Ladies and gentlemen, good day and welcome to Vardhman Special Steels' Q2 FY 2027 earnings conference call hosted by IIFL Capital. As a reminder, all participant clients 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. Prateek Singh from IIFL Capital. Thank you and over to you, sir.
Thanks, Shaurya. Good morning and welcome everybody. On behalf of IIFL Capital, we invite you to Vardhman Special Steels' 2Q FY 2027 earnings conference call. From the management, we have Mr. Sachit Jain, CMD, Mr. Sanjeev Singla, CFO, Mr. R. K. Rewari, Executive Director, and Ms. Soumya Jain, Executive Director. Before we begin, note that this conference call may contain certain 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 a guarantee of future performance and involve risks and uncertainties that are difficult to predict. Without any further ado, I will now hand over the call to Mr. Sachit Jain for opening remarks. Over to you, sir.
Thank you so much. In addition to the team mentioned, we have Sonam, our Company Secretary with us and we also have the Adfactors PR team with us, our investor relations. Mr. Rewari had to step out so he has left the meeting. He is not there in this call. We have had a good quarter last one and one of the big highlights of this quarter has been the foundation stone of a forging plant was laid by the Honorable Chief Minister of Punjab, Bhagwant Mann, and that happened in July end this year. In this quarter we have had record sales.
Demand was strong and partly demand has been strong because of the GST cuts which happened last year on two-wheelers as well as smaller vehicles, as well as SUV sales have been good and the other sales also have been good so there has been good demand. We are getting the feeling that from the non-automotive space also demand has increased which has started affecting various other of our competitors. Overall material supply for automotive segment was tighter and there were one or two unscheduled shutdowns from one of the large companies. That led to also slight shortage in the market and therefore the pull. The demand supply imbalance, we got good price increases in the last two quarters which has led to good profits. Most of these have settled the prices for Q2 and we are talking about price settlements for Q3.
Not all have settled for Q2 so that is still ongoing. In addition to that, we have work going on a new steel plant. We have finalized the equipment for the plant part. Land has been finalized for the SMS and we should be filing for environmental approval within December this year. We are on track as of now to complete the project by September of 2029 and stabilization by March of 2030. In addition to that, the solar plant has been running well and we are now expanding the solar plant by another 22.5 MW. 20 MW for this will be for the current plant and 2.5 MW will be for the entity line which is being set up in the forging plant. For the forging plant, there will be solar power coming in by the time it starts reaching better utilization.
The forging plant is expected to come up by March of 2028 and then of course it will take some time to fill up the capacity. A slight change or thought process is happening on the financing structure of the new plant. We were earlier looking at a debt equity for the company was 0.5:1 which would have been at max 0.75:1. More and more as we were talking to some financial experts and some well-wishers of the company advisors, we are now coming around to the conclusion we are diluting a bit more than required and therefore we may look at a 1:1 debt equity and therefore the debt component will become a bit higher and the equity raising part will be a bit lower.
For the equity part we will be doing a rights issue which will happen in the later part of next calendar year, second half of next calendar year. As far as the project cost is concerned, we are also looking at the project cost. Some aspects of the project have gone up in terms of cost. Land is definitely more expensive than we had envisaged, as well as for the equipment. The rupee has depreciated after the Iran war substantially. Sea freight has gone up, as well as metals have gone up, so our commodities have gone up. So the project cost is going to be higher than what we had envisaged. Also, certain equipment that we had planned in the second phase, we have preponed in the first phase, and we are also looking at some product reconfiguration to better service the non-automotive parts.
All that, the project is being modified to be conceptualization. Everything will be finalized by March, April next year. But suffice it to say at this point in time that the project cost will be higher than the INR 2,000 crore that we had envisaged. But we will also have the ability to have a higher production than 500,000 tons eventually. So we are building in scope to increase the production beyond 500,000 tons to at least 700,000 tons in the second phase. Further after that, also with some more additional equipment. The additional equipment that we will have to add will not be of a highly significant quantity. The other thing we are examining, of course, the decision will be taken by the Board, is also to look at examining suspending the dividend for three, four years.
