CSL/2024-25/80

20th May, 2024

To, To,
BSE Limited National Stock Exchange of India Limited
Corporate Relationship Department Exchange Plaza
1st Floor, New Trading Ring Bandra Kurla Complex
Rotunda Building, P J Towers Bandra (East)
Dalal Street, Fort, Mumbai – 400001. Mumbai – 400051.
Scrip Code :532443
Scrip ID: CERA Scrip Code: CERA

Dear Sir/Madam,

Sub: Transcript of the Conference Call held on 14th May, 2024

Ref: Regulation 30 of the SERI (LODR) Regulations, 2015

With reference to our letter CSL/2024-25/58 dated 7th May, 2024, intimating you about
the Q4 FY2024 Earnings Conference Call held on 14th May, 2024, please find attached the
transcript of the aforesaid conference call.

The same is available on the website of the company, i.e. www.cera-india.com

We hope you will take the same on your records.

Thanking you,
For Cera Sanitaryware Limited.
Digitally signed by HEMAL JANARDAN

HEMAL SADIWALA
DN: c=IN, o=Personal, title=1769,
pseudonym=1330138917160425167M7u3

JANARDAN
VjyWA1Zui,
2.5.4.20=6b4ec8e524e33f51a85e90684a28
3fb7298733d00b4cadaec4b37a8a5411422
5, postalCode=380008, st=Gujarat,

SADIWALA
serialNumber=f2fe036f7fce318ced974ed8
837dfa1e1c2da169e5861098ce6b05679d5
c9f6e, cn=HEMAL JANARDAN SADIWALA
Date: 2024.05.20 11:35:42 +05'30'

Hemal Sadiwala
Company Secretary
Encl: As Above
 CERA Sanitaryware Limited
Q4 FY24 Earnings Conference Call
May 14, 2024

Moderator: Ladies and gentlemen, good day, and welcome to the Q4FY24 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. Should you need assistance during the conference call,
please signal an operator by pressing star then zero on your touchtone phone.
Please note that this conference is being recorded. I now hand the conference over
to Mr. Devrishi Singh from CDR India. Thank you, and over to you, sir.

Devrishi Singh: Thank you. Good morning, everyone and thank you for joining us on the earnings
conference call for Cera Sanitaryware Limited for Q4FY24 earnings, which were
announced yesterday. We have with us today the management team comprising;
Mr. Vikas Kothari - CFO and Mr. Deepak Chaudhary - General Manager, Finance of
Cera Sanitaryware. We will start with brief opening remarks from the management,
following which we will open the call for Q&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 documents that have been shared with all of you earlier.

I would now like to turn the call over to the management for their opening remarks.
Thank you, and over to you, sir.

Deepak Chaudhary: Thank you, Devrishi. Good morning, everyone. On behalf of the management team
of Cera Sanitaryware Limited, I would like to welcome you to our earnings
conference call. I will begin by sharing some updates on operations and strategy,
following which our CFO; Mr. Vikas Kothari will run you through the key financial
highlights.

The challenging market situation, particularly in terms of demand persisted from

Q3 through Q4 of FY24. Despite the tough conditions, Cera not only maintained,
but marginally improved upon the sales achieved during the corresponding Q4 of
FY23. The Company achieved a revenue of INR 547 crore during the quarter under
review, reflecting a growth of 2.6% compared to the turnover of INR 533 crore
achieved in the corresponding Q4 of FY23.

Looking ahead, we anticipate the trend of sluggish demand conditions to continue

in Q1FY25 with a further exacerbated by the ongoing general elections in April and
May. Additionally, seasonal factors like prevailing extreme heatwave conditions in
many parts of the country, shortage of labor, especially in the real estate sector are
expected to pose further challenges. However, we remain optimistic that post
Q1FY25, the overall demand situation will improve in the quarter thereafter.

Transcript of CERA Sanitaryware Ltd. Q4 FY24 Earnings Call Page 1 of 16

 The Company has finalized its long-term operating plan for 3 years after integrating
detailed inputs from sales Executives, zonal heads and the marketing department.
We have also taken into consideration prevailing market conditions in the building
materials industry. Originally, aiming for INR 2,900 crore in sales by September
2025, the target date has been recalibrated to March 2027, that is a stretch of 1.5
years. This adjustment reflects a compounded annual growth rate of 16.02%,
displaying the Company's resilience to navigating tough market conditions while
aiming for sustainable growth.

As you are aware, Cera is strongly positioned in the premium segment with a wide
array of products. We are also present in the luxury segment. However, in the past,
this segment has not enjoyed significant depth and volumes as compared to the
premium segment. We believe that this is set to change over the next 3 to 5 years,
wherein Cera shall be focusing on increasing its presence in this segment as well as
growing the market share.

In the recent past, especially post-COVID, there has been a growing consumer
preference towards spending larger sums of money on buying luxury properties and
using high-value fittings in the bathroom space. There are a large number of luxury
projects coming in the major cities, and it is expected that the segment shall be
growing at a very fast pace.

