Man Industries (India) Limited (513269) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Q1 FY '25 Results Conference Call of Man Industries India Limited, hosted by Emkay Global Financial Services. We have with us today Dr. Ramesh Mansukhani, Chairman; Nikhil Mansukhani, Managing Director; Sanjay Kumar Agrawal, Chief Financial Officer; and Rahul Rawat, Company Secretary. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Harshal from Emkay Global Financial Services.

Good evening, everyone, and welcome to the Q1 FY '25 Earnings Conference Call for Man Industries. We have with us today Mr. Nikhil Mansukhani, the managing director; Mr. Sanjay Agarwal, CFO; Mr. Kamal Sahoo, the strategy head. I would now hand over the call to the management for the opening remarks. So over to you, Mr. Agrawal, you can take the call.

Thank you, Mr. Harshal. Good evening to the shareholders and the investors. For the first quarter of FY '25, the company has reported a standalone revenue of INR 731.9 crores, a growth of 58% on a year-on-year basis. Consolidated revenue of INR 748.7 crores, a growth of 53% on a year-on-year basis, with an standalone EBITDA of INR 61.8 crores, 22% growth on year-on-year and consolidated EBITDA of INR 57.9 crores, a growth of 15% on year-on-year. Stand-alone PAT, 103% year-on-year growth and consol PAT stood at INR 19.1 crore, growth of 70% year-on-year. The company reported EBITDA and PAT are quite strong on a year-on-year basis. Still, we expect further stronger and more sustainable operating and net profit margin going forward. The company envisaged sustainable margin going forward on ramp-up of ERW mill and value-added products like API pipes, whose production was delayed due to certification and approval process and has got started in March '24. However, we are quite excited about our ERW operations that the company is getting good response from government projects. The company is at healthy API orders from various PSUs that unexecuted order book position as of today stands at approximately INR 4,000 crores to be executed within next 6 to 12 months' time. The company has a sound financial health with net cash position of INR 174 crores as of March 31, '24. Man Industries India Limited is happy to announce its expansion plan of setting up a new plant at Dammam, Saudi Arabia with an approx cost of INR 600 crores. This plant will include line pipe manufacturing and a coating facility, which will cater to Saudi Arabia's growing demand. On operation front, recently, we have announced additional prestigious order worth INR 1,850 crores to be conducted -- to be executed in the next 12 to 18 months. Further, we envisaged our strong order book for the coming quarters and are hopeful for a strong performance going forward as well. Having said that, our ERW mill has successfully received the API certificate. These pipes are usually required for oil and gas industry and which has a higher margin as well, although we have started our ERW mill in March '24 and we are quite hopeful that the current financial year will be sustainable year for our ERW segment. Your company is aggressively heading towards its expansion plans for both line pipe and stainless steel tubes, which are very much on track. And we believe we can fulfill our commitment towards all our stakeholders. Thank you. We should now open the quorum for question and answer.

[Operator Instructions] The first question is from the line of [ Gagandeep ] from AlfAccurate Advisors.

Sir, this is Dhavan Shah from AlfAccurate Advisors. So my question is on the projected capacity by FY '26, so I think in this presentation, I think we have shown that by F '26, we'll be having the -- like 25,000 capacity of ERW versus the last quarter presentation, it was showing roughly 275,000 tonnes. So why there is a reduction of roughly 50,000 tonnes in ERW?

[indiscernible] tonnes in ERW?

So this quarter presentation is showing 225,000 tonnes of ERW capacity by FY'26. And in the last quarter presentation, it was showing roughly 275,000 tonnes.

So [ Dhavan ], there might be some clerical error. We will get back to you on that.

Okay. Okay. Second thing is about the margins and the Saudi Arabia capacity. So this INR 600 crores of CapEx in Saudi Arabia would give you how much tonnage of capacity and this will be into LSAW/HSAW, if you can share thoughts on this?

Yes. This would be an approximate capacity of 400,000 tonnes.

4 lakh tonnes?

Yes. [Foreign Language] and top line capability would be around INR 3,000 crores to INR 4,000 crores.

And this is into LSAW and HSAW or how is it?

It will be both. The Phase 1 is currently spiral and coating, all types of coatings. And then it would be LSAW as well.

