Please note that this conference is being recorded. 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 do not guarantee the future performance of the company, and it may involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Pallav Agarwal from Antique Stock Broking Limited. Thank you and over to you, sir.
Yeah. Thank you, Viren, and good afternoon, everyone. A warm welcome to the third quarter results call of Venus Pipes and Tubes Limited. We have the senior management of the company represented by Mr. Arun Kothari, the Managing Director, Mr. Dhruv Patel, the Whole Time Director, and Mr. Kunal Bubna, the Chief Financial Officer of the company. I will now hand over the call to Mr. Arun Kothari for his opening comments. Over to you, sir.
Thanks, Pallav. Good afternoon and welcome to everyone on the Q3 and nine months fiscal year 2024 earning call for Venus Pipes and Tubes Limited. I have been joined by Mr. Dhruv Patel, our Whole Time Director, Mr. Kunal Bubna, Chief Financial Officer, and SGA, our Investor Relations Advisor. We have uploaded our Q3 and nine-month fiscal year 2024 investor presentation on the stock exchange and company's website, and I hope you had an opportunity to go through the same.
Today, I am proud to announce our company's robust quarter and nine-month performance for fiscal year 2024. Revenues for Q3 fiscal year 2024 stood at record high of INR 207.1 crore, witnessing a growth of 52.2% with EBITDA margin standing at 18.9% for the quarter as compared to 12.9% in Q3 fiscal year 2023. PAT for the quarter stood at INR 23.3 crore, witnessing a growth of 106% on year-on-year basis.
On nine monthly basis, revenue stood at INR 578.1 crore, surpassing our fiscal year 2023 revenues by 5%. Similarly, margin stood at 17.5% compared to 12.6% for the same period last year. The robust performance is on the back of multiple factors. Firstly, revenue contribution from high margin seamless pipe increased to 56% of our total revenues for the quarter from 45% for the same period last year. On the back of our backward integration, providing us an edge over our competitors and additionally, anti-dumping duty on seamless pipe and mother hollow pipes, adding in a heightened demand from organized players with high-quality products offering. Secondly, export contribution increased to 17% of revenue from INR 1.4 crore in Q3 fiscal year 2023- INR 35.2 crore in Q3 fiscal year 2024. This comes as a result of multiple things.
Despite our relatively short operating history in the overseas market, the company has successfully forged a solid reputation, establishing itself as a trusted player in the export market. backward integration of the seamless pipe has allowed us to make inroads with full potential in European market. We are also in constant talk to increase our presence across U.S., Africa, and Middle East, and we are confident to increase our exports, faster, and diversify to newer geographies. We have also appointed senior marketing representatives for these regions. Our goal is to replicate the success we have seen in Europe and extend our brand presence in USA, Africa, and Middle East. This performance is a mark of our unwavering commitment to innovation, quality, and customer satisfaction, along with integration of technologies.
Domestically also, there has been a notable upswing in demand, resulting in increased inquiries and new order wins, resulting in increasing market share for the company. This strength underscores the sustained confidence customers place in our offering. Collectively, these factors signify a robust phase of growth and increasing opportunities within the domestic market. With the wide array of opportunity present in front of us, we plan to maximize on the same by increasing our geographical presence by building network and relationships and provide quality products to our clients in the domestic market as well. Expansion of market share by increasing our product SKUs and further diversifying across sectors such as oil and gas, pharma, food processing, power, effluent lines, and railway. Actively assessing the demand outlook and scaling up capacities as needed with a focus on achieving economies of scaling.
Prioritizing digitalization and technology integration, recognizing their pivotal role in fostering growth and enhancing operational efficiency within the company. Committing to sustainable practice, we will be installing a 1.3 MW solar power system at our plant to reduce our environmental footprint. To give you a few updates for the quarter. On the seamless front, following the successful completion of our capacity expansion in May 2023, I am delighted to announce that we have rapidly ramped up the operation and currently operating at an 80% capacity utilization. This achievement stands as a testament to the efficiency and effectiveness of our execution capabilities and quality of our product.
