JTL Industries Limited (534600) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '24 Earnings Conference Call of JTL Industries Limited, hosted by Nuvama Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sneha Talreja from Nuvama Institutional Equities. Thank you, and over to you, ma'am.

Thanks, Michel. Good evening all. On behalf of Nuvama Wealth Management, we welcome you all to the JTL Industries Q3 FY '24 Conference Call. We are joined today by the senior management of JTL Industries represented by Mr. Atul Garg, CFO; Mr. Pranav Singla, Whole-Time Director; Mr. Dhruv Singla, Whole-Time Director. We will now start with the opening remarks from the management, followed by the Q&A. I would like to first hand over the call to Mr. Pranav Singla for his brief opening remarks. Over to you, Pranav.

Thanks, Sneha. Thanks, Nuvama, for hosting our quarterly earnings call. Good afternoon, everybody. Thank you for joining us today for this conference call. We welcome you all for our Q3 FY '24 earnings call. Let's begin the call with a brief overview about the company. With a rich history over 3 decades, we have evolved into a fast-growing steel to manufacturing company. We specialize in producing a diverse range of products, including ERW black Steel tubes and pre-galvanized and galvanized pipes, large diameter steel tubes and pipes, hollow structures -- and hollow structures. We operate through 4 manufacturing facilities located in Punjab, Maharashtra and Chhattisgarh. Out of which, 2 facilities are in Punjab. And as a total group capacity, we stand at a capacity of 5,86,000 metric tons. All our plants have the capacity to produce the VAP product, which is a galvanized pipe under our radar right now, which gives us access to strength and finishing of products. Additionally, our Chhattisgarh plant is backward integrated and offers us cost synergies and facilitating the procurement of raw materials at competitive prices. At JTL, we have 10 listed brands, offering cumulative of 1,000-plus SKUs. These products find applications across diverse industries such as construction, core infrastructure, heavy vehicles, water distribution, energy and many more. With a network of over 1,000 dealers and distributors, we sectorly serve the entire nation and extend our reach to international markets spanning over 20 countries across 5 continents. Our exports primarily consist of GI pipes constituting of to approximately 90% of the export mix to earn higher revenues and margins. Moreover, we hold the recognition as a Star Export House by the Government of India. I'll give you briefly about the financial performance. Regarding our business performance, we experienced a robust demand for our products, resulting in a noteworthy 76% increase in sales volume to 1,00,905 metric tons in quarter 3 FY '24 compared to quarter '23 FY '24 (sic) [ quarter 3 FY '23 ]. On the product perspective, our 9 months sales volume grew by 62%, reaching to a total of 2,10,933 metric tons on a Y-o-Y basis, which also surpassed our FY '23 sales volume of 2,40,000 metric tons. Furthermore, our sale in the value-added product category witnessed a notable increase, growing by 46% from 54,000 metric tons 9 months in last financial year to 81,000 metric tons in 9 months FY '24. Our revenue grew by 65% to INR 5,674 million in quarter 3 FY '24 and by 46% to INR 15,743 million in 9 months FY '24. It was led by the increase in demand of our product. Our EBITDA grew by 46% to INR 429 million in quarter 3 FY '24 and the 50% to INR 1,154 million in 9 months FY '24, led by increase in scale of operations. However, in Q3 FY '24, our EBITDA margins decreased led by decline in sales of VAT products due to scheduled maintenance of our galvanizing pot. This is a periodic measure taken by us to maintain our product quality and standards. For FY '24, we expect our revenue to increase by 35% from FY '23 and EBITDA margins shall remain in upper trajectory from what we will witness in this year. On the industry front, we expect the demand of structural steel tubes to remain strong for the next few years, surging by approximately 12%, 13% backed by robust infrastructure demand, pushed by the government towards construction, oil and gas and water supply. Going forward to seize the forthcoming opportunities, we are targeting to reach a total manufacturing capacity of 1 million tons by FY '25 moreover to enhance our manufacturing capabilities, we have plans to implement DFT at Mangaon facility by this quarter itself, which will be towards 1 lakh metric tons. This initiative will not only enhance our capacity utilization and manufacturing efficiency but we're also open doors to new geographical markets. This will also increase our SKUs by the range of 500 as well. Right now, the SKUs we stand at around 1,000 and post the installment of DFT, we should be standing at 1,500 SKUs. Simultaneously, we are strategically outlining the significant capacity expansion initiative in our Maharashtra through our facility, JTL Tubes Limited, which will further elevate our manufacturing capability, allowing us to broaden our product portfolio and offer an array of products under one roof. This -- through this capital expenditure, we aim to incorporate additional DFT line, expand the capability to manufacture galvanized steel tubes and pipes, introduce a range of color-coated products and implement backward integration in the facility, which will facilitate the production of 3 galvanizes. In order to meet the desired target, we have proposed to raise a total of INR 1,310 crores through various means. Of this fundraise, we will raise INR 810 crores via fully convertible warrants on preferential basis through promoter and nonpromoter category. The remaining INR 500 crores shall be discussed through QIP route. Post completion of expansion, our VAP products will increase, which will further increase our EBITDA per ton as well. Handing over back to Sneha.

