Jindal Saw Limited (JINDALSAW) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Jindal Saw Q1 FY '27 Earnings Conference Call hosted by ICICI Securities Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference has been recorded. I now hand the conference over to Mr. Vikash Singh. Thank you, and over to you, sir.

Thank you, Anushka. Good evening, everyone. Welcome to Jindal Saw Q1 FY '21 Results Conference Call. I would like to thank the management to give us the opportunity to host them. From the management side, we have with us Mr. Narendra Mantri, Chief Operating and Financial Officer; Mr. Vinay Kumar, President and Head Treasury; and Mr. Rajeev Goyal, Senior Vice President, Corporate Finance. Without taking any much time I'll hand over to the management for their opening remarks. Over to you, sir.

Thanks, Vikas. Good afternoon, ladies and gentlemen. I'm Vinay Gupta, representing Jindal Saw. On behalf of the managment team, including Mr. Narendra Mantri and Mr. Rajeev Goyal, it is a pleasure to welcome you to our conference call for the first quarter of financial year 2027, ending June 30, 2026. We also appreciate the ICICI team for hosting this session and coordinating the discussion. The Board approved financial results for quarter 1 of financial year '27 on July 14 in 2026. These were filed with the changes, and we assume you have reviewed them. Now, let us now present the operational and financial performance of the company and its subsidiaries. In this presentation, we will also cover the financial performance for quarter 1 business scenario and updates on the project in UAE and Saudi and few other things. In terms of our financial performance on a standalone basis, the company registered a total income of INR 3,756 crores in quarter 1 of financial '27 against INR 3,327 crores in Q1 of FY '26, representing an increase of approximately 13%. EBITDA for quarter 1 of '27 stood at INR 341 crores against INR 560 crores in quarter 1 of '26, representing a decline of approximately 40%. PBT for Q1 of '27 is reported at INR 145 crores against INR 307 crore in quarter 1 of FY '26, representing a decline of approximately 53%. PAT for Q1 of '27 is reported at INR 110 crores against INR 364 crores in quarter 1 of FY '26, representing a decline of approximately 70%. On a stand-alone basis, total income stood at INR 4,476 crores for the quarter 1 on console as compared to INR 4,103 crores in quarter 1 of FY '26, representing an increase of approximately 9%. EBITDA for quarter 1 of '27 stood at INR 421 crores against INR 688 crores for quarter 1 in FY '26, representing a decline of approximately 39%. PBT for quarter 1 in FY '27 is reported at INR 148 crores as against INR 364 crores for quarter 1 of FY '26, representing a decline of approximately 60%. PAT for quarter 1 of FY '27 is reported at INR 91 crores, against INR 415 crores in quarter 1 of FY '26, representing a decline of approximately 78%. Now, in terms of our indebtedness, as of 30 June 2026, the standalone net debt narrowed to INR 2,345 crores as that -- and -- versus INR 2,453 crores as of 31st March 2026. This includes INR 526 crores of long-term debt. This is timely INR 500 crores out basis from LIC and CD, which is repayable in 3 installments in FY '28, '29, '30. The net execution debt at consolidated basis has reduced to INR 2,472 crore as compared to INR 2,528 crores as of 31st March 2026. And the long-term debt out of this INR 536 crores. In June 2026, CARE rating has affirmed CARE A1+ rating for short-term debt facilities, including commercial paper and CARE outlook stable for long-term entity. They are best form, so there's no change in the rating. Now, let us discuss the progresses of our business. In terms of operations, for the first quarter ending 30 June 2026, performance remained muted, broadly similar to the weak trend seen in quarter 4 of the previous year, with exports, water infrastructure demand and seamless site certifications, all acting as constrains on our business. While we hold a strong order book, including a 6-lakh metric ton work order from Saudi Arabia. All outboard shipments have been suspended since March 2026. Geopolitical situation between U.S. and Iran brought MENA region to a standstill this quarter by blocking the Strait of Hormuz. A short lived diplomatic breakthrough in mid-June offered some hope for recovery. However, the subsequent collapse of these peace talks has limited our short-term visibility. Company had started executing 3 orders on export side to non-MENA region. Due to heavy traffic at Indian port, a few of the shipments have been deferred to Q2 of financial year '27. In the domestic market, the water segment remained weak as Jal Jeevan mission-linked project execution continued to be impacted by delayed lease of central funds and title scrutiny of the state projects. Multiple states reported pending dues and slowed project time lines, reinforcing a demand slowdown for pipe supply tied to government water schemes. However, the company saw a recovery in Q1 of this year, driven by higher decile iron pipe volume -- sales volume for execute various pipe project orders with us. Now, in terms of company-related matters, which have affected the business specifically in Q1, you know the company's seamless pipe business was additionally impacted because of its PPA license remains suspended from January 2026 until mid-June. This limited our ability to participate in certified oil and gas orders during the quarter. API, restatement enables the company to resume API certified seamless pipe supplies and participate in tender that