Ratnamani Metals & Tubes Limited (520111) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ratnamani Metals & Tubes Limited Q1 FY '22 Earnings Conference Call, hosted by Monarch Networth Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sahil Sanghvi from Monarch Networth Capital Limited. Thank you, and over to you, sir.

Yes. Thank you, Malika. Good evening to all. On behalf of Monarch Networth Capital, we welcome you all for the Ratnamani Q1 FY '22 earnings call. We are glad to host the management of Ratnamani today and from their side we have their MD, Prakash Sanghvi sir; and their CFO, Mr. Vimal Katta sir. So without taking much time, I'll hand over the call to Prakash sir for the opening remarks. Thank you, and over to you, sir.

Yes. Good evening to everyone. You might have got the result of quarter 1 '21/'22. Of course, it is a little bit down, the turnover total is INR 533 crores, corresponding to INR 591 crores. Of course, the second wave was there in the month of April, May. That's the reason some of the dispatches have not took place. Otherwise, some finished goods and some working process materials on finishing size is there. So this will be reflected in the second quarter, and the net profit is INR 50 crores. Almost, you can say it the same of course with the corresponding quarter. Order in hands is a reasonable one -- good one, say, about INR 1,600 crores, both in carbon steel as well as in stainless steel. Even some more order is online, some big order that we may -- we are becoming L1, but it will come, so it will reflect -- it will add to the INR 1,600 crores. And rest -- the capitalization took place in the last year itself for both the plant, and both the plants, is running with some small quantity and some trial. But things will improve over here. We are booking some order in carbon steel also to start with some reasonable good quantity when we become L1, but we -- as soon as we get the new plant also, LSAW also for line pipe, it will run. And this side, stainless steel also, we are taking trial, and we took up to 8-inch NV. Now once has remained that we are going to take in next 2 months some toolings are required. Otherwise, the place is also running reasonably good. Some switching problems are there, but it will be settled in a month's time. So then we will do good production in stainless steel as well as in carbon steel, both the sites. And existing capacities are booked in ERW, a reasonably good one up to December, January. Then in spiral, also there -- in stainless steel also, same way business is doing well. We have a good booking recently. Small, small good orders we have booked. So overall, visibility is good. Corona is not, you can say, completely total. But in Gujarat and this area, it is very much okay, and people are working very freely over here. So things are improving. And of course, the raw material price had gone up to -- in both carbon steel as well as in stainless steel. So some difficulties are there in -- to our customer. Rather, they booked order long back, and now they are booking the -- highlighting the order. So some problems are there. But because we are in various segments, so we are booking every day something or other. So things are looking good to take further forward. Thank you.

Sir, shall we start with the question-and-answer session?

Yes, please.

[Operator Instructions] The first question is from the line of Kaushal Shah from Dhanki Securities.

Sir, I had a few questions...

Sorry to interrupt, Mr. Shah. Your voice is not audible. Request you to speak a bit louder, sir.

Yes. Sir, if you can share what is the likely utilization level that we are looking at for our LSAW plant as well as the SS plant? You mentioned that ERW capacity has been booked till December. So if you can just share the new capacity that we have for carbon steel LSAW and the assets? What is the likely utilization in the current year?

See, current year, it might be at the level of, you can say, 20% to 30% only because still a lot of approvals we have to get. But more important approval is the Engineers India that we already got, then API 5L and API 2B that we already got. And we have just recently booked some order also. Of course, it will start, but the raw material has to come. A reasonable quantity we have booked. But in some where we have -- good quantities are L1. So definitely the order will come in a month's time. So it will be a reasonable tonnage we are going to use there. So it will be, say, 30% in -- 25% to 30% in carbon steel. At the same time, in stainless steel, we still -- we have taken trial up to 18-inch NV. Only one remaining like 10-inch that some tooling is -- to be imported -- coming from imports. It will take some time. But rest -- other side is down the level side as we are manufacturing and some switching problems are there that we are sort it out. Our vendors are sort it out. and then we'll take products from here a little bit delay, looks like. But we did so far all the 5, 6 sizes, and we got the good output also. So something will come and then it will be also rectified, these all switching problem, then we will do. And here also, we may produce some 2,000 to 3,000 tonnes for the balance period.

This is in FS?

Yes.

Okay, right. Sir, coming to the next year. So this year, of course, and especially the first quarter was impacted by the COVID second wave. So how do you expect the ramp-up to happen? And at the customer end, are you seeing increased activity now that crude oil has crossed $70? Are you seeing increased activity in both domestic as well as in foreign export markets?

Yes, we are seeing good visibility where we are indirectly getting orders from Middle East through the fabricator. Even we are getting international orders also. Recently, also, we have booked. And even in second wave also, not much affected plants. Of course, people were panicked and a lot of the deaths took place. So the fear complex was there, but plant was running with 70%, 80% capacity. So what -- the visibility is reasonably good and orders are coming from import or export market. Orders are coming from domestic market also. And in one sizable order, we have become L1, that also we are going to get. That actually will run for next 2 to 3 months with good capacity. And in some of the seamless area, we have -- there also, we have booked up to December, January, especially in heat exchangers and others. So I see a good visibility. One is oil and gas. Other one is pharma. Other one is export. These are the 3. And fortunately, we are in a number of segments, something or other is moving ahead.

