Ladies and gentlemen, welcome to the Q2 and H1 fiscal year 2024 earnings conference call of Venus Pipes and Tubes Limited, hosted by Antique Stock Broking. 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.
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 hand over the conference to Mr. Pallav from Antique Stock Broking. Thank you, and over to you, sir.
Thank you, Ashlea, and good afternoon, everyone. On behalf of Antique Stock Broking, I welcome you all to the second quarter and H1 fiscal year 2024 earnings conference call of Venus Pipes and Tubes Limited. We are pleased to have with us the senior management team represented by Mr. Arun Kothari, the Managing Director, Mr. Dhruv Patel, the Whole-Time Director, and Mr. Kunal Bubna, the Chief Financial Officer for Venus Pipes and Tubes Limited. We will have the opening remarks from the management, followed by a question and answer session. Thank you, and over to you, Arun, sir, for your opening remarks.
Good afternoon, and a warm welcome to everyone on the Q2 and H1 fiscal year 2024 earnings call for Venus Pipes and Tubes Limited. Today, I have been joined by Mr. Dhruv Patel, our Whole-Time Director, Mr. Kunal Bubna, Chief Financial Officer, and SJ, our investor relationship advisor. We have uploaded our Q2 and H1 fiscal year 2024 investor presentation on stock exchanges and company website, and I hope you had an opportunity to go through the same. Before going on the company side, I would like to give the outlook on industry demand. The steel demand in India has been on a rapid rise. According to an industry report, the per capita steel consumption from 1.2 kg in 2010- 2.8 kg in fiscal year 2023, yet it is still lower than global average consumption of 6 kg per capita.
We believe that the consumption is poised to rise even further on the back of strong demand and upswing in the CapEx cycle, particularly in industries like railway, food processing, chemicals, cement, engineering, et cetera, with enhanced spending by private and public companies on infrastructure and capacity expansion across the country. The per capita steel consumption is expected to see a steady increase. The pipes and tubes industry are also benefiting from the CapEx cycle and new infrastructure, with consumers placing a strong emphasis on high-quality and reliable products along with necessary certifications. There is a notable shift happening from unorganized to organized players, and established brands like Venus are reaping the benefits of these changes. The shift from unorganized to organized sector is underway, and we will see a gradual uptick in years to come.
At Venus, we were among the few organized players in the country to have anticipated the huge CapEx cycle in India and increase our capacity by 3x from 12,000 MTA- 33,600 MTA. Additionally, for backward integration of seamless pipes, we set up a piercing line to manufacture mother hollow pipes with the new capacity. Fully operational, we are all geared up to cater to the uptick in demand. With increasing volume, we also see uptick in our margin on account of operating leverage and supply of the higher quality and specialized products. Also, manufacturing of mother hollow pipe as a part of backward integration plan will help us to improve our margins going forward.
With the strong demand upswing, we are not only seeing an increase in new inquiries, but also witnessing order conversions simultaneously increasing our wallet share among our existing customers, affirming their sustained confidence in our offering. Overall, these factors are a true representation of robust growth and flourishing opportunity in the domestic market. On the export front, the journey has been nothing short of exciting. Venus has witnessed a substantial growth and has come a long way from where it began. Currently, our export contributed 15% of total revenue, standing at INR 28.5 crore for Q2 fiscal year 2024 compared to INR 1.6 crore in Q2 fiscal year 2023. We anticipate this to increase steadily over the years. It is a result of our strong on-ground team and consistent dedication to provide the quality products to our clients.
To penetrate deeper in the export markets, we participated in multiple fairs and exhibitions and have undertaken focused marketing initiatives to take the brand outside the country. With setting up of a piercing line for backward integration of seamless pipes, we have witnessed increased acceptance of our products and also a rise in order flow from the export market. Overall, the export market has substantial growth potential and with a huge market to cater, and we continue to increase our international footprint in newer geographies. Coming to our performance for the quarter ended September fiscal year 2024, we witnessed a robust performance on all parameters. We achieved all-time high quarterly revenue of INR 191.4 crore with operating margin standing at 18.2%. PAT stood at INR 21.3 crore for the quarter. This robust performance is led by multiple factors.
