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

Ladies and gentlemen, good day, and welcome to Q4 FY '24 Earnings Conference Call for Vardhman Special Steel Limited Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Deepika Murarka from Choice Equity Broking Private Limited. Thank you, and over to you, ma'am.

Thank you. Good afternoon, everyone. On behalf of Choice Equity Broking, welcome to the Q4 and FY '24 Post Results Conference Call of Vardhman Special Steels Limited. I also take this opportunity to welcome the senior management team. On today's call, we have with us Mr. Sachit Jain, Vice Chairman and Managing Director; Mr. Rajendar Kumar Rewari, Executive Director; Mr. Sanjeev Singla, CFO; Ms. Soumya Jain, Executive Director. This conference call may contain certain forward-looking statements, which are based on the beliefs, opinion and expectations of the company as of the date of this call. These statements are not guarantee of future performance and involve certain risks and uncertainties, which are difficult to predict. I now invite Mr. Sachit Jain for the opening remarks to be followed by the question-and-answer session. Over to you, sir.

Thank you, Deepika. In addition to the names mentioned, we have Sonam, our Company Secretary, with us, and Savli from our Investor Relations firm. So ladies and gentlemen, thank you so much for being with us today on this call. Last year has been a very, very interesting year. I would say the growth phase -- the next phase has begun after our consolidation of last year. We completed our -- so we looked at the past last year, and also we looked at the future. So we looked at the past as we completed 50 years of existence of steel business, which is a big event for us, and we gave a one-for-one bonus to celebrate the occasion. And that was also the opportunity to start strategizing our plans for our expansion eventually going to the next phase, which is a second plant. But in the last year, I think one big area where a lot of work has been done is in the area of green. As you are all aware, the future is green everywhere and steel being a major polluting industry, green steel has become a very big word across the world. And we are positioning us as one of the strong green steel producers from India. Our carbon footprint, which has already come down to 0.7 tonnes of carbon per tonne of steel, Scope 1 and Scope 2, and measured on the billet as most of the steel companies are doing. And we are putting up a solar plant, which if things are -- as of now, things are on track, we should be there by December. With that, our carbon footprint should drop to around 0.45. And then we have plans to switch to renewable power from the grid, which has a higher -- slightly higher cost. But with that, our carbon footprint will drop to 0.2. This will make us by far the lowest carbon footprint company in our special steel sector compared to our competitors who will be between 2.5 to 3 as most of them -- almost all of them are from the blast furnace route. We will be at 0.2 in 2 years from now. They will be between 2.5 to 3. So that's one big thrust area. The second thrust area last year was we installed those 2 stands in rolling, which increased our rolling capacity. Then we placed orders for our KOCKS block and for our reheating furnace with a CapEx -- total CapEx of INR 140 crores. The KOCKS block should be in place by later this year, by December or so. By March, hopefully, it would have stabilized. And the reheating furnace will come up in '25, somewhere around June, and we will maybe stabilize by September, October, we'll get advantage of that in the second half of next year. In addition, already approved earlier, we are planning on a second entity line. So a lot of investments which we've planned earlier from an earlier planned CapEx, have started process and expenditure will happen in this year and the next year primarily and then go over to the year after that. And we have announced a new CapEx of INR 33 crores, which will increase our capacity. As we said earlier, we had tested the capacity of 260,000 tonnes of billet making, which was our earlier stated capacity, which meant about 230,000 tonnes of saleable product. And we had a license of 3 lakh tonnes. So we had regulatory approval, but we didn't have the ability to reach there. And I had said earlier that once we reach 260,000 tonnes, we will start looking for improvement opportunities to increase this further. We feel reasonably confident that we should be able to hit 285,000 tonnes in the next 2 years with this CapEx of INR 33 crores. Now this INR 33 crores is primarily investment in environment. Because of the increase in production, the environment will deteriorate in the plant, and therefore, we will be adding almost about INR 12 crore to improve the environment in the electric arc furnace. We're adding ETP. We're adding some other environments. So about INR 14 crores to INR 15 crores out of the INR 33 crores is in environment area. The other investments are in building some redundancies, building some spare capacities, so that the maintenance can done offline rather than online, those kind of investments. And of course, since our test production increase, it means far more testing, far more sophisticated testing also. So we are also investing more in our R&D area and small debottlenecking investments here and there. So -- but the large 3 chunks are one, environment, the largest chunk; R&D investment, the second largest chunk; the third largest chunk is in redundancy, building redundancies and building off-line maintenance possibilities; and fourth is some debottlenecking here and there. So those are the main highlights of last year. One more thing that we have been saying all along is that our stated EBITDA per tonne is INR 7,000 to INR 10,000 a tonne. Last quarter, we have had a good quarter. We've got INR 11,000 a tonne. It is beyond our normal range. So please don't calibrate us for this kind of expectation for the future. However, I think we've become pretty boring. In the last 3 years, we've been saying our range is INR 7,000 to INR 10,000 a tonne. And I've said that we will be -- we want to up this range. I think we are ready now that once this expansion investments of next year, the KOCKS block and the shutdowns which happened because of KOCKS block, because again, we'll have a 1-month shutdown of rolling mill next year, once that gets over, by December, by March, it will have stabilized. So the year '25-'26, we want to up this guidance to INR 8,000 to INR 11,000 a tonne. And we hope, the year after that, after the stabilization of our reheating furnace and further increase in capacity, we will be able to up the range to INR 9,000 to INR 12,000. So INR 8,000 to INR 11,000 is now our guidance from the year '25-'26 onwards. And aspirationally, '26-'27 onwards, we hope to change the range to INR 9,000 to INR 12,000. We are not ready just now to confirm that but I guess somewhere a year down the line, as we develop the confidence, we will come and state clearly that we are ready to change our range to INR 9,000 to INR 12,000. These are, as far as our opening remarks go. And of course, dividend, we have maintained the same dividend. There was thought of increasing the dividend, but since the profits were down from last year despite the strong recovery in second half, primarily the fourth quarter, we decided to maintain the dividend. Our debt equity, of course, is at our lowest ever at 0.2. It is much lower than what -- 0.12, sorry. It is way lower than what it should be. And we will correct that as we plan our capital investments for the further capital investment that we plan and then eventually when we are ready to announce the new plant. So these are I have as my opening remarks. I think this is the longest opening remarks I've given in a long time. But -- and my CFO is reminding me because you were absent last year, so you have given 2 calls worth of opening remarks today. So we are open to Q&A. Thank you, ladies and gentlemen.