Okay. Okay. And during this quarter, I think in the last 2 quarters also, we were mentioning that the execution is majorly from the water side of the business. And that's why the operating margins, excluding other income was lower, but I think the situation is also the same during this quarter as well, even though 70 to 80 percentage of the order book comes from the oil and gas.

Yes. So this quarter, again, there are 2 important things. The majority, more than 80% has been domestic orders. There has not been any exports -- major exports. And the second thing is the ERW orders, which we've just got recently post March, the execution was going on. And the yield percentage in ERW initially set up was quite low. And now since that we've cured those issues initially when we started the plant, so there was a yield issue. So that is why there was a slight effect and dip in the EBITDA. But going forward quarters, it will be much, much better. And we would be hitting the mark what we expect or more than that for this year as well.

Okay. And can you share the order book breakup between domestic and exports, this INR 4,000-odd crores and the -- similarly for this segment wise, how much would be for water, oil and gas and ERW?

Around 80% is exports, 20% is domestic going forward. And ERW would be probably 10% of -- for this year -- for the total order book, 10%.

So INR 400-odd crores order book is from the ERW, and INR 3,600 crores would be splitted between how much from the oil and gas and water?

80% oil and gas, 20% water.

Out of INR 3,600 crores. Okay, okay. And how would be the execution of this INR 4,000 crores, you mentioned that it will be exited within 6 to 12 months? And in the first quarter itself, I think we did revenues of roughly INR 750 crores, INR 800-odd crores, so would it fair to assume that this year we'll end up at least INR 4,000 crores kind of a top line number?

It is fair to assume, [ Dhavan ], that's our target as well. But give or take from last year, we would be at a growth around 20%, 25%.

Sure, sure, sure. And I think -- in last quarter, I think we mentioned that amount from the real estate site would be received in the last quarter, I think it was mentioned that at the -- in the first quarter con call itself, we will receive that amount before that call.

At the Merino Shelter, the money will come in soon. The -- in principally, the transaction is at the final level and -- of signing. And once it is done, it would be announced very soon.

The next question is from the line of Gagandeep [indiscernible] Advisory.

My first question is, could you provide margin and revenue projection for financial '25?

Can you please repeat, Gagan?

Could you provide margins and revenue projections for financial year '25?

For the EBITDA margin, you can consider at around approximately 10% for this year and the top line would be approximately 20% growth from last year.

Sir, my second question is could you elaborate the demand outlook for the upcoming quarters? Are there any specific trends or factors that will significantly impact your sales and market demand?

Demand outlook is quite strong. Overall, we are seeing for the next 24 to 36 months because we are bidding, most of the projects are long term. And -- so the oil and gas outlook is quite strong as of now, internationally as well as domestically. Domestically, ERW is looking better than the other orders, but we've got a lot of inquiries and got recent orders of ERW from government authorities. Internationally, we are -- like I said, we are bidding almost around INR 10,000-plus crores bid book is there. And that is quite robust and quite a lot of large orders are in closure in this year itself, which would then come into the production once we get, it would be next year. So the overall outlook is quite positive for oil and gas. And also, we've got certain inquiries for hydrogen, which we are qualified now in which we are small inquiries, but it is a start. So we have already started to bid for that as well. So which would be another line of business, which would be coming sooner or later for us.

[Operator Instructions] The next question is from the line of Pradeep Rawat from Yogya Capital.

So my first question is regarding our ERW CapEx. So we are planning to expand 100,000 tonne per annum capacity for ERW. So what would be the CapEx for this expansion and when could we assume this plant to be commissioned?

The ERW CapEx, Pradeep, has already been completed, and it's under operation.

Yes. So I'm talking about the expansion that we have like shown in our presentation. So currently, we have a capacity of 175,000 tonnes per annum, and we are expecting this capacity to be 275,000. So I was just asking for that additional capacity.

Pradeep, we will get back to you on that. I think there has been some clerical error on that. So we will get back to you on that. Like we said in the first thing, we will get back on that particular thing.

Okay. Sure, sure, sure. And I missed the revenue potential for the Saudi Arabia line pipe facility. So can you repeat that?

So Saudi Arabia, the potential would be between INR 3,000 crores to INR 4,000 crores of top line. The CapEx layout is approximately INR 600 crores. The completion time period is 12 months.

So our current line pipe facility can make 1 million tonnes per annum of line pipe. So drawing inference to that, so our current facility should yield up to INR 8,000 crores to INR 10,000 crores of top line. So am I missing something here.

