Paramount Communications Limited (530555) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to Paramount Communications Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Ms. Vanessa Fernandes from Investor Relations team of Adfactors PR. Thank you, and over to you, Vanessa ma'am.

Thank you, Huda. Good evening, everyone. On behalf of Paramount Communications Limited, I would like to welcome you all to the Earnings Conference Call for Q1 FY 2027. Today on the call, we have with us from the management, Mr. Sanjay Aggarwal, Chairman and CEO; Mr. Parth Aggarwal, President, Marketing; Mr. Shambhu Agarwal, Chief Financial Officer; and Mr. Narendra K. Gupta, President Accounts and Finance of Paramount Communications Limited. We will begin the call with brief opening remarks from the management, followed by a Q&A session. Please note that certain statements made during this call may be forward-looking in nature. Such statements are subject to risks and uncertainties that could cause actual results or projections to differ materially from those statements. Paramount Communications will hold no responsibility for any actions taken based on such statements and undertakes no obligation to publicly update these forward-looking statements. I will now hand over the call to Mr. Sanjay Aggarwal for his opening remarks. Over to you, sir.

Good afternoon, ladies and gentlemen, and a very warm welcome to all of you to the Paramount Communications Earnings Conference Call for the First Quarter ended 30 June 2026. Thank you for joining us today and for your continued interest in Paramount. Our detailed earnings release and presentation have already been uploaded to the stock exchanges and to our company website. I trust you have had the opportunity to go through them. Let me begin with a brief word on the environment we are operating in, because I think it sets the context for the quarter very well. The wires and cables industry continues to operate against a backdrop of metal price volatility and global trade uncertainty. These are conditions our industry has been navigating for some time. What has remained constant, however, is the underlying demand. Power infrastructure spending, the pace of renewable capacity addition, and continued momentum in construction, railways, and industrial projects, all activity remains supportive throughout the quarter, and we saw that reflected directly in our order flow also. On the export side, following the resolution of the IEEPA tariff uncertainty that had weighed on the U.S. market through much of the last year, we are also seeing the initial signs of a more stable, more predictable trading environment, which is quite encouraging. Against this backdrop, I am pleased to share that Paramount has started FY '27 on a strong note. We delivered one of our strongest quarters on record with healthy improvement across revenue, EBITDA and profitability. Before I take you through the detailed numbers, I would like to hand over to Parth to walk you through the key business developments and demand drivers behind the quarter, because I think the context is important. Over to you, Parth.

Thank you, Sanjay, and a very good afternoon to all of you. Let me start by saying that the growth this quarter was broad-based, with momentum across our domestic business as well as exports. More importantly, the underlying demand environment remains healthy across several of the end markets we serve. Our domestic business continued to build on the momentum we spoke about last quarter, with growth coming mainly through the domestic power and infrastructure sectors. The structural drivers we have spoken about consistently, the grid strengthening and transmission investment, the ongoing renewable energy build-out, the early but growing pull from the data center infrastructure, continued momentum in railways and metro electrification, and steady real estate and construction activity. All are translating into firmer order inflows than we had anticipated at the start of the year. Following the U.S. Supreme Court's invalidation of the IEEPA tariffs earlier this year, and with India now placed at par with the other exporting nations, we are seeing the initial stages of normalization in our U.S. business. We continue to view the U.S. as our single largest and most important export market given the scale of the grid and data center investments being planned there over the coming years. And we remain focused on deepening our distribution relationships in that market. Alongside the U.S., we have also stepped up customer engagement and approval work in the Middle East and other regions like Europe and Africa, where we see medium-term demand building from data center buildouts and grid revamp programs underway across these regions. Our approach is to be positioned with approvals in place and customer relationships established so that when the demand cycle turns fully, we are a natural participant than a late entrant. On the operations side, our Dharuhera and Khushkhera plants continued to operate at optimal utilization through the quarter, consistent with the trend of the past several years. This continues to underline why our new investment in Narmadapuram is central to our next phase of growth, and Sanjay will cover that in more detail. Overall, we remain convinced that this is a multi-year structural expansion phase for the Indian wires and cables industry, and that organized qualified players with diversified product portfolios and export relationships are best positioned to capture a disproportionate share of it. We are equally encouraged by the return of a more stable trading environment with the U.S., which removes a meaningful overhang from the last year. Thank you. I will now hand back to Sanjay for the detailed financial performance of the quarter.

