Vardhman Special Steels Limited (VSSL) Earnings Call Transcript & Summary

Good afternoon, everyone. On behalf of IIFL Securities Limited, I welcome you all to Vardhman Special Steels Limited 1Q FY '22 Results Conference Call. From the management side, we have Mr. Sachit Jain, Vice Chairman and Managing Director, along with his team. Over to you, Sachit, for your opening remarks.

Good afternoon, everybody, and thank you for joining us on our earnings call for the first quarter. On the call with me are Mr. Sanjeev Singla, our CFO; Sonam Taneja, our Company Secretary and Compliance Officer; Bridge Investor Relations team; and my daughter, Soumya. So briefly about the first quarter. Of course, COVID impacted us because there were individual and partial lockdowns in the States that affected sales. April went -- started very strong and then they got affected. In addition, we were diverting oxygen to -- supply to the city of Ludhiana. We were supplying, at the peak, almost 2,000 cylinders per day, more than half of the oxygen of Ludhiana. So that's [indiscernible] a bit. So those -- of course, those factors are gone now. The other big event of the last quarter is that we finally got the environment clearance from the Ministry of Environment to increase our capacity from 200,000 tonnes to 280,000 tonnes per annum. In the first phase, we intend to increase our capacity to 250,000 tonnes by the end of financial year '23. Of course, this requires CapEx. CapEx process has already begun. So some equipment is going to come in by November. Some other equipment is going to come in later and is continuously coming in until December of next year. We are also working with our partner Aichi to achieve better operational efficiencies, better quality, and safety. So we are also, as we shared with you earlier that we will continuously work on our EBITDA on capital employed. March 31 previous year, we had 19.5%. This year, we will target 22% -- around 22%, 22.5%. I mean that's the kind of target we have. And by 2025, we expect to hit a figure of about 25%. So we will gradually keep moving upwards towards our 25% EBITDA on capital employed. On the EBITDA per tonne, this quarter has been pretty good. But we continue to maintain that our range will be INR 7,000 to INR 9,000 a tonne. And this is a good year. So we will be at the higher end of the range. And in the previous quarter, you already see in the results side, there's no point in going about the results, or I'll ask at my end. But Singla, if you would like to quickly share the highlights of the results, and then we can take on questions.

Sure. Thank you. In the first quarter [indiscernible] 43,705 tonnes as against 47,828 tonnes in the Q4 of FY '21. This we are comparing with Q4 of last year because the Q1 corresponding quarter of last year is not [indiscernible] which was high and revenue from operations in the current quarter is INR 330 crores as against INR 334 crores in Q4. And EBITDA, including other income for the quarter is INR 53.71 crores as against INR 54.68 crores in Q4. EBITDA per tonne for the quarter is INR 12,289 as against INR 11,433 in quarter 4. And Q1 profit, net profit after tax stands at INR 27.8 crores as against profit of INR 26.36 crores in Q4 of last year. So that's all on the performance side. Thank you. And now we are open for questions.

[Operator Instructions] The first question is from the line of Chirag Sureka from DSP Mutual Fund.

This is Vivek Ramakrishnan, and a very good set of numbers given the quarter. Could you just let us know whether there's been a buildup in inventory, how are OEMs looking at stocking and whether the material is moving across? Because most of the OEMs in the auto sales also slowed down. So this would be very important for us.

So if we look at how things are going currently, cars seem to be doing very well. Two-wheelers and heavy commercial vehicles are not doing so well. And the segment of auto component exports is doing very well. So that's also a decent part of our portfolio. Many of our customers are actually ultimately component exporters. So since the U.S. markets are doing very well and the exports which are targeted towards the U.S., they are doing pretty good. So the point to basically you would be wanting to know how is the second quarter looking? The second quarter is looking okay, not roaring, but pretty decent. We'll be meeting our budgets and our targets.

Okay, sir. Just as a follow-up, no unusual inventory buildup at your end or...

So we have a shutdown coming in November.

Oh, that's right.