Okay. And sir, just one last question. Two parts. One is that we had indicated about a target of around INR 3,000 crores revenue for the current year. And we had also expected that in terms of tonnage also the new capacities will do a little better now. Obviously, the first quarter has been impacted, not just for you but for everybody. So do we want to kind of revise our guidance? And the second part also...

No, no. We are still in our target, what you have said INR 3,000 crores. We are quite confident, the way the inquiries are with us, the way the order in hand, say about INR 1,600 crore order is within hand. In some of the cases, we become L1. So I am quite hopeful we can cross INR 3,000 crore.

Okay. And sir, on the margins, we had indicated a range of 16% to 18%. So there also...

That remained there.

Okay. And sir, just one last question, if I can squeeze in. What is our bid book as of now in terms of either tonnage or meaning -- any indication about that and how it is going to be let's say in 6 months?

It is really too much, but I cannot say because what the strike of -- our strike in HSV, something different, in current state something different. So it is -- quite big requirements are there. Only little holder point is the raw material price because the customer is having some problem because they have booked long back. So right now, the price had in both, whether stainless steel, carbon steel had gone above raw material. So they are taking a little more time, and they are booking small, small quantity. And they don't want to go EPC for say, 50,000 tonne or 40,000 tonne. They release some 2,000 tonne, 3,000 tonne, whatever they require for next 2 to 3 months. Because they feel that the prices will come down.

The next question is from the line of [ Adyasha Bhanja ] from Axis Bank.

Sir, can you just throw some light on the volumes that we have done in this quarter compared to the previous quarter?

I think that was...

See, madam, volume figures we already shared with those who are -- who have shared with us their e-mail details. So my request is if you can share your e-mail details, so that info I will share with you separately.

Okay. But sir, otherwise, broadly compared to Q4, how much volume dips have we seen in this year, in Q1 FY '22?

Volumes in case of carbon steel have been a little better. Otherwise, volumes have been lower if we look at the total cost in the quarter of last financial year.

Okay. Sequentially, if we compare with Q4, sir?

Q4 was extraordinary. So in our case, quarter-on-quarter performance is never comparable because a lot of factors are there, which impact the dispatches. So basically, year-on-year basis if we look at, so this INR 3,000 crores of top line target, what we are trying to do, some help will be there from the higher raw material prices also. So volumes growth will not be in tandem with the turnover growth. Turnover growth will have some element of higher raw material prices also.

Okay. Okay. So sir, my second question is on the project. I didn't get you, sir. So whether are we in possession of all the approvals required for starting production of all the product categories that we had planned or is any approval pending?

Some international approval is pending from our LSAW plant. Because of still COVID, our people are not able to visit them. The customers said also they are not able to visit. So this will take a little more time. Whatever we can do on virtual, that we are trying to take. And we have -- whether local, we have already got the CI as well as API, both them are important. Now case-to-case, customer to customer, we are going to get. And that will take a little more time because still some of the countries, some of the visas are not available even today also.

Okay. So that approval will be required for all kinds of customers or for specific orders?

No. For new facility only. And for some of the customers are sending us inquiry, and we are getting order also. For some of the specific customer, and facility, people like Saudi Aramco, something like that.

The next question is from the line of Ashutosh Tiwari from Equirus Securities.

Sir, just I think we saw good traction in the stainless steel order book in the quarter. So got order from? Like, the export asset has gone up from, I think, INR 100-odd crores quarter-on-quarter? This is raw material?

Yes. See In the SS, you know very well, we are booking in a small INR 5 crores, INR 10 crores, INR 15 crores, INR 13 crores. But continuous booking is there. Whether it is an export market, whether it's a domestic market, continuously we are booking. So whatever we are dispatching say, you can say about INR 200 crores or INR 100 crores -- INR 80 crores, INR 90 crores. So that much order we are getting. So order flow is good this time. So almost 456 plus, some more order in the last 2, 3 days where you got. So it might be say equal to INR 500 crore.

Okay. So currently, order book is around INR 1,600-odd crores...

Yes, INR 1,600 crores. Yes. Yes, yes. And similar Ashutosh, we become L1 in this line by so that become that -- it will come in a month or so. PSU take their own time, but we become L1.

So that would be what side of order? Will it be INR 200-odd crores...

[Foreign Language]

[Foreign Language] I got it. And lastly, in terms of whether domestic projects or basically overseas projects, whichever we are seeing that we could probably get some orders apart from this L1 you mentioned, like where the order booking is currently going on?

Even we booked some order for LSAW new facility also just day before yesterday only.

Okay. No, I'm saying that which are the projects, basically, let's say, domestic market or anything...

