Ladies and gentlemen, welcome to the Maharashtra Seamless Limited Q3 FY25 earnings conference call hosted by PhillipCapital (India) Private Limited. As a reminder, all participant lines will be in a 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 would now like to hand the conference over to Mr. Vikas Singh from PhillipCapital (India) Private Limited. Thank you, and over to you, sir.
Good afternoon, everyone. Welcome to the Maharashtra Seamless Q3 FY25 results conference. From the management side, we have with us Mr. Kaushal Bengani, Deputy General Manager in Investor Relations and Finance. Without taking any time, I'll hand over to Kaushal for his opening remarks.
Good afternoon, and thank you for joining our earnings call. During Q3 FY25, dispatches of seamless pipes improved meaningfully in addition to improvement in product mix. This was in continuation of the trend seen in Q2 FY25 and had a direct impact on earnings, which revised, as was communicated in the previous two earnings calls. Two key points responsible for our performance are the continuation of reversal in Q3 of the impact of inventory markdown taken in Q1, as more orders have been executed and dispatches have improved in Q3. During the earnings call in July 2024, the reversal in margin in next two quarters was communicated with certainty, as also was the fact that financial performance during Q1 was now higher. Secondly, dispatches of seamless pipes improved by 16% on a quarter-on-quarter basis, in addition to higher dispatches of value addition orders, which improved margin profiles.
I will briefly summarize key financial indicators. On reviewing our Q3 FY25 performance versus Q2 FY25, revenue improved by 2% to INR 1,410 crores, EBITDA increased by 21% to INR 280 crores. However, PAT declined to INR 190 crores from INR 224 crores, and EPS declined to INR 14.19 from INR 16.73 per share, respectively. Despite marked improvement in operational performance, decline in PAT and EPS is solely attributable to lower returns on our treasury. The impact appears to be more pronounced in Q3 because of outsized returns in Q2. On comparison of other income in nine months FY25 with nine months FY24, we have earned INR 157 crores against INR 97 crores, which is an increase in other income by 60%. Therefore, against an average of 32 crores per quarter in nine months FY24, we have earned an average of 52 crores per quarter in nine months FY25.
Apart from these financial indicators, there are five key points which I would like to draw attention to. The first is the credit rating. In December 2024, we have been upgraded by ICRA 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 strength and expertise. The second point is regarding our treasury, which is at INR 2,417 crores as of 31st December 2024. It is being judiciously managed with engagement and inputs at highest levels. Thirdly, our order book remains in the range of INR 1,500-INR 2,000 crores and is at INR 1,674 crores as of 20th January 2025. The fluctuation within the band INR 1,500-INR 2,000 crores is primarily on account of timing mismatch rather than anything else.
The order book remains good as the demand environment is conducive for the manufacturing industry and oil and gas sector. There is no slowdown. In line with the commitment made to shareholders three years ago, there are no ICDs to unrelated entities or corporate guarantees outstanding. We have come a long way from the time when this used to be the main cause of concern, and that has now been fully and completely resolved. Finally, I wish to reiterate that capital goods and infrastructure in general, and oil and gas specifically, continue to witness strong demand for medium term. This directly impacts the seamless pipes market. Demand for seamless pipes remains buoyant, driven by capital expenditure and spending in the oil and gas sector, as we have seen our order book being replenished and maintained at good levels. I would now request Vikas 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 one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Dhaval Shah from Girik Capital. Please go ahead.
Yeah, hi. Thank you for the opportunity. My question is regarding the volume guidance for FY for the current year and 2026. Can you please share what is the outlook and what guidance would you like to give on the volume front?
On the seamless front, we have dispatched 323,000 tons in the nine months ending December 2024. The guidance that we can give right now is we'll reach close to 430,000-435,000 tons for the entire year for the seamless segment.
The current participant has disconnected. May we continue with the next participant?
Yes, please.
The next question is from the line of Shubham Kadi from 3A Financial Services. Please go ahead.
Good afternoon, sir. Am I audible?
Yes.