Further anticipating high demand for seamless pipe, we had announced capacity expansion of 4,000 metric tons per month, out of which 2,000 metric tons per month of seamless pipe commenced operation Q3 fiscal year 2024, and remaining 2,000 metric tons per month of capacity is set to commence in the Q4 fiscal year 2024. With this, our total seamless pipe capacity will reach to 40,400 metric tons per annum by Q4 fiscal year 2024. Lastly, I am happy to announce that we have received approval from leading oil and gas players in India and Middle East. This achievement is a result of our advanced capabilities in manufacturing higher diameter welded pipes. Being one of the select few in the industry with such capacity, we are confident in anticipating a significant uptick in demand and subsequent order inflow for welded pipes in the coming period.
These approvals are a testament to our quality offering and will help us increase our geographical and sector outreach. Looking ahead, there is a robust sustained demand expected for stainless steel pipes and tubes across various end-user industries. As industries undergo expansion and modernization, the need for durable and high-performance materials become paramount, further driving the demand for stainless steel. The path of growth for Venus Pipes and Tubes is robust, and we actively aspire to broaden our influence across various sectors.
Our commitment to a prosperous future is characterized by the continuous expansion of our portfolio in terms of products, clients, and geographical presence. This strategic approach is designed to fortifiscal year our foothold in every industry we serve, driven by the potent combination of enthusiasm and determination. We are committed to building a robust, diversified foundation that propels us towards sustainable excellence. I will hand over the call to Mr. Kunal Bubna to take you through the operational and financial highlights for the quarter.
Good afternoon, everyone, and a very warm welcome to our earnings conference call. We take absolute pride in announcing that your company has reported highest ever quarterly revenue, EBITDA and PAT for Q3 fiscal year 2024. On the revenue front, revenue from operation for Q3 fiscal year 2024 stood at INR 207.1 crore as compared to INR 136.1 crore in Q3 fiscal year 2023, a growth of 52% year-on-year basis.
Revenue for operations for nine months fiscal year 2024 stood at INR 578.1 crore as compared to INR 376.1 crore during nine months fiscal year 2023, achieving a growth of 54% year-on-year basis. Our revenue has grown by 52% and 54% for Q3 and for nine months respectively, despite softening of iron prices compared to previous period. If we compare on volume front, volume growth on welded pipe was more than 50%. For seamless, volume growth stood at more than 100% year-on-year basis.
Revenue bifurcation for the quarter was 41% from welded, 56% from seamless pipes, and 3% from other sales. Growth in the seamless segment was around 89% year-on-year basis. Welded segment registered a growth of 39% for Q3 fiscal year 2024 year-on-year basis in terms of revenue. Our export sales stood at INR 35.2 crore for the quarter compared to INR 1.4 crore during the same period last year. On the gross profit side, gross profit for Q3 fiscal year 2024 stood at INR 60.6 crore as compared to INR 26.9 crore in Q3 fiscal year 2023, a growth of 125.5% year-on-year basis. On the EBITDA front, EBITDA for the quarter stood at INR 39.1 crore as compared to INR 17.5 crore for the same period last year, registering a stellar growth of 123% with EBITDA margin at 18.9%.
EBITDA for nine months fiscal year 2024 is INR 101.2 crore as compared to INR 47.5 crore nine months fiscal year 2023, a year-over-year growth of 113%. PAT for nine months fiscal year 2024 is INR 60.9 crore versus INR 30.8 crore in nine months fiscal year 2023, a growth of 98% on year-over-year basis. The margin for the nine months fiscal year 2024 stood at 10.5% compared to 8.2% nine month fiscal year 2023. PAT for the quarter stand at INR 23.3 crore as compared to INR 11.3 crore in the same period last year and INR 20.3 crore in Q2 fiscal year 2024, a growth of 106.6% year-over-year and 14.8% quarter-over-quarter basis. This strong performance adds another layers to our competitive advantage. With solid financial capability, we are well equipped to weather challenges, invest in growth initiatives, and strategically position itself for market leadership.
With this, I would like to open the floor for question-and-answer round.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets when 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 Dhruv Jain from Ambit Capital. Please go ahead.
Thank you for the opportunity and congratulations team for a good set of numbers. I have two questions. One was around the margin. We've obviously seen a very good performance on the margin side. Say, when do we start seeing sort of a peaking, right? Do you think that there is more scope for margin expansion from these levels onwards, or do you think that it will remain in the same range? That was my first question. Thanks.
