Hi-Tech Pipes Limited (HITECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '25 Earnings Conference Call hosted by Hi-Tech Pipes Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anish Bansal, Whole Time Director, Hi-Tech Pipes Limited. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. It's a pleasure to welcome you to the Q4 and full year FY '25 earnings call of Hi-Tech Pipes Limited. I'm joined today by Mr. Arvind Bansal, Executive Director and Group CFO; and Mr. Arun Sharma, Company Secretary and Compliance Officer. We are honored to connect with our esteemed investors, analysts and partners. Let's dive straight into what has been an exciting and milestone-filled year for Hi-Tech Pipes. We closed the fourth quarter FY '25 on a high note with significant growth across all performance indicators. The revenue climbed 7.74% Y-o-Y to INR 734 crores fueled by strong momentum in infrastructure and construction sectors. Sales volume rose 8% to 116,032 tonnes, reinforcing our leadership and execution strength. Net profit surged an impressive 58%, reaching INR 17.63 crores, thanks to sharp cost control and high-margin products. Annualized, this fiscal year was truly transformational. Revenue jumped 14% Y-o-Y to INR 3,068 crores, our highest ever, supported by record sales volume. Sales volume soared 24%, reaching 485,447 tonnes, a new benchmark for the company. Profitability improved significantly with PAT rising 66% Y-o-Y to INR 72.95 crores, driven by operational excellence and improved margins. Now coming to the financial health. Net working capital days shrunk down to 52 days from 63 days, enhancing liquidity and reflecting better operational control. Return on capital employed has improved to 14.34% from 13.7%. Debt-to-equity ratio has reduced to 0.15. And importantly, credit rating upgraded to A+, a strong vote of confidence in our governance and financial discipline. Now coming to the operational highlights. Let me now take you through some of the key operational achievements of the company this year. Hi-Tech Pipes is proud to support 2 of the nation's most critical infrastructure initiatives, the first being the Indian Railway's Kavach anti-collision system where the company is providing high-quality steel pipes for its safety. Recently, the company has procured orders from Border Security Force for modular multi-layered high-strength border fencing. The growth from Sanand Unit II is now a global supplier for solar top tubes battle for solar energy infrastructure, serving markets across North America, Europe and the Middle East, delivering high production efficiency, scale and exports, a new symbol of our Make-in-India export to world strategy. Additionally, we have successfully commissioned a new hot-dip galvanizing facility at our Hindupur plant in Andhra Pradesh, enabling us to meet growing demands for corrosion-resistant steel pipes. In the last year, we have launched several new SKUs, notably the higher -- the large diameter hollow sections such as 250x250 and 300x200. Now coming to the project implementation progress. The greenfield plant at Sikandrabad is under advanced stage of commissioning. The unit is a pivotal part of our road map to achieve 1 million tonnes of production capacity by FY '26. The facility will produce specialized ERW steel pipes, catering to infrastructure, defense and renewable sectors. Secondly, the brownfield expansion at Sanand Unit II. Our Sanand Unit II expansion aimed at serving infrastructure and energy sectors. This is in line with our strategy to enhance value-added products offerings while optimizing the existing brand ecosystem. Now coming to the branding. The company has amplified its brand awareness through various projects. For example, Mahakumbh in Prayagraj and the enhanced visibility at all the Gujarat and UP Airports. Additionally, robust grassroots campaigns through dealer signages, wall paintings and local activations. With robust tailwinds from infrastructure, defense, clean energy, outlook for the steel prices is bright, we are fully aligned to achieve our long-term vision of 2 million tonnes installed capacity by FY '29. Backed by the strategic initiatives, funding strength and execution excellence, Hi-Tech Pipes is geared to deliver sustained value to all stakeholders. Now we may open the floor for questions.

[Operator Instructions] The first question comes from the line of Vikash Singh from PhillipCapital.

Sir, just first question regarding my FY '26 volume and EBITDA per tonne guidance as well as the value-added mix, which we are targeting?