Sir, should we open the floor for the Q&A session?

Sure, sure.

[Operator Instructions] We'll take the first question from the line of Amit Dixit from ICICI Securities.

I have a couple of questions. The first one is around EBITDA per ton, which has come off slightly compared to the last quarter. While in your prepared remarks, you indicated that this was primarily due to lower proportion of value-added sales, mainly because of maintenance activity. Just wanted to understand, do you also -- did you also see in the last quarter some amount of destocking because of anticipated fall in steel prices? Some of your peers have indicated that. If so, has this destocking ended? And are we likely to see a higher growth in sales volume in the coming quarter?

Amitji, thank you for your question. Here, I would like to say that we have witnessed in this quarter our highest ever sales volume of about 1,01,000 tons. And this was -- we didn't face any destocking criteria from the stockist because we are present in both the markets, primary and secondary. So we have a good opportunity to push our materials in either of the markets when the other market is not performing better. Yes, there were certain problems in the primary market due to channel destocking and the prices being corrected over a period of months in the last quarter. But all in all, we've witnessed that we were able to push out more materials than the previous quarter in the previous year as well. Herein, one key factor I would like to mention for a slight correction in EBITDA per ton is due to the change in our value-added product kitty. So since we were able to achieve a higher number of volume, our value-added product due to maintenance schedule and -- was affected. And also, since we were able to push out more quantities, our value-added product did not increase in that fashion. So therein, we had certain correction in the overall EBITDA per ton levels, which was not very substantial, but yes, it was present.

Also Amitji, if you look at the value-added product tonnage, so we have a net tonnage increase over the past year -- over the past quarter 3 financial year '23 as well. Last year, in quarter 3, our VAP product was 14,000 metric tons. But this quarter, our VAP was around 19,800 metric tons. So quantum wise, it has increased. But as the company is growing and expanding their SKUs and grabbing the market in the black pipe market as well. So that's why the percentage where it matters, the percentage seems low. And if you look at the 9 months EBITDA per ton as well, so that somewhere in tune to the last year itself. Last year, our EBITDA per ton of 9 months was around somewhere [ 472 ]. And this year, we are close to INR 4,500. So the exact picture of a company's performance doesn't depend on EBITDA per ton of the quarter. It's more accurate to take the picture of the full year or half yearly. That's a better way to look at the picture. Every quarter, the depend -- rise of EBITDA per ton is very natural and can happen.

Thanks for the elaborate answer. Absolutely appreciate that. The second question is on the expansion plan. So I just wanted to understand if you could first of all, let us know -- you have indicated 4 buckets that is additional DFT line, galv steel tubes and pipes, color coated and the backward integration. If you could break your CapEx into these 4 buckets and also, if you could also highlight some of the milestones that which capacity would be commissioned -- when each capacity would be commissioned so that we get an idea of the overall CapEx plan -- the track of the overall CapEx plan?