We mainly do product welded and seamless. On the side of seamless, we have been achieving the required margin, what we were targeting for this financial year for this quarter. I believe, definitely it should be in this range bound. The intent is definitely to pick from here also, because if you see for seamless it was around 20%-25% of export in this quarter stand-alone basis. On the side of seamless, the income margin what we are earning is slightly 3%-5% higher as compared to the domestic direct sale earning. I believe that is driving those margins. For that, the intention is to keep this margin intact and increase a bit.
On the side of welded, I think as more and more higher sizes come into play going onward, we can also have the capacity getting more utilized in the process, a bit of increase on margin side would be there on the side of welded.
Okay. Sir, with respect to the exports, obviously now we've come to a substantial level in terms of revenue contribution. Still, I think on the stockiest side, there is a 27% contribution still there. When do you start seeing that the stockiest contribution starts to reduce substantially from the? Say, I'm just trying to guess that in two years, how will your mix of volumes start to look like?
Yeah. If you see from fiscal year 2023 or earlier year, the percentage of stockage had been definitely decreasing. I believe the intent is to keep it around 20% going forward. I think in the coming financial year, we would be able to see those refined numbers from the share of stockage integrated.
Okay. Sir, if you could just spell out the utilization number for this quarter. Thanks.
It was basically on the side of seamless it was around 85% you can say. On the side of welded, all the capacity taken together, it was in the range of 55%, 57%, 60% in the midst of that.
Okay. Thank you so much. All the best ahead.
Thank you. The next question is from the line of Sneha Talreja from Nuvama Wealth Management. Please go ahead.
Good afternoon, sir. Congratulations on an impressive set of numbers. My question is more pertaining on the exports front. Given the ongoing Red Sea impact, are you seeing anything with respect to your exports? Are you materially facing any issues with respect to your supply, or is it still on the healthy curve?
Yes. Basically, those happened in the fag end of December only. We were not much affected in the last quarter because of that. Again, also there is an effect on the price of bit of freight cost because there are mixed type of order. We have air, sea and road type of order. I think the volume and other, I believe it will be intact what we are targeting for this quarter also. Bit of price effects are there on the side of freight, but that is also very marginal.
Understood. Given the strong trajectory that you're seeing, strong demand, you have also highlighted certain customer approvals that you've been getting, what's the target on the export front? Like, what could be your export shares in the next two years?
It is at least we're targeting it should be at least 20% of our total revenue. Whatever beyond that we achieve is obviously our intent to achieve more than that.
Understood. Any significant margin difference that you're enjoying today in exports versus domestic market?
Yeah. Now we have been seeing, keeping our presence, getting more in export side, we are able to get a margin of 3%-5% higher as compared to what we see in domestic side.
Understood. Thanks a lot and all the very best. I'll get back in the queue.
Thank you. The next question is from the line of Kunal Kothari from Centrum Broking. Please go ahead.
Yeah, thank you for the opportunity and congratulations for great set of numbers. My first question is on the overall market outlook. How you see the realization of sales in quarter three on a sequential basis as well as on a year-on-year basis? What is the outlook for the next quarter as well?
Yeah. Basically, if you see on the pricing side, on the side of welded, there has been a decrease on the price by around, you can say, 12%-15%. On the side of seamless there has not been much decrease, but it was around 3%-5%. If you compare quarter-on-quarter basis, it was marginally same, not much effect was there on quarter-on-quarter basis. If I compare this nine months with last fiscal year 2023, 3%-5% in case of seamless and around 12%-15% on the side of welded, there has been a decrease. I believe this should be maintained going forward also. Keeping the current scenario, it looks it should be pan out in this fashion only.
Does the price decline is related to any demand pressure, or what reasons do you see that there has been sharp decline in price?
Kunal, we can say almost it's the international market only. The price of the other raw material has also decreased. Therefore, price is decreased in the market, there is a slow in demand in the chemical sector only mainly. In other sector, because since Venus now has capability to manufacture all type of products. We got the new approval also. This year we have increased our market share in other than chemical also. Till last year, our more focus was in the chemical sector, this year we have started to develop the new sector.
