Welspun Corp Limited (532144) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Welspun Corp Limited Q4 FY '21 Earnings Conference Call hosted by Emkay Global Financial Services Limited. We have with us today Mr. Vipul Mathur, Managing Director and CEO; Mr. Percy Birdy, Chief Financial Officer; and Mr. Akhil Jindal, Group CFO and Head Strategy, Welspun Group. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ayush Bansal of Emkay Global. Thank you. And over to you, Mr. Bansal.

Good morning, everyone. I would like to welcome the management and thank them for this opportunity. I shall now hand over the call to the management for the opening remarks. Over to you, sir.

A very good morning to all of you. This is Vipul Mathur, MD and CEO for Welspun Corp. I hope all of you are keeping safe and keeping fine. It's a pleasure to address this conference call, and thank you for joining us today. Just to give you -- to start where I would like to give you some brief operational and financial highlights as to what did we achieve in Q4 and this FY '21. We are very pleased to inform that once again, in this pandemic area as well, we achieved a sales of 1 million tonne pipes. The total income from our operations is up 30.6% on a quarter-on-quarter basis. Our EBITDA stands at INR 321 crore, up 27.1% on a quarter-on-quarter basis. Our PAT at INR 225 crore is up by 15.3% on a quarter-on-quarter basis. Our net cash stands at INR 620 crore. We generated a free cash flow of INR 723 crore during this year. And our current order book stands at INR 4,800 crore, with an active order book of 1.2 million tonnes. As I said, our net cash is at now INR 620 crores, with -- was INR 314 crore at the end of December '20. The sale of PCMD division and the receipt office consideration post 21st March 2021 has further strengthened our net cash position. And now as of today, it stands at almost INR 820 crore. Just to give you a brief overview on the market and what are the key drivers. As you know, Welspun Corp has a global presence. We are present geographically in India, in Saudi Arabia as well as in U.S. And just to give you a flavor as to what is happening on all the 3 markets and where do we see the market heading for as a guidance for the future, I think so that will be -- you would be very keen to understand that. We are seeing that with the cuts which OPEC and OPEC+ have announced, the prices for the crude oil prices -- the crude oil are now almost at a highest level and almost rate, I think, like close to $75 a barrel. We have seen a very strong rebound both on the demand side of it as well as on the firming price -- on the price firm-up as well. We are seeing even the gas business, which is definitely going to dominate the mix, is also growing up steadily. All in all, looking at the firm-up of the pricing as well as the demand, we are very optimistic that in the mid to near term, mid- to short-term basis or short-term to midterm basis, we would see an incremental growth coming across all the geographies. However, specifically talking about India, the demand -- energy demand in India is the fastest among all the major economies. The country share in global primary energy consumption is projected to increase by twofold by 2035. There's a big thrust on natural gas as part of government plans of raising its shares in the country's energy basket. Therefore, an interconnected national gas grid has been envisaged to ensure adequate availability and equitable distribution of natural gas in all parts of the country. At present, there are about 17,000 kilometers of natural gas pipeline operation in the country, which -- with plans to almost double this capacity. The union budget contained announcement to increase the use of natural gas, including addition of 100 districts to the city gas distribution network and setting up an independent gas transport system operator to facilitate booking of common carrier capacity in natural gas pipeline. We did witness a recovery in the water segment post the first wave of pandemic. However, the second wave and the all-time high commodity prices have slowed down this activity a bit in the sector. In any case, we have a strong feeling that water will remain a key focus area in the country. And we are confident to see bounce back of the demand, both for line pipes and DI Pipes in H2 of FY '22. We continue to stay focused in the export market. The recent award of Barossa order on us from the Australian market and award of few other international projects clearly reflects revival of pipeline demand, its potential and the opportunities in the export market. We are in discussion with various customers across geographies and are confident of bagging new export orders in the near future. As regards USA, as you know, where we have a large presence, a positive economic outlook and higher oil price are anticipated to provide demand recovery in the oil and gas sector. The expected increase in the oil and gas production in the coming quarters would drive significant growth in the pipeline project. Currently, there is a portion among the midstream companies after major pipeline projects have got stalled because of the environmental opposition. However, we are very confident that this demand -- this -- the strong oil price, gas price as well as the demand is going to revive in the later part of H2 FY '22. In terms of Saudi Arabia, we had seen a minor business impact coming up to us in quarter 4 of FY '21, which was on account of lower sales and also a sharp increase in the steel price, which reduced our profitability. However, we still have a confirmed order book of 184,000 tonnes, and for which the steel prices are completely logged in and which will ensure our business continuity to quarter 3 of FY '22. We are also seeing Saudi Aramco in the process of finalizing few projects and being an LTA holder, which is a long-term agreement holder with Saudi Aramco, we are expecting to receive a significant portion of this line pipe order during H2 of FY '22. We have also proposed a listing of our Saudi JV at the local stock exchange. The process of listing would involve divestment of 30% stake, split proportionately between the JV partners. Welspun currently holds 50% in the JV through its overseas subsidiary. That divestment will further improve liquidity at WCL. We target to complete the listing in FY 2022. Taking this opportunity, I also would like to inform you on a few of the business updates. As you would have seen that we -- our -- we have a healthy balance sheet. We are a net cash company. We are -- it is now time for us to embark on a growth journey. Accordingly, in order to improve our earnings predictability and enhance margin in the business, it is imperative for Welspun Corp to enhance and diversify its product portfolio, catering both B2B and B2C segment. It is with this objective, the company has decided to diversify its steel portfolio and bring the following manufacturing setups under one fold, which is Welspun Corp: Number one, large diameter pipe company. We -- as you know, the company already enjoys a global leadership position in this segment and will further continue to focus on expanding its customer base and presence, both domestically and globally. Number two, the DI Business. As already announced, the company has forayed into the Pig Iron & Ductile Iron business by setting up a greenfield project at Anjar. Considering the robust demand, expected growth and budgetary allocation by government of India under Jal Jeevan mission, the sector is bound to grow exponentially. Accordingly, the company has decided to enhance the capacity of this project from 250,000 tonnes to 400,000 tonnes. This will be one of the largest stand-alone, single-location DI manufacturing facility in India. The project is well on track and will be commissioned by March 2022. Number three, we are also forayed in setting up -- in acquiring a long product company. We have noticed a fundamental shift in the steel market and believe that there is a sustained demand and a strong commodity cycle in times to come. In order to leverage this opportunity, we intend to foray into manufacturing of steel long products. And accordingly, company is setting up a brand-new, state-of-art TMT bar manufacturing facility, having a capacity of 350,000 metric tonne per annum through a proposed demerger scheme of Welspun Steel Limited with WCL. As you know, TMT bars are extensively used in the construction industry, both in projects and by direct consumers. With the emphasis on infrastructure development and the resultant construction boom, this facility would significantly contribute and bring growth to our earnings. This facility will be built out at Anjar adjacent to our DI complex. And the synergies between the two, especially in terms of raw material sourcing, common infrastructure, technical manpower, management bandwidth, et cetera, will add further value to this proposition. Fourth, Stainless Steel Tubes & Pipes. As you know, this product is used for critical application, in offshore oil and gas, supercritical boilers, light water reactors, nuclear submarine program, nuclear plants, defense, refineries, petrochemicals, et cetera. A big push for localization of this product under Atmanirbhar Bharat, implementation of quality order, mandatory BIS certification in India, withdrawal of export benefit by Chinese government and a likely imposition of 10% export taxed by the Chinese government would act as a major catalyst for this growth -- for the growth of this sector. Keeping in view these major policy changes through the proposed WSL Demerger Scheme, WCL will also be acquiring 50% stake in WSSL, which is Welspun Specialty Solutions Limited, which has a state of art and a very unique and boutique facility located in Gujarat. As you know, the facility produces alloy and stainless steel blooms, alloy and stainless steel ingots, alloy and stainless steel rolled bars. Over and above, this capacity also produces stainless steel and nickel alloy pipes and tubes. The capacity of alloy and stainless steel is almost 150,000 tonnes, and that of stainless steel pipe is 18,000 tonnes per annum. This facility would also synergically contribute and bring growth to our earnings. A simple comparison of industry peers in this segment would clearly demonstrate that. Apart from above -- apart from these 4 major portfolios coming into our bucket, we are also -- we will also continue