Ladies and gentlemen, good day, and welcome to the Rajratan Global Wire's Q2 FY 2027 earning conference call. 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sailesh Raja from 360 ONE Capital. Thank you, and over to you, sir.
Yeah. Good evening, Sapnali. Thank you for joining us for Rajratan Global Wire Limited second quarter of FY 2027 earnings conference call. During this call from the management side, we will be hearing from Mr. Sunil Chordia, Chairman and Managing Director, Mr. Hitesh Jain, CFO, Rajratan India, and Mr. Pranay Jain, CFO, Rajratan Thailand. I would now like to turn the call to Sunil, sir, for the opening remarks, followed by the Q&A. Sir, you may begin now.
Yeah. Good evening, all dear shareholders. Very happy to connect with all of you today. We are in very encouraging times for Rajratan. Our earnings are growing faster than revenue. It is led by operational improvement, higher volumes, led by higher utilization rates in Chennai as well as in Thailand. Our operating margins are moving in the right direction. In a manufacturing business exposed to raw material prices, product mix, and capacity utilization, our ability to deliver these margins is meaningful and will only improve as this pressures changes. Today, Rajratan is amongst top two players outside China and amongst top five players, including China, which says a lot about how we have continued to focus on making ourselves a force to reckon with in the domestic as well as global bead wire industry.
Our Chennai plant expansion to 60,000 tons is on track and should be completed in the current quarter. We are almost full capacity utilization in the initial 30,000 tons capacity, which we had installed in the first phase and now expanding it to 60,000 tons. Our debt to equity also is comfortable, 0.6x is the ratio, which indicates a healthy balance sheet. This is also visible in our cash flows. In September, we have generated positive operating cash flow in standalone as well as consolidated business. Overall, we are very optimistic for the remaining two quarters of this year as well as at least two to three years, we think that Rajratan will continue to grow at this pace. Now very happy to answer your questions. Yeah.
Thank you, sir. We will now begin with the question- and- answer session. Anyone who wishes to ask a question may press star and then one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and then two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to all the participants, you may press star and one to ask a question. We will take the first question from the line of Arnav Sakhuja from Ambit Capital. Please go ahead.
Hi. Thank you for taking my questions. My first question is that, you mentioned in our presentation that we are planning a 50,000 ton capacity addition in Thailand. What is the broad timeline of this?
Yeah. As already told you, we are running at full capacity, almost 100% capacity in Thailand, and we are refusing customers locally also. Some of the Chinese companies who buy from us and we are not able to supply to them. It is mandatory for us to now expand in Thailand. Maximum it will take one year. Okay? Within next three to four quarters, this capacity will be up and running.
Right. Still focusing on our Thailand business, we saw a strong improvement in the realization at around INR 97,500 per ton. What drove this improvement in realization for Thailand?
I don't think your numbers are correct. But broadly, what you are saying is right. We are getting more approvals from major customers, the multinational clients, and more volume will be going to them in the current quarter and next quarter. Also the export from Thailand is also improving. So all this will improve the performance of Thailand. That is why further capacity is planned. With that capacity, our cost will further come down. So going down the line for next two, three years, we are very bullish on our Thailand business and performance.
Okay. Congrats again on a strong set of numbers, and thank you for answering my questions.
Yeah, thank you.
Thank you. We will take the next question from the line of Ritesh Shah from Investec India. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, couple of questions. First is, how much is the CapEx number for the Thai expansion?
Ritesh, generally, the brownfield expansions are very competitive, which gives you very good return on the investment. Broadly, we should be able to do it in INR 100 crores, ballpark number. Up till now, we already spent about INR 20 crores in acquiring a new factory there, where we will be shifting some of the facilities. There is hardly investment in infrastructure. Investment will be there only in the machines and plant and machinery. Total, including everything, it will be INR 125, but from now, INR 100 crores is enough.
Sir, you said shifting some of the facilities. I did not understand that, sir.
No, no, because we were short on space. We bought one closed factory across the road, so finished stocks, raw material, spool cages, they are shifted in that location, which is not the same land area. It is across the road.
Okay. This closed factory had nothing to do with bead wire, it was something else. It is just—
No, it was something else—
—[inaudible].
—[Non-English content]. Land and some sheds.
Okay. Perfect.
Yeah.
Correct. Sir, second is, can you give some broad numbers on the total exports out of Thailand for first half?
Pranay, you are there?
Yes, sir. I am here. So first half, we have done 8,500 tons of export from Thailand.
Okay. In Q2?
Am I audible?
Yes.
No, I am talking about H1. Yeah, it is H1—
Correct. [crosstalk].
—and Q2 is 5,200.
Okay.
5,200 .
Correct. Sir, would you like to call out for any numbers for full year? Will it double or can it be more than double?