Okay. What will be the current order book in hand and bifurcation towards the exports order book as well?
Hello.
Yeah.
Kunal, hello. We have an order book of INR 230 crore and the export is around 20% of that.
Okay. Sir, lastly, want to understand similarly on our overall revenue share towards stockists and traders. If I compare on a year-on-year basis, we have increased from nearly INR 40 crore- INR 56 crore. That is a tremendous growth that we are seeing over there. I, of course, believe that compared to direct sales and exports, the margins will be quite lower to them. Despite the growth towards the stockists and traders has been quite healthy. What is the reason that we are not able to reduce our dependence on stockists and move towards the direct sales?
Kunal, we are developing the Almost we have done the capacity expansion of the 3x of the earlier capacity, or we have increased the sizes and expertise in all variety in the stainless steel pipe segment. We are pursuing with the customers because for the almost new sizes and to target the new customers, we require them because our product is used in the critical operation, we require the approvals from the clients also. We are pursuing our marketing team and our technical team is pursuing with all the companies to get the approval. Overall basis in the volume terms, we are increasing our share, increased share for the direct end user, but in the percentage term, we are almost equal level since our capacity has been increased substantially. We can see in the next coming two quarters, it will also go down.
Okay. Is it safe to say that incremental volume growth that we will be having will be towards-
Yes
the direct sales and exports-driven only?
Yes, Kunal.
Okay. What will be the margin difference? Can you also state that?
When we sell to stockists and traders, the margins are slightly low by 2%-4%, you can say. There are few orders also where you are also getting good rates also as compared to what you earn in direct sales. We are able to cherry-pick the orders with traders, stockists and also on direct clients base. That way we counter those effects.
Okay, sir. Thank you so much. That's it from us.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Shobhit Singhal from Anand Rathi Share and Stock Brokers . Please go ahead.
Thank you, and congratulations on the good set of numbers. I have a couple of questions. One with respect to the welded pipes. We are seeing a very strong growth in the seamless pipes. Welded pipes, if I see last five quarters, average growth was just around 6%. When do we expect it to ramp up to around 80%-85% utilization levels?
Yeah, basically, see, we have been receiving approvals, as we said, from some of the leading oil and gas company, also from few of the overseas clients. That utilization level will definitely increase with each quarter to come. I believe next quarter would be incremental from what we have achieved for this quarter of roughly 55%-57%, and there will be increment in the next quarter, and I believe from the next financial year, those higher percentages should come into play. Each quarter would be having incremental utilization on the side of welded.
Sir now our 400 metric tons per annum seamless capacity will be fully operational by Q4. What will be the incremental CapEx that we would be incurring, and can you give any color on the new plant addition that we have seen in this quarter?
Sir, there as we see, mentioning a specific name slightly competitive, oil and gas we have added, we have added in pharmaceutical, we have added in chemical, we have added in engineering, we have added in paint. There are mix bag of sectors wherein the plant addition has been done. I think see, post this completion of all this CapEx in this end of this fiscal year 2024, from the next year, I believe there would be CapEx which will drive us a higher double-digit growth on the side of capacity. That should be in the range bound of, you can say around INR 40 crore-INR 50 crore each year for the coming year, basically.
Okay. Last question, sir. If you can give the sector-wise breakout. Just wanted to understand how a percentage sales in the oil and gas or the other premium product category industry has increased year-over-year basis or if we are still in the same kind of tonnage basis on those industries.
Chemical and engineering are definitely the predominant sector wherein we catered, the sector which has increased their contribution is basically paint, you can say, pharmaceutical, power industry, a bit of oil and gas. These are the few sectors, and railway a bit. These are the few sectors which has added as compared to the earlier sector which were there.
Okay. Thank you, sir.
Thank you. The next question is from the line of Vikas Singh from PhillipCapital. Please go ahead.
Good afternoon, sir, and congratulations on a very good set of numbers. Sir, I just wanted to understand, once all of your expansion plan is completed and properly ramped up, what kind of margins you are targeting?