So as we mentioned before as well, our entire CapEx for the first 1 million ton will be completed before FY '25. So we are well on track for that. As we mentioned in the last con-call as well that we are expected to receive a DFT this quarter. And apart from that 1 lakh tons of additional machinery facility as well. So that is well on track and should be happening this quarter itself. And the production shall we start -- the production will start to flow for the same in the next quarter of the financial year as well. And if you talk about the other capacity expansions, which is the DFT which is supposed to come next year as well and apart from that, 1 lakh tons of machine in Maharashtra to complete a 1 million ton, that's well on track, and we shall be completing that before time. And to discuss about the next expansion that we've planned, so the company had already goes to reach the capacity of 2 million tons by FY '28-FY '29 before. But after the whole fundraise, the management -- the promoters push of money as well, the game plan has changed. And we shall be receiving the capacity of 2 million tons by cutting it to 2 -- by 2 years. So the entire capacity of 2 million tons shall be installed by FY '27. By the end of '27, everything shall be installed and the sector play of everything should be happening in FY '28. So this is a broader picture I can elaborate and tell you that how we're expanding and growing in our network.

Okay. Sure. That's very helpful. I will -- maybe I will get the details off-line in the interest of time and all the best.

The next question is from the line of Bhavin Pande from Athena Investments.

I just wanted to understand the trend of our export volumes and just get a sense of why they have behaved the way they have behaved over -- on a comparison with last quarter as well as the year?

Hello?

Hello? Can you hear me, Pranav?

Yes. So the export volumes, they have an upper shift this quarter as there was so much abundance, demand of the market -- for the production in the domestic market itself. So the company was more focused on circulating the product in the domestic market itself. So net to net, we didn't have an increase in the domestic -- in the export market, and we were well in line of the last year -- last year's numbers. There's more -- the company has been focusing more on the domestic front for the -- for domestic right now.

Additionally, what has happened is like since the last year, certain dynamics of export has changed. Especially in the last quarter, the problems of the red sea had arisen. Due to that, there was certain stoppages in export shipments. So we faced certain problems in receiving the allotment of containers. That is another reason of a slight dip in our exports of the last month.

Okay. So I'm assuming our export numbers should also be, I think, it will be in the higher growth in the period ahead because of the backlog we had this quarter. Is it safe to assume that?

Yes, we are anticipating in the next quarter since it's the first quarter for the rest of the world and its last quarter for India financial. So everybody is in a positive -- pushes the material in a positive manner. From both the directions, we would anticipate that we should have a certain growth in the next quarter.

Okay. And when we look at our 9-month numbers, our margins have sort of expanded very slightly. So is it because of the efficiency enhancement in our production processes?

Yes, it's because of coming scale as well, you can say that. And moreover, the company's production as -- like the production that we did last year so it was for 9 months. So there's some effective benefits the company sees and it's in that scenario itself.

Okay. And will we see -- as more capacity comes in and our utilization improves, should we see more improvement as the scale improve?

We can expect that. The company is also working on mass capacity right now, like we are fully utilized right now. So it's very hard for me to produce more than this quantity given the capacity that I have right now. So one can say that time will tell how is the capacity expansion and the effective would play out.

Okay. And just last one thing. Could you just help us with the Q-on-Q change in steel prices?

Sorry, can you come again with the question?

Could you help us with the change in steel prices for the quarter, how has the HRC prices behaved?

So in the third quarter, as compared to the previous year, there was a good correction in the prices of HRC and also the secondary market had a recorrection in prices, and the difference between the primary and the secondary also had increased this particular quarter. But again, when -- as I mentioned with the earlier question on Mr. Amit that despite all this, we were able to push on more material because of our prices will go to market and perform -- give a better quantity performance this quarter. Having been said that, there was a slight correction in the last quarter for HR coils as compared to the Q2 of this year and certain destocking the channels as well. This quarter, quarter 4, we see an upward correction in the prices happening, people are wanting to push up more material, international prices have also corrected to the upward direction. So we believe in the coming months, there should be a good demand and -- of steel and especially ERW pipes.