I had a question regarding the impairment of investments in the subsidiaries. It was to the extent of INR 800 crores. Right now, our capital employed in the rig business is around INR 650 crores. Do we plan to distribute the proceeds of sale to shareholders, or what is it?
This is an old point. You can refer to our earlier earnings calls for further clarity. We've spoken about this at length, but it's not relevant right now.
Okay, and any revenue guidance that you can give for FY26?
In FY26, we are expecting the finishing line facility that we are installing at Telangana to be commissioned. Once that happens, then we can see growth in revenue. But that is only after December 2025.
Is it possible to quantify any number right now?
Our tonnage and revenue in current financial year and as is disclosed can be used as benchmark for what we can do in the next financial year.
Okay, sir. Thank you very much.
Thank you.
Thank you very much. Next question is from the line of Dhaval Shah from Girik Capital. Please go ahead.
Yeah, hi. Am I audible? My line got disconnected. Hello.
Yes, we can hear you.
Oh, sorry. Thanks. Yeah. So, what is the you were mentioning about the guidance for the ERW for the current year? So, in ERW, we have done around 64,000 tons.
For seamless, I had said 430,000-435,000 tons. That is the conservative guidance which we want to give for the year. For ERW, I think we'll end up close to 90,000 tons.
90,000. Okay. And how does the ramp-up happen once the 1 lakh ton factory facility starts in December 2025?
Ramp-up will start from January 2026 because once it is commissioned in December 2025, then we will immediately be able to utilize the inactive production capacity that we have right now.
Yes. So the utilization of our 1 lakh ton, so in 2026, if the orders are at hand, how much can we utilize out of 1 lakh ton, additional 1 lakh ton?
I think reasonably speaking, since it will be immediately after commissioning, you can model 15,000 tons for the quarter of December or, sorry, of March 2026.
Okay. March 2026. Understood. 15,000 for the one quarter.
Okay. And for the.
'26.
Yeah. Q4 2026. Yes. And out of for the entire year, so can the ramp-up happen for the complete? So how would the ramp-up be? Then around 50,000, 60,000?
What did you tell you? 15,000.
Yeah. So that should be the run rate you are saying for the first year of operation.
As of now, yes. But we update you closer to December 2025.
Okay, and the margins would be better in the new facility?
Since production will increase, then generally operational margin will improve. But then it is also a function of what the raw materials prices and what the sales realization are. So if everything remains constant and only production increases, then yes, margin improves.
Interesting and last question. Now, we have been hearing about this U.S. being wanting to increase the production, so what would be the indicators and the parameters we should be seeing out where the actual activity happens and we start getting orders?
If there is more drilling activity in U.S. and Canada, then it will benefit all oil and gas sector players. The indicator that you can track, because apart from that indicator, I don't think there is another definitive indicator available. There is a website called aogr.com, American Oil and Gas Reporter. On that website, you're able to track weekly rig counts.
Okay. Okay.
That is a good indicator to assess what is happening on the drilling front in the oil and gas sector.
Got it. Got it. Interesting. Thank you. Yeah. And just one more. On this treasury front, so INR 2,400 crores was as of January. And now, so are we shifting money from equity to debt funds? Have we done anything of that sort given the sharp correction that we have seen in the markets?
We have a strategy in place, and we are working according to that strategy, which we don't want to disclose in public.
Understood. Understood. Okay.
But keep that in mind that while the strategy is not being disclosed, the intent is very clear that we want to make money for shareholders and for the company. And there is a team in place which is looking for this. It's a dedicated team. And as I said earlier during the opening statement, instead of INR 32 crores per quarter, which was the performance in the comparable period of last financial year, we have done INR 52 crores per quarter. INR 52 crores per quarter.
Yes. So yes, I just wanted to understand. What is the sharp? Yeah. So the INR 90 crores has come to INR one crore. So what is the sharp swing in this other?
No, INR 32 crores has also gone up to INR 52 crores. If you add up the other income in FY24, nine months FY24, then you will get a figure of INR 97 crores for nine months, which is INR 32 crores per quarter. And if you add up the other income for nine months in FY25, then you will get INR 157 crores, which is INR 52 crores per quarter.
