Jai Balaji Industries Limited (JAIBALAJI) Earnings Call Transcript & Summary

Ladies and a good day, and welcome to the Q3 FY '24 Earnings Conference Call of Jai Balaji Industries Limited hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sana Kapoor from Co-India Advisors. Thank you, and over to you, ma'am.

Thank you, Michelle. Good afternoon everybody, and welcome to Jai Balaji Industries Limited earnings call to discuss the Q3 and 9 months FY '24 results. We have on the call Mr. Aditya Jajodia, Chairman and Managing Director; Mr. Raj Kumar Sharma, Chief Financial Officer; Mr. Vijay Bagri, President, Finance; and Mr. Ajit Pandya, Company Secretary. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company faces. May I now request Mr. Aditya Jajodia to take us through the company's business outlook and financial highlights, subsequent to which we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you Sana, very good afternoon to all of you. We are pleased to welcome you all to our maiden earnings call. As this is our first interaction, I would like to take a few minutes to discuss the journey of Jay Balaji Industries Limited, followed by the strategic updates and the performance highlights. Our investor presentation has been uploaded on the exchange, and we hope that you have had the opportunity to review it. Jai Balaji Industries Limited has a long history of 24 years, and we have seen many commodity cycles and survived those some with much difficulty also. Over the years, we have been worked hard to achieve a strong operational efficiency and build a large integrated organization very much focused on specialized value-added products. Today, we are one of the largest manufacturers of value-added products, specializing in DI pipes and specialized Ferro alloys. We have state-of-the-art manufacturing facilities across West Bengal and Chhattisgarh, including a 1.1 million tonne fully integrated greenfield steel manufacturing facility. The company is at the forefront of the industry, and we have a very large export base also and are exporting currently to 40-plus countries globally. The company has fully integrated operations and specialized product portfolio, focusing on value-added products like ductile iron pipes and specialized Ferro alloys. Ductile iron pipes contribute around 30% of our revenues, and we are strategically placed in an industry which is poised for substantial growth. It is expected that the industry will grow at 13% to 15% CAGR in the near future. These pipes essential for water transportation and drainage systems are witnessing increasing demand due to infrastructure development initiatives such as the JAL JEEVAN MISSION and MISSION AMRUT. Jai Balaji is actively contributing to these projects and currently holds around 10% of market share in the DI pipe industry segment in India. And we expect to improve our share to around 18% to 20% following our capacity expansion on which we will be talking later. Consequently, we expect the revenue contribution from ductile iron pipes to increase to 45% to 50% of our group's revenue, reflecting our strong strategic focus on this growing market segment. We are also one of the largest producers of specialized Ferro alloys in India. The company's specialized Ferro alloys command a significant premium over the benchmark prices in the market, underlining their high quality and value. Jai Balaji expects revenue from specialized Ferro alloys to increase substantially from the current 20%, 25% to 35%. Furthermore, Jai Balaji Limited has also secured its market position by establishing long-term contracts with both Indian and international clients of great repute. As the company continues to enhance its capabilities in specialized Ferro alloys, it also remains very well poised to capitalize on the increasing demand and maintain its premium position in the market. Jai Balaji Industries Limited is strategically executing a very comprehensive cost-cutting strategy aimed at optimizing operational efficiencies. Through meticulous planning, the company is expanding its capacity with a focus on achieving the lowest cost structures and capitalizing on economies of scale. The establishment of a 6 lakh tonne iron ore beneficiation will be utilized for beneficiation of iron ore dumps. Additionally, the presence of 3 railway sidings enhances transportation efficiency, contributing to the overall cost savings. Furthermore, the utilization