Rajratan Global Wire Limited ($517522)

Ladies and gentlemen, good day, and welcome to Rajratan Global Wires Limited Q4 FY '26 Earnings Conference Call hosted by 361 Capital Markets. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Sailesh Raja from 361 Capital Markets. Thank you, and over to you, sir.

Good evening, all. Thank you for joining us for Rajratan Global Wires Limited Fourth Quarter of FY '26 Earnings Conference Call. During this call, from the management side, we'll be hearing from Mr. Sunil Chordia, Chairman and Managing Director, Mr. Yashovardhan, CEO and Deputy Managing Director of the company, Mr. Pranay Jain, CFO, Rajratan Thailand, and Mr. Hitesh Jain, CFO, Rajratan India. I would now like to turn the call to our Chairman and Managing Director, for the opening remarks, followed by Q&A. Sir you may begin now.

Yes. Thank you, Sailesh. And thank you all the participants for your interest in Rajratan. And I'm happy to say that we are meeting in a very exciting times when the global businesses are affected by geopolitical situation, war situation in GICC countries. A lot of businesses are affected. Supply chains are disturbed, okay. But our company has been able to perform in spite of all the difficulties. And we have a mix of good news and some, not so good news. Good news is that we have been able to achieve the higher [indiscernible]. Our sales on year-on-year basis have increased by 18%. We have done more than 133,000 tons of total sales from 3 locations, and particularly in this quarter, we could not achieve the EBITDA -- targeted EBITDA. That is because of the high prices of raw material. There was a sudden increase in steel prices beginning from January. So from January till March, the prices went up by almost INR 10,000 a ton, which we could not pass on to the customer. And that is why the EBITDA percentage in this quarter has gone down. Coupled with that, the availability and the price of energy was a difficulty, which also affected the EBITDA margin, particularly in this quarter. So -- but we have been able to pass on the price increase in the current quarter. And we see a robust demand from all of our customers in India as well as in Thailand and globally also. So I can say that this year, should be another growth year for Rajratan and we target to grow our business in volume by around 17%, 18% in the current year also. With this, I'm happy to answer all your questions along with my team members. Thank you so much.

[Operator Instructions] The first question is from the line of Sanjay Shah, KSA Securities Private Limited.

Sir sincerely appreciating the performance in this global volatile situation. My question was regarding -- can you please highlight upon and talk about exports business opportunity region-wise for our bead wire and even some non-tire segment globally.

So Sanjayji, we won't be able to give very specific information. But generally, Yashovardhan is handling the global business. So he will answer you what are the developments in different markets.

So because of volatility, to be honest, the only impact that we've seen until now is disruption in shipping especially from our Thailand plant. But overall, the development of export market remains robust for us. There are many companies that have already approved us in Europe, and we are under regular supplies to them since last 6 months. Definitely ensuring that the material reaches them on time is something that we are struggling with, since last 30, 40 days, but I think that should ease out. And also in American market, the demand still continues to be robust. So we were expecting that the geopolitical issues will create or reduce the demand, but it has not happened til now.

That's great. So basically, it's the entire segment itself for a onetime...

I would say 70% of the efforts and development is happening in Tire segment in terms of number of counters and number of plants. But today, Non-tire segment volume is also substantial. But this ratio will keep changing because tire companies take a long time to approve. Products are faster approvals and volumes come in faster. So it's a mix of both.

Right. Sunil, Sir, I have one question for you was regarding our Chennai plant. Can you share the ideology of working where we have [indiscernible] many tire industry supply from Chennai, and we are catering to some low-margin customers from Indore. So how do you see that panning out in near future? And how do you see that capacity over there? And do you need any CapEx in any of the plant further?

Yes. So last quarter, Chennai utilized capacity almost 85%, 90%. If you look at the exit rate, against 30,000 tons capacity, they have been producing 2,200, 2,300 tons per month. And that is why we decided to put in the money for balance equipment and some equipments have started arriving and will become a 60,000 tons capacity plant by same quarter of this financial year. This year, our plan is to sell around 35,000 tons from Chennai to other customers who are in that region. So we will be able to cater to customers in North India, who might be a lower-price customers. Okay? So as specified earlier, we don't want to lose our market share, okay? As long as the product is giving us some contribution, we want to continue with our high market share. And in Tire sector, our market share has again reached to 40% to 43%, which had come down to 35%, 37%. And we are also putting in CapEx for steel cord for conveyor belt in our Indore facility. So that project, of course, got a little delayed because of the reconstruction of the shed. We have broken the old shed, which was made in 1989 and built up a new big shed. But now that work is over, machines are getting installed, and we'll be able to start trials in the second quarter of that product also. So apart from these two, CapEx, there is no additional CapEx planned for this year as of today, yes.