So that's a 15-day shutdown, and we were building up inventories. So there is an inventory buildup as of 30th June. However, we had a problem in Punjab. As you are aware that monsoons were delayed and there were massive power cuts. So our plant was shut for about 10 days. There was no power. So this was an unplanned, unscheduled cuts. So we -- luckily, since we had a lot of inventories, we have been able to use a part of that. And we might have to buy some billets from outside to load up our inventory to be ready for this November shutdown. So we are quite prepared for that.

[Operator Instructions] The next question is from the line of [ Aniket Redkar ], an individual investor.

Congratulations for the good set of numbers. Sir, I have a couple of questions. Sir, my first question, can you give a breakup of black bars and the bright bars for the current quarter?

We don't share that breakup. But very roughly, roughly our bright bars are about 15%, 20%. It's a very rough area. That gives us even an order of magnitude, but we don't share that number.

Okay. Okay, sir. Okay, sir. Sir, as we can see, the volume of current quarter is 43,000 plus tonnes...

Sorry?

For this current quarter, our volume is 43,000 plus tonnes, right?

Right.

So is this sustainable run rate for the next few quarters?

Yes. So we have already said that we are targeting about 155,000 tonnes for the full year. So this is 165,000 to 170,000 or something like that, we'd be targeting. So yes, this is sustainable.

And what kind of production schedules we have received from the auto manufacturers?

As I said, we don't have the craziness that we saw last year. But still decent, we'll have a good quarter, second quarter in terms of volume. The problem, of course, is the raw material costs have gone up, and we have asked for a big price increase. It all depends on what kind of price increase that we will get. Normally, we used to have 6 monthly price settlements. Since this high volatility of raw material prices come in, we have all agreed that we'll have 3 monthly settlements.

So increase in the raw material prices, we are passing these prices to customers and...

We are negotiating with customers and those price increases have not settled, but we have asked for a price increase.

Okay. Okay. Okay. Yes. Sir...

If we get the price increase that we are expecting or looking forward to, second quarter also will be very good. So if the price increase that we get is less than what we expect, it may not be so good. But even the worst situation, if we get a 0 price increase, it is still a decent quarter. And we have already said these figures of the first quarter, INR 12,200 EBITDA per tonne is not a sustainable number.

Okay, okay. Sir...

So we have said that please judge us from INR 7,000 to INR 9,000 EBITDA per tonne. If we get more than that, that's a bonus.

Okay. Okay. Okay. And how do you see the EBITDA per tonne in the coming quarters? Because current quarter, it is...

We believe it is a range of INR 7,000 to INR 9,000.

Okay. Okay. And what is your export contribution for current quarter?

It's very small. It's increasing, but it is still very tiny. Second quarter is going to be more than first quarter, but it's around 5%. It's miniscule. But really, the kind of sample development that's going on for exports is huge. So by '24, '25 our target is to be 25% export, 25% to 30% exports. So there's going to be a massive increase in exports.

Okay. Okay. Sir, last question do we have a...

While are being negotiated, good profitability, good margins.

Okay. Okay. Okay. Do we have added any new OEM recently?

There aren't too many OEMs, right?

And what about the demand coming from? I mean from where we are getting more demand?

Demand is coming from all our retail sectors, 2-wheelers is a little lower. Cars will make up and exports will make up. So we are -- second quarter inclined from volume point of view. And ahead also we're looking forward to good times. It is just a fear of this third wave which is there, which may be keeping some customers away. So I'll put it this way, second quarter of this year -- of every year, we expect a major boom. So that kind of boom is not happening. But still, the demand is good. If we had a major boom, we would not have been able to meet the requirements. So from our point of view, from Vardhman Special Steels point of view, we are doing pretty fine, from a volume point of view.

[Operator Instructions] The next question is from the line of [ Abhilasha ] from Axis Bank.

Sir, my question is potency of CapEx. So you said for the rolling mill initially in the first phase, you'll be going to 250,000, right?

Yes.

And what would be the CapEx estimate for that?

The total estimated CapEx that we have announced is between INR 200 crores and INR 250 crores in the next 5 years. And that includes the investment for environment reasons as well as it includes investment for some bright bar, which will not really increase our capacity. So for quality reasons, some point being...

Will you be able to give numbers for the...

All investments are going to be in the range of about INR 200 crores and INR 250 crores as we foresee it at this point in time.

