Vibhor Steel Tubes Limited (VSTL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Vibhor Steel Tubes Limited Q1 FY '25 Conference Call. We have with us today Mr. Vibhor Kaushik, Managing Director, Vibhor Steel Tubes Limited. [Operator Instructions] Incorporated in 2003, Vibhor Steel Tubes Limited is a manufacturer and exporter of mid steel, carbon steel, ERW black, and galvanized pipes, hallow steel pipes, cold rolled steel stripes, coils. The company also manufactures crash barrier which are widely used on median shoulder, width and high embankment. VSTL is promoted by Mr. Vijay Kaushik, a first-generation entrepreneur with a rich experience of more than 4 decades in the manufacturing sector. Mr. Vibhor Kaushik joined the company in 2006 and under his leadership, the company has expanded its capacity by 19 folds. VSTL's promoters are heavily supported by highly skilled and experienced team of 600-plus people. VSTL has 2 manufacturing units, each in Telangana and Maharashtra with a total installed capacity of 221,000 metric tons per annum. VSTL has a wide product profile comprising electric resistant, wildly pipes, hot dipped galvanized pipes, hallow section tubes and crash barrier amongst others. The products find application across multiple sectors, including agriculture, oil and gas, automobile, telecom, et cetera. In February 2024, VSTL made a stellar depute on BSE and NSE, raising INR 72.17 crores from the IPO. Thank you. I now hand the conference over to Mr. Vibhor Kausik from the Vibhor Steel Tubes Limited. Thank you, and over to you, sir. Please go ahead, sir. Go ahead.

Mr. Vijay Kaushik is also online?

Yes, sir. Please so ahead, sir.

Are there any investors there with their questions?

Yes, sir, I have transferred to the main call, sir. Should I open up for the question and answer? Okay, fine, sir.

[Operator Instructions] First question is from the line of Vanshikha Gandhi from Khambatta Securities.

So I was looking at the stock prices since the IPO came out, and it seems like the stock of the company has been extremely erratic with the value either falling or rising a lot. And overall, it seems to have fallen by a drastic amount, approximately 40% since 20th February to today. Could you give any reason? Could you give an explanation as to why it has fallen that much?

Vibhor? I couldn't understand what she wants to talk [Foreign Language].

Her question is the stock market when it opened up, opened up at a certain level and then it has come down to a lower level. What is the reason for this change in the stock price? What is driving it? That is her question. It is a market-driven phenomena.

Because of surveillance, they have put this share in surveillance. SEBI has put the share in surveillance, that's why it's down.

That is happening at the moment. But when the stock opened up, it opened up to a great response. The share price opening was INR 150. It went all the way up to around INR 440, INR 445. That was because there was a lot of demand for the stock. And slowly and steadily, it came back to the original gray market indicator of around 215. And for the past all these months, it has been floating around the same number...

Sir, do you have any expectation for it to rise again because we also agree usually stock prices do fall after an IPO comes out. However, 40% seemed a bit drastic?

This is also a market-driven phenomenon. It is forward-looking. It is not permissible to say when it is going to rise. However, there are indications that we can give about our company the promises that we made at the launch of the IPO, and we are following the same pathway, the same roadmap that was laid out to the investor at the time of the IPO, such as a new plant is underway, which is coming up in Jharsuguda. Even at the time of the IPO launch, we had mentioned that we had purchased the land. At the moment, after the land being purchased, the plant is under process. We have erected 2 tube mills. There are 3 tube mills we are installing in that area with the slitting line and galvanized unit. The installed capacity of Jharsuguda plant is similar to what we have in the Western region of India in Maharashtra, which is 10,000 tonnes. So these are the developments. I can talk about the development that we promised during IPO that it is underway. And we had given a time line of somewhere second quarter, end of second quarter for the plant to start its trial run or its production, and we are well on our way to achieve that target. So I believe investors will see that the development as promised is taking place. Second development that has taken place was in Hyderabad, we have installed one more galvanized plant because of a new product that we introduced almost around a year ago, but now it has taken a leap forward in terms of its production and its sale, which is a highway guardrail product. Before we were using only one galvanizing line in Hyderabad to cater to the demand of pipe industry and also to cater to the demand of highway guardrail, which is the crash barrier that you see on the highway. On both sides of the highway, you must have seen that corrugated sheet. This is for the protection of the vehicle. In case a vehicle skids to the left or to the right, it does not go off the road. These are the protection barriers. So we have started the production in quite a good quantity. One galvanized line was not sufficient to cater to the demand of the client. So we have put another galvanized line. Just last month, we achieved a target of 1,200 tonnes of dispatch of galvanized product called crash barrier or highway guardrail, which used to be -- before that, it used to be only 500 tonnes. So these are the developments we have made. Now all these developments shall reflect in terms of turnover in coming up quarters and coming up years. This is only the start of it. In Jharsuguda also, we wish to continue with pipe manufacturing, and we wish to continue with highway guardrails as well. And during IPO, we had promised that once we establish ourselves in crash barriers, we will go ahead and introduce other products as well such as Octagon Pole, High Mast Pole, and we are in way of achieving that. The machineries for those products are also being placed, orders of those machines have been placed, and they shall also be getting installed in Jharsuguda location in its due time. So these are the developments which we promised to the investors. Most of it -- all of it, I believe, shall be executed within the time line that was given in February. So based on that, there shall be the trust which we have developed in the investors. We shall continue to have that trust and grow that trust. So once the investors have the growth and it's a continuous trust, so I believe the future prospect for Vibhor Steel as a company is very promising.

