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

Ladies and gentlemen, good day, and welcome to the Vibhor Steel Tubes Limited Q2 and H1 FY '25 Earnings Conference Call. We have with us today representing Vibhor Steel Tubes Limited, Mr. Vijay Kaushik, Chairman; and Mr. Vibhor Kaushik, Managing Director of the company. [Operator Instructions] Incorporated in 2003, Vibhor Steel Tubes Limited is a manufacturer and exporter of Mild Steel, Carbon Steel, Black and Galvanized Pipes, Hallow Steel Pipe, Cold Rolled Steel Strips/Coils. The company also manufactures crash barriers, which are widely used on mediants, shoulders, virges and high embankments. 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-fold. VSTL promoters are ably supported by a 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 Resistance Welded Pipes, hot-dipped galvanized pipes, hollow section tubes and crash barriers amongst others. The products find applications across multiple sectors, including agriculture, oil and gas, automobile, telecom, et cetera. The company went public in February 2024. I now hand the conference over to Mr. Vibhor Kaushik from Vibhor Steel Tubes Limited. Thank you, and over to you, sir.

I welcome, everyone. Currently, I'm calling -- I am on this call from China. I had convey for an inspection of some machines that we have ordered for our upcoming project in Jharsuguda in Odisha. The plant in Orissa, we is taking a lot of our focus. We are in expansion mode and this plants -- 2 tube mills and the slitting line should start as soon as we get the electrical. The project is completed. The 2 tube mills and slitting line is completing -- completed. We are waiting for electrical's to come and then we will start our production. We are hoping that will happen within 1-month period of time. And apart from that, I want to tell that Mumbai plant and Hyderabad plant, both are running at optimal level. And especially in Hyderabad, besides the steel -- besides the pipe and crash barrier, I'd like to let everybody know that we have also started transmission line, and we have secured orders as well. There are 2 orders that we have secured. The total order at this point in time in Hyderabad is 650 tonnes for transmission line. The reason I'm pointing it out is to let all the investors be aware that besides steel pipes and galvanized pipes, earlier, we had introduced crash barriers, highway guardrails, which is showing a steady growth. Apart from that in Hyderabad now, we have also started power transmission line, which is a conventional angle-based power transmission. So this is something I was very excited -- I'm very excited to share with all the investors that we have successfully entered into this field as well. And about Jharsuguda, besides steel pipes, black and galvanized, when the -- as soon as the electricity comes in, which is in another -- hopefully in another 20 days to 1-month. We shall also start other products, same that we have introduced in Hyderabad, which is highway crash barriers -- highway guardrails and crash barriers, power transmission line. And apart from these 2 new products, we shall also be introducing another domain, which is octagon pole and high mast pole, which are used in the -- these are highway products. They are used in -- use for lighting systems. And also, that should -- all these 3 new products crash barriers, pole and power transmission line, conventional power transmission line, which should all start together by the end of December -- hopefully by the end of December in Jharsuguda. All the machines we have ordered, they are on their way. Some machines are reaching in the middle of -- by the end of this month and some are reaching by the beginning of December. These machines are all focused for the expansion that we are doing in different areas, as I mentioned, highway guardrail, power transmission line and octagon. And apart from that, I also would like to inform that we have successfully placed order for machinery for monopole, which is a power transmission new technology. It is a shift from conventional transmission line, which is angle-based to a new method of transferring the power through a pole system, which requires very less space and is much more effective. That machinery order is placed. We are expecting that machinery to arrive in our Jharsuguda plant next year by April. So that is another domain we shall be entering next year. But as for right now, I can say that successfully by the end of December, in Jharsuguda, beside steel pipes and galvanized pipe, highway crash barrier, power transmission and pole, all of them shall start at the same time. These products have a lot of demand in India. And they have -- besides the demand, they have high margins as well. So we are really looking forward to it. The company is exhibiting these products in various exhibition this year, and we are getting phenomenal responses. And I'm very hopeful and very positive that this should take us very less time to capture the market, and Jharsuguda shall be very fruitful because we are very close to the steel manufacturers. So our raw material procurement is very easy. And all these products that we have introduced -- we are introducing is viable to be able to cater to pan-India level, not just locally because our steel, we are sitting -- we're going to be sitting very close to our raw material supplier. So our logistic cost for raw material will be minimal, and that will give us advantage to cater and send this material to all the directions in India. So this is what I wanted to let all the investors know that what we promised earlier in February that we will -- we are putting up a plant. The plant is, I would say, 70%, 75% already installed in Jharsuguda. Once the power line, which is also very close, government contractors are working at it. They are installing the pole and cable, so that we will get -- so the power will come. And what we promised in February, we shall be delivering in December now. The plant should be running along with it all the expansions, as I've explained. Thank you.

