Hariom Pipe Industries Limited (HARIOMPIPE) Earnings Call Transcript & Summary

Ladies and gentlemen, I welcome you all to the Q4 and FY '25 post earnings conference call of Hariom Pipe Industries Limited. Today, on the call, from the management team we have with us: Mr. Rupesh Kumar Gupta, Managing Director; Mr. Sailesh Gupta, Whole-Time Director; Mr. Amitabha Bhattacharya, Chief Financial Officer; and Ms. Rekha Singh, Company Secretary. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, a reminder that this call is being recorded. I would now request the management to detail us about the business and performance highlights for the period ended 31st March 2025, the growth plans and vision for the coming year, post which we will open the floor for Q&A. Over to the management team.

Very good afternoon, everyone. This is Rupesh Kumar Gupta, Managing Director of Hariom Pipe Industries Limited. Thank you all for joining us today on this earnings call to discuss the financial and operational performance of Hariom Pipe Industries Limited for the quarter and financial year ended March 31, 2025. Despite a challenging external environment marked by weaker steel demand and pricing volatility, I am pleased to share that Hariom Pipe has continued to demonstrate growth led by our integrated manufacturing model, strategic investments and a growing footprint across key markets. In FY '25, we achieved our highest ever annual sales volume of 2.45 lakh metric tonnes, reflecting a 23% year-on-year growth. This was possible due to higher output of MS tubes and galvanized products. Following better utilization at Mahabubnagar and Perundurai units, revenue from operations grew by 18%, even as average selling prices declined by 5%. This showcases the strength of our volume-led growth strategy backed by reliable dealer network and efficient supply chain execution. What is particularly encouraging is the increasing share of value-added products in our portfolio. These contributed 97% of our total revenue, up from 92% last year, reaffirming our continued focus on customer-centric, margin-centric segments. On the profitability front, EBITDA increased by 27% to INR 175.4 crores and our EBITDA margin expanded to 12.93%, driven by operating leverage and tighter cost controls. EBITDA per tonne stood at INR 7,147 compared to INR 6,964 in FY '24. Profit after tax also rose by 9% to INR 61.7 crores despite an increase in depreciation and finance costs due to capacity expansions and commissioning of new assets. Another key highlight this year has been the significant improvement in cash generation. Operating cash flow increased 15 times to INR 78.6 crores, translating to a 45% EBITDA to cash conversion ratio. This reinforces the quality of our earnings and the efficiency of our working capital management. Our balance sheet remains healthy. Net worth increased to INR 573 crores and our net debt-to-EBITDA improved to 1.99x from 2.45x last year. Return on capital employed stands at a strong 19.2% and return on equity remains healthy at 10.8%, even after expanding the equity base. Looking ahead, we remain focused on building a sustainable and scalable business. We have incorporated our wholly-owned subsidiary, Hariom Power and Energy Private Limited, to execute a 60-megawatt solar power plant project under a 25-year power purchase agreement with MSEDCL. The project is expected to generate approximately 9.6 million kilowatt annually and will be completed over the next 18 months. This initiative is a strategic move aligned with India's renewable energy goal and government incentives. It will strengthen our ESG profile, help reduce our carbon footprint and enhance compliance and brand positioning. Additionally, it supports our vision to establish a green manufacturing facility in Maharashtra and opens up a new revenue stream through the sale of solar steel structure and profiles, both for this project and for the broader renewable infrastructure market. Our expansion journey continues with targeted investments in capacity growth, especially in value-added products. We are also actively enhancing our reach in Western and Northern India, while exploring franchisee and rural market models to penetrate deeper. To sum up, FY '25 was a year of scaling new milestones, both in terms of volume and value. We believe that the foundation led this year has prepared us well to deliver 30% volume CAGR over the next 2 years, supported by internal accruals, sweating up of assets and a strong channel ecosystem. On behalf of the entire Board and leadership team, I thank our investors, customers, employees and partners for your continued trust and support. Thank you.

We'll open the floor for Q&A. [Operator Instructions] We'll take the first question from Keshav Garg.

I'm trying to understand that if we compare our FY '25 numbers to FY '22, then the power to sales has come down from 13% of revenue to 5%. Sir, value-added products have increased from 66% to 96%. Volumes have increased around 4x. Our debtor days have doubled from 23 days to 54 days. Sir, but still our EBITDA per tonne has declined from INR 8,500 to INR 7,100. Sir, so it doesn't make sense to me that we are giving double the credit and our value-added product proportion has increased from 2/3 to almost 100%. Power to sales, in itself, there is an 8 percentage points delta that should have percolated down to the EBITDA margin, which remains flat. And sir, EBITDA per tonne is actually down despite the operating leverage. So I'm not able to understand that why exactly our EBITDA per tonne has declined?

So thank you, Keshav, to raising all the concerns of yours. That's really good to understand all your points. It's a big privilege that you have placed us. But still, I would like to invite you to our plant to visit and check what exactly are the performances doing and to understand the complete process and other things. It's better we meet one-to-one and understand the business in a better position. As raised by you, INR 8,500 to INR 7,100 per tonne has been dropped down as EBITDA. The marginal growth in all the parameters are good enough to move in terms of all the aspects, as we are growing state-wise as well as the product basket is also getting grown up. Apart from that, the volatility of the market plus the market scenario is getting changed year-on-year. So in that position, EBITDA margins are being maintained well under control. And as the expansion plans are going on, the things are there and well in place.

