Borosil — Q3 FY25 earnings call

Call held 11 Feb 2025

Management summary

Borosil Limited delivered a robust performance for Q3 and 9M FY25, showcasing strong revenue growth across all key segments. Despite challenges from new pharmaceutical marketing practices impacting B2B sales and higher e-commerce customer acquisition costs, the company maintained healthy operating EBITDA margins. Management expressed confidence in long-term growth potential, driven by domestic manufacturing expansion, new product launches, and a strategic focus on premium and healthy product categories.

Highlights

  • Revenue from operations for 9M FY25 reached INR 837.6 crores, marking a 17.1% YoY growth.

  • Operating EBITDA for 9M FY25 stood at INR 140.2 crores, up 17.4% YoY, with a margin of 17% (vs 16.7% in 9M FY24).

  • Profit Before Tax (PBT) for 9M FY25 was INR 86.3 crores, a 6.3% increase from INR 81.2 crores in 9M FY24.

  • Profit After Tax (PAT) for 9M FY25 was INR 63.1 crores, up 3.8% from INR 60.8 crores in 9M FY24.

  • Larah Opalware segment revenue grew 9% YoY to INR 292.6 crores in 9M FY25.

  • Glassware segment revenue saw strong growth of 22.9% YoY, reaching INR 190.9 crores in 9M FY25.

  • Non-glassware segment revenue increased 17.8% YoY to INR 340.9 crores in 9M FY25.

  • Net debt as of December 31, 2024, was INR 20.4 crores.

Concerns

  • Impact of Uniform Code for Pharmaceutical Marketing Practices 2024 (restricting gifts)

  • Supply chain challenges and BIS issues for non-glassware/appliances

Key financials

  1. Revenue ₹837.6 Cr +17.1%YoY
  2. Operating EBITDA ₹140.2 Cr +17.4%YoY
  3. Operating EBITDA Margin 17%
  4. PBT ₹86.3 Cr +6.3%YoY
  5. PAT ₹63.1 Cr +3.8%YoY
  6. Net Debt ₹20.4 Cr

What they filed

Q1 FY27: revenue up 10.3%, net profit down 17.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue274 338 270 233 340 +24%339 +0%286 +6%257 +10%
EBITDA41 54 37 37 48 +17%53 −2%30 −19%35 −5%
Net profit18 35 11 17 23 +28%24 −31%11 +0%14 −18%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹824.4 Cr Total
  • Non-glassware ₹340.9 Cr 41.4%
  • Larah Opalware ₹292.6 Cr 35.5%
  • Glassware ₹190.9 Cr 23.2%

Guidance & targets

Overall Growth

  • Medium-term CAGR Overall Growth · Medium-term · High confidence 15-20%
    overall as a company, we should have a 15% to 20% kind of medium-term CAGR, which I still believe that we can achieve.

    — Shreevar Kheruka

Profitability

  • EBITDA Margin Profitability · Next 2-3 years · High confidence >20%
    in the next say, two, or three years, can we increase our EBITDA margin to beyond 20%. I think that is very much on the cards.

    — Shreevar Kheruka

  • Steady-state EBITDA Margin Profitability · Overall · High confidence 20-22%
    Yes, we have already indicated that we expect somewhere in the 20% to 22% EBITDA margin overall.

    — Shreevar Kheruka

Ad Spend

  • Ad Spend as % of Sales Ad Spend · Next 2-3 years · Medium confidence 6%

    Previously 8% → 6%

    used to be 10% at some point. Now it's down to 8%. And hopefully, over the next two, three years, it should come down to 6%.

    — Shreevar Kheruka

Capacity

  • Glassware Capacity Utilization Capacity · FY27 (within 2-3 years) · High confidence 100%
    overall given three years as, let's say, the time frame in which we should utilize the whole glass capacity. But we hope to do it in two... in any case, it should not be longer than three.

    — Shreevar Kheruka

  • Opalware Capacity Increase (Debottlenecking) Capacity · Coming year · High confidence 10% (from 100 to 110 units)
    we will increase our capacity by roughly 10% as it is. So our capacity will go from 100 units to 110 units in this coming year just by simple debottlenecking.

    — Shreevar Kheruka

  • Opalware Capacity Increase (Further Debottlenecking) Capacity · Next 2 years (after coming year) · Medium confidence 10% (from 110 to 120 units)
    Then we have another potential to further debottleneck, which could maybe increase it from 110 to 120 units about 2 years out.

    — Shreevar Kheruka

Capex

  • Capex for bottles manufacturing in India Capex · Next year · Medium confidence INR 50-70 crores
    somewhere in the INR50 crores to INR70 crores range would be the capex.

    — Shreevar Kheruka

Sourcing

  • Non-glassware Made in India % Sourcing · Next 3 years · High confidence 70-80%

    From 30-35% today

    in the last 2 years, we've now about 30% to 35% made in India, 65% is imported still. With various BIS norms coming into play, I would say, if I have to take a bet in the next 3 years, this will become 70%, 80% in India, and maybe 20% outside of India, that will be the shift.