It does not make sense to give dividend, pay tax on that, then ask rights issue for these same investors to put in money as rights issue. We are examining this. A decision, of course, will be taken by the Board in the April Board meeting. Overall, I think the business remains good. The demand for the next quarter is also good, and we have finally received the approval from the European OE. Mass manufacturing for that has started. Also, on a major import substitution of a domestic major, which is a large quantity and it was a very high-end quality. We have successfully got approval and mass manufacturing for that too has started. Sales for that will start happening from January. We are on track in terms of all our workings.
Our new HT line will get commissioned by December, and the new peeling line will get commissioned by early November. With this, we will have some more capacity, more flexibility to service customers better. So capacity increase will be for peeling. Overall capacity is still constrained by the environment approval of 300,000 tons. We have applied for increasing the capacity to 360,000 tons. We seem to have got a recommendation. Maybe this may happen, but till we have not received any letter so far. But till we have not received any letter, we do not have any further information at this point in time. That is all for opening comments. Over to Mr. Singla, CFO. Then, of course, we will go over for question answers.
Thank you. Good morning, everyone. On the financial part, we have already circulated the media brief, and as per this, our total sales for the quarter has increased on year-on-year basis by 27%. Revenue from operations is up by 39%, and consequently, EBITDA are up by about 50% for the quarter over the corresponding quarter of the last year. The main reason for the increase in profitability, apart from the robust demand, which Sachit has already explained, is also coupled with the operational efficiencies which we have started deriving from the CapEx, which we have undertaken last year in the form of this putting up KOCKS Block and the reheating furnace. Really we have started now getting some benefit in terms of cost saving from these CapEx in the second quarter, and going forward it will further increase.
Of course this power plant is also yielding us the benefit. This quarter in other income also, GST benefit is a little higher than the corresponding quarter because the GST benefit was sanctioned by the government for seven years. The seven-year period has over by August 2026. Now we are left with only electricity duty benefit, which will continue for 10 years and the validity is up to August 2029. That is all on the operational side. Now I request that we-
One more thing I think is that our EBITDA per ton is on the highest part of our range. I will request you not to treat that for now as a standard kind of a thing. We still believe the EBITDA range will be between INR 9,000-INR 12,000 EBITDA per ton.
Currently we are at the higher end of the EBITDA range.
That is all from our side as initial opening remarks, so we are open to questions.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Disha from Sapphire Capital Limited. Please go ahead.
Hello.
No, you are audible.
Yeah. Thank you so much for this opportunity. Couple of questions. Firstly, sir, you mentioned our EBITDA margin has sharply improved. How much of this has been driven by inventory gains?
We don't separate out those, but there is an element of inventory gains. As I said, these are not sustainable numbers.
If we get it one quarter, maybe we get something next quarter. Those are not in our control. Our guidance remains INR 9,000 - INR 12,000 as EBITDA margin.
Okay.
I'm sorry, ma'am. Just to add that from last year, from July 1, 2025, we have shifted to SAP S/4HANA. And in that we are doing the valuation based on the each batch, and whatever the material has been issued, accordingly, the valuation is done. So there is no, the earlier concept, which we were revaluating based on the last three months of average. So now it is on batch-wise costing. So each batch is having its own costing at the time of production. And accordingly, that cost is carried till the sale, and accordingly, the costing is done. So there is no revaluation of the inventory at the end of the month or at the end of the quarter.
Okay. And sir, the volume growth for this quarter.
Sorry?
Yeah.
Yeah.
The volume growth for this quarter has been very stellar. So you mentioned that the demand you see was very strong. Do you see this momentum sort of continuing ahead and maybe will surpass the volume guidance that you've given? Do you see that as a possibility?
No. See, second quarter is always the best quarter because this is a build-up for inventory for the festive season. So unlikely that we've eaten up our inventories of finished goods and billets. So this kind of volume is unlikely, but clearly we will be at the higher end of our, be a bit higher than our initial forecast. So, we expect sales of about 260,000 tons now for the year. Budget was about 260,000 tons.
