Welspun Corp Limited (532144) Earnings Call Transcript & Summary

Vikash, very good afternoon and good to hear from you. It's always good to have so deep thought-rooted questions. Greatly appreciated. See, I will not be in a position to comment on as to what others or what other Indian conglomerates will do. But one thing you have to keep in mind, see, putting up a greenfield project into unknown territories is not an easy cake walk, please. It is very difficult. The local laws, the local regulations, the local culture, the local dynamics, I think so it takes its own time. It has its own. Why we have been slightly ahead of successful, if I may say so, because we were present in both the geographies, let us say, in America as well in Saudi for the last 15, 16 years. We have been on the ground. It is not that we had a supplier relationship, but we were only producing in India and supplying there. We were physically present on the ground. We understand the nuances much better than others would have it. Not that others will not be able to do it, but they will find it very, very difficult. So setting up greenfield or brownfield projects in such economies is not an easy thing, #1. #2, India is -- has a very high concentration. That's a fair point you are making. Now whether with this concentration and most of the facility or capacities which are there in India were more inward looking. They were more servicing the domestic requirement. Now the domestic requirement definitely is receding at this point in time. At least there is a little lack of visibility and the spend which is going to happen there. So India market is slightly muted. I'm sure that everyone would be trying for export at this point in time, I believe that. But you also have to understand that as it is difficult to set up a greenfield or a brownfield capacity, also you have to understand that getting approvals and accreditations is also a challenge. If you really have to work with the Tier 1 producers of the world, there is a process of approvals and accreditations. There is a very high quality standards, which are required, absolutely to a scale, which are very, very difficult to achieve. So that is also -- so there are deterrents to get into that. It is a time-consuming process. So -- and this is where Welspun is slightly blessed because with all our approvals and accreditions, which are global in nature and with the Tier 1s we already have, that is giving us a sort of a head start over the others and our geographical presence into the other markets is giving a head start. I'm sure others will also be trying to do that. I wish them all the success, but it is not as easy as what we contemplate at this point in time.

Noted, sir. Sir, my second question pertains to our cash utilization. As we like to maintain our ROCE at 20% or above, cash is becoming a problem because we already have a pretty high cash position, and I believe that it is going to increase only further. So deployment of this cash, any thought process on that, if you could share with us would be really helpful.

Vikash, first and foremost, today, we all recognize cash is king. I think so there is nothing called -- there is no ambiguity around that. So it is a good problem to have, first and foremost. But I completely understand that in a way, it is also counterproductive. We are very clear that its deployment has to be figured out. Now whether it is by virtue of dividend, buyback, investment, all things -- all those things are very well understood at our end, #1. But we strongly believe that right now, we still have -- we have a decent amount of cash, but we are still into the CapEx cycle. But we also believe that in the subsequent quarters, there will be a more cash flow which will be coming in. We will be sitting by the end of the year at a substantial amount of cash. And I'm sure that at that -- by that point in time, we will have figured out an answer. There are multiple things which are being discussed. And I only want to assure one thing. See, at the end of the day, what the capital allocation is going to be extremely, extremely judicious. We are very, very clear. And if you see for the last 2 years, we have very clearly given our guardrails. Our guardrails are that we will go into our proven geographies, core geographies and core products only. Number two, we will only invest where the ROCEs are more than 20%. Number three, that at no point in time, we would see our net debt to EBITDA going up beyond -- it has to be under 1%. So these are the guardrails which our Board has set for us. Under that only, and we will do any capital allocation. And trust you me, believe me that it will be very, very judicious. You will not -- no investor will feel ever disappointed because of that.

[Operator Instructions] The next question is from the line of Nishant Vass from 360 ONE Asset Management.

Just one question digging into the U.S. North American data center potential. I think there is a lot of discussion even in the U.S. that they are going to fall short of the natural gas generation capacity for the data center side, like close to 100 gigawatts has been kind of under development, but approved list is much smaller. I think you're obviously talking to a lot of midstream guys and they are doing what they can like the likes of Bridge Atmos Energy, they're trying to do whatever they can. The fact that you have capacity coming on stream, you're in the unique position. Is it possible for you to kind of be nominated directly from some of these customers for some of the larger programs coming up? Because I think the window for some of these programs to get initiated is probably less than 12 months. If that is the case, you mentioned you have no new plans of CapEx, but I'm just trying to think from your management advantage, if your capacity gets completely booked for, say, potentially '29 as well, what's the lead time for a new plan? Like I'm just trying to think that from your vantage point.

