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

Ladies and gentlemen, good day, and welcome to the Q4 FY '23 Earnings Conference Call of Ratnamani Metals & Tubes Limited, hosted by Monarch Networth Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sahil Sanghvi from Monarch Networth Capital. Thank you, and over to you.

Thank you, Ashishi. Evening to all. On behalf of Monarch Networth Capital, we welcome you all for the Ratnamani Metals Q4 FY '23 Earnings Call. We are delighted to host the management of Ratnamani today. And from their side, we have the Business -- Carbon Steel Business Head, Mr. Manoj Sanghvi; and CFO, Mr. Vimal Katta. So without taking any much time, I will hand over the call to Mr. Manoj Sanghvi for the opening remarks. Thank you, and over to you, sir.

Thank you. Thank you, Sahil. Good afternoon to all the participants. I welcome you all to this call and hope everyone is doing good. Our results for Q4 and full year of FY '23 have been uploaded on the exchange and I believe you all had the opportunity to go through the same. If you see on stand-alone basis, our company clocked its best ever performance in FY '23, with the top line and profitability at historic highs, both crossing INR 4,400 crores and INR 500 crores, respectively. The operating margins were broadly in line of our guidance provided last year, and that's a bit towards the higher side of the band due to the product mix and stable input prices. As you all know, past few months, prices of steel have been broadly stable, resulting into resurgence of old projects leading to good demand across all segments in the previous year. The expansion across sectors was felt mainly in refineries, process industries and core sector, which may all go well for the infrastructure demand and more traction than we expected in demand of both CS and SS pipes across the globe. However, the order visibility in oil and gas transmission lines looks muted in India with service water, but the business traction in the other segments and SS pipes and tubes continues to remain quite encouraging. Now I would like to straightaway touch upon the quarterly financial numbers and the business update in brief, and then we can have questions from your side. Our operating revenue has increased 47% year-on-year and up by 36% on a sequential basis, mainly attributable to higher net prices during the quarter. For the full year, our revenue growth has been 39%, with EBITDA of INR 793 crores and margin expansion of 130 basis points. Profitability has been around INR 300 crores at operating level for the quarter compared to INR 200 crores during the Q3 of FY '23. This is mainly because of the product mix, better utilization and operating efficiencies. We are projecting the top line of INR 5,000 crores plus/minus 5%, and the margins expected to remain in line as that of current year with the variation of 2% here and there. The present macro is no conducive for maintaining our long-term growth and margin prospects. So as we begin this financial year, our orders on hand, as on 1st April was roughly INR 2,600 crores. Further, I would like to brief on a few major developments. We wish to inform that we had successfully commissioned the captive solar project of 15 megawatts in the month of March, and we expect the same to result into further reduction of carbon emission, and surely our power cost showcasing our orientation towards ESG and sustainability. Our CapEx in CS and SS are progressing well now with some initial delays that happened due to land acquisition and longer lead times of merchandise. During FY '23, we have continued with our strategy to invest in more specialized products and improving efficiency with focus on technology and infrastructure. Our well calculated and judicious capital allocation in CapEx and all investments resulting in very strong balance sheet will to lead to the next level. Now regarding our subsidiary, Ravi Technoforge Private Limited, which has clocked a total revenue of INR 245 crores, with EBITDA margins of 10.8% and net profit of INR 4.5 crores for FY '23. The CapEx has been underway for capacity and process expansion, automation, cost reduction captive renewable power and same is expected to be completed by the end of September, October '23. We are projecting the top line growth of 15% to 20%, with margin expansion of 200 basis points for FY '24. That's all from my side at the moment. Now if there are any questions, I will be happy to answer them. Thank you.

[Operator Instructions] We have our first question from the line of Noel Vaz from Union Mutual Fund.

So in the fourth quarter, what is actually the sales for the quarter? And is this particular run rate, can it be sustained or annualized for FY '24?

I could not hear the first part of your question. Please repeat.

What are the sales volumes for the first quarter? And can the number be annualized for equity?