Okay. And sir, also on the realizations, there has been a sharp improvement. Do you see that? You mentioned because of the demand, supply imbalance, so what sort of average realization should we expect for this year and going forward?
Average realization, I think it will continue at the same pace because we are getting the price increase. In the first quarter also, the price increase was the same, second quarter also, so third quarter also expecting some price increase. So this average realization will continue for two years, or maybe little higher.
Okay.
The other companies have sent out letters for price increases, which are ranging between INR 3,500-INR 4,000 a ton. Those are letters which have gone out. What will be the final settlements will be seen. So far, no settlement has happened for this increase.
Okay. And you mentioned, sir, for the forging, are we expecting forging to be?
Can you come back to the queue, please?
Sure. Okay. Yeah.
Thank you. Anyone who wishes to ask a question may press star and one on the touchtone telephone. The next question is from the line of Josie Haveliwala, an individual investor. Please go ahead.
Hello.
Yes.
Hello. Am I audible to you, sir?
Yes.
Thank you for the opportunity, sir. My first question is, the capacity is at 3 lakh tons for billets and 270,000 tons for rolled bars and 48,000 tons for bright bars, right? What are the current utilization levels, and the principal bottlenecks and the near-term opportunity to improve it without any major incremental CapEx, sir?
Rolling mill capacity is also 3 lakh tons of input, which leads to 270,000 tons of output.
Okay.
After the new reheating furnace was commissioned, which was commissioned in March, after that the capacity has gone up to the full rate. This is the full capacity. We cannot produce more than this because of environmental approval. If we get the environmental approval to go up to 360,000 tons, then we will be able to produce more.
Okay. Sir, basically borrowing has been increased to INR 162.93 crores as of 30th September , which was INR 92 crore at the end of Q4. While our trade receivable rose to INR 410 crore from INR 277. What explains this moment, sir? What are the actions we are planning to take to improve the cash conversion cycle and the working capital efficiency, sir?
Actually, there is a reclassification this time because of the changes in the Ind AS.
Okay.
Earlier, there were some creditors which were against discounting of the LCs were clubbed under payable. Now, because of the changes in the Ind AS, those have been reclassified in the borrowing, sir.
Oh.
Otherwise, in total, if you will see, taken together, borrowing and the creditors, there is no increase. Rather, there is a decrease.
Okay.
Yes.
Our raw material inventory carried forward from the previous quarter supported the-
Can you come back to the queue, please?
Okay. Got it, sir. Okay. Yeah.
Thank you. The next question is from the line of Ritwik Sheth from One Up Financial Consultants Private Limited. Please go ahead.
Yeah. Hi. Good morning, sir, and congratulations on a great deck. Sir, two questions. Firstly, on the brownfield expansion, you mentioned that the EC has already recommended, but you are awaiting final approval, right?
There has been a recommendation of a committee. Now, when the final approval will come, whether some conditions will come, those are all awaited. So till we have something in our hand, we do not know.
Right. And sir, once this final approval comes, say January 2027, hypothetically, how long can we take to increase our capacity from 300,000 tons to 360,000 tons?
There is not also a when, there is also an if question. If the approval comes,
Right
and when it comes. It will take about a year or December next year, whichever is later.
Right. Got it. And indicative CapEx for this?
Why I am saying December, if the approval comes in October end itself, in the next one month.
Okay.
Still, it will be December because we need a 15-day shutdown.
Right.
Shutdown cannot be taken in the season. So we have to look for a lean period for a shutdown.
Typically, the leanest period is December end, when the OEs go on a shutdown, major shutdown for a week, 10 days. That is the leanest period. Most probably we will plan a shutdown at that point in time.
Again, if the approval comes and when the approval comes.
Right. Got it. My second question is the European OEM approval. What kind of contract is this going to be? Is it going to be on a spot basis, or it's a long-term contract? What kind of volumes is possible?
