growth of 1425% has been constituted, and the similar patterns we are seeing in the coming months also.

20:49 Good to hear that. Second question related to this is if you can give some color on the Senator and the Polyflag, sir, because those numbers are also included in these 1018% of the volume growth. So can you give us some color on that as well? And is that the product mix changes because of a Senator, you know, contribution rising? So just to give you an overall understanding with respect to Senator and Polyplus, So our overall approach will remain unchanged as far as Senator and Polyplus is concerned since these are the new initiatives. So right now, about the numbers in terms of volume growth or mix, it's difficult to tell. But the overall projections, what we have given during the year, so those projections will be there. Right now, these businesses are still in the buildup phase.

21:45 And therefore, what we believe is that it is more appropriate to evaluate their progress over a longer time period horizon rather than updating on the quarter on quarter basis. Right, sir. Last question is related to the, you know, the accounting change. So, basically, that's the... Whatever the discount in the expenses now you are booking in the sales. And, ultimately, that's actually improving your margin profile. So the guidance of 13.5% to 14 adjusting for these changes, you had made guidance for margin guidance? The impact on absolute terms would be not there because once you are taking an expense and reducing it from the revenues, your EBITDA margin remains the same in absolute terms. There would be a very slight impact on the EBITDA margin percentage because your turnover is reducing and the profits are remaining the same.

22:46 So assuming that the reduction would be in the range of 2.5% to 3%, So earlier, if you're talking about 13.5% to 14% on 100, now you'll be talking about INR 13.5 to INR 14 on INR 97. So that small change will be there. But apart from that, we remain on guidance that we have given, 13.5 to 14%. You can adjust it for this slight change. No. So the percentage terms guidance is intact. Absolute number will be very impacted. If I'm talking about the 14% on 100 rupees earlier, so now I'll be talking about 14 on 97, let's say. So 14 divided by 97 comes to something like 14 Got point four it. Got it, sir. Thank you. Thanks a lot. All the best. Yeah. Yeah.

23:36 Thank you very much. I request all the participants kindly limit yourself to two questions per participant and rejoin for a follow-up. Next question is from the line of Ritesh Shah from Investec India. Please go ahead. Ritesh, may I request a time unmute your line and proceed with your question, please? Utesha, can I request to unmute your line and proceed with your question? Due to no response, we move on to the next participant. Next question is from the line of from three sixty one Capital. Please go ahead.

24:25 Yeah. Hi, sir. Thank you for the opportunity. I just wanted to understand how much was the onetime settlement in the staff was that you booked? And what is the nature of it, the settlement? What happens is, like, the company's own workers, there is a wage agreement which is negotiated with the unions every four years. Like for the staff, you'll find that the negotiation and the merit increase keeps on happening on a yearly basis. So that typically averages in the range of 10 to 11%. For the workers, we find that the increase is not been the same manner as the staff. Typically, every four years, the settlement is entered into with the union, and that prevails for a period of four years.

25:12 So let's say you have an increase of something like 15 to 20% every four years. So that happens once at the end of the fourth year, the beginning of the first year, once the four years has ended. So suppose we have a 20% increase, it will be remaining constant for the next four years. So effectively for the next four years, the wage for the staff would remain at 120. There will be no further increases apart from another 23% kind of increase which happens on a regular basis, inflationary kind of a thing. So as of now, you can expect something like 15%, 20% kind of an impact on the basic wages on an overall basis, we'll find that 15%, 20% increases.

25:58 The impact for a year on year basis would be 5%. But as of now, it will be an increase of 30% over the wage, which was being paid to the workers earlier. So the negotiations are still going on. It is more or less being settled in May. And the kind of increase that we are envisaging would be in the range of INR 1 crore per month. So INR 6.3 crore was the effect which has come in for the previous period because the last wage agreement had ended in the month of September 25. And that we are giving effect on a retrospective basis. So it will be INR 6,300,000 from the period of September 25 to March 26, which has been given effect in the current quarter. So INR 6,300,000 was for the previous period and INR 3 crores was for the current period.