Firstly, our sales of seamless pipes, which is higher margin product, witnessed a remarkable growth of 153%, driven by the high demand across industry. Acceptance and urge of using the quality product has also been a driving factor for multiple players in the industry, shifting to organized players providing high quality products. Secondly, our global footprint expanded with export contributing 15% of the total revenue, particularly due to the growing presence of our brand in Europe. Margin witnesses significantly improvement year-over-year on the back of our backward integration of seamless pipes, resulting in turning in a higher operating leverage from increased revenue. Welded pipes show a muted revenue growth of 1% year-on-year, largely due to fall in raw material prices, which are passed through in our industry.
However, on a year-over-year basis, the volume growth remains robust, growing at more than 100% in case of seamless pipes and welded pipes witness a growth in high teens. Additionally, the newly commissioned seamless capacity in May is already running at 80% capacity utilization level. This is a huge testimony reflecting the strong demand for high-quality seamless pipes and tubes. Lastly, our current order book stands at INR 210 crore and the additional 400 MTM installation of the capacity for seamless pipe is on track and is expected to be completed by Q4 of fiscal year 2024. This upcoming expansion not only reflects our commitment to meeting growing demand, but also position us strategically for future opportunities. With all our capacity in place and an increasing capacity utilization and robust demand visibility, we are optimistic about the year and journey ahead.
We strongly believe that collective efforts and dedication of all our stakeholder in this endeavor will yield fruitful results, paving the way for sustainable growth in the future. Our commitment remains resolute in elevating the Venus brand to new heights, earning the trust of our customers by upholding the highest standard in the industry. We would also request all our investor analyst community which has entrusted us with immense support to visit our company's new manufacturing facility, which is now fully commissioned and operational. We would be arranging a visit to our company facility in month of November, which coincides with the Rann Utsav. Our Investor Relations team will do everything possible for a safe and smooth visit. Now I will hand over the call to Mr. Kunal Bubna, Chief Financial Officer, to take you through the operation and financial highlights of the quarter.
Hello everyone, and a very warm welcome to our earning conference call. We take absolute pride in announcing that our beloved company has reported highest ever quarterly revenue, EBITDA and PAT for fiscal year 2024. We have also reported positive net operating cash flow from operations for H1 fiscal year 2024. On revenue front, revenue from operation for Q2 fiscal year 2024 stood at INR 191.4 crore as compared to INR 126.4 crore in Q2 fiscal year 2023, a growth of 51% year-on-year basis. Revenue from operation for H1 fiscal year 2024 stood at INR 371 crore as compared to INR 240 crore during H1 fiscal year 2023, achieving a growth of 55% year-on-year. Revenue diversification for the quarter was 40% from welded, 57% from seamless and 3% from other sales. Growth in seamless segment was around 153% on year-on-year basis.
Welded segment registered a growth of 1% for Q2 fiscal year 2024 on year-on-year basis in terms of revenue. However, our volume growth of welded was in high teens for the quarter on year-on-year basis. Our sales stood at INR 28 crore for the quarter compared to INR 1.6 crore during the same period last year. On the front of gross profit for Q2 fiscal year 2024 stood at- Hello.
Hello. I'm very sorry to interrupt. Yeah. Sir, your voice is distorting a little bit in between. Okay. Yes.
Gross profit for Q2 fiscal year 2024 stood at INR 54.4 crore as compared to INR 25.1 crore in Q2 fiscal year 2023, a growth of 117% on year-on-year basis. Gross profit for H1 fiscal year 2024 grow by 98% on year-on-year basis and stood at INR 96 crore.
Gross margin for Q2 fiscal year 2024 stood at 28.4% as compared to 19.9% in Q2 fiscal year 2023, a growth of 857 basis points on year-on-year basis. On the EBITDA front, EBITDA for the quarter stood at INR 34.8 crore as compared to INR 15.5 crore for the same period last year, registering a stellar growth of 125%, with EBITDA margin at 18.2%. EBITDA for H1 fiscal year 2024 is INR 62.4 crore as compared to INR 30 crore in H1 fiscal year 2023, a year-on-year growth of 108%. On PAT front, PAT for H1 fiscal year 2024 is INR 37.7 crore versus INR 19.5 crore in H1 fiscal year 2023, a growth of 93% on year-on-year basis. The margin for the H1 fiscal year 2024 stood at 10.2% compared to 8.1% in H1 fiscal year 2023.
PAT for the quarter stand at INR 20.3 crore as compared to INR 10.3 crore in the same period last year, and INR 17.4 crore in Q1 fiscal year 2024, a growth of 97.1% year-on-year and 16.7% respectively. Looking ahead, the demand scenario appears robust for us. We are actively targeting new sectors and geographies aiming to enhance the utility of our products within our existing supply sector and also expanding our reach and making sure our offerings meet the evolving need of various industries. With this, I would like to open the floor for question-and-answer round.