[Operator Instructions] We'll take the next question from the line of CA Garvit Goyal from Nvest Analytics.

Hello? Am I audible?

Yes, sir. Please proceed.

Congrats for a good set of numbers. You mentioned like we are present in primary market and secondary market both, and that led to improvement in our volumes as compared to our peers. So can you please put some color or give some more understanding on that, like are we using [ Patra ] as a raw material?

Yes, [indiscernible] side, we use skelp as a raw material. So we are prevalent in both the markets, primary and secondary both. So in primary, we use HRC and secondary, we use skelp.

And just...

Yes, To add to that, Garvitji, we are -- we have divided our plants in such a manner that our production gets divided in this manner. Our plants located at Raipur and Mandi work on secondary market basis. Our plants located in Derabassi and Mangaon work on primary market situations.

Understood. And you mentioned like the gap between the primary steel and the secondary steel increased in this quarter. So that -- I think that helped you people to increase the volume, right, on the secondary market, right?

Yes, yes. So the gap keeps on changing on a monthly basis. And at certain points of time, it helps us push the quantity in either of the markets.

And how the scenario will be in Q4? Like how do you look at it?

The gap is still prevalent, and we are anticipating that this -- after the correction -- upward correction in the steel prices of HR coils, this gap would still remain as it is -- as it was in the Q3 levels. So there should be a good demand in both the segments in the quarter 4.

Okay. Got it. And you mentioned like on your CapEx size. So you are mentioning about DFT, you were mentioning about the GI backward integration. So I think all these things the entire new CapEx that you are targeting is towards the value-added price. Is that understanding correct?

To reach capacity of 1 million tons from current 6 lakh tons -- 2 lakh tons is towards value-added products of DFT, 2 lakh tons is of commercial black pipe production. Apart from that, from increasing capacity from 1 million tons to 2 million tons going from -- for backward integrations and forward integrations, those all capacities will be increasing in the value-added segment. So yes, our endeavor is to increase our majority of our capacities in the value-added segment to be able to achieve about 60% of our product profiles of value added.

Understood. And if we look at...

Regarding the next expansion phase in the second million ton, the entire produce would be VAP. So that's something fits as well. The entire produce from the second expansion would be VAP with higher margins.

Understood. And like your current network is around INR 100 crores, right, and capacity we are having around 6 lakhs. So can you help me to understand like this INR 1,300 crores is a huge amount, so how much of it is going to be exactly towards the incremental capacity? And how much is -- how much of it is going to be towards the working capital needs?

So our [ rough lock ] is not INR 100 crores right now. It's somewhere tune to the run of INR 140 crores. And if you talk about the gross going ahead, like the CapEx happening, so we would -- the machineries would be somewhere around INR 850 crores, INR 900 crores for the second expansion. And so the entire gross cost will stand around INR 1,200 crores or close to INR 1,200 crores. And, the company would be expecting a top line of INR 10,000 crores plus on that.

Understood. And you are saying this will get -- it will be completed by the end of FY '27. Is that understanding correct?

Exactly, exactly. So giving a quarter-wise breakup would be very hard because one really doesn't get to know as and when the machine is ready and plan to arrive at the plant. But the broader picture is that everything shall be installed by FY '27 end.

Understood. And how much time -- or how much time will it take to ramp up the things? Like is there any estimation of that?

So it should take around 2, 3 quarters to ramp up everything. And although the effective capacity production in the first quarter of FY '28 should be significant bump as well.

Understood. And what is the overall volume target for FY '24?

For FY '24, we are well on track. So we -- as we mentioned last time in the con-call as well, we are expecting a 30% growth over the H1. So we are well on track for that.