So for this year, we have done 485,000 tonnes net sales volume. And FY '26, we are targeting upwards of 6 lakh tonnes, 600,000 tonnes. And the EBITDA should range from INR 3,500 to INR 4,000 per tonne for the full year. The value-added share, right now, we have closed this year at 38%. And with the new facilities and the recently installed galvanizing facility in Hindupur, we should be around 42% to 43% by end of FY '26.

So given your guidance basically, so shall we assume that the 1 million tonne capacity expansion is coming in the first half itself? Otherwise, that 6 million tonne -- 6 lakh tonnes of volume would be difficult?

Yes, sir. So it is on track. We are in a very, very advanced stage of commissioning and the trail productions will be starting from the upcoming quarter.

Understood. Sir, my second question is regarding the net working capital days. It was -- basically came down to almost 49 in the FY '23. Since then, it is increasing. Given we are going to push more volume, how should we look at this net working capital days? Would it be flattish or you expect it to come down? And by how much, if you could give us some idea regarding that?

Sir, this year, we have come down from 63 days to 52 days. So there is already an improvement of 11 days. And going forward also, I think there should be further improvement in the net working capital days.

Understood. Sir, lastly, on the competitive intensity, almost everybody is putting identical products. And we have seen that a couple of large players have seen some margin push basically or competition in the common segment. So how is our thought process regarding that? And -- because we are also talking about EBITDA per tonne improvement. So can I ask that what is the EBITDA per tonne in the April or May on a monthly basis as well?

So this is an ongoing quarter and, with this, we are in the middle of this quarter, but it is decent right now, and we'll have to see like how the next month or 1.5 months looks like. Coming back to the competition and -- so we are confident of adding like 25% sales volume every year. So that is our main target. And in the last many years, we have focused there, and we have been able to achieve that. So because of new products, geographical expansion, product expansion and through marketing strategies and company's already doing well in exports also. So combined -- so market is there for us, and it is more about execution.

Understood. Sir, just one last question. Gensol was one of our customers. So any -- do we have a major exposure to that? Or it's a minor one and we should not be worried about any bad debt?

One of their subsidiaries was our customer for the solar segment. And yes, that volume, we have -- that volume, there was an impact, but it's not significant in the overall scheme of things. And within solar also, it was less than 10% in our solar customer profile. So it's not a big impact.

The next question comes from the line of Krish, an Individual Investor.

I just have 2 questions. So the first one is, if I look at the steel tariffs, similar tariffs were imposed by U.S. back in 2018. And there we saw kind of steel prices crashing after that, like there was a spike and then they dropped down significantly and all the steel players were affected really badly, especially China dumping them in the global market. So given the similar scenario now, are we optimistic about the quarters that are coming forth? Or do you see something similar playing out?

Yes, Krish, so you are absolutely right, because of the steel tariffs imposed by U.S. for the worldwide steel mills. This is definitely a concern. But the Indian government proactively, they have introduced a safeguard duty of 12% on imported steel. So there is an insulation from these global shocks. And what import was coming like 1, 1.5 years ago, so import has come down quite drastically in the last 6, 8 months. And this duty is for 200 days. And if the findings are there, then this will be extended to 3 years. So we have this insulation of external price shocks.

Got it. But largely, this 12% duty, is this considered to be sufficient by the market? And was a similar thing not there in place back in 2018?

No. That time, it was not there. And this 12% is on top of the custom duty, which is 7.5%. Then there is a cess also. So all in all, it becomes 21% to 22% blended, which is a significant deterrent.

Got it. Got it. Okay. And these things were not existing back in 2018?

No, no, no, not at that time.

Understood. And the last question is, so we had projected for a volume of 5 lakh tonnes for FY '25. And judging by the first 3 quarters, it was growing quite well. So why was there sort of a slack in Q4 in terms of volume?

So as Vikashji had mentioned, there were orders from this company, which was a subsidiary of Gensol, where we had these orders in hand. But then we had planned for these order execution, but it did not happen in this quarter. So there was a small revision there. But overall, if you see out of 5 lakh tonnes, so we have done 485,000 tonnes. So we are like very, very near. And because of this issue, there was this loss of little quantity. Otherwise, we are on track.

Got it. Got it. So just to confirm, due to these tariffs, we are not looking at reducing the margin guidance in any way?

No, not at all.