of captive power and dedication and a dedicated effort to reduce debt reflect the company's commitment to minimizing energy and interest costs, thereby strengthening our balance sheet. These strategic initiatives underscore Jai Balaji's dedication to operational excellence and financial prudence, positioning the company strategically for sustained success in the competitive markets. We have faced very tough challenges in the last 10 years, which are now resolved with the commitment, hard work, faith and resilience of the management, business associates and all its stakeholders. And I would like to take this opportunity to thank everyone for the continued support. Jai Balaji 2.0 is emerging as a resilient organization with a strong focus on margin expansion for value-added products that is GI pipes and specialized ferro alloys and backed by a very strong balance sheet. The company aims to expand its capacity of DI pipes by 175% to 6.6 lakh tonnes per annum, ferro alloys by 46% to 1.9 lakh tonnes per annum, and the company is strategically targeting a utilization rate of up to 90%, emphasizing operational efficiencies. We are also very much focused towards becoming net debt free in the next 18 months. The CapEx going forward would be supported by internal accruals. All these efforts would ultimately culminate into margin expansion. JBIL aims for an EBITDA margin in the range of 18% to 20%, reflecting a dedication to maintaining healthy profitability amid 6 expansion endeavor. JBIL has a clear significant capacity expansion plan for which around INR 10,000 million is the expected CapEx. Out of this, INR 3,808 million has already been incurred through internal accruals and the balance is expected to be spent in the next 18 months through internal accruals only. Capacity of DI pipes is expected to increase from 2.4 lakh tonnes to 6.6 lakh tonnes. It has already been announced to 3 lakh tonnes a few days back. This is expected to be done in 2 phases. Specialized ferro alloys capacity is expected to increase to 1.9 lakh tonnes from 1.3 lakh tonnes in 2 phases. 33,000 tonnes of additional capacity will be commissioned in Phase 1 by FY '24 and the balance is expected to be commissioned by FY '25. The company has also planned to revamp its existing blast furnaces, which would lead to increased capacity of 7.5 lakh tonnes of hot metal from the present capacity of 5 lakh tonnes. The company has also planned to increase the capacity of sinter by around 6 lakh tonnes and also setting up a 35 tonnes BFG boiler, details of which can be seen on Slide 12 of the investor presentation. Now coming to the financial performance. We are extremely delighted to share that Jai Balaji has delivered its highest ever financial performance in Q3 FY '24 and for the 9 months FY '24. During 9 months FY '24, our revenues are today INR 45,682 million. The adjusted EBITDA increased by 103% to INR 6,664 million and EBITDA margins have increased to 15%. PAT also grew by 75% from INR 709 million in the 9-month period of FY '23 INR 6,066 million in the 9-month period of FY '24. In Q3 FY '24, the highest ever adjusted EBITDA for the quarter increased to INR 2,474 million, up by 96% year-over-year. Also, the profit after tax for the quarter increased by a significant 74% to INR 2,346 million. Now coming to the operational performance. We are very happy to share that we have achieved highest ever 9 months sales and production numbers for Tile Iron Pipes. On the other hand, on a quarterly basis, we saw a decline in sales and production numbers and -- on the other hand, on the quarterly basis, we saw a decline in sales and production numbers of DI pipes and ferro alloys owing to technical upgradation of one of the blast furnaces, along with one LME furnace of DI plant and the revamping of the ferro alloy furnaces. The same are now almost complete and commissioning is already on, and we expect the production to increase within the next few days only. Realizations for both DI pipes and ferro alloys increased on both quarterly and 9 monthly basis. In Q3 FY '24, realizations of ferro alloys and DI pipes increased to 176,000 tonnes and 80,000 tonnes, up 33% and 18% year-over-year. With this, I would like to conclude my opening remarks and assure that we at Jai Balaji Industries are very confident that of creating a resilient organization with a strong growth outlook. We can now open the floor for questions. Thank you so much.