What is that amount of CapEx?

In the steel cord, we have already invested around INR 55 crores. I think INR 45 crores to INR 50 crores, and we'll require another INR 25 crores to complete that CapEx. And Chennai, this year will be close to INR 25 crores to complete the capacity to 60,000 tons.

That's helpful. Sir, my last question was regarding margin uptick. Can we see that establishing the rising raw material and energy prices get passed on in coming future times in this year itself?

[Foreign Language], whether you -- whether it is a steel price or it is other consumables or even energy prices. And currently, we are seeing that there is a pressure on the dispatches. We are not able to meet the demand of customers to supply them on time, okay? Because there is a shortage of raw material also, okay? But I think that will become a [indiscernible] by end of this month and we'll be able to meet our overall production target and sales target for this year, unless something major happens, again, okay. So you cannot -- you have to keep your fingers crossed, another war or another issue. Yes, that uncertainty will remain. So whatever I'm talking of is a normal situation.

[Foreign Language].

[Foreign Language] we supply to our company in U.S. who imports, paid 50% duty on the product. So that amount also adds on to the working capital cost. And then customer pays us in 30 or 60 days after he receives the material. So that credit cycle has become bigger.

[Operator Instructions] We have next question from Preet Pitani from InCred Asset.

Congratulations for a good set of volume numbers. Sir, my first question will be on raw material costs. So by telling that we are able to pass on the entire INR 10,000 per ton, which as an increase in the cost. Do we mean to say that we would be able to reach 38%, 39% gross margin, which we were doing in Q3, back in Q1? Is my understanding...

It will be a little more because in percentage, we'll be able to maintain gross margin. So on absolute numbers because prices have gone up, we'll be able to do that, not an issue. So I don't see any issue in this quarter.

Yes. Okay. And I was seeing your Thailand as well as India number. In India, there was a pressure on gross margin, but I can see that in quarter 4, Thailand gross margin stayed constant quarter-on-quarter. But we have seen huge increase in other expense for this quarter as well as for this full year. Any particular reason for the same?

[Foreign Language] other expenses. It is not Thailand other expenses. We have now one more 100% subsidiary, which is getting merged in this balance sheet that is U.S.A. Rajratan U.S.A., okay? So there is a cost of around INR 30 crores, which is for 6 months, wherein we have -- we have been supplying to USA on FOB basis because the import duty in USA is on the FOB cost of the product. Okay? And the U.S. company pays for the shipping cost and logistic cost. So that INR 30 crores of cost for second half of the year is booked in the U.S. balance sheet, okay? So because both the balance sheets are merged and you can't see USA balance sheet separately, you think that it has gone up in Thailand. It has not gone up in Thailand. It has gone up in U.S.A.

So now it is new normal that we would be ingrain around INR 60 crore cost for the full year in this subsidiary?

If the export volumes are like this, or we have a projection to increase that. So this will be further increased.

So can you just help me explain between the EBITDA per ton or EBITDA margin differential between when we sell in India or we sell in Thailand or we sell in U.S. or in other export countries. Is EBITDA per ton maintained at the same level? Or if you could just tell us taking order?

No. Because there will be very different prices, okay, logistic cost, prices, long-term contracts, some orders are at good price. Some orders are long-term commitment. It is very difficult to tell you that what is EBITDA in U.S. market. What is EBITDA in Thailand or customer-wise, okay? In Thailand, we have a mix of customers. The prices ranges from something like THB 26,000 to THB 34,000. Okay. So very difficult. You can continue to assume that we'll be able to maintain this EBITDA level, 13.5%, 14% safely.

Across plants?

On a consolidated basis.

And sir, one question from my side. This year, you have also shown the segmental difference in the quarter for financial about how much we have got from India, how much we have got from Thailand, U.S. and rest of world. Can you break up this 17%, 18% volume growth which you mentioned region-wise. How much growth do you expect in India? How much would we expect in Thailand and how much growth into USA?

So I think we have given -- we have grown 19% in sales volume in India. We have grown 17% in Thailand. And the overall consolidated growth in volume is about 18%, okay?

I'm asking for FY '27, the guidance which we are giving 17%, 18% volume growth for FY '27. If you could just break it up further how much growth we expect in India? How much...