The next question comes from the line of Sagar Shah from Spark Capital Private Wealth Management.

My first question is related to our CapEx plans. We have already around INR 190 crores in capital work in progress, and we are commissioning a new greenfield plant at Sikandrabad and a brownfield expansion in Sanand Unit II phase. So I understand that you have given the figure that we'll reach 1 million tonnes of capacity by FY '26. But can you throw some light that what exactly is going to be the capacity from 7.5 lakh tonnes to -- can you specify a number? And secondly, can you suggest a time line that is the capacity expansion already over or will it get functional by Q2 or Q3 FY '26? That is my first question.

Yes. So regarding the CapEx plans, so we have the ongoing CapEx going in at Sikandrabad, which I mentioned in my speech and the Sanand Unit II Phase 2. So these are under advanced stages of commissioning and very, very soon, we'll be announcing the trial production at both the facilities. Along with that, new facilities at Sri City in Chennai, that is already on -- the ground development work has started there. And the Sanand Phase 3 of Unit II, that is also under start. So by end of this financial year, we'll be at a 1 million tonne capacity, and we'll be on another 25%, 30% capacity increase in FY '27.

Okay. So basically, 1 million tonnes, that is including the Sanand Phase 3 and the Sri City expansion or without that?

No, no, without that.

Without that. Okay. So we'll equate to around 1 million tonnes to be precisely along with all the -- the entire capacity that you are talking of, including the Sikandrabad, Sanand, Hindupur and Khopoli, right?

Yes.

Okay. Sure. My second question is related to your guidance that you have just given of surpassing 6 lakh tonnes of capacity. So what are the drivers for that? Are you expecting some more client addition into your bouquet such as more solar power companies or maybe some more real estate developments. So what exactly are the drivers for increase in the volumes actually for FY '26?

Yes. So Sagarji, so there will be an improvement in the sales. This is not the capacity. Actually, these are the net sales volume, 6 lakh tonnes. So 1 lakh tonne additional sales, and we'll be selling this through our existing distribution channel. And there is sufficient demand for our products. Rightly you mentioned solar being one of the major ones where the growth is coming from. And we have a very strong focus on this segment. And also because of our geographical reach, we have been able to penetrate in this market in a very proactive manner. And apart from this, I mentioned, so railways is also a big -- a lot of new requirement and demand is coming from the railways also. So this is also helping the company in higher volumes.

Okay. Okay. Fine. And my last question is related to our OpEx actually for this quarter. And the other expenses, it came by almost half actually in this quarter at INR 14 crores as compared to INR 28 crores last quarter. So what were -- where was the divergence so much actually? I mean in just a matter of 3 months. Can you explain the difference?

Yes, Arvindji is going answer this.

Actually, in the other expenses in quarter 1, 2 and 3 are the limited review. And this quarter, this is a final ordinary number. In the year-end, some adjustments is always there on full year basis. So one reason is this. And second is as we are expanding our capacity, so some capitalization of expenses is also there, which has been accounted for.

Okay. Okay. So capitalization, that led to a reduction in expenses?

Actually, in earlier quarters, it is only a limited review. So year-end adjustment is always there, which has been reflected in Q4 and being the financial figure of the year-end. If you see on a year-on-year basis, other expenses numbers are at par.

No, no. Last year also, other expenses was at INR 28 crores.

I'm talking about full year numbers. On a full year basis, last year was INR 90.50 crores and this year [indiscernible] [ INR 90.7 crores ].

The next question comes from the line of Radha from B&K Securities.

My first question was...

Radha, can you be a little louder, please? I can't hear you?

Yes, sir. Is it better?

Yes.

So year-on-year, our volumes have grown by 24% on a full year basis. So I'm assuming similarly, our raw material procurement would have gone up in the same range. So with this kind of a growth, what is the incremental discount per tonne that the company is getting in terms of raw material procurement in FY '25 when we compare it with FY '24?

Yes, Radha. So this bracket where we are operating right now, it is more or less the same. But after this -- after the company becomes like 7, 8 lakh tonne player, then there will be a significant difference in the costing per tonne. So right now, we are in the bracket where the slabs are the same. But as we move upwards of 6.5, 7 lakh tonnes, then there is an additional change there.