[Operator Instructions] We have our first question from the line of Roshan Shah (sic) [ Rohan Shah ] from Valcore Cap.

Roshan, before you begin your question, I think 1 more thing which I forgot to share. On a personal note, I became a grandfather. On 6th of April, my daughter, Soumya, our Executive Director, gave birth to a baby boy, [ Suveer ]. And so that's on a personal note, just sharing my promotion from father to grandfather. Anyway go ahead, please.

Am I audible?

Yes.

Congratulations, sir, first of all, on the great news. Moving on to the business, sir. During the opening remarks, there was some disturbance with my line. So I heard that you have -- you're planning for a CapEx of INR 33 crores. So could you just help me with what our installed capacity will reach to now?

So this is an incremental new announcement of INR 33 crores. We already have ongoing project of INR 260 crores, which was announced in 2022. And then another INR 140 crore project which is the KOCKS block and the reheating furnace, which was announced in '23. So these 2 were already announced. So in addition to that, this is a INR 33 crores. Because now all our capital investments have been made, this is only marginal. And out of this INR 33 crores, large chunk is going in environment to improve the dust extraction, fume extraction system. That is the largest chunk of it. The second chunk is in R&D equipment. And the third chunk is in building redundancies. So some areas, adding some spare, some extra spares, adding in some parts which can be removed and -- so maintenance becomes off-line rather than online maintenance to improve the uptime of machines to increase production, so those kind of investments. All small, small, nothing major. And the fourth bucket is in terms of some small debottlenecking here and there.

Okay, sir. Understood. And sir, the next question was also Kalyani has been adding some capacity as well. So are we seeing any great increase in demand?

See, demand is going to continue to grow in the car segment as the cars grow. The second area where demand is likely to increase is as global majors are building plants to make India the major manufacturing hub. So as you saw in today's Business Standard, already Kubota has announced that India will be -- like that, of course, we have information of a couple of other Tier 1s, global Tier 1s. I am not at liberty to share their names out here. But as they are -- some of them are customers who are talking of building India as a global hub. So all these portend to a stronger demand going ahead. But currently, there is a weak environment currently, primarily because of tractors, there is a slowdown in tractors. So there's a little slowdown. And there's a slight slowdown in exports for some of our customers. That, I believe, is temporary. But as of now, this is why last quarter, in fact, month of March, the sales were way lower than what we estimated. So despite sales doing a decent job in the last quarter to help recover part of our loss that we had in sales. But because of the weak March, and we saw the weakness from February itself, we still ended up about 2.5% short, 5,000 tonnes short of the previous year. So there is current weakness but I'm seeing things improving already. Cars are doing well, 2-wheelers are stable. I mean it's basically tractors and commercial vehicles. Commercial vehicles also are improving already, I think. The tractors is the only thing which is a little down, so that should also pick up maybe in a couple of months. And I guess everyone is waiting once the elections are over we are all hoping demand picks up further. Already, demand for construction steel is high, construction steel prices have risen. So that is showing a better demand.

