Maharashtra Seamless Limited (MAHSEAMLES.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Maharashtra Seamless Q1 FY '26 Earnings Conference Call hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded.  I now hand the conference over to Mr. Gaurav Mehta from PhillipCapital India Private Limited. Thank you, and over to you, sir.

Thank you, operator. Good afternoon, everyone. Welcome to Maharashtra Seamless Q1 FY '26 Conference Call. From the management side, we have with us Mr. Kaushal Bengani, Deputy General Manager, Investor Relations and Finance. Without taking much time, I hand it over to Mr. Kaushal for his opening remarks. Over to you, sir.

Thank you, Gaurav. Good afternoon, shareholders, and thank you for joining our earnings call. During Q1 FY '26, we have been able to dispatch almost 1,03,000 tonnes of seamless pipes. However, we have seen a marked slowdown in order booking which started in the previous quarter, but has continued for a longer period than anticipated.  This has had a direct impact on the performance in the June quarter of the company. The slowdown in order booking is attributed primarily to Chinese dumping and reduced expenditure in oil and gas sector. Our margins and EBITDA per tonne have also declined and consequent to the increased Chinese dumping and slowdown of expenditure in oil and gas sector, there has been a decline in sales realization.  Whilst revival in order book is expected, it appears that September quarter is likely to be muted on margin front. I will briefly summarize key financial points. Our Q1 FY '26 performance versus Q4 FY '25 had a revenue decline of 11% to INR 1,303 crores. EBITDA declined by 41% to INR 165 crores. PAT declined by 4% to INR 234 crores and EPS was INR 17 per share. Whilst decline in EBITDA was 41%, the decline in PAT was much lower because of performance of our treasury, which contributed an amount of INR 160 crores booked in other income.  Apart from financials, there are 3 key points which I would like to draw attention to. The first is our treasury. It is at INR 2,919 crores as on 30th June, 2025. It is being judiciously managed with engagement and inputs at highest levels. The second is our order book, which is at INR 1,149 crores. We have seen a slight improvement in the export segment, but it is not enough to offset the slowdown in the other segment.  The third point is a repetition of our credit rating, which was upgraded from AA to AA+ in the previous calendar year. The reason for the repetition is that -- is the highest credit rating which the company has received. And it sends a strong message to all stakeholders about our strength and expertise despite difficult market conditions. That is the entire brief. I would now request Gaurav to kindly open for questions.

[Operator Instructions] The first question is from the line of Chetan Doshi from [TM Financial].

I have 2 questions. So one is, there is a sudden drop in EBITDA. So we are not able to get good pricing from the market because orders are collected much ahead of execution, it takes time. So when orders were taken, that time the pricing at which the orders were taken were low. And second thing is that we have INR 2,900 crores cash, and you have shown that we intend to modernize our plant and INR 852 crores are to be sold. So when the lean period is going on, why the -- there is no action on this subject?

The reason for decline in margins is attributed to fall in realization. Reason for fall in realization is increased dumping from China and slowdown in oil and gas sector regarding the level of expenditure that is taking place.  On the cash deployment front, we are continuing with our finishing line project in Telangana and the cold drawn project in Maharashtra. On the Telangana project, we have issued purchase orders of INR 80 crores and expensed around INR 46 crores till now. And we expect that the project will get completed within the allocated budget of INR 184 crores.  On the co-own projects front, we have received the machines which we had ordered and we are installing one of the machines in August and the second machine should also get installed by September, and we should see an improvement in the quantity of cold drawn pipes dispatched from December quarter onwards.

That is great news. [Foreign Language] one more thing. See, as far as this hot mill upgrade is there and where we plan to do an expenditure of around INR 350 crores. So have we placed order on somebody or still it is to be planned out?

We have not started that portion of the capital expenditure plan. Once the Telangana line is completed, then we will address that.

The next question is from the line of [indiscernible], an individual investor.

My question is regarding one of the products that you said that we were about to begin or developing in our R&D, which one of the competitors were -- has already developed. So what is the update on that, sir?

You are referring to premium connection?

Yes.

That process is continuing. It is a very slow process. It's continuing for more than 2 years now. You will find that hard to believe that launching a new product takes that much time, but it involves a tie-up with a foreign partner. And that process is excruciatingly time consuming, and that is why it is taking that much time.  I cannot give you a definitive date even right now. But even today, we have had an update on that project, which I cannot share right now. But rest assured, we are working on it. But unfortunately, I cannot give you a definite date because there are many factors which are beyond our control.  And for our competitor also, when they had launched in 2022 or early 2023, they had been working on it from 2019 onwards.