Okay. Now since this first phase expansion, you said you will be completing by '23. So that will be like a guidance for the coming year for the CapEx that you're doing. So is it possible to give a number for this?

You can standby then. And some, there will be some tailing off will continue.

Okay. You don't have a number for this rolling mill expansion as such?

No. No. No.

The next question is from the line of Dewang Sanghavi from ICICIdirect.

Congratulations on a good set of numbers. Firstly, I'd like to ask that recently, the specialty steel PLI has been announced.

Sorry?

Specialty steel PLI has been announced by the government recently.

Yes. Yes.

And can you throw some light how can we participate in this particular PLI, which product...

So our products -- automotive steels -- the automotive powertrain steels are included. And what remains to be seen is the details of the scheme. So the details of the scheme are not yet out. So very difficult to comment whether it's an attractive scheme or not.

Correct. So you will be one of the beneficiaries of the same?

We can be a beneficiaries. It all depends on what is the kind of scheme that comes out.

Right, sir. Understood.

Yes, we are eligible from the point of view that our products are included in the scheme.

Right, sir. That's helpful. And secondly, on the negotiation part that we are discussing with our OEM. Any tentative deadline on when can this be finalized?

There is, normally this price increase is for the quarter. And for this quarter, so most probably the price increase settlements normally have a mid-September or end September, when everybody is under pressure to close the quarter.

Right, sir. And my third question is regarding the movement in scrap and electrode prices for Q2 and what it stands currently?

So currently, the prices of graphite electrodes, I think INR 275. Singla, correct if I'm wrong.

Yes, sir. Presently it is INR 275.

So -- and this is for delivery in March, right? No, the current deliveries, yes. I think they are current deliveries now. So INR 275 is the current price. And scrap, shredded scrap is about $535, $540.

The next question is from the line of [ Prithvik from Banal Financial Consultants ].

Great set of numbers. Sir, I had a few questions. Firstly, in previous con calls, you have mentioned that we have sent our samples to Aichi and their customers and are awaiting feedback. So is there any update on this? Have we got...

No, no. We will not be sharing those updates. Samples will keep going because there are so many parts to be changed. So every quarter samples going for more customers, the number of inquiries coming is huge. We will not be able to cope with the inquiries, which is that big set of inquiries. So because not only Aichi, there are other customers out there and they have come to know that Aichi is with us. There are other customers who are buying from Japanese sources are sending us inquiries to ship to us. And you should all be aware that China has put export tax. So earlier, there was an incentive to exports. First they remove their incentives, then they put some export tax. So clearly, the disadvantage India had vis-à-vis China is going to gradually disappear. So I mean we are being swamped with inquiries. And our people -- we are strengthening our R&D department and our export department to be able to handle this.

So it is not only Aichi, other OEMs are also approaching us?

Yes. But then again, you see because of the political situation in terms of who Toyota competes with and so on, they'll be friendly companies and not so friendly companies or all those things happen. So for export business, we consult with Aichi before we resort -- we respond to queries -- inquiries.

Sure. Sure. And sir, second question is on the CapEx front. You mentioned in your opening remarks that until the end of next calendar year, we will be receiving shipments of machineries for the expansion of capacity. So would it be fair to assume that by FY '23 end, we would be up and running on the 280,000 tonne rated capacity?

250,000 around that, we should be up and running.

Okay. By the end of FY '23?

Correct. Yes.

Right. Okay. Okay. So assuming that most of the CapEx would go for this, would it be fair to assume that this incremental capacity would come at INR 75 crores to INR 100 crores of CapEx?

No, no. We have said that total CapEx is about INR 200 crores to INR 250 crores, which is a comprehensive -- which is an amalgam of many things. It includes the CapEx for expansion. It includes equipment for R&D. It includes equipment for safety and equipment for environment and normal replacement. It includes all these. And we're going to shift our bright bar. So there is also some investment for our bright bar, which will not increase our capacity is also included in this.

Okay. Sure. Sure. And sir, you mentioned that we have -- our EBITDA per tonne conversion margin will be between INR 7,000 to INR 9,000 and at the upper end, given the current market scenario. So would it be fair to assume that this INR 12,000 per tonne in excess that we did in Q1, would incremental about INR 9,000 would be purely because of inventory gain?

