Ladies and gentlemen, good day and welcome to Surya Roshni Limited Q2 FY23 earnings conference call. 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 date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Raju Bista, Managing Director at Surya Roshni Limited. Thank you, and over to you, sir.
Namaskar. Thank you very much. Good evening and season greetings to everyone on behalf of Surya Roshni Limited. I extend a very warm welcome to everyone for joining us on our call today. On this call, we are joined by Tarun Baldua, our CEO of Steel Division, and newly inducted Mr. Jitendra Agrawal, CEO for Lighting and Consumer Durable, our CFO and Company Secretary, Mr. B.B.
Singhal, and SGA, who is our investor relation advisor. I hope everyone had an opportunity to go through the financial result, which we have recently published and also uploaded to the stock exchange and our own company site also. The company reported a healthy set of number amid global uncertainty, rising input costs, especially on freight, shipping, fuel costs and adverse currency movement.
The company fared well on financial as well as operational metrics. The company could weather the storm underpinned by inherent core fundamental strength built over the year. Our team has displayed sheer operational excellence and resilience during these times.
Coming to the lighting and consumer durables, Q2 and H1 FY 2023 revenue grew by 12% and 29% year-on-year respectively, mainly on account of an improved product mix with a good growing shares of new age line of product. LED revenue grew by 29% and 48% year-on-year during Q2 FY 2023 and H1 FY 2023 respectively, backed by value-added product like LED downlighters, battens and other luminaires.
Professional lighting too also witnesses a robust 37% growth and 49% growth in terms of revenue for Q2 and H1 FY 2023, along with a good inflow of orders. The company is aggressively growing this business, and the effect is clearly visible in the order inflow and current orders in hand. Consumer durables too saw a significant pickup in demand towards the end of Q2 FY 2023, maybe due to the festival season.
We expect some spillover effect in Q3 FY 2023 as well. The company is planning to leverage strong traction in lighting and consumer durables by strategically launching trendy products. The company has undertaken multiple price hikes in order to mitigate rising input costs. We are witnessing stabilization for multiple input costs, especially on the commodity front.
We believe that most of the input cost has peaked out and we should witness a downtrend in the H2 FY 2023. This downward trend, along with already undertaken price hikes, should help the company to improve the margins further, especially in lighting and consumer durables. The company CapEx under the PLI scheme is going as per the schedule and will help the company to reduce reliance on imports, reduce the cost, and improve the margins as well.
The company continue to invest in adopting modern processes, focusing on R&D and quality improvement. In fact, replacement cost now stand at 5.9%, which was at one time it was more than 12%. A significant reduction on year-over-year as well as quarter-over-quarter basis.
The company is focusing to reduce this cost further going forward. Over the years, Surya Roshni has built strong and extensive capability and competence in designs, manufacturing, R&D and operational excellence. The company has accelerated the branding, the marketing initiatives, as well as increased the dealer and distribution engagement program.
The company has successfully gained the market share in metro and tier one cities, along with further deepening the reach in rural market. We remain confident that all this initiative has helped the company to remain ahead of the curve, and the company remain well positioned to scale this business rapidly going forward without requiring a large CapEx. Now moving on to the steel pipe and cold rolling division. Steel pipes and strips performance was affected in terms of revenue due to sharp correction in global steel price.
At one time it was INR 75,000 a ton, now it has come down to INR 55,000. The EBITDA has grown by 30%. Volume is almost at same level, but EBITDA has grew by 30% year-on-year to INR 55-INR 59 per ton in Q2 FY 2023, mainly on account of healthy revenue mix and value-added product. We believe that this headwinds are temporary in nature and steel prices are likely to be bottomed out. We expect H2 FY 2023 to be far better than H1 FY 2023 in terms of revenue growth, especially in steel division. Lastly, I will also like to welcome once again Mr.
Jitendra Agrawal on board as CEO for lighting and consumer durable, having very rich experience in electrical and lighting industry, Luminous Power Technologies, including 19 years at Philips India Limited. In his last role at Philips, he was there as a senior director, responsible for professional lighting. We look forward to work with him and firmly believe that under his leadership, the lighting and consumer durable will scale to a very new high. Lastly, now I would like to request Mr. B.B. Singhal, who is our company CFO and company secretary as well, for his remarks on finance.
Thank you, respected MD, sir, and a very good evening to all the participants on the call. The company reported a very good performance for Q2 financial year 2023, owing to a strong recovery in lighting and consumer durable. During this period, the company has been able to demonstrate the strength of its business dynamics.
