Ladies and gentlemen, good day and welcome to the Maharashtra seamless Limited Q4 and FY25 earnings conference call hosted by PhillipCapital (India) Pvt. Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vikash from PhillipCapital (India) Pvt. Ltd. Thank you, and over to you, sir.
Thank you, Shruti. Good afternoon, everyone. Welcome to Maharashtra seamless Q4 FY25 conference call. From the management side, we have with us Mr. Kaushal Bengani, Deputy General Manager, Investor Relationship and Finance. Without taking much time, I'll hand it over to Kaushal for his opening remarks. Over to you.
Thank you, Vikash. Good afternoon, and thank you for joining our earnings call. During Q4 FY25, we have seen some slowdown in order booking, but have been able to still dispatch almost 118,000 tons of seamless pipes, thereby exceeding our annual growth guidance of 7%-8%. On margins and EBITDA per ton, we have again been in the region of the guidance given. In this quarter, our ERW segment has outperformed due to dispatches of a particular type of product getting concentrated in the last quarter. This outperformance is one-off, and consequently, annual ERW margins and EBITDA per ton have been slightly above the given guidance, with ERW tonnage dispatch being as envisaged. I will briefly summarize key financial points. On reviewing our Q4 FY25 performance against Q3 FY25, revenue improved by 3% to INR 1,456 crores. EBITDA increased by 2% to INR 285 crores.
PAT increased by 28% to 243 crores from 190 crores in the previous quarter, and EPS increased to Rs. 18 per share from Rs. 14 per share. On comparing the entire financial year 2025 performance with financial year 2024, although revenue remained more or less similar, earnings declined significantly despite an increase of more than 10% in dispatches. This has been solely due to a fall in sales realization on a year-on-year basis. The performance of our treasury and other income items has been fair. On comparison of other income in FY25 with FY24, we have earned 197 crores against 141 crores, which is an increase in other income by 40%. Therefore, against an average of 35 crores approximately per quarter in FY24, we have earned an average of 50 crores approximately per quarter in FY25.
Apart from financials, there are five key points which I would like to draw attention to. The first is our credit rating. We've been upgraded by ICRA in December 2024 from AA to AA Plus. This has been the highest credit rating which the company has received in the last 10 years and sends a strong message to all stakeholders about our strengths and expertise. The second point is about our treasury, which is at INR 2,630 crores as of 31 March 2025. It is being judiciously managed with engagement and inputs at the highest level. The third point is regarding our order book. It is at INR 1,584 crores, which is still within our range of INR 1,500-INR 2,000 crores. We have seen some slowdown in order booking in the previous quarter, but in general, the demand environment is conducive for the manufacturing industry and the oil and gas sector.
The fourth point pertains to ICDs and corporate guarantees, of which there are none to any unrelated entities or guarantees being given to any related entities. The final point is regarding dividend. In FY24, we have quadrupled the dividend amount paid. In FY25, we have maintained the same dividend despite a decline in annual profit of 19%. Consequently, our dividend payout ratio has improved from 14% to 17%. That is the entire brief. I would now request Vikash to kindly open for questions.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Shriram Khadi from 3A Financial Services. Please proceed.
Hello. Am I audible?
Yes, sir.
Yes. Hello, sir. I just wanted to know about the update on the CAPEX regarding the cold drawn line.
The equipment for cold drawn line has already been ordered. It will be received by us towards the later part of this calendar year.
Okay. And post that, you will continue with the remaining CapEx, right, of around INR 700-750 crores?
Our other CapEx at Telangana is also continuing in parallel to the cold drawn.
No, sir. I was talking about the hot mill upgrade or the other CapEx of INR 852 crores that is mentioned in the PPT, INR 100 crores of the cold drawn pipeline. Other than that.
These items are not being undertaken.
So when can we expect them?
Telangana and the cold drawn is completed, then we'll update you.
Okay, sir. And, sir, actually, I'm new to this company. I had one bookkeeping question. Every year, you have shown an impairment expense. So what is that regarding?
What do you mean? Which year?
Oh.
I'm looking at the financial statements right now. There is nothing to make that change.
Like annual reports. In each annual report, there's a plant and machinery INR 186 crores expense. So what is this about? Is that about USTPL?
It could pertain to USTPL. When we acquired it, we had to do a revaluation of the fixed assets and the stock which was there in the inventory sorry, stock which was there in the plant at that point in time. It could pertain to that. If you can send me an email, I'll get back to you more specifically.
Okay, sir. And any guidance on the volume growth that we expect to achieve in FY26 and FY27?