Sir, my next question is regarding the other income. You also would agree that our other income has now become a major part of our total PAT. And I have no problem with that. But the only issue is that now when we have a quarterly or a yearly result, we for -- ourselves are not sure as to how would the company do out of the main operation or from the mutual funds or the other investment that you have. So one of the -- and we also see that the management is not willing to distribute the money to the shareholders in the quantum that they have by their good management they have earned, but you are not willing to give that to the shareholders as well because the -- I have been a shareholder in the company for last 5 years. And for last 3 years we have seen that your CapEx has been the same, the projected CapEx, but nothing is being happening on the ground.  And also, one of the thing is that you are well covered because even if in case -- in the worst-case scenario, I feel that INR 600 crores is something that you will yearly earn even everything goes haywire. So when you are well covered and I think a business like yours is in a maturity state wherein either you want to grow or you want to distribute these profits that you are gaining to the shareholders.  As a shareholder, I think that your company is one of the most valuable company that I have come across, now with a market cap of INR 9,000 crores, you have INR 3,000 crores in cash or cash equivalents. But as a shareholder, I want to be a part of it. But at the same point of time, I don't see what the management is trying to do with what they are accruing.

Your points are well noted, Mr. Ankur. We had put out the capital expenditure plan of INR 852 crores against which we've issued purchase orders for 2 projects, which would be less than INR 150 crores to the best of estimates. And on the dividend front, we have quadrupled the amount of dividend which was paid out in FY '24 from the level that it was at in FY 2022.  In FY '25, despite a decline in profitability, we maintained the level of dividend which we had paid in FY '24. Your point is that despite these 2 points, there is still a comfortable level of cash with the company, which is a correct point. I had mentioned in one of the earlier calls that our plant and machinery is subject to the risk of obsolescence because it is very old plant and machinery. There is no problem right now, and we are doing good in terms of the ability to produce based on the current plant and machinery that we have. But there will come a time in future when we have to replace the existing technology in entirety with new technology. And that is also one of the reasons why we are conserving the cash.  The third point which I would like to make is that we are still trying for inorganic opportunities. But in our assessment, we have not found any opportunity which makes sense as per our method of doing business right now.

Sir, your point is well taken. Even I run a business, I have a factory and you would agree with me that in no point in time, the entire machinery is out of date until and unless a new technology comes in and the -- our technology is obsolete. You are also agreeing that you already are increasing your manufacturing limits by the CapEx that you are going to do. So, you will get ample opportunity if in case you don't have enough orders or let's say, your order doubles, you have enough time to -- you are increasing your capacity, you can also do is you can use that capacity and improve this capacity.   But I don't see that the requirement would be in next 3 to 5 years. So when you know that you do not have an immediate requirement for next 3, 5 years in replacing the entire technology that you have, why would you like to keep so much amount of money with you? And sir, it is not necessary for the company to grow. If in case you feel that you're comfortable, you are earning good amount of money, it is good to enjoy that and share that with the shareholders. But never will be a time when you will feel in your entire life that either you will get an opportunity, you will not get an opportunity. If in case you get an opportunity, come out with the right issue, we'll be more than happy to share money with you.  But for last 3 years God has been kind that your investment has reaped benefit again and again. From INR 400 crores you have come to INR 3,000 crores. And it is very good that God has been with you and the markets have reaped benefits. Either divide the company in 2 parts, one should be a holding company, one should be a seamless company. Maybe I don't want to be a part of your holding company, I want to be a part of your seamless company. But now you have merged 2 big things together and the picture is not clear, sir. Don't mind my saying it, but the management should take a big decision. And again and again, shareholders have raised this question with you, and you have repeatedly given the same answer, but the answer doesn't satisfy me. I'm sorry to say.

Okay. I don't have anything to add.

The next question is from the line of Saket Kapoor from Kapoor & Company.

Sir, firstly, the EBITDA per tonne is now in the range of closer to INR 13,000. And earlier -- in your earlier conversation, we were looking for a bracket of say, INR 15,000 to INR 18,000 to be very precise. So, with this kind of order booking and the slow intake in the orders, what should be [indiscernible] in for the current year in terms of the band for your EBITDA per tonne?

Current year would be difficult to guide. But I think we are 1 month into the second quarter and order book does not look encouraging. So I don't think margins would be higher than what they are in the September quarter.

The band will be closer to where we are at today. That should be the very likelihood.

Yes.