requires the API monogram. In terms of a couple of new opportunities, as was pointed out in the previous call, heightened geopolitical risk across the MENA region is driving a decisive shift towards more secure overland energy infrastructure, creating a strong pipeline of opportunities in expansion, rehabilation and replacement projects, especially those aimed at avoiding vulnerable maritime choke points. This shifts it speeds up investments in rooms that bypass high-risk areas, creating major opportunities for pipe manufacturers and vendors in oil, gas and water infrastructure. Currently, India is also prioritizing energy security with new pipeline tenders expected in coming quarters that further in landmark March '26 government mandate designed to fast track nationwide pipe gas rolled out by eliminating geropetic delays, access fees and local bottlenecks through time bound central approvals. We would not like to update you about the company's ventures in MENA region. So as you know, like in the geopolitical hurdles, which exists in MENA region, the shift dynamics bring new chances for companies like us, and that is why we are actively pursuing these opportunities by expanding and manufacturing locally. As you know, like we had announced seamless project in Abu Dhabi and Soporset in Saudi Arabia. So first, let's talk about seamless pipe plant in Abu Dhabi. As we updated on various occasions, the company has initiated the process to set up a state of the art seamless pipe and factoring facility Awunabi, with an estimated project cost of approximately $300 million. The plant will primarily cater to the oil and gas sector in MENA region and more set in, which are aligned with the company's strategy to strengthen its supply base closer to the key global energy markets, including UAE. The project execution has commenced. By securing and developed leasehold lines with existing civil infrastructure, we have effectively shortened our construction time line. Procurement for critical long-lead equipment is already underway, whereby we have started opening LCs and placed cash advances. With financial closure expected in next few months, the project remains probably on track, which is likely to come into the commercial operations in financial year 2029. Given Abu Dhabi strategy now as on a dual pipe platform. seamless pipes, plus the decile are pipe deplete, both aimed at entering a full flat resalhub for energy and water infrastructure. Some brief about our Sharpie plant in Saudi Arabia. We updated in the past that we have established a strategic joint venture in Saudi Arabia, holding a 51% equity stake alongside Saudi, which will hold 49%. The JV is dedicated to establishing advanced Elsa and stop mills of 300,000 metric tons per annum each to serve water infrastructure and energy demand. Having already secured the project plan and established LC for selective equipment, we are fully committed to fast tracking for construction of these manufacturing facilities. Furthermore, we expect to finalize interim financial closure within the next few months. We are meeting Saudi's domestic demand, these facilities are steadily position to capture lucrative core to our commercial opportunity in the region, aligning with the broader MENA shift towards alternative energy supply route that circumvent the Strait of Hormuz. Overall, builder saw is creating in Middle East production corridor. Ahuja as a controlled high-end single hub and Saudi and JV driven local content risk capacity in ES and [indiscernible] to lock in infrastructure demand. Now, let us look at our subsidiary in UAE and other parts. In UAE, because of the regional conflict in MENA region, the operations remain disrupted at the in Abu Dhabi. The UAE remains a highly impacted area within the region due to these octanes and will employ safety as our top priority, operations have been renewed to meet essential demand. The sales from Abu Dhabi plants are restricted to customers in the country, which have begun the tuck-in range only. And this backdrop, in Q1 of FY '27, Abu Dhabi Company delivered approximately 34,000 metric turn off ductile pipe as compared to 48,000 in the previous quarter of which quarter 4 of last year, the ductile pipes. As on 31 -- June 30, '26, the subsidy hold in order book of approximately USD 188 million in terms of volume, it is 37,000 tonnes, which ensures operation visibility for next 3 quarters. This backlog is independent of the order book of Jindal. Jindal Hunting, which is a joint venture between Hunting Energy Services, Singapore, and Jindal Saw,Jindal Saw sides hold 51% in this company. It generated a revenue of INR 5 crores and the loss -- the first time it incurred a loss of INR 5.3 crores in the Q1. As this poor performance is a result of the suspension of the API license of GendaloLimited. And since the API license has been restated, we expected the performance to improve gradually in coming quarters. Last, about the court case of Jindal versus NTPC, the conflict -- with respect to this conflict argument from both sides are closed at the double bench of Delhi High Court and the order has been reserved. We expect the order to be announced in next maximum 2 months' time. The courts are on vacation, which are likely to be over in some time. And after that, the order can be announced. So we thought let me give you a brief summary at this time and let's have more interaction. So I leave the floor open for interactive discussion. My colleagues, Mr. Narendra Mantri and Mr. Rajeev Goyal are with me to address any other questions on me. Thank you very much.