Nishant thank you. Nishant, I think that's a very great question. See, first and foremost, to set up any plant in America is for someone like us who is present there, who is already on the ground, it's at least an 18- to 24-month process, first and foremost. If someone intends to even do a greenfield part of it, I do not know what time it will take because everything is on fire in America. So is there a threat of any new capacities coming up? And if someone would like to explore, good luck to them. But I don't think so that it is something which someone need to even venture about because things are not as what we see from here. #2, we also believe that there is a tipping point. You could -- we could see a demand -- we are seeing a very structural demand for the next 5 to 7 years' time, right? Out of which we have only booked for 2 years' time and maybe potentially we can -- as the things will progress, we can book in a year or so. Even if we start thinking beyond adding our more capacity, which we don't want to do that, I think it is beyond a tipping point because overcapacity is also detrimental to into a market which is growing. So we do not believe -- I think right now, we believe in the U.S., the type of capacities what we have and the type of capacities our competitive landscape is having. I think so with that, it has reached to a point that there probably is no need to add any capacity. Because if we really want to see the momentum, if we really want to see the margins being maintained, I think so the best way would be to maintain the capacity levels at this level itself. And we believe that, I think so this is a sort of a general sense I'm getting. And in any case, any newcomer putting up a plant is next to impossible, it is not possible. And even if somebody venture, he's going to bleed that. So I think -- so from a capacity point of view, everyone seems to have reached to a certain optimization level. Let's not forget that we are also a project business. This is also a cyclical business. All what we are seeing is a 5, 7 years of a sustained growth. But then if you have an overcapacity, then that also comes and bites you back when the sun is not shining that -- the sun is not as shiner as it is now. So we are very clear that at this point in time, we have done what we would need to do. We have positioned ourselves. We want to maintain our leadership position, which we have. We want to have a particular market share, which we have. We will continue to maintain our market share. That's what we have invested for. Beyond that, we are not looking at anything at this point in time.

So can we then assess the fact that I'm not comparing it like-to-like, but there was obviously a similar shortage on the data center build-out from memory. And I think if gas becomes, let's say, a roadblock for growth in memory, could you -- is there a pricing lever which you can extract from the customers that you talked about margins? I think then there is a much larger headroom for margin expansion in the U.S. if some of the things that we talked about data center build-out happens for you guys. Is that understanding correct?

That's a fair understanding. I think so the margin profile has been increasing. It has been what it was 2 years back and what is it for now and what is it going to be in future. I think so the margin profile incrementally has been better. And please understand on the other side of the table are intelligent buyers. They completely understand that. I think so the name of the game is all about how quickly they can -- how quickly they can be into the particular market and how quickly they can be served. And that is one of the USP what Welspun bring up on the table. And that has helped them to be quicker into the market. And at the same time, they have rewarded us with a margin expansion. So it's a 2-way process. It is very, very open, transparent, and that is the strength of that particular market.

We have our next question from the line of Netra Deshpande from Asset...

Congratulations on the great set of numbers and the new record level of global order book. My first question is pertaining with the DI pipes. As you have flagged about the funding constraints under this Jal Jeevan mission impacting the domestic marketing demand. So which is like the strategic pivot shifting towards pig iron exports more this time. So can you quantify the current exports against and what would be the sustainability about this strategy as a margin level?

So Ms. Deshpande, you are right. I think so the domestic demand for DI, which was under Jal Jeevan mission is under severe pressure. And we see that it is going to be there for a significant longer period of time. We were expecting that things in H2 should improve. But the way I think so the priorities are changing for various reasons, I mean, I completely respect that, looks like that this is going to be a sort of a sustainable pain for a sustainable period of time. So all what we are trying to do is recalibrating our complete strategy. While we will continue to focus on our DIP business, there is still a market. We are still a large player of DI player in the DI market. We will continue to focus the domestic market. We will -- we have an advantageous position on servicing the export market. But both the domestic and export market, apart from that, it will also give us an opportunity to do some big exports, and that's what we have opted for. At the end of the day, the bottom line remains that we remain -- despite the challenges which are there into the domestic market, we still need to be very profitable. So that's the strategy which we have calibrated our change to. I think so this is the right strategy, a domestic presence, export focus and a blend of pig iron coming into play. And I think so these 3 things put together will continue to give us the margin profile what we are looking at.

Okay. Okay. Noted, sir. And sir, my last question is about the one-off deal that is of EPIC. So I just would like to ask about this post partial Epic stake sale, what would be the residual shareholding in EPIC as any other monetization which is planned as this is a one-off deal. So that has shown a good amount of exceptional gain this time in this quarter.

M So Ms. Deshpande, our EPIC is a strategic asset for us, right? While we have been slightly diluting our positions here and there, recently being 4%, 4.5%. But after that also, we have more than 22% of the share, 22% shareholding out there. We are still the largest shareholder, and we will continue to be the largest shareholder, number one. It is a very strategic fit for us because it offers EPIC and our 100% sub, which is coming up in Saudi. I think so these 2 companies put together brings a sort of a very unique portfolio on the table, which is unparalleled. So our -- we will continue to invest in EPIC. We have no further intentions of diluting it. This 3% or 4% dilution, what we have done was done with a very specific purpose, with a very strategic intention and throwing that money. bringing it out from the Saudi market and employing it in the Saudi market only. So it is not that we are bringing that money home or we are taking it anywhere else. We are only divesting and investing into the Saudi market so that our portfolio, the comprehensive portfolio between EPIC and the Welspun becomes such a formidable portfolio, and that becomes the key driver for our growth in years to come.