And what is the outlook in terms of EBITDA per tonne as well as operating margins for FY '26?

So the EBITDA per tonne remains almost similar. This may vary INR 200 to INR 500 plus side only, because as we are entering into the new aspects of power and other things, which will also add on some cost effectiveness and the values in the process.

Sir, please tell us that what percentage of our total output in terms of sales volume is coming from basically the sponge iron. I mean -- or let's put it this way that what is our backward integration percentage? What percentage of our raw material are we captively producing from sponge iron?

Just hold a second. We'll be specific on it.

Sir, basically, we have to understand that when you are comparing with FY '22 versus FY '25, you have to understand that in FY '22, we are totally integrated facility. We are dealing with MS tubes. Our value-added product is only MS tubes and scaffolding, which is produced from the integrated source from iron ore to end product, where the EBITDA margin is consistently high. Second thing is in FY '22, the per tonne realization is much more higher than the FY '25 per tonne realization. Third thing is when we are talking about FY '25 EBITDA margin, that is including the galvanized and cold-rolled product, which where the major raw material is HRC, hot-rolled coil, that we are consuming from the domestic market as well as international market. So whatever for production of MS tubes, we are generating this HRC from our own integrated facility. So up to HRC, whatever the margin, that was intact with Hariom for selling of MS tubes. But when we are talking about galvanized product, that HRC margin is with the supplier. And from HRC to end product of galvanized coil, that much of margin we can generate. So per tonne EBITDA, product-wise if you have divided, so per tonne EBITDA is different for MS tubes earning by Hariom and per tonne EBITDA earning in GP and CR. That is why average EBITDA per tonne is coming a little bit lower than FY '22. I hope I can explain you properly.

Yes, sir, I understood somewhat. And sir, last question from my side before I again join the queue. Sir, now we have a very aggressive target of growing by 30% volume growth for next 2 years. Sir, if we see post-COVID, the whole industry has done well. The whole industry has delevered and everybody is aggressively expanding capacity. I hope, sir, there is no glut in the market, because all the supplies are coming at the same time and everybody is expecting aggressive volume growth. And surely, the market is not growing by 20%, 30% in terms of volume. Sir, so then basically, will we be able to sustain our margins as well as EBITDA per tonne?

Sir, first of all, we have set a 30% volume growth target for the current financial year. And so far in Q1, progressing well, we are sitting on 10th of May, last 38 days, we have achieved around 14% volume growth in Q1 comparatively to the last year. And this is in line with our internal plan. The balance growth will pick up in the coming quarters as new market geographies, franchisee channel and capacity utilization ramp up. So I make sure that we'll definitely reach whatever we have targeted for this financial year as far as volume growth realization. Moreover, I'm happy to announce that the price realization is also, comparatively to the Q4 versus Q1, is almost up 7%.

Sir, I got your point. Sir, I'm sure you will achieve your volume growth. But what I'm trying to understand, if there is a glut in the market, then maybe your operating margins and the EBITDA per tonne might suffer. That is the question.

[Foreign Language] So we are not worried on the market size expansion and other things. Everyone has its own goal and areas to cover. [Foreign Language] basically is totally different than others. We are on a dealership-based model wherein every end consumer has to get the range of the products what we are supplying in the market. Product to product, it depends on market-to-market scenario.

We'll take the next question from Udit Sehgal.

Sir, are we seeing any impact on steel prices because of the anti-dumping duty? And should that theoretically increase our margins?

Yes. Thank you, Udit. Basically, yes, it is again a favorable point by Government of India. We thank it from the industry segment. Because of this impact, undoubtedly, the primary producer prices have gone up, which is a positive sign for Hariom.

And how much of our product is, sir, fully backward integrated? I think the previous participant also asked the same question.

One second.

Sir, our total raw material produced by us is 264,232 metric tonnes and fully backward integrated output is almost all 137,000 tonnes (sic) [ 437,000 tonnes ].

So basically on this 50%...

That is totally MS tubes. Whatever we are producing MS tubes, that is totally backed by our integrated process. Whatever we are selling that galvanized and cold rolled product, that is totally backed by HRC coil purchased from the market.

And on our current capacity, what is our peak revenue? And how much are we doing -- what is the capacity utilization going on right now?

Peak revenue will be, if we are optimized utilizing the capacity, the peak revenue is -- on the present market sales realization value, if we take into the consideration of the Q4 FY '25 value, then that will be reached in terms of value up to INR 2,250 crores to INR 2,300 crores. And if it will increase by another 7% to 10%, which we have received in the Q4 -- Q1 FY '26, then it will be reached near to INR 2,500 crores of the present existing capacity.

And you have guided for 30% volume growth, sir, but what is your guidance on the PAT growth also, because our interest and depreciation has also gone up. So how can we look at that?

PAT growth in terms of volume -- in terms of absolute value, you can see that last year-on-year basis, we have grown around 9% on absolute value figure, and we have consistently grown in such way. But the percentage, if you are taking into the percentage level, absolute percentage level versus turnover, then it will remain near to 4.5% to up to 5.5%, in between, depending on the other parameters.