Understood. And in Q4, is it likely the realizations will improve because GI plant schedule maintenance is over and you are saying prices of the steel will also increase, so that will continue to increase in realization?

Yes. As soon as -- the -- top of the per ton, that might increase because our VAP share will be back on track above the levels. But it's really hard to tell about the average realization of a product because it's totally dependent on the HRC and prices of the raw material in the secondary market.

The next question is from the line of Vikash Singh from PhillipCapital.

Am I audible?

Yes, Vikash.

Sir, my first question pertains to when we will be having our 1 million ton capacity by FY '25, what percentage of our product would be in-house or backward integrated? And what percentage it would be at the 2 million ton by FY '27?

Can you please come back with your question? It wasn't clear that much.

Sir, Mr. Vikash Singh's line has been disconnected. In the meanwhile, we'll move on to the next question, which is from the line of Aditya Welekar from Axis Securities.

Good to hear, Pranav, that we are expanding and you will be reaching 2 million ton capacity by FY '27. So just on that front, what will be our ballpark utilization for FY '27 assuming that we reach 2 million ton by FY '27?

So the effective utilization on the 2 million tons, it's very easy to give that year -- for FY '28 50% because that's very easy target to give. Obviously, we aim to increase it as soon as possible as the capacity is installed. But as you know, the production ticks up -- ramping up every quarter-on-quarter, so it's very easy to say that effective production of 2 million tons would be happen 50% in FY '28.

50% in FY '28. Okay.

Exactly.

Okay. Okay. And what is your target internally for EBITDA per ton by that time? So if you can just throw some -- a large number, means not a very precise number, but your [indiscernible] number EBITDA per ton by FY '27 and '28?

So we are expecting, as we closed last year around INR 5,000 EBITDA per ton. So our projection for FY '28 is a 50% bump over that for the FY '28 numbers. As a value-added product, [ CapEx ] would be expanding, the number should be tuning to the range of that.

Understood. And on the CapEx scheduling, so when will our CapEx kick in to the max from which year, means for FY '25, it's understood that we will -- our CapEx is on schedule. But for the next phase of expansion of 2 million ton -- additional 1 million ton, what will be the CapEx profiling?

So it's already undergone process, which is happening to the fact that a part of machinery for the second million ton has also arrived in our Maharashtra unit. So the machine is coming as and when every quarter, every half yearly and the effective installation of everything should be happening, again, as I mentioned, by FY '27 end. So it's the mix of actual machinery, which is happening in the second capacity -- second million ton of capacity is also coming well in time before that. So it's a mix of everything and coming as and when by the quarter-on-quarter.

So by end of FY '27, we can assume majority of our INR 1,300 crore CapEx will be over?

Majority -- the entire will be over.

The entire will be over. Okay. Lastly, of our demand perspective, means, it's good that we are expanding, and we have a demand visibility, but we can see that sometimes traders push back and there is a destocking in the system. So from that perspective, do you see that our demand visibility is there, then we have an additional 1 million ton capacity. So effectively, when we have 2 million tons of capacity by FY '27, '28, at that time, because the competitors are also growing their capacity, so from that perspective, will there be any impact from demand side?

Yes. To answer that, I would simply say that we are not expanding our capacities in the time ranges or SKUs that we are currently producing. So currently, if we are producing a range from half existing tenancies, we are bringing in DFT structure, we are bringing in higher dia, higher sized, higher dia pipes. Then for supporting the forward/backward integration, we are bringing in the pre-galvanizing line and then venturing into CRM process as well. So our product -- we are increasing our SKUs, our product line, our product profile. So we don't have to bag only the present dealer network, we are able to expand the dealer network to the persons in the different market segment as well. So that is more of the motive behind the bond realization coming in the next 2 years. So if we were only expanding in the commercial black pipe production, that would have entailed that we would be having this such a problem, as you mentioned, of a demand being stagnant for our product. But since we are increasing SKUs, increasing product profile, we hardly see that happen.

Understood, understood. So our market condition reports are happening parallelly whatever new SKUs we will produce that also [indiscernible] happen for that also with that?