As we said, for the seamless side, it is basically we were running around INR 60- INR 63 per kg in the fiscal year 2023 target. That is the intent. It will be more than 50% incremental
On the side of seamless and on the side of welded, which was INR 37, INR 38, we target around 15%, 17% incremental on the side of welded. That is the margin target for the going year for welded and seamless.
Understood, sir. Sir, also I wanted to understand our capital allocation policy because this year we are almost completely completed with one of these sharpest CapEx plans. Next year, as of now, we have just a small plan for the LSAW mill. How are we going to utilize the cash? Next year, our cash flow generation would also be incrementally better.
Yeah, see, basically, there are two things in it. One would be the CapEx requirement, what I've said, in the range of INR 40 crore-INR 50 crore. Second would be increased turnover will lead to increased deployment of working capital. What we see, there would be healthy cash flow, I believe both are in second together, the working capital and the increased CapEx can easily be made from this internal source accruals what being generated. The intent is to keep those accruals towards this working capital and CapEx requirement to be met.
Understood. Sir, just one last question in terms of the capability side. With these facilities coming in, have we covered almost all of the seamless steel capabilities or there are certain areas where we can work on and can further announce some CapEx? Basically, we are still importing certain premium goods from the foreign market. Any idea whether you want to go on that side or by when we expect us to announce CapEx on those sides?
Basically, the intent are very clear to be making CapEx towards high-margin products going forward. There are a few sectors wherein there are specific grades of pipe required. There are some special grade of pipe also being manufactured, what we currently don't do, both on the side of welded and seamless. The intent is to those announcements, to make those announcements going forward, wherein we can serve to specific sectors wherein those demands are there, where higher margins are there, also to manufacture specific grades of pipes which we don't manufacture or which we import. Definitely those intents are there, and going forward, the expansion would be more slanted towards higher margin products.
Nothing finalized as of yet, right?
Yeah, definitely. But it won't be right to announce it currently. We are working on that.
Okay. Sir, lastly, what is our make to order percentage in overall sales?
It will be around 80%. More than 80%.
Okay. More than 80% is made to order, basically.
Yes.
Thank you, sir.
Thank you.
That's all from my side.
The next question is from the line of Sahil Rohit Sanghvi from Monarch Networth Capital. Please go ahead.
Yeah. Hi, am I audible?
Yes, you are audible.
First of all, congratulations for delivering what you have guided and very good margin performance also. My first question was, when you say 80% utilization in seamless, would that be on the 12,000 tons capacity or would that be on 14,400 tons?
It would be on 12,000 tons. For next year?
No. Current utilization for seamless.
Yeah. It would be on the capacity as and when those are coming. On that basis, I am telling it is around 82%-85%.
Okay. We have commissioned that 200 tons per month.
Yeah, it includes that 200 tons also which had come lately in the quarter. It includes that also.
80% on that, right? That is included. Okay. My second question is, how do you expect the working capital, maybe the cash conversion cycle or working capital requirements to move forward? What happens is that our cash flow from operations still appear quite weak. I understand most of it is utilized in working capital. Now, since last two years, we had quite a steep ramp-up in our volumes also. Next year, do you see some easing in the requirement of working capital? Can we expect some higher cash flow from operations, and how do you expect that to.
I think definitely, you are right to say next year there would be good amount of cash generation from the operation. See, there won't be much CapEx and definitely last two, three years there was CapEx, there was increased all sides. I believe, coming fiscal year 2025 and I think even if you see fiscal year 2026, there would be a healthy cash flow generation from the operation. Which will be marginally used towards this capacity expansion, but which is not very high number, nor into three-digit numbers. Apart from that, the balance leftover can easily be used for this working capital requirement for the business. I don't think there would be much issue in utilizing this and there will be not much challenge on the side of cash flow also going forward with this healthy profit coming into the business.
Right. Would you be able to tell us the debt number as of December?
Roughly in the range of INR 155 crore.
Okay. Thank you. Congratulations and all the best.
Thank you. The next question is from the line of Bhargav from Ambit Asset Management. Please go ahead.
Hi, good afternoon. Congrats on a good set of numbers. Sir, in the presentation it is mentioned that Europe is already seeing good business and our future growth on the exports will come from Middle East, Africa, and U.S. Given that you are focusing on these new markets, why are we guiding that exports will only remain about 20% of overall revenue and not increase?