Thank you, sir. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch tone phone. 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 Mr. Dhruv Jain from Ambit Capital. Please go ahead.
Congratulations to the entire Venus team for a great set of numbers. I had a couple of questions. One was with respect to the welded pipe. We've seen a very strong growth in the seamless side. However, I think you also mentioned that the welded pipe growth was slightly lower. Any color on that would be useful.
If you see on the side of welded pipe, if we compare with year-on-year basis, we have a growth of, as I said, more than 15% on the side of welded pipe. On July- September 2022 with July- September 2023 quarter. If I see definitely the last quarter, it is a growth of more than 25% on welded pipe. That with those expansions of higher diameter mills, those all have been started. We are seeing welded pipe also increasing. If you see last quarter, we had a contribution from revenue in the terms of quantity. 55% was from seamless and 45% was towards welded. For the Q2, it is 52% from welded and around 48% from seamless side.
Okay. Is there any reason why seamless is growing faster than welded is what I was trying to figure out.
There had been demand. The exports which had increased, it primarily pertained to seamless side only. With the backward integration and all, the material of seamless side is acceptable in the European market. That has also helped us seamless side to grow in a faster pace. Along with that, in the month of December 2022, the anti-dumping circular had also helped for the seamless to grow on a faster note.
Okay. Sir, you mentioned you have a INR 210 crore sort of order book. This would be pertaining to what period, how many months typically would require this kind of execution?
Generally, it should be basically 90 days- 110 days.
Okay. Sir, if I may, one more question. You've announced an expansion of capacity of about 400 tons per month in the seamless side. What would be the incremental CapEx that you would have to incur? If you can give any color on the new client addition that we have seen in this quarter. Thanks.
Basically the last quarter we said around CapEx will be around additionally INR 35- INR 40 crore, which will include this 400 metric ton per month for seamless pipe and some modification has been done by us there for the LSAW Mill. The 48 inch tire we had increased up to 56 inch. Thirdly, on the side of round bar mill, hollow pipe manufacturing mill, we have increased the efficiency, which will cost these three CapEx together between INR 35 crore- INR 40 crore.
Sir, any new client, the color, that any new clients or key clients that you have signed?
Naming the clients will be slightly competitive, but I can give you. There had been a sector which are getting a red light. We are getting new client from the sector like oil and gas, chemical, pharmaceutical, railway and others.
Thanks a lot and all the best. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant, and you may join the question queue again for any follow-up questions. The next question is from the line of Mr. Kunal Kothari from Centrum Broking. Please go ahead, sir.
Thank you for the opportunity and great set of numbers. Way congratulations. First question is, you mentioned order book is INR 210 crore, can you provide the bifurcation between exports and the domestic order book? Secondly, earlier we were having the backward integration of 9,600 tons, and similar was the capacity with the seamless pipe. With the new capacity adding up, our seamless capacity will go up to 14,400 tons. The additional mother hollow pipe, are we looking to again import from China or what is our plan towards the additional capacity?
Yeah. On the first question, basically from the perspective of order book, we have around 25% of that from export. Out of that INR 210 odd crores order book that we are adding. The way as we said, we mother hollow pipe manufacturing wherein we will be getting a better efficiency. For this 400 metric tons per month of expansion, we will get a bit from that efficiency increase. Apart from that, the anti-dumping circular, if you see more than six inches, there is no anti-dumping involved. Part of it will also be imported. That and those differences.
From 9,600 tons, are we expecting to produce more than the stated capacity? If so, how much we can produce?
See, those modifications had been done, those expenditures had been incurred. We are currently running, as we said, around 80%. As and when in the coming quarter, we will be running on more side. We will come to know what more efficiency actually we can get out of that.
Okay, sir. My second question is pertaining to the exports volume that we have gained during the quarter. Overall, as per the reports, we see that there is a slowdown in demand, especially in Europe. How we managed to get such a high growth in exports during the quarter? Secondly, sir, also our overall debt has gone up. The gross debt has gone up from INR 90 crore- INR 145 crore. We had mentioned earlier the new CapEx, which was announced, that will be through internal accrual. Still, I see that the long-term borrowings has gone up by INR 5 crore, also the working capital loan has increased substantially. Can you just elaborate on the borrowings part as well?