[Operator Instructions] We will take the first question from the line of Avi Welike from Axis Securities.

Congratulations for the great set of numbers. We have witnessed a great turnaround story, sir. And going ahead, if you can throw some light or explain the traits or strategy in place to sustain the profitability, especially if you can comment on any threshold debt level which you want to operate? And also what gives you confidence of achieving EBITDA margins in the range of 18% to 20%. So that's the first question.

I think we'll address your query. Coming to the part that what is the sustainable debt which we're looking at? See, currently, our debt is -- it is in the region of only INR 560 crores. As we mentioned in the opening remarks also, the aim and target of the company will be to be net debt free over the next 18 months. With the current cash flows of around INR 250 crores plus every quarter, there is going to be jumps in the improvement of EBITDA margin going forward as the CapEx plan unrolls. But even if we assume that the -- even if we maintain the present margins and the present EBITDA also with the present CapEx plans and with the current repayment plans, we will be in a very comfortable position to be net debt free over the next 18 months. The company does not envisage to raise any term loans of any sort to finance this CapEx plan. And it will be done entirely through internal accruals. So the strategy on debt will be to be net debt free. And then coming to the second part of your question as to what gives us the confidence and what -- and how we will be increasing our EBITDA margin. I will just go back, I think, a few quarters ago. Just to go into the history of the company, around 2 years ago, our sale of value-added products in the entire revenue basket was only 30%. With the initiatives which we have taken over the last 2 years, it is now around 50%, 55%. Going forward, it is going to be over the next 18 months, it is going to be 18%, 25%. When the product share -- sorry, when the revenue share of the value-added products was only 30% 2 years ago, our EBITDA margins were in the region of 7%, 8% only. With announcement from 30% to 50%, 55%, we at 15%. And as we go forward towards 80%, it will be moving towards 18%, 20% along with value-added products, what you also mentioned was that we are also going for cost-cutting measures. So with cost-cutting measures, what we mean, it is that the economies of scale will come into play, new technologies will be put into use, whereby the other cost of raw material, et cetera, also will come down. So all the cost-cutting measures will be in place. So this particular margin, what we're looking at, we are very confident that we will be able to achieve these margins.

Understood, sir. Thanks a lot for that explanation. Next one is if you can throw some light on production sales in guidance for FY '24 also on EBITDA or PAT guidance.

This is Raj Kumar Sharma. And Sponge Iron in third quarter, we have produced 61,000 tonnes as compared to 64,000 in Q3 FY '23. Pig iron because one of the blast furnace was under modernization, the production number in this current quarter was 93,000 as against 125,000. Billet, we had slight increase, 42,000 as against 40,000. TMT, there was a very good performance of 71,000 as against 59,000 in Q3 FY '23. Ferro alloy, we maintained the same run rate, 27,000 as against 27,000 in Q3 FY '23. Ductile iron pipe was 49,000 as against 58,000. As far as realizations are concerned, sponge iron, it was INR 2,921 as against 32,819. Pig iron was INR 3,511 as against INR 41,252. Billet was INR 1,947 as against INR 44 TMT, the realization was 46,211 against 50,850. Ferro alloy, because we have shifted to specialized grade of ferro alloys, approximately 30% of our ferro alloys is now specialized grade. The realization has jumped from 132,000, now it is 176,000 [Technical Difficulty] Ductile iron pipe was 80,000 against 68,000. And as far as guidance is concerned for the future, I'll hand over Aditya to...

Yes. So what Sharma Ji has just told you was the guidance for the future is that as we are ramping up the capacities, means we are looking at a capacity of approximately -- the guidance for FY '24 will be around 3 lakh tonnes of ductile iron pipes.

So with regard to the guidance, just on the number side, we can say that we are expecting to achieve more than 20% of turnover in the last quarter with the additional capacities being put up in place. And similarly, the bottom line should also increase. On the guidance, we don't want to comment much on the numbers.

[Operator Instructions] the next question is from the line of Vikash Singh from PhillipCapital.

Sir, my first question pertains to the capacity addition in DI pipe. So we are in the Eastern region where almost every other player is also increasing capacity significantly. So do we feel that there would be a situation where the competitive intensity could be very high. And in fact, contrary to your expectation of higher margin, we will end up getting a lower margin for a certain period of time?

Thank you for this question. It's an excellent question. So this is one debate which we always have before we put up any expansion plan. See, first of all, whether the manufacturers are in Eastern India or in Western India, that is not the important part because the market is absolutely pan-India. Our company, it is today supplying from Jammu Kashmir to Kerala and from Gujarat to the Northeast states also. So the question of being in Eastern India, Western India will not arise because the execution of orders are pan-India, number one. Number two, coming to the more important question is that other players are adding capacities. So how will the margins pan out? So on this front, I will just explain to you a couple of things. Here, we have a dual strategy. Number one, amongst the peers, we will be one of the lowest cost producers, which will ensure sustainable margins. And as far as the demand is concerned, the demand for these pipes are very, very huge for -- and over the next 5 to 10 years, 15 years, and as of now, as we see it, the demand for these pipes will remain very robust for 3, 4 reasons. This I will explain. Number one, the government is already on a mission to complete the Jal Jeevan mission program, where they have a program for connecting every household, but the scheme is called Nal Se Jal. Other than this, the Amur scheme is also being implemented. The advantage with these pipes as when we compare to the conventional materials of, say, steel pipes or PVC pipes or if we compare to the cement pipes which we see on the roads is that, number one, is that these pipes have a long life, number one. Number two, there is no leakage of water, which currently is a very valuable resource in every country. And as we go forward, this will become more and more valuable. Number three, one which is extremely important again is that with these pipes, there is no question of contamination or arsenic poisoning. So as you go forward and as the nation grows, the demand for these pipes will always keep on increasing. So in the -- so as of now, in the foreseeable future, we are -- I think that the demand will be robust and the margin should not get squeezed, rather it will be increasing only.

