Walchandnagar Industries' MD & CEO Chirag Doshi discusses India's ambitious #Chandrayaan3mission with Sajeet Manghat. #BQLive
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00:00 Welcome to BQ prime. The Chandrayaan 3 is expected to land on Wednesday evening and
00:06 there are many Indian private sector companies which are contributing to the space and the space
00:14 ventures that India is undertaking. And today we have with us a company which is more than
00:21 100 years old with 50 years of experience in the space and aerospace segment. This company
00:28 is Valtron Nagar Industries. And joining me is Chirag Doshi who is the managing director and
00:33 CEO of the company. Mr. Doshi, first of all you know you've been there working with ISRO for last
00:41 50 years, almost from the ASLV to the GSLV Mark 3 you have contributed with boosters and rocket
00:53 casings. How do you see this journey of private sector in the aerospace sector?
01:01 Yeah, so thank you first of all for having me on the show. I think it's been a brilliant journey,
01:09 I've said this in the past, our partnership with ISRO I think has been a sort of an example of how
01:18 government and public sector can work very efficiently with the private sector when we
01:24 want to sort of achieve something that is unique, that is different, that is game-changing as
01:30 far as India and the world is concerned. And it's been now 50 years for us and we're very proud
01:36 to be associated with the entire space program as we are with the defense program and the nuclear
01:43 program and I think it really is a shining light for our country that we've shown that it is really
01:49 quite easy for private sector companies to work with the government and I think that's been part
01:56 of the reason why over the last three, four, five years with Honorable Prime Minister's
02:01 Atma Nirbharta mission, many many private sector companies have now found the confidence to sort of
02:08 enter into some of these what were originally government-focused and government-run programs.
02:16 You know, if you look at the history of all Chennagar industries and your founder, you were
02:21 one of the founding members of Hindustan Aeronautics, Hindustan Shipyard and Oriental
02:27 Insurance as well. So before the state took over those companies and today those companies are big
02:33 in their own way. Give me a sense of how big and what kind of business segments you are in
02:39 Walchand Nagar Industries. Yeah, so you know we are honored and proud to have the name
02:46 of Walchand Hirachand in our name of our company and I think our company has
02:51 sort of endeavored to fulfill his vision and his passion of being patriotic and being sort of at
03:00 the cutting edge of indigenization and so while he did cars, planes, automobiles, ships and various
03:10 other industrial products, we ourselves are also endeavoring to ensure that we continue that
03:15 that innovation and that legacy whether it be the space program, whether it be the defense program,
03:20 the submarine program, indigenization of gearboxes for all our naval vessels,
03:29 the nuclear program. We are also doing a lot of work now in crushing and grinding equipment,
03:35 a lot of which used to get imported into India. We are now trying to manufacture a lot of
03:40 equipment for cement, for petrochemicals. We are looking at a potential play in equipment
03:47 for hydrogen when that plays out over time. So I think we just continue to evolve our product
03:53 offerings as an organization and ensure that we continue to focus with Prime Minister Modi's
04:01 Atmanirbhar mission at the top of it all, making India being important and whatever sectors require
04:09 our investment and our ability to manufacture, we will be in those areas.
04:18 How big is the space sector for you in terms of revenue on an annualized basis?
04:23 So as a number it takes, it's about 25% of our entire turnover but contributes probably a lot
04:34 more than that to our EBITDA and what you must remember is that most of our material that we use
04:44 for manufacturing our products for space come free issue from the government. So it's really
04:50 purely labor and labor oriented work. So if we were to sort of invest in the material it would
04:56 be a lot higher than it is but it's about 25% of our entire organization's turnover and will
05:04 probably grow as a percentage over the next five years. What kind of order book that you see for
05:11 space flights because given the kind of capabilities that you have acquired over the last
05:17 five decades, how many PSLVs or boosters for PSLVs and GSLVs will you be able to manufacture
05:24 every year? What kind of capability or bandwidth that is there in the organization?
