Securities for hosting, Apollo Tubes, for its quarter two FY 2024 earnings call. We welcome all the participants on this earnings call. To start with, I would like to share that Apollo Tubes recorded its highest ever quarterly sales volume of 675,000 tons, highest ever EBITDA of INR 3.25 billion, and highest net profit of INR 2.02 billion on a quarterly basis in Q2 FY 2024. Coming to the highlights for the quarter. Number one highlight is Raipur update. We are just complex for the thicker coated sheets, and super light tube also started, and the commercial production for super light tubes has started, and for thicker coated sheets, the commercial production will start in November.
Now almost 1.2 million ton of capacity in Raipur is online, and we charged around 27% utilization levels in Q1. The plant generated EBITDA of INR 5,000 per ton in Q2. With such low utilization levels, we are getting good EBITDA per ton spreads, and as utilization levels go up, the EBITDA spreads will go beyond INR 5,000 per ton to the desired numbers of INR 6,000-INR 7,000 per ton. Within Raipur, the roofing sheet is ramping up pretty fast, with utilization levels over 50%. The heavy structural tube also is ramping up, with utilization levels for 500 square mils in Q2 was 35%.
As Raipur is ramping up, we are working pretty hard on market creation, as well. Apart from heavy structural tubes, we are working towards transformation in the construction industry. The sales for heavy and super heavy sections for the Q2 was 56,000 tons versus 41,000 ton in the earlier quarter. So we are seeing almost 35%-40% jump on YoY and QoQ basis. Other than heavy structural tubes, we have identified other high margin value-added segments like solar torque tubes, thicker coated sheets, which will start from Raipur. The global business for Apollo, which comprises of export sales from India and our Dubai plant, is under a lot of revamping.
The export sales increased 28% on YoY basis in Q2. And even the H1 sales for export segment were up 28% YoY. The other value-added products from Raipur are CRCA tubes, which are annealed tubes for industrial applications and furniture applications. Then the coated sheets for roofing also, the utilization levels were around 50%, and we intend to ramp it up in the following quarters at good speed. So from Raipur, we expect the utilization levels to go up to around 40% in the third quarter.
The other update is on our branding strategy. Last two years, you see that we have been pretty soft on our branding strategy. Now, this year, we have decided to go aggressive, and we have appointed two Bollywood superstars, Amitabh Bachchan and Akshay Kumar. The campaign is going to be rolled out over the next one to two months. It's a 360 campaign, which is comprising of outdoor holdings, television, and social media campaigns. The ad spend and the sales proportional expenses were around INR 300 million last year. This year, the budget is around INR 500 million- INR 600 million. Coming to the quarterly update, the sales volume were 625,000 tons, up 3% year-over-year.
The value-added proportion was slightly low because of softness in our Apollo Z sales, which got hit in the coastal markets due to heavy monsoon and floods in some of the regions. That segment showed up in the second half. The EBITDA per ton for the whole company was stable at INR 4,800, and is in our strategic guideline of INR 4,500-INR 6,500 per ton. Working capital days remains stable at five days. In H1, the operating cash flow to EBITDA was 76%, which helped us to fund the CapEx of INR 356 crore. The ROC, including Raipur plant, was 22%, which was despite that the Raipur plant generated EBITDA of around INR 500 million.
Now, once the utilization levels go up to optimum level in the next two to three years, the EBITDA should increase at least 3 x from Raipur. So without Raipur investment, the ROC for Apollo, ex Raipur, was 40%. We maintain our FY 2024 volume guidance of 208 million tons. Although there could be some softness in October or November months, but as you know, the company recovers sharply in terms of its sales volume. The reason for softness is one, number one, recessive season, which is normally a weak for the construction sector. And second, the regional HRC prices are quite low compared to domestic prices.
There is fear of some price decline in steel, which is leading to some deferring. You must have observed in last years also that after de-stocking of 20 days to 25 days, when restocking starts, the company recovers its sales volume pretty sharply. There is no threat to our FY 2024 sales volume guidance of one million tons. Given that the capacity expansion in Raipur and Dubai is online, we should be ready with five million ton capacity by FY 2025, and we target to hit this number in terms of sales volume in the following year, which is FY 2026.
So overall, quarter two performance was pretty good with all-time high numbers for each volume, EBITDA and PAT. And Raipur and Dubai plants are ramping up pretty well. We expect this momentum to continue over the next three years. That's all from our side. We can now have a Q&A session. Thank you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question, press star and one on your 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.
There are more than 20 parties in the conference.
The first question is from the line of Amit Dixit from ICICI Securities. Please go ahead.