Thank you, Parth. Let me now take you all through the numbers for Q1 FY27 in some detail. Revenue from operations for Q1 FY '27 grew 17.4% year-on-year, although it declined 7.7% Q-on-Q to INR 529.4 crores as against INR 450.9 crores in Q1 FY '26 and INR 573 crores in Q4 FY '26. I would like to mention here that it is an annual trend, the last quarter of every financial year tends to be a pretty high volume quarter and the opening quarter of the next financial year normally is a bit lower than the Q4 of the previous year. EBITDA including other income was INR 37.8 crores with EBITDA margin at 7.1%, an improvement of 44 basis points over Q4 FY '26 and 3 basis points over Q1 FY '26. Even more encouragingly, our operating profit, excluding other income, grew by 129.2% year-on-year to INR 34.7 crores with operating margin expanding by 320 basis points year-on-year and 136 basis points quarter-on-quarter to 6.6%. This is the metric that best reflects the underlying business trend. PAT, profit after tax, for the quarter stood at INR 19.7 crores, up 3.7% year-on-year and down 4% quarter-on-quarter with a PAT margin of 3.7%. Earnings per share for the quarter was INR 0.64. As I mentioned earlier, our first milestone, which we had set out in our last call, was to get back to the FY '25 level of margins by the Q4 of this current year. I am happy to report that this quarter's numbers show that we are very well placed towards achieving that milestone. This has been a strong quarter across all metrics that matter. Coming to the U.S. and export business, a meaningful part of the improvement of our results has come through because of the normalization of the U.S. business scenario. As I said in the last quarter, we had made a deliberate call to hold on to our U.S. distributor relationships even through the worst of the tariff disruption. Instead of exiting the market that we had spent more -- nearly a decade building up from 2 distributors in FY '22 to 8 as of now. That patience is now paying off. Exports for the quarter stood at INR 155 crores contributing more than 29% of the revenue, up approximately 77% quarter-on-quarter against the tariff compressed Q4 FY '26 in which only INR 87 crores of U.S. exports took place despite the volume being so high overall. We expect this recovery in the U.S. market to continue building throughout the rest of the year. Coming to the domestic business, our domestic business has continued to accelerate even as the U.S. market has also come back, which is exactly the kind of dual engine growth that we have been building up. Domestic revenue for the quarter was INR 374 crores contributing 70% plus of the revenue, led once again by our Power Cables segment, which alone accounted for 57.2% of the Q1 -- quarter 1 revenues. Within domestic, our B2B industrial business grew 90% year-on-year to INR 296 crores, B2C retail and distribution grew 15% to INR 44 crores, and our B2G, government and PSU business, stood at INR 35 crores, reflecting the normal execution timings across the government segments. Our order book as of 30 June '26 stood at INR 615 crores, a healthy uptick from INR 583 crores at the end of March 2026, comprising INR 518 crores of domestic orders and INR 97 crores of exports. Power Cables orders alone stood at INR 455 crores, up 27% year-on-year, representing approximately 74% of the total order book and giving us a strong visibility into the coming months. Now coming to the working capital, our cycle stood at 96 days for the quarter, which is an improvement over the 101 days that we got in Q4 FY '26, and receivable days improved to 64 days from 79 days at the end of March '26. The elevated receivables position we had flagged last quarter has substantially normalized as we had expected. Coming to the balance sheet and equity raise, during the quarter, we successfully completed a fresh equity raise of approximately INR 122 crores, another step in strengthening our balance sheet for the growth phase ahead. Of the amount raised, approximately INR 65 crores has been earmarked for Narmadapuram CapEx and the balance strengthens our working capital position giving us a meaningful liquidity buffer to fund the growth without any near-term pressure. As a result, our net worth strengthened from INR 778 crores at the end of March '26 to INR 894 crores as of 30 June '26, with our debt-equity ratio remaining comfortable at 0.15x... On Narmadapuram, our greenfield project, this is going to be our third manufacturing facility located now in Madhya Pradesh this time, progress remains on track. Most of the critical plant and machinery has already been ordered. The mobilization of civil construction has already begun. We expect the operations at Narmadapuram to partly commence in Q1 FY '28 with revenue of approximately INR 500 crores expected for FY '28 from Narmadapuram plant. This we hope shall scale up to INR 1,200 crores by FY '29 as the plant ramps up. We continue to expect this project to be funded through a mix of recent equity raise, internal accruals, a modest amount of debt with our overall equity debt position remaining quite comfortable. We do not expect to cross the level of 0.3x at best by the time we complete the first phase of our Narmadapuram project. Coming to the future outlook, I think this has been a genuinely good quarter, after the problems, difficulties and the losses we faced on account of exports to the U.S. market last year. This quarter has been now strong on revenues, strong on margins, and there has been an improvement in working capital with the U.S. recovery and the domestic momentum both working in our favor at the same time. The broader industry backdrop continues to support our growth and we remain firmly focused on our five-year vision of reaching revenues of INR 5,000 crores by FY '31. And I believe this quarter is a clear evidence that we are moving in the right direction. So ladies and gentlemen, we now open the floor for discussion, for questions. Thank you so much.