[Operator Instructions] We take the first question from the line of Deepak Poddar from Sapphire Capital.

Sir, just wanted to understand now on the visibility going forward. I mean, you mentioned that in India, the JJM continues to delay. So the DI Pipe offtake is also on the lower side in the Middle East because of the current situation, even the stock failing has provided you limited visibility. So I just wanted to dwell more. So how should one look at the execution this year? I mean -- or by when we expect some kind of traction in your volumes? So something on those lines, your comments will be very helpful, sir. Yes.

Yes. So Rajeev is respecting the question. So Rajeev, can you please help.

So as Vinayji mentioned in that performance in the first quarter because of multiple regions and geopolitical issues, which is to continue in the quarters also.

Your voice cracked. Can you just repeat this last time, I mean, your voice was not very clear, yes. .

So given the current scenario, domestic as well as it Order book would see as quite persistent. There is a little bit in terms of volumes we are efficient, we are likely to go and it til order in the current year, and the volumes are to remain at the same level as in FY '23. As we have mentioned term scenario, these going on -- but we are working on multiple strategies beyond the MENA region. On the domestic front also, some in water sector from state budgets where we are seeing some uptake improving in first quarter, and this is likely to continue. So this is that the situation remains same, so while we are likely to achieve the same level what you needed.

Okay. Just to summarize, I mean, you mentioned the volume in FY '27 overall is likely to be flattish given the current scenario? And offtake, you have seen some improvement in Middle East and you expect that to continue?

In the Middle East, we is a little bit different. On the domestic front, but in the Middle East, the monthly dispute should remain in the same range, like 10,000 to 12,000 tonne per month. So that is something which is where we can supply the material through the road only. So till the time, material through mainland, and sea route is not open. This level of operations, we are likely to continue.

So let me recall what Rajeev said, what Rajeev was mentioning what we are doing from Abu Dhabi plant to cater to the Middle East market, okay? Secondly, if you're asking about like how we are catering to Middle East because the Middle East remains practically blocked from for us for countries like India from March. So we have a sizable order book for Middle East from India. As of now, that order book is on hold, but we are now working out on varying other options, specifically in terms of late if it is catered to Saudi because they are -- that will hold an order of 600,000 tonnes, even if it is on the job basis. So we are -- because Saudi has the alternative book also which can take -- in terms of time, it can take much longer. It has a cost issue also, but we are now lead with the buyers to find the solution, which is a kind of, let's say, possible for both sides so that we can -- even if this stalemate continues, so we are trying to find a solution that we execute at least that order because Saudi has both sides of the sea. So given the solution might take some time, but we hope to find a solution for that. If that is workable, that takes care of a larger order book.

Okay. Okay. I got it. Understood. And just 1 last thing on the interest cost. So there was a sharp reduction in your interest cost. So what led to that? And how should 1 look at your interest cost going forward?

See, this is the interest are on our banking capital income loan, which is the hard INR 70 crores, INR 75 crores. One of the larger composition in the previous -- last previous quarters, especially quarter 4 of 2026 got significantly impacted because of sharp depreciation of rupee in that particular quarter. Fortunately, in this quarter -- so I think like I thought that takes some disruption. So in this quarter, since the also are a there was not much of the impact we can debate this account. So -- this INR 70 crores, INR 75 crores in the court, which has been paid to the low.

