Agarwal Industrial Corporation Limited (AGARIND.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Agarwal Industrial Corporation Limited Q1 FY '26 Earnings Conference Call hosted by HEM Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Astha Jain from HEM Securities. And over to you, ma'am.

A very good evening, ladies and gentlemen. Thank you for joining the Agarwal Industrial Corporation Limited Q1 and FY '26 Earnings Call. Joining us on the call today from the management team is Mr. Vipin Agarwal, Chief Financial Officer. We will commence the call with the opening thoughts from the management, post which we will open the forum for Q&A session, where the management will be glad to respond to any queries that you may have. Before we go on to the main call, I would like to read the standard disclaimer. There may be forward-looking statements about the company and the subsidiaries, which are based on the belief, opinion and expectation of the company's management as on the date of this call. The company do not assume any obligation to update their forward-looking statements if those beliefs, opinion, expectation or other circumstances should change. These statements are not guarantee of future performance and involve risks and uncertainties that are difficult to predict. Consequently, listeners should not place any undue reliance on such forward-looking statements. With this, I will hand over the call to Mr. Vipin Agarwal, Chief Financial Officer, to take it forward. Over to you, Vipin, sir.

Thank you so much. Good afternoon, everyone. Thank you for joining the Agarwal Industrial Corporation Limited earnings conference call for the first quarter ended June 30, 2025. The earnings presentation has been uploaded to the stock exchanges and is also available on the company's website. We trust you have reviewed the information provided. The company's performance during Q1 FY '26 was impacted by a combination of external challenges. Revenue and operations was INR 594 crores, reflecting a decrease of 16.1% year-on-year. EBITDA was INR 38 crores, resulting in an EBITDA margin of 6.4%. Net profit for the quarter was INR 15 crores. While the performance was impacted by certain external factors, we continue to focus on driving long-term growth and strengthening our market position. During the quarter, bitumen volumes were at 1,24,600 metric tons, which were lower than anticipated volume due to certain external factors. Despite these challenges, the bitumen segment remained the largest contributor, generating INR 496 crores in revenue. The shipping segment also played a key role, contributing INR 72 crores or 12.1% of total revenue. These results underscore the strength of our integrated model, which combines import, sourcing, manufacturing and logistics, ensuring consistent operations even in a challenging environment. The quarter was significantly impacted by a combination of geopolitical disruptions and the early onset of the monsoon season. Geopolitical tensions, particularly between India, Pakistan led to disruption in trade flows and shipping schedules, resulting in an estimated loss of 15 days. Additionally, highlighting the geopolitical tensions across U.S.A., Iran, the Middle East and Israel disrupted regional trade, particularly affecting the UAE and the wider Middle East, causing nearly 1 month of impact on shipping movements. The early onset of the monsoon season in India further slowed construction activities leading to softer demand for bitumen. These external factors, combined with seasonal moderation directly impacted volume -- bitumen volumes and effective performance within the quarter. Despite these external challenges, India's road infrastructure sector remains a strong growth driver. The government has set ambitious targets, with projects award expected to reach INR 7 lakh crores by FY '26 and scaling up to INR 10 lakhs annually thereafter. Key programs such as Bharatmala and PM Gati Shakti are expected to drive this growth, with the growth of construction under -- constructing more than 100 kilometers of road per year, underscoring the scale and urgency of infrastructure development. These government initiatives offer strong visibility and sustainable demand for bitumen, positioning it as a crucial raw material for the country's road construction projects. Building on the development, post Q1 FY '26, the company announced the acquisition of 100% equity shares of Konkan Storage Systems Private Limited, a company engaged in port-based industrial and infrastructure activities. This acquisition will further strengthen our logistics and infrastructure capabilities, enabling AICL to capitalize on the growing demand driven by these government initiatives. Subject to regulatory approvals and execution of the share purchase agreement, Konkan Storage Systems will become a wholly owned subsidiary of AICL. This acquisition aligns with AICL's integrated platform, which spans importing, sourcing, port-based storage, manufacturing and last mile delivery and remain a key differentiator in the market. With a private sector bitumen market share of nearly 20%, AICL is strategically positioned to capture the opportunities arising from India's growing infrastructure demand. The company remains focused on expanding its capacity and strengthening its market position as infrastructure development accelerates. Looking ahead, Q1 FY '26 demonstrates our commitment to operational discipline and resilience, despite external challenges. With the continued enhancement of our infrastructure and logistics capabilities, AICL is well positioned to capitalize on the long-term growth opportunities within India's infrastructure sector. We remain focused on scaling our operations, driving efficiencies and delivering sustained value as the infrastructure landscape evolves. Thank you all for attending today's call. The floor is now open for the questions.