Yes. Yes. Yes.
So instead of doing a quarter-on-quarter comparison, I think if you do a longer period comparison, you will come to the realization that we have done better than what we have done last year on this front. It is only that in one quarter we've done exceptionally well, and in the next quarter, we have not done well. Hence, the comparison is not appropriate because it's a sharp dip.
So this INR 90 crores would mean your incremental increase in your NAV, investment NAV? Is it that INR 90 crores it means that? So how do you arrive at the INR 90 crores and this INR 1.86 crores? Sorry.
Fair valuation of the investments which have been undertaken.
Okay. So your investment fair valuation compared to the September quarter and December quarter, there's an increase of INR 1.86 crores. Is what it means?
Yes.
Understood. Understood. Okay. Okay. Yeah. Fine. Thank you.
Thank you very much. Next question is from the line of Mohammad Farooq Umar from Pearl Capital. Please go ahead.
Hello. Thank you for the opportunity and congratulations for the good set of numbers. With India's seamless pipe demand currently at 900,000 tons annually, and the Maharashtra Seamless holding over 50% market share, where do you see the annual demand growing over the next three years and at what CAGR? Additionally, we believe the government has implemented sufficient mechanism to protect domestic seamless pipe manufacturers from anti-dumping practices by Chinese players, especially in the light of U.S. imposing tariffs on Chinese products.
On the market size of 900,000 tons per annum, we expect the market to grow by 4%, I think, per year. And that is the average rate of growth because what happens is during periods of good orders, a lot of capacity comes into play because orders are received. And then generally, there is a dip because it's a cyclical industry. So year on year, the market doesn't definitely grow, but an average rate of growth would be around 4% for the industry. This has been driven by the improvement of capital expenditure in the oil and gas sector. And we expect this rate of growth to be sustainable. We are also activating the production capacity, which is inactive right now, basis this assessment. And one of our peers has also announced expansion in their capacity.
On the issue of domestic industry being protected from Chinese dumping, the level of protection that should be there is currently not in place. We are petitioning the government to assist in protecting domestic industry from restrictive trade practices which are being engaged in. That has also had a negative impact on margins wise. INR 20,000 per ton would appear to be good margins, but that's not the full potential of the industry. Once suitable measures are in place, then we can expect to see even higher margins. That will only happen once these measures are in place.
Okay. So second question is, with the cash reserved at approximately INR 2,400 crores and only INR 800 crores allocated for CapEx, what are the plans for the remaining INR 1,600 crores? Specifically, are there any considerations to reward the shareholders through initiatives such as shares buyback or higher dividends? Additionally, despite the company's strong profitability and cash generation, the stock continues to trade relatively at a low PE. What steps are being considered to address this valuation gap and enhance the shareholder value?
On the point of utilization of the treasury, the first response would be dividend. We have quadrupled the amount of dividend that we paid in FY 2022 to FY 2024. In that three-year period, we have quadrupled the amount of dividend that we've paid. Secondly, we've announced a capital expenditure plan of INR 852 crores, which we have commenced. And thirdly, the plant and machinery that we are using, we want to ensure that in future, if we have to buy new plant and machinery or if we find an inorganic opportunity, simply have sufficient cash to address this requirement. That is why we are conserving cash. Regarding the fluctuations in the equity market, I think we've done a lot in the past two and a half years to enhance shareholder value. In September quarter of 2021, we were at INR 2,000 crores market cap.
Currently, we are at INR 8,000 crores market cap.
Our market cap had gone up to INR 14,700 crores approximately. We are working with an intention of enhancing value for all stakeholders, and we have done good things within the company so that that is achieved. We continue to walk that journey.
Thank you, sir. Thank you very much, and all the best.
Thank you.
Thank you very much. Next question is from the line of Rishi Solanki from Green Curve Securities. Please go ahead.
Hello. Am I audible?
Yes.