This year, total export target from India and Thailand is more than 30,000 tons.
Yes.
Sir, India would be how much?
Close to 14,000, 15,000 tons.
14,000, 15,000 tons. Okay. Sir, second question, I think Chennai expansion, any thoughts on increasing capacities over here? I think we are already marching towards, I would presume 40, then 60, which is not very far. I presume we have land in place for the next phase of expansion. But how are we looking at it? I think the incremental growth engine is still cord. But on bead wire also, are we looking at something within next three years, five years in mind?
Yeah, definitely. The Indian tire market is growing at 8%-10% now. In the last entire year, we didn't see a dip in demand. We didn't see even two, three months where customers had cut down their production. Okay. Looking at the demand and the number of export of tires, which is increasing from India, I think within next two years, we will have to put up another 60,000 tons in Chennai. But we cannot commit anything now. Okay?
Okay.
Everything depends on how market is. If there is a return on investment, we will do that. Yeah.
Perfect. And sir, any specific update on steel cord, the progress? I think earlier you had given certain numbers on revenue and margins.
No. Which steel cord? For conveyor belting, which we are doing in Pithampur. We have started trials. It is a small project, and again, a very quality sensitive product. And we have some capital equipments yet to be bought and installed. But till that time, we will be buying the semi-finished goods from the market. And I think next month we will be able to submit samples to our customers. But in all our projections, we are not taking any number of revenue or tonnage in our presentations. But I am confident that it will be up and running in full scale next year, and this remaining six months of this year will go in trials, submitting samples, maybe one lot, two lot. We will keep doing that. Yeah.
Perfect. And sir, last one, would you like to comment on how the competitive intensity is in the local market? I think we are going ahead with playing on the operating leverage market share, which is great. But from a top-down standpoint, how should we look at it?
As I told you, we had decided to continue capturing market share or at least maintaining our market share. You will see in the numbers, at all premium customers, we are close to 50% of market share. Low-cost , low- price customers, we are not able to supply and we don't want to supply. Okay. As it is, our capacities are running at full scale, so no need to do that. I am sure there will be some change in the dynamics in maybe one or two quarters, and we should be able to improve the pricing. That's what I can say. But very difficult—
Perfect.
—to comment on the competition in the market. Yeah.
Sure, sir. Thank you so much. All the very best.
Yeah.
Thank you. A reminder to all the participants, you may press star and one to ask a question. We have the next question from the line of Pranay Roop Chatterjee from Burman Capital Management. Please go ahead.
Hello, sir. Am I audible?
Yeah. Very much.
Great. My first question is regarding the Thai expansion. Historically, we have been very conservative in terms of how we expand capacity or I should say prudent, and only when you have optimally utilized your existing facilities, you go for CapEx. It is heartening to see the 50,000 expansion after we have fully utilized the facility. My question is more around at the pace at which you expect to utilize it. I will tell you where I am coming from. Globally, the bead wire industry is growing somewhere in the 3%-4% range. If I look at your Thailand numbers over the last five years and last 10 years and do a CAGR, both come to about 12%, 13%.
If I assume you will continue growing at 12%, 13% after the capacity comes in, it will sort of take you five to six years to fill the facility. My question to you, sir, is, has there fundamentally something changed in the global competitive landscape which can allow us to grow faster and fill the capacity ahead of that five to six-year timeline? I am alluding to an interesting point you made in the last con call where you said that there was some, I do not remember exactly, but some environmental norms which were favoring sourcing from Thailand to Europe, is one thing you mentioned. Then you also mentioned that after one and a half years of effort, you have finally cracked some global premium MNCs. These are two of the things you mentioned.
So if you can help me understand what has fundamentally changed and what is allowing us to get confidence to utilize it faster, if at all.
Yeah. So very long question. I will give point-wise answer in brief. Yes, your numbers are correct for global market growth and everything, but if you look at regional growth, Thailand capacities are growing much faster.
I see.
Which are around 10%-15%. Locally, domestically, Thailand tire industry is growing.
Okay.
That is point number one. Point number two for us in Thailand, we have got major approvals from world leaders in tires, whom we were supplying locally. Now we are supposed to supply them in their different locations in Europe, America, and Southeast Asia. So that will take our capacity, or that is already happening. We had to shift a lot of supplies from local customers to those MNCs, and we are short of capacity in Thailand. So my projection for utilizing this capacity is not more than three years. As against your estimate of five to six years. So I am very confident that this capacity will be utilized in next two years. One year of implementation and two years of utilization.
Interesting, sir. So my second and last question. Sir, is there anything—
About the CBAM. Sorry. So Thailand—
Sure.