We'll take the next question from Aadesh Gosalia.

So I had a couple of questions. The first one being, sir, our gross margin has contracted in the year. If we see the FY '25 performance, our gross margin has come down to 22.8%. So what is the reason for that? And even on a quarterly basis -- mainly on a quarterly basis also, in Q4, our margin has contracted to 21.3%. So what is the reason for our gross margin contraction?

So that gross margin is actually material margin. So due to that imported coil was stopped by the government due to the safeguard duty, the domestic HRC price is going up. And throughout the year also, if you check that, the volatility in the steel price was happened. So due to that, the material margin, our gross margin is a little bit coming down. But as far as our internal control and very much cost-effective operational skill, we have managed our EBITDA in a similar manner and more than the last year.

Okay. And sir, the CapEx plans for the coming years and what will be our maintenance CapEx?

Total CapEx was done around INR 100 crores plus -- INR 105 crores. Out of that, the maintenance CapEx is coming around INR 10 crores to INR 12 crores, that is rolls and some of the -- mainly rolls and some of furniture fixtures and all those things. Major CapEx is taken care in Perundurai unit, where we have addition the new product vertical, which is called CTL, Cut To Length, which basically this product is used for automobile industries where the making of the body of the trucks and all those things. So that plant and as well as we have put renewable power systems, solar panels in Perundurai unit of 1.4 megawatts. So basically, this is the new CapEx.

Okay. And the CapEx going ahead will be in the same range also, even the maintenance CapEx for our assumptions, it will be in the similar range of INR 10 crores to INR 12 crores?

Maintenance CapEx, these rolls, generally, it is a common thing for steel industry. That has happened always. And further CapEx, at present, we do not have any plan. But yes, as much as we are a growing industry, we're definitely doing by our internal accrual in future as per the business needs.

Okay. And so as we have already gotten the Board approval for QIP, so any update in that regards for fundraising?

At present, the Board is deferred from the QIP. We are not doing any sort of things. At present, we are in defer.

It's on hold basically, I mean nothing is going on. Nothing is working on. So it's on hold.

Okay. So as of now, it's on hold.

We'll take the next question from Smith Gala.

My question was regarding power. So I wanted to understand what is the total power requirement for us to produce our products and what of that is coming from renewable sources, because we have managed to reduce the power cost from 13% to 5%. So what will be the power consumption in the future? And how much will come from renewable sources?

Thank you for your question. I would like to share that first of all, we have to understand the process of the industry and nature of activity. See, here, as far as Hariom is concerned, our power optimization unit is melting furnace and rolling mill. And the remaining value-added products like pipe mill, MS tubes production, scaffolding production or galvanized production, that is comparatively to the rolling mill and furnace, we require very nominal power, right? So basically, we require the power in -- we have connected load in furnace is almost all 10 megawatts and rolling mill almost all 5 megawatts. So out of the total connected load, major contribution in rolling mill and pipe mill. Now your second question is that how we are able to reduce the power. So basically, what happened, as we have successfully concluded that hot charging facility implementation, therefore, our rolling mill power cost for reheating the billets are not required. And it is due to that continuous process of this 2 crucible of induction furnace, our rolling mill always getting that 1,100-degree billets through the conveyor and it is processed. So therefore, that reheating of billets are not required in rolling mill. That is the major power consumption for us. That's why you get that much of quantifiable difference. Second thing is when you are using continuous 24/7 crucible, therefore, your inside crucible temperature for melting of iron into liquid mode, that's required roughly 4,400 degree temperature. So that is automatically generated 24/7. Earlier what happened, earlier we were not able to manage this thing of continuous hot charging facility. Therefore, our one crucible always we are not using. Due to that, our power cost is going up. But now we are 24/7 operating system. Our power cost is coming down in a very good manner. And second thing is about the renewable power. We are presently having 3.4 megawatt of renewable power. That is totally used in pipe unit of entire Mahabubnagar plant pipe unit requirement, as well as Perundurai unit, recently, we have installed up 1.4 megawatts out of 3.4 megawatts. That will be impacted in Q4 a little bit and the coming financial year, that is FY '26, it will be impacted more.

Okay. The question to follow is regarding the new power subsidiary that we are opening. So what will be the CapEx required in such company? And how much of those CapEx will come through internal accruals or through debt or, if equity, so how we'll go about to fund those requirements?

So I'll just give you a glance on basically the model, what exactly is going on, like the PPA has been signed for 60 megawatt for Maharashtra government. And we are ensuring that this particular project will be completed by Hariom, first entering into the Maharashtra government policies and all, understanding in the depth, and entering into a greenfield project in future. So this is the first milestone that we have entered into. [Foreign Language] and that will be supplied by Hariom Pipe Industries. Moreover, we are opening up the new wings for the new vertical as the manufacturing of the structures of all solar players and supplying from Hariom Pipe Industries. [Foreign Language] That's the whole aim of opening up this particular, Hariom Power and Energy.

Okay. But on the CapEx requirement front, I could not get you clearly.