to evaluate suitable opportunities, both for organic and inorganic expansion, which have synergies to our business. It is important that we continue to expand our product offering for growth, enabling predictability and enhanced earnings. However, all prudence and due diligence will be exercised with a clear oversight from the Board. I also take this opportunity to give you an update on the projects. First, the ductile iron project. As we previously announced in October 2020, given the industry prospects and synergies with our existing business, we are setting up a greenfield facility at Anjar to enter a ductile iron pipe business. Over the last few months, there has been an increased focus in creating water supply, infrastructure in the country through various government schemes. In Union Budget in February 2021, there was an increase in the allocation on Jal Jeevan Mission, and Jal Jeevan Mission urban was also announced. The outlay for this is INR 2.87 trillion and it will be implemented over the next 5 years. Tap water connections to 2.86 crore urban households and liquid waste management in 500 cities has been envisaged as part of this scheme. Increased spending by the state governments and municipal corporations is also expected to improve the accessibility of drinking water supply across this country. Considering the expected demand, we -- as I mentioned earlier, we have decided to increase the capacity of our DI Pipes from 400,000 tonnes to 200,000 tonnes and also adding up DI fittings to the product range. This would bring the total project cost to INR 1,550 crore plus the soft cost from the earlier planned of INR 1,250 crores. The project is being funded through a combination of internal accruals and debt. There are no changes in the timelines and the project is expected to be commissioned by March 2022. Plate and coil mill divestment. As you are aware, Laptev Finance Pvt. Ltd. assigned all its rights and obligations under the BTA, the business transfer agreement, to JSW Steel. Accordingly, the PCMD Division stands transferred to JSW Steel Limited with effect from 31 March, 2021 for a consideration of INR 848.50 crores plus closing adjustments towards the net working capital. As on June 8, 2021, we have already received a cumulative purchase consideration of INR 723.50 crores, out of that INR 848.50 crores. The balance consideration, subject to closing adjustments of net working capital will be received on fulfillment of certain regulatory approvals and payment milestones as provided under the BTA. We are very confident that the balance formalities would get completed in the coming next 7 to 10 days' time. Third, the proposed acquisition of a steel business of WSL by WCL through a scheme of arrangements. The Board of Directors of the company at its meeting held on June 28, yesterday had decided to propose the Scheme of Arrangement between Welspun Steel Limited and the company to NCLT to transfer the WSL Steel Division to the company, with appointed date as 1st April, 2021, subject to regulatory and other approvals. As you are aware, WSL is a privately held company, situated in Welspun City, Anjar. In its steel division, it manufactures steel billets, DRI and now is implementing a greenfield project for TMT. The expected project cost is INR 175 crore plus the soft cost and the project is expected to be completed by September 2022. Beside, as a part its steel division, WSL also holds 50.03% shares in Welspun Specialty Solutions Ltd., WSSL, a listed company on BSE. WSSL is an integrated producer of quality stainless steel pipes and tubes right from steel-making to the finished products. This is in line with our business growth and diversification strategy. The Board of Directors appointed two reputed valuers for valuation and one merchant banker for fairness opinion. After a thorough due diligence by the independent agencies, the Board has decided to propose the Scheme of Arrangement to NCLT. The consideration of INR 362.73 crores will be paid through 6% cumulative redeemable preference shares, redeemable only after 18 months from the issuance date and there will be no equity dilution for the WCL shareholders. WSSL will continue to remain listed on the stock exchanges, since the stakeholders who are holding not less than 50% of the equity shares in the demerged company are the same stakeholders holding not less than 50% equity shares in the resulting company. The indirect acquisition control of WSSL pursuant to the proposed scheme is exempt from making an open offer under the provisions of the SEBI SAST Regulations, 2011. I also take this opportunity to touch upon some of the software aspects, the key initiatives which the organization with the Welspun Corp has rolled out during this year: The sustainability and the ESG journey. We recognize that our business impacts all stakeholders, including investors and the communities in which we live and work. In this regard, we have accelerated our ESG journey. We have begun by setting a clear ambition with bold targets. We are aiming for increasing use of renewable energy, zero waste to landfill and being water neutral. There are also targets for corporate social venturing and a sustainable supply chain. Apart from the long term sustainability targets, we are undertaking several management interventions with ESG at the core for FY22. Some of these are: We are defining a governance structure for ESG including formation of ESG committees of the Board; creation and adherence of ESG-related policies like overall ESG Policy, sustainable procurement policy and ESG Compliant suppliers code of conduct; 100% coverage of all staff and associates in training for ethics and compliance and conflict of interest; gender diversity to increase from present 3% to 5%; other diversity to increase from 0.25% to 1%; our SWA score too should be greater than 70%; and more than 5% of our employees will volunteer for the CSR activities. The other key initiatives, which we drove very hard in FY '21 was the digital initiatives. We have been rapidly adopting digital technologies into all areas of our business resulting in a fundamental change in how we operate and how we deliver value. All the financial transactions, whether it is AP, AR, GL, have now been moved to the shared service center. We have also developed a customized customer portal with information accessible to each specific customer. Today our customer can log in onto this initiative, see the progress of all our orders what we have placed, what is the status of his orders. He doesn't have to be dependent on any other channel for the flow of information. Other initiatives include automation of export-import documentation, system-driven processes for master data management, integration of our learning management system with our in-house tool and elimination of spreadsheet, excel, to system generated reports and forms. These are all being done in order to bring digital transformation as a core to our growth. We have also utilized this time, pandemic time, in terms of upskilling and using this time for the training and learning and development of all our employees. And we strongly believe that the people are the most valuable assets for any organization, including us, and we have placed a significant emphasis on their learning and development. We are pleased to inform that in FY '21, we conducted over 1,300 training programs, 2,300 employees attending them and cumulatively, 23,500 of training hours training was being impacted. This is phenomenal achievement in my opinion. Health and safety. Our people, as I said, have always been our greatest strength. In the second wave of the pandemic, we lost a few of our employees. While any kinds of financial support cannot compensate for the magnitude for the loss of life, but we will always remain with the families during these difficult times. Accordingly and as a measure to support the families of the deceased employees, the company decided to offer the following: extend the group term life insurance plan for the benefit of employee’s family, 50% of the monthly salary for 2 years as living allowance, medical insurance for the family of INR 5 lakhs for the next 10 years, education fees for 2 children up to graduation and consider spouse and children for suitable job roles based on company’s policy as per the requisite qualification and skill. Bottom line, we are there for the families of our employees whom we have lost. Also, recognizing that vaccination is going is going to be the key remedy to fight this pandemic, the company organized vaccination camps across all its locations globally for its employees, their family members and business partners. More than 3,000 people have been vaccinated till now as a part of this particular drive. Occupational health and safety is a strong focus area. We are pleased to highlight that there has been 0 fatalities in our manufacturing operations across all the global manufacturing locations in FY '21. Also, our DI project, which is a greenfield project, we recently completed almost -- we recently completed 1 million man hours without any lost time injury. Some other updates, which I would like to highlight: One is the corporate tax rate. The company has fully utilized its existing tax credit in Q4 FY '21. Accordingly, from FY '22 onwards, the company will now switch to a new corporate tax rate of 25.17% from the existing 34.94%, both including surcharge. Number two, capital allocation policy. We revisited our -- as we are a net cash company, we revisited our capital allocation policy. And the -- and I'm very pleased to highlight that the company has adopted a very judicious policy for allocating resources to different projects. We will -- as we will pursue both organic and inorganic growth opportunities and bring them to the consideration of the Board, provided they meet the internal thresholds of ROI and profitability as set out. Some of the new business areas that are being evaluated is marine fabrication, industrial fabrication, stainless pipe, carbon steel, business, renewable energy accordingly, et cetra. Accordingly, the -- our object log is also proposed to be amended. Lastly, dividend. Considering our growth plans, cash position and to reward our committed and loyal shareholders, the Board has recommended a dividend of INR 5 per share. It is with this I conclude my opening remarks. I will be happy to take any questions you may have and be -- thank you.

