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00:00Let's go to our first management.
00:01We have Amitabh Bhattacharya, CFO at Hari Om Pipes,
00:05to talk to us about, of course, their fund raise,
00:08but as well as what the future growth
00:11outlook really looks like.
00:12Mr. Bhattacharya, first off, talk to us about the fund raise.
00:16How critical and where are you investing?
00:19Yeah, good morning.
00:20Actually, on 24, 2024, our board approved an enabling resolution
00:26for a qualified institution placement of up to 700 crores.
00:31But as you heard that, as per the SEBI regulation
00:34and the insider trading norms, I'm
00:36restricted from sharing further details at this moment.
00:40So it is already in public.
00:44Got it, Mr. Bhattacharya, but in terms of rationale for the fund
00:47raise, could you give us some insight
00:49on what the fund raise will be allocated towards?
00:52Yeah, in the appropriate time, we
00:54have to, as you heard the SEBI regulation, at this moment,
00:59it is very difficult for me that these insider trading norms,
01:02I have to disclose.
01:03In the correct time, the board will be decided
01:06and the board will place.
01:08And once they approve, we'll definitely
01:10disclose in the public domain.
01:13Just wait for a little bit of time.
01:15It will be come out very soon.
01:17OK, sir, and just about with regard
01:19to how debt is shaping up, I'll focus in
01:21on the capital structure.
01:23You've got around 350-odd crore of debt on the balance sheet
01:27currently at the end of FY24.
01:31Does that at all change likely as part of this raise?
01:37Again, it is related to that only,
01:40insider trading norms figure.
01:42But see, as part of the growth from past four, five years,
01:47if you see the first four, five years,
01:48CAGRs and revenue and everything,
01:51the company has grown like anything.
01:54So if you see that revenue CAGR is 54%,
01:57the ROC is last year 19%, and the company
02:01having the sufficient potential to reduce the debt
02:06by their own also within two, three years.
02:11And subsequently, the net debt to EBITDA
02:13will be coming down in a very good manner.
02:16Now, net debt to EBITDA is 0.8.
02:19It will be coming down very fast.
02:22Let's shift your focus on capacity.
02:24Now, the company has been committed
02:27to increase the capacity.
02:28It's grown at a 30% CAGR in the last five years.
02:32What is the target in terms of capacity for the end of FY25?
02:35And could you give us some more details
02:36on what's in the pipeline or under construction right now?
02:40See, by FY25, the maximum, whatever the capacity,
02:44Hari Om expanding its capacity, a significant portion
02:47of their capital expenditure is already completed.
02:52Presently, our finished steel product capacity
02:56is 0.4 million tons, and overall gross capacity
03:00is 0.7 million tons.
03:02And we are targeting to achieve the optimum level
03:06of the utilization of the capacity by the end of FY26.
03:10That is already we have disclosed
03:12in our recent past investors meeting in Mumbai also.
03:16So we have to target it, and the company is very much focused.
03:19After that, as a consistent growing trajectory,
03:24we have to expand it by way of a brownfield model
03:29or satellite model, geographically, horizontally,
03:32and vertically.
03:34And does this involve also new products coming up
03:38to the fore with regard to their contribution to revenue?
03:41Can you talk to us about some of those?
03:43See, actually, we have introduced new product.
03:46Earlier, we are integrated steel player,
03:49totally raw material backed.
03:52Raw material is also producing by us.
03:54That is our USP.
03:56After that, in current financial year,
03:58in the last financial year, we have introduced
04:02new verticals that is only galvanized and cold rolled
04:05verticals.
04:06And in Mahbubnagar plant, we have already
04:08added tandem mill, which can be produced
04:110.4 mm thickness of coil, which will
04:15be used for engineering sectors, automobile sectors,
04:21fan industries, and so on.
04:24So these are the value-added product,
04:27which will be added recent past.
04:30So this will be coming future.
04:32It will be added the more value in revenue terms
04:38and in profitable terms also.
04:40Mr. Bhattacharya, one of the new products
04:42that the company also introduced was GI pipes,
04:44which are galvanized iron pipes.
04:46And now, this is a high margin area, I suppose.
04:48Could you give us more details in terms of the growth
04:51potential, why are these products,
04:52and what kind of margins could the company
04:54see with this product itself?
04:57See, basically, presently, GI and GP,
05:02we are having the EBITDA, it's near to 7,200 something,
05:07as per the last audited financial.
05:10And we are very much looking forward
05:13to get the EBITDA margin in GP and GI,
05:17is subsequently more than that.
05:20And it is up to 8,000, we'll be able to reach
05:24in the coming years.
05:26OK.
05:28And so what kind of margin does this clock?
05:31Because you're likely in early teens in terms of margins
05:34at best on a full year basis.
05:38Sorry, can you repeat the word?