Understand, sir. Sir, my second question pertains to our near-term margin. Can you tell us what percentage of your DI pipe orders are on a fixed price basis since the iron ore and coking coal are on an upward trajectory, how does we see the near-term margin, basically the 4Q and 1Q FY '25?

I'll explain. Around 30% to 35% of the prices are on a fixed price basis. But even when we say fixed price is most of these contracts, they are actually on a WP index basis. But if the prices of the raw materials go up or other pig iron goes up, then automatically, the prices will get adjusted. And if the prices come down, the prices will get again readjusted on the lower side. So by and large, our margins are well secured and covered.

Understood, sir. Sir, one more question regarding our CapEx plan and the debt-free plan. Basically, we have more than INR 500 crores, INR 560 crores of debt and a pending CapEx of over INR 600 crores. So -- and with this kind of increased capacity, you would require the working capital and there's a lag effect of the ramping up. So just wanted to understand when we are giving a guidance of 18 months of debt free, what kind of assumptions you are baking in, in your estimates? Because it seems a little bit optimistic to me at this point of time.

Just to update you that in the current fiscal in the 9 months period, we have generated around INR 700 crores of EBITDA, and we are expecting the full year EBITDA to be more than what we have done in the last quarter. And going forward with the CapEx, which has already been taken place because we have already spent INR 380-odd crores till now. And in the next quarter, around INR 100 crores more will be spent. So these already INR 500 crores of CapEx will generate additional cash flow and will add more values to the company in the coming quarters. So we are confident in servicing the debt and meeting the net debt -- becoming the net debt free. Now second thing, one more important thing is that the term loan which the company has recently got from Tata Financial, we have a repayment term of 36-odd months, which has already started, and we have started making the payments also. So we have time for 3 years to repay the loan. But with the current accruals and with the current profitability of the company, we expect to meet the debt in the next 18 months also. However, you can say that we have shown it as an accelerated thing. But with the profitability coming up in the near future, we will definitely make it net debt free in the next 18 months.

I just add one more thing to what Mr. Bag has said. Even if we take a ballpark figure of the EBITDA, which we have achieved in the last 3 quarters, and we do not add the forthcoming incremental revenue or the incremental EBITDA, which is going to jump, obviously. But even if you take that then by the ballpark figure, we have done INR 250 crores on an average for the last 3 quarters. When we're talking about the forthcoming 6 quarters, it means INR 1,500 crores, though top line and bottom, it will be increasing exponentially. But even if we assume the worst, the INR 1,500 crores, the INR 600 crores of CapEx spending and with INR 500 crores of debt pending, which is INR 1,150 crores, means the balance money can easily go into the working capital.

Sir, the participant has left the queue. We'll move on to the next question. [Operator Instructions] The next question is from the line of Radha from B&K Securities.

Congratulations on good results. Sir, my query was that in terms of DI pipes, your capacities are increasing by almost 3 years. So how much of that are you planning to export?

Presently, we are exporting around 2% of our turnover and going future achieving the to around 10% in the next 24 months.

2% to 5% in the next 24 months. So that clearly states that the global demand of DI pipes seems to be very strong. So could you give us any insights on what kind of -- what is the total global demand of -- or the export market size of DI pipes and which are the countries where we are exporting primarily? And whether we are also exporting to the Middle East region and who are the large players in the export market who we are competing with?

With regard to present exports, we are only exporting to Middle East countries only. We have just now tapped the African market. We have already participated in a large tender in African country for which we have already formed the subsidiary in Uganda. And with this subsidiary, we are trying to tap the market -- African market where we see a very good demand in the near future because there are certain external funds also which have already tied up with the African nations for betterment of their living with regard to supply of water for transportation.

Sir, any increase on what kind of market price would we have in terms of exports for the DI pipes?