And for the tonnage part, sir, last year we did INR 442 for the Seamless segment. And with the commissioning of the new lines for Telangana in the December quarter and if this business environment continue, what should be the -- that tonnages for the Seamless segment that we may expect or anticipate for the entire year?

As of now, I think you should expect similar level of tonnage that was achieved last year. When the Telangana line is operational, then we will see if we have to revise it at that point in time.

Sir, you mentioned about the Chinese product dumping. I think so in your earlier interaction you did mention that there were some specific products wherein -- hello?

Yes.

Yes, there were some specific product lines which were not included in the antidumping, which was introduced in 2022, I think so. So now we have also put forward the revision for the same. So where are we in terms of the hearing? [Foreign Language]

The duty will be up for renewal in October 2026. So, data selection process has started, and we want to include as many products. And the key product in which we have noticed dumping from China, which is one of our value-addition products, is cylinder pipe, and we want to address that issue so that we can sell more tonnage of seamless -- of cylinder pipes and sell them at a better margin.

Sir, we have been predominantly of companies being a proxy to what ONGC and Oil India CapEx has been. And whatever we have heard in the public domain from the interaction with ONGC and Oil India, all have put forward the CapEx amount higher than what have been for the March '25 closing balance or whatever the interaction has been for the last call -- con call.  So taking that into account and the annual CapEx that has to go through in terms of the budget, where has been the sense that the CapEx from the central PSUs are not happening the way that they should be? And they should have this -- I think [Foreign Language] quarterly CapEx [Foreign Language]. So what are we hearing from them, sir, in this context?

Sir, tender issuance is on a slower side. Whilst we would have expected that tender issuance would have improved, but they have not improved. So the fall in order book is attributed only to 2 factors. Number one, decline in expenditure in oil and gas sector; and number two, Chinese dumping. I think both these factors are equally responsible for the decline in our order book. And I think similar trend should be seen in -- for the other participants in the industry.

Right. Sir, last point on the -- last 2 points, especially on the modernization --

Sorry to interrupt sir --

I will come again. Yes, I'll join the queue.

Thank you, sir.

Moderator, please allow him to finish, please.

Okay, okay, sir. Sorry.

There's no problem.

Sir, you can go ahead. Sorry.

Not an issue, ma'am. Sir, as you were mentioning about we creating a surplus for modernization of our plants and machinery as and when the time comes for the refurbishing the same. So taking into account the work which -- homework which you people must have done, what should be the replacement cost that we are facing in that may be required, say, 6, 7 years down the line for which you are working from today in order to not to be in a corner when the time comes and not to be in the borrowers' list rather than to be a cash-rich company till then? So you must have worked out your numbers for the same, sir, in a ballpark number, if you could share?

There isn't a definitive number. There are only broad estimation. And the cost of new machinery 5, 6, 7, 8, 10 years down the line is difficult to estimate. But the idea is that if we want to grow the operational capability of the company, then we want to grow in a cost-conscious manner. All the capital expenditure that we have done whenever we have added mills, we have purchased those equipment at 15%, 20% of replacement cost at that point in time. And that is one of the big reasons why we have been a cash-rich company at all times and a market leader at all times.  So I cannot give you a number right now, but there is a certain basis for our kind of management, and it has protected our position in the market and the combined wealth of shareholders on a longer term basis, which other competitors in our industry have not experienced. And whilst the other competitors have taken aggressive positions and we have taken less aggressive positions at that point in time.  Over the longer term, we have been the greater beneficiary of our decision. So I think we will stick to that style of decision-making where we have been able to demonstrate sustainability and profitability over a longer term basis.

The next question is from the line of Vikas from ICICI Securities.

Just one question to start with. On this ONGC IOCL, they have a minimum order quantity usually for every year. Can you just tell us that what percentage of that minimum order quantity they have already placed in the tender or...?

Very little percentage because we have seen a significant decline in our order book on a quarter-on-quarter basis. There has been a decline of INR 400 crores, which has not been seen for the past at least 12 quarters on a quarter-on-quarter basis. So new tenders are in the process of being issued and some tenders have been concluded and are in the process of negotiation, but the actual ordering is much slower than we had seen at this time in the previous calendar year.

Noted. So there is a hope of second half, some orders would come in.

Yes. And the large order from ONGC that we had received in the earlier part of the year, we have dispatched most of it.

Noted. So in case of given our order book, the revenue visibility is very less. In case of these orders are further delayed, is there any contingency plan or the other segment in terms of exports or other product mix which we can actually shell out at least to get the fixed cost covered up? So if you could give us some insight regarding that thing?