And correcting myself again, so the capacity that -- the utilization I mentioned for '28, apologies, that was '27 itself. In '28, we shall be at the level 65% of the desired capacity and not 50%. The 50% target was for FY '27. And FY '28, we shall be operating at 65% levels minimum.

'27, 60% and...

No, no. In '28, 65% level. And in FY '27, 50% level.

The next question is from the line of [ Onkar Ghugardare from Shree Investments ].

My question is regarding the EBITDA margin since you are mentioning that you will be reaching a capacity of 2 million tons in FY '27 and utilizing around 1 million ton by FY '27 and around 65% of 2 million by FY '28. So given the EBITDA margins, which are currently standing at around 7.5% and you are telling that EBITDA per ton would be around INR 7,500, so can we expect the margins to a double digits by then?

And honestly to give exact picture of the margins is very hard because the net average realization keeps varying every quarter and every year, as we have seen in the past kind as well. But it's very safe to say that definitely we will be entering double digits. But to give a exact number on the percentage is very hard. I can definitely give a close by number on EBITDA per ton, which I've mentioned, but giving exact percentage is very hard.

Yes. But at least, can we start assuming that you will be doing around low double-digit margins -- EBITDA margins of 3, 4 years down the line?

Yes. Yes, we can that.

Okay. And since in that 2 million capacity, what is your ballpark estimate of exports and imports since, I guess, export will be higher EBITDA margin business as compared to the domestic one?

No, we -- it's nothing that wherein in margins in exports and domestic today. But I think right now, we are operating at 10% of the total sales in export market. Going down the line, we are reaching -- when we're reaching capacity of 2 million tons and on back clocking the 10% volume would be somewhere around 5x from what we're doing right now. So it's very safe for me to say that we'll be in the 10% bracket for exports down the line as well.

So you don't expect any significant jump from export as a percentage?

So it can be from 10% to 12% or 15%. But as you -- as I'm saying that the quantum in metric ton is increasing as well. So -- and the demand is itself against -- in the domestic market itself. So there is no stress about we're exporting that much, and I'd rather sell in the domestic market.

Okay. The next question is on the -- whatever is currently going on is going right for the sector in terms of CapEx, government push and everything. So in the next 3, 4 years, since you are bullish on the sector as well as obviously on the company itself, what can go wrong with this?

So the bigger push that you're saying for 3, 4 years, we are actually bullish for the next 3, 4 decades. And if you talk about what can go wrong, probably the machinery getting delayed by a quarter, that's something that maybe answering all or more than that, there's nothing that I'm hearing right now.

You don't foresee any risk to the business apart from the delays in getting machinery et cetera?

It's hard to -- it's wrong to say, but in a scenario of pandemic as well, the sales picked up. So it's really hard to say that what bad can happen and how -- what can happen.

Okay. Just one clarification. So what kind of sales per ton -- I mean, totally ton, you would have been doing by FY '24, around 4 lakh tons?

So in this year itself, as I mentioned, we'll be clocking 50% growth over H1. So if you calculate that, we'll be closing somewhere around 3.4, 3.5 lakh tons.

Okay. And this INR 1,310 crores of expansion, this is only after 1 million -- this is for 1 million to 2 million tons capacity expansion, right?

That's right.

This is nothing to do with -- from 5 86 to 1 million?

That's right.

We'll take the next question from the line of Vikash Singh from PhillipCapital.

Sorry, I got dropped out. Sir, my question is the same that currently, if I believe that we have roughly 1 60 kt of our own coil in 5 50 kt production, which is closer to 30% of the capacity. How this metrics is changing at a 1 million ton and 2 million ton of your capacity?

Vikash, going down the line, we won't be expanding in the coil segment, and this will remain to this particular capacity itself. Whatever expansions that we're doing in the company is basically happening in HRC. Yes, there is a part of it which is happening in the secondary market as well, but the majority of it is happening in HRC, so that it won't really help us expanding anything in this segment as our major [indiscernible] would be HRC and not [ scale ] that we make at the Raipur facility.