See, again, see this HRL is going on. This new refinery is going on, continues. Then there is expansion in Baroda ISL refinery. And in the export market, this Saudi Aramco order with the fabricator placing with us, it is like that. The beside the pharma, this API because that is good. Then there is the export business also good too, still you can say.

Okay. Okay. So overall, I think things are looking good. And lastly, from my side, I think we have mentioned this a couple of times in the last few quarters that obviously, steel prices have gone up, so that's why customers are holding on to it. So that thing is easy of now, customers are now...

No, no. Things are improving. Now things are improving, one, because they have to complete the project. Of course, right now, they -- suppose if somebody want to have 30,000 tonne total order, but they will take 3,000 tonne, then they will go -- come next month, something like that. Because they feel things will go down, they will get some benefit. But totally linked with the raw material, our prices.

Okay. Okay. So you mean to say that even if they want to -- they have a bigger order to place, they probably are just fitting that into the small sizes, just to see that...

In small quantities. They make it like that.

Okay. I got it. On water side, what is happening? Is there a momentum happening...

Water side is also -- there is still not much from Jal to Nal. But local state government, there is a requirement. There is a -- but there EPC is building first, and then they will come back to us. So 2, 3 people have places we have already given an indicative price right, what are the market size today. So they are bidding based on that.

The next question is from the line of Abhishek Ghosh from DSP Mutual Funds.

Sir, one thing. In the stainless steel pipe, import used to be a major proportion, especially on the Mother Hollow. The whole logistical challenge that one is seeing freight cost moving up, you think there is a chance now with your own capacity having come up of that 20,000 tonnes? So that provides you better visibility to be able to push your Mother Hollow. How has the cost dynamics changed? If you can just help us understand it will be useful, sir.

Yes, yes. So it is an opportunity for us, international side has gone up. For import of materials, it is difficult for them. So definitely, they will go for buying local as much as possible, number one. Number two, there are tenders by the PSUs, up to INR 200 crores. Any tenders there have to local if availabilities are there, if countries are manufacturing. Then there is -- in export market, of course, a little bit difficulty is also at the same time because the freight is at both sides while importing, while exporting also. So there is a little bit difficulty. But with this local, this is 20,000 tonne. It will take a little more time to establish fully and approval with all the big customers, you can say. So this year, we are targeting very low utilization from this stainless steel finish mother pipes and some general piping. But sooner, we will start in a month to give some stocking, to give them and they will test our material and everything, something like that.

Sure. Sir, this tender by PSU, which you spoke about, what would be this as a proportion of the overall SS market? Is it like 30%, 40%. 50%...

Yes. Definitely, because the PSUs in our product, they have a major role, say, whether it be power, whether it is a refinery, petrochemical, all these are the PSU. So it's about -- you can say 30% to 35% definitely their role is there.

Okay. And this is where you have the support of these tariff barriers or these barriers in the form of...

Yes, yes. correct. Correct. Correct.

So this is similar to sir, what we have...

In carbon steel line pipe, it is a 100% barrier for import, in carbon steel line pipe. Because anybody has to import, they have to do some 70% value addition over here in the country. Sorry, not 70%, 35%, sorry. 35% value addition. Suppose importing the pipe, then they have to do 35% value addition in the country, then only they can be able to import something more. Yes.

Sir you're referring to carbon steel seamless pipe or?

No. It is carbon steel line price, you can say, whether it is ERW, whether it's LSAW, anything.

Okay. Okay. And this is effective when, sir, this 100%...

It was there since last 2 years. It was there since last 2, 2.5 years.

Okay, okay. okay. And sir, the other thing is in the global market, in stainless steel, is China a very, very major supplier?

China is supplier, but recently, they have withdrawn the export tax, number one. Number two, they are going to put -- of course, if we talk right now going on, they are going to put export tax because they themselves have a huge investment plan in the country itself. And that's the reason they are going to put some export tax. And of course, because of raw material, because of freight part, everything had gone up. So of course, it is a competitor. And there are -- in Europe, there is antidumping duty on Chinese product. In U.S.A., there is some duty. So for us, European market is there. Even somewhere it is not being acceptable because their process is something different from the old tax regime. So a lot many reasons are there so we get the order against them.

Okay. Okay. Fair enough. Sir, coming to the water orders, the Jal to Nal Yojana and things, so are you seeing now traction now that the second wave has kind of subsided, the state governments are they spending? And you trying to kind of ramp up or increase order size there? Any thoughts on that?

Yes. No, we are totally ready. Our EPC is to the state government. In Gujarat itself, there are about -- say, about 600 to -- and something they have announced right now, also one line up to Mundra . So see, this all will come, but it will take 3 to 4 month minimum to finish with the EPC. First, EPC will get order and then we will get the order, something like that. But the momentum is there in Gujarat, and we are here, so we'll definitely get our share.

Okay. And will you like to -- would you like to expand into other regions to -- because water is typically trade sensitive?