Yeah, hi. Good evening, everyone, and congratulations for good performance, and thanks for taking my question. I have two questions. The first one is on EBITDA per ton, in treasury, then for quarter products in particular, it has jumped substantially compared to last quarter. So, could you explain the reasons for that, and is this kind of bump up is sustainable?
Right. So this is mainly for the roofing sheets in our new Raipur plant, right? EBITDA per ton jumped because of better utilization levels. So all the products in Raipur, so one is this coated and second is light section, right? So both these are two categories. So good jump in EBITDA per ton. So this is sustainable.
So as I understand, you know, that going ahead, we expect this Raipur plant utilization to increase. And essentially, these value-added products that you are mentioning, their proportion will also go up. So is it fair to assume that we shall close the year at somewhere close to, you know, our upper range of the EBITDA per ton guidance?
Amit, I mean, EBITDA per ton, yes, ideally it should go up. At the same time, if you see this commodity segment, the general segment, which still accounts for 20% of the business, in that segment, there was pressure, right? Because of, because of, because of pricing gap, high price gap between the inferior quality sap steel and HRC coil. Right. I guess that pressure should remain for next few months, unless we see drop in HRC prices in India, which seems logical and visible as the current scenario. Still then there could be pressure in general category. As a company, we don't see like EBITDA per ton. What we are bothered about is absolute EBITDA, right?
If you see our absolute EBITDA, how it has progressed quarter on quarter. Right. The idea is that every quarter we are able to surpass the last quarter absolute EBITDA number. Now, whether that is by selling extra volume at slightly lower EBITDA per ton or by selling less volume at higher EBITDA per ton, right? That depends on the market behavior, market situation in different categories. Apollo has different multiple product segments in multiple application, multiple industries within the construction sector also, right? Based on that, what we see is that we are able to raise splits, right, from one segment if some segment is not doing well. Yes. But yes, I mean, ideally, Raipur, Dubai, both ramping up. They both are high EBITDA margin products, right, versus our existing portfolio. So yes, EBITDA per ton should expand.
Okay, that's very helpful. Thanks, and all the best.
Thank you. Participants who wish to ask question may press star and one on your touchtone telephone. The next question is from the line of Aman Agarwal from Equirius Securities. Please go ahead.
Yeah. Yeah. Hi, everyone. Many congratulations on one set of numbers again. Firstly, on the inventory, gain or loss impact, did we see any of anything of that sort in Q2, in the current reported numbers?
No, Aman, the prices were pretty flatish on Q2 basis, so nothing substantial which could give us any inventory gain or loss.
Sure. And secondly, on the, on our value-added product mix, you know, there has been some, sideways movement within, you know, last 2-5 quarters now. So we are trading at around 55%, value-added product mix, which is, clearly low from our or previous highs of around 63%, which we saw, I guess, after 2022. So, on, on the movement towards VAP, 70% VAP share, this, is it mainly because of affected, Apollo Z volumes, or was there any other impact in this quarter?
So I guess there are two things what you highlighted. One is that the comparison for the last two years, right, and comparison for the current quarter, so the Q2 quarter. Now, last two years, what has changed is that the share of general segment has increased considerably. Because in 2021 and 2022, those sales were down because the steel prices globally had gone through the roof after Corona, right? So because of the pricing gap between slab steel and HRC, you see that our general segment volumes were going down year-on-year, right? So last year, when the commodity cycle reversed, the steel prices came down from INR 70,000-INR 75,000 per ton to INR 55,000-INR 60,000 per ton.
It led to recovery in our general sales, right? So that trend is continuing, right? The sales will eventually improve to 70%, as our Raipur and Dubai plants ramp up, right? And the volume you will see from those segments which are high margin. So we are not bothered to hit 70% in next two, three years. Quarter-on-quarter, yes, of course, Apollo Z sales were down, right, because of monsoon and floods. This will recover in Q4.
Understood. Now on Shankara, you know, our distribution through Shankara channel, whether if you can give any update on, what's the number or what's the kind of growth that we've seen in the first half of quarter 2024.
Shankara, we continue to get the desired yields, Aman. We are doing around 20,000 ton volume from Shankara platform. And this has been there since we got into this strategic tie-up with the company. And this number of 20,000 ton on monthly basis is up 100% before there was strategic tie-up. And now we are confident that the number from this platform will match the overall sales growth of the company.
Sure. Any update on our investment in Shankara? Do we plan on, you know, adding any more investment to it or maybe liquidating the existing investment?
So, Aman, we are due to exercise our warrants next month, right, which we will be doing.
Sure, understood. Thank you. That would be it from my side.
Thank you so much. The next question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.
Hi, good evening. Thank you for the opportunity. So first question, Raipur has reached about 1.2 million tons. After the balance of, you know, the left capacity gets added, what's the eventual capacity here?