My question would be, can we see the premium thread segment product becoming a part of a manufacturing capability in the next three months as you had said in the previous phone call? And where are we in the agreement with Tenaris? And my second question would be, what about the solar plant approval in Telangana? Where are we with the negotiations with the government? Because it's been almost a year since you had those discussions with the government of Telangana.
On the premium connection, we are not in discussions with Tenaris. We are in discussions with another foreign player. Those discussions are continuing. I cannot talk about it much, but we are in constant touch with them, and we expect to conclude shortly. Regarding the solar power plant, we have written to the government. We followed up. Unfortunately, we have not received approval. None of the industry players in Telangana have received approval. We continue to follow up.
Have any plans of setting up a solar plant, if not in Telangana then some other state?
As of now, we've only announced Telangana. We can look at more solar plants in Maharashtra for captive consumption, but it is dependent on a couple of factors which we are working on. Should clarity be received, then we will let you know if an assessment of that project is required.
Okay. Thank you for your time.
Thank you.
Next question is from the line of Gargi from Value Investment. Please go ahead.
Hi, sir. Thank you. Sir, my question was that out of the 9 lakh tons of seamless pipe demand, currently, how much is being imported in India?
Anywhere between 10%-20% is being imported into India. It depends as the figure varies throughout the year.
In the previous calls, there was some indication regarding the BIS implementation, etc. So is there any respite from this situation, or do you expect the same coming going forward?
Could you repeat your question, please? I couldn't hear you properly.
Sir, in the previous call, there were some indications regarding BIS implementation on the pipes for the pipes that are being imported. So is there any respite from this situation or any indication that the dumping from Chinese players is expected to reduce in the near future?
We are not given any indication on the BIS trend on pipes, but we are trying to address the issue of Chinese dumping. That effort continues.
Okay. So how much is exports in the order book? And is there a delta between domestic and exports margin in seamless pipes?
As of now, exports is less than 10% of total order book, and there is definitely a delta because if there is no delta on the exports trend, then what risk we are carrying is the risk of anti-dumping duties being imposed upon us by the domestic manufacturers of the country in which we are exporting. Because then they would petition their government that we are selling our products at lower margins in the export market.
Sir, this 10%, if we compare it to historically, two years back, what was this number two years back?
Two years back in March 2023, 30% of total dispatches were towards exports. But the fall in exports did not impact our profitability because domestic orders were very good. Domestic demand was very good.
In this quarter, we have seen an improvement in the order book in ERW. So what is leading to this?
Oil and gas expenditure.
Okay, so previously, it had reduced because of lower dispatches by doing the CGD segment?
In which quarter?
The last quarter itself, if you compare the order book in the ERW, current quarter versus last quarter, there is a significant increase.
The fluctuation is all on account of lumpiness in order inflow, so if suddenly we get an order of INR 40 crores in one week and prior to that receipt, if we report the order book, then the order book appears to be lower than it actually is, so the impact of lumpiness in order inflow remains.
Okay, so last question is, is there a lot of oil discovery work being done by private players in the Eastern Coast of India? Is this a correct understanding, and if it is done by the private players, then do we have approval from those players in order to get orders from the same?
I'm not sure about private players, but definitely from PSUs, there are activities taking place on the Eastern Coast, and we expect good demand going forward.
Okay. Thank you.
Thank you very much. The next question is from the line of Vikas Kasturi from Focus Capital. Please go ahead.
Good evening, sir. And so thank you so much. The presentation is fantastic. And in terms of disclosure and updates that you put into that, so I had two questions, sir. And pardon me if I'm repeating a question which has already been asked. So the first one is, sir, when you have back-to-back arrangements with both your suppliers and customers, why is there so much of a swing in the EBITDA per ton? And my second question would be that in terms of the CapEx projects that you have outlined, in the previous call, you had mentioned that we want to do the finishing line first. So my question is, why are the other projects waiting for the finishing line? These are my two questions, sir.