Partly -- very difficult to say on the figures. You see these are all broad numbers. We don't look at exactly how much is because of inventory gain, how much is because of that, very difficult to say all those things. These are broad numbers to look at our company's performance. But yes, we have clearly said at INR 12,200 kind of EBITDA per tonne is not a long-term sustainable number. Please judge us when we get beyond 9 -- I mean if we get INR 9,300, for example, in a particular quarter, please don't say INR 300 is because of inventory gains and INR 9,000 is because of performance. It's very difficult to allocate these things. This is giving you broad range.

[Operator Instructions] The next question is from the line of Bhavin Chheda from Enam Holdings.

Sir, congrats on a good set of numbers and strong momentum. So wherever you're getting the OEM approval, the supply, are you replacing -- are your products import substitute? Or you are one more supplier to already what Tata Steel or JSW may be supplying to these companies? What are the competitors in your production?

So neither Tata Steel is a competitor nor is JSW really a competitor for us. Our main competitors are Mukand, Sunflag. These will be our main competitors. In some cases, Kalyani. And, in some cases, one of other companies. So -- but our main competitor, really, where we keep coming across them are Mukand and Sunflag.

Sure. And you've said that you eventually are targeting close to 300,000 tonnes or 255,000 so. So don't you think that you have much more scalable opportunity beyond this and this number looks too small in overall scheme of things in steel industry and also specialty steel because government is talking about very big numbers in specialty steel when they announced the PLI scheme? So are we conservative in our growth forecast?

No, we are not conservative, but you're also right. So what all we are saying is based on this current location and this current plant. This current plant, even this 280,000 tonnes is a stretch, whether we'll be able to achieve that or not is difficult to say, okay? So this is a stretch in the existing plant. To answer your question, is this being conservative? So yes, as an overall opportunity, the opportunity is much bigger than this. And we have started thinking of what's next after this. But as of now, the right mode we're under only thinking stage, and we have already said publicly that we intend to be a between 700,000 to 1 million tonne company by 2030. Now by what time before 2030 will we reach that level, it is difficult to say at this point in time because we don't have any...

So you will put alternate locations, sir, basically, here?

It will be in alternate location. This location has no possibility of going beyond this 180,000 tonnes of billet and 250,000 tonnes of rolling. So beyond this at this location doesn't have a possibility.

The next question is from the line of [ Rohan Mehta ], an individual investor.

Congratulations for a great quarter. Sir, just a couple of things. As you mentioned earlier, you mentioned that this year would be like a year of sampling with respect to Aichi. So just wanted some more color from your end about what can we expect on that front.

Nothing. So there's nothing that will be visible to you. It is just that we are sharing with you this is what we are doing. So it's just extra cost coming in because when you sample products, maybe you make a heap of 35 tonnes and 2 tonnes of that will go and the remaining will either have to be remelted or wait for some time before diverted to some other customer because these are all unique grades, right? So the sampling is heavy cost. And of course, we are examining with our auditors, whether we can capitalize some of those costs or not. Because this is going to yield business results and have nothing to do with current operations. But as an investor in terms of results, you will see nothing out of this. Next year, we'll start getting some trial orders. Then you start seeing something. But again, that will be too small to notice. That is why I've said all along that what you will start seeing on the bottom line will be from '23, '24 and the real benefits -- I mean '24, '25. And then to add to your question and the previous question we ask. So we -- very clearly, the problem sharing it in the phase is we are going to have a massive capacity shortfall. Because our current capacity is around 180,000 tonnes, we are going to increase it to, let's say, 240,000 or 250,000 tonnes, that's 70,000 tonnes increase. And Aichi itself requires between 50,000 and 70,000 tonnes and it is 0 currently. In addition to that, there are other OEMs, Japanese OEMs and Thailand, et cetera, from Thailand or from Philippines or Indonesia who are wanting material, plus there is growth in the Indian market, plus there is EVs or demand for EVs is coming in. Some of our customers are supplying to EV. So we have started supplying steel for the EV segment. Those are newer segments. So with newer business coming in, we are going to have a capacity problem in the next 2, 3 years. And as a management team, we have started examining what are strategic options available to us.