05:28 Yeah, so today our existing order book for aerospace itself is about 180 crores pending
05:38 orders to be executed out of our current 900 crore order book but we sense and we've had of course
05:46 multiple discussions with ISRO, ENSIL with the privatization of PSLV with L&T and HAL.
05:54 So we suspect that the requirement for launch vehicles over the next five to seven years will
06:00 probably double if not maybe go more than that with the number of launches that are planned
06:07 annually both through ISRO and ENSIL as well as through the private sector. So we are gearing up
06:14 for probably a round of fairly large capital expenditure in the next 12 to 18 months where
06:23 we will set up a new facility and a new line to cater to that enhanced requirement whether it be
06:30 the requirement through ISRO itself or through the private players or the privatization of some of
06:38 ISRO's launch vehicles like the PSLV and now the SSLV tender which is out. So we are very
06:46 bullish about aerospace as an opportunity for Valchandagar and we will continue to invest and
06:53 ensure that we are able to cater to the enhanced requirements of the country. What is the kind of
07:00 capex that you're looking at? We've not fixed the number yet, I think that will be dependent on
07:06 ultimately when the board gets together and sees the presentations made by each of the divisions
07:11 and businesses but I suspect that in order to scale our business over the next five years we will
07:19 need to do a capex anywhere in the region of 60 to 100 crores in the next let's say 18 months to be
07:27 sort of more conservative. The other important segment that you cater to is the missile segment
07:35 where you have been producing for Akash missiles and even for Agni if I'm not wrong and now you've
07:45 got Astra as well which will go into production I think this year. How big is that opportunity for
07:51 you? So the opportunity, so today the contribution from the missile business is not very large but it
07:59 has been a I mean similar to how ISRO was in the 1970s and the 1980s it has been a 10-year plan to
08:07 sort of engage and get invested in all of our country's missile programs and we started with
08:14 Agni from a strategic perspective but Akash from a non-strategic has been sort of a big
08:22 investment of ours and since Akash we have now got qualified in 10 different missile programs,
08:29 Astra, Rudram and VLR, SAM and many others. We expect all of those missile programs to scale up
08:36 in the next 10 years and so we will be ready capacity-wise and it will be step by step as you
08:44 rightly alluded to. There's a new generation of Akash coming, we've already got some orders for
08:51 that. There is a Astra order that has already been received by us, I think 200 pieces may be the
08:59 number and I think all of these programs will scale up over the next five-seven years and
09:03 as we get a grip on what the numbers are going to be from our end customer, we will then decide
09:12 our sort of investment plan to make sure that there are separate lines put at the factory to
09:20 take care of all the programs simultaneously. You know in the sea system or I think submarines is
09:29 where you have been doing some work as well. Give us an understanding of what is the kind
09:35 of opportunity which is coming your way because you have new submarine tenders which are going
09:40 to come out, both Mazagon and L&T are front leaders for bagging those contracts. Apart from
09:50 that you have frigates which are there and you have also COVID which are coming in, landing
09:55 platforms which are coming in for many of the shipyards and ship building builders. One of the
10:03 ship building companies were telling us that in the next three to five years there will be up to
10:07 1.2 lakh crores of orders coming for the shipbuilders. So what kind of opportunity that throws up for you?