[Operator Instructions] We have our next question from the line of Mr. Ritwik Sheth from One Up Finance.

Congratulations on your personal milestone as well. Sir, couple of questions from my end, just to get my understanding whether it's right or wrong. The billet capacity today is 260,000, which will go to 285,000, as you mentioned.

Correct.

And the rolling mill capacity, which is currently 2 lakh tonnes per annum will go to 250,000 of the CapEx that you have already mentioned in the previous quarters, right?

No. So 2 lakh, it was. With the addition of these 2 stands because of which we took some shutdowns last year, this capacity has already gone up to about 215,000, 210,000 to 215,000 -- 210,000, sorry, I stand corrected, so 10,000 tonnes capacity has already gone up, so it's 210,000. And with this KOCKS block and the reheating furnace, our capacity will go up to about 260,000 to 270,000 tonnes. So then rolling will not be a bottleneck anymore. Just now rolling is still a bottleneck and this is why we have a lot of job work where we are getting billets rolled from outside. Then once this capacity comes up, all those billets which are getting rolled outside will get rolled inside. We'll have better control on quality and there will be some saving of costs and improvement in margin because what is being rolled outside, there is freight cost as well as profit margin we transferred to other companies.

Right, right. So basically in 2 years, we'll be at -- we can sell 250,000 to 260,000 tonnes per annum finished products from our existing Ludhiana...

From a capacity point of view, yes, we'll be able to sell. But we always believe in gradually building up. So our target will be 250,000 tonnes of sale, which is what we'll target, I'm not saying that we're committing that, but we target that in the year '26-'27.

Right. Sure. Got it. Sir, this is helpful. Sir, secondly...

And for next year, we are targeting somewhere between 210,000 to 215,000 tonnes.

Yes. Okay. So next year...

I mean, for this year, not next year.

FY '25.

This year. We are already in next year, yes, correct. In '24-'25, 210,000 to 215,000.

Okay. So we will not be needing any external rolling to be done by anybody?

No, this year also, we will, because we have 1 month of shutdowns. And since the KOCKS block will be not yet put up we will not get the gains of that capacity. This year, again, we will have. Next year onward this outside rolling will go away. And currently, about 35,000 tonnes was rolled outside last year, and about 8,000 to 10,000 tonnes, we have some bottleneck of production but those are certain kinds that we don't have that size range in our rolling. That will remain. But roughly 25,000 tonnes of this 35,000 tonnes will get rolled inside is being rolled outside. Now you'll be surprised, this is for everybody else, that when the capacity shortage is not as much, why the job work amount is larger than the capacity shortfall. That is for servicing reason also, when suddenly, you get orders -- bunching of orders, to meet service requirements, we need to do some job work from outside.

Okay. Got it. Got it. And the...

With the KOCKS block, our capacity will go up and our servicing ability will also go up. So the need to get any outside rolling neither for capacity reasons nor for servicing reasons, so we'll be able to do all this rolling inside.

Got it. Okay. Sir, second question is on the exports volume. Would it be possible to share the exports volume for FY '24 and how we expect to see over next 2 years, FY '25 and -- in current year and then next year?

Sure. Singla, can you share the export numbers?

Yes. Last year, we ended up total export volume of 7,300, plus exports to Aichi, which are clubbed in the domestic sales, which is about 5,000 tonnes.

So total, 12,000 tonnes, yes. And this year, we are expecting about 16,000 to 17,000 tonnes.

Okay. And incremental, I'm assuming that it will be going to Aichi, majority?

We don't share all those numbers now. The total is about 16,000, 17,000. The sales to Aichi are going a little below expectation and there are 2 reasons for that. One, the Japanese yen has weakened so much that Japanese steel is marginally or almost the same rate as steel from India. But secondly, also, Toyota sales are a bit down. Thailand, the sales are a bit down. So that is the reason for lower -- and plans are being made to see how to make up this shortfall.

Okay. Got it. And sir, 2 quarters ago, you had mentioned that a global OEM had taken some samples from our site for green steel. So if you can share any updates on that?

That's a progress, all such things take a year, 2 years to happen. I'm just saying it's a signal that global OEs are looking at India steel. So the idea was more a signaling impact is this is a direction where companies are going. Any impact of this, you'll see only some impact you'll see -- not in this year, the next financial year, which is '25-'26. The real impact will be in '26-'27. It's a slow process of getting into a global OE. It takes about 3 years minimum. So -- but then once you get in, then you can expand your footprint and then it's also difficult to get you out. It's a sticky business. But one interesting thing is they have asked us that 100% of power for their manufacture has to be from renewable energy. So this is a clear requirement of this OE.