So basically, in a layman language, for generating 1 megawatt solar power, you have to require almost all INR 3 crores to INR 3.25 crores of CapEx, including the land. So it's roughly INR 180 crores to INR 240 crores, in between it has been happened. Higher side, INR 4 crores, means INR 240 crores; lower side, INR 3 crores is INR 180 crores. Presently, our entire team and the consultation team are into the process of land acquisition. And once it is completed, then we have to prepare the technical viable report and the detailed CMA. And after that, we will be able to give you the exact figure. So my understanding -- my request is you can send a mail to our Investor Relations department or to me also, we'll let you know, inform through mail. Second thing is, as far as Hariom equity investment, it is totally backed by the -- under the PM-KUSUM scheme, where we are getting the entire equity amount as a subsidy during the construction period from the central government.

One more question was regarding Ultra Pipes. We had recently announced the acquisition, but later on we canceled it and now we are taking the same on lease for 99 years instead of 40 years. So what will be the use case of this? And what will be the benefits that Hariom will get through this lease agreement with Ultra Pipes, which is a related party?

See, basically, Ultra Pipes is having a better technology, totally backed by solar power, renewable power. And certain sizes, which Hariom is selling to the market, that certain sizes and big pipes for use in infrastructure is manufactured by Ultra. Hariom, acquisition done through the long-term lease, the reason behind that to cost effective of the stamp duty as well as some legal issues with the stamp department, we have shifted instead of acquisition on a long-term lease where the company will get a much more financial benefit rather than it is going through upfront purchase in the long-term basis.

Okay. One last question from my side was regarding raw material capacity increase as we are struggling to get gross margins and as you explained earlier that because we have to purchase our HRC coil from outside, so we are not able to get the margin on those. Are we planning to increase our raw material capacity for sponge iron or HRC in that matter?

No, no. That is routed through blast furnace mode. So we are not going to construct or capitalize for any blast furnace operations.

It's a big investment. We are not prepared for that now. Let us set down our assets first and then later on we will see. I can make sure, basically every year-on-year something or the other will move on in Hariom. That's for sure.

So do you see gross margins improving in the coming year, FY '26?

Yes, yes, surely. Because the volatility is almost all completed.

So any guidance on how much the gross margins will come up?

Again, earlier, whatever the existing margin we have, that will be -- we're very much hopeful to get that.

We'll take the next question from Vijay Chauhan.

Can you just repeat the number or the growth that you have seen in the first 38 days for the quarter 1 in terms of volume? We achieved around 58,000 tonnes in the last quarter, like Q1 FY '25. So what is the growth? And you mentioned some realization growth as well. So can you please repeat those numbers?

Sir, we'll avoid giving...

No, but we mentioned something in the beginning of the call only. So what was that number? Like 38 days, there was some mention...

Can you please be specific on that? I mean what...

There was some -- like when I joined the call, there was some announcement like, in the quarter 1, like in first 38 days until 10th May, we saw some volume growth or some demand improvement. So some number was related to that. And you mentioned also that the realization has gone up, I think, some 5% or 6%. So I just wanted to like get that number, because I couldn't hear at that time properly.

So as of today, we are on track to achieve around 14% volume growth in Q1 compared to the last year, sir.

Okay. So this growth will be like 58,000 tonnes what we sold last quarter 1. So you are mentioning over that only 14%, or like you are looking only for the 38 days like-to-like basis, like...

Just a second, sir.

Sir, to be precise, in last 38 days, we have achieved almost all 33,380 metric tonnes.

Okay. 33,000 tonnes...

33,380 metric tonnes in the last 38 days, from 1st April to 8th May, to be precise..

Okay. 33,000, right?

33,380 metric tonnes, which is almost 40% of our Q1 FY '26 target. Now I'm clear?

Yes, pretty clear. And realization side?

Realization side, we have received average realization price is almost all INR 57,000 plus, which is compatible with the 5% to 7% hike from the...

That's very good to hear. Now if these metrics are improving, so basically, if everything else remains constant and if we start to see finally the operating leverage, so last quarter 1, which I recollect, our realization was somewhere around INR 59,000 per tonne, and our EBITDA was also north of INR 7,300 or INR 7,400. And so if these things are like, let's say, what you are saying, the metrics are improving on the forward-looking basis. So typically, the EBITDA per tonne also should improve, because now everything else remains constant. So typically, it will improve, let's say, EBITDA per tonne and also the profitability what you were suggesting. So is that assumption correct? Because then only we will see like material improvement in PBT or PAT going ahead. So is that assumption correct?

Yes, yes.

Okay. Okay. And anything on the, let's say, the new power like initiative that we have taken of 60 megawatt. So have we finalized some, let's say, like IRR number or, let's say, we have got some kind of like guidance would you like to provide on revenue or PAT going ahead? Or is it too early to comment on that?

Yes, yes. Mr. Vijay, basically, it needs some more time to give you those figures. The process is under the way and it's going on.

We'll take a question from the chat. It's from Nitin Gandhi. He's asking what is the revenue of Ultra Pipes and capacity?

Ultra Pipes capacity is roughly 84,000 metric tonnes, the total installed capacity. It can produce operationally up to 36,000 metric tonnes to 45,000 metric tonnes, because we have a lot of sizes. So every time you have to change the rolls and all those things. So almost all 50% to 60%, it can be produced.