[Operator Instructions] The first question is from the line of Mr. Vikash Singh from PhillipCapital.

Sir, I just want to understand our cash position. So basically, we had, what, roughly about INR 700 crores, after March when our cash position was INR 600 crores plus. So have we invested significant amount INR 500 crores, INR 600 crores during the last couple of months into CapEx? Or why -- or it has gone to the working capital because it actually is not matching the incremental tax inflow, plus 2 months of other cash flows just from the normal business versus closing balance so. So if you could just reconcile this, it would be really helpful.

Sure. Yes.

This is Percy here. So the cash that we received from the PCMD sale proceeds after 31st March, it has gone in 2, 3 avenues. First is, of course, our DI project that is going on. So from Welspun Corp side, as the promoters contribution, we have to invest at least 30% into that. So some of the funds have got invested into the DI project, which is being under construction right now. And a few other funds have also gone into working capital. So some of the customer advances that were there in the olden days, those orders that have they got executed, those customer advances have been now liquidated. So mostly, it's in the DI project investment, and of course, in the working capital. And the balance is, of course, will result into an increase in the net cash. So as and when we come out with our June quarter numbers, you will see that our net cash is also improved further.

So is it safely as -- safe to assume that this total buyback number would be INR 500 crores, sir, because that's how the math works out, in last 2 months, this INR 500 crore kind of the investment we have made in working capital as DI CapEx?

So the March net cash was INR 620 crores. And after that, we have received the PCMD sale proceeds. And PCMD sale proceeds are going into 3 places, as I said. First is into the DI project. Something is going into working capital. And the third is what will result in increase in net cash. So from INR 620 crore plus whatever is the balance will be increase in net cash.

Understood, sir. Understood. Sir, my second question pertains to your TMT business. Basically, we have been, in the past, have walked down the path of kind of a steel manufacturer and later on sold that business to JSW only. So why we are actually entering into TMT manufacturing now at this point of time? So my first question is that. And secondly, would the DI blast furnace now would capacity, like, would also be enhanced to 0.7 million, 0.8 million tonnes, so that it would be able to cater the TMT business as well apart from catering DI Pipe business?

Ashish, the 2 businesses of what you're talking about, PCMD and TMT are 2 different businesses altogether, right? The TMT...

No, no. I'm talking about we used to have strong iron 1 million tonne manufacturing facility 5, 6 years back. And this they have sold to JSW at that point of time. So we have walked down the path long back in terms of trying to be an integrated manufacturer. I am talking about 2013 kind of the scenario when we had suffered huge losses on the steel business side.

No, you're right. What you are saying is right. But I think these are not 2 comparable scenarios. You are referring to Vikram Ispat. The intent of setting up Vikram Ispat was very, very clear, that we wanted to become an integrated steel manufacturer, wanted to make our own slab and wanted to use those slabs for our plate mill. But you are aware, because of the gas allocation policies, which got completely changed at that point of time, which was the fee, which was a key fee for that particular plant, that could not materialize as it was planned. So that was on those days. Now coming back to this particular business, this particular business is already as -- is a completely integrated unit. We are -- they are manufacturing their own DRI. They're manufacturing their own SMS. Now we are only trying to put a further downstream value-added product, which is called TMT. So this is all at one particular location the facilities are completely existing, and it is only a downstream value-added product which is now getting added. So the 2 things are literally are not comparable. Coming to the blast furnace side of it, I think so your second question was with respect to the blast furnace. As you know, that we are putting up a blast furnace which would have a capacity of almost 400,000 tonnes per annum. And accordingly, now what we have done is, earlier, we had -- we were trying to put a capacity of 250,000 tonnes for our DI side of it, which means we were using 250,000 tonnes of metal out of 400,000 tonnes, which was coming up on the blast furnace, but looking at the potential, which we are seeing that is incremental potential which we are very hopeful to get in the DI business, we have decided to increase our DI facilities also to match to 200,000 tonnes. So now we would have the blast furnace also at 400,000 tonnes and the DI manufacturing facility also at 400,000 tonnes.

Okay. So this billet manufacturing capacity has been said by another mill. Is that correct assumption?

This billet manufacturing facility is right there in Anjar adjacent to our steel plant, the DI plant, but it is an independent facility in together. It has its own klins. It produces own DRI. It produces its own SMS, which is billets and now under the billet we are putting up our new TMT mill. But what is the -- the advantage is going to be that, but for both the plants, whether it is a DI plant or the blast furnace or for this TMT mill, the raw material feed is all about iron ore, coal and scrap. So we are going to buy -- there is going to be a complete integration of supply chain which is going to happen. Everything is going to come under one roof. The management bandwidth is going to be the same, either the logistic integration is going to happen. So there's a lot of synergy which is now emerging into this. On top of it, the greatest advantage is that this facility, the WSL facility where we intend to make the TMT, also has an NMDC linkage. We have an arrangement, an agreement with NMDC for sourcing iron ore. So this facility, in any case, is sourcing iron ore under the contract arrangement with NMDC and that is going to be beneficial for both of the facilities, now for the DI as well as for the TMT side as well.