[Operator Instructions] Our first question is from the line of Koustubh Shaha from Wallfort PMS.

So I had a couple of questions. Firstly, sir, on the volumes, so obviously, in the first quarter, we have just clocked 1,25,000 tons. And second quarter is usually a dull quarter. So last year, we had guided 6,50,000 tons of volume for FY '26. So what according to you should we look at in terms of the full year guidance for the volumes?

As explained in my last con call also, we -- though we have a shortfall of 50,000 metric tons in the first quarter, we assume that by the end of this year, we should be able to achieve the growth as predicted in the earlier con call. So we should be able to do around 6 lakh tons.

Around 6 lakh tons?

Yes. The guidance still remains around 10% of the volume that we did last year.

Okay, okay, okay. And other thing was that on our vessel chartering, if I look at the segmental split, so over there, the EBIT has come down from an average 28% to 11.3% in the quarter. So any specific reasons for the same?

Yes. As explained in my opening remarks, there has been -- due to the geopolitical situation, the vessels were not optimally utilized. So there, the vessels were underutilized in this quarter. And it affected the EBITDA margins.

Okay, sir. And now almost 2 months have passed in this quarter. So any improvement that we should assume from the previous quarter?

Yes. There are improvements in this quarter because as explained, these geopolitical situations, no one can predict, and no one can even assume that there can be an India-Pak war, which lasted maybe for a short period, but it impact -- does impact the business.

Okay. So we should -- okay. Fair enough. And lastly, again, the last question was that how much bitumen volume was handled through our own vessels out of the 125,000?

It's almost 60%, 60%, 63%.

The next question is from the line of Yash Verma from Abnay WealthWise.

Am I audible?

Sir, you are audible.

So sir, In FY '25, the company missed its 20% volume growth guidance due to the vessel maintenance and cyclone-related disruption. So now for FY '26, the company again guided for 20% volume growth with stronger quarter expected in quarter 1 and quarter 4. However, the quarter 1 has already seen a 26.9% year-on-year degrowth. So does the management is still confident in achieving this guidance? And what specific actions are you going to take to mitigate such external risk and ensure the volume recovery in the remaining quarters?

See, we have done close to 5,35,000 in FY '25. And we assume that we would be growing at around 10% -- nearly 10% of the given volume. So we should be -- our guidance still remains at around all [indiscernible], all depending upon geopolitical. Again, this time, we would -- I would like to add a disclaimer of geopolitical situations because if there is any disturbance in geopolitical maybe within any country, it may impact the flow of product. But these all factors are already passed now. Hence, for the balance -- 2 quarters, we will be able to give you a better guidance in the third quarter.

Okay, sir. And sir, if you could provide me with your EBITDA per ton guidance.

EBITDA per ton still remains around the same level that we had given in the first quarter, around INR 4,300 -- more than INR 4,300 for the year.

[Operator Instructions] The next question comes from the line of [ Tanvi ] from HEM Securities.

Again, I think it would be a bit of a repetition, but the question remains the same regarding the guidance that earlier we had guided for FY '28 that you'll be doubling your volumes from FY '25. Given the disturbance that we had faced in FY '25 due to dry docking and maintenance, and now in FY '26 due to geopolitical situation, so are we also shifting our target of FY '28 to any later years or something?

Thank you so much. If you have seen the track record of the company, in FY '22, '23, we clocked around 4,25,000 tons. In the next year, we clocked around 4,90,000 tons, which is almost a 10% growth. And in '24, '25, we did around 5,36,000 tons, which is again a 10% growth. I would like to recorrect, in FY '23, '24, we did around 16% growth from 4,24,000 to 490,000. And in '24, '25, we did around 5,35,000 from 4,90,000, which is almost a 9.19% growth. Given these factors, the guidance for the FY '28 still remains the same because this last quarter was one of the quarters wherein -- which is affected due to geopolitical situation, which may not arise every year. Hence, our guidance remains the same for FY '28.

Okay. But given the fact that you also lowered your EBITDA guidance from INR 4,500 to INR 4,300 level...

I said more than INR 4,300, ma'am.

Okay. But still, I think lower than INR 4,500, which you earlier guided, and there will be also higher depreciation due to the one more vessel you had acquired in last quarter. So how do you see your bottom line going forward?

Bottom line, I would like to give you in metric tons only. We had around INR 4,100 in FY '24, '25. The guidance earlier was given at INR 4,500. We still maintain. However, we would be adding a disclaimer at minimum INR 4,300.

