Venus Pipes and Tubes Limited (VENUSPIPES) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Venus Pipes & Tubes Limited Q2 and H1 FY '26 Earnings Conference Call, hosted by DAM Capital Advisors Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements do not guarantee the future performance of the company and may involve risks and uncertainties that are difficult to predict. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Aasim Bharde from DAM Capital Advisors. Thank you, and over to you, sir.

Thank you, Iraca. Good afternoon, everyone. On behalf of DAM Capital, I welcome you all to the Q2 and H1 FY '26 Earnings Call of Venus Pipes and Tubes Limited. We are pleased to have with us the management team represented by Mr. Arun Kothari, Managing Director; Mr. Dhruv Patel, Whole-Time Director; and Mr. Kunal Bubna, CFO. We will have the opening remarks from the team, followed by a Q&A session. Thank you, and over to you, Mr. Kothari.

Good afternoon, and a warm welcome to everyone on the Q2 and H1 FY '26 earnings call for Venus Pipes and Tubes Limited. I have been joined by Mr. Kunal Bubna, our CFO; and SGA, our Investor Relations Advisers. We have uploaded our Q2 FY '26 investor presentation on stock exchanges and company's website, and I hope you had an opportunity to go through the same. India's CapEx cycle continues to remain on an upward trajectory, supported by a strong policy push and sustained investment momentum. The buildout of critical infrastructure is now being driven by the few high-growth sectors such as power, railway, engineering and industrial machinery, semiconductor and defense. These sectors are witnessing accelerated project execution and multiyear investment visibility, indicating that the CapEx cycle is not only robust today, but positioned for structure and long-term expansion. A key commodity across these sector and a major opportunity for us is the extensive and increasing use of stainless steel pipes and tubes, whether it's the nuclear power generation, modernized railway train, precision equipment manufacturing, advanced semiconductor fabrication or mission-critical defense components. The demand for reliable corrosion resistant and high-performance stainless steel pipes is rapidly rising. Two key drivers are shaping this demand growth. First, there is a clear shift towards stainless steel from other steel categories, particularly in critical and high-performance applications where reliability and corrosion assistance are non-negotiable. Second, many of our end user industry are currently in an up-cycle with sustained capacity growth, such as energy, railways, engineering. However, while demand is expanding, it's important to recognize the current market sector. A significant portion of demand is still catered to by the unorganized sector and imports. This landscape is now changing with rising regulatory oversight and customers increasing price quality and long-term reliability, we are seeing a gradual but clear shift away from unorganized players on the import front, antidumping duties and quality-linked norms are also encouraging domestic high-quality production. This evolving environment has encouraged more companies to enter the organized space, but while many may want to participate, serving this market is challenging, there are high entry barriers. Customer approval in critical industry can take years. Quality control systems, testing infrastructure and certification require sustained investment and technical discipline. This is precisely where Venus has a distinct and proven advantage. For years, we have invested ahead of curve in expanding our product basket, adding SKU, quality system and advanced lab infrastructure for testing, ensuring that every product leaving our facility meets the highest global standards. This is why we are trusted and approved by leading companies across the world, including several from the Fortune 500 companies. Having built this platform, our strategic focus is now on value-added and critical application products, segments that demand deeper technical capability, longer approval cycle and that deliver superior margins. These are not categories where many new entrants can simply walk in. They require express credibility and trust earned over time. This positions Venus in a different league. We are not just participating in industry growth, we are stepping it. The strength of our narrative is backed by our numbers. This quarter, we achieved our highest revenue ever, underpinned by a healthy order book and solid growth in our export market. We will dive deep in the numbers as we go ahead. Our ambition is to most trusted and preferred supplier to customers who value quality, reliability, and performance. Coming to the Q2 FY '26 performance of the company. We delivered a strong performance this quarter, achieving our all-time high revenue of INR 291.5 crores, representing a 27% year-on-year growth for the quarter ended September 2025. This performance reflects both healthy underlying demand across our key customer segments and the effectiveness of our execution strategy. Growth was driven by the combination of higher volumes and continued expansion in exports, market where we have been strengthening our presence over the past few years. Let me now share a few key updates from our operations during the quarter. Export continued to be a significant growth engine for us, reaching an all-time high of INR 105.6 crores, marking a 53% year-on-year increase. This performance is particularly noteworthy given the ongoing geopolitical uncertainty, which show the acceptance and trust in the quality of our products in global markets. Export contributed a strong 40% of total revenue, shown strengthening our international footprint. On the domestic front, we recorded 15% growth supported by continued traction across key end the industry such as power, engineering and railways. As mentioned earlier, the shift from the unorganized to the organized sector, coupled with the CapEx cycle across several industry segments is driving our respective demand. We continue to view the domestic stainless steel pipes and tube markets with a positive and multiyear growth outlook. Our order book remains healthy at INR 490 crores, providing strong visibility for the coming quarters. On the capacity expansion front, in November, we successfully commissioned 18,000 metric ton MT of stainless steel seamless pipes and tube, taking our total seamless capacity of 16,200 metric tons per annum. We expect a steady ramp-up in utilization level in the coming months. Additionally, the new capacity for fitting and seamless pipe and tubes remain on track and expected to come on stream in the second half of this fiscal, further strengthening our ability to serve high-value and critical application segment. In closing, we will continue to focus on delivering high-quality products and creating long-term value for all our stakeholders. We are confident of a strong performance in the second half of the year. The best is still ahead of us. Together, we will continue to set higher standards in our industry. With this, I hand over to Mr. Kunal Bubna, our CFO.