The market size is very large. In fact, what is happening today is that because today, because of the Jal Jeevan Mission scheme and because of the focus of the government to implement it at the fastest, currently also, there is a very large market. But what is happening is that because of the huge demand in the local country itself. So the first priority is that in the interest of the local infrastructure and in the interest of mission building, the first priority for all the manufacturers will be to sell first to the country and then export. The demand is very large. So whatever capacities are coming will do 10%. And the demand potential is not only from African countries and Middle East, the demand potential is also from the replacement markets in Europe and America, et cetera, also. In fact, I'm not taking names, but one of the largest DI pipe manufacturers in the country, we are currently exporting 50% of the production on a consistent basis. And that production currently, it is 3x our production. I think that will answer the question.

Yes, sir. Sir, Europe, I understand if you correct me if I'm wrong, Europe has a on import of DI pipe. So would we be able if you are targeting Europe market, would sales would be competitive with respect to the manufacturers that are there in Europe.

But I will explain that also. See, our primary market will be since DI pipe is a voluminous product, our first targets will be the countries which are nearer to India, that is the Middle East countries, where there is a shortage of water and where the -- all the infrastructure work has been rolled out. Secondly, the market will be -- the target market will be the African countries, where again, there is a huge shortage of infrastructure and the funds were short, but now funds are pulling it from the multinational agencies. The third market will be Europe. Though there is an antidumping duty, but Europe is also now imposing a carbon tax. And our company will be very, very well poised to encash this particular tax in a manner in a manner that the tax will work to our favor because our -- most of the pipes which we'll be producing, our ESG footprint and our carbon footprint will be one of the lowest in the industry. And we are very confident that this particular duties, they may work in our favor on the contrary. As far as the antidumping duty is concerned, antidumping duty is definitely there. But in spite of that, they have strict approval processes and the companies which are approved, they are able to be -- all these exports are -- in spite of the duty, they are revival from India. Already one of the largest manufacturers of pipe in the country, they are already exporting to Europe, as you will see from the data.

Sir you said that the elastic demand is pretty strong. And as a standard but and we even are key factors driving the demand. But other than that, there is also increasing demand from pipe litigation. So any sense in terms of what kind of demand we are expecting from this price litigation -- in terms of volumes, could you give us any numbers on this?

Madam, see, the projections are very, very large. these projections are so large that when we are saying that the market will grow by 13% to 15% CAGR. In the past 10 years, we have seen that the market has grown by more than 20%. Actually, the demand has grown. So what we have taken in our projections, it is that the demand will grow by 13% to 15%, but the past trend has shown that it has been 18% to 20%, 25% also in some years. In irrigation also, madam, so far, what is happening is that so far in irrigation by India when we are doing -- in case we are [indiscernible] what we see is that irrigation, it is normally the canals which are there, which is open to the sky. So most of the irrigation it is in the canals where there is a huge evaporation loss also. As the country progresses, as the demand for water increases, as the demand for other things increase, naturally, the water is also a very, very valuable resource. So there are already schemes in the government pipeline, which will be implemented very soon, hopefully, maybe after some next year [Foreign Language] we are looking forward to a particular situation where there will be a scheme where all these irrigation canals will also be replaced by pipe water because land and water are being used.

Are we expecting any kind of scheme to be launched by government for this pipe irrigation system as well?

Absolutely. We are looking at that also.

Okay. And sir, last question. You mentioned in your opening remarks...

Radha Madam, I'm sorry to interrupt. Madam, I would request you to kindly rejoin the queue for follow-up questions, please. [Operator Instructions] We'll take the next question from Vikash Singh from PhillipCapital as this line had got disconnected earlier.

Sir, just wanted to understand the tax benefits which is available to us. So till what profits we don't have to give any taxes?

Carry forward loss of approximately INR 1,700 crores, out of which the current year's profit will go out and probably 18 months from here, we are tax-free.

[Operator Instructions] The next question is from the line of Manav Gogia from YES Securities Limited.

So sir, my first question comes on the cost savings side. The setting up of this iron ore beneficiation plant of the 6 lakh tonnes, how much of savings do we see out over there on a per tonne basis, if you could let me know? Also the railway sidings that you mentioned on the logistics front, can you just give me a brief explanation on what sort of incremental savings you get from the railway sidings as compared to using the road transport?

Yes. See, when you talk about the railway sidings 3 railway sidings, 2 are at the plant locations inside the plant practically. And one is in the iron ore belt of Barbil in Orissa where the iron ore is loaded. Now you must be well aware is that to make 1 tonne of steel more than 3 tonnes of raw material is required. And iron ore means it constitutes the major bulk of the movement. The current situation is that for the last many years, means the railway is the cheapest mode of transport. And even in the forthcoming years, this is going to be the cheapest mode of transport in India. But unfortunately, there is a huge shortage of rigs due to which many of the peer companies have to move the material by rail also and by road also, which is much costlier. So due to the virtue of the railway sidings, what happens is that our raw material movement of iron ore, it is been done entirely by railways, which is the cheapest mode. So not only does it reduce the cost when we compare the cost to the peers, it also eases the movement of the traffic. So this is one part. Also, what happens is that when the traffic has moved from road, there is a lot of filfage, et cetera also. When you move by the railways, the filfage is practically nil. So these advantages are always there. When you talk about the iron ore beneficiation, how it helps is that India has a huge deposit of low grades of iron ore, which are currently being exported and the usage has not been done in the country. So what we aim is that we will take advantage of these low grades of ore, utilize them internally inside the country itself by beneficiating it. So that there is a cost advantage to the blast furnaces and to the other units also.

Okay. I mean, like could you provide me some numbers on the same if you could like any incremental savings that you see from this plant, especially like on a per tonne basis that you have modeled it out.

See, railway siding, we always consider as a very integral part of the, I would say, of the entire plant. So if you have to evaluate the advantage, it will be around INR 400 to INR 500 per tonne on per tonne of movement of the iron ore. So this translates into how much ethanol.

Roughly INR 200 to INR 300 per tonne, right?

Yes. So approximately, the advantage will be INR 400 to INR 500 per tonne for iron ore movement. And in terms of beneficiation also, the cost will reduce around INR 40 to INR 50 per tonne for iron ore. So overall, when you talk, it is around INR 1,000 per tonne of advantage due to railway sharing and beneficiation.

Okay. That was quite helpful. Sir, my other question is, if you could just throw some light on who your top 3 or top 5 clients are in this DI pipes and the ferro alloy segment? And what percentage of the total revenues do these clients contribute to?

In Ductile Iron pipes, the major customers currently, they are the Haryana state government. It is Maharashtra, that is MGP and also Jammu and Kashmir. These are the major states. And in the private sector, it is mega Engineering, NCC, Kalpataru, GMC projects. So these are the major customers in the private space and the government space as far as the DI pipe industry is concerned. And as far as the ferro industry is concerned in India, all the large players who are making niche products, they are the buyers as well as internationally out of the 40 countries -- the countries are spanning from Japan to America across the globe wherever niche producers are there. So we have long-term contracts with many of them.

[Operator Instructions] The next question is from the line of Aman Jain from Arihant Capital.

Yes. So sir, just wanted to understand the EBITDA per tonne that we are doing for TMT, DI pipes and ferro alloys. And if you could give the breakup of what is our supply to distributors and what is our supply to the projects that we do directly.

So just to update you that with regard to distributor sales, presently, some part of the empty bars is only supplied to distributers. Our major segment in ferro alloys as well as DIP are either intermediates or go or directly in projects, which are being done on an EPC basis by the contractors. Now with regard to your per tonne EBITDA, just to say that on the metallic front, say TMT bars or intermediates, the EBITDA is much lower. It's approximately 6% to 7% only, whereas we are having a higher EBITDA in ferro alloys as well as in DIP, which ranges somewhere between 17% to 18% as of now.

Sir, I just -- if you could give the EBITDA per tone that we do.

The breakup of per tonne of EBITDA, if required, we will send you separately send us the requirement, we will share you the EBITDA per ton.

Okay. So my next question is, so I saw that the ferro alloys production and sales has been flat as compared to the year-on-year last quarter. So I just wanted to understand if there is no demand or we have reached the maximum capacity utilization.

No, no. We have -- our MD has already given in the opening remarks that 2 of our furnaces were there under maintenance in the last quarter. So you will see a much better improved performance in the quarter -- next quarter only. There is no question of demand, we have large orders in hand. So due to the maintenance, the supply could not happen in this last quarter and which will be taken care of in the next quarter.

Okay. And sir, my last question is what are the capacity expansion plans for FY '26, especially for the ferro alloys and DI pipes? And what will be the capacity utilization at that time?

The ferro alloy capacity at present is 130,000, and it will increase by around 50,000 in the next 12 months only. And we expect the utilization to be around 75% on a year basis on a full year basis in '25. With regard to DI pipe, already, we have enhanced the capacity by 60,000 tonnes a few days ago, and we are expecting it to increase to 360,000 by FY '24. And in the next 12 months, the first phase of expansion of around 2 lakh tonnes will be in place. So for the first full year of '25, '26, we are expecting around 90% utilization with the capacity of around 6 lakh tonnes.

[Operator Instructions] The next question is from the line of Deepak Poddar from Sapphire Capital.

Many congratulations for a great set of numbers. First, just a clarification. You mentioned somewhere, I mean, this fourth quarter, you're looking at 20% growth in revenue on a Y-o-Y basis. Is that right?

On a quarter-on-quarter basis.

On a quarter-on-quarter, I mean, fourth quarter versus third quarter, correct?

Yes.

Okay. Okay. Understood. And I mean, all this expansion that you have been speaking about in the DI pipes and as well as in ferro alloys, right, which is expected to get commissioned fully by FY '25. So what can be our maximum revenue potential? I mean, at about, what, 90% or 95% optimum capacity utilization?

Yes. We are expecting the full year revenue in FY '26 to around 9,500 crores to INR 10,000 crores.

9,500 crores to INR 10,000 crores. Okay.

On current prices basis.

Yes, absolutely, assuming the stable realization. And when you say that we are looking at EBITDA margin in the range of 18% to 20%, that is on the basis that we will reach the optimum capacity utilization of your expanded capacity?

It may on Q-on-Q basis. You will see the numbers on a Q-on-Q basis as and when the -- actually, we are -- whatever capacity expansion is being done, is done on a modular basis. So with every passing quarter, there will be some percentage hike which we are foreseeing looking into the current price scenario.

Correct. So -- and this threshold or this range, we might look at to achieve, I mean, by FY '25 itself, right?

FY '26.

FY '26 Okay. FY '26 is the range that we might be looking at?

Yes, yes, yes.

Okay. And my last query is on your order book. I mean, do we maintain any kind of order book? I mean, if as such, how much would that be right now?

We are maintaining order book for DIP as well as for ferro alloys. So the DIP order book presently will be somewhere in the region of INR 1,800 crores to INR 2,000 crores. And for ferro alloys, it is around INR 400 crores.

It's about INR 400 crores.

Yes.

The next question is from the line of Rajesh Vora from Jainmay Venture.

Congratulations on very strong set of numbers. In fact, I would want to know what are the key factors that dramatically changed profitability in the third quarter and the 9 months of the year vis-a-vis a year ago. The obvious ones are obviously capacity utilization, revenue mix, value-added product and average selling price and the raw material. So could you give us in these 4 factors, what are the exact drivers of this change? And what are this -- and is all of these 4 going to sustain over the next year or 2? What are your thoughts on that will be very useful.

The realization in Ductile had increased approximately INR 10,000 per tonne. And the amount of value-added specialized ferro alloys that we are producing, that percentage has gone up because of addition of the new sub-merged arc furnaces. And what happened that we have -- apart from selling from -- we used to sell it through dealers, the export market. Now we have started catering directly to them and the export percentages have gone up for ferro alloys where the realization is very high. These have contributed. Apart from that, the blast furnace is coming up, which is going to reduce the cost of hot metal. Sinter capacity has been increased, which has reduced the cost of iron ore. There were other synchronizations which have been done, which have contributed to this margin.

Okay. And would you have any idea about -- I mean, it's very tough, but current prices of all your products, are we at the -- what stage of cycle, commodity cycle are we? And what sort of your intelligent estimate is, nobody knows how they will behave. But broadly, how do you see them behaving over the next couple of years or at least next 1 year?

What you will see from our numbers that more of ductile and ferro alloy capacity, our production has shifted from sponge pig, billet, TMT and more towards ductile iron pipe and ferro alloys. So we are not much affected by the commodity prices. If you will also see the prices for sponge pig and the CMT has come down by INR 1,000, INR 2,000 if you compare by Q3 of '23. The prices have softened. But you will also see that the ferro alloy prices, it has jumped from INR 140,000 to INR 170,000. It is because -- and this -- what I'm telling is INR 170,000 is blended realization of normal ferro alloys and specialized ferro alloys. This percentage of increase of specialized ferro alloys has resulted in increase of per tonne sale rate from INR 140 to INR 170. Similarly, because of demand of ductile in India, it has increased from INR 70,000 to INR 80,000 somewhere INR 8,000, INR 80,000. So what has happened, the commodity prices have come down, but value-added products in which we are moving and expanding also, that has gone up.