Cera is now strategically positioning itself to strongly capitalize on the growth

opportunities in this segment. In this direction, we had recently, already introduced
the Luster brand last year and also rejuvenated the existing Senator brand. We
intend to launch new products within these ranges to cater to the discerning
customers. These new products will showcase innovative and aesthetic designs
with value-added features that resonate with the luxury seeking customers.

Cera plans to launch dedicated brand stores to showcase these premium offerings
and enhancing the customer experience. Furthermore, Cera is actively
collaborating with influential architects who play a crucial role in shaping new
design trends and project specifications to promote the sale of these products in
the luxury developments and high-end projects. While we are advancing towards a
more premium market stance at Cera, we are equally committed to honouring our
roots in the traditional segments. Our strategy involves seizing opportunities across
the board, ensuring that we remain relevant and competitive in all market
segments, maintaining our margins. This balanced approach not only strengthens
our market position, but also underscores our adaptability and commitment to
serving a diverse customer base.

The sharp increase in new design and product launches over the past 3 years has
involved substantial efforts and is paying rich dividends with new product
development accounting for 30% to 35% of the total sales.

Transcript of CERA Sanitaryware Ltd. Q4 FY24 Earnings Call Page 2 of 16

 In Q4FY24, our China imports totalled INR 10 crore, representing 1.8% of the sales.
Cera has consistently maintained a strategic approach to minimize reliance on
products made in China, leveraging our in-house capabilities.

In our previous conference call, we had announced the successful completion of

the faucetware facility expansion program, which raised our monthly production
capacity from 3 lakhs to 4 lakh pieces. I am pleased to share that following the
completion of the ramp-up phase, our plant is now fully capable of delivering 4 lakh
pieces per month. During Q4FY24, our faucetware capacity utilization reached an
impressive 90%, leveraging the augmented capacity from the brownfield
expansion.

Furthermore, the majority portion of the land for our greenfield sanitaryware
project was acquired by March 2024. We anticipate completing the acquisition of
the remaining land by June 2024. This new plant is scheduled to become
operational within 18 months from the zero date with an estimated cost ranging
between INR 125 crore to INR 130 crore.

These strategic capacity expansion projects in both sanitaryware and faucetware

underscore our commitment to broadening our range of premium products. All
these items requiring specific high-quality expertise and technological precision will
be exclusively manufactured in our facilities, utilizing advanced technology and
stringent quality control measures.

Our routine capex budget for FY 2024-2025 is INR 25.4 crore. This includes essential
upgrades in our sanitaryware and faucetware plants, focusing on machinery
replacement, enhancing customer touch points and IT-related developments,
ensuring operational efficiency, business continuity and improved logistics.

Cera had introduced the Retailer Loyalty Program in FY 2022-2023 and now after 2
years, we have successfully enrolled over 19,300 retailers, with a total of 2.9 lakh
plus invoices uploaded on the retailer loyalty app. The feedback received from
retailers has been instrumental in understanding the evolving consumer demand,
geographical SKU segmentation and refining our rewards program. Out of the total
retail sales amounting to INR 291 crore, rewards eligible sales totalled over INR 109
crore, representing 37% of retail sales.

In FY24, we recorded advertising expenditure amounting to INR 63.2 crore,

representing 3.4% of our revenues. Increasing our advertising expenditure has
proven highly beneficial, yielding significant returns across various metrics,
enhanced brand visibility and customer engagement resulting from increased
exposure have reinforced our market presence.

This year, we focused on a comprehensive 360-degree amplification of our new TV

campaign to effectively reach our target audience. We secured premium
advertising spaces in key locations such as airports in Delhi and Mumbai, along with
prominent outdoor placements. Additionally, we hosted a tiles NPD meet for

Transcript of CERA Sanitaryware Ltd. Q4 FY24 Earnings Call Page 3 of 16

 potential dealers to showcase our latest product range. Furthermore, we organized
various plumber meets to enroll plumbers in our star plumber reward program,
strengthening our relationships within the trade community and enhancing brand
advocacy amongst industry professionals. These consistent strategic initiatives
have significantly strengthened our market penetration and engagement levels.

Effective cost management and improvements in operational efficiencies have

enabled the Company to sustain margins without necessitating any price increases.
Given the adequate inventory levels, we moderated the manufacturing pace
slightly during the last two quarters. During Q4FY24, the sanitaryware plant
operated at a capacity utilization rate of 82%.

At CERA, we have a strong track record of retaining top talent. Over 4 decades of
journey, our employees have consistently found convincing reasons to stay with us
for many years. It's part of Cera's core values to create a supportive work
environment, offer comprehensive benefits and nurture a strong Company culture
that we have built over the years. These aspects have not only attracted but also
helped in retaining the critical talent.

In line with the above, Cera has introduced an ESOP scheme this quarter. This will
help to motivate and reward key human resources within the organization on a
medium to long-term basis, ensuring stability and longevity in their tenure, enabling
them to contribute to the Company's growth plan and retaining knowledge and
experience within the organization.