But are we ready for 100%...

Which is good for us. No, we'll be ready. By the time the production requirements happens, we'll be ready with that.

Okay. Sir, just 1 last question from my end. You had mentioned a few quarters ago that our material to Aichi, which is the quality is a little bit subpar then the Japanese material that they receive. So how is the progress on that front? Are we happy? Is Aichi happy? And is it completely at par with Japanese material or there is still some scope for improvement there?

So I think you have misinterpreted what I said. The quality, no customer will take any subpar quality. So the quality that we are producing is equivalent to Aichi quality. However, we have and what I said was we are having difficulty making that quality and our internal rejections were and rework were significantly higher than we had anticipated. And those -- as our internal quality levels have improved, so those rework and rejection levels have come down. And that is also one of the factors which has contributed to the profitability being better in the last quarter. I'm not saying that's the only factor, but one of the factors. And one of the factors which has given us the confidence to change our forecast, our guidance to INR 8,000 to INR 11,000 from our up till now range of INR 7,000 to INR 10,000. But again, I'm saying this would be for the year '25-'26 because next year, again, we have shutdowns and we still have some constraints and we still have some material being rolled outside and all those constraints are there. So really, '25-'26, we'll get the full impact. Again, we'll not get full impact, but we'll get most of the impact and '26-'27 has the full impact, which is why INR 8,000 to INR 11,000 is the range we have set '25-'26. And aspirationally, we see INR 9,000 to INR 12,000 EBITDA per tonne range in '26-'27.

[Operator Instructions] We have our next question from the line of Angad Katdare from Sameeksha Capital.

Congratulations, sir, for becoming grandfather. So my first question is related to the other income, which includes the GST and electricity incentive. Can you share the outlook for FY '25 for the same?

Will be the same -- it will be in the similar number because there's nothing of the past year in this year. Last year, we still had, I think, INR 7 crore, INR 8 crore of previous year, so INR 9 crores. So which means, actually, the EBITDA level, though it seems lower this '23-'24 compared to the previous year, it is at par with the previous year because in '22-'23, we had INR 9 crores of the prior period. So this year, everything is of this year, and we can expect the same -- similar numbers going ahead, which is why we have stated that we believe this is part of our income for our regular operations. This is not an other income which has been -- this is part of our costing structure.

Got it, sir. Sir, my second question is related to the greenfield plant. Any development on the same? Forging plant integration and the greenfield...

So all these areas, we have started serious discussions. And by -- hopefully, we'll start looking for land soon. We've started the process of thinking which state to look at, all those things. So in the next few months, hopefully, we'll decide the state and then start identifying land parcels. But we've started the process now.

Great to know that.

It will take its own time. And when we're ready to make an announcement about timelines and so on, we will do that. But as of now, no concrete steps have been taken. We just started the process of discussion and thinking and planning and study. As the audience here would know, we are a conservative group, and we go slow and steady. So we are a little patient and cautious. So -- and on top of that, our partners are Japanese who are also slow and patient. But the beauty with our Japanese, what I have seen is, they take their time in planning and thinking and consolidating. But once the plans are made, then they are firm and action is fast.

[Operator Instructions] We have our next question from the line of [ Rohan Mehta ], a shareholder.

Congratulations on the personal good news. Sir, just to build on the previous question regarding CapEx, if you could just shed some light on if there's been any further discussion with Aichi about this CapEx and how the entire CapEx would be funded?

This CapEx is a small INR 33 crore additional, easily internal accruals and a little bit -- and payback will be -- within 2 years it will be paid back. So the company can take care of it.

Okay. And beyond that, nothing on the horizon with respect to Aichi management with a view for more CapEx?

See, with this -- all CapEx as far as this plant is concerned is over. So then after this, any new CapEx will only be once we take a firm decision on a new plant; and two, when we decide on forging. In fact, we started the process of studying the forging industry, identifying suitable partners and identifying which OEs to work with. So that process of study for forging have also started. Decision will be taken at the appropriate time, but this process of study has begun.

Okay. Understood. So the mass production that we have begun for Aichi will be taken care of from the existing facilities. Is that right, sir?

Yes. All the plans that are there are from the existing facility. Once we have a new facility planned and it comes up, then of course, all these plans will change because one of the reasons the plans were not more aggressive was that we didn't have enough capacity; and two, we have some limitations of what sizes we can make in this plant. So in a new plant, whenever we plan it, whenever we execute it, all those limitations will be gone.

Understood. Understood. And sir, on the billet capacity, which has improved, is it because of any particular debottlenecking that has happened? And maybe a year or 2 down the line, what can we see in terms of our billet capacity?