Understood, sir. Sir, just one last question, if I can put it. Our U.S. numbers have seemed to be much better on a quarter-on-quarter basis. So if you could just tell me the volumes and major reasons? Or is that the run rate we can assume going forward for U.S.? Or this would keep on fluctuating until and unless we get new orders from there?

See, the U.S. in the last -- in the U.S. We had -- we did almost -- in the last quarter, we did almost 65,000 tonnes of sales in the U.S. in the quarter 4. And then we have an order visibility until the Q1 or let's say, by mid of Q2, we have a complete visibility until mid of the Q2. Literally, by end of July, we would be done with all the existing orders in hand. Today, beyond that, we do not have any business or business visibility in our hand. The U.S. business, as I have told you earlier also, is going -- is seeing a little bit of a headwind at this point of time. But -- If you look at the fundamentals, the oil pricing almost at $75 a barrel, the gas pricing at its highest, right, the demand coming back to almost pre-pandemic level. I think it is just a matter of time that we would see the CapEx coming back into the U.S. We expect that in the second half of the -- later part of the second half of this FY '22, we expect the demand to come back. It looks like 1 or 2 quarters could be a slow quarter for us in U.S. But beyond that, look, things should be coming back because you can -- these fundamentals cannot be overlooked.

Okay, sir. Sir, this USD 217 EBITDA part in U.S., any one-off in that or is purely operational in this quarter?

It's purely operational.

The next question is from the line of Mr. Siddharth Oberoi from Prudent Equity.

So this is regarding this -- the restructuring which is going with scheme of arrangement. You have mentioned that INR 363 crore is to be paid by Welspun Corp. Is it correct for this scheme?

That's correct.

Yes. So what does this include? Does this include the TMT bar facility, the Welspun Specialty Solutions stake, this Anjar TMT and the Welspun Captive Power, these 4 things included?

Yes. So the consideration is for Welspun Steels Steel division, which is currently, of course, billet manufacturing. They are also into a project for the TMT facility setup. So now in this TMT setup, obviously, it's just initial construction. So there is no valuation assigned to the TMT work. And then, of course, the shareholding. So Welspun Steel holds about 50 percentage shareholding in WSSL, that is Welspun Specialty Solutions Ltd., which is a listed company. So that 50% investment is also coming. And then there is also an investment in Welspun Captive Power Generation, which is obviously for the captive power consumption requirement. So that also is coming to the Welspun Corp. So the INR 362.73 crores of consideration includes Welspun Steels Steel division, then the 50% investment stake in WSSL and, of course, the roughly 3 percentage stake in Welspun Captive Power Generation.

Okay. And so WSSL is a loss-making company right now with INR 93 crores of revenues last year.

Correct.

And what is the profitability of Welspun Captive Power?

Welspun Captive Power is a very profitable company, and their business is basically only captive power supply, so it's in a very good shape.

Yes. But we are buying just 3%, right, it's hardly any -- it's very, very minority stake.

You're right. But let me just clarify about this Welspun Specialty Steel, where you said it is a loss-making entity. What you have made a statement is absolutely right. But we have to understand the nature of the business, what that company is doing. This company is making specialty steel, which is a stainless steel and stainless steel pipes. This business is completely on an upswing at this point of time. If you see in the last one year, they have done an sale in the last year, financial -- FY '21, they did a sale of 2,300 metric tonnes. A year before, they were close to 200 tonnes. So from 200 tonnes to 2,300 metric tonnes is a quantum jump in the sales what they have done. The net sales, NSR, realization is almost close to INR 4 lakh per tonne for the pipes what they are selling. And this is almost at par comparable to any best of the industries in this -- the peer group in this particular industry. This business, as you know, is all about approval and accreditations. And one of the reasons for Welspun Corp to pitch into this particular business was that Welspun Corp has the might for and they can get the approvals and accreditations today. In one year time, the amount of approvals and the accreditation this Welspun Specialty Steels have achieved is phenomenal. And that is the reason for this exponential growth from 200 tonnes to 2,300 tonnes in this -- in the FY '21. Literally, they are at a breakeven point at this point of time, right. If you see it is a very high margin and an EBITDA accretive business.

And it did revenues of INR 93 crores, correct?

Yes, it is INR 93 crores revenue, over 2,300 tonnes of sales of pipes.

Yes. And generated INR 44 crore loss out of that?

It was close to -- INR 30 crores is the latest -- So it is a journey. It is a business which is getting incubated. We are completely convinced that in the last 12 months, the phenomenal growth what they have done. Fine. They are still -- they are almost on the verge of breakeven. But the way the company will move forward into the next -- in the next financial year, this is a very, very productive business and a very, very high EBITDA accretive business. We are very confident -- and if you look at it, you compare the peer group in this particular segment and there the answers lie there itself. We are very bullish on the new order flow. If you -- just to highlight, even in this 2,300 metric tonne business what they did in this particular year, almost 18% has been the export. So the product acceptability into the market, the approval and accreditation is global, I think is what it is going to charter the growth of this company in times to come.

Yes. And so we get -- so we -- is there any plan to repay the debt of this company INR 166 crores by Welspun Corp?

We do not have any plans as there would be -- as the debt would be close to INR 185 crore, if I am not wrong. The precise number would be INR 185 crore, and that is the way it would be -- that is the debt which will come into the Well Spun Corp books.

All right. Also, this Welspun Steel has 3 divisions, like one is sponge iron division. Are we merging that as well?

Welspun Steel has 3 setups. One is the sponge iron making. Other one is the SMS where you make the billet. And the third facility what they are currently setting up at this point of time, as we speak, is the TMT. So all the 3 will...

Ladies and gentleman, please stay connected. Line from the management got dropped. [Technical Difficulty] Ladies and gentleman, we have the line for the management reconnected to the call. Sir, you may go ahead.

My sincerest apology for this technical glitch. I think so -- where did I lost you, guys?

So you were saying that the WSL has 3 divisions.

Yes. So one is the sponge iron making facility. Other is the SMS where they make the billet and the third facility is being TMT, which is currently being set up. So as a part of the restructuring, as a part of the consideration, the sponge iron and the SMS facility is coming and the TMT facility is being set up at this point of time.

Yes. So but that's my question. So 2 billets and TMT is going to WCM, but not the sponge iron one, correct?

No, no. Including the sponge iron, SMS are already an existing facility. TMT is being set up at this point of time.

All right. So all these 3 are getting demerged?

That's correct.

Okay. All right. Also this is regarding the orders that you've bagged in the last 1 year. There have been hardly any exits for this Australian one, which was already given and kind of that was probably postponed if something has come back. There has not been much order bagging. Right now, we have orders for almost like maybe 2 quarters. And after that, I think -- I mean there's nothing actually. So what has been the scenario there?

So last year, the order book -- we booked order close to 825,000 tonnes in the year, number one, right? And right now, as we speak, we have an open order book of almost close to 580,000 tonnes -- 500 -- correction, 528,000, 530,000 tonnes of an order book what we have. There has been a little slowdown as you know that in India the water sector has got impacted because of this pandemic. The first quarter of this year -- the first quarter of the last year also was impacted. The first quarter of this year is also getting impacted because of this pandemic, where the procurement activity under the water sector has slowed down a little bit. And that is slightly getting reflected. But as we have caught up in the subsequent quarters in the last financial year, I am sure that with the strong oil price and strong demand rebounding back, and in any case, water is going to play a key role, this demand is going to come back, and we should be able to get our own share.