As I have outlined, there are multiple initiatives underway encompassing aspects

such as capacity expansion, enhancement of capabilities for complex products, new
product development, advertising, and marketing, focus on premiumization,
enhancement of network and distribution channels, engagement with influencers,
such as architects and plumbers as well as announcement of ESOP plan for greater
employee reward. This comprehensive focus has been due to untiring efforts of our
promoters to ensure balanced and sustainable growth in the years ahead.

In conclusion, I would like to emphasize that as we navigate through some near-

term demand led challenges, the Company remains committed to maintaining its
leadership in the sanitaryware and faucetware industry, while promoting
sustainable growth. Cera has cultivated unique strengths over the past 4 decades
that have set us apart in the industry. Today, we are optimistic about the
opportunities arising from positive economic trends and evolving market dynamics.

Looking ahead, with increasing economic activity nationwide and sector

formalization, we are confident that Cera will continue to experience strong
demand from both B2C retail consumers as well as B2B projects, driven by both our
traditional and premium offerings. Moving forward, we are confident in leveraging
these inherent strengths to support sustainable growth and deliver enduring value
to all stakeholders.

Transcript of CERA Sanitaryware Ltd. Q4 FY24 Earnings Call Page 4 of 16

 With this, I would like to hand over to Mr. Vikash Kothari, our CFO, who will present
the operational and financial highlights for the quarter ended 31st March 2024.
Thank you, and over to you, Mr. Vikas Kothari.

Vikas Kothari: Thank you, Deepak. A very good morning to everybody. It is my pleasure to update
you on the quarterly performance of the Company for the quarter ended 31st March
24.

In Q4FY24, revenue from operations stood at INR 547 crore as against INR 533 crore
in Q4 FY23, reflecting an increase of 2.6%. In Q4FY24, the Company experienced a
notable increase in EBITDA and EBITDA margins compared to Q4FY23. EBITDA in
Q4FY24 stood at INR 109 crore as against INR 98 crore in Q4FY23, an increase of
11.2%. EBITDA margin for the quarter stood at 19.3% as against 18.1% in Q4FY23,
an increase of 1.2%.

I will just try to explain the major factors leading to such improvement in EBITDA
margins. The gross margin of the Company in Q4FY24 stood at 50.5% against 53.5%
in Q4FY23, a decline of 3%. This decline in gross margin is mainly due to higher
discount offers to address challenging market conditions. Despite the decline in
gross margins, the Company managed to offset it by smartly phasing out the
publicity spending during the year. As a result, publicity spending in Q4FY24
accounts for INR 15.4 crore versus INR 24 crore in Q4FY23. This has positively
impacted EBITDA margins by 1.7%. Further, the increase in other income from INR
9.8 crore in Q4FY23 to INR 16.4 crore in Q4FY24 contributed positively to EBITDA
margins by 1.1%. And lastly, cost optimization efforts resulting into savings in opex
cost has further supported the EBITDA margin by 1.4%.

In FY24, the Company continued its strategy of investing more in publicity with total
spending reaching to INR 63 crore as compared to INR 57 crore in FY23. This
deliberate choice underscores the Company's commitment to enhancing its share
of voice in the market. Despite challenging economic conditions, this sustained
investment reflects the Company's dedication to maintaining strong visibility and
market presence, potentially paving the way for long-term growth and competitive
advantage.

For the quarter under review, 51% of the topline was from sanitaryware, 38% from
faucetware, tiles represented 9% and wellness 2%. On a Y-o-Y basis, sanitaryware
revenue registered a decrease of 2%; faucetware revenues increased by 10%, tiles
decreased by 10% and wellness increased by 21%.

The sanitaryware and faucetware verticals continue to be the cornerstone of our

business. together contributing 89% of the overall revenue. In Q4FY24, 41% of our
sales were in the premium category, 35% in the mid category, and 24% in the entry-
level category.

Transcript of CERA Sanitaryware Ltd. Q4 FY24 Earnings Call Page 5 of 16

 Profit after tax was INR 75 crore in Q4FY24 versus INR 62.9 crore in Q4FY23,
representing an increase of 19.2%. EPS for the quarter stood at INR 57.69 versus
INR 48.39 in Q4FY23.

The changes in the working capital position in the current quarter as compared to
the corresponding quarter for the previous year were as follows: Inventory days
reduced from 77 to 70 days, receivables days slightly increased from 32 days to 34
days and payable days increased from 40 to 45 days. Therefore, the net working
capital days were reduced from 69 days to 59 days in Q4FY24.

As on March 31, 2024, our cash and cash equivalents stood at INR 828 crore
showcasing an increase of INR 141 crore or 20.5% compared to March 31, 2023 at
INR 687 crore.

In terms of our sales distribution, Tier 1 cities accounted for 34% of the total sales;
Tier 2 cities - 21% and Tier 3 cities led with 45% of the total sales in Q4FY24.

During the recent past, internal accruals were utilized to fund the two capital
expenditure programs. Looking ahead, we aim to maintain the flexibility to use a
portion of our cash and cash equivalents as needed without any plans for debt
raising or equity dilution to support the capacity expansions.