[Operator Instructions] The first question is from the line of Suraj from YES Securities.

Congratulations management on a good set of numbers. My questions are basically focused on EBITDA numbers. So earlier you had mentioned that the first milestone was to return to EBITDA margins of FY '25 levels. What's the potential to return to pre-tariff margins also? So would we expect these margins to steadily move towards 8% now? And question #2 is, can we explain the 320 bps improvement what are the factors that led to this and can we sustain this going forward in FY '27?

Now, I think the Q1 result is actually fully in line with the expectation that we had in the previous quarter. The 6.6% operating margin, which excludes other income, is quite a meaningful step for us to achieve the FY '25 levels that we hope to close with in the current financial year, by -- at least by the last quarter of FY '27. So this progress towards that margin level is going to be of course maintained through this year. We have to appreciate that last year our EBITDA margins went down dramatically because of the U.S. margins having gone even into the negative territory. It's only the strength of our domestic pivot that we were able to make -- that we were still -- able to close the year with a reasonable growth and a reasonable margin on the table. So we are confident that by the end of this year we should be achieving the pre -- or rather the FY '25 levels in terms of margins. The factors that we can say broadly that will contribute to increasing these margins by 300 basis points plus roughly, should be the normalization of U.S. exports, which has already happened after the U.S. Supreme Court invalidated the IEEPA punitive duties which had particularly been very harsh on India and which had made our competitive position versus other countries very weak. So that stands nullified and we are restored to our original competitive position. Second is, within the domestic market, we have quite a favorable product mix. Our Power Cables domestic were around 57% of the total Q1 revenue, and this is more towards the higher margin B2B institutional business that we have been doing. Exports coming back to 29%-plus versus 15% in Q4 of FY '26 is also an indicator of the strong recovery, which has started happening in the export market. And I think more or less we think that we are quite very well on track.

The next question is from the line of Bhavya from Share India.

My questions are around Narmadapuram capacity expansion. So I just wanted to know what is the status over there and any cost or time overruns that we are expecting?

I think this is something that we would also -- ourselves would also like to clarify. You see, the most crucial part right now in the cable industry is to arrange for the machinery that one needs because with the expansion that is going on, there is a pretty good longest line for delivery of the machinery. We have ordered most of the crucial machinery quite well in advance and we expect that all to come absolutely on time that we need it to be. As far as the building is concerned, the mobilization on the site has already started. We expect the construction process, the major construction part to be accomplished within a period of 6 to 7 months, which is the time frame that we have on our internal charts. So I think we should be hopefully very well on the -- as per the plan, and we do not expect any major overruns. Some variations always take place while doing any CapEx project, any infra project, but more or less it should be on line. We don't expect any surprises.

Good to hear that. Sir, my next question is how much CapEx have we incurred till date and if you can break that down between debt and equity mix?

We have roughly spent around INR 35 crores -- INR 30 crores-plus on the Narmadapuram project, although we have been spending on CapEx on our existing plants also. For the last 3, 4 years we have spent more than INR 155 crores in both the existing plants also. So this investment is coming out of, of course, a mix of the equity that we have raised and at the same time the internal accruals, and the debt that is also going to be a part of the mix. So it's a mix of the funding that we have already set up in place for the project.

I'll just add to this. Basically, the debt to equity that you are asking about, Shambhu, I think you would have been able to handle.

Yes. See on that we have not taken any debt as yet. Whatever we are spending on the Narmadapuram CapEx it is out of the internal accruals and the capital raised by us recently. Certainly at the later part we are targeting some term loan also, but in any case, after completion of the Narmadapuram project our target is to keep the debt-equity ratio below 0.3% (sic) [ 0.3x ] only, not to put extra burden on the company towards interest or repayment...

We are targeting a turnover of around INR 500 crores in FY '28 and INR 1,200 crores in FY '27 (sic) [ FY '29 ]. What kind of capacity utilization can we expect to achieve these numbers?

Roughly, I would say that INR 1,200 crores expected for FY '29 should be at 75% level of capacity utilization.

Lastly, any approvals in place for EHV cables?