—we are the only company in bead wire space who can supply green bead wire, because our source of raw material is green, and which is not available in India, which is not available elsewhere in the world. It might be available some places, but not available easily. So especially European customers are inclined to buy major quantities of green bead wire from Thailand. That encourages us to quickly ramp up the capacity.
That is very interesting, sir. My second and last question. Is there any one-off impact in the other expenses of this quarter? I saw two comments in the presentation. One was freight cost inflation and one was fuel cost inflation. Both of which I don't consider as structural. These are one-offs and should eventually wear off. What would be the one-off impact this quarter? Because I would expect with higher volumes, margins ideally should have expanded, but they have been under pressure quarter-on-quarter.
Yeah. Freight, you must be talking to other companies.
Freight remains very volatile. Okay? We are supposed to supply material on DDP basis, delivered to their door of customer.
Freight rates are fluctuating. To mitigate that risk, some places we have built up a markup or kind of freight surcharge. Some customers have agreed.
And then there is CBAM in Europe. There is a quota which has started in Europe. Rajratan being agile and a smart company, we are able to supply bigger quantities in those markets, and we are of course taking the risk and all this volatility. Yeah.
Thank you so much, sir. All the best.
Yeah. Thank you.
Thank you. We will take the next question from the line of Bhargav Buddhadev from Ambit Asset Management. Please go ahead.
Yeah. Good afternoon, sir, and congratulations on the good set of numbers.
Yes. Thank you.
Sir, you mentioned that the CapEx in Thailand is closer to about INR 100 crores. Is it fair to say that if you are able to utilize in about two years' time, then eventually the payback can also come back in two years of this INR 100-odd crores?
Payback again, depends on the profitability, margins, everything. As told you, our focus is to consolidate our market share, and I believe once you have a bigger market share, your profitability always improves. We don't see business on absolute bottom line. We see it on a comparison, how our competition is doing, how the market is doing, how the other industry is doing, and we find Rajratan in a very consolidated position today. Very difficult to commit that payback will be two years, but it is absolutely necessary from the point of view of supplying to marquee customers. This increase in capacity and INR 100 crores is nothing. It would have costed us maybe close to INR 300 crores for a greenfield project in Thailand, which we are doing for only INR 100 crores. Yeah.
Secondly, sir, if you look at EBITDA per ton, it has sort of declined by marginal 3% on a YoY basis. Now we are seeing a very strong revenue growth, but essentially the operating leverage benefits are not coming at the EBITDA level. So when do you see the operating leverage benefits also coming to the EBITDA in terms of EBITDA per ton?
Let me tell you, it will not reflect in numbers because lot of our inputs have gone up, the gas price, the electricity, the transportation, diesel cost, lot of consumables, packing material, everything has become expensive since this war has started, okay?
Sure.
In spite of all those increased costs, we have been able to maintain the EBITDA per ton.
Sure.
I think which is commendable. Okay. If you don't appreciate it, at least I would like to appreciate that we have been able to do that.
Sure.
Our strategy also is to not reduce production or not walk out of the market. As told you, we want to consolidate on the market shares further.
Sir, in terms of profitability on the export side, given that exports will be driving the volume growth going forward, is it fair to say that exports are the most profitable on a per ton basis compared to either selling in the Thailand local market or selling in the Indian domestic market?
Exports overall is a good business, profitable. In India also or in Thailand also, in our conversation, we have said there are marquee customers. For us, marquee customer means who gives a good price, where our product is appreciated. There are customers who don't want to pay good price to us. So export is better than those customers. If we are not exporting, means we will have to sell it to customers where profitability is very low or probably there is no profit left for us. So in our priority, our marquee customers are number one, export is number two, and then some 5%-10% we continue to sell in the customers where profitability is not there.
Lastly, sir, if you look at rubber prices for your customers, it has actually gone up more than 50% on a YoY basis, and we have seen some impact in terms of profitability for the tire companies as well. So given that your customers are going through a tough time, are they also trying to squeeze you or because you are not a very big sort of cost in their overall tire manufacturing, you are able to pass through easily?
Nothing is easy. Whether rubber prices are going up 50% or 10%, or it is going down, the purchase manager of a company will always bargain. But we always have an argument. We are only 3% of your total tire cost. So end of the day, we are getting reasonable support from our customers also.
Great. So thank you very much and all the very best.
Yeah, thank you, Bhargav.
Thank you. We will take the next question from the line of Nishita from Sapphire Capital. Please go ahead.
Yes. Hello, am I audible?
Yes.
Yes, you are audible.
Yeah. I had a few questions. On our Chennai facility, you mentioned that we will be able to the rest of the 30,000 ton capacity will be able to start the commercialization from this quarter, right?