Yes. Yes, I can tell you. Thailand,we are not expecting 20%. We are expecting around 10% to 14% because there is a capacity constraint in Thailand. We are doing some de-bottlenecking. So Thailand from currently year volume, which is close to 51,000 tons, will grow to 55,000, 56,000. tons. That is why I'm saying 10%, 11% growth in volume in Thailand. Balanced growth of -- to make it to a consolidated 17% will come from India because Chennai capacity is ramping up. And we have less growth possible in [indiscernible] per factory. And in all these numbers, I'm not including steel cord. So steel cord will be trials and it will take some time before we talk of volumes of that product. So next year, you can estimate 155,000 tons of total sales, if things remain normal globally.

Yes. I'm not asking about not plant-wise growth. I was asking about region-wise revenue growth, like USA last year, we did...

Revenue. So USA will further grow we like this year, exports from India has grown by 250%, okay? But in different markets, we choose where to supply from. Okay. So matching both this is a little little, okay? We look at the transportation cost, capacities available in different plants, okay? But we have a plan to grow around 30% in North America, I can tell you, and yes, and some growth in Europe, which will be around 50%, a Southeast Asia 10%, 15%, because we were suppliers in South Asia, South Asia for many, many years. So not many opportunities left for us.

North Europe, you mentioned 50%, 5-0?

Yes, yes because the base is low.

Yes. And Southeast Asia, you mentioned around 10%?

10% to 15%. Yes. And base is high and U.S., we see bigger opportunities.

And sir, if you would mention about working capital defense, like you mentioned, if we sell to U.S.A., we take additional 34 days to receivable money because of the long supply chain. What would be the difference between this -- the working capital in India and Thailand, do we receive it in 30 or 60 days?

Thailand is overall average 30 days and India is about 50 to 60 days. And then some working capital for stocking and finished goods and raw material. So -- but export has a longer working capital cycle because Europe shipping line takes 45 days to reach U.S.A. takes anything from 45 to 60 days, and then there is a credit to be extended.

So we would continue to see short-term loans at a higher working capital loans at a higher range for the next couple of years until we reach to [indiscernible] stage?

Yes, yes. It's good to follow at 7%, 7.5%, okay, and invest in a profitable business. So working capital borrowing will continue.

We have next question from the line of [indiscernible] from [indiscernible].

Congratulations of the volume growth. Sir, I wanted to know when would we see a margin reversal to the expected levels from 13% to 14% as we had spoken on 9-months?

Yes. So as told you in the earlier question, the margin dip is because purely because of the sudden increase in wire price in January, February, March, which we have been able to pass on to customers in the current quarter, April, May, June. So you will see the margin coming back to 13%, 13.5% in the current quarter itself. If everything remains normal. If there is another situation, some another breakout event happening in the world then yes.

And sir, like we have spoken about the wire rope expansion as well and the steel cord expansion as well. So what is the time line on the steel cord, when would it be online itself and...

Yes. So wire rope steel cord are one. We were telling that it is a wire rope project, but now it's a similar product. But we have decided to make the same product, what was being made in the same factory in Greece. So -- and that will start production in as in second quarter and will take some time for approval and regular production. So you can expect bigger revenue next financial year. And in all our discussion and projections, we are not including bigger numbers of this product.

So sir, as I know steel cord gets a higher realization and has a higher...

It is not that steel cord called for tires. This is a steel cord for conveyor belt. Yes. So very niche product in a niche market.

So sir, what would be the capacity of the...

Total capacity of this plant is 10,000 tons a year and the generation at current level of pricing, the top line possible from this investment is around INR 150 crores.

That would be assuming in 3 to 4 years to reach peak utilization? Would that be correct?

2 years.

From next year onwards?

In FY '29?

And sir, what would be the average realization per steel cord?

Different sizes, different prices, but on an average, INR 150 a kg.

And what are the margins on this product?

[Foreign Language] the current sales and if you look at financials, the EBITDA margin as of today are around 20%. We will have to see going forward yes, how it works about.

And sir, there is a debt increase as well as in short term and long term. What would be the peak that we are assuming post the CapEx cycle once it's completed?

Yes, I have been telling that this is the peak, but because of business situation, our volumes in North America has grown substantially, which has -- which needed more working capital. So we had to borrow. Similarly, CapEx in steel cord and remaining CapEx in Chennai required more term loan, but we have paid around INR 50 crores of term loan in the current year also. So that is the company culture. We keep borrowing and repaying. And we still feel rather than diluting equity, we should continue borrowing at a lower cost and save dilution of equity.

And sir, there is a very quite a spike in the other income as compared to last year. Could you just shed some light on? Is it like one-off?