So eventually is 1.2 million tons, Rahul. Eventually is 1.2 million tons, which is today. So yes, earlier the plan was one million ton and incremental 200,000 ton. So that has also come online, so now we are at 1.2 million tons.
Okay, perfect. And company level, the [audio distortion] is one to, you know, October end, what would that be?
It will be around 3.6%-3.7%, okay. Eventually this will be INR 5 million in next twelve months.
Got it. And CapEx, you know, the cash flow say about INR 400 crore for first half. Can you elaborate a bit, where was this spent, just different projects and, full year, what's the budget, and next year, what's the budget? Just break it down, please.
So mostly Raipur and Dubai, Rahul. Okay, other than that, some value addition downfield expansions continues, right, but their CapEx amount is very small. But out of this, INR 350 crore of [audio distortion] , mostly was Raipur and Dubai. Full year, we could see another INR 200 crore-INR 300 crore. Idea is INR 200 crore, typically. Then, because Raipur is completed, and Dubai balance also, we should be spending like INR 200 crore in the next six months.
Got it. And lastly, on the debt side, INR 1,150 crore. Just wanted to know, where would this peak? Because project is mostly done except Dubai. So will there be more project debt here or INR 1,150 crore?
Rahul, don't look at our gross debt, okay? Because we have a cash balance also. So net debt on the books was INR 2.2 billion, INR 220 crore.
Yes, I'm aware of that. My question essentially was on gross debt. Just wanted to know that out of this INR 1,150, but, you know, this will include project debts from Raipur as well as Dubai, right?
Yeah, that's right.
Just wanted to know this, does it peak down already?
Yes. At gross debt level, yes. Now, after this project is done, we will be net cash pretty soon, Rahul.
Perfect. And, how will this gross debt come down? As in, is there a firm repayment plan for the project debt?
So, Rahul, see, I mean, I can repay INR 900 crore of debt, right? Because I have deposits worth INR 900 crore, right? So this is like some advantage of interest cost, right? What we are getting, and obviously how we see ABPL, the Raipur plant, as a separate company, although it is 100% owned. We want ABPL to stand on its own, to show its own performance, to have its own ROE, ROC, right. So that's why this structure, I mean, this INR 1,150 crore can become INR 950 crore tomorrow.
Yeah, absolutely. I completely agree and appreciate. My sense was, as you said, ABPL is a separate entity, so there will be a repayment plan based on their own cash flows, right?
Yes. So ABPL added due to EBIT of INR 50 crore, right? It will ramp up over the next two, three years. So yes, as the cash flow comes in, we have no option but to repay debt, right?
Right. So this gross number will continue for two years in the balance sheet. I understand the net. I know companies have, you know, enough amount of cash, but this gross number should continue for two years. Is that fair?
Yeah. So it will keep on reducing as cash flow from Raipur plant comes in.
Perfect, got it. I come back in the queue for more questions. Thank you so much.
Thank you. The next question is from the line of Bhavin Pandey from Fortuna Investments. Please go ahead.
Hey, good evening, and congratulations on great numbers. So just first part, I wanted to understand that in terms of capacity now, are we the largest [audio distortion] world? As it shown in the presentation, could we...
Sorry, your voice is breaking. You're not clear. Can you say it again, please, Bhavin?
[audio distortion] . Can you hear me now?
It's still, it's still cracking.
Just a sec. Clear now?
Yes, go ahead, please.
Yeah, sure. So, as it's shown in the presentation, are we the largest player in the world in terms of capacity? And the second follow-up would be that, regarding the announcements we made for three new personnel teams, one for branding, one for information, and, I guess, the CFO people. So who's behind it, the CPO, CIO?
Right. So yes, there have been heading off for three senior people. Like I said, that now we plan to go aggressive on our branding side, because two years we were soft. Right, so we wanted to have talent and capable resource who could manage this appropriately subject what we supposed to have, right? And Deepak Goyal, of course, he got elevated as Director of Operations. So the CFO, so we hired a new CFO, right, and yes, even Chief Information Officer, because we are doing a lot of automation, and IT softwares for different operations functions we are implementing. So we need to have a good senior resource. And our existing CIO is also, he's also retiring. So we want him replaced with more senior resource. And sorry, what was the first part of the question, Bhavin?
Now, in terms of capacity, are we the largest player in the world now for steel tubes?
Yeah. So, in structural steel tubes, yes, right, we're the largest player. In steel tube segment also, barring two players in China, we are largest.
Okay, okay, wonderful. Just one part I missed. The existing utilization, I think, was 50%, and we mentioned that we could see an improvement of 40%. The absolute of forty percent of the sheet, that will be up to 70% utilization.
On Raipur, 50% was for the roofing sheet segment, and when I say 40%, that is for the overall Raipur.