See, definitely-
Yeah.
Definitely it will go more than that. For at least for the next two quarters, we are targeting our exports to be between the range of 20%. In the long run, it will stay for the four quarters to six quarters. Definitely it will go up because for the development of new market in the export requires the approval process of the plant as well as the client approval. That takes almost time to, we can say, five to six months. Right now for next two quarters, we are targeting almost 20%. Definitely in export side, you can see growth after the three quarters, four quarters, definitely you'll see more growth.
Sir, if we take a two to three-year view, is it fair to say that exports can reach closer to about 35%-40% or that is a far-fetched number?
Bhargav, we are targeting, right now we can't much say about that. Once our project will be approved in the coming quarters for the U.S. market and Middle East market, we can further say how much we can achieve, Bhargav.
These will be altogether new customers that we are targeting, or it could be the same company having a manufacturing operation in U.S. or Africa?
Almost new customers we are targeting. Almost mostly right now we are targeting our export in the territory of the Europe only or the Europe clients. It doesn't have that much presence in the Africa, Middle East, or we can say in U.S. All will be new customers.
Okay. Secondly, sir, you mentioned on the export side, you make higher margins. Is it because the factor mix in domestic is different from the factor mix in exports, or is it that the margins are only higher on the export side?
The margin is basically only higher when we sell in those territory where we are currently selling.
Okay. The mix is broadly similar, chemical, engineering, across exports.
In case of export, currently, we don't sell to end-to-end industry. We are selling to trader, distributors, or stockists of Europe.
Okay.
They in turn sell to the industries.
Okay. Lastly, sir you mentioned about INR 155 crore of debt on the balance sheet. Do we have any milestone by when we want to become debt-free, or it is too early given the high growth phase we are in?
The endeavor will always be to be a debt-free company. If you compare my debt with other issuers, not a very high debt or it's a nil debt you can say. The intent is always to get it, but it's a growing company. The volumes and value of sales both are increasing multifold. The requirement of working capital would be there in the business. The target will always be sooner become a debt-free company, but it will take some time, I believe.
This working capital side on the stockist, I presume would be higher as compared to on the direct business, right?
If you see a stockist and trader in India, that's not high basically because they in fact have lower tenure as compared to when you sell to end industries.
Okay. Should we work with 100 days- 120 days of working capital cycle as compared to about?
Yes. 100 days- 110 days. You're right.
Okay. All right, sir. Thank you very much, and all the very best.
Thank you.
Thank you.
The next question is from the line of Karan from Swan Capital. Please go ahead.
Thank you for this opportunity. I'd like to congratulate the management of the stellar numbers they've posted. My first question is, our company has aggressively been expanding its seamless facility over the last few quarters, and we've also spoken about how the anti-dumping duty on Chinese-made seamless pipes, introduction of BIS export incentives, which have been withdrawn by the Chinese government, has impacted the supply of seamless pipes in India. My question is, if anti-dumping duty or the BIS provisions were to be withdrawn and Chinese-made seamless pipes were to flood the market again, how would this affect our company?
Definitely the anti-dumping is there for five years, I don't see any reason for it getting withdrawn. The intent of our company is to be supplying to a variety of sectors. Right to supplying our good to pan-India and also supplying to the various parts of the world. That's why we have been successfully increasing our sector. We are successfully increasing our presence throughout India, and we have been successfully able to win on the part of the world front also. Also to keep on adding the right number of sizes, the right number of grades of pipe what we can cater. Also, as you can see in case of welded, we can manufacture up to 56-inch diameter which only few manufacturers in the country can do.
We are trying to make ourselves a company which can serve the majority of the requirements required for SS category of welded pipes and tubes and seamless pipes and tubes, that if any chance some type of government policy or something changes, we are very negligibly affected by this. We become a unique company which can be differentiated from any other company which are there operating in the country.
All right, sir. My second question is, you mentioned that Ratnamani and Jindal Saw are our competitors. Now we are in an industry where in stainless steel pipes, there's not much of product differentiation. What stops our customers to go to them?
Can you repeat? I'm unable to take it.