Other income is a gain on foreign currency fluctuation, foreign currency appreciation. So dollars appreciated as we have a bigger export. We gained this on dollar and Thai Baht has also become strong. So there is -- there is a growth -- there is an appreciation of Thai Baht, which has reflected in the balance sheet.

[Operator Instructions] We have next question from [indiscernible] from [indiscernible].

Congratulations on a good performance in a tough market. Is it possible to share what is the exports from India, which we have done in FY '26?

Total volume, I can tell you from India we have done, I think, close to 9,000 tons this year. I can give you that number separately also. Remember Yashovardhan?

It is a little more than 9,000 tons volume. Balances is from Thailand.

Okay. So in FY '26, the exports from India was about 9,000 odd tons, more than 9,000 tons.

Yes.

Right. Okay. And next year, what are we planning? This number can increase to how much, I mean, in FY '27 from India?

Yes. So next year, probably we are expecting to touch about 15,000 tons of export from India.

And this will be mainly from Chennai. I presume?

Again, specific things are very different to compare today, wherever we get a container wherever we have capacity.

Sure, sure. Secondly, sir, you mentioned INR 25 crores of CapEx at Chennai for the 30,000 tons. So assuming that you are able to ramp it up in a year's time than that INR 25 crore can be recovered in a year's time? Is it fair to assume?

No, I think the plan is not to ramp up so fast. The decision is to invest and keep the capacity ready. But the volumes will increase gradually only. And I think the plant will also develop capability to increase volume gradually. So I think it will be long to estimate 60,000 tons figure and then [indiscernible] that next year's production will be [indiscernible] much.

And lastly, sir, on the Chennai location being very close to your South Indian clients, is it fair to assume that there could be some savings in terms of freight expenses? Have they started realizing or it could take some time?

[Foreign Language].

[Foreign Language].

[Foreign Language] We are very conscious that we are in a competitive market, okay. So competition will also play. The moment we pass on some benefits so very difficult to.

And sir, lastly, what has been our peak market share in history? I mean, what was our highest market share...

43%, 44%.

[Foreign Language] we are back to...

Close to that exact numbers are difficult, but our monthly data collection shows that we are back at 42%, 43% kind of market share in India.

Also, sir, you mentioned that there are some challenges in terms of raw material procurement. So you being a market leader if you are facing challenges, is it fair to say that your competition would face far more challenges given the inflation and also the issues in terms of availability.

I heard that everybody in the wire industry is having raw material issue. Yes.

We have next question from Ajit Sethi from Eco Quantum Solutions.

Sir, what is the CapEx amount we are spending on steel cord wire?

Close to INR 70 crores.

So in FY '27, we had given a guidance of 37,000 tons from Chennai plants, which comes around 60% utilization. So it is fair to assume that we can achieve a peak utilization from Chennai plant in FY '28?

'28, '29 by -- as Yashovardhan said earlier, it takes time to build capability, okay. So it is the question of our capability, customer approval, customer confidence. A lot of things are involved. Yes.

But let me clarify, I think it's not fair to assume the utilization so soon.

We have last question from Preet Pitani from InCred [indiscernible]

Sir, this quarter tax rate was very low. Any specific reason?

Yes, it was low on a consolidated basis because, Pranay will you answer?

Yes. So we are getting exemption on income tax after the sales of 26,000 tons. And we are a [indiscernible] company. So the base taxes is 20% for the normal companies and privileged companies, the effective tax rate comes to be 13.9%.

After the volume of 36,000 tons on an annualized basis. So this 13% is on entire profit or is only 36,000 tons, whatever we are making?

Entire profit, 13% because it is prorated. I'm telling you effective tax rate. So up to 36,000 tons, the income is taxed up to 20% and beyond sales of 36,000 tons. There is no tax.

That's why we have seen a lower tax rate. Sir, on the PLI front, last year, we did not get the PLI because we were not able to [indiscernible] in Chennai. But this year, we have also, than we are expecting [indiscernible] as well. So do the PLI benefits flow? What is stable?

As I said, we are knocking the doors of Steel Ministry. We are also making the presentations to Commerce Ministry, who is overall in charge of the PLI, okay? They all hear us, but nobody is giving assurance. I think it will take some time before I can confidently say that we are getting PLI. But we could not achieve first year target targeted production has committed to them. And second year targeted production was also not achieved because first year was missed. Second year was also missed. So we have requested for change in the late okay? If that is approved, we'll get PLI. Otherwise, as of today, the question mark is there on the PLI. And in all our projection discussion, we are not including PLI as a benefit.