Thank you for your kind words, Vikas. On the point regarding the fluctuation in EBITDA per ton, there was an amalgamation of two or three factors in the first quarter of FY25, which led to a significant friction in EBITDA per ton in the first quarter. In the earnings call for the first quarter, I had spelled out that the EBITDA per ton has been disproportionately impacted because of the two or three factors which you can read about in the transcript of that earnings call, and those factors are mostly temporary and will reverse in the second and third quarter. That is exactly what has happened. However, optically, it appears that EBITDA per ton has moved from INR 9,000 per ton to INR 20,000 per ton, which is a huge fluctuation.
But if you consider a blended EBITDA per ton for the nine-month period, then the figure is closer to 16,500. And at the start of the year, I had given a guidance of INR 15,000 per ton for FY25. So I think that should throw some light on why the sharp movement in EBITDA per ton has taken place in this financial year. But overall, on a nine-month basis or in other years, on a six-month basis, you will see that EBITDA per ton is generally at the level where we expected to stay. So orders are being received every day. Orders are being dispatched every day. EBITDA per ton also varies quarter on quarter, depending on the product mix that is being manufactured and dispatched. However, our profitability per order always remains at what we envisaged it to be before taking that order. And that is our post-trend.
The second point you raised was regarding capital expenditure. The other aspects of capital expenditure will start shortly. However, for the moment, we have only started upon the finishing line at Telangana because similar teams are involved in these types of capital expenditure projects, and that team is currently involved with the Telangana unit. Once that Telangana finishing line is activated, very soon after that, we will start on the cold drawn pipe facility, which we have mentioned in the financial presentation.
Thank you, sir. If I may just ask one more question, sir, it's on the rig. So I think by the time we speak the next time, I think it would be sometime in May or June. And that rig would, I believe, our contract would be over, the three-year contract for the rig. And the return on capital as far as that investment has gone, the rig is, I don't think it is subpar as compared to the overall company average. So any indications on what you plan to do with the rig, sir? And yeah, that is my question.
We don't know when the rig will be behind. It will either be in May or it will be post-monsoon. Once we have clarity on that, then we'll be able to tell you specifically what we'll do because there is one more board meeting prior to the earliest date of BIS, which is in May. The answer which you are looking for, I can probably best give you in May.
Okay. All right, sir. And sir, in terms of the corporate governance, you've done a fantastic job in terms of all the activities that you've done over the last two, three years in terms of reducing inter-corporate deposits and in general, even the promoter increasing stake and so on. Sir, except for this rig part where you have given it to another group company, which has then given it to another, I think, Oil India or ONGC, I forget which one. So it just optically just doesn't look in line with all your activities that you've done, sir. So if you could just correct that part of it, it would look fantastic, sir. That is just my humble two cents to you, sir. Thank you.
You are right. And I personally agree with you. But once suitable decisions and board approvals are received, we will make communication on this.
All right, sir. Thank you. Thank you for your elaborate answers.
Thank you.
Thank you very much. Ladies and gentlemen, we will now take a last question from the line of Sanket Kapoor from Kapoor & Co. Please go ahead.
Yeah. Namaskar Kaushal ji, and thank you for the opportunity. I hope I am audible. Hello.
Yes, you are audible.
Yes, Namaskar sir. Sir, firstly, just to conclude with what you said to the last participant in terms of the future of the rig business from MSL. Sir, in principle, we have already articulated to the fact that we will be staying to our core business. So whatever will be the next course of action, that would be in aligned to what we have communicated earlier. So that understanding is correct. The board will meet and all other stuff is definitely a time apart. But in principle, we have been communicated that since it is not the line of business for us, we will stay on course with our core business in pipes. So that understanding is correct, sir?
That is correct, but I can only confirm once board approvals are received, but you are right. That has been communicated earlier. It is still the position which I hold right now, but 100% confirmation can only be communicated once board approvals are received.
[Foreign Language]जी, सर. सर, जैसे आपने ये भी बताया कि Telangana में जो finishing lines हैं, उसका उससे जो output आएगा extra, वो first quarter of FY26 में आएगा. तो अभी तक हमने क्या amount spend किया है वो line पर जो total expenditure का कितना % अभी तक spend हो चुका है?
