Surya Roshni Limited (SURYAROSNI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Surya Roshni Limited Q3 FY '25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of the future performance and involves risks, uncertainties that are very difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Raju Bista, Managing Director of Surya Roshni Limited. Thank you, and over to you, sir.

Hi. Welcome, everybody, and thank you very much for joining us. Good evening. On this call, we are joined by Mr. B. B. Singal, our company CFO and Company Secretary as well; Mr. Naresh Singal, Executive Director, Steel Business; Mr. Jitendra Agrawal, CEO of Lighting & Consumer Durables; Mr. Gaurav Jain, ED and COO of Steel Operations; Mr. Vasu Mitra Pandey, COO, Lighting & Consumer Durables Business; and SGA, our Investor Relations Advisers. And I hope everyone had an opportunity to go through the financial results. And moving on to the overall financial performance highlight. We are pleased to have delivered a resilient performance in Q3 FY '25 despite challenging macroeconomic conditions. During the quarter, our revenue saw a marginal decline of 4%, primarily due to an average 18% year-on-year decrease in HR Coil prices, but we achieved revenue growth of 22% and EBITDA and PAT grew by 87% and 163%, respectively, as compared to Q2. Our Lighting & Consumer Durables segment delivered a healthy performance with robust growth across Professional Lighting, decorative fans and home appliances. This reinforces our strategic focus on innovation, quality and customer-centric offering. On a sequential basis, we recorded double-digit growth as well. Optimizing our capacity utilization, efficient working capital management and strategic cost rationalization have enabled us to achieve 0 debt while maintaining a cash surplus fund of INR 220 crores as of 9 months FY '25. Now coming to Lighting & Consumer Durables. Despite industry-wide challenges, including price erosion in LED segment, our proactive approach to product innovation, strong distribution network and early market initiatives has enabled us to achieve double-digit growth year-on-year revenue growth of 12% in this quarter. Focusing on premiumization, cost rationalization, innovation and technology and backward integration under the PLI scheme also contributed to improved margins and overall profitability. Professional Lighting delivered almost 15% year-on-year growth, benefiting from increased demand across key product categories, including LED streetlight, where volume nearly doubled. A healthy order book of about INR 150 crore in the Professional Lighting segment further strengthens our growth momentum. Looking forward, we remain optimistic about the business road map, and we are confident in delivering double-digit revenue growth for the full fiscal year in Lighting. Our focus will also be on achieving double-digit EBITDA margin through a balanced approach of product mix optimization, operational excellence and innovation. We are well positioned to drive consistent growth and reinforce our leadership in Lighting & Consumer Durables segment. And also we are investing INR 25 crore at our Gwalior facility in Lighting division to set up a state-of-the-art domestic wire business unit of specified size and categories. Now moving on to the Steel Pipes and Strips segment. The Steel Pipes and Strips segment witnessed 8% year-on-year volume growth, reflecting healthy demand. However, revenue declined by 8% year-on-year to INR 1,417 crore, primarily due to drop in average HR Coil price by 18%. That is about INR 10,500 per ton compared to same corresponding year last year. On a sequential basis revenue grew significantly by 25% in Steel Pipes business from INR 1,135 crore in FY '25, recording a strong recovery. On quarter-on-quarter basis, EBITDA per ton improved by 78% from INR 2,900 in Q2 FY '25. EBITDA for Q3 FY '25 stood at INR 111 crore, declining 9% year-on-year from INR 121 crores. This EBITDA per ton declined to INR 5,163 from INR 6,156 primarily due to absence of inventory gain, which contributed INR 1,200 per ton in Q3 FY '24. Value-added products, API, spiral and galvanized pipes contributed almost 45% of total revenue for both Q3 FY '25 and 9 months FY '25. Export sales remained unchanged year-on-year, but globally trade uncertainties and reservations around the U.S. tariff policies prevented a potential double-digit growth. Despite this headwind, we are expanding our presence in Middle East, Saudi Arabia, Europe and Canada market. We currently have order book of about INR 600 crores in hand for oil and gas sector, water sector and export business. With rising demand for structural pipe in infrastructure, construction and industrial sectors, we are expanding our section pipe capacity using Direct Forming Technology, DFT, to enhance efficiency. The new spiral plant in Gwalior and cold rolling expansion at Bahadurgarh plant are set to commence operations in February and March this year '25, respectively. And at our Hindupur facility, we are increasing CapEx from INR 75 crore to INR 125 crore to expand production by almost 200,000 tons per annum, focusing on large diameter 8-inch to 20-inch DFT mill and coated pipes for water line project and infrastructure project as well. At our Bhuj, Anjar facility also, we have made an investment of about INR 75 crores for manufacturing of large-dia pipe and DFT pipes, which will add another 60,000 tons of annual capacity and support our export business. Steel Pipes are at 5 years -- steel prices are at almost 5 years level low and further declines are unlikely, providing a stable cost environment. We remain committed to expanding our product portfolio, strengthening our export business and investing in technology, driving capacity enhancement to drive long-term growth and profitability as well. And that's it. Now, I will request our CFO, Mr. B. B. Singal ji, to share his thoughts.