No, this 260,000 tonnes is what we announced. It's just that we tested it and found that in January month, we hit the number of 22,000 tonnes for a month at a stretch and February also was good, which gave us the confidence that we can -- the 260,000 tonnes level has been achieved. And as we have said earlier that once we achieve this number, then we look beyond that. And from January we started looking at what more can be done. And then we found that we could go up to 285,000, which is what requires was the CapEx that we have got approved now. And maybe many of it was would anyway have to be done because I don't think environment is directly -- the environment expenditure is directly linked to capacity expansion, R&D investment was anyway required again. So many of these investments were perhaps anyway required, but we just clubbed it all together and helping us go to further capacity expansion. So 285,000 tonnes is the new capacity. And we hope to hit this figure depending on, of course, our marketing that we are able to sell obviously by '26-'27, latest '27-'28.

Understood. Okay, sir. And sir, you mentioned that Toyota sales have been relatively muted. So if I may ask your take on...

In [ Thailand ]

Okay. So what can be expected -- does the industry look different in the new fiscal or the next 2 quarters and whether that will impact our exports?

It's still a very small business. So it will not have a major impact. And one thing -- good thing about the Japanese is once they've made a commitment and it is not working as per that commitment, they look for other opportunities to make good their commitment. So they are examining other products that were to be localized into India, which can be localized, and some of them are being fast forwarded in. In another year or 2, we'll catch up with the targeted and committed volumes. So I'm not too worried about that.

We have our next question from the line of Ms. Radha from B&K Securities.

Congratulations on good performance and also congratulations for the personal note. Sir, I wanted to ask first question was that this quarter, we had done 52,000 tonnes of volumes. So previously, we had done this kind of volume in 1Q FY '23? So if we compare 1Q with this quarter, then the raw material cost for us is very low for us this quarter and which has benefited us a lot. However, the other expenses for this quarter is higher as compared to that quarter. So I wanted to understand, sir, why the other expenses have gone up in 4Q or we can say in FY '24 compared to FY '23?

Singla, if you can answer this question?

In other expenses -- the higher expenses are because of 2 reasons. One is the job work charges, which are higher than the Q1 of FY '23. And secondly, because in Q1, the prices of electrode were on lower side and earlier, we were storing at lower prices. So the electrode prices were lower in Q1, whereas in this Q4 quarter, the prices of electrode were higher. So these are the 2 major reasons for other expenses to be on higher side.

All right, sir. So going forward, should we continue with this FY '24 other expenses per tonne number?

Yes, for this job work charges rolling from outside, it will continue for another 2, 3 quarters -- 3 quarters more. And on this electrode prices, they have started softening. So they will -- they are coming down in the subsequent quarters.

Okay. Sir, secondly, in the opening remarks, you mentioned that from FY '23 onwards, we had announced CapEx 2 to 3x. So total -- first is INR 220 crores and INR 140 crores and now INR 33 crores. So I think it's around INR 400 crores. So out of that, how much we have spent till now and how much is pending and what is the timeline by when we want to complete the entire CapEx?

So roughly about INR 82 crores out of this has been spent. So from the INR 260 crore and INR 140 crore, INR 400 crores, and this new INR 33 crores is INR 433 crores. So INR 83 crores has been spent. Everything else will be...

INR 25 crores for land.

And INR 25 crores for land has been spent and we have allocated about INR 19 crores for our share in renewable project. So those are in addition. And so all this CapEx will be done in the next -- primarily the next 2 years, a little bit may stretch into 3 years. So in '24-'25, '25-'26, most of this is investment would be done. Some will spill over to '26-'27.

All right, sir. So just a follow-up on the answer that you gave on the...

Radha, as I answered earlier to the other question, repeating that. With this, most of our -- almost all our CapEx plan for this unit is largely done. There will be only minor, than normal CapEx, a little R&D equipment, some more testing and all. Those are the only kind of investments that will continue. But after this, almost all our CapEx plans are done.

Sir, just a follow-up on the answer that you gave on the electrode prices. Sir, just a small query that the electrode prices going up or any fluctuation in this, so this should have been captured in the raw material prices, then -- unable to understand that why it's coming...

Electrode is not raw material. Raw material includes our scrap, pig iron, sponge iron, our alloying elements, those are our raw materials. Electrode is consumable.

[Operator Instructions] We have our next question from the line of Akshay Thakur from PICO Capital.

Congratulations on becoming a grandfather. My question is related to...

By the way, the mother is also on the call, Soumya is also on the call.

Congratulations to her. My question on the business. So just to circulate back on the topic of electric arc furnace as a method of manufacturing specialty steel. We have heard a lot about the advantages on that. Are there any challenges as such about this method of making it?

