Detailed Narrative
Q3 FY25 Performance Overview
Kriti Industries reported a challenging Q3 FY25, with revenue declining by 14% year-on-year to INR210 crores. The company incurred an EBITDA loss of INR1.4 crores and a net loss of INR11 crores for the quarter. For the nine months ended FY25, revenues were INR584 crores (down 13% YoY), EBITDA was INR28 crores (down 38% YoY) with a margin of 4.83%, and net loss was INR60 lakhs.
Raw Material Challenges and Margin Pressure
The company faced significant challenges due to raw material price volatility. While Kriti Industries procures raw materials under annual contracts, open market prices for PVC were substantially lower during the quarter. This disparity, coupled with declining international polymer prices and high imports leading to suppressed local market prices, resulted in inventory losses and severe pressure on operating margins. Management indicated that the current annual contracts expire by March 2025, after which the procurement strategy will be revisited.
Segmental Performance and Strategic Focus
The Agri segment showed marginal volume growth of 2% year-on-year, reaching 16,511 metric tons in Q3 FY25. The Building Products segment demonstrated strong performance, with volumes growing by 30% year-on-year to 2,262 metric tons. However, the Industrial segment experienced a significant decline of 73% in volumes, falling to 931 metric tons. This degrowth in the Industrial segment was intentional, as the company adopted a cautious approach to government-linked EPC contracts due to concerns about timely payments and cash flow cycles.
Capital Allocation and Debt Position
The company has already spent INR20 crores on capex during the current financial year, with plans to finalize medium to long-term growth strategies focused on higher-margin products by the end of FY25. Net debt increased from INR105 crores in FY24 to INR112 crores by H1 FY25. Management expressed comfort with the current debt levels and stated a commitment to being conservative regarding additional debt, aiming to avoid taking on money upfront for capex until needed.
Outlook and Future Strategy
Kriti Industries anticipates an improvement in EBITDA margins from the coming financial year (FY26) as new procurement contracts will be aligned with current market realities. The company expects the Building Products segment to grow faster, potentially doubling its growth rate, and the Agri segment to maintain an 8-10% annual growth rate. The company is also awaiting a final government announcement on Anti-Dumping Duty (ADD) for PVC resins, which could help stabilize market prices and improve industry conditions.
Regulatory Support for Industry
The management highlighted that the government is aware of the challenges faced by the local industry due to imports and declining international prices. Processes for implementing Anti-Dumping Duty (ADD) on PVC resins are complete, and notification details have been circulated. The final announcement of ADD is awaited, which is expected to protect local manufacturers and help rectify the market situation.