Auto industry does not work. I mean, we don't operate on any spot contract.
Prices are fixed, and every quarter those prices change
Right
based on the negotiations that various steel companies have with various OEs.
The prices change as per that. This European OE is new to the Indian market, so they will figure out with us whether they want to go with the Indian system or they will go with the European alloy system, because Europe has a different set of pricing. We are flexible. We are open to both because with a lag, both match eventually.
Okay. Sir, actually, I was asking from the volume perspective. Sorry. Is there any fixed volume that they have committed?
We don't disclose volumes of each customer like this.
Sure.
Since we are anyway running full, so eventually if the volumes increase, we will reduce our less paying customer.
Mm-hmm. Okay. Sir, I have a couple of more questions. I'll get back in the queue.
Okay. Thank you.
Thank you.
Thank you. Participants, in order to ensure that the management is able to address questions in the conference, please limit your questions to two per participant. The next question is from the line of Divyansh Gupta from Latent PMS. Please go ahead.
Hi, sir. Good afternoon. First question regarding financials. So the incentives that we receive from the government, in the other income, is it recognized based on accrual or only when we receive the money. And if it's on accrual, then what is the typical timeline between accrual and receipt of the money, and any delays in government that we have experienced?
There are two types of incentive. One is GST and another one is electricity duty. So electricity duty, regularly we are getting in our monthly power bill. Secondly, GST refund. GST refund is basically centralized, managed by the central government. So GST refund is received by the state government. So normally it is a lag of two to three years time lag. So we are recognizing on accrual basis, but to get the money in cash from the state government, normally it takes three years.
Got it. Therefore, the second related part to the question is, if we see the financial, we see a large jump in the account receivables. What is driving such an increase in account receivable if I just look at it from a number of days perspective? I know sales have increased, so amount should increase, but on days basis also it has increased.
Yes, it is directly in proportion to the increase in sales. Because if you will see, the sales numbers are also during this quarter is more than 70,000 tons of sales, which in Q1 was only 59,000 tons. So the difference, the incremental sales of 11,000 tons, which happened in the last two months, August and September, is leading to this high receivables. Some effect.
Got it. So there's no increase in days on a BAU basis. It's just the matching of-
In number of days, it has increased by four to five days only because of some sales to the customers who are having a high credit period.
Got it. The second question is, what would be the export sales deemed or direct in this quarter?
It is almost in the same ratio as was there in the last year. So 6%-7% is direct and another 6%-7% is indirect through ASC.
Understood. Sir, just the last question. I know there is a limit of two, but just the last question.
Can you come back in the queue?
Sure. No worries.
Thank you. The next question is from the line of Anand Darshan from 360 ONE Capital Market Private Limited. Please go ahead.
Good morning, sir. Congrats on the great set of results. Sir, my first question is regarding the new revised CapEx. You had mentioned there has been an upward revision for the CapEx numbers now, sir. So what is your revised CapEx for both the new steel plant and forging plant, and what payback period we will be assuming for the new numbers, sir?
As I said, we are still revising all those things. This has not been declared as yet. This will all be done by March, April. So we will have a better idea because we are still reconfiguring some of our things to service the non-automotive segments, which are becoming very attractive now.
Sir, did you see like maybe 20% upside of cost or something like that, sir?
As I said, we are not sharing any information at this point in time.
Okay. Right, sir. Sir, my next question is regarding the forging facility.
Forging, the cost will be lower than what we had budgeted.
Oh, right, sir. Regarding the forging facilities, sir, we had around INR 475 crores of CapEx planned. Can it roughly absorb around 65,000 tons of steel, sir, from our facility?
No. Initially, it will absorb about 15,000 tons annually at full capacity, and it will take some time. Because we are not new builders, it will take some time to build up to full capacity.
All right, sir. This is the phase one, right, sir? 15,000 tons it will be absorbing.
That is the first time that we are putting up. That is why.
Okay. Sir, on the EBITDA range, which you had mentioned as INR 9-INR 12 per kg. Is it for the next two quarters, or what is your guidance for the next year also, sir?