So the total revenue for the first quarter was approximately INR 1,450 crores. And yes, we had the capacity to do it, but sustainable over long run quarter-to-quarter basis, it is very difficult since we are in a project mid-year now. So we might see INR 1,500 crores in one quarter, another quarter can be INR 1,000 crores. Again, it can go to INR 1,500 crore. But yes, say, INR 1,000-plus crores is what is our target, with one quarter going to INR 1,500 crores, INR 1,600 crores.

I'd like to answer one thing. Total volumes in Q4 were close to or near 106,000 tonnes for all our products. And as Manoj has shared, see, in our case, margins are totally dependent on nature of products, product mix, timing, so many factors are there. It is very difficult to say if performance in a particular quarter can be extrapolated because we are in direct business, order-driven activity. So we always say it is between 16% to 18% is the range at EBITDA level, which seems to be sustainable over a longer period. Plus/minus 1% here and there may happen in a particular reporting period, and that should be there going forward also.

We have our next question from the line of Pritesh Chheda from Lucky Investment Managers.

Sir, can you give the volumes for FY '23? And what would be the capacity utilization on this blended capacity utilization?

The total, Pritesh, we did close to 304,000 tonnes for both the products during FY '23. And on capacity utilization, Manoj will share. We can see in our case for stainless steel welded, it would have been optimum. Stainless steel welded would have been close to 60%, 65%, near capacity. In stainless steel seamless would be closer to 35%. And on carbon steel, it has been optimum. Helical SAW has been optimum. Processed pipe order capacity has been optimum. Newer capacity will be maybe around 30%, 35% sort of thing.

So I will end there. Segment to segment, it will vary. But most of the segments, other than newly added capacity, utilization was between 60% and 80%. Only stainless steel extrusion and LSAW, both were close to 30% utilization.

You said that SS seamless is 35% and SS welded is 100?

No, no. SS seamless is optimum, cold finishing, okay? Optimum means close to 80%, 90% part of it. Cold finishing will be around 8,000 tonnes, 9,000 tonnes sort of thing. Yes. And welded is maybe around 50%, 65% sort of thing. Newer capacity has been roughly maybe around 30% only for hot extrusion.

It says cold is 30% only. So basically, on the 20,000-tonne capacity that you added in FY '23, the capacity utilization is 30%?

Yes.

And as SS seamless, which is our cold, is full capacity?

Yes, yes.

Okay. So basically, in the 48,000 tonnes, you would have SS seamless of 8,000 tonnes, SS welded of 20,000 tonnes and SS hot of 20,000 tonnes?

See, SS, whatever we produce from our seamless, some part has gone for cold finishing also. So if you look at the sellable capacity, that will be even lower because whatever [ steel ] we are using, that will become part of the overall capacity only. It will not be available for sale.

Okay. Is it possible to share in this 304,000 tonnes how much is SS?

Earlier we used to share. But since last few quarters, we have taken a conscious call not to share certain info, yes. So certainly we can discuss, yes. Yes.

What is the progress on that capacity expansion that you had planned about INR 180 crores in SS and another INR 170 crores in carbon steel?

Yes. So stainless steel expansion are quite significant as we see, renewal by December of this calendar year or maximum January of next calendar year. For carbon steel, land acquisition and development has already started, and we expect that to happen in first quarter of next financial year.

Okay. And my last question is, sir, there is this antidumping, which has come on hollow pipe, SS hollow pipe. So how -- and also SS pipe, I think the antidumping, the duties have been increased. So how does it benefit us in terms of the capacity utilization, if you could share that, and the industry at large?

Yes. So antidumping on stainless steel seamless pipe had come somewhere in November, December of last year. And since then, we have seen demand increasing, but a lot of it being imported in India was reexported. That demand for there, the antidumping does not play any major role. It is still being imported. But yes, some demand increase is being seen because of this antidumping.

Okay. And do we have our -- are we 100% backward integrated in hollow pipes?

Yes, we have our own mother alloys, but not from right from melt to finish at the moment.

Not from?

Not from melting and then casting and...

That's okay. So you basically must be buying a bar, right, and you make your own hollow pipe? Of billet, and you must be making on hollow pipe?

Yes. Yes.

We have our next question from the line of Pujan Shah from Congruence Advisers.

Sir, on a previous con call, we have seen hydro demand on that part. So currently, I wanted to know on that part as well, what are the situation currently we are facing from the hydro side and how we are looking at the industry for that?