Doo you want me to begin the question-and-answer session?

Yes, please.

[Operator Instructions] As there are no questions in the queue, I hand over the conference to Mr. Vibhor Kaushik for closing comments. Over to you.

Mr. Vijay Kaushik is also present. And so it is a coincidence that last time also, I was in China. When we had a meeting like this, and that time also, I had come to inspect some machines and those machines have arrived. I would like to inform that this year, because of the central election, the demand, the projects and the government, everything has been slow, which has reflected in quarter 1 and quarter 2. However, having said that, it is important that I highlight that in the month of October, we had seen everything mostly coming back to its original normal sell that happened last October last year. Our sales have picked up in October, and that has been reflected in our production also, in our production value, production quantity and our dispatch value and dispatch quantity as well. So we are hopeful, and we are positive that the demand is now going to be very steady for our steel pipe and black and galvanized for quarter 3 and quarter 4. And along with that, crash barrier, the new product has already picked up. We are hitting a constant average of anywhere between 500 tonnes to 800 tonnes in a month, and we are expecting this to increase because now more and more road contractors are getting aware of our presence in the market, and they are getting aware of the product that we are making and our quality. So that is what we are expecting in quarter 3 and quarter 4. There are steel pipe, black and galvanized both shall pick. And apart from that, crash barriers shall also see because quarter 3 and quarter 4, the contractors have targets to complete by the end of the year. So we should see growth in both of this. Apart from that, transmission line is already -- as I said, we already have more than 500 tonnes of order. So this means that the market has a lot of demand as they are entertaining us, we have just entered in the market and yet we've been able to capture orders in the market. So this is all evident that the market has very healthy demand for all the new products that we have come up with. And we are very positively looking for quarter 3 and quarter 4 for all our product that has existed and all the new products that are coming up. Thank you very much.

We have one question.

Export increased by 300, 400 tonnes increase of export DIY. Yes -- has also increased.

Yes. We have one question in the queue. Should I take him?

Please.

We have a question from the line of Rahil Shah from Crown Capital.

Yes. So just you mentioned you're adding these new product lines, correct? You're introducing the transmission lines. And then you also mentioned something about a monopole. So when will that be starting?

The monopole has a few set of equipments that are required. They are -- the name of those equipments are plasma cutters, press brake and pole closing. Now plasma cutters, we have already secured that has arrived in our factory. It's currently going under installation. Pole close has also been purchased and it's currently getting installed. Press brake, which is the main item, that is the reason why I'm in China. We've just placed the order for it. We're expecting this machine to arrive India in April. So we can say that by May or June, this domain, we should be able to enter successfully. It also requires galvanized setup, which we already have up to a certain diameter. Higher than that, we shall be installing, but the first phase of monopole, I am expecting to start somewhere in June next year.

Okay. Can you also please highlight again what is the use for this monopole? Like, where is it used most? And how will it benefit us?

If -- most of the power transmission in India and also around the world has happened in a conventional setup, which uses angles. You must have seen on highways, they look -- they have 4 legs. There are big structures that carries electricity grid. Now those structures take up a lot of space. They look like big robots with arms because those arms are -- they are holding the cables together for transmission. The problem is that has been going on for quite a while, but the problem with that setup is it takes a lot of space. So now when the land is getting expensive, more expensive, it is -- it is the need of the hour that we look for a replacement of a structure that will take up a very less space. So that's when the monopole comes in. Monopole it's a cylindrical body. It's like a pipe, but it's made on a -- in a different way. It's made on a press brake. It's circular in structure, and it takes maybe half of the space of what angle-based transmission line would take. And its weight is also less than angle based. So it's a profitable in both sense in the amount of space it takes and also amount of tonnage it requires. So this is what monopole is. It's used in all transmission lines from 33 kv to 133 to all the way up to 70. So -- but India is still growing. There are not too many players who have entered this domain as yet. But they -- but there is a certain demand. I was at the exhibition and a lot of contractors approached us, and they were hoping that we start as soon as possible because we already have experience with galvanizing. So this is what a monopole is. It's for the transmission of the power and it's a take from conventional way to a modern way, which requires less pace and it's more effective.

Okay. Yes, I just Googled it. I Google the monopole...

Mr. Shah, can you hear me?

Yes.

So that one think Mr. Vibhor has told you, the other aspect is this, [Foreign Language].

[Foreign Language] We can't consider it as a -- major contributor, okay.

[Foreign Language]

[Foreign Language]

[Foreign Language]

So you think this can be bigger than our core business or galvanized pipes and...

Yes, yes.

[Foreign Language] We don't consider this as of now. So at what growth percentage do you think your -- the remainder of the business can grow a pipe [indiscernible] [Foreign Language] our transmission and the crash barriers?