No. It is not that something new we are starting there. We were already having a capacity of 30,000 tons. We started adding more machines, and machines are modular. If you ask me today, our rated capacity in Chennai is 40,000 tons. Few more machines will be added next month. It will go up to, on a monthly basis, from 3,500 tons, we are targeting 4,000 tons. From 4,000 tons, we will start making 4,500 tons. So gradual improvement and gradual increase in production per month to ramp up the capacity up to 60,000 tons. Yeah, that is the plan. There is no starting date or ending date in this. Yeah.
Okay. By end of FY 2027, can we expect that the capacity will be improved till 60,000 tons?
No. To give you a flavor, this year from Chennai, we will be at least making 37,000, 38,000 tons in the current financial year, which is already more than the 30,000 tons overall capacity. Yeah. The balance will come in the coming years.
Okay. Understood. What is the incremental cost in adding each machine? Like you said, gradually we are adding the capacity. What is the incremental CapEx that we are spending there?
I recall we had spent INR 270 crores for a facility of 30,000 tons, and we spent another INR 30 crores, INR 35 crores to complete it to 60,000 tons.
Okay. Understood. My next question is on our Thailand capacity. You mentioned that our CapEx, the bounty CapEx that we will do will be of INR 100 crores. How are we going to fund this CapEx? Is it going to be from internal accruals?
Yeah, both. It is a combination of internal accrual. Thailand balance sheet is accruing cash month- on- month basis, and there are banks. Loan is also at a very competitive rate, below 4% we borrow from bank. It will be combination of loan and internal accrual.
The capacity, we can start operations in that capacity from FY 2029 start, right? Because it will take a year to build the machineries and start the capacity—
FY 2028.
No. Like you mentioned, that will take a year for the capacity to start.
Yeah. So one year from now. Okay. We are in—
Okay. One year from now.
Yeah.
H2 FY 2028, we can expect the—
Yes.
—capacity to start.
Yes.
That will be of additional 50,000 tons.
Yes. It will take two years to utilize that capacity based on the current demand. This is our projection.
Right. I just wanted to understand. Our margins have been under pressure, and we are doing all this CapEx also. Can we expect the margins to improve gradually from here on? Do you think this is the bottom part of the margin?
I can say that our current margins are rock bottom. It should not go below this, so anything from here will improve. Okay. We have decided to—
Right.
—compete head-on in the market. We don't want to leave the space for competition to grow.
Right. My next question is on growth. We've had very good growth, revenue growth in Q1 and Q2 year-on-year. Can we expect this growth trajectory of around 27%, 28% to continue for the full year and for FY 2028 as well?
Yeah. I can talk about volume. Revenue is a function of price and—
Right.
—other dynamics also work. As I have been saying, 15%- 20% volume growth year-on-year, you can safely consider for Rajratan. It is combination of growth in Thailand, in Chennai, and some in Indore. This will continue for next at least 10- 15 quarters. Yeah.
Okay.
We have been consistent in saying this.
Right. Okay. Understood. That is it from my end. Thank you so much.
Thank you.
Thank you. We will take the next question from the line of Abhishek Benkar from Genuity Capital. Please go ahead.
Yeah, hi. Am I audible?
Yes, you are audible.
Yes, Abhishek.
Yeah. Thanks for the opportunity. My questions are, first, my question is about EBITDA per ton differences between Thailand and India. What is that difference? On blended basis, where are we going? How are we going to improve that?
Let me tell you, we never compare India EBITDA per ton and Thailand EBITDA per ton. Thailand has different set of customers, different market, different source of raw material. Their cost of manufacturing is different.
Yeah.
You have to divide your question in two parts. India business is very different. The source of raw material is different. Prices are different.
Yeah.
In Thailand, we source globally raw material. Thailand is a market which is open for Chinese competition. Very difficult to answer your question. If you can break it down into two questions, I will be happy to answer that.
Yeah. Then my other question is that Thailand expansion we are doing, are we targeting similar set of customer, same customer mix, or are we going from current customer mix to premium or export customers from there?
Let Pranay answer this question. Now he is better connected to all the customers than me. Pranay?
Yes, sir. I would answer that Thailand itself is a growing market, and we have recently got good approvals in our marquee customers, which sir has just mentioned, and they are very hopeful with two or three good counters, which are renowned all over the world. So the growth which we are expecting will be, of course, with the premium customers increasing their shares, and the balance will be in the Southeast Asia and European market. That is the target for the growth, what we are presenting now and what we are going to get the new customers.
Okay. That's it. Thank you.
Yeah.
Thank you. We will take the next question from the line of [ Parsh Seth] from Smith & Thompson's Capital Advisors. Please go ahead.
Am I audible?
Yes.
Yeah. I wanted to ask the decline in other income. Is there any one-time reason, or what is the sustainable other income absolute number you can assume?