Sir, any numbers you can give on a per tonne basis, what would be the estimated discount post we reach that level?

Radha, that depends on several factors, the market conditions and everything. So that will happen when it happens. So I think FY '27 is the right period, and it is like now it's almost 1.5 years away. So we are focusing on the current financial year. But of course, the higher volumes is part of our costing strategy also.

Okay. Sir, if we talk on the basis of index numbers, suppose now we are doing 4.8 lakh tonnes of volumes and you get X percentage of discount. So when we cross that 7 lakh to 8 lakh metric tons of volumes, so can you give some kind of an indication what would this X become at those levels?

Sorry, I did not hear you after 6 lakh, 7 lakh tonnes?

Suppose now at current volumes, we are getting X percentage of discount. Now when we cross 7 lakh to 8 lakh tonnes of volumes, what would this X percentage become at those levels?

Radha, there is -- you can take a range of INR 200 to INR 400 per tonne. How -- and it will play out, that will depend on the market conditions also.

INR 200 to INR 400 at what level of volume, sir?

On a 7 lakh tonne.

Okay. And post that, when we cross 1 million tonnes?

Yes. So in the same percentage proportionately.

That was helpful. Sir, secondly, basically, I wanted to understand if the competitor's procurement is 6 to 7x of Hi-Tech, then how will this discount work? Will it be solely based on volumes? Or will it be similar to the largest player? Or will it remain the same for all?

So there are like freight factors also, the landed price also. And the mill, there is one slab that is the highest slab it works out. There is one -- after a certain threshold, the discounts are maximized. So at the 1 million tonne level, all the players are more or less in a very, very similar range of costing.

Okay. And so what I understood is at 1 million tonne production, the raw material discount would be similar for all the players. And there is a certain threshold post which the procurement or discount would increase for those players?

Yes, yes. So discounting becomes very, very similar at that level.

Sorry, sir, just a confusion at 1 million tonne is similar for all players?

Yes.

And what is the threshold post which it would be higher for higher volumes?

So basically, what I've told you is at 1 million tonne level, so the pricing structure, the costing structure and the discount structure is very, very similar for all the players at 1 million tonne.

The next question comes from the line of Pallav Agarwal from Antique Stockbroking.

Sir, first question is on this purchase of stock in trade. So this quarter also, it's been -- it's pretty high about INR 75 crores. So what exactly is this? Like is this more of a trading business? Or what is the nature of this?

This is not trading basically, these are like some inventory that is stuck with the company, some odd sizes, some odd bits are there, some material defects are there. So this is the sale of those items. In the overall scheme of things, it's just like 5% to 5.5%. It's not a significant number.

Sir, will this sustain or every quarter or this is more of a one-off?

This is ongoing, and this has been ongoing for several years, and it is across the industry. So there are a lot of stuck material, which needs to be liquidated on time.

Okay. So this is something that we produce or is it something that we have purchased and you've got stuck with it?

Both, both.

Both. Okay. Sir, the other thing is just on the broad market trends. So now post safeguard duty HRC has again gone up. So is there more competition from patra pipes now given that the premium has gone up again?

So no, actually, there's a lot of market distinction that has taken place. So patra players, they have formed their own market and the branded players are have -- and the organized players have their own market. So it's not a big impact. So as you've seen, like we have done higher sales of 24% volume-wise. So for us, we are finding our new markets and new products and cutting edge products. So that's not a big issue right now.

Sure, sir. Sir, also just on -- if you could just tell us what are the warrants outstanding and how much of money can probably come in, whether it will come in, in '26 or '27?

Sorry, can you repeat, please?

The warrants. What are the warrants…

Volumes?

Warrants, share warrants outstanding.

No, there's nothing pending for conversion.

Okay. So everything is converted?

Yes, sir.

So there will be no more dilution then going ahead?

Yes.

Okay. Sir, great. So just lastly, so I think this year, because of the QIP, I guess, we would have ended with a net cash position right now, right? So I don't think we would be having any debt on our books, including working capital?

So basically, long-term capital has been [ going ], but with the new increased volumes, some working capital will be there.