So the peak revenue potential?

Peak revenue potential is almost all...

But we can take it later, either we can send a mail...

Depending on the market realization value, there can be changes, but we can take only the volume figure. We can speak about volume figure, because the condition is not in our hand, so therefore volume based we can say.

Okay. And any CapEx required for the Ultra Pipes?

No, no.

No, not required. We'll take the next question from Hrishit Jhaveri.

Sir, 2 questions from my side. First, on the stand-alone business. So how much is it coming from Western region currently? Because I think from last 2 years, we are planning that we'll expand in the Western region, we'll get out of the South. But I think the numbers are not coming in. Are we facing any significant competition here in the Western zone?

To be honest, we have not prepared our data sheet on zone basis. Maximum we can say, the customers we are having in the Maharashtra and other Western parts. But we are not having that readily available. I have no specific zone basis data. I have the whole area. If you need this, you can mail to us with specific questions, we can give the reply.

But on the front of business, basically, apart from this one, the business is growing on the Western side. And we don't feel as we are supplying our value-added products, which are CRC and the engineering products in that areas, so that particular business is growing in that area, and we are getting good revenue from that. And even the repeated orders are there for even the pipes and as well as the coils.

Okay. But I'm asking, are we facing any significant competition in the West with our products, because we are not able to significantly ramp it up even through our distribution channel or through distributors or franchisee model, anything.

No. So basically, once this particular line, which we have installed last year, is now growing up and the products of those particular lines like CR, CRGP and coils and other value-added products, those are getting -- because it's like OEM segments and we need to have the permission approvals from the upper bodies and all. So all those things are getting into place and the business is growing. So there is not a lot of competition in that area. Even GP pipes and all, yes, it is growing in that area and the consumption is good.

Okay, sir. I hope you scale it up this year. Second question on the Hariom Energy part. I think our total CapEx would be INR 180 crores to INR 240 crores as guided. How much would be debt out of this and how much would be equity? If 100% debt, what would be the average rate of interest?

Sir, it is not 100% debt. It is always maximum 75% -- 70% to 75% debt are coming, maximum side for any industry or as per the banking norms, okay? And the rate of interest is coming whatever as per the present Hariom rating, we are enjoying in our last financial year altogether 8.85%. So it is in between 8.5%, will be the answer.

So sir, just an inquisitive question here that we'll be taking around INR 100-plus crores of debt, on the pessimistic side, with an interest rate of 8.5%, 8.9%. Why are we allocating capital to an industry which is new to us and not investing aggressively in the industry we are present since long, first. Second, renewable is not a unique industry as of now since last 4 to 5 years. It is becoming a very competitive industry. So taking debt, adding pain to our interest expense, depreciation expense and harming the stand-alone business, do you think this is an efficient capital allocation?

One particular point, as I mentioned before, this model, it is not only for the solar generation and supply, it is a model for a new vertical [Foreign Language], we are just enhancing this particular division with a wholesome ready-to-use material for all the solar manufacturers, not only for this particular unit, we have started supplying to a few of the consumers who are just the EPC partners who are taking the material from us and utilizing their resources. So just to enter into some particular business, we have to have that platform ready. And for the future growth of the industry, we need to jump up to the central or the northern part of India, wherein the raw material and other things are available, either the market or the raw material. So we see now Maharashtra as an option for our future expansions in moving ahead.

Agreed on your part that we are entering into a new segment, sir. But clearly, first of all, it will take 18 to 24 months to at least start and to scale it up. Secondly, it is a clearly new segment for us. So instead of taking such a long route, we would have taken a better indirect route, obviously, with a lesser margin, but to just enter the industry, we could have partnered up somewhere -- because I think INR 100 crores, INR 120 crores of debt currently on Hariom's balance sheet is not an efficient allocation, sir.

Sir, the debt is not coming in direct way on the day 1, first thing. Second thing, it's a Hariom future expansion need. We have to new, for Maharashtra, as our MD sir has already cleared in their opening speech also, we have to start a new relationship where Hariom has entered into this segment with the Maharashtra government backed by the PM-KUSUM scheme by the central government. And the second thing is, as this facility, once we have generated this power, it will allow for our next future Maharashtra expansion to generate similar kind of activity for our own manufacturing facility also. So it is a kind of strategic move for a long-term vision, not a short-term vision. When we are doing the business, we have to think in a long-term way, not every time economically in a short-term way. So that is the strategic move. More than that we cannot disclose in this platform. If you need further detailed clarification about financial and profitability and future expansion, all those things, we'll share with you one-to-one.

Hrishit, may I request you to please rejoin the queue? Yes. We'll take the next question from Shaurya Yadav.

Sir, my first question is, what would be our working capital days going ahead? Like our payables have increased substantially, which is a positive sign. Like what's the reason for the same?

Working capital days?

Yes, sir.

Yes, trade payable days have been increased this year and mainly due to the change in the way our purchase cycle and payment schedule are structured. As the business has scaled, we have aligned our procurement and payment terms accordingly. Earlier, we were not getting any credit from JSW and other companies. Now we are enjoying this credit facility also from the relationship with the JSW. And there is no change in our approach to vendor relationship. It is simply timing alignment that reflects our current scale and structure of our operations.