26:46 So for the current year, we anticipate that the wage cost would be going up by something like INR 12 crores for the full year for this particular period. And because INR 6,300,000 has been affected for the previous period, the total impact in the profit and loss of the year would be INR 18.3 crores. I mean, just to understand this quarterly run rate would now be the similar one, which is in one q, ex... Excluding the fixed crore, which was a onetime settlement. Right? You're talking about the margins? No. No. I'm saying for the staff cost, this would be around 72 crore kind of a quarterly Correct. If you're talking about the staff cost, if you exclude 6.3, then you can expect the same to be replicated for the remaining three quarters.

27:37 Apart from the fact that in certain quarters, there would be incentive coming in for the staff. But on an overall basis, if you take the previous year, increase it by mostly 10... Eight to 10% kind of, I think, 10% because staff is increased by a certain percentage, which is not increased by the same percentage. So effectively, it will be in the range of eight to 9% for the whole year and add 18.3% onto that. So that will give you the whole year projection kind of a thing. We believe it will be coming in the range of 300 crores for the current year. Okay. Understood, sir. And, sir, on the Sorry to interrupt your order. Can I request you to come back for a follow-up, please? Thank you. I request all the participants kindly limit yourself to two questions per participant and rejoin for a follow-up.

28:27 Next question is from the line of Subhi Gupta from Cera Sanitaryware Asset Managers. My first question is that we are internalizing some SKUs that we were outsourcing, as you mentioned. If you could just talk a bit more about that. And my second question is that how many... I think our target for flagship stores this year is about 60, if I'm not wrong. If you could just update me on the progress on that as well. Thank you. You're right. Like, we have been talking about internalizing certain SKUs. Like, typically, both for... In the case of Sanitaryware as well in the case of POSITS, we manufacture most of the complex SKUs in house and the simpler ones are outsourced.

29:16 In case of Sanitaryware, recently there has been some issues in the context of Modi being not operating up to its full efficiency. So availability is in case of Mode B. We were initially in Q1 facing some challenges, and it was anticipated that the challenges may happen in the Q2 onwards also. But on an overall basis, we have been quite comfortable in respect of the kind of SKU that we have volumes that we've been able to get from Movi from our outsourcing partners. So as of now, we are quite comfortable in respect of abilities, both in context of Q2 as well as for the entire year. We don't see too much of a challenge. But as an anticipation that there could be challenges, we had already taken the process of internalizing some of the higher selling SKUs from these outsourcing partners to make them internally within our manufacturing plant.

30:14 So we have already undertaken that exercise. And in case we are having problems from the outsourcing arrangement, we are now well geared up to produce this SKU in house. Sure, sir. And the second question about the flagship stores? Stores, we have already given a guidance in the... As we're talking in respect of Senator, we have given a guidance that will be going up from 35 to something like 50 stores by the end of that... Of the current year. So we'll... We are online with that. We'll continue to kind of scale up these tools, and we should end end up with something like 50 by the end of the current financial year. Okay. And for this internalization, do we need some additional investment for this or no?

31:02 Small amount of investments are required because the kind of casting lines which are required are different for different kind of SKUs. So kind of $2.03 crores of investment or small investments, which are a part of the routine also. We do that on a regular basis also. That kind of investment is required, but we don't require kind of massive investment in terms of setting up manufacturing capabilities or getting additional machineries. The current facility by itself with some change in the lines which are required for specific SKUs that needs to be done. Okay. Thank you. Thank you. Next question is from the line of Ritesh Shah from Investec India. Please go ahead. Two questions. First is with respect to the change in management fee, GMP recently, who's going to take over the responsibilities with respect to Senator and PolicyCenter? And if you could just refresh us with the targets that we had set for both these initiatives for, say, for the short term and longer term view?

32:10 Yeah. Thank you, Ditesh. So regarding the recent resignation of mister Baliga, so just to update that he is he is leaving due to his personal reasons. So his responsibilities were limited to the senator and the new initiatives what we have started one one and a half years back. And now we have identified our existing national head under the succession plan to lead these businesses going forward. However, mister will continue to support the company till September 30 to ensure the smooth transition. So overall, we do not see any sort of major challenges as far as the exit is concerned.

