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

Ladies and gentlemen, good day, and welcome to the Man Industries Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prateek Singh from IIFL Capital. Thank you, and over to you, sir.

Thanks, Shruti. Good afternoon, and welcome, everybody. On behalf of IIFL Capital, we invite you to the Man Industries Limited 1Q FY '27 earnings conference call. From the management, we have Dr. Ramesh Chandra Mansukhani, Chairman; Mr. Nikhil Mansukhani, MD; Mr. Sandeep Kumar, CFO; Mr. Rahul Rawat, Company Secretary; and Mr. Vijay Gyanchandani, DGM, Investor Relations. So without any further ado, I will now hand over the call to the management for their opening remarks. Over to you, gentlemen.

Thank you, and good afternoon, everyone. This is Nikhil Mansukhani here. On behalf of the entire Man Industries team, I welcome to you all to Q1 FY '27 earnings call. A bit of the quarterly highlights. We have started off FY '27 well with the highest ever consolidated quarterly EBITDA. This is mainly led by our optimized product and geographic mix and continued deepening of our global order pipeline. Consolidated revenue growth was strongest year-on-year revenue growth in the last 5 quarters. If I take only core pipe business, this is the strongest Y-o-Y growth in the last 8 quarters, while consolidated PAT more than doubled Y-o-Y. Our consolidated order book stands at approximately INR 3,600 crores across India and Saudi Arabia, with the majority executable order over the next 6 to 12 months, giving us a strong revenue visibility into the rest of FY '27. Beyond that, our combined bid pipeline stands at approximately INR 24,000 crores, giving us a substantial base for future order inflows. Industry demand outlook, basically stepping back from the numbers for a moment, I want to share our view on where demand is headed and how we see ourselves placed within it. What we are seeing across our markets isn't a one-off up cycle. It's a structural multiyear shift. Governments and national oil companies are investing to secure and diversify their energy supply to build out water and desalination infrastructure for growing populations and to industrialize their economies through giga projects and dedicated manufacturing clusters. That's a very different demand profile from the project to project [ cycility ] this industry has historically lived with. And we think it favor companies with a genuine scale, local presence and long-standing customer relationship over pure-play exporters. Aramco's network expansion, water transmission projects, the expansion of East-West pipeline, rehabilitation program, Master Gas System expansion, along with parallel wave of water and desalination investments are all translating into tangible and executable pipe opportunities. Saudi Arabia's infrastructure pipeline includes significant investments across oil and gas, gas transmissions, water, desalination and large-scale development projects. What gives us particular confidence in the breadth of demand across multiple end markets and projects rather than dependence on any single project or customer. This diversification, combined with the Kingdom's long-term infrastructure ambition provides us with strong multiyear visibility and compelling platform for sustained growth in Saudi Arabia. The traction is visible across nearly every region. We track not just Saudi Arabia. In the wider MENA and GCC, the post-conflict environment is, if anything, accelerating investment procedures -- producers like ADNOC, Qatar Energy are pushing ahead with expansion and government-backed water and gas programs are continuing regardless of the near-term shipping disruptions. In Southeast Asia, we are seeing a genuine second wave of pipeline investments from Indonesia, Vietnam and Malaysia, all expanding gas transmission and LNG import infrastructure and Asian governments collective targeting to close $1 trillion of energy infrastructure investment over the coming years. Across the broader Far East and Asia Pacific, the Strait of Hormuz disruption has had an unusual side effect because roughly 80% of the crude oil and nearly 90% of LNG that transits through the state is destined for Asian buyers. Countries from Japan, Korea, Vietnam, Bangladesh and Philippines are now urgently diversifying their supply chain, locking in long-term contracts with non-Gulf producers and expanding LNG import and distribution infrastructure to reduce the concentration risk. That's a genuinely new structural tailwind for pipe demand in the region, one that didn't really exist 18 months ago. With National Pipe Company, we've moved from being an exporter into Saudi Arabia to being in Kingdom manufacturer, with Aramco-approved vendor status, our upcoming facility, the coating and double jointing facility deepens that local value change and value-added product. Our Jammu project extends our capability at home into a new higher-margin stainless steel segment, all while our core India business continues to benefit from country's own water and gas infrastructure build-out. Put together, we now have a genuinely diversified platform spanning geographies and end markets rather than concentrated bet on a single region or a commodity cycle. On the business development front on NPC, having completed the acquisition of NPC, our teams have made a strong progress in integration, takeover, and we expect the Saudi operation to ramp up meaningfully from Q2 FY '27. This gives us confidence in significantly stronger and more complete contribution from the platform going forward. On our upcoming Dammam coating and double jointing facility, this further strengthens our integrated manufacturing, value-added processing capabilities in Kingdom with operations targeted to commence by March '27. On our Jammu greenfield stainless project, construction remains on track with production expected by March '27. A little bit on our real estate Merino Shelters. The monetization is already in process. We have now also received the commencement certificate for the entirety of the project, along with the RERA registrations. And the project is set to launch around mid of September. And this would further bring in the cash revenues to the company in FY '27. I would like to hand over the call to CFO, Mr. Sandeep Kumar Garg. Sandeep, over to you.