Okay. I think if it gets approved, how much would be the PLI percentage?

Our percent on sales, incremental sales every year 8% from Chennai. Total quantum will be INR 40 crores to INR 50 crores in 5 years' time.

And sir, I see every year, we get around INR 3 crores of state investment subsidiary, I think it will be because of Chennai plant. How many years still we will be getting more to subsidy?

No, it is not Chennai. It is Indore. We had done investment in 2020. So we were getting 30% of the capital subsidy. So whatever we had invested that year, every year, we get in 7 years, that disbursement happens, okay? So I think some INR 24 crores, INR 25 crores was sanctioned. And every year, we get INR 3 crores, INR 4 crores. So it is that money coming to balance sheet from MP state government. We get similar subsidy from -- for our steel cord investment.

Okay. And is this subsidy shown in the P&L? Or is it directly knocking off the...

No, no. It is knocking off from the investment.

Sir, for this year, what would be our wire rope volume?

We are not assuming any volume this year. Maximum it 2,000, 3,000 tons, okay? But right now, we are not talking of numbers.

In FY '26, I'm asking about the year, which has just passed.

No, there was nothing from wire rope.

So there was some other wires that we do, which contribute around 3%.

Which is 14,000 tons, which was 14,000 tons in Indore factory.

14,000 tons for FY '26. Okay. And our 17%, 18% growth projection and 155,000 tons volume prediction included this 14,000 tons right?

Yes, yes, yes.

Got it. And then last, on the competitive front, like we have been hearing that competitor has done in excess capacity and there is a pressure on pricing. So what makes us different with respect to competitors? And will we be able to maintain the 13%, 14% margin if their excess supply comes off on the road or do we have to reduce the price and take a hit on margin to preserve our market share. What would be our strategy?

Competition decides to further reduce the price to our understanding, they are already losing heavily in this -- at this price. If they decide to lose further, okay, I don't know. So very difficult to predict. okay? But we are surviving and making this kind of margin in last 4, 5 years -- 4 years, at least, okay? So competition is not new.

Perfect. And what would be the price difference between our product and there, is there any difference or we are at the same level?

No, no, there's a big big difference.

We are on the higher end or we are on the lower end?

At higher end, definitely. Any new entrant has to enter with a price cut okay?

Yes. So what makes us different that it's our relationship with the client? Or what is the difference that they are...

30 years of hard work and knowledge of this product and relationship is everything.

We have next question from Saloni Arya from [indiscernible] Ventures.

I want to basically get a bit more understanding on the new verticals that we are trying to do [indiscernible]. That is why wire rope and steel crorord. If I'm right, we have already spent around INR 70 crores in wire rope.

We have invested INR 50 crores. Balance will be invested in current year.

Okay. And how much are we expecting to do in terms of revenue from wire rope?

Peak revenue will be INR 150 crores, which will take at least 2 years to reach.

That is just for wire rope, sir.

Yes wire rope, steel cord whatever you say. It's the same thing. Yes, yes.

Sir, what [indiscernible] led us to venture into this segment because it is completely new for us like a niche segment?

I'll say it is not completely new. It is a wireline product, okay? And it goes into rubber application, okay? So we know the business, okay? And we wanted to identify one more product for growth in Rajratan. Okay? So we choose to do that. It's not a very big investment. Anyway, we are making. We'll wait and watch the performance of this investment. And then we may decide to go in a big way. But right now, it's a pilot project, I would say.

But the end industry in this segment will be different than the [indiscernible]. So it would not...

Definitely, it is not existing client, but there is a limited growth you can achieve in the existing client and in one product, okay? You can't expect every customer to buy more than 40%, 50% from one supplier, okay? So if we expect a growth in our business, how much can we grow in one product. So we are also -- we are also trying to identify areas of growth, okay? So this was an effort to achieve that.

If you could give me a rough year, sir, around the potential market size of this product? And if it luckily works out for us....

No, no, no. It's a niche product, not a very global market itself will be some 70,000, 80,000 tons, okay? So -- but this will also teach us how to make wire ropes. So the next project might be wire ropes, which are similar in nature and similar in properties and manufacturing process.

So this is not just an experiment for us. We are trying to basically venture into this because we want to create a new segment and potentially get into the wire rope. I'm correct in understanding that?

Yes.

We have the next question from [ Sashank Kanodia ] from ICICI Securities.

So just wanted to check that you given a guidance of 13.5% to 14% of sustainable margins for us as a consol basis. Are there any drivers to margin movement organically given that we have been ramping new capacities and optimizing the bead portfolio?

