Detailed Narrative
Q3 FY25 Performance in Challenging Market
HIL Limited reported a modest 3% year-on-year revenue growth, reaching INR 805 crore at a consolidated level for Q3 FY25. This growth was achieved despite a difficult market and external scenario, where most industry peers reported underwhelming results in both India and Europe. The company's 9-month consolidated revenue stood at INR 2,686 crore, reflecting a 6% growth over the previous year. However, the consolidated PBT for Q3 was a loss of INR 51 crore, indicating margin pressures.
Strategic Focus on Volume Growth and Cost Structure
In response to weak demand and pricing sluggishness, HIL focused on gaining market share in priority segments like Pipes, Construction Chemicals, Panels, Boards, and Parador, outperforming on volume growth. The second objective was to maintain a sharp focus on cost structure to minimize the impact of soft pricing. Despite lower pricing, the company experienced margin growth in some sub-segments of Building Solutions, Construction Chemicals, and Parador, with margin erosion in other categories being significantly lower than the price decline.
Polymer Solutions Segment: Robust Volume Growth Amidst Challenges
The Pipes and Fittings segment within Polymer Solutions registered a robust 57% volume growth and 38% revenue growth, reaching INR 122 crore in Q3 FY25. This performance was driven by strong distribution network expansion, despite a nearly 70% decline in government's Jal Jeevan Mission (JJM) spends. However, the segment faced INR 2.5 crore in inventory losses. The company successfully integrated its acquisition of Crestia, expecting further market strengthening and synergies.
Parador (Flooring Solutions) Turnaround and Expansion
Parador grew its volumes by 4% and revenue by 5% in Q3 FY25, in a market that declined by about 10%. This industry-beating performance was attributed to market share gains in core European markets, new products, and addressing pricing/product mix concerns. Parador achieved a positive EBITDA of 1.3% in Q3, a 100 basis point improvement YoY, driven by better material margins and improved realizations. The company expects this momentum to strengthen with geographical expansion into Americas and Asia, aiming for 15-20% CAGR over the next two years and to be cash positive in FY26.
Roofing and Building Solutions: Mixed Performance
Roofing Solutions sustained market leadership despite a 4% YoY revenue decline to INR 217 crore, focusing on protecting its price premium. The company is optimistic about the upcoming season due to expected robust rural demand and government investments. The Building Solutions segment faced subdued demand and increased competitive intensity, leading to a 4% YoY revenue decline to INR 132 crore. However, it expanded overall margins by 160 basis points, with the Blocks business improving its contribution margin by 400 basis points.
Capital Allocation and Future Outlook
As of December 31, 2024, total debt stood at INR 720 crore, with a debt-equity ratio of 0.59. The debt increased by INR 172 crore during the year due to the Crestia acquisition. The company invested INR 85-90 crore in CAPEX over nine months. Management expressed cautious optimism for Q4 and beyond, citing positive factors like the Union Budget's focus on infrastructure and rural demand, and potential anti-dumping duties on engineered wood flooring in Europe. New product launches and Blocks capacity expansion are planned for the coming months.