32:58 Since both the businesses have dedicated operating teams, the established business processes and a strong second line of management. So as such, we do not expect this transition to have any impact on our execution. We are moving or progressing in the same way that we were doing earlier, and now it will be led by the existing national head. And, sir, on the targets? And on the targets also, like I told, the targets remain intact what we have given initially for Senator and PolyPlus. However, on quarter on quarter basis, it is difficult to give the numbers because it's still these are young initiatives, and we are moving in a right direction.

33:48 And we see that the targets what we have given are approachable. Sure. Sir, my second question is you did indicate about taking certain issues in house given the issues that were involved because of external reasons. Sir, how should we look at this with a longer term time frame? Like is this something which is a change in strategy when we are looking to increase the insourcing part and reduce outsourcing? How should we look at it? So that is a continuous process like on a continuous basis, we keep on trying to see because the SKU profile also keeps on changing on a regular basis. And now if you see the recent past, you'll find that that happens on a very frequent basis.

34:34 Like earlier, if you had a certain set of SKUs, it used to have extremely long life cycle. Now you'll find that the life cycle of the SKUs have also started coming down. So it's a continuous process. But if you talk about the kind of mix which is there, typically on a long term basis, the idea is always that the plant should be manufacturing more complex pieces and the simpler pieces should be outsourced. But whenever the need arises that you have a situation like the current situation, which had developed in the recent past in situation. So it is always possible for us to internalize the outsourcing SKUs in house, like within the current situation. So to answer your question, on a long term basis, a more complex excuse would be in house.

35:21 But whenever the need arises, we can make it a slight shift in the overall mix as required. Would it be possible to put a volume and a value number for outsourcing the aspiration number for both as well as Sanitaryware, please? Thank you. See, that keeps on evolving. On a long term basis, we have been kind of maintaining a fifty fifty in house and outsourcing kind of a ratio. In case of sanitaryware, it has slightly skewed more towards outsourcing in the recent past. That is also because of the fact that apart from the items that we are manufacturing, sanitaryware would always involve certain items, which will always be outsourced because it also involves a lot of bottled parts like systems, heat covers and crushing mechanism, which will always continue to be outsourced. We don't want to enter into those manufacturing.

36:12 Same thing in the case of faucetware also, there are certain SKUs which are from polymer or ABS and which are chrome plated later on. So these items also will continue to also. We don't intend to enter them into manufacturing of those SKUs. So apart from these SKUs, we find that the mix will keep on changing on a dynamic basis. There are certain SKUs which will always keep on outsourcing. Apart from that, mix will keep on changing. But the idea would always be made more complex in house, simpler ones outsourced. Sure. Thank you so much. All the very best. Thank you. Thank you. I request all the participants kindly limit yourself to two questions per participant. Next question is from the line of Rahul Majedya from Straton Oakmont Capital. Please go ahead.

37:00 Hi. Thanks for taking my question. So we've delivered a great revenue growth, but it's not translated into operating leverage from our side. So is this margin dilution a result of the deliberate and aggressive pricing strategy to capture market share from the unorganized players? Or is it just because of the raw material and fuel cost inflation? And what's the extent of our pricing power to pass these inflated costs to the dealer network in the coming quarters? Thank you, Rahul. You find that in the recent past, we have started showing a top line growth. In the current quarter, we grew by something like 19.5%. In spite of that, our revenues kind of dropped by, you can say, 3%.

37:48 We were something like 13.5% earlier. We were 10.13% in the current quarter. This has been primarily because of a certain number of onetime impact, which has come in this current quarter. We can say it is onetime and transitional kind of a thing, which has happened in the current quarter. So I'll just run you through the main idea of what I'll be communicating right now would be that over the years, full year for financial year 2027, we expect that the margin that we were predicting earlier, 13.5%, 14%, will be meeting those margins on a full year basis. The impact of the margin that we see in Q1, 10% is something only because of certain onetime factors which have happened during this quarter. So I'll just try to run you through those onetime factors which have impacted profit in the current quarter.