Borrowing part, basically, if you see the debt has increased from INR 90 crore- INR 145 crore, basically increased around INR 55 crore. We have not borrowed long-term borrowing for this new CapEx. The earlier project what we have expanded, that is tube mill and all, for that we had borrowed. For INR 13 crore-INR 14 crore is incremental on that part of the project, which we have earlier also said it will be funded through debt. That is the increase in balance is around INR 38 crore-INR 40 crore is for working capital, which is required for the increased business that we are forecasting and doing. On the front of export, Dhruv .
Hi, Arun ji. On the global demand for particularly mentioning Europe, we do not see very slacking demand from Europe currently. Yes, there is some effect of global slowdown. In this sector, I don't think it will be much affected. There are lots of oil and gas projects coming up. There are lots of projects announced all over the world for oil and gas, and there are new plants coming up for hydrogen technologies. Keeping all this in mind, what we feel is that the demand will be on the growth.
Okay. For sequential quarter as well, we can see similar export numbers or we can see higher than the exports reported during the quarter.
Kunal ji, regarding the export, we further like to add. We had built a very good team in the Europe market. Very senior person has come in the management of the seamless pipe for the marketing of the seamless pipe in the Europe. They are working hard. We had started the backward integration facility in the month of May, and we are able to achieve in the first quarter itself of our total seamless pipe capacity. You can say we are 25% of the seamless pipe capacity is going to export in the Europe. This is the first quarter of the operation of the backward integration facility.
In the coming quarters, there is a very good, as Kunal ji has told you, we have almost order book of the total order book of almost INR 50 crore order book, you can say is from the export market, which will be supplied in the next quarter. Definitely next quarter will be same demand in the export market will you see in the coming quarter or in the next half year. For next half year, we are forecasting much better export demand compared to this quarter in the seamless pipe segment.
Okay, sir. Thank you for the detailed explanation. Thank you so much, sir.
Thank you. The next question is from the line of Mr. Sahil Sanghi from Monarch Networth Capital. Please go ahead.
Yeah. Thank you for the opportunity. Many congratulations to the whole team for a very excellent performance. My first question is, can I know the proportion of welded and seamless in the order book right now? How much would be welded orders and seamless orders?
Yeah. From the value perspective, it is 50/50, and from the quantity perspective, welded would be around 55%-60%, and balance would be seamless.
From the quantity perspective, it is how much, sorry?
55%-60% is welded.
55%-60% is welded. Okay. Can we also get an understanding of what is the utilization rate of the hot piercing plant, and what do you aim to run it for the rest of the year, as in how that will work out?
Yeah. Basically, for half year, the utilization level was around 75% for the hot piercing. Currently, we are running at a level of 80% and we will see in going quarters and going forward, it will definitely be or more from here.
Okay. Thank you. Next question.
Thank you. The next question is from the line of Mr. Vikas Singh from PhillipCapital. Please go ahead, sir.
Good afternoon, sir, and very congratulation on the very good set of numbers. Sir, my first question pertains to how much of this margin expansion you can pertain to the backward integration. As we can see that the seamless percentage has increased significantly year-over-year basis. Going forward, it looks that the welded would be taking over again and the seamless percentage would come down. How should we look at the margins going forward?
On the side of seamless, definitely margin increase is majorly towards backward integration because of manufacturing of in-house hollow pipes. You can say whatever margin expansion had happened, 80%-85% is from this backward integration. You are right, definitely currently, going forward, the percentage of welded pipe will definitely increase. Wherein it's low margin as compared to what we earn in seamless business. But if you see on the absolute term or the data per kg for whatever may be the seamless and welded, it will be increasing, but definitely on the percentage basis, a minor reduction can be there because of increase in welded proportion going ahead.
Majority of the increase you would be able to carry it for the longer period of time. Is that-
Absolutely. Also we have better understanding and also we had a higher margin on the side of export also, which had also helped us to increase this margin.
Understood, sir. Sir, my second question pertains to your industry-wide exposure, which you are not giving right now. Just wanted to understand, have our percentage sales in the oil and gas or the other premium product category industry has increased on a year-over-year basis? We are still in the same kind of the tonnage basis on those industries? Just wanted to understand on that perspective, have we able to build inroads in the higher margins premium products in this higher margin orders kind of the industry?
If you see from the industry perspective, we had been able to increase our proportion in paint industry, paper industry, pharmaceutical. These are the few sectors which had increased. Oil and gas had increased, but it is not that high as it. It is in line with what we have been achieving earlier. A minor increase is there, but we believe from the coming two quarters, definitely higher sizes of welded sales would be there, which will help us to increase those sector also going ahead.