Thank you, Nikhil. Good afternoon, everyone. Thanks for joining us for the discussion on our Q1 FY '27 financial performance. Let's start with the key financial highlights. On a stand-alone basis, revenue grew 37.5% year-on-year to INR 1,028 crores. EBITDA grew 95.1% year-on-year to INR 157 crores, with EBITDA margin expanding 450 basis points to 15.3%. PAT more than doubled year-on-year up to 167.7% to INR 78 crores, our highest ever stand-alone quarterly PAT we have achieved. This PAT margin expanding 370 basis points to 7.6% is also a record for the company. On the consolidated basis, we delivered our highest ever consolidated quarterly EBITDA of INR 155 crores, which is up 92.6% year-on-year and 5% quarter-on-quarter, driven by the strategic optimized product and geographic mix and continued deepening of our global order pipeline. Consolidated revenue for the operation grew 37.7% year-on-year to INR 1,065 crores, while consolidated PAT more than doubled year-on-year to INR 61 crores, underscoring the operating momentum we carry into rest of FY '27. As all of you know that we have acquired National Pipe Company in the last quarter -- current quarter and acquisition date was 21st of May. So only some part of revenue has come into current quarter. And from the next quarter, full quarter revenue will be reflecting in the results. We -- as per our guidance, we have given around INR 1,500 crores should be the revenue for the NPC in this current FY '26. Merino Shelters also, as Mr. Nikhil ji just mentioned, has got the RERA certification received and project is getting launched next month, we are anticipating INR 50 crores -- INR 35 crores to INR 50 crores cash inflows in this current financial year. With this, we open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Viraj from MoneyGrow.

Nikhil, Mr. Gupta (sic) [ Sandeep Garg ] congratulations, fantastic results and good to see NPC numbers coming through. Two quick questions is, one on your press release, I wanted to reconcile a disconnect between your stand-alone and consolidated performance. So in the EBITDA line, the number for Q1 is roughly the same. However, at the PBT and the PAT level, the number is lower at consolidated versus stand-alone, reflecting a PAT of INR 61 crores versus -- in consol versus INR 78 crores in stand-alone. Can you explain what's happening there?

Yes, sure. It's a very good question. As you know, that Man Industries as a stand-alone company has given intercompany deposits loan for the Saudi acquisition as well as the Jammu project, MSPL. So all this income, which is intercorporate income, corporate guarantee commission, which is treated as an income in the stand-alone basis, get nullified when we do the consolidation. So I think when our business is growing and looking forward at Saudi operations, consolidated numbers, you should look at, which gives the correct picture of the consolidated.

And these intercorporate deposits will be repaid by these various entities to stand-alone, so over time, that will normalize a little bit?

Over the period, this will be paid back.

My second question is, again, regarding your press release where in the first quarter, you've done INR 1,000 crores of top line. You have a INR 3,600 crore order book, which is executable over 6 to 12 months, which takes you into mid next year. But you give a revenue guidance of INR 5,000 crores. Again, can you reconcile that? Because unless we win a good amount of orders fairly soon with a 6-month exit -- sorry.

If you see, we've given this as on August. So a certain part of July, full July is already...

Executed.

Already executed.

So that's the gap.

And plus there are some orders we have already received, but we normally announce it once we cross INR 500 crores.

The next question is from the line of [ Dikshi Jain ] from InCred Research.

My first question is regarding the numbers of NPC consolidated into Man Industries. Can you give us an idea what was the revenue portion for NPC that has been consolidated? And how long is this -- how many days is this consolidation for in the first quarter?

Yes, it's the total value...

Consolidation is hardly 15, 20 days number as we've taken over the company on 21st of May, and there was a Eid holiday. So around 15 days, there was no work. Saudi was completely closed. So they opened on the first week of June. So around 20 days number, which we have consolidated is around INR 43 crores revenue has come in this period.