For the quarter, revenue grew by 2%, EBITDA grew by 28%, and PAT grew by 54% on year-over-year basis. For first half financial year 2023, the revenue was INR 3,824 crore as compared to INR 3,399 crore, a growth of 13% on year-over-year basis. EBITDA stood at INR 202 crore, and PAT at INR 90 crore, as against INR 82 crore. EBITDA grew by 3% and PAT grew by 11% year over year respectively.
In lighting and consumer durable, Q2 FY 2023 revenue stood at INR 383 crore, a growth of 12% year-to-year. The growth was mainly on account of a higher share of value-added LED lighting products, professional lighting and consumer durables. EBITDA and PBT grew 12% and 17% year-to-year to INR 31 crore and INR 23 crore for Q2 FY 2023. Coming to H1 FY 2023 performance, revenue came in at INR 718 crore, a growth of 29% year-to-year. Similarly, EBITDA and PBT stood at INR 53 crore and INR 37 crore, a growth of 20% and 34% respectively.
In steel pipes and strips, the company's Q2 financial year 23 revenue remained largely flat-ish to INR 1,601 crore, mainly due to the reasons discussed by our respected MD, sir earlier. However, during the same time, EBITDA and PBT grew 34% and 70% respectively to INR 100 crore and INR 68 crore respectively, owing to a higher share of value-added products such as API coated pipes.
Now coming to the return ratios. ROCE has been improved by 530 basis points to 19.6% for the second quarter of financial year 2023 from 14.3% in the second quarter of financial year 2022. While return on equity has improved by 445 basis points to 17.1% in the second quarter of financial year 2023 from 12.6% in the second quarter of financial year 2022. ROCE has remained largely stable at 13.8% for the first half of financial year 2023 compared to 13.7% in the first half of financial year 2022. Return on equity stood at 11.9% in the first half of financial year 2023 compared to 11.7% in the first half of financial year 2022. Now with this, I conclude the presentation and open the floor for further discussion.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Participants who wish to ask a question may kindly press star one on your touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and 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. Please press star one to ask a question. The first question is from the line of Bhavesh Chauhan from IDBI Capital. Kindly proceed.
Sir, congratulations on great set of numbers. My question is on steel pipes EBITDA per ton, which was very good at INR 5,200. We have a very strong order backlog of API. What is the sustainable range in the, let's say, next one year or so or maybe two years?
Hi, Bhavesh bhai, Raju Bista.
Hi.
[Foreign Language]
[Foreign Language] I hope I am clear.
Yeah, yeah sir. Thanks for the detailed answer. Sir, secondly [Foreign Language] cash flow generate [Foreign Language] specially from steel pipes [Foreign Language] ? What could be our CapEx plans or capital allocation next 2 years?
[Foreign Language] cash generate [Foreign Language] obviously [Foreign Language] growth [Foreign Language] CapEx [Foreign Language] investment [Foreign Language] Growth [Foreign Language] working capital [Foreign Language] involved [Foreign Language] shareholder [Foreign Language]
Okay, sir, one last thing, sir. Obviously, lot of news comes out of Surya Roshni regarding demerger. What are the promoters views regarding that? Should it's long time to go still?
[Foreign Language]
Okay, thank you, sir. That is it from my side and hope you conduct the calls every quarter again.
[Foreign Language]
Thank you, sir. Appreciate it.
Thank you.
Participants, if you wish to ask a question, kindly press star one. The next question is from the line of Surya Narayan Nayak from Sunidhi Securities. Kindly proceed.
Yeah, sir, am I audible?
Yes, yes go ahead.
Okay, sir, just to understand, you know, what kind of price hikes you have taken this quarter in consumer durables, especially consumer durables and lighting, if you can give?
[Foreign Language] detail [Foreign Language] explain [Foreign Language] lighting consumer durable [Foreign Language] value addition 55-60% [Foreign Language] That is one.
[Foreign Language]
Okay, regarding the steel business, are we seeing any kind of cost pressure mounting due to the rise in the coal prices and coal prices especially staying at a higher level? What is the scenario from the input side in the steel business?
[Foreign Language]
What is the HR coil has reduced from the peak level because you know you have seen that we are getting the news that the HR coil prices have fallen by 40% in the past six months. What is in your case?
It is true. The HR coil basically everybody is using the same HR coil and we are not different on that. It was INR 75,000 a ton. In which month, Tarun ji?
It was April starting.