[Operator Instructions] The next question is from the line of Aman from Authum Investment and Infra.

Sir, just a couple of questions. One is I would like to understand how much total CapEx is done till date out of INR 1,550 crores in DI pipe?

Yes. So, so far, we are close to about INR 400 crores is what we have already invested. And then, of course, there are LCs that are open for machinery to be supplied and purchase orders are issued. So I think capital commitments that we would have gone by now would be close to INR 1,000 crores.

Okay. And how do you see that next 2 years for year 1, say FY '22 and '23, the capitalization of the DI pipe?

See, in FY '22, it is in FY '22.

'22 and '24, I'm sorry for that.

Yes. '22, the product is not going to be there. In '23, '24, I think so the product will be into the market. It will require approvals and accreditation. But -- And of course, there is going to be a sort of a gradual ramp-up on the selling side of it. But then you have 2 products. If -- we would sell the DI pipes, of course, and then we will also focus on selling the big items because both the commodities are completely sellable. We will continue to work on that. But looking at the demand, I mean, just to answer your question that looking into the demand, what we are forcing at this point of in time, I think so in the very first year, we should see a significant capacity utilization of our DI plan. That's the whole objective. That's all we are working for.

Is it fair to assume that 60% to 70% in year 1 or crossing 75% to 80% in year 2?

No. That will be too optimistic. I don't think so any new businesses requires that time to ramp up. I think so anything between 30% to 40% capacity utilization in the very first year and the ramp-up over the next 2 years is a very fair estimate to make...

EBITDA positive, right?

So our intention would be to do more, but just we also have to be mindful of the ground situation as well.

Okay. Sir, coming back to the recent acquisition, which we announced from the promoters group and all, just want to understand how much total CapEx addition over and above the DI Pipe company is committing and what will be the gross value addition, gross added, gross debt added in the consolidated balance sheet?

So apart from the consideration, what is being finalized based on the arms length evaluation done by the independent agencies, there is going to be a CapEx of almost around INR 175-odd crore, which is on the TMT side of it, number one. And from a gross addition in the debt, I think so that INR 185 crores is the total debt, which will come into the Welspun Corp books. That's the total addition of the debt, which will happen. And that debt, in any case, is sitting in WSSL. In WSL in any case, is a debt free company. One what the -- the portion of the WSL what we acquired is completely debt-free. So there's hardly any debt addition on WSL. The INR 185 crores of addition of the debt is only happening through WSSL.

Okay. So when do you see that this total, total, whatever the businesses we are acquiring, how much total EBITDA can be generated out of 2 or 3 years when it will be started because WSSL also as on today is making losses. So how we see this total investment what we are doing should start generating the returns?

See, if we look at a medium term, let's say, if we plot it over 3 years' time, when it is very, very clear that 40% of our total sales and 50% of our EBITDA in times to come over 2 to 3 years' time is going to come from these new businesses. And that is what is driving us to bring -- we want to bring earnings ratability on the table. Today, we have been purely on the water -- oil and gas and the water side of it. And there has been issues with respect to the predictability. And it is that particular issue we are trying to address, number one. So the earning predictability will come. And on top of it, it will enhance our earnings. So that is the road map, which we have embarked upon and that is why there is diversification, which is happening.

So sir, what is total return on equity that management is trying to -- total investment what we are committing as an expected return on equity, what we are trying to target?

It has to be in excess of 15%.

And sir, any uncertainty, which you see in this because our past -- as we discussed also in the con call that it's not that easy to ramp up the CapEx and everything. Any uncertainty which you feel like in this -- which is get associated with the company?

See, this let's talk about the TMT business. See, on the WSSL, which is the specialty steel business, I don't see any uncertainty. I only see a strong tailwind, which is going to support that particular business. Coming back to the TMT business. This business is a commodity business, right? We are into a super cycle of commodity at this point of time. All feedbacks, all indications, all everything is suggesting that there is a fundamental shift, which has happened into the steel market. We have seen how the coal is moving. We have seen how the iron ore is moving. We have seen that -- we are not going to see the steel price dropping back to the same level as what we have seen 3 years back. So there is a fundamental shift which is happening to the commodity cycle. And this cycle is going to stay. So earlier we are getting to the cycle, the better and the longer we are going to ride on it. And that is the whole retinal of going into the TMT business. We could have stayed back at that billet business. But then again, you -- the more you are into a value-added product, the better position you are in billet. TMT is a far more value-added product in front of billet. In any case, we are producing billets. Rather than making billet, why can't we do -- why can't we make TMT and every year move up in the value chain. So that is the whole thought process. I think so the downside is only -- the downside as you ask is if the commodity sectors take the most value. And the steel industry as such takes the most value in, then we will definitely be impacted like anyone else.

Sir, just last thing. You have written that other opportunity or of other side opportunity which you are looking into it. Was that the size which you are looking or any -- as in something is on table?

Nothing, nothing. We keep on evaluating. See at this point of time, when I have a balance sheet like this, I have -- we have cash available. And more importantly, forget about this thing. More importantly, ample opportunity is available on the table. You are seeing that under the IBC, NCLT liquidation... [Technical Difficulty]

[Operator Instructions] We have the line for the management reconnected. Sir, you may go ahead.

Amit, I don't know where did I drop. So did I answer your question, please?

Yes, sir, just last thing, want to understand the capital allocation policy has been already drafted or has been planned. But what about the distribution policy? We have announced INR 5 dividend, but it's very in -- in taxes, it's not an efficiently -- tax can be worked out in this. Why not -- after company is sitting with a huge cash flow and a strong balance sheet, why not a strong buyback or something has been not done?

See you have to go -- we believe in walking the top. Let's say this company has been a dividend paying company for the last 10 years, number one. Whenever we have the cash available, we have always believed in distributing that cash. If you see in FY '19, we did a buyback. In FY '20, we gave a special dividend. In FY '21, we have the earnings, we have given the dividend to our stakeholders. Prior to that, we had a debt which is -- almost INR 2,000 crores debt, which was there with us. We had always been working in terms of making this company as a debt free, which was our long-stated goal in any case. The moment we started becoming debt-free on the bygone, if you see our performance in the last 3 years, as the earnings have been there, we have been rewarding our stakeholders. So that is the journey we will continue to work on, whether it is by virtue of a dividend or by virtue of a buyback, I think so that's in the wisdom of the Board, they keep on deciding and keep on guiding us, but rewarding the shareholders continue to be our foremost priority.

Next question is from the line of [ Mr. Varun Nathan ] from Nippon India Mutual Fund.

Just want a clarification on the CapEx spend for FY '22. So I think you've guided that INR 175-odd crores would be spent on the TMT division. Over a number of that, of course, the balance to be spent on the DI, which would be anywhere about INR 1,000-odd crores. So what -- will there be any other incremental CapEx?

Nothing. Apart from that, there would be minor maintenance CapEx for our existing -- our existing pipe business, which is always in the vicinity of anything between INR 50 crores to INR 60 crores.