Yes, challenges are there that the cost of steel making is higher with electric arc furnace route compared to a blast furnace route, but they damage the environment massively and they have a high capital, a very high capital cost. And you have to be -- today, to set up a new plant under the blast furnace route, you need to make it economically, it has to be at least 3 million to 4 million tonnes, whereas electrical arc furnace, you can set up a 300,000 tonnes or 500,000 tonne plant and the capital cost for smaller capacity as well as cost per tonne will be lower and environmentally far better. Worldwide in the special steel industry, worldwide, almost all companies -- the good companies are all electric arc furnace. India is perhaps one of the only countries where we have blast furnaces and many blast furnaces making alloy steel for automotive sector.

Okay. One more question on the same. Are there any structural changes happening for sourcing raw material, that is the scrap steel, for India as a country?

Yes. As the country is moving towards circular economy, which is a topic -- hot topic being discussed by all OEs, as the government is pushing circular economy, so clearly, scrap from the auto OEs is likely to start moving to people like us. So there is this structural change that the auto companies will be looking at in the future to see how they can channelize their scrap to people like us.

We have a follow-up question from the line of [ Naitik M ] from Sequent Investments.

Congratulations on a good set of numbers and congratulations to the entire family on welcoming their newest member. Just 1 question from my side. Sir, I believe you were in constant negotiations with OEM during quarter 1 and quarter 2 for price hikes. And I think we have seen a positive effect of that in the Q4 numbers. Now post that, commodity prices are again shooting up. And do we think at these prices, we will be able to maintain the kind of EBITDA per tonne or EBITDA margin that we did in quarter 4 moving forward in quarter 1 and thereon?

Just hold on 1 minute. Just hold on. Yes. Sorry. So see, one thing please understand, we have always said this INR 11,000 EBITDA per tonne that we got is beyond our normal range. In any case, we will never say that those kind of numbers we can expect on an ongoing basis. One odd quarter, again, we can get it, but this is not a sustainable number as of now. The second thing is, whenever raw material prices rise, sometimes -- so what we asked OE is for a price increase. Let us see how the negotiations happen. And the third is when raw material prices go up, at least the quarter where the prices have gone up, there are also inventory gains. So 1 quarter and all would get -- could get protected. It is when the old inventory runs out that when the shock happens, so without a price increase. So Q1 for this year should be reasonably fine. And if we don't get a price increase, Q2, there will be some problems. But overall, for the year, we will remain in the range of INR 7,000 to INR 10,000 our EBITDA guidance. Sorry, just to add more information, the letters that have gone to the OEs from various steel makers have asked for between INR 2,500 to INR 3,750, I think one company has said. But I'm sure INR 2,500 to INR 3,500 is a range in which letters of increase has gone to the OEs. And maybe INR 3,750, I'm not sure of that number of INR 3,750.

We have our next question from the line of [ Mr. Tushar ] from Phoenix Advisers.

Congratulations to the whole family. I was just trying to envisage power savings that we could get from the new solar plant. So if you could help me with some numbers.

Can you repeat your question? I couldn't understand, new what plant, solar plant?

Solar plant, yes, sir.

Yes. What about the solar plant?

So the power plant is for -- what I know is for 55 megawatts. And what PLF could we expect from the plant, if we have the numbers ready? The PLF, plant load factor, from the solar plant?

We will get about 8 crore units from that plant.

8 crores. Right, sir. And yes, that is the number that I could come. And the current cost...

About 17.5%.

Sorry, sir. Okay. Yes. 17.5%.

About 17.5%.

And the current cost per unit is INR 7 per unit as from the last call I could recollect. Is it?

Yes.

And what could be the cost that we could expect from the new plant?

We haven't shared that number as of now. But the range we are all aware at induction point, most companies are saying between INR 3.5 to INR 4 a unit. And then there are some costs there. So it's within that range.

INR 4 per unit. So the total...

But in addition to that, there are other costs, there are wheeling charges, there are T&D losses, at least our agreement is minimum INR 0.50 saving or actual, whichever is higher.

INR 0.50 or actual. Okay. So we could expect...

I mean, whichever is higher.

Savings, we can expect savings from INR 5 crores to INR 15 crores annually.

Yes. Yes, correct.

And the new plant is coming live December '25 or December '24, if you could help me?

'24.

'24. Right.

But it's all dependent on government approvals coming in place for the connectivity and so on. So our contract is in December '24, but maybe there could be a delay of a couple of months. So let's say safely by March '25.

March '25. So the benefits we can see from the next fiscal year, right?

This is why the confidence of increasing the range of EBITDA per tonne.

[Operator Instructions] We have our next question from the line of [ Ayan Sharma ] from B&K Securities.

Congratulations on the good news. Sir, I had just a few questions regarding the gross profit per kg. We see that it has improved to INR 35 per kg.

