Purchase of stock-in-trade, almost absent till last year, is Rs.102 crores. This has produced 15-20 % of the revenue (material cost of in-house production is Rs.590 crores). This points strong demand, which the company is unable to meet from its own capacity. So it has sourced finished products from outside. While this is a positive, it also means that when the new capacity comes up, in-house production will replace these purchases. To that extent, new capacity will not contribute to topline growth. Part of the future topline growth has already come in this year. Margins should still improve though.
This is an item that should be watched.