05:39What kind of margins does this product category clock?
05:44Overall, just for your context, you're
05:47in early teens in terms of margins, if I'm not wrong.
05:50Yeah, we are having good margin comparatively to others.
05:55Because our main USP is we have our own raw material,
05:59and that is why we are getting much better margin.
06:04And our USP in terms of this also,
06:07the new product vertical also, we
06:09are expecting some around 12% to 13% EBITDA
06:14will be coming into the new vertical of the GP product
06:17also.
06:18It is coming in the coming future.
06:21And so just overall on a blended basis,
06:23when I'm looking at your margins,
06:25there's a significant shift in product mix.
06:28Maybe say over the last three to four years
06:30towards more value added products,
06:32but not seeing that shift in margins,
06:36is that the correct way to look at it?
06:37Or how should one take stock of this?
06:42No, actually, if you see that last five years margin,
06:45if you see the blended EBITDA, FY21, our blended EBITDA
06:50was 5,756 exactly, to be precise.
06:54And here, our contribution in the value added product
06:57is less comparatively to the other steel products.
07:01Whereas if you see that in next year, FY22,
07:04our blended EBITDA is 8,938, where
07:08we are a little bit shifted to almost 50% more shifted
07:13to the value added product.
07:15And the margin is shoot up.
07:17And as you heard that in FY22 also,
07:20that everyone, the steel market, all the steel manufacturer
07:23players, that is the golden year for everyone.
07:27So we are also getting a very good margin
07:28comparatively to other financial year.
07:31In the next financial year, subsequently in FY23,
07:34it is coming down a little bit of 7,500.
07:37But at the same time, our value added product
07:40is growing much more contributed.
07:43And now in FY24, almost more than 90%
07:46we are contributed to the value added product.
07:48And subsequently, the market, if you
07:50see that price down in the comparatively to FY23 to FY24,
07:55there was a price correction almost all 25%.
07:58After that also, we have achieved 7,200 plus
08:03blended EBITDA margin.
08:04And in the coming future also, if you
08:07see that the government's investment budget
08:11and investment, government is very much
08:13focused to invest in infrastructure, railway.
08:16So therefore, the steel market or steel industries,
08:20whoever the players, are having bright future
08:22in coming five years for India.
08:25So therefore, we are very much keen and looking forward
08:27to get better margin in our financials.
08:32Gaurav, let's talk about your sales volume now.
08:35FY24, when you compare to FY23, saw an 82% growth.
08:39What kind of growth or sales volumes do you expect for FY25?
08:45See, ma'am, to be honest, our growth,
08:48we are anticipated our growth for FY25 is around,
08:53see, in FY23, we have completed our IPO, made an IPO.
08:59And we had pipeline of two new expansion.
09:04And our capacity was expanded almost all double
09:08during the FY23.
09:10And this is coming to the enforce in FY24.
09:14That is why the revenue was jumped from almost all 80%
09:18compared to the last year.
09:20This year, anyhow, we are expecting near about 52%
09:24of growth from the comparatively to the last year.
09:26But this particular quarter is little bit soft.
09:30And after coming to the complete this quarter,
09:33we have to give the correct figure.
09:35But as of now, we are anticipated that somewhere
09:38around 50%, we have to grow.
09:44And so how is pricing evolving here in your segments?
09:51Pricing's a little bit down.
09:52At this moment, see, basically what happened, every year,
09:55if you see the trajectory of the history,
09:58every year this particular second quarter was soft.
10:02And due to that monsoon season and infrastructure work
10:06is a little bit slow down in India.
10:08So therefore, it will be the soft.
10:10But in the coming aspect, in the third quarter, Q3 and Q4,
10:17we are expecting it's a good result.
10:19And the price will be, this is the lowest price present market
10:24scenario in the steel market.
10:27And we anticipated that it will be much more corrected.
10:33Gauram, and in terms of like a one to two year guidance
10:37in terms of your revenues and your volumes,
10:40where does that stand at?
10:43See, already we have disclosed in addition past August also.
10:48So basically, we are expecting that by FY26,
10:52whatever our existing capacity, installed capacity,
10:55that is gross production capacity is 0.7 million
10:59and the net output is 0.4 million.
11:02So we are expecting we will be achieving the 0.4 million.
11:09We can able to use the entire capacity in optimum level
11:13by FY26.
11:15And therefore, we will be definitely
11:17actually almost all whatever our earlier targeted top line,
11:22that much we can achieve.
11:23If you see that last for FY24 to FY26 top line,
11:31so it will be automatically in FY24 audited to FY26,
11:35which will be coming.
11:36It will be automatically doubled.
11:39So you know, please continue, please continue.
11:43Yeah, tell me.
11:45No.