In FY26, I think we'll do similar volume that we did in FY25 till our finishing line at Telangana is operational. Once that is operational, only then we'll be able to generate volume growth.
Do we expect better realizations on the volume?
It is difficult to say because we work on short-cycle order books. Therefore, to give guidance for the rest of the year is more difficult for us than it is for other companies who have larger duration order books.
Okay, sir. That's all from my end. I wish you the very best.
Thank you.
Thank you. The next question is from the line of Mohammed Farooq from Pearl Capital. Please proceed.
Hello. Good afternoon. Thank you for the opportunity. Over the past three years, we have observed that the company's top line has remained flat or slightly declined. Could you please kindly share the key reason behind this trend? And additionally, when do you expect to see a meaningful recovery in this revenue growth? And is there any internal forecast for FY26 that you could share?
We expect to maintain the level of dispatch that we have done in FY25 in FY26. The realization that we have seen in FY25 has been significantly lower than the realization that we've seen in FY24. So even though we've been able to dispatch more than 10% increase in seamless pipes, the overall revenue of the company is broadly similar in FY24 and FY25. This has solely been due to a fall in realization. As of now, the only guidance which we can give you right now is that we'll be able to dispatch the same amount of pipes. If our finishing line is operational towards the end of this calendar year, then we will see an increase in the tonnage dispatch.
What's the main reason for this drop in realization? Is it due to demand or oversupply?
It is not really due to a drop in demand because the demand environment is broadly good. There has been a general decline in the prices of pipes across the entire industry because what had happened a couple of years ago was that the Russia-Ukraine war. Rather, three years ago, due to the Russia-Ukraine war, there was an energy crisis for a brief period, which led to a spurt in demand for oil and gas sector products, which led to an increase in realizations, which continued for maybe a year, a year and a half. And thereafter, the market has normalized. But if you look at the tonnage which the company has dispatched or which other competitors have dispatched, all of them will show an increase in FY25 from what they have dispatched in FY24.
Okay, sir. One more question, sir. The company maintains a healthy return on capital employed of around 16%. And we note that there is a significant cash in reserve, approximately INR 2,600 crores, currently parked in the bank deposits or mutual funds. While this reflects a strong financial prudence, may we know if there is any plan to deploy this in acquisitions or something like that to get better returns?
There is a plan to deploy this in acquisition opportunities. But those opportunities should be at a cost at which we are comfortable. Such opportunities are not available right now because when markets are good, then undervalued assets are not usually available. That is what we've realized after searching for some time.
Thank you, sir. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Chetan Doshi from Tulsi Capital. Please proceed.
Yeah. Thank you for giving me the opportunity. I have two questions. One is, see, we are having a lot of cash on our balance sheet. So are we planning for some acquisition? Because asset slowdown is there. So where will be the focus in the coming year wherein we have better realization in spite of dropping sales?
Realization is not within our control. We have improved the proportion of value-addition products that we are dispatching in our total dispatch portfolio by developing new products and ensuring that we are a developed source with PSUs. That has already been done around two years ago. Right now, we are open to acquisition opportunities. But as I said earlier, it has to be at a price point at which we are comfortable because we don't want to pay or buy overvalued assets and then get caught in the wrong phase of the cycle. Therefore, we are extremely cautious whenever we make any acquisition. As of now, we have not encountered any attractive opportunity. Having said all of this, you must also bear in mind that our plant and machinery is very old. There is no problem in efficiency right now.
But going forward, maybe 10, 15, 20 years into the future, there will come a point in time when we'll have to do major overhaul of our plant and machinery for which we'll require the cash. So we have taken the view that we want to conserve our cash or wait for an opportunity that is available at our price point.
All right. And in the beginning remarks, you said that this ERW is one time. So from current year, you don't expect any orders on that segment?
We expect orders from that segment, but the tonnage is limited, and because the tonnage is limited and the frequency cannot be predicted, it is better to consider it as a one-off rather than a general rule because if you see the EBITDA per ton on ERW that we have done, it is at INR 9,897, which is broadly in line with what you can expect in the ERW segment when the segment is a combination of two sub-segments, one for the water sector and one for the oil sector. In the oil sector, we make higher margins. In the water sector, we make lower margins, and we dispatch both kinds of products. In FY25, we have been able to dispatch slightly higher percentage of oil sector products, which is why the ERW margin is close to INR 10,000, but in the previous year, it would be lower than that.
It is at INR 7,315.
The government's program of that Jal Yojana, that is not moving at the pace what we expected?
