Q & A Highlights

Q: What is the company's volume guidance for FY27 and FY28, and what is the CapEx plan to reach the 2 million tonnes capacity target by FY29? A: Anish Bansal, Whole-Time Director, guided for sales volumes of 6.5 to 7 lakh tonnes for FY27 and 1 million tonnes for FY28. The total CapEx for adding the next 1 million tonnes of capacity is around INR650 crores, with approximately INR200 crores to be spent in the current financial year. The company remains confident of achieving the 2 million tonnes capacity target by FY29, with another 0.5 million tonnes set to start contribution by the end of this fiscal year.

Q: Can you provide an update on the progress of the various expansion projects, including the DFT facility, API Pipes, and the Hindupur plant? A: Anish Bansal confirmed that the Direct Forming Technology (DFT) facility at the Shanam Unit 2 Phase 3 is progressing as planned and is expected to be operational by Q3 FY27. The API Pipes Limited facility is expected to be ready by Q4 of the current financial year, enabling entry into the specialized oil and gas transportation segment. The integrated manufacturing facility at Hindupur, Andhra Pradesh, which will produce ERW tubes, specialized solar tubes, and other value-added steel products, is also expected to become operational by Q4 FY27.

Q: What is the current product mix by end-user industry, and what is the outlook for EBITDA per ton? A: Anish Bansal stated that approximately 50% of end applications are towards the construction and infrastructure sector, 20% from water and oil & gas transportation, and the balance from engineering, solar, and other specialized segments. Regarding EBITDA per ton, despite headwinds from elevated gas prices and logistics costs, the company maintained around INR3,200 per ton. The target is to reach INR4,000 per ton as the newly operationalized plants reach critical mass and the company stops offering additional dealer discounts for market penetration.

Q: How is the company viewing the demand environment across infrastructure, construction, water, solar, and other industrial segments for the remainder of FY27? A: Anish Bansal noted that demand from the infrastructure and construction sector remains very strong, with many previously on-hold projects now coming into shape. The next 2 to 3 quarters will be crucial for these sectors. In the solar segment, the company is gaining market share and will add more lines this year to further establish its footprint in the solar top tubes segment.

Q: Can you provide more color on the emerging data center segment and the company's export business? A: Anish Bansal highlighted that the company is seeing green shoots in the data center segment, with new inquiries for large hollow sections for gigawatt-scale data centers. The company aims to start with 15,000 to 20,000 tonnes for this segment in the current financial year. Regarding exports, the company has been in international markets for 1.5 to 2 years with a phenomenal response, targeting 10% of total sales volumes from international markets in the long term. Key markets include Europe, America, Canada, and Australia.

Q: What is the expected contribution of the new value-added segments like DFT and API to the company's margins? A: Anish Bansal explained that the DFT and coated steel segments will form the major part of the new 1 million tonnes capacity. The EBITDA per ton for DFT is currently around INR4,500 to INR5,000, while the API segment is expected to generate INR6,000 upwards per ton. The company is targeting a 45% to 50% share of value-added products (VAP) by FY28, with the full benefit of the DFT facility expected in FY28.

Q: How have the volumes been in July and August, considering the monsoon season, and what is the expected quarterly volume trajectory? A: Anish Bansal stated that Q2 volumes are expected to be similar to Q1, but once the monsoon and geopolitical situation softens, H2 will be a good half-yearly period for expanding volumes. Q3 and Q4 are expected to be relatively much stronger.

Q: Why is the finance cost high relative to the debt level, and what is the expected debt trajectory? A: Anish Bansal explained that the high finance cost is due to the simultaneous commissioning of three new facilities within a span of four to five months, which has increased working capital requirements. This will normalize as capacity utilization reaches optimum levels. The debt level is expected to remain approximately where it is, increasing with volumes but coming down on a per-tonne basis.

Q: Can you explain the nature of the purchase of stock-in-trade, which was high in Q4 and has come down in Q1? A: Anish Bansal clarified that the purchase of stock-in-trade includes some import consignments that were disposed of on the high seas due to the geopolitical situation. This amount will continue to come down going forward, normalizing to around INR50 to INR200 crores.

Q: What is the reason for the high blended realization of around INR90,500 per ton, and will it normalize? A: Anish Bansal indicated that the high blended realization is partly due to the stock-in-trade and will normalize to around INR75,000 per ton as the impact of the disposed import consignment fades.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .