Ladies and gentlemen, good day and welcome to Jindal Saw Limited Q2 FY 2027 earnings conference call hosted by ICICI Securities Limited. Please note, this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of the future performance and involve risks and uncertainties that are difficult to predict.
As a reminder, all participants' line 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 touch tone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. Vikash Singh from ICICI Securities Limited. Thank you, and over to you, sir.
Thank you, Ela. Good afternoon, everyone. A warm welcome all to the Jindal Saw Q2 FY 2027 conference call. On behalf of ICICI Securities, I would like to thank management for giving us the opportunity. From the management side, we have with us Mr. Narendra Mantri, Chief Operating and Financial Officer; Mr. Vinay Kumar Gupta, President and Head Treasury; and Mr. Rajeev Goyal, Senior Vice President of Corporate Finance. Now, without taking any minutes, I will hand over the call to the management for their opening remarks. Over to you.
Good afternoon, everyone. I am Vinay Gupta, representing Jindal Saw Limited. On behalf of our management team, including Mr. Narendra Mantri, Mr. Rajeev Goyal, I am delighted to welcome you all to our Q2 2027 earnings conference call. Our sincere thanks go to the team of ICICI Direct for facilitating this call also. Let me now take you through the operational and financial performance of Jindal Saw and its key major subsidiaries for the second quarter of FY 2027, with a focus on the key developments that are shaping our business performance and future growth process. In today's presentation, we will cover three key areas.
First, the financial performance, which Board has approved on last Friday. This is for Q2 FY 2027 and H1 of FY 2027. Second, the business scenario and outlook. And the third, update on the new project in MENA region. Through this discussion, we aim to provide you with a clear perspective on our performance, business priorities, and growth opportunities going forward. Now, let me first present the high-level summary for the Q2 FY 2027, comparing it with the Q1 FY 2027 and the corresponding quarter in the previous year.
During Q2 FY 2027, the company delivered improved top line with gross revenue hitting INR 3,870 crore, which is up by 3% on quarter-to-quarter basis and 14% year-on-year basis. However, operational had been compressed the EBITDA to INR 254 crore, down from INR 341 crore in Q1 of FY 2027 and INR 334 crore, which was in Q2 of FY 2026. Below the operating line, finance expenses rose to INR 92 crore, which includes INR 15 crore negative forex impact, normalized finance cost to that modest of INR 77 crore. And finally, the profit after tax, PAT came in at INR 63 crore compared to INR 110 crore in Q1 of FY 2027 and INR 80 crore in Q2 of FY 2026.
This is net of a INR 30 crore tax credit received during the quarter. Financial performance on a standalone basis for H1 FY 2027 and H1 of FY 2026. The company delivered improved top-line momentum in the first half of H1 FY 2027, with gross revenues rising 13% year-on-year to INR 7,627 crore, up from INR 6,736 crore in H1 of the previous year, which is FY 2026. However, operating profitability faced pressure as EBITDA contracted to INR 595 crore from INR 894 crore in the similar period last year. On a positive note, finance costs fell to INR 163 crore from INR 239 crore in H1 of FY 2026, showcasing efficient capital management despite INR depreciation against the USD.
Ultimately, higher tax expense and lower operating margins impacted the bottom line performance of the company. PBT finished at INR 178 crore, down from INR 412 crore, while the PAT landed at INR 172 crore compared to INR 443 crore in H1 FY 2026. A reflection of INR 6 crore tax expenses this half versus INR 31 crore tax credited last year. Overall, H1 FY 2027 has delivered an increase in the revenue and lower finance cost, although profitability remained under pressure due to lower operating earnings and couple of other things. On consolidated basis, we will now discuss Q2 versus Q1 of FY 2027 with Q2 of FY 2026.
On a consolidated basis, gross revenue income increased by FY— Yes, exactly. Okay. On a consolidated basis, our top line expanded by 8.8% sequentially to INR 4,512 crore from INR 4,476 crore in Q1 FY 2027, and rose 5.8% year-on-year basis from INR 4,264 crore in Q2 FY 2026. The EBITDA slid to INR 312 crore from INR 420 crore in H1, in Q1 of FY 2027 and INR 482 crore in FY 2026. Finance expenses rose 15.7% sequentially, up INR 17 crore- INR 125 crore from INR 108 crore in Q1 FY 2027, although remained lower than INR 153 crore, which was logged in Q2 FY 2026.
PBT dropped to INR 14 crore after the adjustments of the joint ventures, and compared to INR 143 crore in the previous quarter and INR 183 crore year-on-year. Profit after tax is reported at INR 35 crore from INR 91 crore in Q1 FY 2027 and INR 139 crore in Q2 FY 2026. Notably, INR 24 crore tax credit caused that to spread PBT by that amount. On consolidation basis, our top line continued on a higher side with gross income expanding by 7.4% to INR 8,988 crore. However, severe operating margin pressures impacted overall profitability.
EBITDA declined by 38.3%, leading to a 5.9 percentage point contraction in EBITDA margin to 8%. While a 27.8% reduction in finance cost down to INR 232 crore offered some relief. Pre-tax savings, PBT after JV share fell 33.8% to INR 146 crore. Finally, the operational slowdown combined with higher tax provision resulted in a 78.7% EBITDA in profit after tax. Now, in terms of our loan profile, indebtedness, as of September 30th, 2026, the company's standalone net debt narrowed to INR 2,245 crore versus INR 2,346 crore on June 30th, 2026. This includes long-term debt of INR 522 crore, which is the entity subscribed by LIC, and it is repayable in year 2028, 2029, 2030.
The net institutional debt on a consolidated basis has reduced to INR 2,074 crore as compared to INR 2,473 crore as at June 30th, 2026. As at June 30th, 2026, the long-term debt was INR 532 crore only, including Abu Dhabi, U.S., and all. Further, in June 2026, CARE Ratings has affirmed CARE A1+ for short-term debt facilities, including commercial papers and CARE AA with outlook stable for long-term debt facilities. What is the premises for these results? Overall, while our revenue increased, profitability got impacted, and the major reasons for this weaker performance are as under.
Ongoing geopolitical tension in West Asia have worsened due to recent escalations in Saudi Arabia, a region where we hold significant export order exposure. The main challenge is not order cancellation, but rather delay in shipping and revenue recognition. If these project delays persist, dedicated production facilities will remain underutilized and continue to drive up fixed and operational costs. The ongoing global conflict has driven up international and domestic logistics costs.
This directly impacts our operations, particularly because most of the sales contracts are structured on a delivered basis for [cervical. Surging raw material costs, particularly for coking coal, have squeezed margins in the DI pipe business. This pressure was further compounded by lower capacity utilization due to lower execution of water pipe business as softness in domestic water business continues. This resulted in the impact on the profitability. The Abu Dhabi DI plant is facing a combination of cost overruns, underutilization, and delivery constraints, including difficulties serving customers who cannot be reached through truck-based transportation.
This resulted in lower production sales and impact on profitability. In the seamless business, while the API license reinstated in June 2026 for our eligibility for the key orders, those immediate financial impacts remain limited in Q2. The seamless pipe business is currently bidding on new orders to rebuild its order book and is witnessing the improvement in the backlog. To summarize the performance for Q2. The weaker performance appears to be the result of combination of geopolitical disruption, continued weaker demand of the optics in domestic water infra segment, increased raw material prices, increased logistics cost and other cost inflationary factors, and also supply chain constraints rather than a single adverse factor.
The impact is particularly visible in the ductile pipes and seamless pipes businesses, where increased cost and sub-optimal capacity utilization has impacted the profitability. To mitigate or minimize the impact of the above risks to the businesses, company is positioning ourselves, and we are now highlighting a couple of pointers that how we should be positioning ourself for the Q3 or H2. The company has confirmed order book of $ 1.135 billion, which approximately INR 10,700 crore. It further received letter of intent for approximately $ 575 million, which is a mix of export and domestic business.
These LOIs for $ 575 million, these orders are not from MENA region, and the export out of $575 million constitute $425 million approximately, and this is oil and gas sector. With this, on receipt of the order, our order book will be at approximately INR 16,200 crore. The LOIs might get converted in next couple of weeks. But the execution of these orders is likely to be from the month of February, March because we would be receiving steel accordingly. Another good thing is that post the Board meeting on Friday, we have received another LOI for approximately $ 50 million. This is for exports to Southeast Asia.
If we add this $50 million further, our total order book would be in the vicinity of INR 17,000 crore. The existing job work order of approximately 6 lakh metric ton to Saudi has been delayed significantly, primarily because of the war in Middle East. While it has not blocked our working capital because it is a job work order, it impacted the capacity utilization and revenues recognition. Parties including the buyer are engaged to work out an out-of-the-box solution for transportation or logistics services. If a solution works out, then we may see the positive impact on the capacity utilization, revenue recognition in next few months time.
On the seamless, while the API license is reinstated in June 2026, the company is bidding for new API orders very aggressively. API business fetches better margin. We expect the impact of the same in next quarters. Ductile business may take some more time due to the micro and macroeconomic issues. However, we expect some export orders in DI business, where we could be able to reduce concentration of business in the domestic market. Pellet business and profitability has been impacted and may remain impacted to some extent due to increase in the diesel prices, low Fe content in the iron ore, coupled with higher exporting ratio. We have seen reduction of current assets in Q2, and we expect further reduction in the inventory and receivables amounts.
This helps us to improve our liquidity position and thereby reduce bank borrowings. We are focusing on improved capacity utilization in all facilities over absorption, cost control, and deliveries. We are also keeping our eyes open on the capital allocation for CapEx, not only in India but also in the MENA region. All these measures should start showing better results or demonstrate better volumes and thereby better margins. As we had said last time also, we expect H2 to be better than H1. Let us discuss about the MENA region.
The company initiated this project when the MENA region was stable. Our pipe manufacturing investments in U.A.E., Saudi Arabia were designed from day one to serve as permanent foundation for the region's essential energy and water ecosystem. The economic fundamentals underpinning these projects remain entirely unchanged. Today, the project implementation is progressing well. By manufacturing locally, we are mitigating international logistic risk, improving local content integration, which is ICV in U.A.E. and ICV in Saudi, and ensuring that critical utility infrastructure continue to build without disruption.
Let us talk a bit about our progress of our seamless pipe plant in Abu Dhabi. Jindal Saw proposed seamless pipe manufacturing project in Khazna Industrial Area, Abu Dhabi, U.A.E., is progressing through the initial development and construction phase. The project with a proposed capacity of 300,000 tons per annum and an estimated investment of approximately $330 million, is intended to strengthen the company's presence in Middle East oil and gas market. By securing a developed leasehold land with existing civil infrastructure, we have accelerated our construction timeline.
Procurement of critical long lead equipment is underway, supported by active letter of credit and initial cash advances. With financial closure projected in coming months, the project remains firmly on track to commence commercial operations in FY 2029. Jindal Saw's Abu Dhabi strategy reflects a deliberate move to establish a strong regional manufacturing hub by combining seamless steel pipes for the oil and gas sector and ductile iron pipes for water sector infrastructure.
This dual platform approach is strategically aimed at capitalizing on the Middle East's long-term investment in energy security, hydrocarbon development, and water infrastructure, while strengthening customer proximity, enhancing regional market access, and creating a diversified platform for sustainable growth across the energy and water sectors. Regarding our SAW pipe plants in Saudi Arabia, we communicated earlier also that we have established a strategic joint venture in Saudi Arabia, where Jindal Saw will hold 51% equity stake and Buhur of Kingdom of Saudi Arabia will hold 49%.
The joint venture envisages setting up two advanced pipe manufacturing facilities, helical pipes and longitudinal pipes, with a capacity of 300,000 metric tons each, catering to the region's growing water infrastructure and energy requirements. The project is progressing well. Land has been secured. LCs for long lead items have been established. We remain focused on accelerating project execution, with interim financial closure expected over the next few months. We recognize the prevailing geopolitical environment and highlighted regional security concerns may create some near-term uncertainties around project execution, logistics, and investment timing.
Nevertheless, our approach remains guided by the long-term fundamentals of Saudi Arabia's energy and water infrastructure requirements. Beyond serving domestic demand, the facilities are strategically positioned to capitalize on emerging regional opportunities, including the potential for alternative energy transportation and export routes that reduce dependence on the Strait of Hormuz. We remain committed to a disciplined approach to project implementation while closely monitoring the evolving situation in the region. The Jindal Saw Middle East strategy leverages a dual platform approach to target critical investment in energy security, hydrocarbon development, and water infrastructure.
The company's Abu Dhabi hub serves as a controlled high-end base for seamless pipe and ductile iron pipes, optimizing customer access. Meanwhile, its Saudi Arabia joint venture focuses on localized longitudinal helical pipes, creating a balanced, diversified corridor positioned for sustainable regional growth. Now, let's talk very quickly about our ductile iron pipe operations in Abu Dhabi. Regional conflicts in MENA have disrupted operations at our Abu Dhabi facility. The facility remains highly impacted due to the war. Due to these circumstances, and with employee safety as our top priority, operations have been reduced to meet essential demand.
The sales from Abu Dhabi plant are restricted to customers in the countries which are within the trucking range. In this backdrop, Q2 of FY 2027 for Abu Dhabi, we delivered 29,000 metric ton pipes as compared to 34,000 metric ton pipes in Q1 of FY 2027 for the DI pipes. As of September 26th, the subsidiary holds order book valued approximately $ 195 million for corresponding 177,000 ton pipes, ensuring operational visibility for the next nine to 12 months. This backlog is independent of Jindal Saw India's outstanding order book of close to INR 17,000 crore including orders plus LOIs.
Now about Jindal Hunting, a joint venture with Hunting Energy Services Private Limited, Singapore, in which Jindal Saw holds controlling interest of 51%, it generated revenue of INR 9.70 crore and a loss of INR 1.5 crore in Q2 of FY 2027. This dismal performance is a result of suspension of API license, which is likely to improve in coming quarters as the API license has been reinstated. Now the last about the litigation in Jindal ITF versus NTPC. In this legal conflict, a division bench of Delhi High Court delivered a split verdict.
Consequently, the Chief Justice has referred the matter to a third judge who has now been appointed. The next hearing is scheduled for January 2027. This is from the presentation for today, and we now leave the floor open to take certain questions. Mr. Narendra Mantri and Mr. Rajeev Goyal are with me to address any of the questions. Thank you very much, and let's start the question- and- answer session.
Thank you very much. We will now begin with the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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. The first question is from the line of Shaurya Shah from Equirus Securities Private Limited. Please go ahead.
Yeah. Thank you for taking my question. The first question I have is regarding the new LOIs. Just wanted to know how firm are these LOIs, and an approximate date as to when are they expected to translate into some dispatches. The other thing is that, can these orders, to an extent, replace the affected MENA volumes at comparable margins?
Can you come for the second question, then we'll provide answers for the first also. Can you repeat the second question?
Yeah. The second part of the question is that the LOIs that we have received already, the $575 million of LOIs, and majority of them being outside of U.A.E. region. Just wanted to know whether these will kind of replace the affected MENA volumes or the delayed MENA volumes at comparable margins.
Okay. We will not talk about the margin at this point of time. Let me discuss two things which you rightly pointed out. One is that, first of all, we have now, after receiving the additional LOI of $50 million. So the total LOIs, other than the confirmed orders, are $625 million. That is one. Out of this, $430 million, $+50 million, let us say $480 million is export, and the $430 million is in CIS countries. This $50 million is from Southeast Asia. Second point is that how confirmed we are for the sale order. So eventually, this is a process. Every buyer has their own systems and all. So when we receive the LOI, then from there, only two, three things remains pending.
One is, let us say, conversion of this LOI into a firm sale order, which is a legal thing, so that you negotiate the legal thing and start doing the thing. But the possibilities of, let us say, not getting the order remain very low. Eventually, we have already started booking a fee for these orders also. In terms of the production and dispatches, this production will start sometime in February, March. Because the LOI, once we get the confirmed order in next couple of days or weeks, after that, the raw material which has already been blocked, we expect to receive the raw material from January or February.
So effectively, production will start again the new order sometime towards the end of the year. But having said about the MENA region order, it is one of the largest order what we received in terms of volume, 6 lakh ton. Incidentally, the buyer is our joint venture partner in Saudi project also. We are not replacing the capacity. For some time, the capacity might not be fully utilized. What we are trying to do, we are trying to find, along with the buyer, alternative routes for transportation. So if that works out or if the scenario in general improves, then our capacity would get booked very quickly.
Okay, understood. Thank you for your response. The other thing I wanted to ask is that there is also some imposition of anti-dumping duty on DI pipe imports into Saudi Arabia. I just wanted to know your exposure to Saudi region, specifically for DI pipes. Can you explain the specific rates, if possible, as in the anti-dumping rate that would be applicable, if possible, on DI pipes exports to Saudi?
Yeah. Basically, you are right that anti-dumping duty has been imposed by Saudi Arabia government on the Indian exporters. But good thing is that since we did not export pipes from India to Saudi, so we are not into that anti-dumping duty imposition. We are doing sale to Saudi Arabia through our Abu Dhabi subsidiary. This is not impacting us. However, the other manufacturers in India, the duty is being imposed on them in the range of 16%-25%- 30%, based on the export to this region and their pricing. That is something which is positive for us that we are not included in the anti-dumping duty liability.
Yeah. To add one line here is that it's good for our Abu Dhabi facility since because of the anti-dumping duty, the Indian producers, the profitability will reduce, thereby we can sell more pipes in Saudi Arabia market from Abu Dhabi facility.
Okay, understood. Lastly, one thing I wanted to know is that we have mentioned that we have got some initial order placements from our upcoming SAW pipe facility at Saudi. I don't know if you already mentioned it, but if you could just assign some approximate number as to how much order filling has happened for this plant.
You are talking about Saudi facility?
Yeah, correct.
No. It's a long process. First of all, as we had mentioned this call, previous call also, we have acquired lands, and the land development work is going on. The plant, once it gets implemented, then it will go for inspection. After that, once the approval is received, then only we can participate in the order. So maybe 2028, 2029 is the time when we are targeting the commercial operation. Prior to that, we won't get orders for this facility.
Even though what can happen that our JV partner, maybe the moment we start the operations, because they are one of the largest EPC contractors in Saudi, maybe they can take the order and we can load the order on the Saudi facility. But at this point of time, we have not secured any order. We don't have manufacturing facility as of yet.
Okay. Just one last question, if I could push in. There was something mentioned about a hold-up in terms of a Saudi DI pipe project in the presentation. So just any guesstimate as to when this is expected to kind of move forward? So it will still be within the timelines, right? Or will there be certain delays in terms of commissioning?
See, that facility, in any case, initially that facility was not a, let's say, complete back-to-back or integrated facility. It was like kind of taking the semi-finished pipe from U.A.E. and finishing it and doing couple of other processes in Saudi Arabia. Right now, considering the Saudi Arabia scenario, we have put on hold that venture. In any case, it was very small. Till that time we finalize our thoughts again. We would be serving that market from Abu Dhabi only. Otherwise also that was not adding to the top line or productivity. These were the semi-finished pipes getting finished in Saudi and being sold in the Saudi market, which we will continue to do from the Abu Dhabi facility.
Okay. Understood. Yeah, these are the questions from my end. Thank you for answering.
Thank you.
Thank you. Anyone who wishes to ask a question can press star and one now. The next question is from the line of Sailesh Raja from 360 ONE Capital. Please go ahead.
Yeah. Thanks for the opportunity, sir. Sir, our gross profit per kg it has declined over the past few quarters from INR 51- INR 41 per kg in this current quarter, reportedly due to an unfavorable product or segment mix you were referring. Given the current order backlog of 2.5 million tons, including this LOI, I am talking 0.5 million ton, with approximately 55% is exports and Abu Dhabi operations. How should we assess the quality and the profitability of the order book? Over the next 12 months, what trajectory that you expect for gross profit to improve and when it will return to that INR 51 spread, which was reported in last year?
Sailesh, you are right because of geopolitical situation, other domestic market situations, profit margins per kg has reduced drastically, which is reflected in the numbers also. What we see that the new order booking other than the MENA region and the execution possibilities are much stronger than what we are experiencing right now in the MENA region. We are looking for better margins, and our target is to, again, reach to that level what we were in 2025.
This is the endeavour of the company management, and we are seeing that from Q3 onward, we may see some upward trend in terms of margins also because these new orders will change the product mix in the time to come, because majority of the orders are coming from the oil and gas sector and exports. Again, export, which is executable. It will give the product mix, which will lead definitely to the better margins. We can expect Q3, Q4 onward that margins will be moved towards double digits, and we expect that very soon this situation will be same what we were doing a few quarters back.
Okay. Great, sir. Sir, our effective utilization is around 67%. Our effective capacity, I am taking 2.3 million tons. By when do you expect that utilization will reach 80%, sir? Either in third quarter or fourth quarter?
No, 80% utilization and all depends on the execution of multiple orders. In the best case scenario, also our execution level was somewhere 75%, not crossing that. We achieved the highest volume somewhere in 2024, 2025 when we achieved 1.8 million tons. What we feel that reaching to that level of execution will take time. However, improvement in the execution we are expecting Q4 onwards, definitely.
Okay. Sir, one question that the LOI we have received INR 6,000 crore from non-MENA market. Is this fully FOB order?
No. Generally the trend in the export market is completely— It is not FOB. It is generally a CIF where the freight is also included. But since the current situation is more volatile, we have taken sufficient cushion about the pricing of all elements, which is on our part. We have taken care in our pricing and it is very well taken care of.
Okay. Sir, in the same region, do we expect in next two to three quarters more sizable orders in the same region? How strong is the current pipeline?
Currently, inquiry levels are quite high, and we are participating in all large inquiries. We are hoping things may crystallize, but as of now, inquiry levels are high everywhere, oil and gas and water sector, especially in the export market.
Okay. Sir, one last question. Sir, can you provide update on performance of key subsidiaries, particularly that U.S. and Abu Dhabi? Could you please talk about how it has performed in terms of operating profit levels?
In Abu Dhabi, as Vinay ji mentioned in his initial remarks, because of MENA region situation, the Abu Dhabi facility is operating at around 50% utilization level. We achieved 34,000 tons in a quarter against, I think, 43,000 tons. In that scenario, because the situation is again worsened in this region, we are able to maintain that run rate. But we are hoping because of this anti-dumping duty on Indian exporters in Saudi, we may get the benefit of it, and we may increase our supplies to Saudi, which will definitely improve the execution in Abu Dhabi facilities in the coming quarter.
Abu Dhabi facility is contributing at EBITDA level positively, though the EBITDA margins have reduced because of the underutilization of capacity. The U.S. facilities which are under Jindal Saw hold, they are performing well. They are contributing positive. They are largely in job work areas where double jointing, coating, and some mechanical anchor activities we are doing in various entities in U.S. So these entities are contributing positive.
Okay. Now, compared to last year, is there any improvement that you see, sir?
Their performance is quite consistent. U.S. NCD's performance is quite consistent. However, there is a decline as compared to last year in Abu Dhabi facility because of Middle East situation.
Yeah. Okay. Thank you, sir.
Yeah.
Thank you. To ask a question, please press star and one now. The next question is from the line of Vipul Kumar Anupchand Shah from Sumangal Investments. Please go ahead.
Hi. In your presentation, you mentioned that export volume is 41% of your total order, but value-wise, it is 28%. Are we getting a substantially reduced realization per ton in export market, or is my understanding wrong?
No, volumes are including the job work order of roughly 6 lakh ton, where the volumes are high. However, this order is job work order where only the job work value is included. That is why in terms of value, it is 28%. However, in terms of quantities or volumes, it is high.
Will it not be better if you put these separate slides to the presentation so that this confusion does not. Overall, for manufacturing export and domestic margins are almost same, or is there any difference between the two?
In general, export orders are more profitable than the domestic margin in terms of water. Oil and gas, they are pretty similar.
This 6 lakh tons which you are referring to is pure job work order, that is why its margin is low.
It is a water pipe order. Job work is generally, basically, the raw material cost is not included. That is why the value is lower.
Okay.
The raw material is being supplied by the buyer free of cost to us, and we are doing the value addition, making the pipe and selling them. It is only the conversion and the margins which are included in the order. That is why in terms of value, it is lower.
I would request if competitive pressures do not forbid you, then you make some separate disclosures like these orders in the presentation.
Okay. Well noted.
Thank you, sir.
Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.
Namaskar, sir, and thank you for the opportunity. Hope I'm audible.
Yeah, you are audible, Saket.
Yes. Thank you. Sir, firstly, in terms of the tonnages part, how are we seeing our tonnages scheduled for H2, and what kind of volume growth are we expecting comparison to what we did for FY 2026 in terms of the only pipe segment?
In terms of pipe segment, we are expecting some betterment in terms of volume in pipe segment specifically because till H1, volumes are higher than the previous H1 figures. We expect that the same momentum should continue in H2. Overall volumes in FY 2027 should be higher than FY 2026 volumes.
Yes. When we look at our realization also, since the volume was up, but the realization was not commensurate to that, and hence the margins were also lower. Taking into account the existing order book, excluding the LOI one and the recently added orders, are we expecting the margin profile for the pending order book which is to be executed for H2 also remaining in the same vicinity as was for the quarter two?
In H2, we are expecting a little bit change in terms of sales mix, because this quarter sales mix was altogether towards water sector, which is in general a low margin, and specifically in domestic market, where now oversupply situation is there, due to which margin pressures we are experiencing. However, in the coming quarters, Q3 and Q4, we are expecting some improved volumes in oil and gas sector, which will definitely lead some better margin or margin improvement, as compared to H1.
Okay. This EBITDA margin should have bottomed out in this 6.8% level. Last year also when we had the December quarter, we had double-digit margin, and margins were always closer to 10%. Can Q3 itself see the reversion and improvement in the margin? Or how should we penciling in the EBITDA margin profile for H2, taking into account what H1 was?
Right now we can comment on H2 blended because things are so volatile. We are working out certain modalities to export even the job work order also. We cannot comment on exact numbers as of now, but H2 should be better than H1. That is something which we are sensing right now.
Right, sir. For the pellet segment, sir was commenting about some factors that have led to the decrease in the margin. Can you elaborate what exactly are the troubles in the pellet segment? I think so some EC clearance was also pending for enhancement of the capacity. Where are we in terms of pellet performance going ahead?