[Foreign Language] We have put up another GI in Hyderabad versus last month [Foreign Language] And even in North we are getting order from North side. [Foreign Language] Now we are getting from Raipur also [Foreign Language]

[Foreign Language]

[Foreign Language]

Mr. Shah, let me step up. Because the margins and contributions what is going to make. See, in pipe, the model is that we have to keep a lot in stock. So price variation and everything becomes a part of it, it becomes effective. In this, it is order based. We get order, then we get the raw material and then we process it. So our profit at the time of when we quote it to any of the customer, it remains same. There is no major variable factors in it because we've already considered raw material prices and we've already considered galvanizing prices and everything. In terms of the volume, if you look at our turnover will always be high for pipe because the volume of pipe will always be more. We have 2 plants, Bombay and Hyderabad, that we're using -- we're making pipe. Third, Jharsuguda, which is I sometimes feel as a bigger market for everything, for pipe also. So the pipe contribution from Jharsuguda will also be significantly higher. So in terms of the top line, if you see pipe will always have more. But in terms of the bottom line, if you see when we do a breakup in the future because this is right now, we just entered. So there's not much data for us to show. But in the future, you'll see that our bottom line contribution from these other products is going to be significantly higher than pipe. And in terms of how much, it's variable, but you can consider it at least 2% higher than what it generally reflects in pipe, more than that. But at this point in time, you can consider 2%.

Okay. So sir, overall, on an annual basis, are you able to guide for a certain revenue growth?

Yes. So now we are expecting in quarter 3 and quarter 4, there will be revenue growth. The reason for the revenue growth will be, one, market has come back to normal. The election time is over, although there is election going on in Maharashtra, but now that is also over. So government -- this is the end. Quarter 3, quarter 4, always see all the targets has to be completed. So the growth will always be higher numbers and more importantly, Jharsuguda, an entire new area where we don't supply is coming up for the last quarter at least. So definitely, the revenue turnover will increase only from the pipe, if you talk only about the pipe. But apart from pipe, we get revenue growth from all these new projects as well, that will definitely show because we have orders in hand, we're executing right now. So they will definitely show in quarter 3 and quarter 4.

Okay. Since your H1, you saw a degrowth in both the quarters. Do you think H2 we more than need to compensate for it and you will see an overall annual growth over FY '24?

See, if we -- this is something I highlighted last time also. If we leave the COVID time that era and we go a little back, the industry has always been pre-Diwali and post-Diwali. Pre-Diwali, the numbers are always a little stress. And after that, the numbers become better. The reason for that is that everyone has a project, everyone has a time line to complete, so the growth start to see. The same thing is happening with the steel pipe prices also. Prices are going up. The reason why it's going up is because the same trend, which has been going on for years have now come back because the COVID era was different, so I don't talk about that. But otherwise, this has been the trend. And if we go by the trend, which we've already seen in October, which we're seeing now also -- in November also, the prices are going north for raw material. So yes, our growth -- the margins will come back. Our turnover will also increase, and the turnover will also increase because of all the new product line and the new area we'll be going to cater, which is Northeast of India.

Okay. Okay, sir. So from what I understand, I think H2 will be much better and FY '26 will be a game changer for both revenue and margins.

Absolutely, we are very positive on that because we have seen a lot of positive response on the market, and we've really entered into this domain. So yes, what you have understood is -- and I'm glad that we've been able to translate it to you. And I think you've understood exactly what we are doing and how we are implementing it.

Got it. Sir, looking forward to it. And all the best.

Vibhor sir, any closing comments from your end?

Well, I'm on the way right now to airport. My job in China is finally finished. And I think all the machines and all the equipments that we had ordered most of them are coming. The only thing that is left, which is monopole, I was discussing with Mr. Shah, that machine order is placed. So now all my energy will be in India. We shall be running this new plant in time, hopefully, in the next 20 to 25 days, the first phase of the production will start, which is a smaller diameter pipe. And then another 40 to 45 days, full-fledged we are hoping to start Jharsuguda. So in December, hopefully, the numbers from Jharsuguda in our top line revenue and shall start reflecting, and we are really looking forward to it. Apart from that, all the expansion that we've been doing from February to now, I am glad to announce that the crash barrier has successfully reaching an average of 500 to 600 tonnes every month. And I'm glad to announce that the new domain of transmission line has already got us ordered, which shows that there's a lot of demand in India. And if there are players who are doing galvanizing and the room for quality such as us, we get good response and good orders already, and we're really looking forward to catering to all these new sectors that we have entered, and that shall show in both our top line and bottom line in quarter 3 and quarter 4 and definitely in the coming year ahead. Thank you very much.

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