Surya Roshni Limited (SURYAROSNI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Surya Roshni Limited Q1 FY '27 Earnings Conference Call. Before we begin, a brief disclaimer. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as of the date of this call. These statements are not the guarantees of future performance and may involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Raju Bista, Managing Director, for his opening remarks. Thank you, and over to you, sir.

Yes. Good evening, everyone. I am Raju Bista, Managing Director, Surya Roshni Limited. On behalf of Surya Roshni Limited, I extend a very warm welcome once again to everyone for joining us today. On this call, we are joined by Mr. B.B. Singal, CFO and Company Secretary; Mr. Gaurav Jain, CEO, Steel Division; Mr. Vasumitra Pandey, CEO, Lighting and Consumer Durables; Mr. Naresh Singhal, Executive Director, Steel; and SGA, our Investor Relations Adviser. I hope everyone had an opportunity to go through the financial results, which were published just almost 1 hour before. Now moving on to the overall financial performance highlights. In Q1 FY '27, our consolidated revenue stood at INR 2,046 crores, up by 28% year-on-year. EBITDA for the quarter at INR 120 crores. PAT for the quarter stood at INR 60 crores, up by 77% year-on-year. We remain a 0-debt company with a net cash surplus of about INR 155 crores as of June 30, 2026. Coming to the Lighting and Consumer Durables. The Lighting and Consumer Durables segment delivered its strongest ever first quarter with revenues of INR 456 crores at about growth of 15% year-on-year. Growth was broad-based led by LED bulb, batten, downlighter alongside continued momentum in appliances and Professional Lighting. EBITDA for the quarter stood at INR 36 crores, which is up by 17% year-on-year with margins improving to 7.9% in Q1 FY '26. Even as we pass on an input cost increase of approximately about 7% during the quarter with minimal impact on profitability, Professional Lighting ended the quarter with an order book of approximately INR 150 crores, providing healthy near-term execution visibility. In Wire & Cables, we achieved close to our FY '26 sales volume within Q1 of FY '27 itself, supported by our direct benefit transfer electrician loyalty program, where enrollment have gone up to 36,000 as of today. Our FY '26 revenue target for the wire business remains INR 250 crores on track with our 3 years guidance of INR 500 crores. We remain fully on track to deliver our FY '27 guidance of about 22% to 23% value growth and about 25% of volume growth in lighting. And with the festive seasons now underway, we expect the next 3 quarters to be more strongest supported by deeper distribution penetration and continued investment in brand building. Now moving on to the Steel Pipes and Strips segment. The Steel Pipes segment delivered a strongest start to the year. Revenues for the quarter stood at INR 1,590 crores, which is up by 32% year-on-year with volume growth of around 21% year-on-year to 2.28 lakh tonnes achieving its ever-highest sales in quarter 1. The growth was based led by section pipe, ERW API pipe supported by a sharp rise in export volumes following the opening of our U.S. market, spiral cold rolling and GP pipe even as galvanized pipes remain soft due to continued delay in government fund releases. EBITDA for the quarter stood at about INR 84 crores, up 63% year-on-year with EBITDA per tonne to INR 4,006 against INR 2,922 in Q1 of FY '26. The capacity utilization stood approximately 82%. Value-added products contributed 47% of overall volume and export accounted for 20% of segment volumes. Our order book across trade, export, API and spiral pipe stood at INR 800 crores, including 78,000 tonnes of export API orders for the U.S. market. Looking ahead, our strategy for the business rest on 3 pillars: capacity expansion and depending on our value-added product mix and structural cost reduction. 3 new DFT mills are being commissioned across Gujarat, Malanpur and Bahadurgarh plant between August and December 2026. And we will continue to add 2 lakh to 3 lakh tonnes of capacity every year, targeting overall capacity of about 16 lakh tonnes in FY '26 and approximately 2 million tonnes of capacity by FY '28-'29. On cost, our various automation, energy efficiency and replacing old plants initiatives are directed at a per tonne cost reduction of about INR 1,100. And we are fully committed that in full year of FY '27 guidance of INR 4,600 to INR 4,700 per tonne EBITDA will be achieved. We remain confident that our current global supply chain present a structural long-term opportunity for efficient Indian manufacturers with integrated capabilities and Surya is exceptionally well positioned to capture that upside across both our businesses. Now I would like to request Mr. B.B. Singal to share his views.