Do you expect this kind of run rate going forward as well, assuming the rupee volatility is not there?

Fine. Yes, that's a fair assumption. .

We take the next question from the line of Shweta Dikshit from Systematics.

So my questions are around the MENA projects that are ongoing. Firstly, on the seamless pipeline that is expected to commission in FY '29. Any idea or any sense on utilization levels of volumes that could be achieved in FY '29 as well as what -- any sense on what happened on the DI pipe commission capacity of 1 lakh tonnes? How is that likely to contribute to our financials in the next 2 years? And similarly on the shop plants which are coming up in Saudi, what is the commissioning time line if I missed it earlier?

Okay. So Shweta -- okay. So let's say, to describe your question, you are trying to understand when these projects are going to be implemented, whether it is seamless project or also SDI plant in Saudi and Abu Dhabi, okay. So critically, the longitudinal and helical pipe plants should be done -- can be done in 18 to 24 months time. We are trying to crash some of the activities. And we -- and presumably are considering maybe assume that the stalemate in MENA region is likely to be over in the next couple of months, maybe 3 months, 6 months, whatever. And this is the time when we don't need equipment to land at that location. So this is a time we will use to develop the site, specifically the Saudi because they are the new sites. So if everything works well, we can complete the execution in next 1.5 years' time. And then the production, let's say, the testing and everything will start. Critically, we expect when we consider let's say, utilization of approximately 50% of the capacity. This is theoretical because everything will depend on the project because these are like simple technology projects, unlike the tile or other things. There, we should get the orders and depending on the, let's say, ships we are using, the caps can be ramped. So in terms, theoretically, we have also assumed that we would produce and sell roughly 50% of the capacity, which is, let's say, 150,000 tonnes each in both the projects. the tile, 100,000 tonnes, I mean, we can consider 50% to 60% of the capacity, but the Saudi market can take the entire production also. That's not a big issue. It will be a continuous plant on the top of this. In terms of seamless, seamless, we again believe that we can complete this project now from today in next 18 to 20 months' time because a lot of time has been saved by us by taking a land, which is brought of land, which is already developed. There was already a factory. So we need not to fill the site. We need not to be filing and anything else. -- equipment majority of the long delivery items have already been ordered. And maybe in next 9 to 12 months' time, the equipment delivery will start. And again, when we are commissioning the project, we believe that we can do 50% to 60% in the first year. Seamless will require approvals also. So in the first year, a couple of initial months will go for -- and including in the longitudinal API grade, couple of months goes for taking the approval. And pending that, we can do production also. So to answer your question, we -- theoretically, we presume that production in all facilities will start in '28, '29, number one. Number two, theoretically, we are considering roughly 50% approximately production in all the facilities.

I was saying in that phase, I think FY '30 or FY '31 could be the peak utilization of all the capacities together, if I'm not wrong.

Yes. So a, you're right. within 2 to 3 years' time, we are expecting the peak capacity utilization in all the plants. .

2 to 3 years from now, right?

Yes. From '28, '29 onwards. Yes. .

Okay. And lastly, any guidance that you could provide for seamless pipe facility in India. Nasik plant in so now the API licenses reinstated. So your last year before the commissioning of the management was guiding to get a run rate of around 80,000, 90,000 tonnes every quarter. When do you -- do we expect to hit this run rate if it is still going to take? Or what would be the possibility, sir?

The utilization seamless facilities in Nasik is going to ramp up...

Ladies and gentlemen, the line for the management has been disconnected. Please stay connected till I rejoin the management. Thank you. Ladies and gentlemen, thank you for waiting patiently. The management line has been connected. Sir, you may proceed.

Yes. So Shweta, your question was relating to the capacity utilization improvement in seamless Nasik unit, where we actually the API licenses have been restated very recently. So in -- since January to June, we were not eligible to participate in any of the API-related supply tenders. So this activity has started now. We have started in participating in the business, but what we expect that at least a quarter or so, there will be some gap in terms of the utilization levels, but we are expecting that September or October onwards, the facilities should start improving the utilization level because API-related sales, we are expecting to come into the production. So October onwards, we can expect the better utilization in seamless.

Roughly got utilization as you saw I mean, are we looking at 80,000, 90,000 tonnes quarterly volume since starting 3Q?

So it will be somewhere in 70,000 to 80,000, yes, definitely, quarterly.