No, this is our guidance for the foreseeable future. When we change the guidance, we will change it. We do not look at quarter to quarter. We look annually.
Great. Sure, sir. Sir, regarding the import substitution which you have mentioned-
Can you come back in the queue?
Sir had requested to come back in the question queue. The next question is from the line of Akash Rawal from Sanghvi Family Office. Please go ahead.
Hi. Thank you for the opportunity, sir, and congratulations on great set of numbers. Sir, just want to understand how much CapEx is budgeted for the next three years. Like FY 2027, FY 2028, and FY 2029. And in proportion to that, how much debt we are going to take? Hello?
It will be about INR 150 crores for the existing plant.
Okay.
For the steel plant, as I said, we are still tempering the final figures that we will be investing.
Okay. Sir, the debt amount-
Less than the INR 475 crores budgeted.
Okay. Sir, if I assume cumulatively, INR 1,000 crore debt can be taken in the next two years?
When we finalize everything, we will share in the next year, we said in April. Do not make any assumptions, though, that we have no comments at this point in time.
Okay, sir. And sir, just want to understand your strategy around the non-automotive OEM part. What are the steps taken by the company over here?
We are starting with ingot casting, which is the route to make specialized steels. This is something that we will start in the end of November, it will start. It will take a couple of months to stabilize, and then we will figure out the markets. There are attractive segments, and we will gradually get into those segments. Tool and die steels is one, oil and gas is another, railways is a third, then bearings later. Eventually, there will be aerospace, defense. There are several sectors which open up. But today we do not have much capacity, so we are just going to be seeding some of these segments. And then when the new plant comes up, we will have the capacity to have higher diameter blooms. Some of that will go into automotive for sure. But we will also be able to make steel for railways, for the windmill sector.
We are seeding those sectors now, and the real volume will come when the new plant comes up.
Okay, sir. Thank you, sir, and all the best.
Thank you.
Thank you. The next question is from the line of Chaitanya Ramesh Rao, an individual investor. Please go ahead.
Hello, can you hear me?
Yes, sir. Please go ahead.
Yeah. Congratulations on a good set of numbers. My question was regarding the entry of VSSL into the ring gear section that you had mentioned in the last conference call. What is the quantum that we are looking at? I suppose there was a timeline given of completing the commissioning till next October, that is one year from now. What will be the capacity and what is the competitive environment currently in India and what is the plan of VSSL regarding that sector?
We fully stabilized commission and so on by March 2028. This is something which is a highly automated line. This is a specialized line, which gives us an advantage in terms of better quality and much better yields compared to the normal methods of manufacturing in India. Already we have got approval and orders from one of the big global tier ones. The process has started, but this is a new business we are getting into, so it is a slow process. We do not have any certain plans. Steel, we will have certain plans. Forging, there is no. Aichi, our partner, they have nine such lines. They are experts in this method of steel making, forgings. They have dispatched a senior level person who has been appointed as president of the forging business. Aichi, the Japanese, will be driving this business.
Of course.
Is there any indicative tonnage that you are looking at and expected EBITDA levels from those?
At full capacity it will be 15,000 tons.
Okay.
It will take some time to build up to that capacity.
The EBITDA realization will be higher than the current level?
See, this is a new business. Give us some freedom to start learning this business before we start committing something.
Sure. Thank you so much, sir. Best wishes for your journey.
Thank you.
Thank you. Anyone who wishes to ask a question may press star and one on the touchtone telephone. The next question is from the line of Ritwik Sheth, One Up Financial Consultants Private Limited. Please go ahead.
Yeah. Hi, sir. Thank you for the follow-up. So on the greenfield plant, is the land acquisition completed, the entire-
The land acquisition for smelting part is completed, and for the rolling is ongoing, and we should be completing it by January of next year. Plan or roadmap.
Okay. Then we will have to apply for the EC, right?
EC will be applied within this year because EC for the steel, for the melting part takes a longer period. That will be applied within this year.