April [Foreign Language] almost ₹75,000 [Foreign Language] ₹55,000 [Foreign Language] ₹50,000 [Foreign Language]
Okay, if government will allow the export to happen maybe in the second half because government has choked the export for to increase the supply at the domestic market to curb the inflation and it also buys steel. If that happens in HR coil, do you think HR coil stabilizing here or falling further to aid our margin?
[Foreign Language]
In the second half process steel HR coils this is the last question if the coils will be stabilizing here or may be falling a little bit or let's say hardening here then can we see a stable EBITDA in the second half as well. I mean similar to H1.
[Foreign Language]
Revenue volume, sir, volume [Foreign Language] growth [Foreign Language] volume [Foreign Language] ?
Volume [Foreign Language] volume [Foreign Language] pressure [Foreign Language] India [Foreign Language] HR coil ₹75 [Foreign Language] project even distribution segment [Foreign Language] through [Foreign Language] material [Foreign Language] pressure [Foreign Language] volume growth [Foreign Language] double digit [Foreign Language] 10% [Foreign Language] volume growth steel division [Foreign Language] maintain [Foreign Language]
Okay, thank you sir. I will come later. Thank you.
Thank you.
Thank you. The next question is from the line of Manish Bhandari from Vallum Capital. Kindly proceed sir.
Hi, good evening, Mr. Bista.
Yeah.
Hi, sir, my question is regarding the PLI scheme. [Foreign Language] IRR work [Foreign Language] PLI scheme [Foreign Language] return on capital employed [Foreign Language] benefit [Foreign Language] backward integration [Foreign Language] overall profitability [Foreign Language] improvement [Foreign Language] ?
[Foreign Language] PLI scheme ₹25 [Foreign Language] as per the schedule [Foreign Language] investment [Foreign Language] ₹4 [Foreign Language] return [Foreign Language] calculate [Foreign Language] investment [Foreign Language] payback [Foreign Language]
Okay, my second question is regarding the change in the management. [Foreign Language] responsibilities [Foreign Language] change [Foreign Language] Mr. Vinay Surya [Foreign Language]
Mr. Vinay Surya [Foreign Language][Foreign Language] is from promoter family and [Foreign Language] lighting [Foreign Language] extra time [Foreign Language] steel [Foreign Language] extra time [Foreign Language] areas [Foreign Language] define [Foreign Language] controls [Foreign Language] steel division [Foreign Language] overall [Foreign Language] company [Foreign Language] efficiency improve [Foreign Language]
Sir [Foreign Language] CapEx [Foreign Language] company [Foreign Language] net debt [Foreign Language] CapEx [Foreign Language] cash flow from operation [Foreign Language] CapEx [Foreign Language] debt [Foreign Language] west [Foreign Language] east [Foreign Language] side [Foreign Language] CapEx announce [Foreign Language] steel [Foreign Language]
[Foreign Language]
Sir, the last question [Foreign Language] steel [Foreign Language] lighting division [Foreign Language] volume growth assume [Foreign Language] .
[Foreign Language]
Thank you.
[Foreign Language]
Thank you. Thanks a lot.
Thank you. Participants, if you wish to ask a question, kindly press star one. The next question is from the line of Pranav Jain from HDFC Securities. Kindly proceed.
Good evening sir. Thank you for the opportunity. Sir, I wanted to know like what is our total capacity in the lighting and consumer durable segment and what are the current utilization levels in that?
Overall lighting division [Foreign Language] capacity utilization, basically [Foreign Language] lighting [Foreign Language] consumer durable [Foreign Language] The first part is lighting division [Foreign Language] lighting [Foreign Language] One is the conventional lighting [Foreign Language] bulb tube [Foreign Language] utilization [Foreign Language] 20% [Foreign Language] convert [Foreign Language] bulb [Foreign Language] part [Foreign Language] conventional lighting [Foreign Language] India [Foreign Language] bulb [Foreign Language] rural market [Foreign Language] conventional [Foreign Language] As far as LED which is a growth segment is concerned, [Foreign Language] capacity utilization [Foreign Language] 65 to 70% [Foreign Language] scope [Foreign Language] In fact, [Foreign Language] PLI [Foreign Language] balance ₹15 [Foreign Language] investment [Foreign Language] ₹10 [Foreign Language] ₹25 [Foreign Language] investment lighting [Foreign Language]
Okay sir, [Foreign Language] hedging policy [Foreign Language] exports [Foreign Language] what is our hedging policy? [Foreign Language] hedge [Foreign Language]
Import [Foreign Language] component [Foreign Language] steel [Foreign Language] import [Foreign Language] hedging [Foreign Language] business [Foreign Language] simple [Foreign Language] import book [Foreign Language] same day [Foreign Language] hedge [Foreign Language] export [Foreign Language] 25 [Foreign Language] 30 million [Foreign Language] at any time order book in hand [Foreign Language] 75-80% [Foreign Language] ग hedge [Foreign Language] premium [Foreign Language] dollar [Foreign Language] hedging [Foreign Language] in terms of [Foreign Language] premium [Foreign Language] Otherwise [Foreign Language] focus [Foreign Language] dollar [Foreign Language]
Okay, sir. Lastly, [Foreign Language] B2B and B2C [Foreign Language] sales [Foreign Language] out of this [Foreign Language] steel business [Foreign Language] proportion B2B [Foreign Language] B2C [Foreign Language] ?