Okay, okay. And the optimum level should be somewhere around 70%-75%, if I'm not wrong?
100%.
Oh, wonderful, wonderful. Okay.
Double capacity.
Okay. Perfect. So thanks, thanks, Anubhav for all your time today.
Thank you.
Thank you. The next question is from the line of Madhav Marda from FIL. Please go ahead.
Hi, good evening. I just want to understand a bit more on the export side. So, which are the key countries we are exporting to, and will also the export happen from the Dubai plant, or will the Indian facilities also be exporting? And, is there like a target in terms of like, firstly, how big is the export volume for, say, Q2, and, how do you see this playing up for us over the next three, four years higher? And how does the economics fit, basically? I mean, is it more value-added trades, which you can sell more in the export markets or, you know, lose the competition? If you would give us some sense, because this is like a new area that I'm getting into and looking to scale up. Thank you.
Madhav, if you see our last seven, eight years of growth, right, which we have achieved 20%-25% volume stagger, it was mainly to the domestic markets, right, because all the resources were focused to grow the domestic business. Last two, three years, we evaluated that given the, given the size of Apollo on global stage, right, we cannot afford to be a low exporting company, right? We need to have good presence in the international market also. Two, three years ago, we kind of focused on to this segment, and we started appointing distributors in Middle East, and Europe and North America, right? We provided distribution of our products.
Given the quality, given the capacity, it was easy to catch hold of large distributors of steel pipes. We started exporting. Right now, two, three years, what we have found out is that the demand is pretty strong, right, for someone like APL Apollo Tubes, that it's easy to penetrate the market. After having two, three years of good sales momentum, if you see first off, also, our exports is having increased by 28% on year-over-year.
So we believe that it is good to have presence in Dubai, in Middle East, to be able to export to other countries, Europe, and North America, with the fact that Middle East obviously going to see a lot of demand because of a lot of construction activities happening there. The other reason what prompted us to set up a factory in Dubai was to the access to cheap raw material there. Because in India, the domestic steel prices are always higher compared to the regional steel prices. So that makes you uncompetitive, right? Versus the other players who have factories outside India.
So we are very confident that after Dubai plant is operational, we have put up a capacity of 300,000 tons. And glad to share that, product SKU range in Dubai also starts from 15 by 15 mm dia tube till 300 by 300 mm dia tube. So we have full range of structural steel tubes for the export market, which will be produced in Dubai. So we are pretty confident that having the product range, which is commoditized or value add, same mirror what we have in India. So the mix will be good, margins will be good, right? With the right competitiveness, which we will get after having access to cheap raw material in the Middle East markets.
Wonderful. And so the idea of more, more value-added trade, and how is the margin there versus domestic? Or is it a bit early to say because we are still kind of building up your base there?
So of course, it's a bit early to say, but we have tasted success, Madhav, right? So we'll talk about this over the maybe after two quarters, but what I can tell you is that the EBITDA spreads are higher than what we do in India.
Perfect. Perfect. Got it. Thank you.
Thank you. The next question is from the line of Aaron Armstrong from Ashmore Group. Please go ahead.
Hi, thank you very much for taking the questions, and, congratulations for a great set of numbers. Can you talk a little bit about the ramp-up in Raipur, please? Could you talk about whether that's an operational ramp-up, that it takes time to build out the kind of manufacturing capacity and actually produce the volumes? Or is the ramp-up more around market creation and customer offtake? Kind of which is the factor that dictates the speed of the ramp-up at Raipur, please.
There are two elements to it. Number one is the market creation, of course, because these are most of the products from Raipur are innovative products. So market creation had to start early before we got into commercial production. So market creation for heavy structural tube, for particular coated sheets, started last year itself, before we started our line. Right? So we are satisfied with the market creation, what we have done for both of the segments, right? And now we see that, the heavy structural tube segment. Right now the ramp is actually 7%-8% utilization levels.
Because coated sheet, which will start next month, there also we see immediate result because lot of exercise and activities have already been taken place in terms of market creation. To educate fabricators, to educate our distributors, to educate the retailer network. And secondly comes the adjacent product, which is a roofing sheet from new Raipur. Now, that's an established market, so there the utilization levels are highest, which is today, right? And like I said, it's an adjacent product going to the same distributor. Distributors sell to the same retailer. Retailers sell to the same fabricator who was selling our tubes anyways for the roofing structures, right? So roofing sheet went as an adjacent product to complete the solutions in a house. So that ramp was very quick.
So yes, the market creation activity started much in advance, right? A lot of hard work yet to be done, right? Because we are talking about transformation of the construction industry, products which have not been seen in India. So it will take time, but we are playing very patiently. We don't have objections on our Raipur plant, right? We want to keep our margins high. So we are playing the game patiently with the right introduction and selling of our products.
Thank you. So is it the case that just purely from an operational perspective, you could ramp up to, say, 100% or full utilization reasonably quickly? The area where the kind of patience comes into it is on the market creation side and building the awareness.
That is right. Yes. So, we target to utilize this project to be the 1.2 million ton by FY 2026. That's the target, we are having.
That's great. Thank you very much.
Thank you. The next question is from the line of Aditya Welekar from Axis Securities. Please go ahead.
Thank you for the opportunity. I just wanted to understand the pace of growth, additional five million tons. From when can we expect to initiate for that, from which fiscal year?
Still we start seeing 400,000 tons on monthly basis, right? Right now, we are doing 2,500 tons. We have big task ahead of us to utilize this five million tons first, right? So once we get to the sense, right, that yes, we are achieving the targeted number of 400,000 tons of monthly sales, we don't want to commit any CapEx, right? And we are evaluating a lot of options on our drawing board how to go on infrastructure building within India, outside India, because we see good momentum from Dubai coming in, right? Some of the other applications are also under evaluation. So right now we are on the drawing board.
We'll talk about it maybe during our Q4 FY 2022 earnings call, where we will come up with a more firm plan. But yes, we don't want to commit even $1 of CapEx till we see ourselves hitting 400,000 tons of monthly sales.
Okay. And can you reiterate your volume guidance for FY 2025, 2026?
Like I said, we should be of five million tons of capacity comes in FY 2025, and after, 12 months, 13 months, we want to hit, sales volume of the same number.
Thank you.
Thank you. The next question is from the line of Omkar Ghugardare from Shree Investments. Please go ahead.
As you mentioned, Raipur facility, that 40% is still commoditized value. So when your Raipur plant hits 100% capacity, where can this number settle?
30%. So value added will be 70% and general will be 30%.
So the 40% which you mentioned will be 30% at utilization of 30%?
Yeah. If you see Q2, Q2 was even 43%. Right, so this will go to 30%.
That will be at around FY 2025-2026 level?
FY 2026, yes.
Okay. Another thing is that you mentioned that, around INR 300 lakh tons is the capacity you have. So if you look at even the margins, they are better, but in overall scheme of things, the contribution, the volume, and eventually the EBITDA or the, or the profit will be lower as percentage of the total portfolio, right?
No, because 300,000 ton is Dubai capacity, not export. Export volume is already 100,000 ton without Dubai on annual basis, right? So, so after we hit 300,000 ton in Dubai, we expect actual business to be around 10% of the total.
Okay, so 10% of buy, then you are expecting of the total 100% from exports?
FY 2027.
FY 2027, you are expecting. And, can you share about margins in the export product currently, and what is the potential?
Right, so keeping the sensitivity, they are, they are higher than what we are doing in the domestic market today.
That's the only thing you can share about the margins in this?
Yeah, that's right.
I mean, if you're able to talk a little bit more about that, like, how much higher they are, like, not exactly, but, like, what percentage?
20% higher.
Okay, then the domestic one, right? Okay, thanks very much.
Thank you. The next question is from the line of Garvit Goyal from Nvest Analytics Advisory. Please go ahead.
Hi [audio distortion],
Go ahead, please.
Thanks for the opportunity and congrats for a good set of numbers. Just want to know about the guidance, like, earlier, in Q4 as a you had mentioned that we will be able to achieve somewhere around three million tons. So that's what is it. And what is the reason for this reduction in the guidance?
So what we said was that, our guidance is 2.8 to three million tons. Okay. So yes, I mean, completing first half and having finished October. So right now we think that, 2.8 million ton is what seems to be achievable. But let us tell you that, we have full capacity available, right? If there are tailwinds with us, we can go much beyond three million ton also. But like I said, there are two things which are not in favor. One is the price gap between the domestic HR coil prices and regional HR coil prices. Second is the price gap between the structural steel tube and the scrap steel tube. So these are the two main reasons that make us believe today that 2.8 is what we should be able to do easily. But yes, if anything of this reverses, we can go beyond three million also.
That's good, sir. Does it mean you mentioned, like, October and November are not doing that much well because of the season and the difference between the prices? So what was the run rate in October?
October was a bit soft, right, but and November also, because of festive season, should remain kind of softish. We might see improvement and sharp rebound right, like towards the end of November and early December. We just need, like, 10 days, 15 days time to bounce back sharply, which we always do.
I see. And can you please throw some light, like how much percentages of the revenue comes from the government side and the private side, and what is the difference in the margins that come from both of these, customers?
So what I will tell you is that 90% of our sales come from distributors. Now, distributor may be selling to retail or government, but just saying, we don't sell directly to the government. 90% through trade, through distributors, 5% exports, and 5% to OEM clients. We don't have direct dealing with the government.
Understood. Understood. And, talking about the EBITDA per ton, so, like earlier you mentioned, it will be somewhere around INR 5,000 per ton, right? It was year basis. But in Q4, it is less than INR 5,000. So can we expect, this, beyond INR 5,000 per ton of EBITDA per ton in second half?
So given the product range, what Apollo has, given that a lot of investment from Raipur is yet to yield results, because the large plant, almost INR 1,200 crore worth of plant is under the ramp-up stage. So we always give guidance of INR 4,000-INR 5,500 per ton at the EBITDA per ton level. Right now, you may say that there is a big variation, but if you look at from our perspective, that's hardly like 1% of our NSR, Net Selling Realization. So this much leeway Apollo requires the management of Apollo needs, right? Because there are a lot of moving variables in the market. So what we always target is the absolute EBITDA number.
Right, we have been increasing our EBITDA, if you see quarter-on-quarter, that is achieved by selling 10% less volume at 10% higher EBITDA per ton or 10% high volume at lower EBITDA per ton. That's like end result, right? What matters to us is the absolute EBITDA number, which we want to keep growing, expanding quarter-on-quarter basis.
Yes, sir. And lastly, based on the guidance that you have provided us, is it fair to assume that Q3 will fall short as compared to Q2 as well?
We don't know yet, right? Like I said, we just, we need just 10 days to bounce back sharply, right? If market is in favor, then who knows? Today is not the right time to give guidance for Q3. But for 2024, 2.8 million ton is achievable, and we are confident.
Okay, sir. Okay. All the best, sir. Thank you so much.
Thank you. The next question is from the line of Ankush Agarwal from Surge Capital. Please go ahead.
Yeah. Can you just confirm the volume numbers for Raipur for this project?
Just under 100,000 tons, 100,000 tons.
You were talking about 28% utilization for FY, right? For Raipur.
Yeah.
You expect this to move to 40% coming forward?
Yeah, so there are two ways to look at it. So 100,000 ton volume on, so which is like four million ton annual. Sorry, 400,000 ton annual. And actually was one million ton. Now it is hitting 1.2 million ton. Right? So it was 20% on the available capacity, if you see. Right. But if you take 1.2 million ton, then it was like 30%-35%.
Okay, got it. Thank you.
Thank you. The next question is from the line of Vikash Singh from Phillip Capital. Please go ahead.
Good evening, and thank you for the opportunity. Just so a little bit of clarification, since you said that the domestic steel prices are much higher than the export prices, but we still get the better margins in the export. So just, try to understand where is the differences, basically, because, conversion costs, even for the importer, shouldn't be that high.
So first is that, not domestic export prices, import prices. The regional steel prices are lower, versus, domestic steel prices. Right? So, so if you are having factory in Dubai, you can, you can, you can get steel at, cheaper, right? Almost 20% cheaper.
That's what I understand. Basically, I'm talking about current exports. Can we assume that the current exports which we are making is of a lower margin and in future we will substitute it with Dubai and getting some market margins?
Yeah, that's right. Yeah, so, so this is the reason that why we are investing in Dubai.
Understood. The second question pertains to, since we are investing heavily on the heavy section, super heavy section, where we need to develop the new market. Just wanted to understand what percentage of our targeted volumes of 5 million ton would be at risk if this market, you know, takes a little bit more time, because you need to educate the user industries, and it might take some time. So what percentage of our volume target would be at risk if they go slow on that?
If you look at our presentation, right, we have given the proposed capacity for heavy and super heavy products. That's around 400,000 ton, 393,000 total size. Now, on five million tons, this forms 8% of the total capacity. Right? Now, if you see, this 8%-10%, out of this, we are already doing a volume of 150,000 tons per year anyways. Because the first mill, what we set up in Raipur was 300 by 300, right?
Here the market has already been created and the volume is ramping up. So, there is no reason why one should believe that this market will not be developed, because replacing conventional concrete construction over steel construction makes sense. It has happened outside India. In India also, it will happen. It is happening, right? And steel tubes are better compared to conventional long steel products. That also, like there is no rocket science to know about it. It is just about the awareness, right? And the acceptability of the product.
So we have done a good amount of work with the influencers, like architects, structural consultants, and EPCs and government construction agencies and real estate developers and contractors. So eventually this has to happen, right? But to answer your question, the risk factor is like 4%-5% to the total capacity.
It's pretty low, actually.
Yeah, it's pretty low.
Yeah. Just one last question, if I may ask. Has promoter done any more plans of selling stake or, we are done with most of our capital need in other businesses and no more selling in the jail or below?
No more selling.