It will be there. But that will not be very material. It will be less with our volumes.

Yes, absolutely.

And with working capital days coming down, so that also should help reduce the working capital debt?

Yes, sir. Yes, yes.

Okay. Sir, lastly, just on the CapEx, absolute, any guidance for '26, '27, what type of CapEx outlay we are looking at?

Approximately INR 200 crores.

Each year, sir, or across both years?

For this year, for FY '26.

Okay. Okay. And then the 1 million tonne -- extra incremental 1 million tonne, that would entail a separate CapEx?

Yes.

The next question comes from the line of [ Mayank ] from Arabian Machinery & Heavy Equipment Company.

This is Mayank from AMHEC. So my first question is on this tariff thing. Just wanted to understand what kind of price tariff differential we have with respect to China if we export from India to U.S.? Is there any number we have?

Yes. So Mayankji, so as we are already -- we know that this is a continuously evolving situation. Every day, every week, these tariffs which U.S. is imposing, they are changing and they are being deferred or they are being reimplemented. So it's quite a volatile situation right now. And simultaneously, you are already aware that the Indian government is pursuing the bilateral trade agreement with U.S. So -- and the China government is also trying for some trade deal, but it has not yet been done as of now. So it's quite a volatile situation. We are watching it. But right now, India definitely has an upper hand when it comes to exporting to the U.S. market. So India would be perhaps in the lowest band right now for the tariffs because they have imposed for Canada, Mexico, Korea and other countries also.

So I'm just trying to understand the export opportunity, which many players in this segment is trying to get hold of. What do you think about this next 2, 3 years, if this situation kind of prevails or the tariff uncertainty remains?

So export definitely is a very big opportunity, provided like all these trade deals and these agreements, they are in place. India should be a net exporter of steel products in FY '26. And the market is big, especially the American market. So we are keeping a close watch on this. And hopefully, the numbers should speak for itself.

Does that answer your question, Mayank?

I think his line has disconnected.

Yes. Does that answer your question, Mayank?

Yes, that's fine. So my next question is on the product-wise. I mean, if you could break given a breakdown of your product by the thickness of the pipe. I mean, your market share probably would be -- number would be helpful in terms of the thickness of the pipe that you sell?

So Mayank, it's a large -- it's a wide range of thickness we are operating in, starting from 1.1 mm and going up to 12 mm. So it's -- and there is a market for every, every thickness depending on the size.

So we are a leader in what kind of thickness because I think in the low -- I mean, in one of the con call, you mentioned that the patras, the difference with the patras price and the HRC prices also depends on thickness what we are producing. So therefore, I'm just trying to understand the price gap with respect to your product.

So -- so as I mentioned earlier, like our market is quite different where the approvals are required, the pipe has to be and it has to be like widely available and all the like 1,500, 1,600 SKUs should be there. So -- but to give you the answer, our main range is between 3 to 10 mm.

Okay. So 3 to 10 mm. And what would be your market share in this range, any number?

Our market share, I think like in this -- will be approximately our total market share, which is about 8% to 9%.

Okay. And lastly, on -- I mean, in terms of the interest expense next year, what kind of interest expense we should expect? If we could give any number, FY '26?

I think largely, it should be in the same range.

INR 44 crores, INR 45 crores.

Yes, yes.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Anish Bansal for his closing remarks. Ladies and gentlemen, the management has got disconnected. I would request you to stay online until I get them connected. Thank you. [Technical Difficulty] Ladies and gentlemen, the management has been reconnected. Please go ahead, sir.

Sorry for the disturbance. Thank you all for your active participation today. FY '25 was a landmark year for Hi-Tech Pipes, defined by record-breaking revenues, exceptional profitability and strategic milestones. Bolstered by strong momentum in infrastructure, defense and clean energy, we are advancing decisively towards our 2 million tonne capacity vision by FY '29. Your trust and partnership remain pivotal in our progress, and we are committed to driving sustained value creation through innovation and disciplined execution. We appreciate your continued confidence and look forward to sharing our next phase of growth. Stay well. Thank you.

Thank you, sir. Ladies and gentlemen, on behalf of Hi-Tech Pipes Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.