I'm sorry. I'll just repeat again. You mentioned earlier that there's Ratnamani, there's Jindal Saw who are our competitors, and we are in an industry when stainless steel pipes, there's not much of product differentiation. What stops our customers to not take from us and go to them?
See, everybody has their capacity constraints be it from the vendors or be one. There is a demand in the market from export, from internal, and there are a lot of smaller players also operating in the zone. You always have a leeway to capture those smaller players who are operating in the market. There are increased towards sectors. There are number of satellite railway, trench, and other sector which we were earlier not catering, now we are catering. See, the customer has to come to It can't be restricted to one or two because, see, if everybody comes to me, I would be having my delivery constraint or my capacity constraint. It will be mixed bag always, I feel. We won't be that much affected by two or three of the competitors.
All right, sir. Thank you so much, and all the very best.
Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Harsh Mulchandani from KRIIS PMS. Please go ahead.
Yes, sir. Thank you. First of all, congratulations on great set of numbers always. We've seen your performance is bang on. Wanted to understand a bit more on the export front. While it's good to have diversified geographies, why don't we double down in Europe and get a higher market share because you already have an entry over there? This is my first question. The second question is, what is the key breakthrough for us which we can look to achieve in markets like U.S., Middle East, and Africa? Like the backward integration was a key enabler for us in Europe. What would be the key enablers for these newer locations which we are targeting?
The intent on the side of export, you can't fix yourself to any specific sector or any specific geography. The better the price you get, the better you shift towards that. That is the intent, basically. Definitely, if the prices are, we keep on getting higher prices, you can see a higher volume growth on the side of Europe also as compared to what we have achieved in this quarter. The intent is to cherry-pick those orders where in the margins and profitability are coming on the higher side. Definitely Europe, the backward integration was a key to increase on the front of Europe. Other part of the country, be Middle East, be U.S. and Africa or other location what we target. It will be number of SKU what we can serve will definitely help us to penetrate that.
That will be the one of the factors. Supplying the quality product and having the requisite qualification to qualify for all those zones.
Got it. Makes sense. Just one follow-up question. Our market share would be negligible in Europe currently, right?
Right.
Got it. Okay, perfect. Thank you so much.
Yes, sir.
Thank you. The next question is from the line of Pallav Agarwal from Antique Stock Broking Limited. Please go ahead. Mr. Pallav Agarwal.
Yeah, hello. Sorry.
Yes.
I had a question on the other income. This quarter it was significantly higher than the previous quarter. Any particular reason for this, and is this sustainable for the quarters going ahead?
A slight bit of basically exchange gain and all. Negligible. Not much about.
Sure. Just a question on the competitive scenario because we've heard of Man Industries also probably entering into the stainless steel pipe segment. We've also seen Welspun Specialty also ramping up their production of both seamless tubes and bars, Ra. Recently there was news that Shyam Metalics was also acquired, Mittal Corporation. What's the broader view on the competitive landscape going ahead?
Right now, Pallav, we have heard about the Man Industries. Definitely Man Industries is expanding their capacity, but Man Industries will be expanding their capacity only in the seamless pipe segment. They are putting up the extrusion mill, which is a very high CapEx-intensive industry. In the seamless segment, definitely competition will be there. Due to anti-dumping, still there is a lot of, we can say, demand in the seamless front. There is a good demand in India or in the international also. The seamless pipe from India is well accepted almost in Europe market, in other market also. Almost all the stockists and other players prefer to buy from India, but due to lack of capacity, they are not able to buy from India. If any other player will come, the usage of the stainless steel also growing.
If any new industry will come in this line of SS pipe, again, the question of the approval will also arise. Because to set up the plant and after approval, there is a long journey. If any new player is coming, definitely they will take time. By the, we can say next two to three years, Venus will be in different position or will be an established player in the SS pipe industry, or we will able to get almost all the approvals in the coming years. Our focus is to develop the core or critical product. We want to go in the critical product where high margin is there. We are targeting next two, three years, we will develop the good product where we can get the consistent order, we can get the fixed buyers for the product.
Sure. Also if you would just throw some light on the U.S. duties. We are targeting the U.S. market and a couple of other players also are doing the same. High margin products in the U.S. What is the current level of anti-dumping duties and tariff barriers that are there in the U.S. right now?