Hydrogen or hydro?

Yes, hydro, I'm talking about hydro power plant.

Power plant, no major demand. For hydrogen, still very nascent to comment what kind of pipe will be used and whether stainless steel, carbon steel. In the process, maybe stainless steel is important than maybe carbon steel. That we will come to know once -- going forward, there is a lot of research for the steel is also going on and in the process, whether it can be welded, seamless so those research has been going on.

Okay. And sir, our expectation is that we are speaking about INR 5,000 crores top line in next financial year. Currently, we are at around INR 4,500. So -- and we have grown around 43% for this financial year. So why we are eying -- like are we being conservative? Or we are seeing some subdued demand in any sector specific?

So 2 reasons, this -- the kind of growth we had for the last financial year, it's slightly -- one at a time because the projects was there, demand was there, capacity came in at the same time, so we could capitalize on that. But yes, in this financial year, we see some drop in carbon steel line size demand. So still because of better utilization of other products, we will be able to maintain 10% growth rate.

We have our next question from the line of Kunal Shah from Carnelian Capital.

Sir, I just -- I hope this is better now. A few questions from my side. In the first place, congratulations for such fantastic set of numbers. I wanted to get a sense on the volume growth for the next year? And also we did about 106,000 tonnes, the execution in the current quarter in comparison to about 66,000 tonnes, 67,000 tonnes in the previous quarter. So wanting to understand what led to the superb execution in the current quarter? And also if you could help understand volume growth guidance for the next year?

So as commented previously in my opening remarks, the volume growth -- like we finished this year at close to INR 4,450 crores. Next year, our expectation is -- or what we have budgeted is close to INR 5,000 crores. It can be a plus/minus 5%. And to answer your second question, which is what led to such numbers in the quarter. So the utilization for all the segments and all the products during the last quarter was at its optimum, which led to this number. So in case if there is demand and for all the products, all the segments, then yes, this number is achievable. And I have in my previous call, I have already said that we have capacity today to reach a turnover of INR 6,000 crores.

Got it, got it, got it. And also, we have this enabling resolution that we have taken for about INR 500-odd crores. So you would want to enlighten, I mean, how should one look at that?

Basically, it is an enabling resolution. So because we are working on our next growth plan also. So if required, we may go for tying up the debt. And in case of that, as you know, now regulations require a portion of debt has to be raised through bonds and other instruments. So it is an enabling resolution, right, though nothing has been planned as far as CapEx is concerned. But the team is working on that. So there is a fair time, nothing else.

Got it. Got it. And just wanted to understand on these clearings, right? So we have got about INR 104 crores revenues in the current year coming from Ravi, right? So when you say INR 5,000, how should one look at the clearing business in this INR 5,000?

INR 5,000 is on stand-alone basis, whatever the INR 300 crores we are targeting for the year will be additional. So on consolidated basis, we can have a number of INR 5,300 crores, plus/minus 5%.

Got it. Just one last question from my side. On the general demand scenario, if you will share how was the -- the projects going on, the [indiscernible] projects going on? And you did mention some slowdown? [Technical Difficulty]

Mr. Kunal Shah is dropped from the queue. We'll go on to the next question from the line of Radha from B&K Securities.

Congratulations on good performance. My first question was that, so 2 years back, we had this stainless steel capacity of [ 8,000 tonnes ]. So now that is 28,000 tonnes. So at that point of time, 2 years back, via hot extrusion the capacity was 6,500 tonnes. So now that the stainless steel seamless capacity is 28,000, so what is the hot extrusion capacity?

The 8,000 tonnes was cold finishing capacity. And combined with hot extrusion capacity is 20,000 tonnes for the new press. The old press is 6,500 tonnes.

10,000 tonnes.

10,000 tonnes. So hot extrusion is 30,000 tonnes. And cold finishing is, right now, close to 10,000 tonnes.

Okay. And so what will it be in the next 1 or 2 years?

Still a marginal increase in cold finishing will be great. Because, yes, I think that will be for the high level limited products. This will become operational by year end. But overall capacity in stainless steel, stainless will continue to remain at 30,000 tonnes combined together with hot finish and cold finish because whatever we are going produce through cold finish, part of it is going to be used captively. This will be cold finish. So sellable capacity will be 30,000 tonnes of stainless, 20,000 tonnes of billet. So total 50,000 tonnes of CapEx.