Other income, because we are a company having a subsidiary in U.S.A., a subsidiary in Thailand, and the consolidation happens. A lot of revenue items also when we consolidated, reflects in the other income.
Okay.
Other income is not extraordinary income, which generally is not part of the EBITDA. I will say this is very much part of the EBITDA for us. Otherwise, what is your question? I did not understand it.
What is the reason for on [2Q 1Q] basis, other income has declined significantly. Earlier it was INR 3.4 crore, and now it has declined to INR 0.66 crore.
I think numbers. Other income on standalone basis has gone up, and on consolidation, because of consolidation that has gone down.
Hmm, consolidation.
[Non-English content] U.S. balance sheet, consolidate other income knockoff. Yeah.
Okay. Got it. Thank you.
Okay.
Thank you. We will take the next question from the line of Ritesh Shah from Investec India. Please go ahead.
Hi, sir, just quick questions. Sir, what percentage of our volumes will be premium for India and Thailand? The reason to ask this question is you indicated that as we move more towards premium customers, we will get rid of the bottom customer base. So just trying to understand the impact on profitability it can have say over next two years, three years. So if you could help us understand the percentage of premium volumes and how much is the difference in pricing for a standard customer versus a premium customer.
Yeah. So, Ritesh, it won't make a big difference in India because in India premium customers, we are already at more than 50%, 60% counter share. Okay? So we are not projecting to further consolidate that market share. Something may happen because of our Chennai location. Okay? But that is not our projection. Definitely, the big difference will come in Thailand, where the price difference also between a premium customer and a Chinese customer is in some cases up to THB 10,000 per ton, which is in Indian Rupees today close to INR 25,000, INR 26,000. Okay, so that should make a difference. Yeah.
And sir what percentage of our volumes—
Premium customer volume growth takes time. It is happening every year we add more volume to that. Pranay?
Yeah. I will answer that question. Currently, around 30%- 32% of our sales are towards the premium customers. As sir has mentioned, it will take time to grow, but few marquee customers are already approved, and we will supply them. We expect this to grow by 40%, means 30% will become 40% in the coming year. Product mix.
Correct. And sir, how much is the differential in working. Yeah, that is helpful. A related question, basically, when we look at exports, how much is the difference in working capital days, basically when we are catering from India to, say, Europe or U.S., likewise from Thailand to Europe to U.S.?
Pranay?
Yeah. Working capital for European customers is around 70- 80 days, what is the credit. It also includes around 40 days of transit time. Transit time to Europe is 40- 50 days from Thailand. That is the reaching time, and after that, 30- 40 days is the credit time. We can say around 70 days is the working capital for exports to Europe.
As against local, I think it is 30 days payment term.
Yeah, local is 30 days. So on an average is 40 days is the receivable collection days for local.
Sir, I did not understand. Sorry.
If you sell local in Thailand, then the money comes in 40 days on average. If it is exported to Europe, 70-80 days, because 40 days is the shipping time.
Correct.
For U.S., it is 90 days.
Perfect. Sir, my second question is, you did indicate Thai facility has the benefit of probably scrap usage and its green bead wire. Are we getting any benefits out of it?
Yes, definitely. We got few quick approvals only because those European customers were very keen to buy green bead wire because of their targets of making green tire and reducing carbon footprint. Thailand also has an advantage, the CBAM, which is applicable in Europe now, E.U. Thailand is much competitive when the CBAM will be applicable. Compared to India, Thailand is a better position.
Fair. Sir, Indian exports, do they target Europe or is it largely towards U.S.? How should we look at it?
From here, we are exporting to both the continents. It is depending on which product is approved from which location.
Correct. But sir, there will be a negative impact because I think, I do not know the source of our feed for the Chennai and Pithampur plant. It will not be scrap-based wire rods. So the carbon intensity will be higher.
No, no. It is higher. So those customers are not supplied from India. We cannot.
Okay, fair. This is helpful. Thank you so much, sir. Thank you.
Thank you, Ritesh.
Thank you. We will take the next question from the line of Varun Sharma from Corpus Investments. Please go ahead.
Hello.
Yeah Varun.
Congratulations for the good set of numbers, sir.
Thank you.
My first question is that, what were the tariffs on a product when we were exporting to U.S. when the tariffs on India were 50%?
For a long time, the tariff on our products is 50%. Our product falls under Section 232, so all the steel products exported to U.S. face a 50% duty. From India or from Thailand or from anywhere else. Against China, it is little more. They have additional duty of 12.5%.
Okay, sir. My second question is that, who would be our main competitor? Would it be Bansal Wire or would it be Tata Steel?
Both.
The main competitor, would it be Bansal Wire or Tata Steel?
We consider both of them as competitors. Bansal is new. Still, according to us, he is not in all the counters able to supply. So more competition with Tata than Bansal.