10:14 So as far as seafaring vessels are concerned, we really focus on two three areas. One is of
10:21 course the gearboxes. We have done a lot of work since 1960 on a lot of our old frigates and
10:29 corvettes and destroyers, Godavari class and thereafter. So we've built gearboxes for
10:36 many and a large number of our naval vessels. We've also had the opportunity to build the gearboxes
10:43 for our Arihant class submarine and therefore being a company that has the ability to build a
10:51 fully silent gearbox for submarines. So I think our focus on all the naval platforms will be
10:57 first and foremost to indigenize all gearboxes that get installed in our Indian made
11:04 vessels, whether submarine or any of the ships. I think the government itself has a desire
11:13 that our dependence on foreign companies for gearboxes should diminish if not go away
11:20 completely and Valchnagar needs to be at the absolute forefront of that. Other than the
11:25 sort of gearbox, we will ultimately want to look at entire propulsion systems
11:30 and as we have done in some of the submarines and some of the ships, we will of course look at all
11:40 the missile launchers that go on board all of these vessels. So those are largely the areas
11:47 that we will focus on. We're not really into hull building or any of the metal work there,
11:53 but I think these two opportunities are large enough for us to be completely occupied for
11:59 many years to come in those two divisions of ours. And what about the nuclear space? Because
12:06 you've been recently, I think you backed an order from NPCIL of 250 odd crores for nuclear
12:13 plant as well, right? So that also takes care of good, what kind of work that you do there for
12:20 nuclear plants? Yeah, so we've been making the core equipment of many of the nuclear reactors
12:26 that NPCIL and Atomic Energy Commission have built over the last 40-50 years. So the Calendria,
12:33 the Enfield, tanks, reactor header vessels, everything that goes sort of into the core of
12:42 the reactor and it's highly critical work. It's not easily doable. We are lucky that after a very
12:49 long break of nearly 10 years, I think the government and NPCIL have now decided to move
12:56 forward with their nuclear program. There are 10 plants, 10 sites that are going to now get
13:04 Indian-made nuclear plants. Four or five of those have already been tendered. We've been blessed
13:14 to have won nearly 300 crores worth of orders from those four or five sites. Already in execution,
13:20 we expect to start delivering as early as 2024-25. And these orders will go on till about 2026.
13:27 And in the due course of time, I am sure that NPCIL will release tenders for the rest of the
13:34 plants. And we hope to win those as well and increase the order book and execution of what
13:43 is required for... I think nuclear is going to play a big role. I think the country has realized
13:48 that frankly nuclear is safe, nuclear is clean energy and it is very useful when we want to go
13:55 into this shift to hydrogen to augment all the solar and wind power that we generate in the
14:04 country. And I think I'm glad that the government has now taken this decision and we look forward to
14:08 further orders in the next few years. Mr. Doshi, you mentioned your interest in hydrogen.
14:18 Give us a sense of how big that opportunity is for you, what kind of investment that would
14:24 require from you and where is your expertise lie within this hydrogen ecosystem?
14:29 Yeah, so we will continue to always be an equipment manufacturer. I think that,
14:35 let's be clear, we're not going to produce hydrogen. I think that will be left to many
14:39 of the other companies who have already announced their hydrogen plants. But for them to be able to
14:45 generate that hydrogen, to store it, to transport it safely and efficiently,
14:52 there is going to be a need for a large number of vessels, storage tanks. So we are doing a study
15:02 and exploring the entire value chain as it stands. And once there is a more detailed
15:10 plan, we will, of course, in due course of time, announce it. And we will exactly know
15:18 what are the equipments that we're going to offer to the end customers, just like we do with all
15:24 the rest of our process equipment and crushing and grinding businesses. So this will just become
15:29 part of our process equipment business. But it's still a little premature. We need to get a lot of
15:36 clarity on how much capacity is coming up, when it's going to come, where it's going to come,
15:41 and what are the sort of equipments that people are really going to need from organizations
15:46 like Valchandagar that offer a certain quality of and scale and size of equipment that may be
15:53 required. Give us a sense of how your order book is expected to grow given the kind of
15:58 opportunities that are coming in. Last year, it grew by nearly 36% to 909 crores.
16:05 With so much of opportunities coming in, do you see the growth taking a higher trajectory from
16:12 here on? Yeah, I mean, I'm sure we would like it to happen. I think there's huge opportunity
16:19 the next four, five years and us sort of coming out of our entire sort of restructuring and the
16:25 company also gaining a little bit of momentum over the last few months has given a lot of
16:32 positivity to everyone in the system. I think with the right amount of cash generation and maybe
16:40 you know, reduction of debt, there will be a lot of cash in the system in the next 12 to 18 months,
16:47 investing that appropriately to expand our capacities in the correct way. And then looking
16:54 at sort of scaling up, I think there should be no reason why our order book shouldn't continue to
16:58 grow at a similar pace as it has done over the last few years. And you know, some of these new
17:05 opportunities that we talk about may help us accelerate that. So yeah, we're hoping to be a
17:11 fairly good growing company over the next four, five years. Yeah.