Okay, sir. And sir, next question is in stainless steel. So planning to do this coil tubing business. So just wanted to understand for this business, will this be in a separate manufacturing line or in the same line? And also with regards to this, wanted to understand what is the product about? How is the market size? And what is the scope of business and competitors in this business?

I don't know where you have this information from coil tubing, but that project is still under implementation and as data, we would not like to dive on that.

Okay, sir. Sir, thirdly, the Ravi Technoforge, in FY '22, we did a revenue of INR 30 crores. Now in the second half of FY '23, revenue is INR 104 crores. So if you extrapolate, it comes to around INR 200 crores for full year. So is there a degrowth in this business in FY '23?

Yes. FY '23, so for 7 months, they clocked the revenue of INR 130 crores. And last 5 months after our -- being -- acquiring the stake, there is a revenue of INR 105 crores. This year, there have been degrowth, one, during the first 7 months, they had some financial stress, so they could not actually utilize the capacity and convert the demand into orders. And second, because of the slowdown in -- because of the war in Europe, there is a recent slowdown from European manufacturers which led to this degrowth. But going forward, we see that the demand has started coming back. And this year, we will be able to clock close to INR 300 crores.

And sir, what about the debt in this business? I think in FY '23, we have around INR 75 crores of total debt. So how do you see this in the coming years?

Every year, I think there is a repayment of between INR 15 crores to INR 20 crores, which did happen in the last year.

Okay, sir. And sir, lastly, this -- in extra carbon steel mobile manufacturing -- mobile plant of 60,000 tonnes, around 60,000 tonnes. So that, the plant is -- is it fully depreciated?

I don't know, the acquisition -- no, I think there will be something left. It would not be fully depreciated.

Okay, sir. And sir, lastly, what is the CapEx guidance for the next 2 years?

Next 2 years, we are working on a lot of things at the moment still on the drawing on? So maybe in another 6 months, we will be able to throw some light on that.

We have a next question from the line of Riya Mehta from Aequitas Capital.

Congratulations for a good set of results. My first question would be based on what was order book levels of both stainless steel and carbon steel? So I would want to know where this is coming from exactly almost, and which segment?

For the last quarter?

Yes, order book for the last quarter, I think [ 2,000 ]?

No. Can you please repeat your question?

I'll answer. See, mainly the orders are coming from oil and gas sector and process industry for [indiscernible]. And certain orders from power sector also, and plus other cleaners out there, okay? And in case of carbon and steel, it is a mix of oil and gas, and then water.

Okay. And my next question is in regards to margins. So what worked in favor for us this quarter?

The one thing is you got the benefit of economies of scale because the production businesses, both were higher. Second thing, product mix also is higher value-added products, volumes were also higher. And in carbon steel, also major orders were related to oil and gas sector where margins are typically better. So everything is in favor of better margins.

Okay. And actually, could you tell me the capacity utilization again, if you don't mind?

So you see, most of the segments, stainless steel welded, stainless steel seamless, carbon steel [indiscernible] and coating. All the products, the utilization is between 60% to 80%, except for 2 capacity expansion like, one, hot extrusion for stainless steel seamless what we mean and another capacity expansion in carbon steel volume LSAW pipe. So these 2 were on 30% utilization. Utilization being the first year of actual commercial production. And that's between 60% to 80%.

And in terms of the pipeline of orders, what is the kind of pipeline are we seeing for the next year going forward?

Starting this year with INR 2,600 crores. We've been booking orders for stainless seamless, welded across industries and for carbon steel and LSAW pipe. However, some softness is seen in the CVD segment and the line pipe segment -- the line pipes, fire and line pipe, oil and gas segment. But we are hopeful, we are seeing good demand in the water segment. So there, of course, we'll cover up on the water segment.

We have a next question from the line of Dhananjai Bagrodia from ASK.

Just wanted to understand our increase in margins, maybe I missed this. Is it the increase in margins is because we had some contracts earlier and that's how we're going to benefit of lower inventory? And b, which end use industry has seen such a strong volume growth? Do we see that sustainably grow, let's say, next year and the following year after that?