[Operator Instructions] We take the next question from the line of Sailesh Raja from 360 ONE Capital Market.

Sir, our order book stands at 1.78 million tonnes of which 0.710 million metric tons exports are there. So within exports around 6.08 lakh pertains to helical job work orders. So could you help us understand the composition of the remaining 1.42 lakh tonnes? Specifically, how much relates to elsa pipe and DI pipe? Additionally, could you provide the breakup of exports orders between Middle East and non Middle East?

So Sailesh, Middle East or non Middle East combined order book is roughly 60% export order book is from Middle East -- on overall basis, yes. Okay.

Sir, can you give the breakup of this 1.12 other than non-job work order, the balance quantity is 1.42 lakh tons. So how much is elsa and DI?

So in terms of value, if you talk about roughly 70 million tonne is from longitudinal. $30 million order book is on seamless, and ductile is from roughly $40 million is the order book.

Okay. Okay. This is overall you are talking, sir, in exports.

Yes. I'm talking about exports only.

Yes. And also, in the near term, as you said, the outlook remains uncertain during the geopolitical situation and the slow recovery in domestic water infra-spending, so how will we thinking about derisking in order book geographically? Are you aggressively pursuing opportunities in the market like U.S., Canada, Southeast and other regions? Or is the strategy to maintain focus on existing market to preserve the market share and execution capability until the Middle East and domestic demand normalizes? So what is our strategy?

So in terms of the talent or water sector, primarily led by DI, as you mentioned, yes, the domestic front, there is -- again, JJM is not coming up very prominently. So domestic front to mitigate the domestic risk, we have already started exploring the overseas market, primarily the Europe, which is having a steep demand, and we are also getting good inquiries from this market, and we are likely to increase our export order book in the coming quarters. So some of the facilities will be dedicated for export market in ductile so that we can actually decentralize or direct the concentration on the domestic market. That is the strategy we are following.

And how about the other segments, seamless and products?

This is Vinay Gupta. So Sailesh, in terms of our strategy, order strategy, if you see in the last 2 years or a couple of that year or for that matter, we used to have 30% of export, 70% or domestic maybe 5% plus/minus. Now, the serious problem is account of the MENA region. So -- I mean, any sensible organization would start looking beyond the -- your stock pool. So we are at all possible territories in the regions where we can approach conveniently and economically. For example, for the longitudinal and helical pipe, it doesn't make any sense to look at U.S. or China or Canada. We have served to Latin America. We are looking at Southeast Asia where China is not allowed kind of. We are looking at CIA We are looking at all possible options wherever that whatever does are coming or can come so that till the time the issue of MENA gets sorted...

Ladies and gentlemen, it seems like the line for the management has got disconnected. Please wait till I rejoin the management. Ladies and gentlemen, thank you for waiting patiently. The management's line has been connected. Sir, you may proceed.

Yes, okay. Sorry, Sailesh, line again has got disconnected. So I was just talking about let's looking at variates globally wherever it is possible. And Hopefully, we should make announcement in some time to come. So these are like -- these are the reasons which earlier we were not focusing very, very specially, which we are focusing now. And as Rajeev said, ductile pipe, of course, we have pages in Middle East, which is catering to Middle East, but now we are looking from Indian facility. We are looking all our area. And we have -- we already have a presence in Italy, and we are likely to -- we are very implicative to increase the presence in entire Europe from there.

Since you have named Italy, so in our latest that company in being post, it is mentioned that successfully qualified 5 years with an n of 70,000 PSA from the Italy lab for the pipes for transporting pure hydrogen and hydrogenated blends. And also, we uprate, I think, only 8 miles of 18-inch pipe for a products. So how big is this opportunity for the next 2, 3 years? Or how large the size of the demand globally? And, also what is our right to win over global players in this hydrogen transporting pipes?

So Sailesh, yes, there are much talked about business opportunities related to the hydrogen transportation media as a pipe. So we are qualified for that, and we have got some certifications that our pipes are qualified for transportation of hydrogen gas. In that scenario, we are also exploring the possibilities and exploring the market. Wherever we get the opportunity, we can tap it. We are ready. Our facilities are ready, but still ground level demand is yet to come. So we have not seen demand in a big way. There are discussions going on, but still at ground level, we have not seen significant demand in this specific area.