Additionally, the Board of Directors announced a dividend of INR 60 per share,

representing 1,200% of the face value per share.

In conclusion, I would like to emphasize that given the various inherent strengths
and dominant position within the sector, we are committed to maintaining a strong
financial discipline. Moving forward, Cera remains steadfast in its pursuit of
consistently improving its financial performance.

With this, I would now like to request the moderator to open the line for Q&A.
Thank you very much.

Moderator: The first question is from the line of Jaspreet Arora from Equentis PMS.

Jaspreet Arora: My first question was, if you could just repeat, you said the fiscal year March '27,
now we are looking at revenue target of INR 2,900 crore. Did I hear that right?

Vikas Kothari: Yes.

Jaspreet Arora: Okay. And that's about 16% CAGR from March '24 exit that you've done?

Vikas Kothari: Correct.

Jaspreet Arora: Okay. Great. The other question was, I missed that number. So, you gave the split
of FY24 segment-wise, how well you did, right. So, wellness grew 10%, tiles grew
10%, what was the breakup for the other two?

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Vikas Kothari: So, the breakup was as far as the sanitary is concerned, there was a decline of 2%.

Jaspreet Arora: 2%. okay.

Vikas Kothari: Faucetware, there is a growth of 10%, and wellness 21% growth and in case of tiles,
decreased by around 10%.

Jaspreet Arora: Tiles was minus 10%?

Vikas Kothari: Yes.

Jaspreet Arora: Okay. Sorry, sir. I heard plus 10. And within this, possible to break it up between
volume and price, the trend?

Vikas Kothari: So right now, it is not possible in terms of the breakup of trend between volume.
So, it is a mix of factors resulting into the segmental performance.

Jaspreet Arora: Okay. Okay, fair. And so...

Deepak Chaudhary: Like you can write down the numbers also. I am talking about Q4 FY23-24,
sanitaryware was INR 273 crore, faucetware was INR 202 crore, wellness was INR
11 crore, and tiles was INR 51 crore. I'll repeat INR 273 crore, INR 202 crore, INR 11
crore and INR 51 crore.

Jaspreet Arora: Sure. And the trend that you gave the percentage up or down, that was for the full
year, right, FY24, right?

Vikas Kothari: No, this is for the quarter.

Jaspreet Arora: No. Initially, what you gave wellness grew 10%, tiles minus 10%, faucets plus 10%,
sanitaryware minus 2%.

Vikas Kothari: Yes, this is for the quarter.

Jaspreet Arora: Oh, this is for the quarter, I am sorry. Okay so, what is it for the full year, sir, could
you give that as well for the last financial year?

Deepak Chaudhary: For the last financial year FY23 - 24, I'll just give you the again breakup in numbers
in crore. Sanitaryware was INR 959 crore, faucetware was INR 671 crore, wellness
was INR 37.54 crore, let's say INR 38 crore and tiles was INR 191 crore. I'll just give
you the year-on-year growth also. Sanitaryware is negative 0.3%, more or less
stable, faucetware is positive 9.8%, wellness is 21.1% growth and tiles is 0.8%
growth.

Jaspreet Arora: Okay. Now the follow-up here, sir, is this muted ness in sanitaryware, I am talking
about the full year now, I am not talking about the fourth quarter. I am saying
largely the full year, this muted ness in sanitaryware and also in tiles, what are some
of the reasons that you could ascribe this to?

Transcript of CERA Sanitaryware Ltd. Q4 FY24 Earnings Call Page 7 of 16

Vikas Kothari: So ideally speaking, in terms of the sanitaryware or in terms of the tiles, the
question what you have raised in terms of the demand getting muted. So, as you
know, as far as the financial year 2024 is concerned, it is impacted by subdued
demand across all the regions. And in terms of the sanitaryware, if you see, since
we are established in this segment for a larger period than faucetware, and the
market size with respect to faucetware is quite big as compared to sanitaryware.
So, some impact with respect to this slowness has contributed, and we are hopeful
that financial year 2025, I think after these elections are over, we will be again
resuming back in terms of the positivity in demand and then the things will improve
better.

Jaspreet Arora: Sure. I am actually just trying to get, see what we hear on the ground is and
obviously, I am sure you're going to counter that by saying, the real estate activity
seems to be very, very high, very active, very buoyant, right? And obviously the
following demand will be realized later, but this activity was strong in '23. It's not
that FY24 is less strong than FY23. Parallelly, the GDP at 7.5-plus percent, IPA is at
6%. So, GDP will not grow like drastically next year for the, so I am just trying to
understand on ground why demand impacted, why is demand flat. I am sure our
market share loss not there. If at all, you would have gained market share. But on-
ground, what are some of the reasons because the demand is so lackluster, which
is like 0%, assuming you have a market share net gain only and not a loss?

Vikas Kothari: So, when we are talking about the real estate upswing, so definitely, there is a real
estate upswing. But as far as our products are concerned, sanitaryware and
faucetware, generally means these products, if you see, they are installed at last
stage of the project. And we see that in the last year, there are projects which are
near to completion, and we have a good project bank right now available. So
definitely, it's a phasing impact which is there. So, this real estate upswing will
provide us sort of the projects and other things, and that will be encashed in this
financial year.