So part of it, yes, may be correct that you have some orders which are of the start of last financial year when there was -- when the war has started, commodity prices was kind of in the new [indiscernible]. But most of -- as you know, and as we always say, like most of our owners are on back-to-back places. So we have -- so maybe 10% benefit we would have derived from such total orders -- out of total orders, 10%, but not a major fact because of the commodity prices.

Margin is sustainable because [indiscernible] pretty much is that sustainable?

Sustainable margin is between 16% to 18% because last year, if you see, if I break down the product mix industry-wise, more we need for oil and gas, right? But it is not going to remain same year-on-year. Maybe this year, if I change that, oil and gas might go down a little, and water is added. So if water is added, the margins might -- but still we keep our focus on -- to maintain to say between like 16% to 18%, 15% to 18%.

So sir, then just following up with the question, what is the leverage in margin been oil and gas and water?

It's -- normally, oil and gas is a little more value-added than water, maybe 1% or 2% more. But it totally depends on demand and suppliers.

We have a next question from the line of Vikash Singh from PhillipCapital.

Congratulation on very good set of numbers. Sir, I want to understand since we are guiding for almost double of the top line versus our current order book. But we are, at the same time, telling that the oil and gas segment demand has been -- is a bit slow. So are we expecting incremental demand to come from water segment or export segment? Or because CS segment is the one which drives our top line. So I just wanted a little bit clarity on the same.

Yes. So see if we started the order book at INR 2,600 crores, so we are already having, say, 6 months backlog if I consider INR 5,000 crores of revenue. So -- and we are seeing few water projects -- specifically, if I talk about carbon steel, we are seeing a few water projects, which we will book in the first or second quarter, which will be discussed in third and fourth quarter. So to answer your question, yes, INR 5,000 crores is very much possible, considering you are already having orders of INR 2,600 crores.

So the domestic water segment is where we think that the traction would be there going forward.

There is demand for domestic water segment. There is demand for international water segment also, few projects we are under [ negotiation ].

Understood, sir. Sir, second question pertains to SS segment export products. Basically, after many quarters, I have seen that our export order book in excess has been higher. Is it a short-term phenomena you see? Or do you see that this kind of the trend would be sustainable and a lot of order can be exported from India in SS segment especially?

Going forward, in stainless steel, yes, this kind of export is sustainable. More and more end customer there are accepting our product, and once we -- and this is in repeated orders. So we don't see any until -- unless there is antidumping or anything. We don't see any reason for this to go now.

And because basically traditionally also, we have been getting almost 50% of turnover in stainless steel from physical exports direct and around 20% from indirect exports. So that way, some of the steel -- stainless steel products, we are already there in a reasonable way in international market. So with the increased capacity, our focus is going to be both on import substitution and international market also.

Understood, sir. Sir, just one last question on the CapEx. So at least, can you tell us the FY '24 CapEx targets, which you -- concerning current plans?

Maybe INR 100 crores, INR 150 crores, INR 200 crores might be there. But [ still to be ] something for the next growth plan will also be happening by the time we close the year. So major outflow will not be happening for that. So safely, we can say INR 150 crores, INR 200 crores might be the range here.

Sir, we already had INR 350 crores kind of the CapEx fund, which was announced at the start of the year, but new SS additions are also which...

For [ Orissa ] project, it will take some time.

Okay. So as of now, how much we have spent on that INR 180 crores of SS cold rolling facility and this [ Orissa ] project? How much we have spent on these individual projects?

[ Orissa ] project is only very significant. Some amount for lease, rent and other things have been paid. The major output will be happening for land. Land will be only lease, and rent only will be [ linked ]. CapEx will take some time. Some activities may be starting. Am I right, Manojji?

Yes. CapEx will take some time. Maybe we will see something starting from the second quarter of this year.

In standard system, we might have spent 50 -- maybe around INR 60 crores, INR 70 crores sort of thing. Major outlook will be assumed once the deliveries of critical plant and machineries start.

So this year, again, meanwhile, we'll see our cash balance going up, right because this money would be getting at [indiscernible]?