Thank you. That's informative and all the best for future.
Thank you. The next question is from the line of Amruta Deherkar from Wealth Managers India Private Limited. Please go ahead.
Hello.
Yeah, please go ahead.
Hello. Yeah. Thank you for the opportunity. So my question is regarding the general structure. So right now, general structure contributes around 45% of the total revenues. And, for the, for the past five quarters, we've been, reporting the utilization of greater than 100%. So I just want to know, isn't, are we, like, what, to what extent of, subcontracting is possible in the general structures? And, do we have any subcontracting in the, any other products?
No. Even in general structures, we are hitting like 100% because we don't want to invest too much capital into a commoditized segment. All our CapEx in the last two years has gone into Dubai and Raipur and other value-added products in existing plants. Just in our overall five million ton scheme of things, also, you will see that we shall increase from one million ton to 1.3 million tonsonly, right? Right now, the volume is not from contract manufacturing. Yes, we have always explored and we still explore good contract manufacturers who could manufacture for us. It requires a lot of things to fall into place.
For example, the quality of the product, and, the mill has to be near to our end market and raw material availability also, because both inward, outward freight, play important roles. So, so yes, I mean, at some point, we may go ahead with this, but we have always, been evaluating to find, good contract manufacturers.
So, like, right now, whatever excess above 100% utilization that we have for general structures is all in-house, as in, or are we doing it right?
No, no, it is in-house. So, so, so that's what we say, you know, that, our, the capacity what we always give, it is not licensed, it is not pledged capacity, it is sellable capacity. So, so, so we can always go beyond, this number.
How, how beyond can we go in overall? Like, we are targeting five million tons of capacity. So, what you're saying is that 5 million tons of capacity is the sellable capacity, right?
Yes, so 5%-10% is achievable.
The max utilization, so because it is five million tons sellable capacity, you can... so you're saying on that five million tons, the 100% utilization is possible?
I'm saying if it's 100% yes, 100%, we are saying that we will do. We can go incremental 5%-10% only.
Because in the general structure, like when I just, you know, chart out the numbers, I see the utilization like for this quarter around 150% utilization in this particular quarter.
Yes. So in general,
Yeah.
Yeah, yeah. Yeah, yeah. So general and gal, you will see that utilization is like 100%.
Yes.
In general, it is even higher. Yes. So in general because of less SKUs and less time in changeover of process, et cetera, we are able to achieve that. So when I said 5%-10%, that's on full five million tons. Product by product, it may vary.
So you have, like, the capacities are fungible, as in from varying the product demand, you can say, kind of, move the capacity from GI to Apollo Z, something like that?
Amrita, Amrita, we have 75 mills, okay? So not all 75 mills are fungible, but some of these, between 25 mills are fungible.
Okay. Okay, got it. Thank you.
Thank you. The next question is from the line of Shweta Dixit from Systematix Group. Please go ahead.
Hi, good evening. Thank you for giving me the opportunity, and congratulations on a good set of numbers. Could you repeat the residual CapEx for this year? Is it INR 200 crore for both Raipur and Dubai? Is that correct?
Yeah, that is right.
Okay. So that's INR 400 crore CapEx will come in the second half. And can you just elaborate on the-
INR 100 crore. No, no, INR 200 crore total consolidated in second half.
Okay. Okay. Okay. And another question, can you elaborate on the incremental volumes that we can see in the third quarter, especially Raipur plant, with 27%-40% utilization, incremental, additional volumes, despite it being a soft quarter and because construction activity is lower due to the season?
It doesn't impact Raipur much because Raipur is innovative products, right, and the volume is pretty small. When we say that, volumes are soft, that is on overall company basis, right? And mainly general segment, mainly general segment, because of deep pushing, et cetera. So, Raipur, we should see utilization levels, like on 1.2 million tons, what we are targeting is of 42% in Q3.
Okay. Okay. Thank you. That's all.
Thank you. The next question is from the line of Bobby Jayaraman from Falcon. Please go ahead.
Hi, you've been marketing the Raipur products for quite some time, right? Can you tell us a bit about some of the pushback that you get from customers in terms of pricing or whether there's really a need for that product or where it is available?
So there is no pushback as such. It is just the acceptability is always low for new products in India. Acceptability is always low for new technologies in India, right? You can see that the ramp up has been there for all the other segments. Pushback is never on the correction front. It is just the accessibility, the market awareness, the education. A lot of these factors need to fall into place, which we are doing. We are confident that the utilization levels for each and every product will improve quarter-over-quarter for Raipur.
All right. Thank you. The next question is from the line of Omkar Gurgule from Sri Investments. Please go ahead.
You have given in your presentation the global EBITDA margin, the companies are making around 14%-19%. So, what point of time we can at least expect a lower single-digit margin or a higher single-digit margin of APL Apollo?