Okay.
By December we would have applied for the EC.
Okay. Got it. Okay. And sir, any ROCE or EBITDA to capital employed for the forging plant you would like to lay out for the
Forging, we are not making any comments at this point in time. It is one line, which is a small line. It is sub-optimal.
It is an entry into a business.
Got it.
We have the advantage of our partners who are experts in this area.
We are relying on their knowledge.
Once we add two, three lines, that is when EBITDA on capital employed and all this start coming in.
Sure.
For now, our focus is only successful implementation of the project, getting the production lines operating, and getting quality right and the throughput right. Those are our objectives.
Got it. And just one last question from my end. The brownfield expansion, if and when we get the approval from 300,000 KTPA to 360,000 KTPA of melting capacity, what kind of CapEx will be required approximately?
It is not substantial, but about INR 100 crore-INR 115 crores.
INR 100 crores-INR 115 crores. Okay, got it. Okay, sir, thank you and best wishes for the upcoming fiscal year. Thank you.
Yeah. Thank you.
Thank you. We have the next follow-up question from the line of Divyansh Gupta from Latent PMS. Please go ahead.
Hi sir. The land acquisition we just answered was one of the question. The other question was, we were hearing that one of the other listed specialty steel player is
in the process of increasing its capacity by about 40%-50%. The last time when we discussed it was that the industry is capacity constrained. So just wanted to understand how do you see, let's say, the request for price increases in view of upcoming capacity by competitor impacting our realization, or even EBITDA per ton?
I don't waste my time on trying to forecast what price increase will come or not. I focus on our operations, and the price increase will depend on market situation at that point in time. Previous quarter, we got a better price increase than what we were anticipating. We can easily get it wrong here and there. We focus on our INR 9,000 - INR 12,000 EBITDA per ton. But my understanding is, any new plant which gets announced will take three years to four years after announcement for it to start. So I don't know which company you're talking about and when they made the announcement, and what is the status of their project. So I have no idea. But to my understanding, next two years, no new capacity is coming up. That is my understanding, but I may be wrong.
Got it. All right, I will take it offline. Understood, sir. That is it from my side.
Thank you. Anyone who wishes to ask a question may press star and one on the touchtone telephone. The next question is from the line of Namish Pandya from NP Investments Management. Please go ahead.
Hello, sir. Congratulations on good set of numbers. Am I audible?
Can you be a bit louder, please?
Hello. Am I audible, sir, now?
Yeah. Now you are.
Yeah. Okay. Thank you. First of all, sir, congratulations on the good set of numbers. I have a couple of questions. First thing, what measurable benefits have been realized from the KOCKS Block and reheating furnace CapEx throughput, yield, energy consumption, product quality, and cost per ton? What further benefits remain to be captured?
With the combination of KOCKS Block and reheating furnace, we have been able to increase our capacity to 300,000 tons. We can actually increase this capacity even beyond this. That depends on once we get the environmental approval, but we can now go up to 330,000 tons. That is one. The second is that quality has improved all around. Our rework and rejections have come down. Third, we were doing job work from outside, so that has come back in largely. That is why the job work area of our expenditure has come down, and therefore the margin has gone up. Yields have become better because from a 4.2 m billet, we have gone to a 5.2 m billet. The wastage happens at each end of the billet.
Now the wastage is happening at the end of a longer billet, therefore the yields have improved.
Understood, sir.
Also, because of the better quality, we have been able to stabilize our production at one billet size. This will be fully implemented in the next six months. This will give better flexibility. That means we can service customers better using the combination of the billet size as well as the KOCKS Block.
Absolutely right. My next question is: Which end markets are contributing most to incremental demand passenger vehicles, two-wheelers, tractors, bearings, engineering, or other applications? Sir, are any customer segments showing signs of slowing?
Across the board, the demand is there.
Okay.
Tractors, what I am hearing from all the customers seems to be slowing down a bit.
Oh, okay, sir. Got it. That is it from my side, sir. Thank you.
Thank you.