Sir, like how much working capital days we are targeting in FY '26?

FY '26, it will be almost all net working capital days, if you have taken, so it is coming around 100 days we are expecting.

Okay, sir. And sir, like since we are guiding to increase our volume and increase our VAT contribution, like how much PAT growth we can expect in fiscal year '26, like in terms of percentage?

In terms of value growth or in terms of PAT percentage?

Sir, PAT growth, I'm asking.

PAT growth last year, it was 9%. So similar line of activity, in between 9% to 12% in terms of value we are expecting.

Okay. And sir, my last question is like what type of strategy we are implementing to increase our B2B contribution? Like it's been mentioned in our investor presentation that we are looking to increase our B2B contribution from 15%. Like what is our strategy going ahead?

Basically, in this particular line of activity, we are now supplying to multiple OEMs and the MNC companies who are there with us because of our tandem mill production and the quality enhancement in that particular unit and the division. In that particular segment, we are targeting that B2B business, which is giving us a good opportunity to enhance our revenue as well as the EBITDA levels.

We'll take the next question from Radha Agarwalla.

Sir, my first question was that to make galvanized pipes, the raw material which you mentioned, HRC, that is currently available in the market at INR 45 per kg. So what is the blended cost of manufacturing, including the raw material and conversion cost, just for this galvanized pipelines? And what would be the average realizations currently?

So basically, madam, in short, all of your questions, I can give you that around INR 6,600 to INR 6,800 that much of blended EBITDA -- that much of per tonne EBITDA we are earning from the galvanized pipe and coil, this product.

Okay, sir. And second question is, you mentioned about the solar, INR 180 crores to INR 240 crores of investment. So this would be spread over how many years? And by when do you expect the revenue to start generating?

It will take minimum 18 months.

So from '20, I think...

So from now on, there is no investments now on because the land acquisition and all and other things will take its own time of 3 months, 4 months. From there on, the things will move on, and we have good time to settle down. So in this financial year, I think last quarter, I think maybe some investment would be done, or in the next year only?

Next year.

Next year only, right? Next year only it will be done, not in this particular financial year.

Sir, FY '26, in the core business, what is the CapEx? And this entire power business CapEx, if my understanding is correct, it would be in FY '27?

Power business, there will be a little bit CapEx in FY '26. And in FY '26, our core business CapEx, as we mentioned in the earlier conversation that 10% is the normal maintenance CapEx required for rolls for rolling mill, pipe mill, that is nominal.

Sir, actually, since our core business is generally low-margin business for the industry, and since we already have above 100 days of working capital cycle and we are going to invest more in terms of capital employed, wherein the revenue for the power will be seen only after 2 to 3 years, revenue and EBITDA. So then the ROCE is in the interim. So do you expect that when the power business starts contributing to EBITDA, so would that business give better ROCEs than the current business profile that you have on a consol basis?

So undoubtedly, this particular core business, we are focused and we are focusing more on to the core business only. That particular vertical, as I mentioned before, [Foreign Language] ready-to-use concert, that particular business is getting -- new vertical is getting enhanced. And that particular line of activity will go on throughout the India. We will be the core suppliers as the raw material is us, as the final product is us, as we are the manufacturer of scaffolding and the engineering unit is us. In that particular segment, it's ready-to-use concert wherein the whole site where the theft and other things are happening for the EPC manufacturers, we'll be supplying the material ready to use. So that enhancement and the revenue part will be more better than the regular business is what we assume.

Then I think I will present it in a different way. Between the stand-alone pipes business and the stand-alone power business, at optimum utilization of both the businesses, what would be the ROCE of both the businesses? And which one do you think is better investment?

Madam, we understand that the nature of activity of these 2 segments is totally different. You cannot compare -- you can compare apple versus apple. It's not apple versus apple. Second thing is this project is revenue generating from the day 1, that power project. And its under 25 years PPA, with predictable cash flows and minimal operational risk, the capital employed in the power business is also structured in a way that it does not affect the return profile of our steel business. So our core business ROCE will remain healthy. And over time, the power vertical will add stable return, support our ESG positioning and help unlock further value.

Sir, what is the payback you're expecting from power investment?

If you want this kind of questions, just mail to us, we'll give. As earlier also we have disclosed that now the project is very preliminary stage. Only we have signed the PPA. Now we have our consultant team and our team is selecting the land with the MSEDCL. After that, we can give you the detailed info.

Sir, could you give us the 5-year ROCE target?

Sorry, Radha. Can I request you to rejoin the queue, please? We'll take the next question from Madhur Rathi.

Sir, I wanted to understand, considering some debottlenecking at our furnace and other segments, sir, what could be the optimum volumes that we can create in our MS tubes segment? And sir, what is the steady-state EBITDA margin that we earn on our MS tubes segment?

Sorry, your point is not...

Can you please repeat it?

Yes, sir. I'll do that. Sir, I wanted to understand, with some debottlenecking and some major -- minor CapEx and improvements, sir, what is the optimum -- or what is the incremental -- what is the maximum MS tubes volumes that we can produce? And what are the EBITDA per tonne on a steady state that we can earn on the MS tubes segment?