Jaspreet Arora: Okay. I mean the real estate activity was equally strong in FY 22 - 23. I am just not
very clear why is this is. Anyway, so I mean, still not very clear on what's exactly
leading to this lackluster demand. This year, we are confident that beyond Q1, I
understand Q1 will not be great, but I'm still not very clear but happy to hear you
talk later on in the call. Thank you.

Moderator: The next question is from the line of Praveen Sahay from Prabhudas Lilladher.

Praveen Sahay: The first question is related to the sanitaryware. In the last call, you have said that
the average price increase in the sanitaryware taken off 2% and effective from
February 2024, so is that taken? And after that, the 2% of degrowth in the
sanitaryware you had observed in Q4?

Vikas Kothari: Yes. So as far as this sanitaryware is in terms of the price rise if you see, means we
have not taken any price rise in the past 20 months. The recent price rise, which
was taken in February 2024 was 2% in sanitaryware segment to offset the impact

Transcript of CERA Sanitaryware Ltd. Q4 FY24 Earnings Call Page 8 of 16

 of the increased input costs. So ideally speaking, the price rise has been taken, but
it is just to offset this impact.

Praveen Sahay: Okay. Second question is related to the cost saving program you had said, which
has delivered the improvement in the margin apart from your cut in the publishing
expenses. So, is that continue in the nature, like the way forward, you will see such
kind of a margin profile to continue in the FY25? Maybe comment on that.

Vikas Kothari: So, like you see as far as the margin stories are concerned. So, in this particular
quarter, if you see the margins have performed or we have sustained and improved
the margins. So ideally speaking, the margins will be sustained and as the demand
conditions improve, definitely, the margins will also improve.

Praveen Sahay: Okay. And last sir, on the number. Can you give the gas prices for the quarter?

Vikas Kothari: Yes. So, in terms of the gas prices means gas prices remain favorable during the
quarter. So, the average gas price from GAIL was INR 28.35 per cubic meter in Q4
FY24, which was INR 35.67 per cubic meter in the last year's quarter. The average
gas price from SGL, Sabarmati Gas was INR 50.12 per cubic meter in Q4FY24 as
against INR 57.40 per cubic meter in Q4FY23. And this positive trail of lower price
is further supported by the increase of gas from GAIL, reaching to 80% in Q4FY24.
So traditionally, we were having 50-50 ratio. So, in this year, if you see the drawl
from GAIL has improved. And in this particular quarter, 80% of the gas is drawn
from GAIL and 20% from Sabarmati. And the weighted average cost of gas in Q4,
considering both GAIL and Sabarmati was INR 32.63 per cubic meter as opposed to
INR 43.23 per cubic meter in Q4FY23, which is, I would say, significantly lower than
the industry average.

Moderator: The next question is from the line of Lakshminarayanan from Tunga Investments.

Lakshminarayanan: So my question is related to the sales. So, I think we have around 6,000 touch points
at which we sell. How this has actually moved in the last 1 year. What is any changes
you made in your distributor reach as well as the dealer reach? I mean I just want
to understand that. And within that, how much is overlapping between
sanitaryware and faucetware?

Vikas Kothari: So, regarding the distribution networking, if we see, we are having a base of around
6,200 dealers. And this networks, if you see in terms of the growth versus the
previous year, so previous year, we were having around 5,400 dealers were there.
So, there is a growth of around 800 dealers. And of these if you see the base of the
retailers also because our distribution network is largely through dealers. And since
we have introduced this loyalty program for the retailers, so from there, we are
counting the numbers also. This is the invoice uploaded to the system. So, our
retailers base has also improved, which was around 14,500, in March 2023, and it
is now increased to 19,300.

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Lakshminarayanan: Okay. And you are tracking sales at the dealer to retailer level? Or you are also
tracking sales at the dealer level?

Deepak Chaudhary: Our sales tracking is only to the dealers. It is only through the Retailer Loyalty
Program where we have started asking for invoices to be uploaded onto their
applications that we start getting to know what kind of numbers of retailers are
there and also what pace that they have done. But per se, we don't have a direct
relationship with the retailers. We are mostly selling to the dealers.

Lakshminarayanan: And what is the mix between, I mean how much is the overlapping between
faucetware and sanitaryware?

Deepak Chaudhary: I think most of our dealers are common. Sanitaryware dealers would be selling
faucetware and faucetware like vice versa. We don't have separate for sanitaryware
and faucetware. Tiles, you'll find there are a separate dealers exclusively who are
dealing in tiles, but sanitaryware and faucetware are mostly common.

Moderator: We'll take the next question from the line of Achal Lohade from JM Financial.

Achal Lohade: Sir, just a little clarity on this. You said the distribution, if you look at the dealer or
the retailer touch points have increased meaningfully yet our growth is weak. How
do we explain this? Is there a market share loss in certain pockets and gain in certain
pockets, which is offsetting? How do we explain this despite such a significant
increase in distribution touch points, the sales didn't see much increase, I am saying
from the full year perspective. The growth excluding tiles is just 4%.