I guess some of our products you see, they are already at high single-digit EBITDA per ton, right? INR 1,000 per ton. For something to happen, the share from our general segment has to be pretty low, right, compared to what it is today. Secondly, the share from super heavy, right, the coated products, now we are very bullish on our Dubai, our Dubai plant, which is having high margins. We are very bullish on thicker colored coated sheets, which will see commercial production from next month. We have a lot of products for high single-digit INR 1,000 per ton. For company also, I mean, barring commodity, barring general, the idea is to take every product towards high single-digit thousand per ton.
At a company level, is it possible when the Raipur plant fits full capacity? I'd like to say that.
What we believe is that 6,000 [audio distortion] is achievable, is possible with the Raipur full-fledged, and that's what we have, the guidance.
Sorry, I missed the number. What you said?
We believe that 6,000 per ton at company level is doable, is achievable.
100% capacity of Raipur plant, right?
Yes.
Okay. And this higher single, higher single digit margin at company level, is that something in your mind when you are planning for, say, next five million ton capacity, so totaling 10 million ton capacity? Is it something on your mind for that?
Yeah. So like I said, we are already sitting on a growing boat with lots of options, a lot of applications, a lot of new industries within CQ in geographies as well. So we'll be talking about it in another two to three quarters. But right now, our focus is 100% to achieve existing five million ton capacity with, of course, INR 5,000-INR 6,000 per ton EBITDA.
So, this is five million ton capacity by capacity at INR 6,000 per ton EBITDA, correct?
That's the target, yes.
Okay. Another thing is that you had mentioned in the last quarter or last, last quarter call that the [audio distortion] next, say, two, three years. So is the plan still on or is it achievable to do?
Yes, I mean, even by the simple math, you do, right? So you'll get the numbers.
Yes.
Anyways, our history, our history is that we have been growing our earnings by 20%-25% every year. So, so that means doubling our number every three years, right? So-
Correct.
Thank you. The next question is from the line of Bhavid Pande from Fortuna Investments. Please go ahead.
Hey, thanks for the opportunity, again. I wanted to follow up on the capacity for exports, about it, to be connected to how overall happens.
You have to say it again, please. Your voice is not clear.
Yeah, sorry. So I just wanted to follow up on the capacity for export. So what would be the sales mix for export when the ramp up happens?
Sales mix as in, general and, value add?
No, no. Exports are a proportion of our total top line.
Target is a 10% sales mix, right, for international business in four years.
In four years. Okay, sir. I had INR 1,000 there. Okay.
Yes.
Sure.
Can we have the last question, please?
Yes. Thank you. The next question is from the line of Sachin Damania from Swan Investment Managers. Please go ahead.
I believe this is the last question, Mr. Moderator.
Okay.
Yeah, go ahead, Mr. Damania.
Yeah. Hi, Anubhav. Thank you for the opportunity. Anubhav, just wanted to check that since we are moving to a five million ton, and we are seeing a ramping up of Raipur and Dubai will be kicking in. Any plan or any explanation in terms of where we are on the setting of the capacity in East India?
So yes, our five million ton has 200,000 ton of capacity from East India, right? So right now, we are exploring the land. We zeroed down on the location already, right? And in next two, three weeks, we should be starting the process for land acquisition. So once land is there, infrastructure is built up, then it takes approximately six, seven months to start the line. So 12-13 months from today, we should be able to, we should be able to at least start the production. If not 200,000 tons, but in phases, we should start.
What is the capital expenditure we are going to be spending for that?
Around INR 800 million.
Okay. Last question, since we are more into a heavy and the super heavy, which we are doing it from the Raipur, and we have seen the increase in the volume. So just wanted to understand the opportunities from the railways for us, how big is the opportunity and how are we placed?
Railway is one segment which can contribute quite big because Indian government wants to redevelop around 1,500 railway stations over the next five to 10 years. Right? And all these railway stations, 80% of them are coming on stream. And right now we are talking to a lot of contractors and railway agencies for tubular construction. So we have supplied our steel tubes for tubular design to two railway stations now. One is in South India, one is in North India. And we have plans to close on more number of railway stations. So railways stands as a very good opportunity to sell our heavy structural tubes.
Thank you, Anubhav. That's all from my side, and all the best.
Thank you. Ladies and gentlemen, we take this as the last question, and now I hand the conference over to the management for closing comments.
Yes, thank you, IIFL, for hosting us, and thanks to all the participants who dropped by. Look forward to see you for our quarter earnings call. Thank you so much. Thank you.
On behalf of IIFL Securities Limited, I thank you for the conference. Thank you for joining us, and you may now disconnect your lines.