You see, this is a product that approvals would come gradually once the plant is established and the product is manufactured. But let us understand that this plant is fully fungible with the 11 KV and 33 KV product that we are already selling extensively in the market, and even 66 KV. So 66 KV, we have the approvals in place. But 132 KV, for example, the approvals would be required. So practically this plant we are going to hit the ground running. We are going to start manufacturing and selling from day one. That's not an issue at all. But yes, the time taken to really get the final approvals and the major volumes of 132 KV, yes some time would definitely be there on cards.

But I think we are pretty confident given our track record in the industry, our experience and the very experienced manpower that we have. There is no doubt in there about getting those approvals. It is a natural timeline that it will take after the production commences.

And in addition, you see the amount of confidence that the customers have in Paramount is going to be a big factor for us being able to get the volumes that we need at much earlier dates than what any new person might expect.

The next question is from the line of Prathamesh Sawant from Abakkus Investment Managers.

Congratulations on a great set of numbers. Just one question from my end. Our exports although have grown 30% of the orders, but our order book, I could not see strong growth in exports, any reason? Could you explain what is happening? Typically, how does the order book build up in exports?

You see, exports typically we were having much larger order books. Now after this last year's disturbance, both -- on one side we have become more careful, the other side, our distributors also are a bit more careful. The sort of risk -- realization of risk that we saw, the problems we saw last year, we all want to be careful. We have a steady pipeline; we are not afraid that we are going to have some bottlenecks on the way. So we are happy to keep our order book at a lower level right now. And as we gain more and more confidence, we will try and increase it, because there is no pressure on us to have a larger order book. That's where we stand on this issue. You see, almost all our customers have now shifted to the duty, any change in tariff to the account of the buyer, rather than the earlier position where we were absorbing -- we were supposed to absorb the full impact. But because of the huge value of the impact that was happening, we were able to convince our customers to share that hit with us. Now the customers won't, because they were seeing more of an upside, in the sense that duties were coming down, so they said, okay now we want to take the full plus/minus to our account, we said we are happy to do that, not a problem. So most of the customers doing that also removes -- takes away our risk and we are comfortable. So we also do not want to jump into a situation where we try to press the accelerator too hard, we don't want to do that. Without doing that also, having done INR 155 crores in quarter 1, I am more than sure that we will easily do INR 700 crores to INR 800 crores in exports again this year to the U.S.

Will it be right to understand that the supply chain has shifted to a much shorter run this year? Otherwise, what we were doubting was that the margin improvement that we were expecting, exports would be a key trigger like that. So your views on that.

You see, margins definitely are on an uptick. There's nothing better to explain this uptick than the fact that last year we were actually at EBITDA minus, substantially, I think, we had 4%, 4.5% of loss at EBITDA level on the U.S. exports, because of the tariffs that we were having to bear despite the customers sharing the hit with us. So right now, we have got a good quarter, and we expect to consolidate it. Because you see, the customers also have been hit. Our distributors, they also shared the tariffs, and they are also starting from the pain. So we all are gaining confidence and going ahead but we want to take some firm and strong, solid steps.

Agree, sir. But what I want to say is, let's say, if we understand that, since we have a smaller order book, so it should not happen that in H2, we have a smaller export component and that's why the margins kind of retrace from where they are now. So that is not a risk that is...

You see, let me just tell you again. You see the -- as our guidance used to be very clear till FY '25, that on the export front, we were 1.5% higher compared to the domestic margins, right? Now FY '26, everything totally changed, as I just mentioned, that we in fact had losses at EBITDA level on the exports. So that was not a guidance at all, right? Now, coming to what is happening in the current year, we are gradually improving our export margins. Because you see -- we were at a huge disadvantage last year compared to our competing countries, especially countries like Vietnam or South Korea or even to some extent Cambodia. So these things that now we are overcoming and we are -- we are getting over them and we are -- every quarter we expect to improve our margins. At the same time, we have to appreciate that Paramount can pivot very, very fast from domestic to export, and export to domestic. This has already happened twice with Paramount. We have given a very interesting chart in our earnings presentation in which we have shown the revenue mix that how it has changed over different periods, and the market trends, if you look at FY '22, 22% of our revenue was exports to the U.S. In FY '23, when demand in the U.S. was booming, and there was very heavy pressure on us to supply more, we went up to 50% of our revenues from exports in FY '23. So in actual numbers, the exports became INR 132 crores of exports became INR 400 crores. Out of INR 130 crores, U.S. was only INR 100 crores, INR 30 crores was other markets, which we have thereafter decided, not to service mainly. So INR 100 crores from the U.S. became INR 400 crores in FY '23, which was 50%, and then in FY '24, the demand in U.S. went down. So we did only INR 276 crores which was 26%, and we covered that by 74% of domestic which became INR 771 crores. So practically my domestic revenues, I was able to nearly double in just one financial year from INR 396 crores to INR 777 crores (sic) [ INR 771 crores ], so that was a pivot again. So while we absorbed the shock of a -- grown by 30% again. So that is what we have done. And again, if we come to FY '25, this was a year of extreme shock in which H1, we had touched 43% of our revenues again in exports to the U.S. In H1, we had done a total of roughly -- INR 900 crores -- INR 878 crores, out of which we did INR 381 crores in U.S. exports alone. But in the next quarter when the heavy 25% reciprocal and 25% Russian oil tariff was imposed on us, we had to go down to just INR 169 crores, but that does not mean that Paramount's turnover did not grow. We maintained and we increased our turnover again. The INR 497 crores of domestic turnover in H1 became INR 864 crores in H2. So this is what shows that the fungibility of our capacities and the strength of Paramount, not only in the U.S. market but also in domestic market, which is able to give us double the volume in a single year. That is the strength of Paramount's positioning in the domestic market also.