Next three to four years kind of the target, what is the percentage of sales we are looking from the oil and gas industry? If you could give us some idea.
Vikas, for the sales figure, we can't quote. Sales in quantity we can't quote. We had started our all the new facility in the month of May or July. We are in the process of the number of companies approval. Some of the companies of the approval is already been received in the oil and gas sector also, in other sector also, in engineering sector also, some different diameter size of the pipe. This quarter we have seen the less turnover from the high-yield industry sector. In the coming quarters, definitely it will improve every quarter. That result will peak result you will able to see in the first quarter of the fiscal year 2025. Slightly approval, some approval we will get in the Q3 of this year, some of them Q4, or some of them Q5.
We will be in an increasing trajectory you mean to say.
Yes, definitely. We are behind that. We are pursuing for the high-yield product only or which will improve. In next six to nine months, mostly all the approvals will be on hand of our company. Definitely there will be improvement in the margin in the coming quarters.
Understood, sir. Thank you and all the best for future.
Thank you. The next question is from the line of Mr. Umesh Jain from Kotak Life Insurance. Please go ahead. Mr. Umesh?
Hi, am I audible?
Yes, you are audible, sir.
Sorry. Couple of questions from my side. First, in terms of the seamless, the ADD is effective now close to a year now. Have we seen increased competitive intensity from the unorganized layer where they are increasing the capacity? How this end market growing in terms of the capacity in seamless pipe?
Basically, currently we have not had much many manufacturer of hollow pipes or any unorganized putting up. It is open field, so there can be a company which might come in near future or a small manufacturer who was only having a capacity of slit might backward integrate itself. Backward integration is a costly affair. Some will require a desired capacity to put those capacity. It will create slightly for those unorganized sector. Currently we have much going forward.
Mr. Kunal, I'm sorry to interrupt. Sir, your voice was distorting a little bit towards the end of the answer.
Hello, I'm audible now?
Yes, sir, you are audible.
Yeah, Umesh. Are you able to hear me or I should try it please?
I can hear you. What you're trying to say is the seamless capacity, as of now, we have not seen any major capacity announcement from the unorganized layer. Is that the fair understand?
Yes.
Okay. Off lately.
Just to clarify, anybody who want to put up seamless, keeping this anti-dumping and all, he would also be required backward integration manufacturing of hollow pipe. To stand competitive in the market, I think both the capacity need to be announced for the annual sector.
Sure. Secondly, on the working capital side, if I look at your working capital standing as on fiscal year September end versus March end, and annualize our half-yearly sales, is it fair to assume our working capital base has remained constant?
Yeah, it is fair to say.
Okay. What is the guidance on the working capital side going forward? Do we have room to decline the working capital from here on?
See, the endeavor would always be to reduce it, see, 90 days- 105 days is the general working capital cycle in our industry, I think it will remain at this level.
Sure. Thirdly, on the welded pipe segment.
I'm very sorry to interrupt. Could you join the question queue again, please, for follow-up questions?
Sure. Okay.
Thank you so much.
Thank you.
The next question is from the line of Mr. Pritesh Chheda from Lucky Investments. Please go ahead, sir.
Yeah. Hello, sir. Sir, I am not sure, but I looked at the presentation. You haven't given the volume data. If you could give the seamless and the welded volume number for the quarter two, and you can also give us what is the EBITDA per ton or per kg for seamless and welded that you would have recorded.
Basically, Pritesh, we are not giving volume data on a quarterly basis. Basically, we give on annual basis for this.
Okay. This is the first time that you have changed it. Okay.
No, no, sir. Earlier also, we have given on annual basis.
Okay. The second question is the backward integration.
Just we can give you a directional number of achieving around 10,000 metric tons, keeping both welded and seamless, and it was around 50/50 for both.
I didn't understand.
In quantity terms.
10,000 metric tons for?
A half year basis.
Okay. No problem. The second thing is this backward integration of hollow pipe that has flowed into your P&L completely for the quarter two?
Yes.
Okay. You would have got full utilization available, full capacity available for the quarter gone by?
Yeah. Basically, for the hollow pipe, we have utilized around 75% of the capacity, and currently we are running at 80%.
The capacity was 9,600 metric tons, right?
Yes, absolutely.
Okay. Sorry. Hello?
Hello. Regarding the hollow pipe capacity, Pritesh. Hello?
Yes, sir.