Good afternoon, everyone. We are pleased to share that our company has delivered a resilient performance in the second quarter and half year ended September 2025. On the revenue front, revenue from operations for Q2 FY '26 stood at INR 291.5 crores as compared to INR 228.9 crores during Q2 FY '25, achieving a growth of 27.3% on a year-on-year basis. Revenue for H1 FY '26 stood at INR 568 crores, witnessing a strong growth of 21.1%. Revenue bifurcation for the quarter was 38.9% from welded, 56.3% from seamless and 4.8% from others. Growth in seamless segment was 25% on a year-on-year basis and railway segment registered a strong growth of 48% on Q2 FY '26 on a year-on-year basis in terms of revenue. Our export sales stood robust at INR 115.6 crores for the quarter compared to INR 75.6 crores during the same period last year, a growth of 53% year-on-yar basis. On the EBITDA front, our EBITDA for the quarter stood at INR 47.4 crores as compared to INR 40.9 crores in Q2 FY '25, a growth of 16%. EBITDA margin for the quarter stood at 16.3% On H1 FY '26 EBITDA showed a growth of 2%, standing at INR 92.3 crores, margin at 16.3%. PAT for Q2 FY '26 was INR 26.1 crores compared to INR 23.7 crores. In Q2 FY '25 a growth of 10% on a year-on-year basis. PAT margin stood at 8.9% for the quarter. In closing, we remain confident about the road ahead with focused investment, strong execution and a clear growth strategy. We are committed to strengthening the Venus brand and setting new benchmark in the stainless steel pipes and tube industry. With this, I would like to open the floor for questions.

[Operator Instructions] The first question is from the line of Parth Bhavsar from Investec.

I had 2 questions. One is that we had won this order in April or February, right, INR 190 crores. Are there any updates? What sort of execution has happened of that project? Also wanted to understand, if you maintain your guidance for FY '26?

Yes. On the front of the bigger order of the power sector, what we have won, we have executed around more than 15% of the same and balance is under process of execution and we target -- internally, the target is to finish it before June 2026. We maintain our guidance for the same.

15% executed till now.

Yes, sort of near to that.

The guidance for 25% revenue growth is maintained?

Yes, maintained.

Next question is from the line of Dhruv Jain from AMBIT Capital.

Sir, my first question is on the margins. With all the capacities and value-addition that's coming through over the next 6 months, how should we look at the margins in FY '27? If you could provide any number, that would be great?

See, currently, it is around 16.3% for this quarter. As you rightly said, generally, the value-added welded seamless and fitting for the plant will be started by end of this financial year. Next year, the entire operation will be there and also along with value-added products. We believe it will be higher than what we are currently around and it should be in the range of between 16% to 18% on a blended basis.

Sir, you mentioned 16% to 18%, sir, but should we not see a higher jump in the sense that because of the fittings and value addition, should it not start to look like 18% next year onwards?

See, it would be a new business for us from the perspective of approval and all. Those things need to be considered also, so those factors will also play in many of the other things. Keeping that, we believe that is the number currently what we are targeting for.

Sir, my second question is on exports. While we've seen a very good growth in exports in this quarter for the second half of the year, how will that mix change? Will it be more domestic or exports will continue at the current run rate? The reason why I'm asking this question is I'm guessing there would be some bit of soil tending on the U.S. exports that would have happened because of tariffs in this quarter?

Yes, you're right. It should not be at this 40%, but we believe it should be more than 25%, 30% sort of number for export going forward also.

The rest of the growth will largely be driven by the domestic market?

Right.

Sir, I think order book, if you could just -- sorry, I missed that number. If you could just repeat that, sir?

INR 490 crores.

Sir, if you could just give the split of volume growth and value growth for this quarter?

Volume-wise, see, we are not giving a such numbers. Again, for the year-on-year quarter, the volume growth is also on a blended basis more than 20%, at least.