Yes, yes, yes. And we -- as I have shared in that is there are plans to continue this growth during FY '25 also. So something other than whatever we have planned, that may also be planned. And we'd like to start working on that opportunity also.

Sir, what is our net cash balance as of now?

See, the net cash keeps on fluctuating. So as on 31st March, we -- on net side, we were close to INR 20 crores plus. Today, it might be again INR 20 crores, INR 30 crores plus or minus because total long-term debt will be maybe around INR 140 crores, yes, sort of thing.

Okay. That would be our peak net debt level, INR 140 crores?

Net, yes, yes, because there are no short-term borrowing, only long-term borrowings of roughly INR 150 crores are there as on date.

We have a next question from the line of Pallav Agarwal from Antique Stockbroking.

Sir, I had a question on your stainless steel manufacturing, the hollow pipe process. So is there some difference between the hot extrusion process and the [ coal drawing ] or the [ buildup ] process. Is the process that we follow, is it superior to the other processes?

Hot extrusion, filtering, growing, those are all different processes. Hot extrusion is the -- hot extruded material is input for the filtering. But yes, there is a similar process to hot extrusion, which is piercing, and piercing is normally used for carbon steel [ investments ], whereas China adopted the technology of using it for stainless steel pipes. And then the Indian manufacturer has also started. So yes, there is a large difference because one is used for carbon steel. Another is used for stainless stell. The product which comes out is also different.

Sure. So there are certain high-end applications where probably that product is not accepted. Is that the case?

Yes, if you see, for example, Saudi Aramco certification, they don't accept the pierced material, or if you see for example, Reliance's specification, they don't accept the pierced material. So there is a reason a lot of study has gone in -- there are various papers available online also, which explains the key difference between both, but there are some industry where criticality is not so much, and they are okay to use pierced.

Sure, sir. Okay. And also just on the question on exports. So what was the proportion of exports in total revenues and in the order book?

20%. Total exports close to 20%.

And order book also current order book of INR 2,500 crores [indiscernible].

Order book, I don't have the breakup of exports for that.

I'll just check. Just 1 minute. Out of these -- as on 1st of May, we were having close to INR 557 crores of export orders out of [ INR 2,440 crores ] of total order book.

We have our next question from the line of Aman Thadani from Solidarity Investment Managers.

Sir, my first question is one of our peers has recently entered the ERW space. So I just want to understand that what sort of margin does a new player wake in this space and the overall opportunity in this space.

What sort of margins in this space is difficult to say at the moment because, see, the last 3 years, 4 years, ERW was running, I'd say, almost 90% capacity utilization. But this year, I think that there is -- the demand is not as high as it was. So -- and with a new player coming in, of course, we will take some time for approvals and everything. But margin is, again, difficult to say because it varies from 12% to 16%, 18% depending on number of projects available in the market. See what has happened, CGD demand has also gone down [indiscernible].

And sir , how much time will it take for a newer guy to ramp up? How many years does it take?

For a new company to ramp up, 12 to 18 months.

Okay. And sir, my second question is, first is, SS is a key business for Ratnamani. So what is it about this product or this segment that a lot of players have just not bought it right?

Time. The amount of time what we've given right from '83, '84 and slowly consistently growing. That is the only thing, I would say, which different.

So time in terms of what is it in terms of -- is it in terms of the complexity that is there and like to understand the complexity? Or is it in terms of the [ competence ]?

It is a different mindset of business, I would say. It is not like a normal tubes pipe business. Carbon steel is totally different if I compare with stainless steel.

Okay. And sir, even if someone is able to get the product right, even to maybe build on the projects, what are the criteria that one would be?

It's more about the competition rather than the [ company ]. I don't know what you want to hear, what you want to understand from me answering this.

And sir, just one general question, sir. In the past, we have guided for 15% to 17% long-term margin band. But this quarter, we have seen that going away, it would be more of a 16% to 18% range. So sir, what has changed?

The product mix because as I have told you, the carbon steel demand, oil and gas is subdued. So likely from that INR 5,000 crores, more will be stainless steel. More will be value-added products in carbon steel. So that's why it is 16% to 18%. But at the start of the year, this is our guidance. It can be between 15% to 18% also going forward. If few water projects are moved at a little low margin, it can be 15% to 18% also.