In pellet, as Vinay ji mentioned in his initial remarks that—
Okay. Saket, in pellet, the kind of mines which we have, we have a high stripping ratio and low grade of iron ore. Because of that, our margins are under pressure now. The depth of the mines has gone up, and we are working how to enhance or maintain the margins there. As far as EC is concerned, the application has already been made and we are discussing with the MOEF for getting their final approvals on whatever application which we have made. The EC enhancement, technically it is not there because the ROM will remain at the same level because of high stripping ratio over total overall mining quantities has increased, including the OB. Otherwise, ROM or the iron ore quantum will remain same, whatever we were doing it in last year.
Sir, because what we—
Sorry to interrupt you, Mr. Kapoor.
Ma'am, I will only conclude. Ma'am, I will only conclude to what Vinay sir was discussing, if you may allow. Sir, if I may conclude.
Yeah, please continue.
Yes, sir. Sir, in terms of the pellet volumes, that are on the higher side, and what we understood that pellet being a commodity, the prices are also tended up. So the contribution margins have also been lowered for the first half or what is the color on that same, sir?
Okay. As far as the selling price is concerned, it is linked to the market conditions and other things. When I say that there is a higher stripping ratio or low grade ROM, that means the yield from the iron ore is lower. So that result into the higher operating costs, and that is why there is a low margin. But by making the other sources of our acquisition of similar kind of material, we are trying to reach to the level of pellet generation, whatever we did in the last year.
Thank you. Participants who wish to ask a question may press star and one at this time. The next question is from the line of Parth Bhavsar from Investec India. Please go ahead.
Hello. Yeah. Hi, sir.
Yes, sir, you are audible.
Yes. I had a couple of questions on demand. One is, you highlighted in the exports market, you are looking at good demand undercurrents. Wanted to know which are these countries where excess demand where you are getting a good response.
We have already highlighted the LOIs which we have received from CIS countries and Southeast Asian countries. Please allow us to give some space till the time we receive the confirmed PO. This is a bit sensitive. But these are the LOIs not from MENA region.
Okay. CIS and Southeast Asia, right? Okay.
Yeah, $430 million CIS, Southeast Asia, $50 million.
Got it. Perfect. And sir, just on the domestic front, we have been hearing that there are fund releases in JJM, right? Jal Jeevan Mission, where INR 7,000 crore has been released. So what is happening on the ground? Are you hearing about these releases, or are there any new workflows, new orders that are being placed?
Funds release is happening in a gradual manner, and that is why in our presentation we have said release or reduction in the levels of receivables and as well as inventory. So we have seen funds getting released. But yes, it is slower. It is not like clearing of the existing payable by the government. That is one. Second thing is that for some time, the orders would not be issued under Jal Jeevan Mission scheme. It would be from the state government side. So state will raise the funds. They are issuing the orders, they will issue the orders. So orders are coming. But yes, it is through the state.
Okay. Got it. How positive are you on these orders? Do you think this can maybe a good chunk of your order book over the next maybe six to one year or two year period?
Okay. See, execution is the key at this point of time. For example, we would still have all our ductile facilities fully booked for almost one year. The challenge is not the order. The challenge is the execution of the project on ground. Because we supply majority of our pipes to EPC contractors, and EPC contractors would be doing work across the country. So maybe they are receiving money in one or two states.
The money getting released in two states. So EPC, at this point of time, the business is not being fully implemented. That is where some lag impact has come and the value chain has, let's say, got impacted. It's likely to be reversed, likely to get improved gradually. It will not happen overnight. But orders are there. We are fully booked for all facilities.
Got it. That was very helpful, sir. Thank you so much.
Thank you.
Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for the closing comments. Over to you, sir.
Yeah. Thank you very much for all the participants, and hope that we could clarify, provide our perspective on the business and scenario in India, overseas. We will be happy to take the questions. Our team is there, Mr. Rajeev Goyal is there. You can approach them one to one. Thank you very much once again for joining this call.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.