Okay. So on stand-alone basis, according to the last presentation, NPC company had higher EBITDA margins than Man Industries' stand-alone. How did it happen that for this quarter, the consolidated numbers, it became dilutive after consolidation?

No. The numbers diluted in the sense you mean to say the profit, like Sandeep just said before this question that the loans given get counter, right? Because...

I'm talking about the EBITDA margins. So on stand-alone, they are at 15.3%, but consolidated EBITDA margins are at 14.6%.

Yes. So basically, the -- because the revenue was not much, that's why the EBITDA margins are not higher for those particular days for NPC.

EBITDA margin for NPC is still higher, almost 21%, of which NPC is operating. But as I told you, only a small portion of that income has come into consolidation. From the next quarter onwards, you will see the full flavor of NPC Saudi operation into our results.

Okay. My next question, lastly, the question regarding one, gross margin and other expenses. The gross margin quarter-on-quarter has come down significantly. Is this because of an order which was lumpy in nature that caused the gross margins to drop and other -- gross margins to drop and also other expenses have also come down significantly this quarter as a percentage of the revenue. So can you explain here what is the difference?

Regarding other expenses, as you know, that we were doing some DDP businesses. So the composition of quarter changes every quarter depending on which project we are implementing. So that has reduced the total other expenses. As far as gross profit is concerned, I don't think there's much change from the last quarter.

Gross margin in this quarter is 35%. Last quarter, it was at 53%. So there's a significant change on margins.

This point, I will come back to you. I will -- I have you -- this one, I will come back to you on this point.

Yes, sure.

Mainly the product is the only reason. But if you look at our PAT and PBT, all those numbers are better because what has happened that DDP orders have changed some -- from DDP to other mode of order module. So revenue and expenses both has come down, but net profit are increased.

Okay. I will get back to you regarding this.

[Operator Instructions] The next question is from the line of [ Ganesh Rao from Punavi ] Capital.

Team, great set of numbers. My first question is on the capacity utilization for NPC, right? It revolves around that. You said that NPC will start ramping up meaningfully for the next quarter. So is it possible for you to give us like what would be the quarterly run rate going into FY '27 end? Like -- and what would be the utilization levels that you're targeting by March '27?

Capacity utilization is approximately when you talk about India, is around 50%, 50% to 60%. And NPC quarterly run rate from Q2, we are assuming between -- any time between INR 300 crores to INR 500 crores, INR 300 crores to INR 400 crores to INR 300 crores to INR 500 crores. This could be the quarterly run rate. And then we are obviously ramping it up for the new businesses, which are coming up from December in Saudi.

Okay. And -- okay. Sir, on the margin side, sir, NPC had reported roughly around like 25%, but our understanding is that we'll be kind of normalizing towards the 15% to 18% margins at a consolidated level, right? Like what specifically kind of causes this normalization? And what would you need to do to make NPC to kind of go back to the 20% margin levels eventually?

No, no. This is consolidated margin, we are talking about between 14% and 15%. So in general sense of design mix of the business, you don't always get all the businesses with coating or bends or double joints. There are a lot of value-added business when you get a single order. But every time the same is not the case. That's the reason why we've said that on a consolidated level now, we will be consistently delivering higher EBITDA numbers and higher PAT is NPC will perform between 15% to 18%. And we will try and take more orders from Aramco because the EBITDA margins and profit are slightly higher and lesser towards water. So that is always our first focus that the more Aramco orders you take, the profitability is higher, and then we take the water orders. So that can push up the profit up to -- almost up to 20-plus percent.

Okay. The next question that I had was like you kind of alluded to it, but like what percentage of NPC's current order book is -- or contains coated or double joint ones? And can -- how much can potentially be converted into like pipe plus coating order from your existing pipeline?

No, no. Currently, NPC doesn't have the coating orders because currently, NPC is only a bare pipe manufacturing unit. So there is nothing alluded. Basically, it is bare pipes, which we are executing the orders of Aramco and water orders. Currently, NPC doesn't have the coating facility. It's under construction, if you see, and it would be up and running by March. And post that, we are hopeful that we would be getting the coating and the double jointing orders from Aramco and the other vendors.

Okay. So within this, so you see some potential of what NPC orders today to eventually also get coating order in the future, right? So what kind of percentage will be ballpark around, sir?

No, all the orders which are there are coated. So once you start getting -- once the coating mill is up, you will start getting the coating, the double jointing and the pipe making because all the pipes are 24 meters over there, which are LSAW. So Aramco gives the order 12, 12-meter pipes, which you have to DJ compulsory and then you compulsory coated 24 meters. So we are hopeful that we will get the entire packages. And which should be all the packages. You get the pipe, you should be getting the coating orders as well.