We have our next question from the line of Suyash Bhave from Wealth Guardian.

Am I audible?

Yes. You are audible, sir.

Yes, yes. Sir, in Q1, as per official data, the total bitumen imports into India have risen by 3%, while we have lost volumes of 27%. So what kind of market share loss have had -- have we experienced in Q1?

In the first quarter, our sales volume is down by almost 20% from the preceding last year's first quarter. We were 170, and now this year, we have done around 126 -- 125.

Yes. I understand the volume drop. I'm asking about the market share drop because the total bitumen Indian imports have risen by 3%, but we have actually lost volumes. So hence, I was talking about the market share drop.

The increase that you're seeing is in terms of drums, not in bulk. And the bulk volume still was lower by almost 8% to 10% in the first quarter.

Okay, okay. Understood. And in this quarter and for the last couple of quarters, we are seeing higher tax provisioning. For example, in Q4, our tax provisioning was 17%. In Q1, that is 22%. Has there been any change in tax laws in UAE?

No, no. The difference between Q1 and Q4 is basically due to the volumes. As we assume in Q4, when we have -- we see that the volumes are high. As the taxation, we have to pay higher taxes as per the advanced tax norms by the income tax. Hence, you see the differences. But the tax remains the same.

All right. So -- and in the shipping vertical, we have seen a big margin drop as well as a revenue drop. What are the key costs in the shipping vertical?

Sorry. Can you come back again, please?

Sir, in the shipping vertical, we have seen a margin drop from 32% to 11%. And we have also seen a revenue drop by almost INR 24 crores. There has been a drop in the revenues. What are the key costs in the shipping vertical? Why is there such a 20% margin drop?

See, your cost -- fixed cost remains the same in any business that you do. So even in the shipping side, your fixed cost of wages, crew, the shipping operation, everything remains same, irrespective whether the vessel is moving or not. As explained due to the geopolitical situations, when the vessels were not moving, but your cost -- fixed cost remains the same. And you tend to lose on the revenues because the voyages are not complete due to the factors explained. That is the reason. The expenses side remains the same, whereas the revenues are on the lower side.

All right, sir. So I have one last question on the recent acquisition that we did. So even before that, we were already building up a 40,000 metric ton storage at Bangalore. And I'm assuming this recent acquisition was very nearby in Karwar is what I'm assuming because of the name of the company. So can you give more details about it? As in what is our cost for that? What kind of capacity does it hold? And what is the strategy for having another port nearby to one that we are already building?

We are already operating at both the places. Even in Karwar and Bangalore, both the places are giving almost 35% to 40% of the company's revenue every year. And at both the places, we are having tankages on lease. Hence, we have acquired an existing company in Karwar and building our own storage in Bangalore. Thus, this will contribute in the saving of our rental expenses that we are paying towards the operations in both the 2 locations, thereby adding to the bottom line in terms of saving any additional rentals by increasing throughputs.

Okay. All right. So can you give the cost and capacity for this new acquisition, the cost...

The new acquisition is having existing capacity of more than 24,000 tons and the total CapEx will be more than INR 30 crores in this.

[Operator Instructions] Our next question comes from the line of Vishwanath A from Prosperity Wealth Management.

So we have recently added capacity during the quarter of vessels. So I just wanted to understand how -- what is the CapEx for it and how have we funded it.

Can you please repeat your question again, please?

Yes. So regarding the vessel...

Vishwanath, sorry to interrupt. You're coming through a little muffled. So may we request you to please check on the mode that you're using for your handset.

Yes. Is it better now?

This is much better.

Yes. So regarding the vessel addition in Q1, I wanted to understand what is the CapEx and how have you funded it.

The vessel was acquired in the fourth quarter, which is operational in this quarter. We had already given the details of this vessel in the previous con call.

Okay, okay. And my second question is in our presentation, you have mentioned that the bitumen demand growth is 4% to 6% CAGR, but we are targeting mid-teens growth for Agarwal. So what is the rationale behind that?

Every year, as we have explained in the earlier con calls, these volumes that we are anticipated to bring inside into the Indian ports, it requires a lot of logistical challenges. Thus, we are focusing on the challenges to increase the volume and also get into the market share of existing importers.

Our next question is from the line of Yash from Equitree Capital.

Sir, in the previous calls that you have mentioned that demand has never been the problem. But also you said recently that there is -- there has been a drop by 10%. So bitumen consumption has dropped by 10% in this quarter. So sir, first is that, so how is demand looking as of now? And sir, second, you said on the logistics side that bringing the bitumen is a problem, but we have been sorting it by adding more vessels.

It's a challenge -- problem.

Correct, sir. So we have the capacity of around 1,13,000, and we can do around 8 to 9 round trips. So considering that, we can do 9 lakh to 10 lakh tons. So I want to understand on both the fronts, like how are we seeing it?

Can you put -- can you break your questions for me to answer, please?

Correct, sir. So first is on the demand side and second is on the logistics side. So these are the 2 questions.

As I've explained, there is no problem in terms of demand for the product. But if you are seeing the weather conditions, which from the month of May, the monsoons have arrived earlier this year. Hence, there was a low demand of product because construction activities do not happen during monsoons. That is one of the factors, which has led to lower production of -- construction of the road, hence, requirement of bitumen. I hope I have addressed your question.

Got it, sir. And sir, on the logistics front.

Can you repeat the question again, please?

Yes. So as I said, the -- with the vessel capacity of around 1,13,000 and also we can do around round trips of 8 to 9x, so we can bring around 9 lakh to 10 lakh tons of bitumen, right?

Yes. As I've explained earlier in my con calls, when we are going to the East -- Eastern coast of India, it takes around 40 to 45 days for us to complete the 1 cycle of bitumen supply towards East. And we are working only during 8 months in the year. 4 months of the monsoons, we are not bringing any product into India. Or we can say lower volumes are moved into India. So hence, for India, we are only doing 8 months of vessels turning around.

Got it. And sir, also -- can you hear me?

Yash, you are not audible at the moment.

Can you hear me now.

Yes, we can hear you.

Sir, so second question is, can you please help us understand about the shipping segment? Like how is the revenue generating? What is the charter rate per day offered? And how -- for logistics, what is the -- when does it breakeven?

Commercials, we usually do not disclose commercials, but other vessels are always moved on maybe a voyage charter or a time charter.

The next question comes from Botla Lakshman Kumar from CRISIL.

Am I audible?

You are audible, sir.

Yes. Sir, I would like -- I mean, as majorly on business side, many people has asked questions. So I would like to know better regarding the liquidity profile. So how is the liquidity currently regarding our company?

Absolutely no problem in terms of liquidity.

Okay. So in terms of any free cash or anything you can disclose?

That is one of the reasons we are putting Bangalore and Karwar projects wherein as on date, the company has funded all the cost of these 2 projects through the internal accruals.

[Operator Instructions] Our next question comes from the line of Keshav from RakSan Investors.

Yes. Sir, you mentioned the Indian bitumen imports have dropped by 8% year-on-year, and our volumes have come down by 24%. So how significant is this underperformance? Are there quarters where these kinds of differences are expected? Or are we seeing increased competition, which might be straining our market share?

Thank you so much. I have explained earlier, the demand of the bitumen has gone down in the first quarter due to the early onset of monsoon, along with the factors, geopolitical issues in the Middle East and the Gulf region. That is one of the reasons, which led to lower imports of bitumen. There is no problem in terms of requirement of bitumen into India. It is purely because of 2 -- 3 reasons: the geopolitical situation between India-Pak; U.S., Israel and the Middle East; and the monsoons. These 3 factors have resulted in lower imports of bitumen.

Okay. So there's no impact on our market share, that is basically what I was trying to understand.

If you see the entire year, I think you should be able to see better performance than we did into '24, '25.

Okay. And sir, the chartering margins, should they also bounce back to earlier figures in the upcoming quarters?

The bounce back, as and when we start increasing the volumes and the vessels are utilized 100%, all the numbers and EBITDA that we used to see in the earlier quarters, you'll be able to see in the next 3 quarters. Usually, even quarter 2 is a slow quarter for us if you see year-on-year, but Q3, Q4 should be a good quarter this year.

Okay. And sir, lastly, with the opening up of NHAI tenders worth INR 3.4 lakh crores this year, so do you think we could see a higher volume growth than 10%, what we are guiding now? Or could there be a much better growth in the following year?

I assume we should be able to grow better than the forecast guidance that we are giving. As you have mentioned, there are a lot of tenders being awarded, which are scheduled to be executed in the next 2, 3 quarters.

Our next question comes from the line of Koustubh Shaha from Wallfort PMS.

I had 2 questions. One was so you -- some participant asked about the maximum volume that we can do, and you gave a very detailed answer. But in terms of tonnages, if you can just -- can you give a number that on 1,25,000 capacity of vessels, what is it that peak capacity that we can handle for 8 months or for 9 months, whatever business we can do, if at all at full capacity we operate?

We can easily do 5 lakh to 6 lakh tons.