Right now, we are utilizing at the 80% level, but there is a chance to improve the further utilization level. We are trying to go up almost 90%-95% utilization level. We are improving in our annealing and pickling line backward integration facility. We are doing the certain improvement and modification, which will also increase the capacity by 10% from 9,600 metric tons, too. Our hollow pipe capacity will be improved in the coming quarter. Installed capacity will be approximately 10,500 metric tons in the coming quarter.
Okay. On the residual CapEx left, it just the 400 metric tons seamless CapEx which is left to be spent and installed, or is there anything else along with it still left? What happened to?
Yeah. Please say.
What happened to the welded larger dia capacity that was supposed to come? That is already there in the 24,000 metric tons?
Yeah, that is the higher dia tube mill and also mill both have started. Few in May and few in July. The major CapEx or the substantial portion of the CapEx for whatever is left is pertaining to this 400 metric tons.
400 metric tons. Okay. How much is that CapEx number?
It would be, as I said you, total the three it will cost INR 35 crore- INR 40 crore, and out of that, INR 200 already been done. It will be roughly in the range of INR 20 crore- INR 25 crore.
Okay. This debt number that I see on the balance sheet, considering whatever we know today in terms of the CapEx and expansion, what should this debt number look like?
Pritesh, sir, I request if you can rejoin the question queue.
Ma'am, I've asked the question, now let him answer.
Yeah. See, my debt is around INR 145 as on September 2023. I believe it would be increased another INR 20 crore-INR 25 crore only.
Okay.
For the coming half year.
Okay. Thank you very much. Thank you and all the best to you guys. Thank you.
Thank you. The next question is from the line of Mr. Bhargav from Ambit Asset Management. Please go ahead, sir.
Yeah, good afternoon, team, thank you for the opportunity. My first question is it fair to say that EBITDA per kg savings from this backward integration of hollow pipes could be in the range of INR 18-INR 20 per kg?
Yeah. It can be.
Okay. How much of that has been achieved in this quarter, broadly?
Yeah, majority of it, 70%-80%, you can say.
Okay. When you mentioned about increasing this capacity by about 1,000 tons, what would be the CapEx for this?
Can you repeat your question?
You mentioned increasing the backward integration capacity from 9,600 metric tons- 10,500 metric tons. What would be the CapEx for this?
No, those efficiency measures had already been taken. As I said to you, there was three CapEx. One was this increase in this hollow pipe. Second was increase of size from 48 inch- 56 inch and third was 400 metric tons per month of seamless side expansion. The three in total will cost us around INR 40 crore.
Is it possible to give investors a complete breakup between welded and seamless?
See, basically, it's not given quarter basis.
No, yearly basis.
Last year, we have given, basically it was more than INR 60 per kg on the seamless side and more than INR 35-INR 37 per kg for welded pipe.
For this backward integration, how much can this be across?
See, keeping all the improvement like backward integration, we are having a portion of export sales. Thirdly, for welded and seamless pipe, higher welded pipe, there are few manufacturers in the country. We will be targeting to increase our direct supply portion. We basically on the front of basically 40%-50% should be increased in EBITDA per kg on the side of seamless and 15%-20% on the side of welded, when these all full capacity are running.
Okay. The last question is on the export side. With rising exports, sir, do you see any increase in working capital or we can assume it at current level?
You see the working capital will not be much affected because there are a right number of payment terms which help us to maintain the same working capital which are there for our domestic.
Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Mr. Kaushik Mohan from Ashika Institutional Equities. Please go ahead, sir.
Congratulations for the great set of numbers, sir. Sir, most of my questions have been answered, and I have one on accounting side. Sir, half yearly numbers that if I see for the cash flow from operating activity, we have generated around INR 65 million. That comes to INR 6.53 crore. Sir, but our entire profit is around more than INR 37 crore. When are we going to neutralize on this side and when are we going to increase this number? Where are we getting more stuck on?
Absolutely. See, we have become positive for this half year. Definitely, as we said, there would be increase in the profit margin in both the sector wherein we operate, and also the volume would also be increasing. Definitely, second half we'll also see a much better operating cash flow as compared to what we have achieved in the first year. I think fiscal year 2025 would be a very good year wherein those operating, operation cash flow should be there in good quantum.
Got it. Sir, if you look at trade receivables, more than 63 crore are being stuck up in that place. Can we get a schedule for this creditor schedule?
See.
How much of this percentage is below six months?
See, more than 95% would be below six months. majorly-
More than one month, sorry.