Awesome. Okay. And one last question is a more broader demand-based question, demand and capacity. Like with many of our competitors like Welspun, East Pipes, Arabian Pipes and other players adding capacity in Saudi Arabia. How do you see the industry capacity versus the demand over the next, say, 2 to 3 years? Do you expect utilization or pricing to become a problem or a constraint for us?

Currently, there is a shortfall of between demand and supply. So supply is lower and demand is higher. And we expect this to continue for the next 3 to 4 years, looking at the current -- with the war scenario and everything, a lot of new projects, the East-West line, the Master Gas expansion. So we do not see any problem as such for the next 3 years. Post 3 years, I can't say. I don't know if any other new player is coming. But what we are aware about, we don't see any demand-supply issue as of now.

The next question is from the line of Darshil Jhaveri from Crown Capital.

Firstly, congratulations on a really great set of numbers, sir. Sir, just a question, sir. So now by March '27, I think our Dammam plant and Jammu plant will come online. So in terms of FY '28, how do we look at that, sir, in terms of guidance, sir?

So we would be doing approximately 25% to 30% growth.

That would be in base business, but even Jammu would come in, right? So that would push it further or how...

But Jammu will not straight away give a top line of INR 1,000 crores, INR 2,000 crores. The Jammu would be an addition of probably INR 200 crores to INR 300 crores because we've considered 25% to 30% of revenue in the first year. So -- yes. So it will be scaled up eventually. And I'm saying this would be the minimum growth, 25% to 30%. And then if things go well, it could be higher.

Okay. Okay. No, fair enough, sir. And sir, I just wanted to know like when you said the demand is not an issue, but in terms of competition, how do we look at it right now? There are some players trying to get a plant in Saudi. So maybe not this year, but they're going to come up by maybe next year or next year end. So in terms of competition, how do you look at it? Like is the competitive intensity kind of increasing? And how do we mitigate that, sir? Does it become more like a price war? Or how do we mitigate it?

The thing is currently, even 2 years down the line, there is a demand-supply gap according to us. And obviously, the newer players will start -- some of them will start next year and some of them will start the year after. But the approvals, the API approvals, everything will come. But we still don't see a demand-supply massive gap. Yes, there might be some pressure on the price. That's always the case, but it is not like a price war like you're saying. There is still enough gap in demand-supply yet. So we don't see any issues.

Okay. Okay. And sir, just one bookkeeping question, sir. In terms of Merino Shelters, so when we say we expect INR 35 crores to INR 50 crores cash flow, so how would that get recognized in our books? Would it just directly flow into PAT via other income? Or how would it be, sir?

Yes, it would go directly into the PAT in the other income. Yes.

And that would -- [Foreign Language] would it be lumpy in nature? How would it just come like it would come in any quarter or it will be like steady flow? How would -- like is there...

It's real estate, so it would be lumpy, but we are estimating the project time line is around 4 to 5 years for completion. So we've divided total revenue over 6 years. So it is -- it will be slightly lumpy, but you would get -- that's why we've given a ballpark between INR 80 crores to INR 100 crores. So plus and minus 10%, probably a very good year would probably get you some more revenue, some more income. So -- but principally, I think this is the ballpark which it will be around.

The next question is from the line of Subrata Sarkar from Mount Intra Finance.

Yes. Sir, one question on the NPC -- NPC side basically. So one of our assumption is like we can -- in terms of our business turnaround and growth in case of our NPCs, one option can be...

We cannot understand. Your voice is getting cut. Can you a little bit...

Is it audible now?

No.

No, no, it's still very...

Sir, is it audible now?

Yes, it's better.

Is it better?

Much better.

So one point is like, sir, one of our internal assumptions can be like if we -- in order to do a better margin in NPC, if we can replace our raw material through Chinese steel. So in that case, since we know like there is a [ ITPBA ] program where itself Saudi want to do more internal -- internal like usage of their own resources. So in the circumstances, like is it a viable strategy that we can replace some of the steel through Chinese import and then we can do a better margin? This is one question. And I have got another question as well.

Yes. Should I answer or wait for your next question?

No. Sir, next question is on the broader side, sir, like we are undergoing 2, 3 initiatives. One is NPC, second is J&K, and third, the coating plant. So like what is our managerial preparation to execute all these things simultaneously? What is our bandwidth? And like is there any -- so in terms of capability, like, sir, how prepared we are? These are the 2 questions.