Okay. I would ask one more question....

I hope this answers your question, Gandhi.

Yes, sir. But I was also wondering that you have increased your assets by a lot, it seems like it. Is that the reason why there is approximately a 15% decline in your profit because it seems like this...

This decline of the profit is a cycle of steel which was expected after the rise of steel prices due to COVID. The ripple effect of COVID has taken its own due time -- due course to settle up. Now the prices that has risen to a very new height during COVID has come down to almost its original price, which used to be before COVID. So all the price correction that has taken place, we believe it has more or less come back to normal or come back to being stable. So the -- although our turnover hasn't -- or our volume hasn't changed drastically in the first quarter, neither have our profit, but a little bit less profitability is in the account of steel price correction which we expected even last year that it will happen in the first quarter of this year. So it wasn't a sudden surprise we expected it and we managed it very well, we believe.

Gandhi ji, there’'s one more thing to be mentioned that the quantity is not decreased. Quantity is the same. Last quarter in [Foreign Language] the quantity was 38,129 and in '24-'25, it is INR 36,747. So quantity-wise, it will not decrease because of the prices goes down, that's why sale is affected in terms of amount. It's a very important thing to know.

[Operator Instructions] Our next question is from the line of Vanshika Gandhi from Khambatta Securities.

Yes. Sorry, I had a few more questions. It seems like right now no one answered that. So okay, I was wondering that now that you have your IPO proceeds, could you tell me how they've been utilized so far? And like what amount is remaining, how you plan to allocate the proceeds that you received through your IPO to maximize shareholder value?

I believe the question is since IPO is raised, how has been our fund utilization from the IPO? Correct? Gandhi ji, this is your question?

Yes.

We utilized the fund for the working capital.

For the working capital as in your land, your machinery and everything?

No, no. We have taken loan on the machinery. We have not utilized this money. We have utilized this money...

This working capital is only utilized in our procurement of raw material which was the reason why we raised IPO. It was mentioned as well, and that's exactly where the fund has been utilized. Most of the fund is utilized there. I think we have very less, which is in the form of FD. I'm not sure about the exact number. It should be around INR 3 crores...

It is not used. We have made FD also which is not utilized, INR 3 crores something. We have made an FD also because we were not utilizing that fund. So we have made the FD.

We're planning on continuing to use this amount for working capital and not for of any long-term assets?

No, no, not for the long-term asset. It has been done through our internal accrual and also the term loan that we have taken from the banks.

Okay. And also, I saw that the debt levels of the company are also pretty good. So does the company plan on managing its debt levels and finance costs moving forward? Or is it more reliant on financing through debt?

I believe with the IPO being successful, the money has been raised for working capital. So now we have been able to manage our debt significantly effectively. So that has been taken care. And so our bank interest for the working capital, which is a CC or OD limit, that has been under control which was our target.

Interest amount will be reduced heavily. So it will add in the profit because interest will be decreased quite a lot. So it will affect the profit.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

[Foreign Language] very generously, we are doing our best to maintain that confidence [Foreign Language] Jai Plant we have installed in Hyderabad and the investors which we have promised in Jharsuguda, we have taken possession of the land in the month of January and month of January, 6 months -- within 6 months, we have installed 3 pipe mills. We have made 5 sheds. We are making GI plant. GI plant approximately 50% is complete. Because of heavy rain, we are suffering a lot installing the plant. [Foreign Language] I feel we are going to be in production in the month of September. It may go up to October, but not beyond that. So in 9 months, if a man put a factory from the scratch [Foreign Language] I'm going to catch my flight for Jharsuguda, I'm on the way to Delhi airport. So I'm in the car. So my son is also in China because we have to take delivery of some machineries. So he has gone there to see the machinery and then my will be finalized and that machine will come in the month of August or September, I think so. So [Foreign Language] October, November you can watch very easily [Foreign Language]. So I think that we will maintain the confidence of the investors. [Foreign Language] I think is very proper to tell you all the things [Foreign Language] I would prefer that if investors want to visit the place, most welcome. Thank you very much.

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