Okay. Right. So you mentioned about the CapEx plans over the next 4, 5 years...

Those CapEx plans, despite that, we will have a capacity problem. So we have started thinking now as to what to do after this. But no plans have been made, which is why we have said, this CapEx plan is for the existing announced plan. We have started thinking about the next plan. But that is only in thinking stage. It is not even in planning stage. Yes. So first, it is thinking, then it will come into discussion, then planning and then it'll come into announcement, execution and so on, after having increased plans. But I do feel that COVID has delayed these things because our partners are unable to come here and these kind of discussions need to happen face-to-face. But I think 1 year from now, we will have more clarity about our next plan. So I do hope that next year that we close the financial year '21, '22 we hope to, by then, to have some clarity that we can share with our investors about the next plan.

Okay. Okay. And sir, would the -- our recent environmental clearance that we've got, would it have any bearing on CapEx plans whatsoever, sir?

No, that's -- so the CapEx plan of this INR 200 crores to INR 250 crores includes the investments required for the environment. So all this is already budgeted and announced that -- we went ahead and announced those things with the assumption that we will get the clearance.

Get the clearance, got it.

And we shared with the market that this is what we want to be investing. So all the investments required for the environment clearance -- let me restate that. All the foreseen investments have been -- is part of this INR 200 crores to INR 250 crores.

Okay. Okay. Got it, sir. Sir, just one last query about our debt situation, which is, we've repaid a fair bit of our working capital debt. So will we be needing any more funds as such -- will we need more for that in the coming quarters? Or can we expect a similar level of short-term debt?

No. The total net debt equity for the company -- the net debt in the company was about INR 130 crores in the year ending 31 March Q1. Singla, am I correct, INR 130 crores?

Yes, sir, INR 130 crores.

Yes. So there will definitely be an increase at that level when we end this financial year for the simple reason that now the CapEx would have happened, one; two, the scale of operations is going to be better. Last year, we did 150,000 tonnes. This year we are saying 165,000 tonnes to 175,000 tonnes. So there'll be a bigger volume and therefore, bigger inventory, finished inventory, outstanding will be higher. And three, because the price increases, the per tonne value of inventory, per tonne value of outstanding is going to be higher. So very clearly, the capital employed is going to be higher at the end of this financial year. And therefore, the debt figures will be a bit higher. But we are very clear now the debt equity, the net debt equity will be definitely below 0.5 for now. And with the current plan, as foreseen, the current announced plans, we expect by 2025 or 2026, it should be a 0 debt company.

0 debt company.

Again, I'm repeating with the current foreseen plans.

The next question is from the line of Urvil Bhatt from IIFL Securities.

Thanks for the wonderful explanation as always. Just a couple of questions. One bookkeeping question. You mentioned that the target plan is around INR 200 crores, INR 250 crores CapEx over the next 5 years. So I just want to understand, I mean, should we build around INR 50 crores, INR 70 crores will be the run rate for the next couple of years?

No, no. The larger part of the investment will be done by the end of next year. So the first 3 years it's front-loaded. First year will be lighter. Second year will be heaviest. So this year, we will expect between INR 40 crores to INR 50 crores, Singla? Singla?

It may be INR 30 crores to INR 40 crores, sir.

Yes. So about INR 40 crores, let's say this year. The second year will be far higher. The second year will be very heavy.

Yes.

The second year, actually, it will be around INR 100 crores, INR 120-odd crores?

Yes. And we have [ referenced ] those numbers. But second year will be heavier. Then third year would be a little less. Fourth year will be little heavy. It will scale off.

Understood. Understood. Understood. That's helpful. And also, I mean, on the working capital side, I mean, what kind of increase have you seen in terms of inventory just because of the pricing efforts. I mean prices have increased significantly, and you are still negotiating for another price hike. So should we expect a further increase in working capital in the coming quarters?

Yes. That's right. And please, on the quarter by quarter, you see because we are building up inventory pressure down.

Yes. Correct. Correct. Understood, sir.

That is why we are saying for the year-end.

Understood. Understood.

At the year end, we expect our working capital figures to have gone up.

Understood. Understood. That makes sense. And also on the expansion side, I mean, if you can...