    — Shreevar Kheruka

Risks & concerns

  • Impact of Uniform Code for Pharmaceutical Marketing Practices 2024 (restricting gifts)

    high

    This regulation impacted B2B sales and was identified as the 'biggest impact from a sales perspective' for the year, though management expects it to eventually reverse.

    Management acknowledged

  • Supply chain challenges and BIS issues for non-glassware/appliances

    high

    The vendor ecosystem for some non-glassware products does not yet exist in India, posing challenges for domestic sourcing and compliance with new BIS norms.

    Management acknowledged

  • Higher customer acquisition costs due to shift to e-commerce sales

    medium

    The increased marketing expenses for online channels contributed to pressure on overall margins.

    Management acknowledged

  • General consumer slowdown and muted growth in kitchen appliances

    medium

    A broad-based consumer slowdown was observed across the industry, impacting various product categories, including kitchen appliances, and specifically affecting Borosil's B2B channel.

    Management acknowledged

  • Increasing competitive intensity in the opalware/dinnerware segment

    medium

    Management noted that a fourth player is expected to enter the opalware segment, prompting them to evaluate strategic focus within the broader dinnerware category.

    Management acknowledged

Areas of evasion (2)

  • Channel-wise sales mix data
  • Specific margin impact of India vs import sourcing for bottles

Q&A highlights

3 direct
Impact of BIS norms on steel bottles and strategy for domestic manufacturing. Direct
So we have, frankly speaking, no alternative but to decide to make this product in India. And I think very shortly, we'll be doing that. We do see some short-term challenges in terms of revenue growth... But I think these are short-term challenges.

This question addressed a significant regulatory change (BIS) and revealed management's strategic pivot to domestic manufacturing for steel products, acknowledging short-term revenue challenges but highlighting long-term opportunities.

Asked by Aniruddha Joshi

Reasons for margin pressure and the company's outlook on future EBITDA margins. Direct
The challenge has been, as I mentioned earlier, there's been a change in channel mix, and advertisement expenses for online have increased which has contributed to this. The second thing is because, again, this a course change in channel mix, things like institutional sales, which were relatively more profitable... have definitely contributed to some reduction in margin.

Management provided a clear explanation for the margin compression, attributing it to channel mix shifts and the loss of profitable B2B institutional sales, while maintaining a positive outlook on gross margins and future EBITDA targets.

Asked by Dhaval Shah

Competitive intensity in the opalware segment and future capacity expansion plans. Direct
there are at least 5 players in India who can do this, out of which 3 are already playing. So our understanding is that a fourth player coming in this segment. It's coming, it's about to come... we should then evaluate whether we want to focus more on this category or look at other categories within the dinnerware segment.

This question revealed increasing competition in the opalware segment, a core category for Borosil, and indicated management's consideration of diversifying focus within the broader dinnerware market.

Asked by Akhil Parekh

2 min read 6 chapters

Detailed narrative

Robust 9M FY25 Performance Driven by Key Segments

Borosil Limited reported a strong 9M FY25 with revenue from operations reaching INR 837.6 crores, a 17.1% year-over-year growth from INR 715.1 crores in 9M FY24. Operating EBITDA grew by 17.4% to INR 140.2 crores, with margins at 17%, slightly up from 16.7% in the prior year. PAT for the period stood at INR 63.1 crores, compared to INR 60.8 crores last year, despite increased depreciation and tax impacts.

Segmental Growth and Strategic Sourcing Shifts

The glassware segment demonstrated exceptional growth of 22.9%, reaching INR 190.9 crores in 9M FY25. Non-glassware also performed strongly with 17.8% growth to INR 340.9 crores, while Larah Opalware grew 9% to INR 292.6 crores. Management highlighted a strategic shift towards domestic manufacturing, aiming for 70-80% of non-glassware to be made in India within the next three years, up from the current 30-35%.

Margin Pressures from Channel Mix and B2B Headwinds

Despite improving gross margins (up 2 percentage points across categories), operating EBITDA margins faced pressure due to a shift in channel mix towards e-commerce, leading to higher customer acquisition and advertising expenses. The new Pharmaceutical Marketing Practices 2024, restricting gifts, significantly impacted B2B institutional sales, which are typically more profitable, contributing to margin reduction.

Capacity Expansion and Utilization Plans

Opalware capacity utilization is currently around 85%, with plans for debottlenecking to increase capacity by 10% (from 100 to 110 units) in the coming year, and potentially another 10% (to 120 units) in the subsequent two years. Glassware (press) utilization is at 55-60%, with a target to fully utilize capacity within two to three years (by FY27), supported by new product development.

Future Growth Drivers and Capex Outlook

Borosil is actively working on launching new products in the dinnerware segment (beyond opalware) and other non-glassware categories within the next 3-6 months to drive future growth. The company anticipates a capex of INR 50-70 crores in the next year, primarily for setting up manufacturing capacity for bottles in India, aligning with the domestic sourcing strategy.

Competitive Landscape and Market Outlook

Management acknowledged increasing competitive intensity in the opalware segment, with a fourth player expected to enter the market. However, they remain confident in the overall medium-term outlook, targeting a 15-20% CAGR for the company and aiming to achieve an EBITDA margin of over 20% in the next two to three years, potentially reaching 20-22% overall.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Consumer Durables earnings calls