So basically, sir, presently, we are having 132,000 capacity. Whatever you said, the minimum CapEx what we are up to reach of up to 180,000 metric tonnes.

Okay. Got it. So 132,000 metric tonnes to 180,000 metric tonnes, got it. And sir, what is the steady-state EBITDA that we can earn on this segment?

EBITDA per tonne?

Yes.

Presently, we are getting INR 8,000 plus EBITDA, and we are to get more than INR 8,000 to INR 8,500 per tonne EBITDA.

Got it. Sir, so my question is, on a broader level, sir, when I look at our 5-year business, sir, our MS tubes segment has grown at a slower rate, or I can say that our GP coil and GP tube has grown at a faster rate. So sir, how do we see over the next 3 to 5 years if the low -- not low, but when compared to MS tube, the margin of GP is lower. Sir, so how do we keep our margins stable going forward? And which segment do we focus more on, which segment should grow faster out of these 2?

So Madhur, there are 2 things. Basically, one is the backward integration, what we have, which is the MS tube, which is the old going concern and it's going on. And minor capacities are getting increased. And on those lines, it is going on. As you rightly asked, the GP product, which is there in line, this particular unit has got installed 2 years back, and it is in continuous process expansion and [Foreign Language]. So there are 2 different concepts of backward integration and moving forward for forward integration. [Foreign Language] compared to the backward integration product MS tubes.

Okay. Got it. Sir, I wanted to understand 2 things on the solar front. Sir, are we trying to become an alternative to aluminum extrusion that is required in solar, like setting up this pilot facility, and whoever would like to shift to -- like the B2B segment will grow. So if anyone wants to set up their solar plant, they'll straight away give whatever steel requirement or steel fixtures kind of business to us. Are we trying to do on that segment? And sir, currently -- sorry. Please go ahead.

Yes. Surely, your assumptions are 100% right. That's the business model that we are planning to do. And in this, aluminum extrusion part is not included. This is purely with MS pipe and the accessories used for the model. And this will be supplied to B2B and for the EPC contractors. They'll come back and procure it from us and we'll supply them directly.

So margin in this segment should be relatively higher to our current margin. Is that understanding correct?

Very true. Very true. And with regard to the readymade product and one-stop shop product, so the margin would be higher and very easy to communicate, very easy to supply, very easy to get the materials from the consumer, because if at all we see the process, I mean we are supplying from the base plate to the nut bolt. Everything will be manufactured in one process, one shed, and we'll be giving them as a complete set of structure wherein [Foreign Language]. All these particular things will be [indiscernible]. In that the margins would be very high.

Got it, sir. Sir, that was very helpful. Sir, just final question. Sir, the 60-megawatt solar plant that we are installing, sir, how much that will be currently captively used?

No, it is not captively used at all. This will be under PM-KUSUM yojana, wherein this particular generation will be supplied directly to the Maharashtra government. You can check the policy.

We'll take the next question from Devendra [indiscernible].

First of all, congrats on the debt number of INR 400 crores. This is, I think, a history in your quarter based revenue, INR 400 crores. Congratulations again. The first question is about your borrowing is INR 400 crores, okay? You said your rate of interest is 8.50%, okay? Repo rate is going down. Now you can see there the interest rate will be 7.8%, 7.9%. Means, you can reduce your borrowing interest cost to 10%. Is this possible?

No, no, no. 10% is not possible. The lower side can be possible.

No, because your income statement, you said INR 45 crores is interest cost, okay? If suppose borrowing is INR 400 crores right now, rate of interest will be 8%. Then it comes to INR 36 crores.

No, no, no. INR 400 crores, whatever it may be, that is as on your 31st March. So you have to take other financial charges apart from only -- you have not considered, when we have put in the P&L, the financial expenditure, that includes, apart from interest, the bank LC commission, other BG charges, other bill discounting charges, bank commitment charges, bank processing charges, so many things are there. So all together, it is coming under INR 44 crores to INR 45 crores, including term loan interest. So therefore, simple calculation is not like that, 8.5 x INR 400 crores, it's equal to INR 32 crores. So therefore, [indiscernible] 45 means 10%.

Okay. We can reduce INR 400 crores to INR 300 crores, is it possible?

It depends. It's time to time business requirement as it is growing from INR 45 crores because we have procured certain imported coil in Q2, Q3. Subsequently, we have taken some bias credit also. And as far as repo rate is concerned, in the last financial year, the repo rate was not cut down by the RBI. The repo rate was cut down in the Q4, March.

Correct, correct.

So therefore, in Indian financial institutions, they do not cut down the rate. Despite Hariom is having A-rated company, therefore, Hariom is enjoying the lower rate of interest comparatively to any other in this segment.

Okay. Is it CRISIL rating?

Yes, it is CRISIL, A- long-term rating.

Okay. And what is your non -- fund-based limit?

Fund-based limit at INR 340 crores. Working capital fund-based limit is INR 340 crores.

INR 340 crores. Okay. And congrats once again. I think achieving that 30% rate once again next quarter, that INR 300 crores to INR 400 crores and INR 400 crores to INR 450 crores.

We'll take the next question from Bhagwat N.