Your voice is muffled, it is not so clear. Can you speak a little slowly?

Sir, is it better now?

Yes, better now. Correct.

Sir, congratulations on the good news. Sir, I had a few questions regarding the gross profit per kg actually. We see that it has improved to INR 35 per kg. So how long do we expect this to continue? And how much of this benefit is from lower RM benefit? And how much is from a better mix benefit?

Very difficult to -- we don't share all those things. So overall, and there's no -- see, each one factor leads to several other factors also. Lower raw material costs may mean higher power costs and lower yield. So all those costs change. So it's a complex whole and that's why we don't share those numbers. We talk about a range, and we're saying whether range is going up or the range is going down. So our stated range is INR 7,000 to INR 10,000. This quarter, we got INR 11,000, which is higher than our range, and we are saying, therefore, do not look at INR 11,000, go back to INR 7,000 to INR 10,000 as the expected range for this financial year.

[Operator Instructions] We have our next question from the line of [ Aniket Redkar ], our shareholder.

Sir, I have few questions. I just wanted to understand as -- how does the current industry landscapes appear as we are seeing that the current anticipated demand from automotive sector is improving?

Correct. You're right. Automotive sector is improving. So what is the question?

What are our steps in terms of this improvement in the automotive sector? How are we going to take this?

So we are improving our capacity. We are adding to our quality capability, our quality sustaining and the measuring systems, which has quality assurance, a new nondestructive testing line is in place. All the CapEx that we're making is in line with that and more R&D -- sophisticated R&D equipment that not many steel companies have. So we've added those kind of equipment, thanks to our partner, Aichi. We know what equipments to have. And then we synchronize those equipment as per Aichi's readings and we get training from the Aichi people to run those machines, to use those machines effectively. So that's what we are doing, preparing for more and more auto companies, more EV requirement, which means better quality steels, cleaner steel, lighter steel. Similarly for hybrids also in the future. So the requirement of steel is going to be lighter, stronger and cleaner steel, and that's where we are working towards. Have I answered your question?

Sorry, this was not my question, sir.

Anyway, I have probably answered the question. Yes. Next question, please.

Just a follow-up on the power question on the solar plant. Sir, as we see our total power and fuel cost, what all is included in that power and fuel cost, if you could help me, the number that we...

Primarily, power and the fuel, it includes gas that we use, natural gas.

That's all?

And last year, there was some furnace oil and a little bit of diesel also was there.

And sir, what -- a ballpark number, what would be our consumption -- power consumption units, if you could help me any given point?

Power consumption is about 800 units. Roughly 800 units per tonne of steel.

And I guess I missed on the debt portion, the question that I asked, what is the number?

Our debt figures are 0.12 debt-to-equity.

Yes. So we've significantly paid off our debt in this financial year. So what is the future outlook for debt?

We have CapEx of about INR 370 crores pending, roughly. Yes, about INR 380 crores CapEx pending. So of course, we will have some incremental debt coming in.

I hope we might not cross 0.2, 0.3 debt-to-equity?

Certainly not, we won't cross 0.3, no. And within 3 years, we should be down to 0.1 for the current CapEx plan.

0.1 by?

We'll be back to 0.1 in the next 3 years. But I'm repeating this is the current CapEx plan. Moment we announce a new CapEx plan, this would perhaps be either forging or a new steel plant, then there will be separate CapEx starting for that, starting with purchase of land and then it's a different process will start altogether.

We have our next question from the line of [ Rahil Shah ] from Crown Capital.

Just a question. For the FY '25 guidance, what are we guiding in terms of volume -- overall volume and revenue?

Volume will be around 220,000 to 230,000 tonnes. So we are saying 210,000 to 215,000 in '24-'25 and 220,000 to 230,000 in the year '25-'26. And about 235,000 to 250,000 in the year '26-'27.

Okay. And bright bars capacity currently, I believe, is it 48,000 tonnes per annum?

Yes.

And so what are we expecting it to go to, let's say, by next year?

In the next 3 years, we'll take it up to about 60,000.

60,000. Okay.

Again, mostly will be done in 2 years' time, but it may spill over to the third year. All our CapEx -- most of our CapEx should be finished by the year '25-'26.

We have our next question from the line of [ Anil Kumar ], an individual investor.

Congrats for your good numbers. Sir, my question is regarding any plan for dilution of equity regarding the -- to Aichi? And when we plan for the -- our green plant project?