38:37 First was the long term settlement, which impacted revenues by INR 6.3 crores because it was in respect of the previous September 25 to March 26. This was onetime and is not expected to recur in the future periods. If I see the impact of this INR $6.30 lakhs, INR 6.3 crores, it has a 1.3% impact on my margins. Apart from that, we operated with one single kiln during the month of May and June and also for part of March, but we're talking about Q1. So it was mostly sorry, April and May, we operated with a single kiln. It was only in the month of June that we started off with the second kiln.

39:24 Now the fixed costs were being incurred for as it is, but only one kiln was under operation. So you can say our production was impacted to the extent of 30%, 35%. We produced only 65% to 70% of what we would have normally produced. This had an impact of something like INR 3.7 crores on account of under absorption of fixed costs. This impacted our margins by something like 0.75%. This is again onetime and is not expected to recur in the future period. What we have also done during this period is that because the validity of projects typically is for one year, we try to foreclose and deliver as much of materials possible to the outstanding orders because the prices of brass and even gas was on a uncertain side, and we were anticipating that it may be going up further in the subsequent periods. So we tried to foreclose as much of the orders as possible. And that is why we find that during this period, the proportion of Project two overall revenues has gone up from 39% in the previous quarter to 43% in the current quarter on a quarter on quarter basis.

40:40 Now on account of this increased closure, we have had an impact of something like INR 4 crores in terms of profits. This is translating into something like 0.8% on our overall revenues margins, on our overall margins. Apart from this, the price increase that we have taken, it has not reflected on the project size. And also what has happened is we took the price increase in the month of May. Even on the retail side, it takes some time for the price impact to take effect. What happens is whenever a price hike is imminent to be announced, you find that the dealers kind of rushing to put in orders and these orders are dispatched when they're putting before a particular cutoff date, they are dispatched at the same old pricing.

41:29 So because the price increase was taken in the month of May, we had a kind of backlog in orders wherein even for the retail, we dispatched at the old prices and not in the new prices. So that... You'll find that from the month of July onwards, there are all these dispatches have now started happening for the retail portion of the revised prices only. So this kind of delayed price increase effect, you can say, will lead to a kind of improved margins in the future by 1.5%. So if I see on an overall basis, I'll just summarize the various onetime factors which had impacted in the current quarter. LTS had an impact of INR 3 crore 6 or 1.3%. Onekin under absorption of fixed cost had an impact of INR 3.7 crore or 0.75% in terms of margins.

42:24 Impact due to closure of old projects, increased closure of old projects, which took our project per share also higher, about INR 4 crores or 0.8% and the delayed price increase effect as 1.5%. So if I add all of them, you will find that it is reduced to a kind of onetime impact of 4.35% and the current EBITDA was 10.1. So effectively, if this onetime impact was not there, my EBITDA would have been in the range of 14.5%. So we anticipate that for the whole year, will be still some impact in the Q2 also because projects, as I've mentioned earlier also, they have a kind of validity of six months to one year. And once the old prices start, the projects would be old prices start getting closed and they start having new projects coming up, dispatches for the new project starts happening, we'll find that this change will start reflecting in the project segment also.

43:22 So going forward, we anticipate that there would be an impact of all the onetime impact of all these factors will not be there. Projects will start delivering the kind of margins that they're supposed to on, let's say, post Q2. So for the full year, we are confident that the kind of margins that we talked about earlier, 13.5% to 14%. As mentioned earlier, also adjusted for the kind of reductions that we are doing in terms of turnover, we should be able to deliver for the full financial year. Right. Thanks. And my second question is more regarding the greenfield sanitaryware expansion plans. So we've previously deferred our $1.30 to $1.50 crore greenfield expansion plan due to subdued subdued demand expectations.

44:10 Yet, we've just posted nearly 20% top line growth. So does this Q1 volume performance trigger a revival of the greenfield CapEx execution? And if not, then how close are we to maxing out our current sanitaryware capacity utilization? And do we need to rely more on outsourced manufacturing to meet the higher demand? That will be all. Yeah. So regarding the greenfield part, so as we are seeing the continuous improvements which are happening as far as the demand is concerned and especially in case of Sanitaryware also. So the growth is coming. Like, I projected the numbers also. So we have this 14% growth prior to this quarter, it was roughly 10% growth was there.