Congratulation on the strong quarterly results. So we are targeting 30% volume growth for financial year '26. So as previously mentioned, we are estimating 9% PAT growth as compared to FY '25. So these 2 estimations are not reconciling. So could you please comment on this?

Sorry, can you repeat again?

So we are targeting 30% volume growth for financial year '26. And as I heard correctly, if 9% PAT growth, that is what we are estimating. So these 2 statements are not reconciling. Could you please comment on this?

So 9% means last year, FY '24, if you check, our total PAT amount was INR 56.80 crores. In March '25, INR 61.73 crores. So absolute value, if you've taken on the growth trajectory, 9% growth was there, '24 versus '25, in absolute value taken, not in terms of against the revenue.

Okay. So that 9%, we are not estimating for financial year '26, but that is the growth that you mentioned for FY '25?

Yes, yes. That is on value terms, not in percentage PAT versus turnover. It is in growth between the 2 PAT absolute figure year-on-year.

Okay. Okay. Understood, sir. And what would be our CapEx for the Energy segment for this financial year, FY '26?

Sorry?

For financial year '26, what we are estimating for CapEx amount? For energy segment, I'm asking, sir.

For FY '26, there is no much more of CapEx. It is only the regular CapEx which will be going on for the maintenance.

Solar power. Actually, you are asking about solar power?

Yes.

Solar energy. So there will be much more CapEx.

Okay. So that we are estimating from FY '27?

Yes.

We'll take the follow-up question from Keshav Garg.

Sir, whatever I could understand from our foray into this 60-megawatt renewable power, sir, I could not understand the rationale. If we are planning to supply solar structures to EPC companies, we can do it anyhow. We don't need to install a 60-megawatt power plant to supply solar structures to EPC players. They are 2 different things. Secondly, we already have INR 400 crore debt, sir. All these schemes are for those companies which have cash surplus. So by deploying in these areas, they can get some low double-digit kind of IRR, which is more than bank deposit rate for them. So it works for them. But sir, already we are over leveraged. So why don't we instead try to get into stainless steel pipes or fittings or something like seamless pipes, sir, which is a related business, instead of getting into power production. And sir, like you said that in future, you will install capacity in Maharashtra, then you will use this power. Sir, anyway, solar panel prices keep on falling. So it doesn't make sense to put a capacity in advance for your future capacity.

Keshav, thank you for the insights basically. So the business model, we cannot give you a very clear picture on this platform. I would request you to just meet us in person, so that we can -- undoubtedly, your insights on the SS pipe and other things are really welcoming, and we are already planning on that lines also. So the management is very much core on the development side and value-added products basically, which is the core area which we are targeting. So I would request you to give us some time to explain you in person on the complete parameters of the business. We welcome you to Hyderabad. Please allow us to host you.

Sure, sir. Also, sir, for FY '26, can we expect the PAT growth to move in tandem with the 30% volume growth?

PAT growth versus tandem growth...

[Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language]. So I would really love that you can come down, we can share you all the things whatever required by you.

Sir, there are some questions in chat. I'll quickly ask them. There's a question from Mr. Majid Ahmed. Can the debt reduce going forward? What are the working capital days going forward?

Yes, the long-term debt will be reduced and the short-term debt also. We have not closed the short-term debt. Short-term debt will remain same, but the long-term debt will be reduced proportionately. Another 2 to 3 years, the long-term debt will be reduced by our...

The other question is from Mr. Pawan Mehta. We were planning to become debt-free by FY '27. Where are you on that? And where do you see interest cost going ahead?

See, it's our internal accrual. By FY '27 or by FY '28 maximum, our internal accrual will be that much positive where we will be able to repay the entire debt amount by our internal accrual.

Sir, the last question in the chat is from Mr. Gurvinder Juneja. Please share your thoughts on how and if your economics change as you sell more to B2B channels, that is margins, working capital and cost of sales.

Can you repeat the question once again?

Can you share how the economics of the business will change as you sell more and more to B2B channels versus 15% as of date?

So basically, B2B sales, while we are increasing the B2B sales, the margin always is good. Moreover, a very much predictable top line is coming, and the margin you can easily understand, which is not connected with the recent market pricing or volatility. So in future, it will impact positive side on the present scenario. So we are looking forward to -- it depends on what kind of product we are manufacturing and servicing.

So since that was the last question for the day, I will invite you to give your closing comments. Would you like to give any closing comments, sir?

Yes, yes. Rekha ji.

Thank you again to everyone who joined us today. We value these interactions as they not only allow us to communicate our performance, but also help us to understand the perspectives of our valued investors and analysts. As we look forward, our priorities remain clear: deepening our integrations, expanding our market presence, enhancing profitability through value-added products, and driving sustainability-led growth. The result for FY '25 strengthens our business model and the dedication of our team. We are confident in our strategy and are well positioned to capture emerging opportunities in both steel and renewable energy segment. We appreciate your continued support and confidence in Hariom Pipe Industries Limited. Should you have any further questions or queries or require details, please feel free to reach out to our Investor Relations team. Thank you. Have a great day.

Thank you to the management for giving us the time. Thank you to all the participants for joining on the call. This brings us to the end of today's conference call. Thank you.

Thank you.

Thank you all.