Okay, sir. Okay. Thank you, sir.
Thank you. We will take the next question from the line of Sanjay Upadhyay from Elara Capital. Please go ahead.
Yeah, good evening, sir. Thank you for giving me this opportunity.
Yeah, Sanjay.
I just wanted to ask you regarding this green bead wire, as you mentioned. You said that you are the only supplier which is supplying from Thailand, and you also got the approvals regarding the same to export it to Europe because of the green, whatever the globalization it is, the green thing. Can you highlight some more details on this? Why don't we have some other competitors in this green wire?
Very simple reason. Thailand has the source of raw material. He uses 100% scrap.
Okay.
The material coming out of the scrap is called green steel.
Okay.
In India, nobody is making wire rod out of scrap. They are still using the iron ore and pellets and those raw materials. That is the difference.
Okay.
Our Thailand source uses 92%-95% scrap as his raw material. We use that wire rod for making green bead wire. That is it.
Okay. The technology is open, or is it that any competitor can come in and make this thing?
If we want to make in India, we are not able to do it. Some customers who are doing some trials, they place a small order on our Thai company, and we supply them from there to make some prototype tires and trials, and everything is going on. It is more of theory. It is more aggressive in European market. But other companies are also, because of their commitment to become a green company or reduce carbon emission globally, there is a flavor, there is a pressure, there is a need for green.
Perfect, sir. Thank you so much for this answer. May I know, sir, I understand that this is very initial and nascent stage that we are heading towards green revolution and everything. Are we expecting some huge amount of good amount of margins or it is just for green energy and everything? I mean, the introductory stage, as you said. What kind of margins can we expect once this scales up?
Margin we cannot project today because of our ability to supply green bead wire, we got approvals faster in bigger counters, European tire makers.
Okay.
That is the advantage. They got attracted. In short time, they said, "Okay, if you are supplying that product, we will approve." So entry and business.
Understood, sir. So basically initiation of market share.
That green bead wire I can sell at $300 more.
Okay. Initiation of market share. I agree, sir. Entry into the new market.
Yes.
Agreed, sir. As you said that on the steel cord, which is for conveyor belts, you said that it is in the initial stages. Just wanted to understand, any other products in the pipeline other than this, which you might be testing and—
No. Not right now. Our focus is on building up capacity in Chennai and Thailand.
Okay.
Which I can see will be consumed very quickly. Right now, nothing beyond this.
Okay. Thank you so much for this and good luck for the future. Thank you so much.
Thank you, Sanjay.
Thank you. A reminder to all the participants, you may press star and one to ask a question. We have the next question from the line of Saket Kapoor from Kapoor Co. Please go ahead.
[Non-English content], sir.
[Non-English content].
Firstly, just to reiterate two points. You mentioned that firstly, our EBITDA margin will be in the vicinity of this 12.7%, 13% expect minimum margin?
better. But this is the minimum—
[Non-English content].
—I think this is the lowest margin because our volume and our efficiencies, we are able to click this double- digit volume. But when I look at other balance sheets of our competitors, none of them globally is making double- digit EBITDA margin.
Sir, volume we are getting additional 7,000 from the Indian domestic operation, that is the Chennai part for H2.
Yes.
That is what the volume growth will be, expected volume growth for H2 from the—
India 14% growth [Non-English content] first half to second half, and we are on track to continue growing in the second half also. Consolidated growth of 17%. Thailand has grown by 22%. So this year we should end up more than close to 160,000 tons of business.
160,000 for the entire both the profile—
For consolidated. Yes.
Last year we did 133—
Yeah. We are targeting 160.
160, out of which we did 71 for the first half. Right.
[Non-English content].
One second. Okay. Secondly, when we look at the balance sheet part, [ Non-English content ] capital work in progress closing balance [Non-English content] . For INR 90 crore standalone it is for both the steel wire project, cord project as well as the Chennai capacity that is what the closing balance is and how much you are going to capitalize.
[Non-English content].
[Non-English content].
INR 70 crore is for steel cord project. Okay.
Okay.
Which is still not capitalized. Okay.
Okay.
[Non-English content] Chennai as well as Thailand.
Okay. [Non-English content] then that figure is 115 when we look at the console part our closing—
Yeah. The real number for Pithampur is INR 80 crore. Okay. Chennai must be INR 15 crore and INR 20 crore in Thailand. Okay.
And out of that INR 80 crore, [Non-English content ] that will get capitalized when sir?
I think by end of this quarter we should be capitalizing that. [Non-English content ]. Once we start regular production, we will capitalize it [Non-English content ].
Okay. What should be the expected revenue contribution for H2 sir?
For H2, [I think] in all our discussion we are not counting steel cord revenue.