हमने करीब-करीब INR 57 crores, sorry, 57 नहीं, INR 72 crores के expenditure के लिए purchase orders issue कर दिए हैं, जिसमें करीब-करीब INR 30 crore हमने spend already कर दिया है.
जी, सर. And sir, other income जो component आपने बताया था कि इस साल का हमारा जो औसत रहा है, average रहा है, वो higher है हर quarter के अनुपात में. तो यही औसत हम average हम maintain कर सकते हैं going forward also? क्योंकि एक major portion आपने जो अपना treasury का है, वो mutual fund में रखा है. तो किस nature के mutual funds हैं, सर, ये, जिसमें INR 1,500 crore हमने निवेश किए हैं?
हमारे पास debt और equity mutual funds, ये दो type के mutual funds हैं. Perpetual bonds, tax-free bonds हैं, corporate bonds हैं, corporate fixed deposits हैं, fixed deposits हैं. ये सारे treasury instruments में हमारा पैसा invested है. जो projection रहा other income का per quarter basis पे, वो मैं नहीं करना चाहूंगा क्योंकि variation आता है, जैसा कि second और third quarter में इतना बड़ा fluctuation आया है. But it is something which we are focusing on with a dedicated team.
Right, sir. And last bookkeeping question में, sir, देख रहे थे कि other expenses line item का जो nature है, अगर आप उसे थोड़ा समझाते कि वो किस factors पे dependent रहता है. क्योंकि हमारे tonnage improve किए quarter on quarter में Q2 से Q3, but other expenses lower रहे. और last year से जब हम compare कर रहे हैं, तो वो other expenses significantly higher दिख रहे हैं. मतलब 180 crore के versus इस साल 227 crore है.
Other expenses में mainly administration आता है, selling और distribution आता है, और other manufacturing expenses आता है. तो ये तीन broad heads हैं, फिर इनके नीचे further distribute हो जाता है.
Okay. And sir, depreciation front pe bhi humne dekha ki pichle nau mahine se agar hum compare kar rahe hain, to wo INR 10 crore se lower hai. To ye kis karanvash aisa hai?
June 2023 में हमारा depreciation per quarter था 34 crore, approximately. उसके बाद जो जितने भी quarters हैं, उसमें approximately 25 crore per quarter हमारा depreciation रहा है. ये fall in depreciation from June 2023 to September 2023 इसलिए है क्योंकि कुछ fixed assets हमारे बहुत पुराने हो गए और books के हिसाब से fully depreciate हो गए. इसलिए उसपे further depreciation charge नहीं होता है.
Okay. And lastly, sir, जब हमने United Seamless को विलय किया था अपनी कंपनी में, उस समय कुछ tax incentives के advantages हमें मिल रहे थे, carry forward losses and all के. तो वो सारे advantages में जो tax outgo होना था, वो सबका benefit हमें मिल चुका है. और सर, अभी अगर हम अपने नौ महीने के हिसाब से advance tax में net cash कितना हमने pay किया है, वो number आप share कर सकते हैं?
वो number हमने अभी नहीं share कर सकता हूं immediately. पर जितना भी हमारा tax benefit था, वो सब कुछ March 2024 तक utilize हो गया था. उसके बाद जितना भी हमारा tax का provision है, almost उतना ही हमारा advance tax paid है.
अच्छा, जो हमारा number दिखा रहा है tax provision का, उसी को हम अपना base रख सकते हैं?
हाँ जी. तो जो भी tax benefit है, वो completely absorb हो गया है March 2024 के पहले.
Correct, sir. ठीक है, साहब. धन्यवाद, सर, सभी प्रश्नों का उत्तर देने के लिए. And we hope that कि जब हमारी next वार्तालाप होगी, next meeting के बाद, तो एक clear message रहेगा board का कि किस प्रकार से वो अपने निवेशकों को पुरस्कृत करना चाहेंगे जब भी वो decision लें. And sir, dividend distribution policy पर भी, सर, अभी तो budget हमारा दो दिन के बाद due है, तो पहले क्या tax incidence बनता है, वो उसके बाद. आप definitely cash जो share करते हैं निवेशकों से, आपने definitely बढ़ाया है उसको, जो आपने विस्तृत रूप में बता भी दिया है. But उसके बावजूद भी एक specified, qualified अगर policy भी हम ले आएं, तो उससे निवेशकों को एक सही रुझान मिलेगा कि आप क्या कितना portion of cash share करेंगे, और कोई ad hoc basis पे नहीं होगा. धन्यवाद करता हूं, सर.