17:15 Do you look at raising fresh equity or capital? Is that a requirement for you for future growth?
17:22 What is the kind of debt, gross debt or net debt which is there on the books as of today?
17:27 Yeah, so I'll answer your second question first. I think today, our long term debt is about 37
17:34 crores, maybe 40 crores odd, which we will pay off most definitely in two years,
17:42 but would like to try and pay it off faster than that. Our working capital limits are about 200
17:47 crores, a lot of it is sort of fully utilized, but you know, the cash generation will sort of
17:53 reduce that over time. So I think from a debt perspective, we're absolutely in the right place.
17:59 Whether we raise equity or not in the future, I think that is something that again, the board
18:05 will decide. I think that's a call that they need to, they will take based on what presentations we
18:11 as management make to them of our plans over the next six to 10 months. And I think that will then
18:18 become a, you know, a play, maybe closer to the end of the end of the year by March, we should
18:25 have a better grip on how we're going to if there is a need, and how we're going to raise that any
18:31 amount of money in the future. As a management, do you see a requirement of capital, given the
18:37 fact that you are hitting, you know, the cap on working capital and working capital is the
18:43 biggest thing for companies in the defense and aerospace industries, because it is a cycle of,
18:49 you know, money coming back, and it takes longer time because you're dealing with either state
18:54 agencies or the center, in many cases, or centrally owned companies. So do you see
19:01 working capital enhancement as one of the key triggers for raising capital going forward?
19:10 No, I don't think so. I think we've done a really great job of managing our working capital,
19:15 especially, like you said, with even government agencies. But I must say the agencies that we
19:20 work in, work with are fantastic, when it comes to sort of releasing money and paying on time.
19:26 And we've also moved away from our sort of government owned sugar play to more private
19:32 sector, you know, crushing, grinding, cement, fertilizer businesses, who are wonderful when
19:37 it comes to sort of making payments. So it's not the working capital that bothers me. I think,
19:42 I think where the money will be required is when we put our capital expenditure plan in place.
19:46 And depending on what that number is, we may need to look at alternative sources of funding.
19:56 And I think that decision, and all options will get, will get studied and, and then we'll come
20:04 up with the right decision. So I think it will be capital expenditure based rather than working
20:08 capital based. Okay. Coming back to the space thing, you've been closely involved with all the,
20:16 you know, launches. What is the future programs, which you're working on? Are you are you also
20:23 looking at the manned mission, which is expected going forward? Yeah, of course. Everyone is
20:33 eagerly anticipating Gaganyaan. We've done a lot of work for the Gaganyaan program, as we have done
20:41 for every program that ISRO has, that has, you know, we participated in we, we make all the
20:48 boosters, all the nozzles for stage one of every launch vehicle that goes to space. It'll be a
20:56 very proud moment for India, when we put, you know, some of our brothers and sisters into space.
21:03 But I think there's so much more for us to do. I think Chairman ISRO is incredibly visionary.
21:10 I think the entire space sector is going to have a lot of young entrepreneurial private sector
21:18 players, bringing in a lot of incredible achievements for this country. And we just
21:24 want to be a part of it in all possible ways. Today, we make, you know, only launch vehicles,
21:30 but we're exploring many other areas that we want to participate in, beyond just the launch
21:35 vehicle manufacturing, where we think we as a company can add a lot of value to the space
21:42 program. So there's much to be studied much to be brainstormed internally, and then announced
21:50 to the rest of the world once we decide to sort of enter new areas, but it's a it is, it is by far
21:56 Valchan Nagar's number one focus area is aerospace today and that that is, and that is by, by no
22:06 doubt going to be our absolute thrust area going forward. Mr. Joshi, we're going to see the landing
22:12 of Chandrayaan-3 tomorrow evening. We wish best of luck to ISRO for that as well and to you as
22:20 well for the future space flights that you're going to help, you know, navigate for us. Thank
22:26 you very much for joining us in BQ Pride. Thank you so much for having me.
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