Okay. But sir, [Non-English content ] on account of depreciation and interest.
Not very big. [Non-English content ]. We need ISO certification, we need BIS certification. All these formalities will take lot of time. But I am confident that next financial year it will be running at good capacity utilization.
Okay. And sir when we look at our borrowing part also on a consolidated level, the borrowings have gone up. What explains this INR 90 crore difference for the consolidation? When we look at consolidation, it is only I think the Thailand that gets consolidated. So in the borrowing as well as in the inventory part. Can you explain since you are mentioning that—
[inaudible] revenue growth [Non-English content] . Okay. So majority of this is working capital borrowing. It is more so because working capital cycle for export is higher than the local. Okay.
Right.
So majority of this is borrowing for working capital and it is in proportion to the growth of business.
Okay. Lastly, [Non-English content] . The major part of it that we have invested.
Yes.
Okay. [Non-English content]. It is the only the plant and machinery I think so that is what—
[Non-English content] almost 250,000 sq ft. With a capability to take more machines and more volume in future. [Non-English content].
Lastly sir, when we look at our EBITDA growth, EBITDA growth sir [Non-English content] quarter-on-quarter. [Non-English content]. When we look at a console level, Q1 [Non-English content] INR 41.71 and Q2 was INR 45.79—
That is done. Year-on-year it is 14. Yeah.
[Non-English content] so that translates into 10% Q-on-Q. Taking into account [Non-English content] volume growth expect [Non-English content] in terms of the growth part. [Non-English content].
[Non-English content] our projection for Thailand is better. You will see better number from Thailand in the coming quarter as far as EBITDA is concerned. We do not expect much improvement in EBITDA in the remaining two quarters in India. As I told you, market is competitive. And we are also one of the head-on competition with other two names which were discussed earlier. But in console you will see improvement coming from Thailand.
Okay. So to conclude, [Non-English content ] margin contribution [Non-English content] and volume India [Non-English content ]. That is what—
[Non-English content].
Because sir, Thailand we have done 29,000. So [Non-English content]—
[Non-English content].
Correct.[Non-English content] . Thank you.
[Non-English content] thank you.
Thank you. We will take the next question from the line of Pranay Roop Chatterjee from Burman Capital Management. Please go ahead. Mr. Pranay, please proceed with the question.
Hey, sorry, I was on mute. Am I audible now?
Yes, you are talking.
Yes, Pranay.
Sorry about that. My question is with respect to the India capacity. After Chennai scales up, our total, I am talking with respect to Q4 of FY 2027 as an example. By then, our annualized capacity in India would be 132,000 tons, 132,000, which is effectively 120,000 of bead wire, and the remaining is the other product. On that—
10,000 tons of steel cord.
Total is 132,000 tons, right? Including steel cord.
42 [Non-English content].
Okay. Let me then be sure about this. I am looking at your presentation. Pithampur has total capacity of 72,000 tons, of which 60,000 is bead wire. That is correct?
Correct. Yeah. But we are adding 10,000 tons of steel cord also.
[Non-English content]. Because I think the last time I spoke with the team, I was under the impression it was being that black wire is being converted into steel cord, and it is not incremental. That is wrong then.
No, but I also told in the call that right now we'll be buying raw material, semi-finished goods, but we are installing few more equipments and lines to—
[Non-English content].
—have in-house capability, yeah.
Okay. If I then, for a second, ignore that additional 10,000, because anyway, we are not building anything into this year. It's probably next year.
Okay.
I focus only on the 132,000 tons, and I divide it by four. I get 33,000 tons for the quarter, which is the capacity.
Yeah.
What is the maximum we can produce on that 33,000 tons, even if we stretch ourselves to the max?
90% of that.
90% of that.
We are doing that in Thailand. We are stretching to that capacity.
Hence my question, sir, [Non-English content ] aren't we doing almost 100%? Because I think we sold 15,260 and our quarterly capacity in Thai is 15,000 tons.
Yeah, you are right. Production was little lower than this. It was 4,600 something. Yes, we are doing some debottlenecking, some change in the sizes. Okay? When we say capacity, it is based on some assumptions of sizes and beads and—
Understood.
Okay. If there are orders for thicker wire, [Non-English content ]. Those complications are difficult to explain you on phone. Yeah.
No. Perfectly understood. Sir, the reason I am asking this is, obviously at the start of the call, you said that basically now nothing is approved on Chennai going beyond 60,000 ton capacity, and obviously this is how it gets utilized, and basis the return on investment, you will decide. I am just thinking, India, if it continues growing in 13%, 14% range, sometime in the second half of FY 2028, likely you will be fully utilized. Chennai completely utilized and Pithampur completely utilized on the bead wire front.
Yes.