Got that. And over and above, there is a scheduled repayment of the cash in charge, which is taking 18 months' time?

It is 18 months from the date of announcement. So it is at least 2.5 years away.

Next question is from the line of Mr. Bhavin Chheda from Enam Holdings Pvt. Ltd.

What would be the breakup of the order book of 528,000, pursuant to India, U.S. And Saudi is the other reason to LSAW, HSAW, ERW?

Yes. If we -- if you look at the breakup of 528,000, it is almost close to 180,000 tonnes in Saudi. In Americas, we have low, it is close to 50,000 tonnes. And in India, it is around 300,000 tonnes. So that put together 530,000 tonnes of order book, Bhavin.

Yes. And product-wise breakup would be?

And the product-wise breakup would be, let's say, out of this 528,000, almost 350,000 tonnes is close to -- is spiral, almost 150,000 tonnes is longitudinal and the balance 30,000 tonnes, close to approximately 30,000 tonnes in the ERW.

Great. And this U.S., you said would largely be over by July, so this quarter 1, July.

That's correct. Let's say, by the start of quarter 2, I think so the entire production and everything would be over for the existing orders what we have.

And the bid book would be like?

Bid book at this point of time is looking out close to 1.2 million tonnes.

Okay. And this is largely from India?

Actually, there's a little shift in the bid book this time. This bid book is -- it has 2 or 3 geographies very strongly looking at. One of them, of course, happens to be India. The other one also happens to be Australasia. I think so the Australasian market is looking extremely vibrant at this point of time. And the third market which is looking very vibrant is the Latin American market.

So what I meant is that 1.2 million tonnes would be largely be bid from the Indian plant book, right? And I think it will be from Saudi also, right?

It will -- in this 1.2 million tonnes largely would be from Indian bid book point of view. Saudi bid book -- Saudi would not be that much as it used to be.

Okay. Because Saudi -- as you said that Saudi Aramco order is expected in second half, so that's not forming a part of ...

It is. It is a part of that bid book. It is a part of that 1.2 million tonnes bid book, but I'm saying that large -- the big ticket items in this 1.2 million tonnes is coming out primarily from Latin America. And there's the oscillation market, and that is meant for India. I'm not saying that Saudi is not there. Saudi and the U.S., both are there. But the component in 1.2 million tonnes is this time a little low. There is a little bit of a paradigm shift which has happened in the bid book.

And this steel company which is being merged, what's the current capacity of DRI and billets, which are already you are manufacturing there?

At this point of time, we are close to like 275,000, 280,000 tonnes of existing capacity, which we are doing it in any case. With a very minor adjustment here and there, we can reach up to 350,000 tonnes of steelmaking capacity. And correspondingly, if you see that we are also putting up a downstream 350,000 tonnes TMT plant accordingly, just to merge that.

And this TMT plant would be ready in this fiscal only?

No. It will -- this is a 12-month process, and we have just started, I think so it will be in the quarter -- it will be by the end of the quarter 2 of the next year.

Quarter 2. So more or less DI Pipe, TMT, all major projects would be completed by next year between March '22 and June '22, right?

Very correct. Very correct. Yes.

Okay. And this TMT 350,000, you said you're spending CapEx of INR 175 crores.

Correct. Plus some soft cost, yes.

Yes. And DI price now is INR 1,450 crore, right?

INR 1,550 crore.

INR 1,550 crore. Okay. And normal maintenance...

INR 1,250 crores plus soft costs, so INR 1,250 crores to INR 1,550 crores. So the total is -- yes, plus soft cost.

What do you mean by soft cost?

We have GST...

Contingencies, GSTs, and any survey, GSTs and all that stuff.

That is another what?

15%, 18%.

The next question is from the line of Mr. Rishikesh Oza from RoboCapital.

Sir, my first question is, if you could talk about the commodity price impact, specifically on what impact we need to have on EBITDA per tonne basis?

Sorry, I didn't get you. Come again, please?

Sir, my first question is, if you could talk about the commodity prices impact? And specifically, on what impact has on EBITDA per tonne?

And this is specifically in question with the upcoming TMT mill, right?

No, no. This is an overall business regarding the steel price increase.

Okay. See, the -- as you know, the commodity price are at unprecedentedly high level at this point of time, number one. In our existing course of business, almost we completely hedge our steel. In a way, hedge means we always cover our steel. So per se, the commodity, any change in the commodity price is a path to -- generally a steel price is a pass-through cost for us. So any commodity price increase or decrease doesn't make much of an impact for us. If it decreases, it helps us. But if it increases, we are adequately covered. But there are certain aberrations. You do almost close to 1 million tonne. It is always some 30,000, 40,000 tonnes, there's a timing mismatch. To that extent, you are open. Other than that, we are completely covered on the commodity side of it, on the steel side of it. Hello?

Yes, sir. So sir, like last call, as you had said, you'll maintain some EBITDA per tonne of $150. So would you guide the same right now?

Generally, I mean we have seen that in the product mix what we are servicing, if our product mix is continually going to be the same, I think that's a fair assumption to make.

Okay, okay. Also, sir, my next question is regarding the DI pipes. So earlier, we were doing like a CapEx of INR 1,250 crore. And on that, you had said some asset turnover you will be maintaining of one. But while our around potential was something like INR 3,000 crores or so. And at the same time now, you said the competitors are almost operating at full capacity, okay. So just wanted to know if you could clear it up, like why are we operating at half of the capacity while the competitors will be operating at full capacity? Just wanted to know here.

So I didn't say that we are -- see, first and foremost, we are yet to commence our operations, number one. I never said that we are going to operate at half of our capacity. On the contrary, if you see that we have enhanced our capacity from 250,000 tonnes to 400,000 tonnes. So we have a very strong conviction behind us. All what I was saying in the earlier part of the call, that any business, any new business will require a period of gestation. It will require 1 or 2 years' time in terms of reaching its fullest potential. So -- and we are very confident to have a high capacity utilization around this plan.

Okay. Okay. And my last question, sir, as you have given the time line on your TMT at September 2022, can you just share what is the revenue potential there and EBITDA margins that you are targeting?

See, typically, once this facility is in place, the TMT facility is in place, that WSSL as an entity -- the WSL as an entity could have a top line of close to INR 1,200 crores, and of course, with an EBITDA margin of anything between 12% to 15%. Hello?

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

Congratulations on excellent set of results. Very quick question. Is there any -- I think on the angle of a dividend distribution policy in terms of return to shareholders, for the last few quarters, you've been stating that we will not be undertaking too much CapEx in the future. I believe now we're going for another big round of CapEx. So you've been generating a significant amount of cash flow of INR 750 crores this year. When can the shareholders expect some decent amount of dividend, sir?