[Foreign Language] steel division [Foreign Language] trade segment [Foreign Language] export segment [Foreign Language] , which is also equally good. [Foreign Language] segment [Foreign Language] oil and gas, [Foreign Language] B2B [Foreign Language] B2G [Foreign Language] 30% [Foreign Language] consumer segment [Foreign Language] , B2C [Foreign Language] distribution [Foreign Language] through material [Foreign Language] stock [Foreign Language] 30% [Foreign Language] B2B [Foreign Language] API [Foreign Language] include [Foreign Language] 15% [Foreign Language] 15% [Foreign Language] cold rolling [Foreign Language]
Okay, okay sir thank you so much for the detail.
Thank you. Participants are requested to kindly restrict your questions to two per participant. The next question is from the line of Anurag Patil from Roha Asset Managers. Kindly proceed.
Thank you for the opportunity. Sir, in lighting segment earlier we used to talk about 20%-25% kind of a growth. Now we are turning it down to 17%-18% and then 15%-16%. What has changed? Can you just explain?
[Foreign Language] 25% [Foreign Language] commit [Foreign Language] 25% trade में growth [Foreign Language] already [Foreign Language] That may be the [Foreign Language] reason.
Overall [Foreign Language] industry 12, 13, 14% [Foreign Language] growth [Foreign Language] 19, 20, 18% [Foreign Language] growth [Foreign Language] obviously [Foreign Language] numbers [Foreign language] growth [Foreign Language] 15-16% [Foreign Language] 40% [Foreign Language] 25% [Foreign Language]
Okay sir and sir earlier we were planning to roll out a major ad campaign with Ogilvy. What is the status on that?
[Foreign language]
Okay sir that's it from my side. Thank you very much.
Thank you.
The next question is from the line of Aman Soni from Prudent Equity. Kindly proceed.
Hello. Yeah. I just have, you know, one question. I just wanted to know what is the, you know, opportunity that we are looking at, you know, in the export market currently. I believe our, you know, export share is, you know, quite low. Specifically, I just, you know, wanted to know the basic, you know, demand scenario. What is, you know, looking like specifically for the, you know, API coated pipes.
[Foreign Language]
Okay. Thank you.
Thank you. The next question is from the line of Rohit Suresh from Samatva Investments. Kindly proceed.
Good evening sir. [Foreign Language] steel division [ Foreign Language]
[Foreign Language]
[Foreign Language] Thank you, sir. Sir, second question [Foreign Language]
Mainly hi, this is Tarun Baldwa here. Mainly the value added products you can consider as far as our product mix is concerned. Number one is the API steel which is a purely a high end value added product. Another is the GI pipe which are the high value added product and the third one is the large dia section pipes of DFT which we have recently installed the complete.
All coated pipes.
All coated pipes. These are the mainly value added products. General products you can consider the hollow section pipes, round pipe, black round pipe and the CR pipe. This is the distribution out of the total product mix. [Foreign Language]
Thank you sir. Sir [Foreign Language] Steel division B2C and B2B , once repeat please? miss [Foreign Language]
[Foreign Language] segment 60% B2C 40% B2B and B2G
[Foreign Language] , sir. Thank you so much and all the best, sir. Thank you.
Thank you so much.
Thank you. Participants, if you wish to ask a question, kindly press star one. The next question is from the line of Hiten Boricha from Joindre Capital.
Hello [Foreign Language] questions answer [Foreign Language] clarification question sir You told कि we are expecting volume growth of 10% or revenue growth of 10% in FY23.