Okay. So Mr. Sarkar, the primary first question about replacement of steel and NPC for a better EBITDA to import from China. Today, in Saudi, basically all -- there are no plate suppliers. So there is no question of Made in Saudi. So everything is getting imported from POSCO, China, all the countries wherever we are getting the best and approved vendor in Aramco, we are getting the best possible prices from there and importing the steel. When it comes to HRC, some of the coils are matched by the local Habib and the remaining are also, if required, are imported either again from China, Korea and everywhere, wherever the best pricing is we are getting. So there is no restriction on that by the government, and we are currently sourcing it with the best pricing possibility. So the EBITDA margins are -- as per guidelines are because of the best sourcing that we are doing. Yes, some things when we took over [Technical Difficulty].

Yes, sir, you can go ahead with your question.

It's Mr. Sarkar, right?

Yes, sir. Sir, I have already asked the question, sir.

Yes, yes, I know I'm just replying. [Foreign Language] So the EBITDA margins, which are currently are as per the best possible prices, which are sourced locally as well as internationally. And regarding your -- our execution capabilities for Saudi coating and Jammu, we already have our teams in place and the execution is going on. So we do not find any issues. And we've been doing this since many years, including our coating plants and everything. So we have a large set of team, which is already doing the needful.

Okay. And sir, last question on the cash flow side, given our CapEx and other expenditure basically, sir, if you can help us to understand like what is our plan to -- like on a FY '27 basis, what kind of cash requirement we have got and how we will make it, sir, FY '28 and maybe '27 and '28, sir?

For '27, we are currently taken up 2 projects. NPC acquisition is already completed. Then we are putting up a coating plant in Saudi that is going on, which is around $50 million investment, which will be funded partly by loan, $25 million, $25 million, we will do from our own. And Jammu project, which is going on for INR 600 crores, the loan component will be INR 389 crores and balance our component, we have already invested in the project so far.

Is there any other -- any cash flow requirement, sir, in FY '27 and '28?

No, no, no. Nothing...

No, no. Already we have -- the company has had surplus of cash.

Okay. And sir, any estimate what can be our peak debt, sir, giving all those things?

Peak debt as on this year?

No, by FY '28. Yes, sir. Both, sir, both. If you have some...

Total debt will be around INR 1,600 crores after all the projects get completed and all drawdown happens.

That will be by FY '28, sir, or like...

It will be lower than that because repayment of loans will start. So it will be lower than that. It will be INR 1,400 crores.

By FY '28.

'28.

Okay. And this year, INR 1,600 crores, sir, will be this year or like in between...

We are projecting to complete both the projects. So this will be this year. Only condition is that all drawdown, everything project completed by March '27, then this will be the number. This is the max loan number. I would say this is the max loan number.

INR 1,600 crores, sir.

Yes.

The next question is from the line of [ Anuj ] from Inter Globe Services.

Yes. Congratulations on the great set of numbers. I'm fairly new to the company. So just a basic question. If you could share basically the revenue breakup between HSAW, LSAW, ERW and stainless steel pipes for this quarter and the same quarter last year?

Anuj, you can send us the details. We will see how we can break it up. We don't give those data across right now.

Okay. Okay. And I just want to know that for the LPE coating that's coming up in Saudi Arabia, what is the total capacity of the LPE coating that's coming up?

4 lakh square meters per annum.

Okay. Okay. And just another question, basically, you mentioned that the capacity utilization in India is between the 50% to 60% range. So is that our peak utilization in every quarter? Or it's more of an order book issue that we can't push the utilization level higher?

No, it's basically the orders, right? So different types and different sizes of orders. So we see where best fit in which mill it goes in and that way. So yes, it's also a business. So that's why it is 50% to 60%.

And just following up one of the earlier participant's questions. So if I look at FY '20 -- FY '25 on a whole, our gross margins were in the range of 22%, which shot up to nearly 38% in FY '26, and we see that trend continuing. So I just want to understand what is the big change that happened in the business that our gross margin shot up by a huge amount?

A lot of the business that we got were DAP, delivered at place and different, different value-added products, CWC coatings. So we got to add a lot of the different, different margins on the varied value-add. So that's why it went up.

And we see this trend continuing this year and the next year as well?

Not always, to be honest. It's a project-to-project basis. But looking at the current scenario in the world, we are seeing a lot more traction and a lot more orders. So probably if this trend doesn't continue, but your capacity utilization will go up. So either ways, it will go up.