See when we say that we are not going to make major CapEx, I think, so it was -- we have done -- it was after we have disclosed the DI part of it. And today, if you look at it post the DI, all the -- only the incremental CapEx what we are contemplating to make is something like INR 175 crore. And we have to understand the rationale behind it. See today, we have to prepare this company for the future, right? If we don't make the calls today, the predictability of the earnings and the enhancement in the earnings is not going to come. So these are calls keeping in mind that how I am going to make this company ready for the next 3 years' time. So it's where all the -- that all the shareholders, stakeholders see a consistent earning coming up, our predictability in earning coming up and appropriate valuation is being assigned to this particular company. Today, being into -- just into a project-driven business, we have been seeing that it has been a very cyclical business altogether. And all that what we are trying to do is make this company ready for the future. And both the DI, what the incremental CapEx we are doing is only INR 175 crores could be at this point of time on the TMT side of it.

Sure, sir. Sir, one additional question. In 2016, you had started a JV with Wasco Energy for the CWC plant. What's the update on that? What's the operating capacity? How is that business going?

That business is completely linked to the way how business shapes up in offshore. And at that point of time, we were very buoyant and we were very optimistic that the offshore business in India is going to grow. Unfortunately, it has not grown to the level as what it was anticipated or what was projected. Nevertheless, the JV per se has not been into losses. It has not been consistently operating. But whenever you get a project, you are able to meet out your cost. It is not neither contributing, not dragging our balance sheet. But strategically, it is imperative for us to be in that particular business. Hello?

Your next question is from the line of Mr. Nirav Shah from GeeCee Holdings.

I have just 3 questions. Most of the questions have been answered. Firstly, we have seen a mark-to-market gain of INR 29 crores during the quarter. So is this on Jorabat Shillong or what is this mark-to-market, on which ones?

Sure. So Welspun Corp has this investment in Welspun Captive Power Generation Limited. And as we said earlier on the call, this WCPGL company is doing very well. And at the end of every 6 months, we need to MTM, mark-to-market. So as the book value keeps improving, we need to realign our investment value also. So that's the reason why you are seeing this.

Okay. So this is on that investment and not on the -- but any update on the bond portfolio because we've seen some resolution over there and in December itself, I mean on Jorabat at least.

Yes. So Jorabat Shillong, we are very confident that we should be able to recover our -- at least our cost. So if you remember, we had about INR 40 crores worth of Jorabat Shillong bonds, which were 100% provided by us in the books. So as and when we are able to dispose that, and we are working on it. If God willing, we should be able to do it in Q1, or if not Q1, then at least Q2, we should be able to liquidate them. And that will come as a bottom line impact, and of course, the cash flow impact, both.

' Perfect. And just the next 2 questions are on the steel price. I mean in USA, we have seen steel prices of close to or more than $1,800 and their prices are highest globally. So you see this as an impediment to future awards. I mean, despite your outlook improving in second half as expected by you. But will steel prices were there in excess of $1,800 space price bar?

It is. It is. Definitely. I don't think so that factor can be overlooked. The prices are too very high at this point of time. And that is also one of the factors for the CapEx spending to be slowed down a little bit. I am sure that these prices will normalize over a period of time, I don't know, and they should, actually. And we should see the CapEx had to be coming back there. But answering your question, there is an impact of higher steel pricing there, which has a whole delta CapEx there. No doubt about it.

And any awarding even if you see something in Q3, execution will start only in Q4. So Q3 will sort of be a washout?

It depends. You see, Nirav, in U.S., things goes up very fast, comes down very fast. So there are quite a few projects which are currently under discussion at this point of time. They are holding back their decisions at this point of time. I'm sure that at the end of the day, the project viability will be the overriding factor. And at that point of time, I'm sure they will try to overlook whether the commodity steel prices is high, low or whatever it may be. But it looks like that sooner rather than later, they should be coming back into the market.

Perfect. And last question is on Saudi operations. Sir, we mentioned that we have locked in the steel prices for the order book -- So any guidance on EBITDA per tonne over there because we reported a loss though a part of that could be attributed to lower operations, but has the spreads per se contracted for the existing operations to a meaningful extent?

If you look at it, last 2 years, we had -- we executed like we have almost 1 million tonne of an order, which we executed over the last almost 2, 2.5 years. There, we've got the benefit of the commodity cycle wherewith the prices at which we have taken the orders versus the prices that we bought the steel, that brought in the extra cash into the system. Now we have got -- now we have come into a cycle where we will get -- we have longer steel. We will be able to get the price -- steel pricing at the same price at what we have bidded for. So there may not be a very significant incremental growth or incremental earnings, which may come because of the differential in the steel price. But having said that, we have covered our steel. We are not going to lose money. It is only a matter that how can we make a little more money out of that or not is that what we will continue to watch.

So there also, the EBITDA per tonne guidance should be close to $150 on at least.

That's correct. That's correct. That's correct.

The next question is from the line of Mr. Akash Mittal, an individual investor.

I mean I appreciate that you are trying to diversify the risk of business from cyclicity and other things. But on the other hand, you are going into a much more cyclical business, which is TMT bars, right? And you're also -- you also said in your words the super commodity cycle we are seeing now. So my apprehension is, isn't it too late to realize that? And secondly, that on one hand, we're trying to derisk from cyclicity. On the other hand, we are adding a much more cyclical business to the fold. What could be the rationale behind it?

So there's a little differentiation I would like to draw Akash. See this cyclical business, what we are now getting it is into, you have a complete end-to-end control -- you have a complete end-to-end control on that particular thing, right? From the iron one making, to the steelmaking, to the billet, to the TMT, you are having a complete end-to-end control on your value chain. When you compare it with our pipe business and the cyclicality regarding our pipe business, we are -- we don't have an end-to-end control on, right? We are buying the steel from outside and selling it at a fixed price. So that puts our business to a much larger risk than where you have a complete control on the valuation or the value chain. So there's a little difference out here. So once you have a complete control on your value chain, the impact of the business, the impact is far more minimal than the impact what you have when you do not have a full control on the value chain. So there's a difference out there. And that is the reason we took a calculative call this time, that whatever businesses we will get into, we must be in complete control of the value chain and our destiny. We cannot leave it to the market forces. Today, what happens? Your iron ore prices will go down. So your final price will go down. So if the spread what you're going to get, you are protecting your spread. Whereas if you do not control the whole value chain, you are not in control of the spread. You're only in control of the limited value addition, 10% of the value addition of 90% or over 100% of the job, what you have got.

So by that logic, you shouldn't have sold the plate and mill division because you had a control on the raw material.

No. I did not. I did not have the control on the raw material. I did not have the slab. And that is why it became a noncore business to me. If I would have a control on my steel, on my plant, there was no reason for us to sell that plate-mill business. And earlier in the call, you would have heard, I'd mentioned that the intent was that. We took that Vikram Ispat with that objective only. But because of the change in the government regulation, it did not work out. That is why it became a noncore business. Otherwise, plate-mill was a beautiful investment to make.

Okay. Now continuing on the TMT bar sir, it's a B2C business, what I understand, right? Now B2C business -- your current business is where you are a leader. I mean it's an aspirational business, that we are the leader. This TMT bar business is a me-too business. There is no berth of TMT mill or billet producing plants, JSW Special Ispat, JSW Steel, BSPL. I can keep on ramping names. So what is it that you're bringing to the table for a shareholder? Because it's a me-too product. There is no differentiation. There is no technology. When I look at your product, I'm into this business. So when I look at products in U.S., when I look at products in Saudi Arabia and India, I feel there is a distinguished advantage you have in your manufacturing process. But for TMT bar, you need a different sort of sales team. You need a different working capital cycles. You need a marketing spend. Where is it all going to come from? I mean, is my money not better invested in the existing DI and HSAW, LSAW, ERW business?