Okay. So just related to this, when we're talking about the mega capacity and backward integration into that, we would be putting an HRC mill in there? So basically, we would be [indiscernible] subsuming the margins of HRC rollout also in our product mix?

No, we won't be engaging in any of those activities. We won't be entering the segment of making HRC.

What kind of backward integration then you were talking about in that 1 million tonne mega plant? You said that there would be a backward integration also. So if you could just give us a little bit...

Yes. We're doing some forward/backward integrations, but forward/backward integrations we meant in the product profile that will be increased. Currently, what I'm making is really 2 products, the commercial black pipe and the value-added galvanized pipe. By doing the backward integration of making a color -- sorry, pre-coated coil, I would be adding another SKU of pre-galvanized pipes by segment. The pre-galvanized coil can be used for seat manufacturing. So yes, so -- and certain other specialty products. So this is the backward and forward integrations that we're talking about.

Understood, sir. And sir, just one last thing. I don't know if any previous participant has asked. So our capacity, if you look at the industry capacity, it might go up by 3, 3.5 million tonnes in the next 2 to 3 years. Do you expect the demand to catch up in the same pace or there would be some [ dull ] period which we experienced -- which most of the people would experience? And how do you foresee the new product that 1 million tonne, which you are expanding? As of now given the market situation, what is the range of the products which we are going to introduce the EBITDA per tonne in those range of products?

So to answer your thing in one simple way, so right now, my sales mix is as such in which the government share is only 20%. And if I just sell to the government itself right now as well, I don't have enough capacity. Obviously, I have maintained my ecosystem in such a way that I have to serve the domestic market as well, export market as well and the government as well, so I have a mix of everything, and I maintain that -- and I want to maintain that in the future as well. But to answer your question in a simple way, like even if I just sell to the government as well, my capacity would be fully utilized. So the market is that strong and that bullish. And if you talk about some reforms that are happening everywhere in Maharashtra, especially the scaffoldings that are used for construction activities and right now, they have the black pipes going down the line, the government, as we hear, is introducing to install galvanized pipes as they increase the life of the pipe and anything that is happening in warehousing is just galvanized pipes itself as well and bigger [ DFT ] structures, which segment we are entering and more than expanding the current products, we are expanding our SKUs. So we would be becoming a one-stop solution. Right now, the edge that we get, which shows in our volumes, is that we're prevalent in both primary and secondary market, both of them. So same dealer is the same customer for both the products. And when will -- when I'll have my primary material, secondary material plus the supplement SKU that I'm adding, I'll become a further one-stop solution for all the products. So all these things give us confidence in expanding and plus the -- even the export market has opted for a [ China-less ] model. So again, that -- all those things just add up and give us boost to add capacity.

Understood. And present margin for those future products which you wanted to increase, what is the ballpark range?

Can you come up again?

So the galvanized products which you are going to use, including sheet and color-coated sheet, what could be the present EBITDA per tonne in those products basically? Just wanted to understand the shift in the EBITDA per tonne, which can happen because of these production.

So there's a tune of 9,000 to 11,000 and -- what we see right now, the margin profile on those items.

We'll take the next question from the line of [Indiscernible] from RA Investments.

Can you hear me?

Yes, ma'am, please proceed.

I, first, wanted to ask, what's the capacity utilization be for the quarter?

So I think net -- we are working on capacity utilization now of 65%, and that's the math that one can perform in this industry.

All right. And I also wanted to know about the steel price. I think there was a margin pressure because of the volatility in it. So we see the stability in that for now?

Yes, in this quarter, we are expecting the steel price to be stable. And in fact, they are on our [ first ] trajectory. So they're more of a stable and going upwards.

Okay. And the last question is that we were given a target that should be like a 30% volume growth in the [ second ] half of the financial year. So are we in line with that?

Performance for this quarter speaks for itself, and we are well in line for that.