Yeah. In U.S., there is two types of duty. In the welded front, there is some AD and CVD is almost 13%, which is applicable all the supplier from the internationally or especially there was some 25% special duty under Section 232 for all the imports coming from all over the world. In the welded. In the 25% duty of the Section 232, some of the traders get the benefit in the seamless front because there is not much capacity of the seamless pipe manufacturing in U.S. They are getting exemption for the supply from the India. Normally, they apply to the ministry in the U.S.A., they got the exclusion for the duty structure. In the seamless pipe, there is a good demand in the U.S. or same in welded front due to their local manufacture.
After paying duty from the Indian port, whatever we supply from India, our product completely is cheap compared to the U.S. producer.
Just on the nutshell basis, we see Section 232 tariff is there on majority of the country which export to U.S. There are specific AD and all, which are there significantly high on China. Also there are some Section 301 duty on China. Which makes Indian good quite competitive as compared to China in U.S. Hello. Hello? Yeah, hello.
Yes, sir. Sir, Pallav's line has got disconnected. I am recovering.
Yeah, I think so. No worry.
Yes.
Am I on the call?
Yes, yes.
Yeah. Okay. Thank you, Arun.
Yeah.
Thank you. The next question is from the line of Parth Mousa from Investec. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity, and congratulations on good set of numbers. Sir, I had two questions. One, you mentioned that on seamless and welded front, you are expecting approximately 60% incremental margin expansion from here on. Over what period can we achieve this?
See, for seamless, we have started achieving those margin. In case of welded, to a good extent, we are. I think from next quarter or first quarter of the fiscal year 2025, I think we'll be probably achieving that.
Okay. Seamless, you are already doing that.
Already doing that.
From Q1.
Yeah.
Okay. Sir, the other question, this mother hollow pipe backward integration that we have done. How much of seamless pipes can we manufacture on the back of that?
Currently, the capacity is there which can cater to a good extent to our current manufacturing. As we said, we will be starting 200 further metric ton by end of this financial year. There would be a bit of gap in that. If you see the anti-dumping, it is for up to 6 NPS size of pipe. Beyond that, there is no anti-dumping. The leftover portion will be imported by us, wherein the anti-dumpings are not there.
Okay. Perfect, sir. Those are my questions. Thank you.
Thank you. The next question is from the line of Nihar Shah from Crown Capital. Please go ahead.
Yeah. Good afternoon, sir. One small question on our guidance, which we had given earlier in quarter two call. It was 35%.
Right
In nine months we have seen around 54% growth. Are we looking at 55% mark for the entire year? Historically our quarter four is better.
Yeah. See, the guidance is I think year to that only as compared to fiscal year 2023 because in range point of 40%-50% only. I think we stick to that.
Okay. 50% growth.
45%-50%.
45%.
Yeah, year-on-year.
Okay. Years going ahead for fiscal year 2025 and ahead?
See, fiscal year 2025 will be again a good year because many of the capacity would be utilized to a good extent. I believe the range around of 30%-40% from fiscal year 2024 if I compare.
Okay. That's okay. Thank you.
Thank you. The next question is from the line of Saurabhjit from LJ Capital. Please go ahead.
Hello. Good afternoon, sir. Congratulations on a good set of numbers. Sir, my question is regarding the market size of the SS pipes and tube industry in India. What is the total market size as per you and what is the market share?
Yeah. We don't have any perfect right figure because there are many of the player who are not listed in this geography. Tentatively, what we have worked out, annual demand of India is roughly in the range of three lakh ton, taking both seamless and welded, wherein welded should be in the range around of 50%-65% and balance should be seamless.
How much that would convert into value terms?
It can be depend on prices, matlab, prices and grades and all, roughly, mix and all. At least I think at least more than INR 10,000 crore, I believe.
Okay. Okay, sir. That's it, sir. Thank you.
Thank you. As there are no further questions, I would now like to hand the conference over to management for closing comments. Over to you, sir.
I take this opportunity to thank everyone for joining the call. We will keep updating the investor community on regular basis for incremental updates of your company. I hope we have been able to address all your queries. For any further information, kindly contact SGA, the investor relation advisor for your company. Thank you once again.
On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.