No, no, you're correct. This is a theoretical capacity, 1 million tonnes. Normally with the thickness and size of the pipe, the production level changes. So at any given point of time, though theoretically, we can say we can make 1 million, but practically, it is not possible. And number two is when we bid for orders, different size, different orders, different thicknesses come in at different times. So that's why the utilization is not between 50% to 60%. The -- in Saudi, the difference is the single diameter, large diameter pipes, you get single orders in which you can run those orders for a longer period of time, that's why you get a bigger tonnage and higher tonnage and that's why the turnover. India itself is also capable between INR 4,000 crores to INR 6,000 crores of turnover, but you don't get those kind of pipelines anymore, which is 200, 300 kilometers single-size single diameter to manufacture. That's why.

Yes. So what kind of utilization can we expect from Saudi facility and Indian facility for line pipes?

Currently, Saudi facilities, whichever are there coincidently right now running at 100%. We are anticipating between 70% to 80% utilization in Saudi.

And for Indian capacity?

Indian capacities, currently, we have plus of 60%. So we are looking and we are going aggressive on our bids accordingly so that we can keep it up around that percent.

Yes. And for the ERW facility, how much of utilization can we expect for this year?

This year, we are looking at utilization of around 40% because with all the feeding issues and everything, last year, we didn't do anything. So we are looking at 40%. And from next year, I think we would be plus of 60%, 70% of utilization at least.

Okay. And we received some big orders this quarter. So is there any scope of revision for our guidance that we gave earlier.

I think our guidance is quite pretty progressive, 20%, 25% growth we've been doing. Last year also, we did a 40% growth from INR 2,100 crores to INR 3,100 crores. And this year also, we are looking at INR 3,600 crores to INR 3,800 crores. We keep -- rather keep this conservative approach and overachieving [ this ] would be better for the company and shareholders.

[Operator Instructions] The next question is from the line of Vignesh Iyer from Sequent Investments.

My question is on -- in line with the order book that we have. So if I understand you right, we have got INR 4,000 crores order book as on quarter 1 FY '25 end, so wanted to understand what is the estimated order inflow that we are seeing for this financial year?

See, order estimated inflow, we have a lot of bids in pipeline, Vignesh. So I can't give you an exact base, but around 20%, 25% is the normal strike rate of the orders, which we are bidding worldwide, India, everywhere. And basically, the orders which anyways, which we are bidding now will come into [ contracts ] and come into production not before Jan, Feb or March. So that would get rolled over into the mostly -- probably last quarter of this year or start of next year itself. So it's like a process. Every bid we are doing continuous orders are coming and we are continuously executing and that's why it's called a bid pipeline. So we keep bidding around INR 8,000 crores, INR 10,000 crores bids are -- online bids are already in process right now also.

So what is our bid book now, I mean, domestic and international?

Our current order book, 20% is domestic, 80% is international.

No, no. I mean our bid book, not our order book.

That also similar for now because the -- internationally, there are far more orders right now. So bid book is also almost at the same range.

Okay. And the value-wise?

Value-wise between INR 8,000 crores to INR 10,000 crores.

Okay, INR 8,000 to INR 10,000 crores. Okay. So just to get an idea perspective of -- like compared to domestic versus international, let's say, a tender gets floated, what is the normal time line to understand by when the conclusions [indiscernible] just to understand the entire process, how much time does it take from floating of tender?

If in India, the deal is to remove an order and go through its process of evaluation and technical evaluation and then finally, price tender. The entire process comes between 3 to 6 months. And internationally, it's pretty much similar. Sometimes internationally, maybe even a little bit longer because of the sheer size of the project. But give or take, more or less standardized when we see, it's 3 to 6 months.

Right. There's last question from my side. So we take tax around 27% in last year and quarter 1 is already 31%, so what is our standard tax rate expected for FY '25?

The standard tax rate is 25.17% only into the new tax regime. Sometimes due to the CapEx, the deferred tax liabilities are getting created. So that's why it is the effective tax rate is getting sometimes higher or lower. Otherwise, our income tax rate is effective 25.17%, which is the new tax regime.

Okay. We have shifted to the new tax regime.

Yes, yes. We are into the new tax regime.

[Operator Instructions] The next question is from the line of Abhishek Agarwal from Prithvi Finmart Private Limited.