[Operator Instructions] We have our next question from the line of Ashutosh Tiwari from Equirus Securities.

Sir, congrats on good numbers. Firstly, this cold finishing capacity will go to what level after this expansion is completed?

This new capacity expansion is of 1,200 metric tons to start with, and it will go up to 1,500 metric tons.

1,500 tonnes, so you definitely go to only [ INR 11,500 crores ]?

Yes. The capacity expansion is small in terms of tonnage, but this is for small diameter tubes. So in terms of meters, that then includes [indiscernible].

Okay, okay. So -- and secondly, we had obviously talked about development of multiple grades of products with this new seamless, [ how to achieve extreme capacity ]. So where are we in that process in last 1 year? Have you developed major products and that is going to drive the growth in export market going here? Some color on that. How should we look at export SS business over the next 2, 3 years?

Yes. So the extrusion, what we had expected to do in the cost here, we could achieve better than that, 20% utilization with the development of grades, which we did not expect in the first year itself. So going forward, yes, the utilization will be better than this year. We are targeting between 50% to 60% utilization.

50% to 60% utilization level.

So -- and SS, given the [ Orissa ] will be higher-margin business, like 20% plus.

Some grade, yes. Some grades, lower. So blended, if I put together, is in the same close to 15% to 18%.

Okay. And that is also in [indiscernible]. How do we see it?

Yes, because the lower-end grades when it is more like commodity, there -- where the margins are also not so great, but for high-end grades or [ nickel-type ] products, the margins are good. So blended, we always -- because we cannot only do high-end grades and -- or we cannot do only the near the low end of the product. So both blended we see the capacity utilization also and margin going through.

Okay. And like we had highlight earlier in the con call, can you highlight like what kind of bidding that we've done to the tonnage in all in oil and gas, water and all as of now?

Details I haven't prepared at this time. Maybe in the next call, which we'll plan after 6 months for the semiannual results, we'll have more detailed -- details on what we are bidding.

Okay. But can you elect some projects which are, let's say, the activity is going on right now?

Oil and gas, if we see right now for bidding, what we have is one project of [ Gas South Africa of India Limited ], which is KKBMPL Phase 2. It is Kochi-Koottanad-Mangalore-Bangalore (sic) [ Kochi-Koottanad-Bangalore-Mangalore ] Pipeline Project Phase 2. So that is under bidding. Then a few projects of IOCL are under building, few in the East for IGGL, which is Indradhanush Gas Grid Limited, which is under bidding. One project for Vedanta is under bidding. And 1 or 2 projects for GIGL. GIGL is a subsidiary of GSPL Group. There are a few projects in oil and gas which are under bidding. For water, we have a few projects in Gujarat for [ Gujarat ] Municipal Corporation for Ahmedabad Urban Development Authority, then [indiscernible]. So in Gujarat, we have some water projects, and we had some water projects in Africa, which we are bidding.

Africa? You said Africa? Sir, you said Africa?

Yes, absolutely.

I think 2018, '19 we've done some at Tanzania, right? It is similar kind of [ bidding ]?

Yes, [ that's the area ]. I cannot say this company.

And think that I think in 2018, '19, we have done some related Tanzania, I guess.

We had earlier -- now this is for Mozambique or Kenya and exactly for sure [ what place ]. It is for Africa.

I suppose, last year also, we have exported some quantities Africa because the carbon steel is purely opportunity-driven business in the case of export. So whenever we get the opportunity, our team books the orders also and that [indiscernible] has happened.

Okay. And on SS side, how are, let's say, how are the orders or maybe inquiries from chemical, pharma and all? Is it also strong? Or it is soft [indiscernible]?

So EPC is the growth -- the driving change in this year is stainless steel and some products in carbon steel, which will have helped actually because the line pipe will remain flattish kind of growth. But yes, stainless steel will grow. Some products in carbon steel will grow, which will help us reach our [indiscernible].

Okay. So it coming from these chemicals and pharma and all and fertilizer? Or [indiscernible].

Yes, it is coming from various industries, pharma, chemical, fertilizer, food and dairy, sugar, automobile. Of course, oil and gas still remain the highest.