I'll also just add one thing. I think what you are asked regarding the order book. If you see in our Q4 and March order book, exports was much smaller, even much lesser than what we did -- which we are today at INR 92 crores. So we still achieved INR 155 crores, so that is not a problem. Even we are very positive that we will be able to do INR 700 crores to INR 800 crores of exports in the current financial year. And it helps us maintain orders at better margins by not taking orders at lower margin, just to fluff up our order book.

One more thing that I would like to add here is that you usually will never see a very large order book number on Paramount's books. And the reason for that is that we try and -- we mostly do not accept orders more than 3 or 4 months delivery when it is at a firm price basis. The reason is that on a firm price, if we accept long duration orders, it is, A, not very easy to hedge, and B, hedging also carries its own risks. So we usually, either it's a variable price order which is fine, if the aluminium goes up, the price goes up and otherwise in the opposite direction. But as far as firm price goes, we try to stick to our 3- to 4-month policy. The day we get these orders from the customer, the next working day we book the metal, and that's how we are covering our risk of volatility in metal.

You've got a pretty long answer for that single question, but I hope everything gets covered.

No, but that was very helpful and elaborative. Just one minor detail, what's the current capacity utilization?

Capacity utilization, you see, in our existing plants, what I'd say is practically 100%, nearly 100% throughout because, ever since, we have been investing, we have been doing CapEx for the last three years continuously, and practically every machine that lands up in the factory starts producing from day one the moment it is switched on. So -- because, for Paramount, the problem is not selling, the problem is manufacturing, because our capacity has been constrained. And now that we are adding our capacity continuously, we are able to grow and that is why you have seen those growth numbers which far surpass anybody in the industry, 30%-plus, 35% CAGR, all that is possible only when you have such a huge customer acceptability.

The next question is from the line of Jigar Jani from Nuvama.

Congratulations on a good set of numbers. Continuing to the previous participant's question, you mentioned you are near optimal capacity utilization in existing facility. So what kind of top line growth do we expect what you have delivered in Q1 to continue and then the majority of the ramp up to come in FY '28 once Narmadapuram kicks in?

Absolutely you see, I think you have answered the question yourself. The current year, we expect to do 15% to 20% roughly in terms of revenue growth because existing plants are, as I said, really up to the neck. We are still doing some more CapEx in those and there are some new products happening. So we should be able to do 15% to 20%. And the next year, once the Narmadapuram capacity kicks in, I think, we should be growing at a much faster pace. We have set ourselves a target of crossing INR 5,000 crores in revenues by FY '31. And we rather hope that we should be able to better that target to the extent possible. If you look at our previous years, we have been growing 30%, 35% in one year 40% even. So that is the sort of growth that we are very confident that we should be able to do. Our problem has always been capacity and as we build capacity, we are very sure that we'll be there.

Sure. And just a follow up on the margin guidance, you said that, we will be back to pre-tariff margins, which is about 8% of EBITDA margins by end of this financial year -- ending quarter of this financial year, right?

Sure, sure, sure. That's our expectation because there has been some gradual improvement in the U.S. market. Domestic market, it's steady but still -- if we suddenly ask very high volumes, much higher volumes out of a market, it takes a bit of time to stabilize. So both things are in process.

Understood. Lastly, one data keeping question. What was your metal throughput this quarter? And what was it in the same quarter last year and in Q4, if you can share?

You see roughly, I think, if I'm not wrong offhand, I can say it was 29,000 tons was the metal throughput last year. I think this quarter, on a year-to-year basis, I think we have some, around 4% metal throughput increase.

4% compared to the same quarter last year, right Y-o-Y?