Sorry, I didn't get your question.

You're guiding that the sustainable margins for us is 13.5% to 14% the consolidated level, right? Are there any drivers for margin improvement given that you're ramping up new capacities, your working in the product portfolio. So is it a theme that we can improve to -- 18%, 20% that we had in the past of 15%, 16% as the best case.

[Foreign Language] That is possible, but we would not like to guide you with that high number. We are conscious of the fact that we are in a competitive market. Some of the participants already asked me a question. Are you scared of competition? Will you have to further reduce the price, okay? So you are asking me totally opposite question, okay? So we are projecting and we are talking in middle. We are not optimistic about 18%, 20%, but we are also not pessimistic about 11%, 12%, okay? We should be making a decent margin of okay? If anything better comes up, it will be a good surprise for all of us.

And sir, given the fact that you've already passed on the rising metal prices to your customers, do we receive any compensation for loss of profitability for Q4? Any onetime [indiscernible].

No, nobody gives, nobody gives.

Okay. And sir, lastly, there is a fair amount -- that the auto sales were slow down because of some supply chain issues as well as price at auto OEM. So any demand outlook we've been hearing from [indiscernible] players regarding how do they see the market both on the domestic and the export front?

No. When we meet our customers, everybody is keeping fingers crossed, okay? But up till now, there is no negative impact, okay? But all of us are expecting April [Foreign Language]. And then a lot of it depends on Mr. Trump.

Okay. right. And sir, lastly, any take on the cooperative intensity, as you know, [Foreign Language] domestically and globally, if you can help us understand?

Currently, capacity is much more than the demand, okay? So there is a competition. And some of the companies globally are also whether they will survive or not is not clear. So consolidation is also happening.

We have next question from Vipul Makwana from [indiscernible] Holdings.

Can you hear me now?

Yes.

Yes. I wanted to know -- I wanted to know the capacity utilization individually across our plants. What would be that for FY '26?

Chennai reached peak in the month of March, which was 85%, 90% of installed capacity. So we have decided to put in balancing machines to double the capacity, Indore continue to operate at 90% capacity utilization. And so does Thailand, okay. So our capacity utilizations have been to peak level both in Thailand and Indore [indiscernible]. And Chennai is ramping up, so there will be open capacity in Chennai next year.

Okay, okay. And the second question would be for Yashovardhan as well as you, that in case of exports, due to the war, was there any situation that sales got affected or are in transit or we couldn't book sales or something of that sort? Could you throw some light on it?

No. As of today, other than shipping lead times have increased, and there is congestion at Singapore port, there's congestion at the [indiscernible] port. Other than that, we have not faced any disruption.

Incidentally, we don't have a customer in GICC countries okay? Where the exports are totally -- have come down to zero.

Next question from the line of Mr. Saket Kapoor from Kapoor Co.

Hello. Yes, firstly, when you mentioned that we are -- we have done some installation of finishing line at the Chennai unit, and then we will have open capacity. So can you elaborate -- in terms of tonnage, what would be the addition in the Chennai unit? And what are we factoring in, in terms of the [indiscernible] for Q1 contribution from Chennai and then going ahead?

[Foreign Language] I have mentioned that Chennai, we had installed 50% of the machines. So capacity was -- until last year was 30,000 tons per annum which is being double to 60,000 tons per year by addition of some balancing equipment and it will happen in the second quarter. Some of the machines are already installed and it started running. So this year will have a growth in the manufacturing from Chennai. And from 17,000 tons last year, we are doubling our business from Chennai.

Okay. So last year, tonnage was 17,000 on installed capacity of 30,000 tons. Now this year, on an installed capacity of 60,000 tons, we are expecting 34,000, 35,000 tons?

Yes.

[Foreign Language], how will this shape up post this commercialization [Foreign Language].

[Foreign Language] everything will be capitalized. So you will see a very a small number in WIP. All this will be capitalized and up and running.

Okay. When we look at this number for a INR 20 crore increase in the consol. This is pertaining to the Thailand unit that is the debottlenecking exercise we are doing or...

Thailand number is very small. Thailand number is very small. On a consolidated basis, all this is a [indiscernible] steel cord project and Chennai balancing equipment. There is no other WIP.

Okay. So -- and in that case, then the INR 50 crore number which you have set for the steel cort part, how much have we invested out of?

[Foreign Language]

[Foreign Language] And steel court will be commissioned. This INR 50 crore project will be commissioned by?

Will start [indiscernible] second quarter, but third quarter, we should be able to capitalize everything.