We are getting orders. There is no problem in terms of orders in the ERW segment. But our impetus is to dispatch those pipes on which we make the highest margin.
Thank you and good luck.
Thank you.
Thank you. The next question is from the line of Gaurav Kannav from CapGro Capital. Please proceed.
Hello.
Yes, sir.
Hello. Am I audible?
Yes, sir. You are audible.
Yeah. I am asking, can you throw some light on the big business because we were planning to divest it earlier, and recently it has been deployed with ONGC. Can you throw some light on it?
I cannot understand what you're saying. Can you please repeat?
I'm saying that the rig business we were planning to divest it, and recently we have deployed it with ONGC for next three years, so what is the outlook and what do you want to say on that?
rig has not been deployed with ONGC for the next three years. The rig has received its subsequent contract with Jindal Drilling. It is under refurbishment. There was a view of getting out of the rig business, but we have not received any update from the board in the board meeting, which concluded yesterday.
Okay, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Vikas Kasturi from Focus Capital. Please proceed.
Good evening, sir. Sir, I had a follow-up question on the Rig itself. I believe the new rate for the Rig is somewhere around the $80,000 per day kind of a rate. So would there be an update? Would Maharashtra Seamless also receive a higher rate from Jindal Drilling?
Good evening. Unfortunately, no. The tender in which this Rig had participated resulted in an L1 of $35,000 per day, approximately, and that is the rate which Jindal Drilling had to match, and therefore, there is no increase in the rental that Maharashtra Seamless will receive from Jindal Drilling. There may be a decline of a few thousand dollars per day in the rental which it receives, subject to the negotiation that takes place between both companies.
All right, sir. And so, just for my understanding, so this new contract for the Rig is for three years. Am I correct, sir?
Yes, it is.
And so does it mean that we cannot sell the rig for three years?
We are not restricted by any regulation. But since the Rig will be given to Jindal Drilling on rent, we will have to take their approval. And Jindal Drilling will give it on rent to ONGC. So we will have to take ONGC's approval.
All right, sir.
We have expressed the point which you just made, and approval from whoever the rig has been contracted out to, that approval is required.
Got it, sir. Thank you for the updates.
Thank you.
Thank you. The next question is from the line of Shubhankar Oja from SKS Capital. Please proceed.
Thank you. So just quickly, sir, out of these INR 850 crores of capex that you have announced, what's the timeline of commissioning of those?
We are working only on two items right now. One is the Cold Drawn project for which everything is in place except for the plant and machinery, which has been ordered and which will be delivered to us towards the later part of this calendar year. The other item of capital expenditure is the finishing line at Telangana, which we had commenced last year, and there is work undergoing. Once these two items are completed, then we will get back to you on the timeline for the other items.
Okay. Okay. Got that. Thank you. And in terms of the INR 1,584 crores of order goal, how much of this is ERW and how much is Seamless?
We've given a breakup on a certain slide in the presentation. Just let me.
I'll look up. I'll look it back.
It's slide 15 of the presentation. The order book of ERW is INR 54 crores, and the order book for Seamless is INR 1,530 crores.
Okay. All right, sir. Thank you. Thank you so much. And best of luck.
Thank you. Participants who wish to ask questions, may please press star and one at this time. The next question is from the line of Saket Kapoor from Kapoor & Company. Please proceed.
Yes.
Namaskar, Kaushalji, and thank you, team, for the opportunity. Firstly, sir, when we look at your CapEx parts, then you have alluded to the fact that this is by this calendar year, we would be trying to commission the Cold Drawn finishing line at USTPL at Telangana. So as of 22-Mar-2025, our capital expenditure has been only to the tune of INR 23 crores for this financial year, and previous year was 32. So we have, as of now, not drawn money for the same. Can you explain why? Is it back-ended, the payment that we need to make?
Yes. Yes. It is back-ended because the way it works is you issue a purchase order, and then you give them a token advance. And then there are stage-wise payments. So the machinery is prepared in parts. And as and when the parts are physically delivered to the location, our engineers will do an inspection. Some of the inspection is done before it is dispatched from the manufacturer's unit. And once it is received, another round of inspection takes place, and then payments are made.
Sir, in your slide, page number 16, in policy implementation, you have alluded to the fact of the Ministry of Steel has revised their DMI&SP policy. So what has effectively changed for us? I think so you have mentioned it, but if you could just throw some more light on how will this help the Seamless companies, how will we benefit out of it?
The key benefit is that imports of seamless pipes will decline into India because of the DMI&SP policy. The policy requires that all seamless and ERW pipes are in the melt and pour category. Therefore, what it means is the entire value chain from raw material to finished product has to be domestically procured in India. This means that import of pipes will decline because those pipes could not be used in the PSU segment.