My question is related to our Saudi expansion, where we are doing the CapEx of INR 600 crores. So I think this CapEx is related to our LSAW pipe and HSAW pipe, correct?

Correct.

So I think currently, we already have the 10 lakh metric tonne of capacity, which you mean in India, okay, right now. And when I look at your presentation, it's saying that our [ increased ] proposed capacity would be the same. So how much capacity would come with this CapEx?

Approximately the capacity would be 300,000 to 400,000 tonnes.

Okay. So this will be incremental to our 10 lakh metric tonne capacity?

Yes, yes.

Okay. And sir how much turnover we can expect with full capacity [ or a tonne ] if you can tell those?

INR 3,000 crores to INR 4,000 crores of turnover can be expected.

And what's the rationale behind putting the capacity in this location?

Reason is there are a lot of bids, which we are putting in Saudi. But unfortunately, because of the duty, we are not able to supply any line pipe over there as well as the shipping cost, which has gone off the roof recently, is also creating a problem of us giving any quantity and there are large -- because Saudi inherently is not having any [indiscernible] linkage or anything, so they don't have water, the transmission of water from East or West going into the country is a large transmission. So we are missing out on this business. So to capture that particular business, we've been there.

Okay. Sir, just for that clarification. So our incremental capacity would be around [ 14 ] lakh metric tonnes for this CapEx, correct?

It is 1.4 million. Yes.

Okay. And how it will be funded?

Approximately, INR 400 crores will be funded through the debt and INR 200 crores from the internal [ accrual ] so by the company.

And margin profile would be the same what we are doing in the India business?

We are expecting better margin profile.

Okay. And what about the stainless pipe CapEx what we are doing and when it is expected to come?

Stainless steel CapEx is ongoing. Second quarter of next year is we are looking at operations. And so it is going well.

So we can expect what the asset [ turn ] for this capacity?

Sorry.

What could be the asset [ turn ] and what revenue we can expect from this?

On the revenue -- on the peak revenue which it can achieve is between INR 900 crores to INE 1,100 crores. EBITDA margin is -- because it's a more premium product, so the EBITDA margin is between 18% to 22%.

The next question is from the line of Pradeep Rawat from Yogya Capital.

So my question was regarding the bid book. So our current bid book is close to INR 8,000 to INR 10,000 crores. So what would be our bid book in the last quarter and in the last year.

Pradeep, I can't tell you often what is the bid book of last year. We keep bidding, bids keep getting changed. Normally, bid book lies between INR 8,000 to INR 15,000 crores depends how many orders worldwide are coming and a lot of those bids also get retendered because it's just a preliminary budgetary bid from oil and gas companies. So it's quite robust to be honest. So I can't pinpoint right now and tell you often what was it last year. But it's -- like I said, it's always an ongoing process. At any given point of time, the bid book is between INR 7,000 crores, INR 8,000 crores to almost INR 15,000 crores also, there was a time which it was.

Yes. Understood. And given that we are at the lower end of bid book like INR 8,000 crores to INR 10,000 crores, so is it normal? Or is it like we are seeing a slowness in demand?

[Foreign Language] bids are not serious, it becomes pointless. What we are seeing recently are that the bids which are going on -- ongoing bids are quite serious bids, and they are -- some of them at closure level. So actually it is better for the company because when the bids are -- though it's a shorter time period bid, but closure is faster, it's always better for the company because we can plan our production and our mill capacity filling accordingly. So we don't feel that it's at the lower side. It's where it is supposed to be. But the good part is that the bids which are going on right now, all of them are serious level bids. And some of them we expected to get completed in the next quarter itself.

Yes. Understood. And the next question is regarding the ERW pipe margin. So in our current order book, which we have of close to INR 400 crores, so what would be the margin on those orders?

Currently, the ERW margin is between 6% to 7% EBITDA.

6% to 7%, right?

Yes.

[Operator Instructions] The next question is from the line of Dhavan Shah from AlfAccurate Advisors.

So my question is on the ERW revenues during this quarter. If you can share the number, what was the revenue from ERW?

So, we will share it with you, Dhavan, separately. One second, approximately INR 50 crores, Dhavan.

Okay. And there was EBITDA loss of how much during this quarter?

There was an EBITDA loss of -- one second...

The loss of this quarter EBITDA loss year-on-year would be of close to [ 2% ].