44:57 So this is a positive sign in terms of reviewing the greenfield project, which was kept on hold for certain period. However, to say that means Q1 was a type of one off where the capacity utilization in case of Sanitaryware was 61 because of all these geopolitical concerns, and we stopped one claim. Operating from June onward... July onwards. So our both planes are operating from June onwards. So means the operational utilization is roughly around 80% of the total capacity. Still we have certain capacities left. So we will review in terms of the greenfield expansion also. So by end of this year, we will be taking the if we see and we expect that the demand will continue in the similar fashion.

45:55 And accordingly, we will take the needful decision. Once the decision with respect to the construction of this greenfield will be there, so the project will take around eighteen months from the date of start. And and I think this... We think that this positivity is continuing, and this is somewhat enable us when we take the decision in terms of the start of the greenfield projects. You. Rahul, I'll just come back for a follow-up. Next question is from the line of Anuparag from Anandati. Sir, as you said that the impact of the project business will be coming from Q3 onwards. So can you guide on the EBITDA margin for H2 FY 'twenty seven and FY 'twenty eight?

46:55 I didn't get it. You are talking about the current financial year or next financial year? Yes. For FY 'twenty seven for FY 'twenty seven, as I just mentioned, it is in the range of 13.5 to 14%. We are standing by that guidance for the current financial year. For the next financial year, we would want to hold that for the end of the year because as we keep on going further into the period, it becomes kind of speculative. So as of now, we are confident that we'll be able to deliver the kind of numbers we're talking about, both in terms of the top line being in the range of 18% to 20% and EBITDA margins in the range of 13.5% to 14%. But beyond that, we would not want to go right now. We'll talk about it maybe once we start ending the near ending the year and then be able to have a better idea about how the demand is progressing and holding up, then we'll be able to gain better in respect of the next year.

47:52 Sir, and for H two FY twenty seven, I was asking. For the full year, we are still projecting the 19 and a half to 20... 18 to 20% kind of growth for the revenue and for the full year 13 and a half percent. Quarter on quarter basis becomes extremely difficult because it is totally a factor of what one time events keep on happening. Like for this particular quarter, if you had asked me in Q4, I would not have been able to predict that we'll be having margins which will be lowering by this extent. We had a few items which we knew that will be coming up, long term wage settlement, etcetera, was there, which we had been telling you also that some impact would be there on the margins in the Q1. Same thing we are seeing for Q2 also. There would be some impact coming in the Q2 also because projects have not yet converted with the revised pricing.

48:39 But for the whole year, we'll be better able to guide. We should be ending with the 13.5% to 14%, which we're seeing right now. Okay. Understood, sir. So by what time line, then we expect to return to the historical average of 16% EBITDA margins? That is difficult to say because we can go on a year on year basis only. Once we are at the end of the year, then again looking at the way that the demand situation is continuing, the kind of growth that we have been able to take, the kind of operational efficiencies that we have been able to bring and the kind of competitive intensity which is prevailing in the market. Based on all these factors, we'll be able to guide you better at the end of the year. But as of now, the visibility is there only for the current year. And based on the various factors which are prevailing right now, we'll stick with what we have given you for the current year.

49:34 Thank you very much. I know I'll request you to come back for a follow-up. Next follow-up question is from the line of Varunjal Sadia from three sixty one Capital. Please go ahead. Sir, I just wanted to understand the gross margin trend given that vast cost is still rising. Mean, both copper and zinc is all time high. So how are we looking at the gross margin? And do we intend to take any further price hike in the coming quarter? Gross margins have been impacted in the current quarter because of the fact that input prices have gone up. And we have taken a price increase, but that takes a little time to get reflected on the top line. So the immediate deficit is an impact on the kind of gross margins we have had, especially in the faucet segment, the gross margin had been severely impacted.