Only that much. So for any -- so now, we'll be hitting 6 lakh tons this year. So we have to -- sorry, sorry. Go ahead, sir.

Yes. Turnaround, see, all the vessels, when they are going to a particular port, there is a time-consuming -- there are days slated, which they take from one port to another. And during that time, we require additional products. Hence, we have to take -- we are always taking vessels from outside even on date. So the total capacity that you will be having, it is not necessary that you can use it 100% all the time because some vessels may be at the load port for loading, and some vessels will be at the discharge port for discharging. Makes sense? And continuous movement of vessels, when we try to optimize the maximum utilization of the vessels for the particular period.

Okay, sir. Okay. So which means that our CapEx will continue. Whenever we get a good opportunity, we may still keep on buying the vessels, correct?

Yes. As I explained in all my earlier conference -- con calls, as and when we get any good opportunity for acquiring any new vessels, the company will definitely go for it because we still require vessels as we are taking from third parties.

Understood. Understood, sir. That was on the -- this. And secondly, on the Konkan Storage acquisition, I had 1 or 2 questions on that. So what is the capacity in which the storage facility will be able to handle?

It is already having a capacity of more than 24,000 metric tons, KL.

24,000 metric tons, okay. And over here, so you had mentioned in the press release also that all solid, liquid -- all 3 kind of forms of material can be handled through this facility. Is that right?

Yes.

Okay. And in which part of the country is this facility available?

In Karwar, Karnataka.

And one last question on this side. So we paid some INR 22 crores of compensation for this acquisition, whereas the FY '24 turnover was just about INR 3.5 crores. So do you feel that the acquisition was a bit too pricey at 6.5 price to sales?

No, no. See, these are terminals wherein you always have to see the replacement cost of any terminal. Or if you have to set up a terminal, what will take for you to set up that acquisition that you are acquiring. If you see Bangalore, we are building new tanks. So we know the cost of making any tankages. And here, this is a ready establishment wherein it is having licenses -- already having B and C class licenses as well. So we need to capitalize on the ready-made infrastructure that we have.

Our next question is from the line of [ Reddy Agarwal ], an individual investor.

Sir, basically, I got through your point that we are confident to do good margins and good financials in the coming quarters. But can you specifically lay down the steps which will be improve the margins and bitumen volume? So apart from being affected by the geopolitical conditions, so what are the steps the company is taking to improve the margins?

As explained in the earlier con calls, as we increase the volume, your bottom line will tend to improve because your fixed -- all the fixed expenses remains the same, and thereby you are increasing your throughput, which with the addition of the new 2 terminals, which are -- which will be operational in this year, we will tend to save even on the rental side. And thereby increasing the volume, the cost of throughput would be lower. Hence, it will add to the bottom line in terms of margin.

Okay, okay. Fair enough. My second question would be, sir, on the dry docking impact, like, we have the problem of our vessels being drying up. And in the earlier con call also, you guided that around 15,000 to 30,000 metric tons is expected to be dried out. So are we expecting this to reduce or you are being consistent with these numbers?

See, as the number of vessel increases, there will be 1 or 2 vessels which are required to do dry dock in a year, and that is part of normal business. So it is not that -- but those period, you have to count as nonoperational, which affects in a particular quarter when they are in dry dock.

So we are expecting around 15,000 to 30,000 metric ton capacity to dry out this year also.

This year's dry dock of 2 vessels has already been completed as on date.

Our next question comes from the line of [ Mezza Mozafer Udin ], an individual investor.

So my question is that with Karwar and Konkan operational, how much impact will it have on your margins?

This will add to saving of the rentals that we are paying at that port.

So in terms of a percentage point and you have on the -- can you give us...

Percentage is very difficult to answer.

Okay. And my second question is, like, as already asked by another participant that this year, around INR 3.5 lakh crores of projects are being awarded. How much incremental bitumen demand can AICL capture in Q3, Q4, in the corresponding quarter?

It varies from project to project. As and when they execute, once they start the earthwork, the requirement of all the projects are in different phases. So very difficult to answer in terms of volume or when -- or how much they will require. But as the projects will be executed, there will be demand created, which is anyways additional to the existing demand in India.

Ladies and gentlemen, we have no further questions. I would now like to hand the conference over to Ms. Astha Jain for any closing remarks. Over to you, Astha.

Thank you, Davin. On behalf of HEM Securities Limited, I thank Agarwal Industrial Corporation Limited team for giving the time to spend on the call and responding all the queries in a detailed way. I would also like to thank all the participants for joining this call. Now I would like to hand over the call to moderator for closing remarks.

On behalf of HEM Securities, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.