See in any -- I think that's a great question and good that you asked that question. See, at the end of the day, we have historically been into completely B2B cycles, number one, right? Now with venturing into the DI business. DI business also has a small -- also has a component of B2C into it, right? In any case, we are embarking on to B2C journey, number one. Number two, in any case, today, if we have to really create valuations for this organization, there has to be an hybrid element of B2B and B2C, just alone having -- earning on the B2B business, we are not seeing any valuation getting created. And if you see the -- if you -- I can also give you a name of half of a dozen companies who are also doing the same, similar business, but their presence in the B2C market is much more, and you see the valuation they are getting around. So the message -- the underlying message ...

Not about the valuation. See, it's about the core, the core of the business. You have a core of the business because you...

I'm coming to that. Akash, I'm coming to that. See at the end what is driving us that there has to be a component of B2C, which has to come into our portfolio, number one. Number two, coming to the core of the business, what is our core? Our core is -- our core is our brand, core is our quality, core is our customer centricity. Core is our deliverability, serviceability. That is what our core is. That is what Welspun stands for, irrespective whether we are in business A or business B, that is what is our offering going to bid into the market.

Okay. I agree to your point. Okay. Let's agree with that. Now my last question, sir. Recently, I'm quite surprised that you didn't cover that point. And actually, that's alarming for me from a management vision perspective, and I will come to that. The point Mr. Biden has an infrastructure plan almost approved. It will be shortly signed off, right? The biggest second best category in that spend is around the 100% replacement of water pipes in the U.S., which are lead driven, right? And you have not touched upon that point anywhere in your presentation or management plan. Rather, it is all about going into TMT bar or something. I would have been greatly happy as a shareholder if you had a thought of that opportunity, planning to capitalize on that, because it's an opportunity, you have a plant in the U.S., you have the whole ecosystem set up in the U.S. So why is no mention of that anywhere?

Akash, a fair point you're making, I think so that should have got reflected. I think so to that extent, I will concede to your point. That should have got reflected into my comment in my opening comments, that's a fair point. But having said that, we are completely mindful of that fact. We are completely mindful as to what is happening, what is the infrastructure plan, but -- plan which has been announced by Mr. Biden. But just for your information, I think so that is an intent which has only been notified at this point of time. It is yet to get a Senate approval. And if you see the traction what is happening in that, I think so there's a big debate which is going in terms of cutting it down. Earlier, they announced it for almost $4 trillion. Now they have already cut it down to almost $1.2 trillion. So there's a lot of debate which is happening around that, number one. Number two, as we speak, we are doing -- we are conducting a sort of a study that what does it mean for us? When they say they are going to replace water pipelines? What does the water pipeline means there? There, in America, the water pipeline system is largely driven by DI as well, largely driven by DI business. So it is not out of our radar. Akash, I just want to assure you as an investor and all the investors and all the people on this call that we are -- we have not lost our site out of our U.S. market. We are evaluating multiple option, but then there has to be something concrete, which has to happen, which makes us to deep dive into the whole process. Today, I -- today we are not ready, today because that plan is yet not in such a form where you can deep dive which is very hypothetical in nature. But just to be assured that it has not lost our sight.

[Operator Instructions] We'll take the last question from the line of Mr. Bhavin Chheda from Enam Holdings.

Yes. Firstly, what would be the gross block addition when you transfer the steel division to Welspun Corp? That would be one. And other, the -- I think WSSL also will be consolidated since you will be having more than 50% stake. So this too would be added to the balance sheet. So if rough numbers if you have?

Sure. So WSSL Steel division, of course, will now become part of WCL itself. So we are looking at something close to about INR 250 crores that is there in WSL. And as far as WSSL is concerned, it's 50% shareholding. So that also has come close to about INR 200 plus, it's about INR 220 crores.

INR 220 crores for 100%, right? Because...

Yes. So minority interest, which... [ Technical Difficulty ]

[Operator Instructions]

Bhavin, did you hear the question? Or should I repeat?

Yes, yes, yes. So I think you said INR 250 crores on steel and INR 220 crores on WSSL.

That's right. And that's 100% on WSSL, so minority...

That was hardly net fixed asset, right, in...

That's right.

Okay. So on the asset side, we are adding INR 470 crores. And on the liability side, what I'm counting is INR 362 crores preferential what you have to give? And INR 185 crores is the debt which is standing in WSSL, INR 547 crores. So the balance number would be either some in network -- no, sorry, the balance number would be in working capital, right, which will get added?

And also 185 also, ideally speaking, you should take only half of it because it's only 50% ownership.

No. But on the balance sheet consolidation, the full number will enter your borrowing figure, sir?

You're right. You're right.

Okay. And the earlier thing, I just missed on your FY '20 -- so the CapEx number, which you plan to spend in '22 and '23, how much was that?

See, maintenance CapEx is usually around INR 50 crores to INR 60 crores per annum.

Over total CapEx.

We said INR 175 crores for the TMT.

The entire thing would be spent in '22?

There will be 2 CapEx. One, there would be a little left over CapEx of the DI plant. That's number one. Whatever is leftover. But most likely, I don't think so that there is any significant CapEx, which will be left over for -- in FY '20.

March '22.

March '22 entire CapEx should be done. There could be a small trickle over. And all what we will be doing is this TMT of INR 175 crores.

So INR 1,550 crores, plus INR 175 crores plus soft cost. So more or less roughly INR 1,800 crores to INR 2,000 crores CapEx would be completed this year?

Yes, pretty much.

Yes. And Percy, you earlier said that with DI pipes, you have spent INR 400 crores till date. But if I see your CWIP number, that's much less. So...

Even our till date, what I was saying INR 400 crores is till date. So as we speak at the end...

In quarter 1, okay. Because your CWIP is INR 142 crores. So -- so rest must be spend in after March.

Yes.

Okay. And what -- so how much would be the peak debt number then? Because if I now look at your numbers roughly cash outgo looks like somewhere just under INR 2,000-odd crores. And we will be INR 820 crores net cash, right?

End June, we should be close to about INR 820 crores.

INR 820 crores. And so maybe if you look at from now till next June or July, would be -- we would be spending roughly INR 1,600 crores, INR 1,700 crores, right?

In terms of CapEx?

Yes.

Yes, yes, including DI, yes.

Okay. And minus the whatever the profits we generate in FY '22 will go down. So then also our -- so March '22 net debt number will be closer to INR 1,000 crores then, right?

Most of the CapEx will get completed by March '22, bulk of it. Sure.

So will again be net debt company by March '22?

Yes, marginally, yes, yes.

I will now hand the conference over to the management for closing comments.

Thank you. Thank you all very much for joining us today on this conference call. I'm sure that we would have been able to answer all of your questions. But for some reasons, if you think that you have any further questions or you need any clarifications, please feel free to get back to us, and we would be more than happy to answer all that. And with that, I once again want to thank you and wish all of you stay safe, and thank you for being on the call. Thanks.

On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.