The next question is from the line of Sneha Talreja from Nuvama.

Congratulations on numbers. Just a couple of questions from my end. Just wanted to get a feedback from the exports market, which are the geographies where you're seeing strong demand? How is the U.S. demand shaping up with not having so much of clarity on the tariff, firstly that?

Yes. The orders are there from -- a good number of orders are coming from Europe currently. You're right on the side of you, there's a lot of uncertainty, so that is slightly deflecting for our side. Again, Middle East and that part is going as per the what it used to be in the last quarter.

Secondly, you have also said that expansions are likely in H2 FY '26, both fittings as well as on the seamless part. What can we expect this particular year in terms of contribution from fittings, sir? H2 as in this will be Q3, Q4? What sort of revenue contribution can we look at especially, from the fitting side of the business?

For FY '26, not much because it would be started in the last quarter of FY '26, so not much amount of revenue will come from fittings from the new plant.

Given that you said that you won't be mentioning much on the volume side of the growth. Given you said it is more than 20% and we have seen around 27-odd percent sort of revenue growth, is it fair to assume that realizations are on a dropping trend. In that case, how should we look at the annualized revenue run rate? Will it be closer to 25% sort of a number that you have guided on the volume front?

Short of that, we believe.

The next question is from the line of Mythili Balakrishnan from Alchemy.

Sir, a couple of questions. I just wanted to get a sense from you of on the welded side, we have seen growth which has reemerged. Is there any particular project or anything particular which is happening on that segment? Because it had been soft so far. Just wanted to get a sense of is that a new product? Is there any new customer, etc., which has got added on the welded side of things?

It's a mixed bag, new geography in Middle East also. Again, in India also, a few new customers have been added. Again, primarily on the bigger size welded pipe, they started deploying.

Also wanted to get a sense from you that if the steel prices sort of stay on an upward trajectory, which is sort of expected, then what has happened to margins for us, while we are short cycle in general? Just wanted to get a sense of how to think about margins in that scenario.

Probably, as a company, we generally try to hedge it while taking the order to a substantial portion of it. On the margin front, we are not much affected with the changes in prices.

Whatever margins we are having right now, it should be at least sustainable given the mix improvement and all that and not much impact from raw material prices changes.

Yes.

The next question is from the line of Pallav Agarwal from Antique Stock Broking.

The first question was on this antidumping duties. When are we expected to expire on stainless steel pipes?

It has come in December 2022. On stainless steel stainless pipe, and it is there for 5 years, so primarily, it should be ended by December 2027.

We have almost 2 more years. Sir, the other thing was on the cost part, so we've seen other expenses go up and on a Y-o-Y basis, employee costs have also gone up. Will this trend continue? Or once all the new capacities come in place, they should stabilize?

Absolutely. See, again, each quarter, there is a new expansion coming in, a new plant started. That's why those costs are increasing. I think post this year, this should stabilize. It should increase in the few quarters to come, but not very significantly. In the coming year, I think it should be stabilized to a good extent.

Also borrowing, borrowings have gone up. I think that's reflecting in the finance cost also. Are we close to the peak net debt? Or is there some more major CapEx left that can push this up?

It will push up because there are CapEx is left because of that, there will be a few loans would be coming in the books. It will slightly push up from here.

Maybe FY '27, maybe it should probably peak out because then the new projects…

Absolutely.

Yes, EBITDA should start coming in from the new projects?

Yes. Absolutely.

Sir, lastly, just on -- I mean, broadly, the understanding is that seamless tubes have a better margin because of being backward integrated and welded. On the export orders, etc., are we seeing that? Because for a couple of quarters now, our EBITDA margin has been pretty stagnant at 16% or 16.5%. You guided for 16% to 18%, so when can we see this bump up happening?

See, the bump up will be more happen in the coming year. Generally all the capacity will start operating at an optimum level. Again, see, the margins have been constant, but see here also the volume and value is also increasing and the subdued in the overall in the market in some places. It has to be taken into care, but definitely, yes, the start of all these capacities, I think the margin should pick up in the coming years to come.

The next question is from the line of Bhargav from AMBIT Asset Management.

Sir, my first question is that on this BHEL, obviously, there will be more orders which they would be tendering out. We believe that it could be in the range of INR 3,000 crores to INR 4,000 crores in the next 2 to 2.5 years. Just wanted to know your thoughts on this number, sir?

You're right, it will be significantly high, very true. Because there are a lot of CapEx on the part of thermal side, with BHEL and other players are doing. See, what we see giving a specific number is slightly tough because it all depends on how the tenders are being floated, but to say it's significantly very high.

But sir, is it fair to expect that one more tender will be opened in the second half of this year or very early to say that?