Very useful. The INR 9,500 crores to INR 10,000 crores revenue you mentioned, that was only for ductile parts or the whole company in FY '24?

Company as a whole.

Company as a whole. And of which ductile and ferro alloys, which is your main value-added products, as you mentioned, they would contribute how much roughly...

Around 80%.

75%, 80%?

Around 80%.

One thing we'd like to add over here is that the entire pivot and the entire aim over the last 2, 3 years and going forward, it is to entirely decommoditize this business. The company started as a small iron manufacturer. The original name was Jai Balaji Sponge Limited 24 years ago. We started like that. But from a small iron producer, from a pig iron producer from a commodity producer, the entire focus has been to now entirely decommoditize the steel business and to go into val-ded products. So that is the major theme of Jai Balaji today.

The next question is from the line of Shubham [indiscernible] from PCAPL.

Sir, a couple of questions from my side. I just wanted to know what is current exports as a percentage of revenue for us? And is there any margin differentials for domestic sales versus exports?

As we mentioned earlier also that previously, the exports were made to the traders. So in the past couple of years, the exports have increased substantially. However, the exports for ferro alloys is the major driving factor for us. Presently, the entire -- out of the entire ferro alloys category, we are exporting more than 40% -- and -- by this year-end, we are trying to achieve 50% because presently, all the orders are executed in export category only. Now on the overall side, the export is not very large if you compare by the turnover. Say, in the past 9 months, we have achieved a turnover of around INR 4,600-odd crores, wherein the export contribution is roughly around 10%.

Got it. And sir, what will be your -- I mean, raw materials with respect to current product mix? And if you can comment on what are the costing situation currently for those raw materials? And what could be the -- I mean, how could it behave in the coming near-term future?

I think with regard to this query, I think you can -- if you can directly send us the requirement, we will send you a separate sheet with the working -- detail working.

[Operator Instructions] The next question is from the line of Radha from B&K Securities.

So sir, what I was asking previously was that you mentioned in the opening remarks that we are one of the lowest cost producers. So if you are referring to the -- because of the backward integration that we have, Sinter, Coke oven, power, so what I understand is all the other players also, including the largest players that you were referring to, they also have all the backward integration. So what makes us say that we are the lowest cost producer? Is it only the railway siding or any other benefit also we are having that other players are not?

I'll explain. See, as far as I'm aware, other than one player in this industry, none of the players have a private railway siding in Orissa, which is an iron ore loading point, number one. Number two, the other players also do not have their own railway sidings inside the plant complex itself. So logistics costs are higher. Number two, even if other players have their coke ovens, I'm not aware of -- most of the players don't have the coke oven at the same location. I would not like to [Foreign Language] but most of the price of coke ovens at a different locations. Again, the cost increase [indiscernible] increase, handling increases, fines and byproducts are increased. So in terms of cost efficiency, that is why we say because of the logistics support and because of we having our entire facilities in the same complex itself. So this makes our particular unit unique as regard to pipe manufacturing, all the facilities are in the same complex itself rather than be distributed over 2, 3 areas and in different geographies.

Okay. So if you say given that we are already having -- if we are having low-cost benefit then on the sale of pipes or other products, so primarily talking about pipes because that's where our main product is. So with respect to realization per tonne, would we normally sell in line with the rates that the other players are offering? Or how would we determine our realization?

The realization will be determined absolutely by the market forces, and we will be selling at the same market prices. And because our cost is lower, we will not be passing the benefit to the customers. The cost is lower for the benefit of the company and for the stakeholders. That is our advantage.

Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for the closing comments. Over to you, sir.

Thank you, everyone, for joining the call today. We trust that we have addressed all your inquiries to your satisfaction. In case we have any other remaining unanswered questions, please do not hesitate to contact our Investor Relationship agency, Go India Advisors. They will be more than happy to assist you on this matter. Thank you once again, please.

Thank you, members of the management. Thank you. Thank you, sir. Ladies and gentlemen, on behalf of Go India Advisors, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.