और एक बहुत अच्छा आपने presentation आप continue करते हैं, सर. बहुत-बहुत धन्यवाद इस विस्तृत जानकारी के. Thank you, sir.
Thank you, sir.
Thank you very much. The next question is from the line of Tiyasa from Nayan M. Vala Securities. Please go ahead.
Firstly, congratulations for the good set of numbers. Am I audible?
Yes.
My question is on the capacity utilization only. Like, after the expansion of the Telangana plant, are we expecting the seamless capacity utilization to maintain at the above 85% levels as well?
Yes. Whatever will happen in the Telangana facility will be common because it is the same furnace which will be manufacturing, sorry, which will be used for the production line. Currently, we are only running one shift, then we'll start two shifts.
So capacity utilization might go above 90% as well?
It cannot be measured right now. It will stay at the average level that it has maintained for the past three years.
In ERW segment, we have seen the capacity utilization still drastically fall to 32% levels. What are we expecting for the upcoming quarters?
Capacity utilization is not a simple calculation of numerator divided by denominator into 100 in the pipe segment. The reason why it is not so is because of the nuance of product mix. In a production period, if you have manufacturing of large diameter pipes versus another production period where you have manufacturing of small diameter pipes, the tonnages that you end up with is materially different. In the case of large diameter pipes, you will end up with higher tonnage. In the case of low diameter pipes, you will end up with lower tonnage. And capacities are measured in tonnage. Therefore, despite operating your production facility for 24 hours a day, only on account of the different types of products which are being manufactured, you will end up with different tonnages which are produced.
Hence, when capacity utilization is being considered, then it is better to look at it from a medium-term perspective rather than a quarter-on-quarter perspective. It will also be better if companies are able to give capacities in meters of pipes which are manufactured because then the impact of the size of pipes is not relevant. But that is not the standard that is commonly practiced, and we continue with tonnages.
Okay. Got it, sir. Thank you.
Thank you.
Thank you very much. The next question is from the line of Tushar Raghatate from Ramayakya Wealth Management. Please go ahead.
Yeah, good afternoon, sir. Thank you for the opportunity. Sir, just wanted to know, like recently Trump said about the increased focus on the oil. So considering the world scenario of jack-up rigs, how do you see the upcoming demand going forward? That would be my first question, sir.
There is no problem in demand. Our order book is good. We are getting good orders, and we are dispatching appropriately. I reiterate that there is no slowdown of any kind. Results of one of our competitors have also been announced in the previous week, and even they have shown no signs of slowdown. There is no slowdown in the seamless pipe segment. As and when oil and gas expenditure increases, drilling activities increase, there will be higher demand for seamless pipes, and we are well positioned to capitalize on this development.
Got it, sir. Sir, in your rig business, any plan to sell that business, or we are going forward with that business rig?
We will let you know in the month of May when suitable board approvals are received.
Fair enough, sir. That was helpful. Thank you.
Thank you very much. Ladies and gentlemen, that was the last question for today's call. I now hand the conference over to Vikas Singh for closing comments.
I think maybe Vikas got disconnected. I'll just submit my closing comments. Thank you, shareholders, for participating in the earnings call. We remain committed to improving shareholder value and maintaining our market leadership position. Temporary fluctuations will not have any impact on the long-term prospects of the company. We are in a good demand cycle. Oil and gas expenditure is good, and we are well positioned to capitalize on it. Thank you for your support, and I look forward to interacting with you in the future.
Thank you, Kaushal.
Thank you.
On behalf of Maharashtra Seamless Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.