Thank you. Anyone who wishes to ask a question may press star and one on the touchtone telephone. The next question is from the line of Deepesh from iWealth Management LLP. Please go ahead. Deepesh, kindly unmute your line, please. Deepesh, requesting you to unmute your line, please. As there is no response, we move on to the next participant. The next question is from the line of Vansh Rathore from JJ Advisory. Please go ahead.
Hello. Hi. Good afternoon, sir. Congratulations on a great set of numbers.
Thank you.
I have a few questions. As the management mentioned that they are targeting a mix of roughly 70% automotive and 25%-30% non-auto revenue by FY 2035. Among the non-auto verticals, railway, oil and gas, bearings, and tool and die, which segment are we particularly prioritizing first for the near-term scale? Do we see any growth in the near term?
Near term, there is very limited that we can do because we are running at full capacity and we are focused on our current business, automotive. We are taking trials and we will start taking trials in coated die steels. We are taking trials in each one of these segments. Then we will have the products ready, and really, once the new plant comes up, we will be able to start expanding the product.
Okay. Sir, the next part of my question would be, what does the management think about the outlook for the domestic automotive segment in the country over the next one or two years? What do you think about the sector?
We are too small a player to start focusing on what the automotive sector will do. You all have better access to the auto company than their con call. My understanding is-
Yeah
the auto companies are bullish on growth, so we do not see any problem. More so, some of the auto companies are diverting better shares to us for the more sophisticated qualities. We do not see any problem in meeting our volume targets.
Okay, sir.
We don't see a problem in filling up the capacity. Of course, giving it two, three-year time to fill up the capacity with new plant. We don't see much of a problem in sales.
Sir, have you identified any downside scenarios such as any risks that you factored in for your growth outlook? Any downside scenarios?
There are several risks. One, there's a project implementation risk. Two, I think that's the biggest risk that we have.
Mm-hmm. Okay. Apart from risk?
Everything else is secondary.
Okay, sir. Noted. Thank you so much for taking my question, sir. All the best for your future, sir. Thank you.
Thank you. The next question is from the line of Manaswini from Oracle Investments. Please go ahead.
Hello.
Hello.
Congratulations, sir, on the good set of numbers. My first question to you is, revenue growth has outpaced volume growth. How have realizations changed, say, by product category, and what is driving the price? Is it customer mix, value-added grades, market prices, or probably contractual resets?
The largest impact is market prices, which means contractual reset, because we don't sell in the spot market.
Right.
That's the largest element. The price increase, because of commodity prices going up, the price increase has been substantial, which has led to, over the last two quarters, the prices have gone up, for some OEs, around INR 8,000. Some OEs, little less because they settled with a lag. And some OEs are the middle of settling, which has not yet fully settled. Second quarter is still not fully settled just now.
Okay. That makes sense. Also, I had another question. Realistically, what market share or tonnage can VSSL capture here over the next, say, three to five years?
We are too tiny to have a large market share. Our capacity is 200,000 tons. This year, we do over 265,000 tons. The market size is about 8 million tons, and there are
several products that we are not even present in.
That makes sense.
Again, these are all questions when you are a larger player, then you look at market share and so on. For us
Yeah
it is just how much capacity we can put up and sell that capacity.
That makes sense, sir. Thank you so much. Thank you.
Thank you.
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Sachit Jain for closing comments.
Thank you so much for showing so much interest in our company. Your questions are all well noted, and we will have more precise answers in the next six months. With this capacity that we are putting up, we will become a substantial player in the alloy steel bar market. We still will not have wire rods, which is a very large segment of the alloy steel market. We will not be in that segment. In the bar segment for cars and two-wheelers, we will be a major supplier in India. Overall, we remain optimistic. The business is strong, and there is the tailwind of green steel. More and more customers are coming to us talking about green steel. No price benefit as yet, but share of business benefit clearly seems to be visible as far as trend is concerned.
Beyond that, we remain optimistic for the future. Thank you so much.
Thank you. On behalf of IIFL Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your line.