Basically, if you see on a totality basis, my six-month sales and my debtors, it is around 60 days-65 days only. Basically, these are all in this range of less than 90 days only.
Okay. There is no any problem in recovering all this money, right?
Absolutely not. We supply to many of the Fortune 500 and many of the end customer. Those are all renowned customer. We as a company focus on three, on three P, product, people and customer, and three Q, and customer is one of the predominant. We definitely do all right due diligence required before supplying to them.
Okay. Sir, how much is the top 10 customers holds from the INR 63 crores?
25% to
See, I can say for sale, that would be the right way to see it. It will be around 25%-30%.
25%-30%. Okay. Sir, the current CapEx, what we are doing, when can we expect the utilization? In the next year coming only we can look at the expectations?
For the CapEx, what we have completed?
Yes.
Basically, as I said you, for a seamless and piercing line, the new CapEx, we are running around utilization level of 80%. We have reached a good level, and definitely, going forward quarters, there would be further increase in both the piercing and seamless line. Apart from that, few of the welded, the LSAW Mill and high alloy tube mill also, they had been increasing, and definitely, in the second half of this year, there would be further more increase in the utilization level. Definitely, fiscal year 2025 would be the year wherein the 85% utilization level should be achieved.
85%.
For all these new CapEx.
Okay. Last and final question, sir. Okay, I'll come back to you.
Yes, sir. Thank you so much. The next question is from the line of Mr. Ritesh Shah from Investec. Please go ahead, sir.
Yeah. Hi, sir. Couple of questions. Sir, first is on exports. What is the mix that we are looking at over here? That is seamless versus welded. That's the first question. Second is from a ROC standpoint, how does exports stack up versus domestic sales? Third, is there any duty differential that we are enjoying when it comes to Indian exports versus other regions? A related question over here, there is this regulation called CBAM, Cross-Border Adjustment Mechanism. It does not include stainless at this point in time, but at some point in time it will be included. How are we looking at that from a carbon intensity standpoint? Thank you so much.
Yeah. Basically, from the standpoint of welded and seamless, predominantly it's currently seamless is leading that. More than 90% is seamless and the rest is welded. Definitely, but going year, half year, we are also targeting to increase welded from the perspective of oil and gas in U.S.A. and other countries. Currently, seamless is the high proportion. Secondly, from the perspective of CBAM and all, definitely as you said it is not there. See, we have appointed a few of the consultant for that. Our team are working on that so that we are equipped ourselves on the CBAM area also. Thirdly, can you repeat one of your question? I missed it.
Basically trade differentials. Does India enjoy any benefits or the differential in duty measures? If Europe has imposed duties on stainless pipes, is it lower for India versus China? Does India benefit anything?
In China, yeah. India benefit because on the Indian good there are no anti-dumping when you export to Europe. When China export to Europe, there is anti-dumping duty.
Sir, possible for you to quantify?
Ritesh, further I would like to clarify regarding the Chinese. The Chinese product, other than the anti-dumping also, for the seamless pipe segment, Chinese products are not much acceptable in the European market due to quality issue and all these things. Some of the companies, traders and other small manufacturers of the Chinese seamless pipe manufacturers can't supply in the Europe. Some of the big players in China, they have the advantage to supply in the Europe, but both prices are almost equal to the prices of the India or China or of the prevailing price in the Europe market. Ritesh.
Sure. With respect to U.S., you still have Section 232, despite the duties, we are competitors?
For the welded pipe in the U.S. market, the demand from the Indian welded pipe or ERW pipe is very good, or we are competitive in the U.S. market. For the supply in the U.S. market, we have already identified some of the persons over there. U.S. market export, we will be able to see from our company point of view in the Q4 of this year or of the Q1 of the fiscal year 2025. For this year, we are expecting more export of the seamless pipe only.
Sure. The last one, Kunal, ROC, basically exports versus local sales. Thank you.
I'm very sorry to interrupt. Could you please join in the question queue again? There are several participants waiting for their turn. Thank you. Ladies and gentlemen, we want to request you to limit your questions two per participant. We'll move on to the next question, which is from the line of Mr. Suraj Navandar from Pruthvi Finmart. Please go ahead, sir.
Hello. Good afternoon, sir. My question was a very broad-based question. In last five years, we have seen a stupendous growth in volumes and revenues as well, of course, over a smaller base. How long you foresee that this 30%-40% kind of a growth can continue? How long is the runway for the growth? When you see this growth normalizing to, let's say, 20%-25%, how do you see next four, five years?