Thank you, respected MD, sir, and a very good afternoon to all the participants on the call. For the quarter, the revenue was INR 1,868 crore as compared to INR 1,938 crore. EBITDA and PAT stood at INR 156 crore and INR 90 crore as compared to INR 158 crore and INR 90 crore, respectively. For 9 months of financial year '25, the revenue was INR 5,290 crore as compared to INR 5,729 crore. EBITDA and PAT stood at INR 397 crore and INR 217 crore as compared to INR 414 crore and INR 225 crore, respectively. In Lighting & Consumer Durables, for the quarter, the revenue stood at INR 451 crore as against INR 403 crore, a growth of 12% year-on-year basis. EBITDA and PBT stood at INR 45 crore and INR 35 crore, a growth of 20% and 18%, respectively. For 9 months of financial year '25, the revenue stood at INR 1,232 crore as against INR 1,154 crore, a growth of 7% Y-o-Y basis. EBITDA and PBT stood at INR 115 crore and INR 87 crore, a growth of 9% and 5%, respectively. In the Steel Pipes and Strips, during Q3 FY '25, the revenue was INR 1,417 crore as compared to INR 1,536 crore. Similarly, EBITDA per metric ton stood at INR 5,163 compared to INR 6,156. EBITDA and PBT stood at INR 111 crore and INR 86 crore as against INR 121 crore and INR 91 crore, respectively. For 9 months of FY '25, the revenue was INR 4,061 crore as compared to INR 4,577 crore. Similarly, EBITDA per metric ton stood at INR 4,840 crore (sic) [ INR 4,840 ] to INR 5,224. EBITDA and PBT stood at INR 282 crore and INR 203 crore as against INR 308 crore and INR 222 crore, respectively. As of December 31, 2024 (sic) [ 2025 ], our net working capital was 57 days, with a return on capital employed, ROCE, of 21.4% and return on equity of 15.63%. With this, I conclude the presentation, and we can now open the floor for further questions and answers.

[Operator Instructions] The first question is from the line of Saransh Gupta from SVAN Investments. The line of the participant was on hold. We move to the next participant that is Aditya Pal Singh Jaggi from MSA Capital Partners.

Sir, I wanted to quickly understand from you that the previous con call, that is Q2 con call, we had said that we can achieve 9 lakh tons volume this year -- 9 lakhs and a few thousand tons this year. But for us to achieve that, we would really need to grow our volumes by 40%, 45% Y-o-Y. So that will be my first question, that do you think that this 9 lakh is achievable? Or do you want to revise the guidance for this FY '25?

[Foreign Language] Next?

Sir, next would be that, again, in the last couple of con calls you had said that in FY '26, we can grow our volume to 12 lakh tons, 1.2 million tons, but revenue would grow by 10% to 12%. From 9 lakh to 12 lakh, we are growing 33% tons, but with a sharp -- the revenue and volume are not matching. So just wanted to understand -- wanted your clarification that are these numbers -- is my understanding correct?

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Correct.

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[Operator Instructions] The next question is from the line of Saransh Gupta from SVAN Investments.

[Foreign Language]. So can you give us a ballpark number for that? And I have a couple of more questions. So should I like put it ahead?

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And sir, upcoming 2 years, as you mentioned that we can go to a gross margin of 23% to 25% with an EBITDA per ton of INR 7,000. So by then, what can we see the volume as?

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Sir, next question is [Foreign Language]. Like, when will it -- when is it expected to come on stream?

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[Foreign Language] Sir, as we have seen a decent pickup in the Mono Block Residential Pumps [Foreign Language] comparing with the API Grade EBITDA per ton?

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[Foreign Language] by when can we expect this?

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[Foreign Language] they have increased the focus on JJM. So [Foreign Language] happening in the coming months. Like in last 1 year, the pipes that we have supplied for JJM, like [Foreign Language]

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The next question is from the line of Rohan Vora from Envision Capital. Mr. Vora, can you proceed with your question please?

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[Foreign Language] over the next 3 years?

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[Operator Instructions] The next question is from the line of Farokh Pandole from Avestha Fund Management LLP.

[Foreign Language] at this point [Foreign Language] CapEx next -- this INR 300 crores, we are going to spend over next 3 years and our capacity -- total capacity, Steel Pipes capacity will go to 18 lakh tons?

18 lakh tons to 19 lakh tons, yes.

[Foreign Language] INR 300 crores [Foreign Language]

[Foreign Language] next 2 years.

Next 2 years [Foreign Language] Net cash position [Foreign Language]

Today, INR 225 crores.

[Foreign Language] We should maintain a net cash position going forward despite...

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[Foreign Language] in spite of all these difficulties [Foreign Language]

[Foreign Language] clearly I think [Foreign Language]

[Foreign Language] high value-added product [Foreign Language] in spite of all these difficulties [Foreign Language]

The next question is from the line of [ Dev ] from NMR Capital Advisors LLP.

I just wanted to ask [indiscernible]

Dev Sir, you are not sounding very much clear. There's a lot of echo there.

Just a second. Hello?

Yes, that's much better. Please proceed.

I just wanted to ask that INR 25 crore CapEx we are doing in the wire business, is that included in the INR 500 crore CapEx plan? Or is it apart from that?

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And my second question was [Foreign Language]

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The next question is from the line of Aditya Pal Singh Jaggi from MSA Capital Partners.

Sir, [Foreign Language]

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Obviously [Foreign Language] H2 heavy [Foreign Language]. But on an average [Foreign Language]

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[Foreign Language] export [Foreign Language] INR 1,167 crores [Foreign Language] because [Foreign Language] opportunity in Middle East and Canada [Foreign Language] scale up [Foreign Language] say by FY '27?

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[Foreign Language] Steel Pipes and Strips [Foreign Language] major segment [Foreign Language] FY '27 [Foreign Language] EBITDA [Foreign Language] on an absolute level [Foreign Language] considerably improve [Foreign Language]

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[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. B. B. Singal for closing comments.

Thank you, everyone, for joining us today on this earnings call. We appreciate your interest in Surya Roshni Limited. I sincerely once again thank to our MD sir and the COOs for sparing their valuable time and addressing queries raised by participants who attended the call. For any further queries, if any, contact SGA, our Investor Relations Advisers. Thanks. Good evening to all.

Thank you very much.

On behalf of Surya Roshni Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.