So Anil, we have already committed to Aichi that whenever they want to increase their stake, they can increase their stake. So we have no plans, they have to decide when they want to increase the stake. So that could happen later this year. It could happen next year, depends on them. The company does not need any more equity at this point in time. However, once the CapEx plan starts for the new project, hopefully, my hope is by end of this year, we will take this decision -- we should be able to take the decision, buy the land and then we start the process. And before we make significant CapEx decisions, I would like to -- though, we may not need to raise capital, but I would like to secure our equity capital, but we will -- it will definitely be dilution whenever we put up a new plant. So whether dilution happens just to Aichi, we do a rights issue, we do a small QIP, all those things are factors which the Board will consider. But clearly, for the kind of CapEx that we'll require, we will need a dilution at some stage.

Yes. After the completion of this year, we will -- picture will be clear, I think, sir.

Maybe happen -- may happen in this year itself, I don't know. I'm just saying, but yes, you're right, in all probabilty, the clarity will happen more by roughly 9 months to 1 year from now, we will be in a much clearer situation once we complete all our studies, and we are able to show. I mean, I'm convinced we need to put up a new plant, but we have to convince -- have everything on paper, proper studies done and so on, so that everyone is convinced, everyone in Board.

We have a next question from the line of [ Aman Agarwal ] from [ Aveksat Financial Advisors ].

Am I audible, sir?

Yes, sir. You are audible.

Congratulations, ma'am, and sir, to both of you. I have questions, sir, as Aichi is working with us to train capacity of employees and improving our process. So...

Can you repeat, please?

I'm saying Aichi Japan has been working with us as a strategically partners from last 3 to 3.5 years. So that they have been guiding us for improvement of capacity and all those things and training our employees and processes. So my question is regarding that in future you have given guidance that you will improve EBITDA per tonne from INR 7,000 to INR 10,000 to next 2 to 3 years by INR 11,000, INR 12,000. So my question is that, will it possible to charge such kind of margins from our suppliers as they are on board strategically and all those things from OEMs, from small OEMs to these global clients?

I'm sorry. No, no, we are not charging anything from our suppliers. Similarly, we are not talking of increasing the pricing to any customer. We are talking about internal improvements and protecting the current spread. If the current spread between raw material prices and selling prices get protected, then with the internal improvements that are already on the plan, on the anvil, then we should be able to reach these numbers.

Okay. If I -- my understanding is that you are not increasing the charges from your suppliers. You are improving your internal processes and maintaining the spread between the commodity charges. But sir, as...

If the spread gets compressed because of market situations, then we will be at the lower end of that range and the spread increase because of the market conditions, then the range, we'll be at the upper end of the range.

Yes. That's why question is that because commodity prices are not in our control. Globally, China is the...

That's is why we always give a range. We are under pressure very often by analysts that, please, do wider range, give a narrower range or give a target. So we are very clear, because of commodity nature of this industry and the variability, there will always be a range. Yes. As we improve operations, as we become more confident of our performance, we are able to increase this range. So if you recall, if you have been following us -- for the people who've been following the company for some time, earlier, our range was INR 4,500 to INR 6,000 of EBITDA per tonne. Then we changed it to INR 5,000 to INR 7,000. Then we changed it to INR 6,000 to INR 8,000. Then we changed it to INR 7,000 to INR 10,000. And now we are saying we're changing it to INR 8,000 to INR 11,000 EBITDA per tonne, but from '25-'26, we could have done it this year also. But this year, since we have shutdowns coming, we are not that confident. And we still have a capacity problem with rolling. So we will still have to go out, to do outside rolling. So some margin is going to go out there. This will come back to the company in '25-'26.

One more question I have. Sir, as you said, in future, you have a plan for forging a new steel plant. So for that, do we have any discussions with the existing partners, Aichi, for these things? Or we will be looking for onwards only?

No. Everything that we do is do with our partners. And it will be incorrect to say we have planned. I said we started studying, discussing these things. So it will be incorrect to say we have plans to get into forging. I just said we have started the process of studies. If the study is concluded fast, we'll take action fast, if the studies take time, we might take a decision later. We might decide after the studies, no, it doesn't make sense to go. The decision has not been taken. It is -- we have started studying this market. So that's why I don't have any time line that I can share with you at this point.

We will take that as the last question for today. I would now like to hand the conference over to Mr. Sachit Jain for closing comments. Over to you, sir.

Ladies and gentlemen, thank you so much for attending our call and for your confidence. I sincerely hope that this new benchmark that we are setting of INR 8,000 to INR 11,000 EBITDA per tonne and then aspirationally INR 9,000 to INR 12,000, we're able to meet that. And I'm confident with the good work our teams are doing, especially both our EDs, Mr. Rewari and Soumya, and the entire management team with them as well as our workforce with this thing and with our partners, Aichi, I feel pretty confident that with the demand situation improving, with this focus on green steel, we are sitting on a very, very interesting opportunity. So we hope to take advantage of that. And we will be here to answering your questions over the next few years. Thank you so much.

On behalf of Choice Equity Broking Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.