On the expansion, to give a guidance. Last year, our net capital employed was INR 600 crores.

Yes.

So I would expect, roughly, 10% to 15% increase in the net capital employed.

Yes.

Could be around 10 -- let's say, around 10%, very rough idea, but around 10% increase net capital employed.

Understood. Understood.

As of now, that is our forecast. That may change, but as of now, that is the forecast.

Understood. Understood.

Again, Singla, please correct me if I'm wrong.

No, no. This is correct.

Okay. Thank you.

So -- and one more follow-up question on the capacity expansion side. What kind of a product mix are we envisaging? And how will that impact our overall margin profile once we reach full utilization levels in '23?

So the products are similar. These are products for cars. So what will -- the big change will be the proportion of cars will increase in our product mix significantly. Today, cars and 2-wheelers are almost similar. So the large part of the increase is primarily in cars. So that's one. And two, the grades are very different because Toyota uses very different grades and specialized steel. So that's the second part. And third, we have already said that we will expect this range of INR 7,000 to INR 9,000 per tonne to increase to INR 10,000 a tonne.

Understood. That accounts for the improving margin -- improving product profile, yes.

And once those products stabilize, you see because there's also a cost for that to stabilize, it takes time to stabilize. We would then expect, at this point in time, this is a setup forecast, I would -- we would like to target, as a management, INR 10,000 to INR 12,000 EBITDA per tonne. This we are talking of, about 5 years from now.

Yes, yes, I understood. It's around once we start delivering to Aichi and once we...

There are lots of ifs and buts in between provided we reach the right quality level and then provided the rejection levels in theory are not so high. And there are lots of provided. But this is what -- what I'm sharing with you as a management, that's what we're going to be targeting. So as you've seen also, we have been steadily increasing our forecast for a long tenure between 4.5 to 6, where we increase the forecast of 5 to 6.5, then we increase the forecast to 6 to 8. Then we increased it further to 7 to 9. And now we are saying 10, and then we are saying 10 to 12. So we are increasing our volume and increasing our margin. And third, we are also working on our capital employed, which is why we are targeting an EBITDA on capital employed of crossing 25%, which means an ROC, EBIT on CapEx deployed of about 20%.

The next question is from the line of [ Manoj Sable ], an individual investor.

Congratulations. Just quickly wanted to check. You mentioned the China impact on the industry as such. Now you had -- when you had guided for these EBITDA numbers, I don't know if that was taken into account whatever structurally, it will change the industry. So do you think there is a risk to the upside to your guidance of INR 7,000 to INR 9,000 because of the structural change? And...

Go ahead, please. I interrupted you by mistake.

Yes. Secondly, although alloy steel perhaps may not be one of the impacts on this price structurally. But given the other companies can substitute the product, this may have an impact on structurally higher margins for this one has been? And second, the last question is whether acquisition of a plant is also in the realm of things that you're thinking about?

So to answer your first question, there is no direct impact of alloy steels in India from China, at least in our product segments, okay? So really, we see no direct impact on our current business. Where we do see an impact is in the business in Southeast Asia, in Thailand, in Philippines and Indonesia, where the main players are Japan, Korea and China. So -- and China was the least priced competitor, as Chinese prices go up, the floor prices will go up, which means the attractiveness of the export customers is going to be better than before than what we assumed. So in that sense, yes, that will be a benefit to our new business, which is why for the first time today, I have used the term, 10 to 12. So in a sense, I have indirectly put in the impact of China that we will expect a higher range of INR 10,000 to INR 12,000 EBITDA per tonne as we stabilize the Japanese business. Yes. So this is as far as the first part is concerned. The other part you said is that indirect another impact could be as domestic steel supplier, some of the large players like JSW, JSPL, Tata Long Products, even for people like Sunflag, cans and words to other products and export those products because Indian prices are much lower than international prices and therefore, create a shortage of alloys steels in the country. Yes, in fact, that is -- factor is already playing, which is why we have got higher pricing, good price increases from the customers. And you'll be -- you are already aware that even today, the HRC prices from Indian -- Indian HRC prices are lower than global HRC prices. So that means there is still headroom for HRC prices to rise. And if those prices rise, then as demand picks up, then you will see even a possibility of domestic price rise also. So if that happens, clearly, this range of INR 7,000 to INR 9,000 will get breached on the upper side. But very difficult for me to forecast those parts. But if that happens, clearly, it is likely to be breached at the upside.