Deepak Chaudhary: The dealer distribution network increase, that is a continuous process. Like as a
Company, we are always in the process of enrolling new dealers so that we can
reach out to newer areas and areas which were not covered earlier. But the demand
sluggishness, which has been there in the industry, if the macroeconomic factors
are such that they are not supporting and there is a certain amount of demand
which is prevailing in the market. The reach outlook that we are doing, the kind of
reach that we are able to create, right now, we're not able to see results because
the demand was slow. But as we go forward and the demand improves with the
kind of increased reach, you'll find that the benefits that we have of the reach that
we have created right now will be coming in once the improvement in demand
happens.

Achal Lohade: Okay. Understood. The second question I have is with respect to the market size, if
you could help us understand, I know it's hard to quantify, but just a ballpark in
terms of what is the market size of sanitary and faucet for the full year FY24? And
what kind of decline or increase you would have seen for the full year at the industry
level? Just a ballpark number would also help.

Vikas Kothari: So, like you rightly told, it is difficult in terms as such, there is no establishment in
terms of the figures. But our understanding, which is on a very global basis. So
sanitaryware, we see the market size between organized and unorganized is around

Transcript of CERA Sanitaryware Ltd. Q4 FY24 Earnings Call Page 10 of 16

 INR 9,000 crore to INR 10,000 crore. And faucetware being a larger market,
between organized and unorganized, it is around INR 14,000 crore.

And now your second question with respect to the market share and all. So ideally
speaking, as far as Cera is concerned, and where our presence is across all the
segments. And like the last year and especially from the second half year, the things
with respect to the prevailing market conditions and the demand were a little bit
sluggish and which is felt across the industry. So those points are there. So ideally
speaking, in terms of the short-term fluctuations, which are there, I don't think that
there is going to be a loss of market share as the things will improve or the
conditions will improve, definitely, in terms of the revenue and the margins, the
scenarios will change.

Achal Lohade: Understood. Just one clarification with respect to the premium mix. Currently, you
said it is about 45%, if I am not wrong, sir? Aggregate for the quarter, 45%?

Vikas Kothari: Yes. So..

Achal Lohade: Premium is 24% is for the quarter.

Vikas Kothari: So, I will just give you the split between this entry, mid and premium. So, the entry,
I am just giving the figures with respect to Q4FY24. Entry is 24%, mid is 35% and
premium is 41%.

Achal Lohade: Okay. Because Q3, I see entry level is 43%, mid is 34% and premium is 23%. There
is a significant change. Is that so sir?

Vikas Kothari: No. So even if you see the corresponding previous year quarter, the entry was 26%,
the mid was 31%, and the premium was 43%.

Achal Lohade: And for the full year if you could give the premium number, sir.

Vikas Kothari: And for the full year, it is for the FY24, entry is 24%, mid is 33% and premium is 43%.
Vis-a-vis, the last year, last FY23, that is entry is 27%, mid is 30% and premium was
43%. Is that okay?

Moderator: The next question is from the line of Udit from Yes Securities.

Udit Gajiwala: Sir, firstly, on gross margin, if you could elaborate, I mean, even despite the price
hike, we had to do some volume push. So, the margins have definitely come down.
So, could you just directionally give us what was the change in ASP or something
that has come up because the margins are drastically down?

Vikas Kothari: So, I think the elaborative explanation I have given during the opening remarks,
which I have read. But again, since you have raised this question, I just want to
clarify you. So historically, our gross margins remain between 52% to 53% or 54%.
This time, the gross margin as compared to the previous Q4FY23, we saw a decline
of 3%. So, this decline is largely, like I explained, is on account of the higher

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 discounts being offered. And this is mainly the prevailing market conditions to
address the prevailing market conditions. So that was there. But however, this
decline is largely offset by the other savings or the other initiatives, what we have
taken so that it is reflecting overall in terms of the EBITDA, it is showing a growth of
1.2%.

Udit Gajiwala: Right, sir. And secondly, sir, what will be your budgeted spend for advertisement
for the coming fiscal given that you see headwinds to continue?

Vikas Kothari: So as far as you see the trend of the publicity spends are concerned, so means in
the last year, we landed at around INR 63 crore. Prior to that, it was INR 57 crore.
So more or less, our spend budgeted for this financial year will be around INR 63
crore to INR 65 crore..

Moderator: The next question is from the line of Dhananjai Bagrodia from ASK Investment
Managers.

Dhananjai Bagrodia: Just few couple of questions. Are we seeing maybe some of our competitors who
now are entering into the space with offerings of going to builders with pipes and
sanitaryware and faucetware, are they having any competition pressure towards
us?

Vikas Kothari: Can you repeat your question, it was not clear.

Dhananjai Bagrodia: Some of our competitors now have entered who were earlier in pipes, now they've
entered into sanitaryware, faucetware and they are directly approaching builders
and giving them the full offering of behind the wall to front of the wall. Are we
seeing any of that competition phase up when we speak to builders or any of the
dealers directly.