[Foreign Language]. So I think we closed this year at a long-term borrowing at [ 130 ] and short term, including the working capital requirement at [ 200 ] [Foreign Language] that is the factor already there. So how much long-term...

[Foreign Language]. Okay. Last year also, we have reduced the long-term loan to that extent. And working capital might be required because of high prices now, because there is a price increase of around 10% to 15%. And also the increase in volume, we are talking of 17%, 18% volume growth, which might require some working capital borrowing also and long lead time for exports. So all these factors put together, we don't expect any reduction in working capital requirement. Rather, we see some more requirement of working capital, but term loan may not be required. There will be a reduction in term loan.

To conclude that in your presentation, in your slide, you have mentioned that we have robust sales pipeline established with market client to customers. So if you could just give us some understanding as you say, we were also looking for some new geographies, [Foreign Language] right? I'm not wrong, correct me there that you are trying to look for new customers from that part of the globe also. So what are you trying to explain here? And then sir, one more point was in the in the number. We have mentioned within USA, the revenue at INR 118 crores. [Foreign Language] how will tariff affected this sale number to U.S.?

I think Yashovardhan will be better but we'll be giving a guarded answer. Don't expect us to tell you everything. Yashovardhan?

Yes. So we had shared the export plan. I think every quarter we are discussing this about setting up infrastructure 2 years back, which is now reached at final approval from customers. Overall, our efforts is not specified to any particular region. We see U.S. as a big potential. We also see Europe as one of the largest markets for the bead wire. And surprisingly, Southeast Asia remains to be competitive, but Japan is turning out to be a new opportunity. Now all of this is just increasing our existing customer relationship to different geographies. The set of customers in terms of name remains the same, but because they have various factories in the world, we are trying to explore opportunities around the globe.

Just to make and understanding.

[Operator Instructions]

Yashovardhan was mentioning, I was just trying to make sense of. If I may and then i'll join the queue. Yashovardhan, you mentioning that we are setting up infrastructure. So this is including the one we have or I could not understand that.

No, I meant to say we've been sharing updates about this every quarter. It started with setting up marketing teams 2 years back, which has now reached to approvals from customers from various geographies. There is no specific reason that we are targeting. U.S. also has a good potential. Europe is one of the biggest markets for us. And Japan also is turning out to be, but it is very initial to discuss any specific development. I just wanted to explain that our efforts are all over.

I'll joined the queue on the tariff, you please answer in the follow-up. How are tariffs impacted on INR 118 crore revenue from U.S.A., How tariff rate part there?

We have our next question from Matt Shah from Sapphire Capital.

Most of my questions have been answered on the previous participant, I think I asked the question on the tariff. So if you could kind of elaborate the impact that we had on the on the U.S. side? Did we have the sales -- most of the exports from India? Or are we exporting from Thailand?

So tariffs have not affected the volume of the business because tariffs, we are under Section 232, where U.S. has put tariff against all the imports, whether it is coming from India or Thailand or China or Mexico. okay? So we are at par with all other countries. So it is not affected. It might have affected the customers there that they have to pay extra price for the product.

[indiscernible]

Yes, definitely, definitely, and the sales revenue includes the tax which comes under our USA entity, which is consolidated business. And I've answered earlier question also with this.

Okay. Secondly, on the Chennai plant. So you previously mentioned that we are taking low-margin kind of [indiscernible] sales on the Chennai side to kind of fill in the capacity. And you also mentioned that there has been like disruption because there's a lot more capacity than the demand currently. There's increased competition and consolidation happening, but yet we are increasing our capacity in Chennai we're actually doubling it. Any reason for this increase in capacity when the margins are so in such a big pressure and also there's a pressure on the raw materials those things, there's also pressure on the supply from us to the customers in Europe and U.S. So if you could kind of give me a trajectory of why we're increasing the capacity in Chennai right now?

No, no. It's not that we are making a big investment. So -- and now we are not selling any customer from Channai where we are losing money, okay? So all the customers supplied from Chennai are profitable one. Number two, we don't want to lose the market share. Number three, increase in production reduces our variable costs also. okay? And we want to be in the game, okay? In a competitive market, if we are contributing to our profitability, we do the business, okay? So this, I must have told in respect of earlier kind of margins, 18%, 20%, which are not there. But 13%, 14% is a decent margin to even plan in investment yes.

Okay. So currently, the sales from Chennai are also -- they are in the range of 13% to 14% more Chennai?

Yes.

We have next question from Preet Pitani from InCred.