Assuming everything goes on track, how do you plan to progress in terms of timeline of events? Because first you have to take board approval, then there will be a lead time of the machines being ordered and coming in, and basis your—
I have answered in the previous question that we have the land available in Chennai, and it is a very good location, very well located. Profitability margins are much better in Chennai. Okay? And our competition is far away from south, which encourages us to quickly ramp up the capacity in Chennai. But unless there is a board approval and there is a firm plan, I do not want to announce. But if you want to foresee, yes, I also foresee that expansion in two years' time.
Understood, sir. Sir, last question I will ask, sir. Just to gauge how the growth could be from an India front, since you have explained Thailand beautifully. Sir, India in FY 2026, we did about 81,000 tons, 82,000 tons, if I round.
I can split that 82,000 tons into 62,000- 63,000 tons of domestic bead wire consumption, 10,000 tons of black wire, if I assume it is fully utilized, and 9,000 tons of export from India. Is that correct, sir?
I'm not so handy with numbers [Non-Englsih content].
I think it is correct, sir, because I think I got this from—
Probably it is correct.
Yeah.
Yeah. So it is correct number. Yeah.
Yeah. I will tell you where I am getting at. If I were to think about what the growth could be from a more medium-term perspective here, the domestic consumption of bead wire would be constrained, right? Because anyway, it is limited by how much capacity your tire guys are putting, and obviously, you are confident of gaining market share, but you are already at a high market share. Maybe 10%, 11%, 12% could be the growth on the domestic consumption piece. I am very excited about the export from India piece. This, I think, historically has been in the 1,000-2,000 mark. After Chennai sort of successfully ramped up in FY 2026, that went to 9,000. I think this year you could almost, not double, but a bit less than double, maybe 14,000, 15,000, 16,000.
40% growth.
40% growth. Sir, what is driving the exports from India, and how much runway for growth do you think there is? Because for me at least, how much I understand your India capacity, this is going to be the material growth engine, sort of, where you can gain market share and drive faster growth.
Yeah. What is driving growth is the quality we make. Other than Rajratan, nobody else is able to export. It is also because of our long, long relationship in India, Thailand, with those global customers. We clearly see that there is a demand China+1 in our product. People are not very comfortable buying 100% from China.
Our hard work of last two, three years of making effort, we now have a subsidiary in U.S. Very soon we will start a subsidiary in Europe, but our marketing people are already located there. Their efforts, our efforts have given this result, and I can say this is only beginning. These volumes will keep growing if everything goes well. Yeah.
Would it be continue to driven by Southeast Asia and U.S.? I think these are the two geographies I had captured from past con calls.
Yeah. Southeast Asia, I do not see much growth because—
[Non-English content].
—China is very competitive there.
But yes, growth in Europe and U.S.A. is certain.
Got it. And you said 40% is the growth expectation this year from India exports?
Yes. Yes.
Okay. Great. Thank you, sir. You have been very, very patient—
Yes.
—in answering.
Thank you so much for your interest. I think it's over now.
Sir, we have one last question.
Okay.
We have the question from the line of Ajay Kapadia from Motilal Oswal. Please go ahead.
Yeah. Good evening, sir.
Yeah, Ajay.
Sir, the last price hike we took was in the first quarter when the steel prices had gone up considerably in the last quarter of the last year. In the last couple of months, although the steel prices have gone up significantly, we normally take a price hike on quarterly basis.
Yes.
Any hike we have taken at the end of this second quarter?
We have been able to take some hike, in some cases where prices were not finalized or we were not committed at old price. But remaining we have to take end of this quarter.
End of the third quarter.
Yeah.
Currently the pressure on margin is more due to the freight and the other raw materials rather than steel. Am I correct? Or steel is also one—
Yeah.
—part?
[Non-English content] .
Okay. Okay.
Impact other cost mainly energy, gas, petroleum, packing products, dyes, everything has gone up.
Okay.
Transportation costs. Export sea freights and they are like crazy. But steel prices, yes, are going up, and I think it will continue till mid of November.
Okay.
Whatever it is, December onwards, we have to pass on the price increase in remaining quarters.
Okay. Okay, sir. Thank you.
Thank you so much.
Thank you very much. Ladies and gentlemen, that was the last question. With that concludes the question- and- answer session. I now hand the conference back to the management for the closing comments.
Thank you all the shareholders for your interest in Rajratan. We are in exciting times. In spite of very turmoil market, very turmoil geopolitical situation, your company has been able to show a good growth, and we are confident of continuing this growth journey for next couple of quarters. Please keep watching us and we will try to do our best. Thank you so much.
Thank you, members of the management. On behalf of 360 ONE Capital, we conclude this conference. Thank you everyone for joining with us today, and you may now disconnect the line.