11:46So you know, an FY26 sales guidance of around 2,500 crores
11:50in terms of your EBITDA per ton, is there
11:52a specific target for the same?
11:55We are expecting the EBITDA per ton in FY26
12:00somewhere around 8,000 plus.
12:03And in terms of outlook for the rest of the year,
12:07in terms of pricing and your realizations
12:09in regard to the pricing, what's your view
12:11on how will pricing improve?
12:12Q2 will be soft, but do you expect a pickup
12:15in the second half?
12:17Yeah, if you take, see, every product
12:20having different range of price.
12:23Like for an example, if you see presently GI pipe rate
12:27is coming around 70, whereas the GP pipe rate is coming around
12:3165, and the MS pipe is somewhere around 50,
12:34present scenario I'm talking about.
12:36But on an average, our realization
12:39is coming around near to 56, 57 contribution
12:44of all the products.
12:46So like that, we are expecting the growing of this realization
12:51is almost all near to 59 to 60, which we have got in FY25.
12:56That is unprecedented 65,000.
12:59But that we are not expecting.
13:02But anyhow, we are expecting somewhere around 59 to 60
13:05will be the correct price.
13:07And the market will be, all the corrections
13:10will be made by that time.
13:11And this is the correct price.
13:15Average price realization rate will be coming into the market.
13:18Got it.
13:19And in terms of your revenue breakup, in FY24,
13:21we saw 37% of revenues from MS tubes, 53% from GPCR pipe
13:27and coil.
13:27Is this the mix, that optimum mix that you're targeting?
13:30Or would you like one segment to have a higher share?
13:34Mostly, if you see that, mostly we
13:37are anticipated the most contribution by GP.
13:43And that is our, what do you call it,
13:49MS pipe contributed around 29%.
13:53And the maximum contributed by GP.
13:58So that's the optimum mix you would like to remain at.
14:0169%, almost all.
14:03It will be contributed by FY26 galvanized tube.
14:06Because we have the total capacity.
14:07If you see that our total capacity,
14:10our 3,000,000 tons of capacity, we
14:12are enhancing in our galvanized unit itself.
14:15Whereas our MS pipe segment and backward integration
14:19also, all together having 1,32,000 capacity.
14:23So therefore, automatically 70% near to 69%
14:27are coming from the galvanized unit.
14:30Got it.
14:30And in terms of scaffolding, I know
14:32this is a segment that is rather caters to a niche segment.
14:35But what's the kind of growth potential
14:37you're seeing from that?
14:39See, that is a constant, ma'am.
14:41Because we are not going to expanding
14:43any capacity in scaffolding.
14:46Our existing capacity is 5,000.
14:49And we are almost all using the optimum level.
14:51And we are expecting 4,500 metric tons
14:54can be eligible maximum we can produce.
14:57And accordingly, this top line will be consistently delivered.
15:00And the margin is also consistent.
15:03Right, sir.
15:04So this new issue in terms of fresh equity,
15:09what does this do to both your EPS or unexpressed share
15:14number for FY25?
15:16Do you believe that this dilution
15:17will impact that number in a substantial way?
15:20That's one, because it's a large dilution.
15:23Second is, does it impact your return ratios
15:25in a significant fashion?
15:29Initially, it is showing like that.
15:32And if we see in today, if you see it on today,
15:36we have to calculate in such way.
15:38But in the coming future, when you have that much of,
15:43what do you call, that much of fund,
15:45so your interest part will be cutting down.
15:49Your growth trajectory will be going much more faster.
15:53And you have multiple, we have multiple option
15:57to edit our value-added product.
15:59And in terms of margin, we have options.
16:03So therefore, once the profitability
16:05that will be going up, it doesn't
16:08matter how much outstanding shares are there
16:11and what is the EPS.
16:13EPS will be corrected automatically.
16:15Initial level, it is showing for the investor's point of view,
16:19if the outstanding shares is going up.
16:21So therefore, the current profit will be corrected this way
16:25as assumption.
16:26So therefore, the EPS will be coming down.
16:28But at the same time, we have to think in the other way.
16:31If the company is having substantial cash,
16:33so therefore, the company is automatically
16:35grow multiple times.
16:38And the company is having that potentially
16:40to enhance their profitability also.
16:42Therefore, their EPS will be constant.
16:44Right, so can we expect a turnaround in FY26?
16:48Just a yes or a no answer.
16:51Sorry, can you repeat again?
16:52EPS will bounce back above FY24 levels in FY26.
16:57Is that the right way to look at it?
17:00EPS, already we have whatever we have estimated.
17:04So that is almost all you can say in FY24 is somewhere around
17:1420.
17:15So now, we are expecting this.
17:17It is all in around 20, 22, 25.
17:20It's like that.
17:21OK, thank you so much, sir.
17:23It's been a pleasure speaking with you and breaking this
17:25down.