We have a next question from the line of [ Hiren Kumar Takulal Desai ], an individual investor.

Yes, sir. So I have 2 questions. One is on the export side. So as you mentioned, this year, the visibility seems to be a little bit muted. Do we have a medium-term thinking in terms of increasing the export share so that this little bit of cyclicality can be sort of mitigated?

Yes. We have our focus on exports. Our LSAW plant has just started. So we are -- it is slowly getting approved in various countries, various geography. So our focus is on exports, but this is a project-based business. So if there is a project, yes. And definitely, then if it is within our reach, meaning if there's no antidumping in that country or in-country value to be provided, definitely, for most of the projects, we are there.

Okay. Do we target some percentage medium term or we can't really say something like that?

Very impossible. One project can change the total dynamics, so like [ 30% ] exports, and then if you don't get that product project, that is maybe [ 10% ]. Carbon steel, it is difficult to say. I mean because it's not like many projects you are supplying to and small quantum. It is one project, which is INR 500 crores, INR 600 crores to INR 700 crores. So our dynamics on the export percentage changes.

Okay. The second question -- no, I think my second question has been answered, yes. That's all from me.

We have a next question from the line of Riya Mehta from Aequitas Capital.

My question was in regards to since we are seeing that water segment is seeing some good traction. Apart from water, where do we see the demand coming in from? If we are seeing lower demand for oil and gas and considering that the realization will also drop for the next year given the lower commodity prices, where do we see the growth and confidence for the revenue visibility?

So as I answered the previous question, oil and gas line pipe is low, but oil and gas process pipe is still on the higher side, both for stainless steel and carbon steel. So that is one sector where we see the growth. Then the stainless steel utilization of capacities in extrusion and some better utilization [ and some ] we will get there.

We have a next question from the line of Pritesh Chheda from Lucky Investment Managers.

Sir, just 2 follow-ups. One, what is the utilization that you would expect in the expanded [ spot ] finish assets, which was at 30% you mentioned in FY '23. This how much will you scale up to?

50% to 60%.

50% to 60%. And my second question is, sir, on this expansion of asset, which you mentioned will add 1,500 tonnes, why are that INR 170 crores, INR 180 crores of CapEx? And it's a low diameter but substantial length. Is it the auto tubes basically?

No, no, no.

These are not auto tubes. Then any reason why for INR 180 crores is just 1,500 tonnes or if you could tell us what will be the asset turn on this INR 180 crores.

1:1 or maybe a little less.

So what is this product actually?

This is a very high value-added product.

Sorry?

Stainless steel, cold-finished tubes.

And what is the dia size? Is it less than 0.5 inch or 1 inch?

Beginning from 3 mm and onwards, yes.

3 mm, okay. And it's not auto tube, right?

No, no. These are used in defense, also in nuclear power plants. Also, a number of applications are there.

We have a next question from the line of Aman Thadani from Solidarity Investment Managers.

Sir, I have just one follow-up question. Sir, since you said that the CGD sector is seeing some pressure, so I just wanted -- can you throw some more color on it?

Color, meaning?

Why is it under pressure since the entire sector is at such a nascent stage?

Yes. So what happened because of the war in Europe, the gas prices has [indiscernible] quite a bit. So -- and the government where CGD was a priority sector for that in between change that sector, and they were not given APM. APM is a subsidized gas which the government would allocate to the CGD companies also. And then they are to buy in the spot market. So the risk associated was quite high. So they are going slow, not that we are going slow at the moment in the capital investment.

It's just a temporary issue, not the long-term story still [ is an ] impact, right?

Yes, yes. It seems to be a temporary issue.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Sahil Sanghvi for closing comments. Over to you.

Yes. I just want to bank the management for patiently answering all the questions. And on behalf of Monarch Networth, I would also like to thank all the participants. Manoj, sir, would you like to give any closing comments?

Yes. Thank you, Sahil. Thank you, Monarch. Thank you all the participants. And sorry to be not answering some questions. We want to answer, but then the situation demands that whatever [ delay ] -- whatever -- we as a group have decided not to divulge a few information, but it is not that we want to hide something. It is for the matter for the competition to catch up. So with this, thank you, everyone, and sorry once again.

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