Regarding the growth side, for the fiscal year 2024 and fiscal year 2025, we are seeing the growth of the almost 35%, CAGR of the 35% for fiscal year 2024 and fiscal year 2025. Further for the fiscal year 2026 and fiscal year 2027, fiscal year 2028, we are forecasting the growth of the almost 15%-20% every year. We have the right now plan for the five years. We have the further plan for the after that also. Right now we can say for five years, this is our plan.
Okay. Sir, do we get any margin difference between domestic and exports? Whatever the margin expansion that has come, is it only because of the backward integration or is there any value-added tube sales into the mix of our sales?
Yeah. It's majorly is towards backward integration. Again, when we have export sale, we are having a higher margin of 3%-5% on the side of export we are earning currently. Thirdly, on the side of welded also there has been some margin improvement. It was because earlier higher sizes where we were doing job work, but now we are able to manufacture higher sizes, so that benefit had also accrued to us.
Hello sir, I asked about value-added, not welded.
Value-added for sales, yeah, we have been in the side of seamless. We have been manufacturing smaller sizes of tubes, which is a value-added product. That contribution had also increased.
Okay, sir. Thank you and all the best. Thank you very much.
Thank you. The next question is from the line of Mr. Vivek Gautam from GS Investments. Please go ahead.
Sir, I've recently started tracking the company. If you find my questions elementary, please don't mind. Just wanted to know about the company, how critical role is the anti-dumping duty imposed on import from China is playing for the wellbeing of our company? If it is reimbursed, then what tax base, how much would be the benefit we will lose? A bit about the location. How critical is this location at Mundra helping us out and the opportunity size for different sector for our company, sir? Thank you.
If you see, earlier manufacturing of seamless pipe from hollow pipe was done by many of the unorganized player in the country. With the instigation of anti-dumping duty on the import of both seamless and hollow pipe, it become very tough for all those unorganized or smaller player to manufacture or to bring those hollow pipe with such a huge, hefty anti-dumping. It will definitely help and it will always help us going forward also in improving our margin. backward integration itself gives you a higher margin. Again, with this scarcity being created for the raw material on the side of seamless, those added anti-dumping benefit would be flowing to us currently and going ahead also. From the perspective of the location, we are very strategically located. From the perspective, it is 40 km- 50 km from both Kandla and Mundra Port.
We do import and we do export. Definitely it help us in both import and export.
Okay. Thank you very much.
Thank you. The next question is from the line of Mr. Shivam from Inga Ventures. Please go ahead, sir.
Good afternoon, sir. First off, congratulations on a great set of numbers. I just wanted to understand, you mentioned that in the hollow pipe segment and even the 20% capacity utilization. With this increase in capacity utilization, what is the margin increment that we are looking at? Because this quarter scope to improve our margin profile and also with product mix changing.
See, first, as I said, what we have achieved in fiscal year 2023, we are targeting around 40%-50% of EBITDA margin improvement. Definitely, whatever we have achieved till now, that is slightly shorter than that, we are targeting to improve that. Apart from that, on the welded side, we are targeting around 15%-20% improvement in margin as compared to last fiscal year 2023. That is again, that we have not achieved till and we are targeting to achieve the same. Again, as I said, we will be manufacturing smaller sizes of tubes and all or high value-added product. That also help us to improve margin. With the growing increase in capacity for seamless, we will be targeting those horizons also, which will be more towards value-added.
Hello?
Hello.
Kunal, sir, we lost you at the end.
Okay. I meant to say, for the increased capacity, what we are targeting for seamless, it will be more towards value-added product, which will help us to improve the margin further on the front of seamless pipe.
You said that 40%-45% of incremental margin in EBITDA. By what timeline you say? Sorry, I just missed that.
We're targeting in the coming half year only.
Okay. Thank you, sir. I think this helps. Thank you so much.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I now hand over the call to Mr. Arun, sir, for closing comments. Please go ahead, sir.
Yeah. Thanks all the stakeholder and all the analyst community to attending the conference. Once again, I would like to repeat that. We would be arranging a visit to your company facility in month of November, which coincides with the Great Rann Festival. Our IR team will do everything possible for a safe and smooth visit. I take this opportunity to thank everyone for joining the call. We will keep updating the investor community on regular basis for incremental updates on your company. I hope we have been able to address all your queries. For any further information and pending queries, if any, please contact our Investor Relations, SGA for your company. Thank you once again.
Thank you, sir. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us and you may now disconnect your lines.