Sir, on -- we have mentioned that we have raised -- raised the price or passed on the cost from Q1. So is it fair to assume that the 85,000, 86,000 tons average realization would improve about 90,000 tons from for this FY '27.

Yes, it has improved.

It has gone beyond 90,000 tons. Is my understanding...

Yes.

Yes. And this -- we are taking price. So it applies to all -- across malls like U.S. and Europe, Europe also we will be getting better realization. How is that agreement with us? Is it seem like India?

No, it's not that big increase there because the dollar has become strong. So we have been able to pass on a little bit because for export, we look at the international prices of raw material, and we can calculate from there. And there is an opportunity to import also if the prices in global market is lower we do import raw materials. So global pricing is done on the global price of wire rod. Otherwise, we can't remain competitive in the global market.

Yes. Got it. Sir, I can see that realization for this our subsidiary which is combined Thailand as well as the U.S. Their realization has also improved this quarter, and which has helped us protect gross margins there. Despite increase in realization, we have seen that the margins have declined by 400 basis points on EBITDA levels. So is it fair to assume that in Thailand and U.S. subsidiary combined together, we would be doing EBITDA margin of around 9%, 10% only? Or what would be the levers which will improve margin there?

No, no. I had in the very beginning, said that the India EBITDA margin declined because of the higher price of raw material in this last quarter, January, February, March. -- which has come back to the same because we were able to pass on the price increase to our customers, our customers agreed to buy at a new price, okay?

Yes, also Thailand and US subsidiary?

Thailand and U.S. subsidiary are same, there is no change in their business. No substantial change in the business.

We are doing 9% margin there, 9% EBIT margin, for quarter 4 in our subsidiary, which was around -- it was around 11.4% last quarter and 13.5% in quarter 2. So what would be the range of margin which is fair --

1-minute. I think we'll give you this answer separately. I don't have that calculation right now.

Okay. We have a follow-up question from Saloni Arya.

Sir, I just want to clear one confusion. Basically, you said that the mobile market place for steel cords 70,000 tons to 80,000 tons. Is the same as a wireline?

Sorry, come again?

Yes, so I'll answer. Different than wire rope. What we tried explaining is the method to produce steel cord for conveyer belt is very similar to wire rope. So by this project, we're able to also understand how to how to like -- to make wire rope. So that will give us an experience to make wire rope.

Okay. Because earlier in the con call you mentioned that we were setting of 10,000 tons capacity for wire ropes, which now right now is for steel cords?

Wire rope and steel cord are the same thing. We had bought the machines for making via but steel cord is one of the wire rope products, you can see it. Okay. So application of galvanize steel rope for making conveyor belt. Then it is for still cord. But [indiscernible] manufacturing process and quality or there is not much of the difference. Okay?

[Operator Instructions] We have Mr. Saket Kapoor from Kapoor Co.

Just to summarize what you have mentioned. If you can just hear me also, firstly, you mentioned about the general auto industry slowdown part. So if you could just throw some light on what you were trying to explain that the April [Foreign Language].

[Foreign Language] and we are not expert of auto industry, but we continue to see a good demand from our customers, which are tire companies.

Sir, can you give me the absolute impact on the EBITDA because of the increase in RM, which we do not pass on?

I told you, it is about 4%, 4.5% in the EBITDA margin. If you look at our raw material consumption percentage from 57% has gone to 63%.

We have next question from Preet Pitani from InCred.

Sir, you mentioned to one of the previous participants that INR 88 crores capital working progress include INR 25 crores, INR 30 crores of Chennai CapEx, which we have not yet capitalized. May i know the reason why we have not yet capitalized those because plant is fully...

[Foreign Language]. Machines are on the way some machines are arrived, which are to be installed and put to use. So unless we put to use and start using commercial production, start doing commercial production, we cannot capitalize.

So these are the machines which -- that -- these are the machines which are still on in transit, and this is the reason why we will be needing only INR 25 crores more for addition?.

[Foreign Language]

We will take that as our last question for today. I now hand the conference over to Mr. Sailesh Raja for closing comments.

Sir, would you like to make any closing comments?

Yes. So the same comments. Unless there is a global change in the situation or something new comes up. I think Rajratan is on a path to growth, okay? This year, we have shown a good growth last year, and we are going to show good growth for next year also. So keep watching, keep in touch and keep looking at Rajratan critically. And thank you for asking very critical questions. We would love to answer all the questions, but because sometimes all our answers become counterproductive for us. So we don't want to share more information than this. I think we are quite transparent and very, very transparent and straightforward with our investors. So thank you very much. Bye.

Thank you, sir. On behalf of 361 Capital Markets, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.