Sure. I think that's the factor to look out for, perhaps.

And the third question that you said is an acquisition or something on the cards. As I said, nothing is on the cards, but in the thinking stage very clearly, we need capacity. And very clearly, again, an acquisition is the fastest way to put up capacity. But an acquisition has sort of its own dangers. One, it will not be a state that you would want to be in; two, the culture will be very different; and three, will you find somebody who already has approvals and who's willing to sell. So there are not too many players in the country. It's not like you can just buy a steel plant and convert it to an alloy steel plant. But if an opportunity comes, we will be open to it.

The next question is from the line of Rohit Ohri from Progressive Shares.

Sir, just one question or maybe a clarity. You seem to be cautiously optimistic on the business, which is quite evident from your commentary as well and the promoters are slowly nibbling into the shares, and it has gone up from INR 59.78 to around INR 60.87 from December 2022 today. Sir, my question is with these capacity problems which you have alluded already and the demand which is there in the market with just 4, 5 or maybe 6 key players or some new entrants that might come, don't you think that the guidance has to be raised from INR 7,000 -- or whatever it is, INR 7,000 to INR 9,000, to slightly more than what it is currently? [Technical Difficulty] Hello, sir?

Ladies and gentlemen, we will reconnect. The line of Mr. Jain got disconnected.

Yes. Go ahead.

He is connected back. Thank you, and over to you, Mr. Jain.

Yes. Go ahead. Sorry, you were asking a question and the line dropped.

So I was asking that with the cautious optimism that you are showing and with these demand constraints that are there, don't you think that you should be increasing the guidance from INR 7,000, INR 9,000 to slightly higher because knowing that there are just 4 or 5 players or maybe some new entrants that might come in the business. Don't you think that the guidance has to be improved in the current scenario?

Difficult to say, you see because there are so many variables just now on which we don't have a handle because currently, we are negotiating for a price increase. If we get a good price increase, we have asked for -- we have asked for a price increase of INR 7,000 a tonne. If we get INR 6,000 to INR 7,000 a tonne, second quarter will be a blockbuster quarter. But will we get INR 6,000 to INR 7,000 -- it's very difficult to predict the kind of price increase we will get because this is not a commodity business. This is a negotiated business. And today, the auto sector is not booming in terms of like as last year, there was shortage in material everywhere. It's very difficult to forecast that. And the other part of your question, yes, not promoters in general. I personally -- in my personal capacity, I have been increasing my stake. Because any liquid funds I had, I was going -- investing in buying our shares. But then we reached a particular level where this is a totally disproportionate amount of my personal liquid funds available. And the problem of markets is when promoter is buying the shares, is all a positive. But tomorrow, if I need some liquidity and I need some money and I sell some shares, it is seen as a negative. So for now, I don't think I'll be buying any more shares. So for the moment, let me share out here, it is highly unlikely that there will be a major change in the promoter shareholding because I was buying in my personal capacity only. And I would like to now diversify my small surplus funds into other investments that I can sell -- liquidate if I need money.

Ladies and gentlemen, this was the last question. I now hand the conference over to the management for closing comments.

Yes. Ladies and gentlemen, thank you for being here with us. We -- the last question, of course, I should have answered it there and then, but we remain cautiously optimistic. And frankly, if you ask me, I would like to give a higher guidance than this. But then the problem is there are also small investors who invest based on management comments and so on. And we must understand it is a risky business. And so INR 7,000 to INR 9,000 that we talk about is -- we are fairly sure we'll be within the range. And this year, can we exceed INR 9,000? I probably think we will exceed this. But as a guidance, I keep repeating, please don't invest in our company from a short-term point of view. Please invest in our company from a long-term point of view and a long term to give a guidance beyond INR 7,000 to INR 9,000 at this point in time with current factors in. So thank you so much for being with us. And I hope to, very soon, physical meetings happen, and we have a physical conference in Mumbai sometime. Thank you so much.

Thank you. On behalf of IIFL Securities Limited, that concludes this conference.