50:29 The brass prices are continuing to go on an uphill side only. Like currently, we have reached, you can say, a range of INR 900. So if it continues to rise, we may have to take a further price increase. So the price increase that we have taken earlier will start coming in on the retail segment from July and from the project segment from the next quarter, let's say, Q3 onwards. If we take a further price increase, there would be some delay again in this actually reflecting on the top line. So there would always be a couple of quarters or one quarter where the retail would take two, three months where the retail takes a certain time to get impacted and longer period for project to get impacted. So we continue to see watch the increased prices sorry, the raw material prices.

51:23 And based on that, we'll reevaluate whether we need to take a further price increase in case of Corsetware or in the case of Sanitaryware. So, sir, can our gross margin expand from here? Like, it's come down to 45, 46%, which used to be 50% plus. So is there any scope that this coming quarter or maybe three to one with the... We can see increase there, expansion there? Again, the current quarter, 46%, as I mentioned, was in aberration. From the next quarter onwards, or maybe from Q3, we will again start seeing a kind of uptrend. And from Q3, the blast prices continue to hold at the current levels and the gas prices also continue to hold at the current level, it should be back at the levels of 51%, which we typically used to have.

52:12 So this is again, Q1, 46% is kind of a one off margin and mostly impacted because of faucet wear, where the brass prices have gone up exponentially, but the prices are taking a little time to get affected. Okay. And on the faucet wear expansion, given that we reached 96% utilization, is there any plan to prepone the expansion that we planned in the 4Q, given that we have seen good demand? Before 4Q, it is not possible because they have already undertaken the assumption, and we should be expecting that increased capacity to come into effect from the fourth quarter. So before that, in Q2 and Q3, it is not possible. But we don't anticipate any challenges in respect of material availability because both the in house and the outsourcing have been functioning on a normal basis in the case of.

53:05 So we have lot of scope for taking procurement from outside also. As well as in house, we have capacity of... We have been functioning at 96%. We can go beyond a 100% also. It is possible to go beyond a 100%. So we don't anticipate any availability challenges in respect of material for process there till the time that this standard capacity comes into effect. Okay, sir. And this last quarter, what was the average? You know? And this, like, 900 versus last quarter? The prices have been going up on a continuous basis. I'll just give you the kind of trend which has been there on a month on month basis. Like December, it used to be in the range of $6.65.

53:54 January, it went up to $7.47. February, $7.58. March was the same range, April, it was 800, May, it was $8.60, you can say, and June, it has one up to $8.80. Okay. Okay. Got it. Currently, July, you can say it is in the range of 9 to 900. Okay. So it's continuously going up, so we may need to another price side. That's what I want to understand. Yeah. We we are evaluating that situation, but if it continues to go beyond 900, as of now, we have taken a price increase which is protecting us from the... Up to this current range. But if it keeps on rising beyond the current range, let's say, goes up to $951,000 kind of the number, then we may have to again think of further prices.

54:45 Okay. Thank you so much, sir. Thank you. Yeah. Thank you. Thank you. Next follow-up question is from the line of Rahul from Straton Oakmont Capital. Please go ahead. Hi. No. I just have a last question regarding our discretionary advertising and promotion spend. So like especially related to Kriti's had a national brand campaign. Are there any more ideas on the table? Or are we do we have any plans to expand our discretionary A and P spend? And if yes, then in what direction? That will be all. Yes. As of now, the budget is, as I mentioned earlier in my opening remarks, INR85 crores. So this includes the kind of spend that we'll be doing for TV, digital, social, everything.

55:34 As we go forward, if you feel that the need is there, even for the current quarter, option is always available. It is not that this is hard cast in stone that will be at INR85 crores only. So as of now, the budget is INR85 crores. If we feel that we need to increase the budget, that can always be done as we go forward. Thank you very much. Ladies and gentlemen, we'll take that as the last question. I'll now hand the conference over to the management for closing comments. Thank you, everyone, for attending this call and for showing interest in Cera Sanitaryware Limited. If you need any further clarification or would like to know more about the company, please feel free to reach out to me or to CDR India.

56:21 Thank you once again for taking the time to join the call. Thank you. Bye. Thank you very much. On behalf of CDR India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.