Deepak Chaudhary: Your question is in respect to like the competition, which has entered from pipe
and other areas into faucetware. You can just again repeat your question, like what
are you really asking.

Dhananjai Bagrodia: So how are they doing? Are we seeing in terms of competition on how they have
been doing?

Deepak Chaudhary: No. We are of the sense that they have been having a very difficult time because
what they are doing is, they're mostly trying to, they have not yet set up a factory.
Most of them do not have a manufacturing facility. They are trying to source from
the outsourcing partners, and they don't have the kind of depth and the range of
SKUs that we have been able to offer and also the kind of dealer network that they
have is extremely limited and very different from the kind which is required in the
sanitaryware industry. So as such, we do not feel that they would be posing a major
challenge. We are confident that within our space we are more concerned with the
traditional players other than the new players who had entered the industry.

Moderator: The next question is from the line of Jenish Karia from Antique Stock Broking.

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Jenish Karia: First question is with regards to your opening remarks where you mentioned that
you'll be rejuvenating the Senator brand and you also launched the Luster series of
products and will be launching a dedicated brand stores for that phase. So, can you
give some color on how does the tier-wise breakup of these brands are, where do
we see the margins for these brands going forward? And what would be the
revenue contribution from these specific brands in the next 3 to 5 years?

Deepak Chaudhary: The Luster was launched last year and the Senator has been there for roughly like
4 to 5 years now. As we said that we have been trying to concentrate on these
particular brands. And number would be difficult to give right now because we have
been, we are now just trying to focus on this particular category, the luxury
segment. The reason is that we see that till now, the kind of focus which is required
for this particular segment was not there. But now with the kind of growth which
has been there in the luxury segment in the projects, which have been coming up
in the luxury space. We are intended to concentrate on this area. So, the target
would be that let's say, by the time that we are reaching 2,900, these brands should
be contributing at least, let's say, 8% to 10% of our total turnover.

Jenish Karia: Okay. And what will be the average realizations for this? Like how much premium
would it be to Cera brand? Just trying to calculate how much of the value addition
can be in the next 3 to 5 years?

Deepak Chaudhary: See again, the kind of premium which will be there for luxury brands vis-a-vis the
Cera premium brands would be quite higher. It will be something like 60% to 70%.

Jenish Karia: Okay, great. Sir, second question is with regards to your upcoming price hikes. So
earlier, we used to take 2 price hikes each year. So, are we moving to that strategy
from this year, or we plan to postpone into the next year considering the
challenging demand scenario? And secondly, can you give some flavor on the
EBITDA margin breakup for each of the segments for FY24? That would be all.

Deepak Chaudhary: See, the kind of price hikes that we are going to take will depend upon the market
conditions and also the way that the competitors have reactions. Normally, we have
been more of a price leader in the segment, like we have been trying to take our
own call with respect to what is environment, how much of price hike to take. But
the current market scenario is such that price hike as of now is offering limited
opportunities to take a price hike. So that will depend upon how the market
situation changes in the future. So, we'd not like to comment on right now whether
it will be 2 or 3 to something, it's going to be planned. It will depend upon the way
that the situation changes. If the demand situation improves, and we feel that the
price rise is possible, will take a price hike. But instead, what we have been doing is
we have been concentrating on the cost aspect more, try to optimize our cost so
that our margins are protected. So that the same effect that would have come from
by taking a price rise is achieved by going towards a better cost model.

Jenish Karia: Okay. And sir, on the margin front, any flavor on the segmental margins for the year
and going forward?

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Vikas Kothari: No. So as far as the segmental margins are concerned, we present the overall
margin. So segmental margins are difficult in terms of establishment, but being the
overall margin that has already been explained.

Jenish Karia: Okay. And going forward, any guidance on the margin?

Vikas Kothari: Going forward?

Jenish Karia: Any future guidance on the margin? Will it remain the same or there will be some.

Vikas Kothari: No. So, like I already told, means we are even in the tougher situations where we
are right now, we have sustained our margins. And as the demand situations
improve, definitely, the margins will also improve.

Moderator: The next question is from the line of Bhaskar Chaudhry from Entrust.

Bhaskar Chaudhry: So just a question on the cash levels. Currently, they are at almost in excess of 40%
of the total assets on the balance sheet. You did announce a dividend for the year.
But any thoughts on the broader level on the level of cash? And have you any plans
for that?

Vikas Kothari: So as far as cash levels are concerned, we are having cash reserves of around INR
828 crore as on March 2024. And in terms of paying back to the shareholders, so
this time, the Board has approved the dividend of INR 60 per share which is almost
32.6% of PAT. And as far as the projects which are going on, the capex programs,
which are going on, they are completely funded through these internal accruals.
And as and when the new scenarios will come, the utilizations will be taken care of.

Moderator: The next question is from the line of Bhargav Buddhadev from Ambit Asset
Management.