Okay. The entire value chain has to be domestically sourced. That is what the DMI&SP should.
Yes. The name of the policy is Domestically Manufactured Iron and Steel Products Policy.
Okay. Sir, as you mentioned that we work on short duration order book, and the executable period is three to four months. And even last year, you gave an understanding of how the EBITDA per ton would shape up in the band of INR 15,000-INR 18,000 per ton for the Seamless segment, and we average around INR 16,000. So taking these into account, do we still hold the band, or what should be the outlook per ton in terms of the Seamless pipes, EBITDA per ton? The trajectory, if you could just spell out.
Reasonably speaking, I think INR 15,000 per ton should be the guidance on our current order book.
Correct. And last two points could be just last two years, we did some plant shutdown to improve the efficiency, and I think so the yield to improve the yield also. So for the current year, do we have any such exercise outlined for any part of the current year, or are we done with the same for at least two years for a longer period of time?
In Maharashtra, I think we will take preventive maintenance shutdown in one of our mills, maybe in the second quarter or in the third quarter, depending on how the order book is. In Telangana, I don't think we will take any preventive maintenance shutdown in this year.
Okay. And last point is about, I think so you spoke about the rig part also to earlier participant and also our investment cash accruals which we are generating into mutual funds and other activity. But taking into account the thought process in a broader sense, what should exactly be investors looking for? I think so the dividend payout ratio has gone up because of the decline in profits, absolute amount being declared the same. So just wanted to understand what should investors understand in terms of the cash accrual because I think so we are not into the business of deploying money into mutual funds. To just have an understanding, as alluded earlier by the promoters also, that we will only participate in activities which are in line with our line of business.
In short term, it is correct to take advantage, but over a period of time, there should be a policy making. So what's the thought if you'd like to share?
Our plant and machinery is very old, and there is no problem in the capacity or in the efficiency of these machines. But you must bear in mind that when we acquired our plants, they were at scrap value or close to scrap value. Going forward, the plants and machinery will gradually continue to depreciate and will eventually have to be fully replaced, maybe 10, 15, 20 years later. That back-ended capital expenditure will be significant. And since we operate in a cyclical industry, we are conserving cash for that eventuality, subject to any acquisition opportunity which may present itself. Right now, there are no acquisition opportunities because the market is generally good. Even after trying for more than a year, we have not been able to find a suitable acquisition opportunity within India. So we have taken a view that we will conserve our cash for the moment.
Yes, your point is well taken. Cyclical nature of business. We are running on a totally net cash position for the last two years. But since you yourself mentioned that it would take 10-15 years, so 10 years is a very, very long time to get the preparation. Maybe if the overhauling is around more than $1 billion to get the plant and machinery done, then definitely that might kind of cost what will be needed at that time. But just a last point, if I may conclude it, we made the rig investment, I think so in the year 2020, yeah, 2020 or 2021. And at that time, even the rig prices were sitting at rock bottom. As you mentioned that we always scout for assets where the NAV is lower than the market is lower than the NAV.
So, taking into account the current price trends in the daily rig rate, will the management may also look out for scouting for more opportunity in the rig business going ahead, or this money will be the cost that we have will only be deployed for the Seamless type opportunity? And the continuity of the rig may happen for the next term, but scouting for more assets under rig is not going to be too amazing. This can be categorically.
I understand your point, sir. We will continue in the steel pipes segment only. We will not go into the Rig segment any further. When we will exit the Rig segment, that is for the board to decide, which has not given any update yesterday.
Correct. Correct, and that is the reason why even investors are looking for the reasons why the valuation for companies with having the assets and net cash lying so low, so I was just working out these parameters. Thank you for the extended opportunity. We'll join the team. धन्यवाद.
Thank you.
Thank you. The next question is from the line of Radha from BNK Securities. Please proceed.
Hello, sir. Thank you for the opportunity. Sir, continuing with the previous discussion, what is the replacement cost of our plant and machinery?
It is difficult to say because we are not looking at buying new plant and machinery right now.
Yes, just an estimated figure at current prices would be helpful.
I don't have any estimate. I think you will be a better judge since you speak with many metal industry companies.
Okay. So the second is your presentation mentions about new discoveries, Ujaya, Mani Vajra etc. So just a very basic question to understand how it works. So whenever there is oil discovery and if ONGC decides to develop the fields, then how long does it usually take for us to get the orders?