We'll take the next question from the line of Vikas Mistry from Moonshot Ventures.

Sir, what gives you so much confidence that you are increasing your capacity by 4x and you think that you will be utilizing 65% of that capacity and even EBITDA margins should be as high as [ 7,500 ]? This is in the context that every industry player is increasing the capacity by quite a much.

Vikas, I think I just answered this question -- one previous question by Vikash. But to answer your question about EBITDA per tonne, as I'm adding my [ QP ] products in [ second ] million tonnes, which is just VAP of 11,000, 12,000 range. And if you do simple math of the entire VAP product of that around 11,000 and the current levels of 5,000, the levels come much higher than [ 7,500 ], but still I'm maintaining a low ballmark figure of INR [ 7,500 ] per, EBITDA, tonne.

Okay. Sir, another question is the time [ perplex ] that you announced a INR 1,300 crores CapEx 3 years before that and we are already having land with us. So we think that capacity for DFT lines can be put in 18 to 20 months. So why we are so early for the CapEx?

If you can come back -- can you repeat your question? It was not clear to me.

Sir, actually, we already have increased our capacity from 6 million tonnes to -- 6,000 million -- 6,000 to 1 million tonnes. But now we announced a CapEx to 1 million to 2 million tonnes. But DFT lines does not take more than 20 months to be deployed, and we already have land for that capacity expansion. So why we are so early in raising this INR [ 1,300 ] crores?

I'm still not getting your question, but I'll answer it some way that so basically from 1 million tonnes to -- from 2 lakh tonnes of capacity to reach the capacity of 1 million tonnes, we took about 4 years some together. So we'll be doing this record-breaking expansion of 1 million tonnes in 2 years. And out of this, DFT would be coming this quarter itself as well and next year, similarly this time as well, the second leg of DFT. And there's not much DFT coming in the second part of the expansion. But yes, everything isn't well in line for that. There is more -- there are a lot more products than DFT which is coming [ second ] million tonnes.

I think, Vikas, you are mistaken. You mistook that capacity from 1 million tons to 2 million tons will be solely DFT. That is not going to be DFT. That is going to be -- as what we said, certain forward/backward integrations for enhancing the current productivity. And a part of it, we'll be using DFT, but the entirety of that will not be DFT. You're right to say that DFT can be deployed in 18 going months. That's why by the end of this quarter, we'll be starting to get a first DFT line and that will be up and running by the end of first quarter of next year. So that's the target of that particular machinery.

Okay. Okay. My last question is working capital cycle. If we are entering into value-added products, then by FY '27, how much we could cash that capital cycle?

So if you see the trend of the company, so basically, we've been expanding the dealer network and which will be the [ debtor ] days just to the tune of 7 to 8 days. Earlier when the company was JTL, was just 1 plant in Derabassi, which was fully serving the government sector, where the [ debtor ] days was a little higher. But now as a mix of all 4 plants, we are a majority of producing into the dealer network more than 50%. Our [ debtor ] days net average has come down significantly. So if you see the trend, we've already come down from 75 days of working capital to around 58, 56 already in the half yearly. And when you go down the line -- and this is without trade financings. And when you go down the line when I'm expanding by more network in the dealer network, I expect my working capital days to come down to the tune of 40 days by the end of next financial year and subsequently reducing them as and when -- as the year proceeds.

That's great to hear. My last question is that what are the SKUs we are adding in value-added products, whether size of that will be how much and whether they are rectangular or hollow section tubes? And can you explain a bit on that?

So I'm already in rectangular, hollow section and [indiscernible] that you mentioned. The products that I'm entering is color-coated segment, and I'll be adding pre-galvanized lines and some [ HRC ] process as well. So the -- there will be ample number of SKUs. A detailed list of SKUs shall be out very soon. But to the tune of -- the company shall be having SKUs to the tune of [ 4,000 ] post the entire expansion of FY '27.

Congrats for that heavy -- massive CapEx announcement.