So obviously, if we reduce our prices by INR 3,000 to INR 4,000 per tonne further and which would mean a decline in EBITDA by a additional INR 3,000 to INR 4,000 per tonne, then we can easily run our plant and machinery. There is no problem on that front. But we want to maximize profitability and then that trade-off has led to a decline in order book.

Understood. And secondly, if you could tell us the impact -- tell us on this 1 lakh tonne Telangana plant? Is there any further delay or now it is on track?

I think we will start by January -- we'll at least start some production by January 2026. If not the entire line in its entirety, then something will definitely start by January 2026.

Okay. Any other opportunities which you have come across into your segment since you are sitting with cash?

We have not, Vikas.

Just one last question. Again, some participant asked about the cash. But right now, given the current market conditions, are we keeping a major portion of our cash in mutual funds or with the banks because this mutual fund with the market fluctuation, we run the risk of getting some losses there, right? So just wanted to understand this INR 3,900 crores, how it is divided in the treasury or bank?

We have given a breakup on Slide 11 of the presentation, wherein INR 514 crores is in bonds, INR 20 crores is corporate deposits. Mutual funds is INR 2,339 crores, fixed deposits is INR 4 crores. Cash as on 30th June, 2025 was INR 42 crores. And the investments in mutual funds are in equity, bond funds, gold, silver and liquid mutual funds and also target maturity.

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

Sir, from April onwards, the stainless and ERW pipes has been put under the melt and core. So what has been the impact of this in 1Q FY '26?

There hasn't been much of an impact for us because our order book has declined by almost INR 400 crores.

Okay. And sir, in ERW, we have seen a slowdown for the last 6, 7 quarters for the industry. So specific to ERW, when do you expect the demand to level in this segment?

Pipes in ERW segment are used in water and oil sector. So in the oil sector, there is a slowdown in expenditure which has impacted the ordering for pipes. And in the water sector, there is slowdown on the Jal Jeevan Mission side, so which has also impacted the Water Pipe segment.

The next question is from the line of Mohamed Farouk from Pearl Capital.

I would like to hear the management's long-term strategic vision for the company. I have 3 questions that where do you see the company over the next 5 years in terms of capacity expansion, revenue growth and market positioning, both domestically and internationally? The second one is, what are the key tailwinds supporting this vision? And what headwinds or structural challenges do you foresee? Third one is, taking all of this into account, how does the management define success for the company by 2030?

On the expansion of capacity for the company going forward, the capital expenditure plan has been put out in Slide 14 of the earnings presentation, wherein we have given line-wise breakup of various items adding up to INR 852 crores. That is the only capital expenditure plan that we have right now. And as and when these things are completed, then we will come out with a new plan.  On the second point regarding where we see ourselves by 2030, I think we see ourselves as a market leader because we have not known any other situation for the past 35 years. There have been other competitors in the same industry who have come after us and who have left the industry in the past 35 years. And our method of doing business is different from what we have seen our competitors adopt, which could also be a reason why all of our competitors have either been bankrupted or gone to corporate debt restructuring or gone to bankruptcy courts and then somehow managed to eat their way out.  But we have always remained cash-rich and financially strong. And those are the core characteristics of our organization which we would like to preserve apart from the fact that we will continue to remain a market leader.

Sir, is there any -- like as you mentioned now, some of the competitors have gone bankrupt. Is there any opportunity for acquisitions, one of them? And second is any of your competitors adding any capacity as of now?

Yes to both questions. We acquired United Seamless Tubulaar Private Limited from the IBC process in 2020 and amalgamated that entity with our company. So that was one competitor which we had taken over. There aren't any other opportunities right now in India. On the capacity expansion front, like the way we are going ahead with capacity expansion, one of our competitors is also doing.

Can you please quantify that, like how much is that adding capacity? Any idea?

It is available in public domain.

Our next question is from the line of Amol Rao from One Up Financial Consultants.

Very quick question on the rig. It comes into operation, as you mentioned in the presentation in Q3. Anything that you could mention about what the day rates could be or what -- I mean, if you could just give us some color on that?

The rig will be deployed by Jindal Drilling with ONGC at $35,000 per day. The rate payable by Jindal Drilling to Maharashtra Seamless would be around $17,000 to $18,000 per day, but that is subject to approval of shareholders, which they will obtain in their upcoming Annual General Meeting.

Got it. And Kaushal ji, the CapEx, how much is -- how much are we spending on that, if that detail could be shared?

On the...

Refurbishment.

Telangana.