JM Financial has written an interesting note on the plumbing and drainage pipes space where they say that demand has picked up well and the months of June and July have been very encouraging. To get some perspective, CNBC-TV18 spoke to Niraj Kedia, deputy CFO at Finolex Industries.
On demand, Kedia said, “Q2 is actually a slower quarter as compared to Q1 in agri sector as well as in sanitation. In agri primarily, because monsoons kicked in so there is less laying of pipes in the fields and again, because it is seasonal, the construction activity usually goes down a bit in Q2. But this year, I would tend to agree with what the analyst report says that the demand has been pretty robust.”
“Post the lifting of the COVID curbs, there is a strong demand in plumbing and sanitation from the urban side. That is because retailers are able to open their shops, and there was a lot of pent-up demand, which was holding back some of the uplifts in the past. So, after the lifting of curbs, after people started to open their stores and all, we are seeing pretty robust demand in the plumbing and sanitation work,” he further mentioned.
On volume guidance, he said, “There was a contraction in the business overall. This year our target is to reach FY20 levels. Seeing the way business has happened in the first quarter and in this quarter as well, we are pretty confident of reaching FY20 levels again this year.”
On revenues, Kedia said, “We had a lower base last year but in terms of volumes in Q1, we were 70 percent higher, our volumes were higher by 5-5.50 percent, which is not bad at all, because even this year, there were COVID restrictions. But in terms of revenue, when you say topline, it was up 70 percent.”
On government projects, he said, “We don't deal directly in any government project. It is our dealers, distributors who, in their own capacity, bid for these projects. So in our case, for our margins, it typically does not really matter, because for us it is any other sale and I will not be able to comment on what margin our dealers make on these projects, but so far as the initiative goes, and the demand goes, yes, we are seeing some traction.”
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