Bhargav Buddhadev: Sir, if you look at the last 5-year CAGR for the Company, it's close to about 6%. So,
when we are saying 16% revenue CAGR for the next 3 years, what are we assuming
on the industry growth rate, are we likely to grow in line with the industry? Or are
we assuming any market share gain?

Vikas Kothari: So ideally speaking, in terms of the revised guidance, what we have given regarding
this 16% CAGR, which is there, so means the guidance is largely based on the
current situation as well as the detailing what we have done in terms of estimating
our 3-years operating plan. So ideally, the factors which are going to contribute to
this growth of 16% will be led by volume, which may be around 10% to 13%. And
there will be some benefit from mix also, which is going to be around 4% to 6%, and
the price will play between 2% to 3%.

Bhargav Buddhadev: Okay. And sir, as we assume a recovery in volumes, is it fair to say that this
additional great schemes that you've offered in FY '24, that will be pulled back and
will come back to 50% to 53% gross margin range?

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Vikas Kothari: Yes. So is, again, this is a seasonality, which is playing a role where you see the
impact of gross margin being slightly lower as compared to the previous year or
quarter. So again, like I told, we are quite hopeful in terms of the demand situations
being getting improved after Q1. And definitely, the discounts and other offerings
which are there because we are not taking any price rise. We are not giving any sort
of other things. So, to meet out the situation, this is a seasonal impact, which is
there. So that will be taken care of.

Bhargav Buddhadev: And lastly, sir, what is the capex for the next 2 years?

Vikas Kothari: So the capex for the next financial year or the routine capex is around INR 25.4
crore, and this is largely taking care of the routine plant and machinery
replacements, enhancing our customer touch points and some IT-related and
logistics developments.

Bhargav Buddhadev: And this greenfield is on top of it, the sanitaryware INR 150 crore.

Deepak Chaudhary: So greenfield is which is the routine capex, which I have discussed. As far as
greenfield is concerned, so means a majority portion of the land, it is acquired by
March 2024 and around 85% of the land is acquired and balance 20% is under due
diligence, and we expect that it is going to be completed by July 2024. And then we
will see in terms of the construction of the new plant facility at an appropriate point
of time considering the market scenarios and the market dynamics, which is there.
And we estimate that it will take around 18 months from the zero date.

Moderator: Ladies and gentlemen, this is the last question for today, which is from the line of
Akash from UTI Mutual Funds.

Akash Shah: Just wanted to ask what is the capacity utilization in sanitaryware segment?

Vikas Kothari: In sanitaryware segment, the capacity utilization in Q4 was 82%.

Akash Shah: Okay. So in sanitaryware greenfield expansion, we had a plan of spending close to
INR 120 crore to INR 130 crore. Out of that majority of land parcel we have already
acquired. So, what would be the cost of that land? And would that be sitting in FY
24 capex?

Vikas Kothari: No. So as far as land is concerned, so it is costing around INR 25 crore out of this
INR 130 crore.

Akash Shah: And that has not been spent yet. Is it?

Vikas Kothari: No, that is already spent.

Akash Shah: So that will be in FY24 cash flow statement, right?

Vikas Kothari: Correct.

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Akash Shah: Okay. sure. And sir, just last question. So earlier, we used to generate close to 30%
to 35% of the sales from project segment or, let's say, developer segment and the
balance was from retail segment. So, sir, I mean, how is the on-ground situation? I
know, I mean, demand is sluggish, but considering the 16% revenue CAGR guidance
for next 3 years, I mean even if demand revives, I mean, historically, over last, let's
say, around 10 years also, the growth in sanitaryware segment has not been close
to 16%. So, any sort of rough reason why we are guiding for 16% revenue CAGR
over the next 3 years?

Vikas Kothari: So ideally when you talk about the projects in retail, so more or less, it's a dynamic
model. And if we see in terms of means when we say globally, it is 70:30 as far as
Cera is concerned. But considering the current sluggish demand and other factors
which are there. So, if we see in FY24, the ratio is 65:35 in projects. So that is one
part. And secondly, answering your question with respect to the 16% CAGR, what
we have estimated on a 3-years operating plan basis, so this is taking into
consideration the split, what we understand is going to be there considering the
real estate growth and the retail market improvements.

Akash Shah: Sure, sir. So basically, we are saying that even Tier 2, Tier 3 cities, demand will
improve from the current level?

Vikas Kothari: Correct.

Moderator: As that was the last question for today. I would now like to hand the conference
over to the management for closing comments. Over to you, sir.

Deepak Chaudhary: Thank you, everyone for attending this call and showing interest in Cera
Sanitaryware Limited. Should 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.
Thank you once again for taking time to join the call. Thanks, and bye.

Vikas Kothari: Thank you.

Moderator: Thank you, members of the management. Ladies and gentlemen, on behalf of Cera
Sanitaryware Limited, that concludes this conference. We thank you for joining us,
and you may now disconnect your lines. Thank you.

Disclaimer: This is a transcription and may contain transcription errors. The transcript has
been edited for clarity. The Company takes no responsibility of such errors, although an
effort has been made to ensure high level of accuracy.

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