These discoveries that have been mentioned in the presentation which you're referring to, they were made public a couple of days ago. Whilst we continue to hear news of discoveries being undertaken, we are slightly disappointed that they have not materialized into orders with the pace at which we expected them. That's the only thing that I can tell you right now. The communication in respect of oil and gas expenditure is frequent and rapid, but the actual expenditure is not as frequent and as rapid, which is not to say that there is a slowdown, but the tempering of our expectation has to take place because ground-level expenditure has not increased with the pace of the communication that is being received.
Okay, sir. And sir, currently our gross block is around INR 3,700 crores, and roughly not even 50% of the assets are depreciated. So what makes you say that the assets are getting old? And plus, we are generating a lot of cash every year. Then what is the reason for conserving cash for something that will be required 10, 15 years down the line?
Our assets were purchased when they were 20 years old, and then we have been operating those assets for 30 years. So already our assets are 50 years old. So there will come a point in time when the piecemeal replacement of parts which are not functioning will not be the way forward because of obsolescence. And since we'll have to embrace new technology and even better efficiency, we will have to buy new assets.
Okay. So within seamless pipes, you have multiple products, so sub-sea pipes, OCTG, API, etc., many kinds of pipes. What is the usual mix of these pipes for the company? Which one contributes to the highest in terms of volumes and margins?
Oil and gas sector is our main area. Almost 70% of total dispatches are in the oil and gas sector, with the balance 30% coming from boiler, power, general engineering segments.
Okay. I'm not talking about the user industry. I'm talking about the pipes, the kind of pipes, sub-sea pipes, API pipes, power pipes, those kind of pipes. Which one contributes the highest in the Seamless EBITDA?
We cannot give that information.
Okay, sir. Thanks, man. All the best to you.
Thank you.
Thank you. The next question is from the line of Harshah from Mirai Plus Advisors. Please proceed.
Yeah. Hi, sir. Thank you for the opportunity. Can you hear me?
Yeah. Yeah.
Oh, sir. As you can draw from the conversation from the previous participant, you said that in the long term, the EBITDA per ton expected should be around INR 15,000. So when do you expect it? So do you expect it to go to anytime soon, by 24 level of around, say, INR 20,000-22,000 in the coming years, say, three, five years down the line?
It is difficult for us to give long-term guidance. When the earlier participant had asked the question, I had said that based on our current order book, the margin would be around INR 15,000 per ton. The current order book is for a period of three to four months. That is what I have communicated.
Okay. Okay. Understood, sir. Thank you so much.
Thank you. The next question is from the line of Vikas from Phillip Capital. Please proceed.
Hi. I just wanted to understand the current market dynamics or the growth rate, if you could have. Also, the Eastern Coast, what we talked about, there's a lot of discoveries. Any progress which you have seen so far there?
Market is growing at a rate of 3%-4%, I believe. But the orders from the oil and gas sector are not growing at that rate. So although new discoveries have taken place, I don't think they have commenced exploration aggressively. The reason why I believe that is because in the offshore drilling rig sector, the day rate for rigs has temporarily crashed, which means that there is availability of rigs, but they are not being properly utilized. Hence, exploration activities are not taking place. And that is the reality for the moment.
Understood. My second question is, we at one point of time before tariffs in 2018 used to supply a good chunk in the U.S. market. Given present condition, though it's still fluid, if India gets a zero for zero tax regime, how should we look at the Maharashtra Seamless benefiting from it?
We will definitely benefit from it because there is currently a 25% duty on all steel products. If that duty goes away, we automatically become more competitive. In the fourth quarter, we noticed an increase in exports, and that increase was there for a period of four months. So three months of the fourth quarter and the April month. But since then, there has been a steady decline in export inquiries, which led to the dip in our order book. We have not reached the levels of exports that we had seen in financial year 2023 when 30% of our total dispatches were exports. And that is ideally what we would like the position to be. But for now, the export market is stopped.
Understood. That's all from my side.
Thank you.
Thank you. Due to time constraints, that was the last question. I now hand the conference over to Mr. Vikas for his closing comments. Thank you and over to you, sir.
On behalf of Phillip Capital, I would like to thank Maharashtra Seamless Management to allow us to host the call. For any closing remarks, over to you, Kaushal.
Thank you, Vikas, for organizing the call. We are grateful to interact with shareholders. The dip in the order book should not be seen as an indicator to write off the company. It is more of a function of what the position of the market is right now. We expect it to improve going forward. Thank you.
Thank you. On behalf of PhillipCapital (India) Pvt. Ltd., that concludes this conference. Thank you for joining us, and you may now disconnect your lines.