[Foreign Language], Dhavan.

But as compared to March, it is almost flat.

[Foreign Language] 1 crore EBITDA loss?

Correct.

Okay. But still, the base business margin is still lower. If I adjust this loss, okay, then also, I think the base business margin is roughly 5.3%.

We started the ERW business in March early '24. So it is principally the first quarter, there is some yield problems because [indiscernible] for ERW.

No. no. no. Excluding ERW, total console revenue is INR 750-odd crores, out of that INR 50 crores from ERW. So if you adjust ERW, then the base business revenue is roughly INR 700-odd crores. And the EBITDA excluding other income is roughly INR 38-odd crore and if we adjust the loss of INR 1 crore, then INR 39 crore EBITDA, right, and on that INR 700 crore revenue, it's roughly 5.5% margin.

Other income is a part of my business only. It's business income. It is not any income getting generated through any other sources. It is coming through the business only, number one. Number two, like I said, the reason is also that this particular quarter not only because of the ERW, but also the majority of the orders which we are doing were all domestic, and that is why there was always obviously a margin [ this ] on the particular quarter.

So why the other income was higher during this quarter? I think there is more of a ForEx related thing, right, in the other income? And given that the domestic revenue is higher during this quarter, then eventually, other income should be lower, right?

No, no, no. Foreign exchange [Foreign Language].

We also have the import as a continuous business, raw material and the payment cycle. So accordingly, the exchange earnings we have of close to [indiscernible] crores that is included in the other income.

Okay. And how much is the hedging position right now and at what rate we have hedged?

Normally, we have natural hedging for most of the imports and exports and the balanced position, we do hedge as a forward plain vanilla forward contracts with the banks. So we are fully hedged as far as our exposure is concerned.

Okay. So apart from natural hedge, there is no extra hedging which we have done. Is that correct?

Natural hedging is majority of the natural hedging [indiscernible].

Majority is through natural hedging.

Okay. Okay. And when the Saudi Arabia plant would commission?

12 months.

So it would be in FY '26 only?

FY '26, yes.

Okay. Okay. So -- okay. And so I think in the presentation, we have to update that thing also, right?

Correct. We will send the updated version.

Okay. Okay. And how much utilization are we expecting in the first year, FY '26 from Saudi?

50%.

How much, 30%?

It's 50%. Saudi is [ 50% ].

Okay. So 2 lakh tonnes you are expecting in FY '26 only?

Yes. I don't know about tonnage exactly, but revenue point of view between INR 1,500 crores to INR 2,000 crores is what we are expecting.

Okay. So INR 1,500 crores, INR 2,000 crores from ERW in Saudi, then you'll be having this steel plant -- stainless steel in the next year, wherein how much revenue we can do, 20,000 tonnes of total capacity, so we can do volumes of how much?

Next year, we are only looking at around 5,000 to 6,000 tonnes for stainless steel for the first year.

Okay. Okay. And here, the peak revenue mentioned in steel is how much, 20,000 tonnes would give you how much revenue?

[Foreign Language].

Okay. Okay. So roughly INR 250-odd crores revenue from steel, then you are saying INR 1,500 crores revenue from Saudi. And then ERW would give you incremental revenue of around -- how much INR 100 crores, right?

ERW would be approximately INR 500 crores to INR 600 crores.

Incremental would INR 500 crores to INR 600 crores?

Not incremental, total would be INR 500 crores to INR 600 crores next year.

Okay. And this year would be how much from ERW?

It would be around INR 250 crores to INR 300 crores. INR 300 crores is something which we will achieve.

Got it. So incremental, you are expecting roughly INR 2,000 crores of incremental revenue over FY '25 and FY '26, right?

Yes, more or less.

The next question is from the line of Darshil Pandya from Finterest Capital.

Sir, just one question from my end. Regarding the 10% EBITDA margin guidance that you've given. So if we could know that, is it because of the order book that we have right now has a higher margin? Or how will we achieve that margin in this full year?

The order book, which we have now is on -- the exports are more on the higher margins. So we are confident to achieve [ yearly which ] guidance which we are giving.

[Operator Instructions] Ladies and gentlemen, I would now like to hand over the conference to the management for closing comments.

Yes, thank you to all the participants for attending this conference call, and we welcome to all of you in our subsequent next quarter's conference call. Thank you. Thank you very much.

Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.