Thank you, respected MD sir, and a very good afternoon to all the participants on the call. For the quarter, the revenue was INR 2,046 crores as compared to INR 1,605 crores, a growth of 28% year-on-year basis. EBITDA and PAT stood at INR 120 crores and INR 60 crores as compared to INR 83 crores and INR 34 crores in Q1 FY '26, a growth of 46% and 77% year-on-year basis respectively. In Lighting and Durables, revenue for the quarter stood at INR 456 crores as against INR 397 crores, a growth of 15% year-on-year basis. EBITDA and PBT stood at INR 36 crores and INR 24 crores as compared to INR 31 crores and INR 21 crores in Q1 FY '26, a growth of 17% and 12%, respectively. In the Steel Pipes and Strips, during the quarter, the revenue was INR 1,590 crores as compared to INR 1,207 crores, a growth of 32% year-on-year basis. Similarly, EBITDA per metric tonne stood at INR 4,006 compared to INR 2,922 in the same period last year, a growth of 37% Y-on-Y basis. EBITDA and PBT stood at INR 84 crores and INR 57 crores as against INR 52 crores and INR 24 crores, a growth of 63% and 134%, respectively. In Q1 FY '27, our net working capital cycle was 72 days, with a return on capital employed of 12.69% and a return on equity of 8.95%. Improved capacity utilization, working capital optimization and cost rationalization enabled us to become a 0-debt company, and having cash surplus fund of INR 154 crores as on June 30, 2026. With this, I conclude the presentation, and we can now open the floor for questions and answers.

[Operator Instructions] We have our first question from the line of Viraj Mehta from Enigma Investment Partners.

Congratulations, Rajuji, for [indiscernible] performance. [Foreign Language] sir, we will INR 4,700 to INR 4,800 of EBITDA per tonne. But if I look at the first quarter [Foreign Language]

[Foreign Language] we are fully confident.

[Foreign Language] Sir, second question is regarding [Foreign Language] roughly?

[Foreign Language] as compared to domestic.

We have our next question from the line of [ Kiran ] from Table Three Capital.

Sir, couple of questions. Sir, first thing on order book within the Steel segment. So we had an order book of -- in March -- as of March ending INR 1,000 crores as given in the presentation. Now in this quarter, we are saying in spite of all these increase in exports and everything else, our order book is INR 800 crores. So there's an order book decrease of INR 200 crores. I mean, should I assume that this INR 800 crores has a higher proportion of exports, and therefore, we'll continue to do better margins because order book [Foreign Language]

[Foreign Language]

[Foreign Language] The reason I am asking, sir, is because [Foreign Language]

[Foreign Language] API ERW pipe not spiral.

Not spiral. Got it. [Foreign Language] because EBITDA per tonne is much higher. So it will be very good to paint a picture for us to say [Foreign Language] and all this export growth will come at a higher EBITDA per tonne.

[Foreign Language] So that is one. Simultaneously [Foreign Language]

[Foreign Language] Is that the right understanding?

See, FY '26 it was about 15%, 16%, precisely 17%. Now for FY '27, it has increased to 20%. So gradually it will go up to like about 25% of total steel segment.

We have our next question from the line of Love Gupta from Counter Cyclical Investment.

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] But as a Managing Director of the company [Foreign Language]

We have our next question from the line of Pranav from Rare Enterprises.

Sir, in last quarter, you had said that you will come to a decision by next Board meeting on demerger. So -- and also second thing is what in macro and micro actually is like? Because 2 businesses have completely different cycles, different macro and different micro. So why we take this reason as a reason to delay demerger or buyback? Just for my clarity.

[Foreign Language]

Correct, sir. Sir, that's why -- because whenever I study this company, I feel that regulatory-wise or bank-wise or anything there is no theoretical thing stopping demerger unless and until...

[Foreign Language] I strongly believe.

[Foreign Language] realization you also got for this quarter exports, but most of the EBITDA increase were eaten away by tariff increase. So going forward, you still think that the tariffs have normalized or the pricing will take care of this EBITDA erosion that has happened, EBITDA per tonne erosion that has happened?

[Foreign Language]

Understood, sir. Sir, last question from my side. You had guided that export versus, say, 1.26 lakh, 1.3 lakh tonnes last year would be 2.4 lakh or 2.5 lakh tonnes this year. So -- and that will help obviously the EBITDA per tonne for our company. So does that outlook -- volume outlook remains same? So 10,000 tonne per month U.S. market that had opened for us. Does this continue?

So overall, as far as U.S. market is concerned, we'll be doing like 120,000 to 125,000 tonnes of business during this entire FY '27.

Right, sir. Total export will be upwards of 2-point-something, 2.2, 2.3?

The contribution of U.S. market probably will be around 10% to 11%. So I think we'll be doing around 3 lakh tonnes of export.

We have our next question from the line of Shantanu Basu from SMIFS Limited.

So sir, my first question is with regard to the Middle East situation. If you could just explain or give us some clarity with regard to how the Middle East situation is shaping up and how would we see it shaping up during the next few quarters? That is one. And the second question is, when I'm looking at Slide 18 of your presentation, I'm seeing that the API and spiral pipe EBITDA per metric tonne dropped very significantly in FY '25-'26 to INR 5,600 compared to INR 9,136 in FY '22, then of course, it went up to INR 12,000, INR 10,000. So what was the reason for this sharp drop? And how do you see it? And what is the figure in Q1 FY '27? And how do you see the figure to improve in the coming quarters? That's all, sir.

[Foreign Language]

[Foreign Language]

So it was INR 3,420 per tonne.

INR 3,420?

Yes. [Foreign Language]

[Foreign Language]

[Foreign Language]

For the full year?

Yes.