[Foreign Languge] 9%-10% will be a volume growth.
That will be in FY23, right?
Ji? FY23, yeah.
[Foreign Language] time। Okay. Sir [Foreign Language] absolute term volume provide [Forign Language] million tons [Foreign Language] ?
Q1 [Foreign Language] Q2 breakup [Foreign Language] Q1 [Foreign Language] breakup 1 [foreign Language] 69 [Foreign Language] 1 Foreign Language] 70 [Foreign Language] is the Q1 and the Q2 is the 2 [Foreign Language] 4 [Foreign Language] So this is the total.
[Foreign Language]
[Foreign Language] volume. [Foreign Language] delivery period We will prepone the delivery then we can accelerate the volume in this six months itself.
[Foreign Language] second half right?
[Foreign Language]
[Foreign Language] Sir, [Foreign Language] second half EBITDA per ton INR 5,200 [Foreign Language] quarter . Is it, is my assumption correct next year INR 5,500 [Foreign Language] FY24 में considering the input prices come down?
5,000 [Foreign Language]
Correct, correct, sir. Sir, last question है raw material HR coil related. currently like [Foreign Language] inventory [Foreign Language] considering prices are very volatile suppose it goes up so.
Depend [Foreign Language] 35 to 40 days [Foreign Language Price downturn [Foreign Language] 25 [Foreign Language] Average 30 to 35 days inventory [Foreign Language]
Currently [Foreign Language] right?
95% domestic source [Foreign Language] 5% [foreign Language] import just to check balance [Foreign Language]
Okay sir, okay. Thank you so much sir. Thank you for answering my question.
[Foreign Language] options available We are importing. We are exporting. We have the license also to import the raw material without paying any duty. options [Foreign Language] working capital में number of days involvement [Foreign Language] high quality product [foreign Language]
Okay. Thank you so much.
Thank you.
[Foreign Language]
Yes sir. The next question is from the line of Saket Kapoor from Kapoor & Company. Kindly proceed.
[Foreign Language] nameplate capacity [Foreign Language]?
[Foreign Language]
Include [Foreign Language] on a thousand [Foreign Language] order book[Foreign Language] parameters correct.
Yes. Ismein kya hai jo 13 lakh tons ki jo capacity hai wo all input capacity jo production ki wo use hoti hai to 12.76 plus new 1. Usmein kya hota hai ki almost slight change yeh woh saara this is a rated capacity. We have already achieved. It is a rated capacity. To rated or actual there is always almost 90% utilization then you are achieving the full capacity utilization in that.
Correct. [Foreign Language] order book sir [Foreign Language] volume [Foreign Language] sir [Foreign Language] thousand [foreign Languge] order book
INR 1,000 crore ki order book mein normally hum order book to aur bhi hai. Hum log order book keval export and API ki hum aap logon ko batate hain. To API ke andar mein almost 50,000 tons ki order book hai hamare paas mein aur export ke under mein almost 32,000 tons ki order book hai. To it is all 82,000 tons ki order book ka jo hum figure bataye hain wahi hai. Haan, 60% jo trade aur cold rolling hai usko hum ismein include nahi karte.
Sir, [Foreign Language]
[Foreign Language]
For the full year.
Yes, yes, full year.
Sir, [Foreign Language] freight aspect [Foreign Language] freight [Foreign Language] costly [Foreigh Language] because of higher fuel prices. Sir [Foreign Language] export segment [Foreign Language] ocean freight [Foreign Language] correct [Foreign Language] over the last one month[Foreign Languge] $1,000 $250 $300 [Foreign Language] container [Foreign Language] impact export segment [Foreign Language] sir major benefit।
[foreign Language]
[Foreign Language] sir। Lastly sir PVC pipe segment [foreign Language] sir, [Foreign Language] volume increase 10,000 ton [Foreign Language] presentation [Foreign Language] segment sir [Foreign Languge]
[Foreign Language]
[Foreign Language] 41% [Foreign Language]
I fully agree and appreciate your concern. [Foreign Language] Overall Russia-Ukraine [Foreign Language] Europe [Foreign Language] UK [Foreign Language] country में, America double digit [Foreign Language]
Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to Mr. Bharat Bhushan Singhal, CFO, for closing comments.
Thanks to all, Mr. Jigar and Mr. Chindawar, and we are closing.
Yes sir we are closing. Thank you very much. Thank you everybody.
Thank you. On behalf of Surya Roshni Limited. That concludes this conference. Thank you for joining us. You may now disconnect your lines.