[Operator Instructions] The next question is from the line of Ritesh Shah from Investec.

Sir, first question is, why is it we are not increasing our full year guidance? Because specifically, when we look at midstream owner operators, I think all of them are actually doing well. They have also increased their guidance for the full year. Any specific reason to be conservative?

Ritesh very good afternoon to you. I think so -- I mean, that's our philosophy. A what we don't want to revise our guidance is. We have given at the start of the year. We are into a project-based business. Will you -- anyone anticipated this war will continue like this? Nobody, right? Will it sustain to this particular period? Nobody. I think so there are events which keeps on changing over a period of time on which you have no visibility to. So I think so it's not prudent on our part to keep on changing the guidance. What is important is to give a realistic guidance #1. And work hard in terms of achieving that or exceeding that. If you see the track record in the last 4 years, whatever guidances we have given, we have always met them, if not exceeded them, right? And in those period of 12 months, so many things geopolitically keeps on changing, which we have no control on. So I think as a philosophy, we believe in giving a realistic guidance, not creating a disappointment, rather bringing truthful thing on the table and keep our investors happy saying that this is what the bare minimum they are going to see. If we are able to do better, nobody is going to mind that. So I think that's a part of our philosophy, operating philosophy, which we operate in, Ritesh.

Yes. Sir, if I just flip the question around, saying like probably you are not changing the guidance because you already have the order book, which is fixed -- we know the volumes. We know the profitability, probably that might be a reason we are not changing it. But sir, if I have to just ask you a question, you did point upon FY '29, some visibility incrementally emerging. Given the situation that we are in, it is quite strong, what is the thresholds when you are seeing no to orders right now? Because I think in one of the prior questions, you did indicate for U.S., we are making more than $300, $300 was a normalized average historically. So is it that we are seeing no to orders, have our thresholds on ROCE moved up? So you did give a number of 20%, but is 20% number higher at this conjuncture?

See, this was relevant when we were talking of FY '28. Right now, when we are talking of FY '29, their discussions are at a very early stage. Because see, you also have to understand that for me, -- we also have to have a very clear-cut substrate strategy, which is the steel strategy. So it is not an easy answer to commit immediately for FY '29. For any steel suppliers to also commit for FY '29 assured delivery at a fixed pricing also becomes equally challenging. So it is not a one data point discussion. It is a multiple data point discussion. we, our capacity availability; #2, the steel guys, what are they thinking about it and the total demand into the market. I think so these 3 points, we triangulate that. basis that what is the right fit for all 3 -- right fit for Welspun is basis that we take a decision. We have -- basis that we have taken decisions till FY '28. Right now, as we speak, we are triangulating these points coming to a broad consensus for FY '29. And the good part is that what I've been saying that the good part is that at least the discussions for FY '29 has started. But whether -- have we triangulated the strategy, have we reached to a broad consensus, I think so it will evolve over a period of time. We are in no rush. We are in no hurry. But we have a very clear objective that how can we improve our margin profile as what we have over FY '28. So that it is with that objective. We are working around that. We have -- have we reached to any conclusion? The answer is no. But I'm sure that we will get there sooner rather than later.

Sir, just one follow-up. When we say INR 24,750 crores of order book, is it possible to put a value on tonnages over here?

Value of -- sorry, I didn't get your question.

On tonnes, tonnes. So the reason -- so INR 24,750 looks beautiful because of Section 232, steel pricing, obviously, is very high in U.S. So if we have to look at it from a -- how should we look at it?

Look at it from an absolute value, this is what is going to happen over the next 2 years' time. Why should you go.

Volume. I'm looking at it from a utilization level standpoint as well. So is it possible to quantify it on a volumetric basis?

Is difficult because it also has other businesses embedded into that also, right? The India business is also embedded into that. The futuristic, there's some WSL. So it is difficult. I'm not saying that it cannot be -- it is not quantifiable, but it is difficult. But you have to understand where do we stand? We stand that we gave a guidance that, okay, guys, this year, our turnover is going to be like this and our EBITDA margin -- EBITDA is going to be like this. I think so that is what we are focused on rather than volumes or the percentage because the more variables you like to bring into the play, the more confusion we create. So we want to be very clear, very straight, very upfront so that I and very transparent that this is what we are committing. This is what we are delivering. If we can do better, trust to me, you will not leave any stone unturned to do things better. I hope you -- that comfort and that confidence you will be having on this team and on this management.

Sure, sir. And sir, just last question quickly. You indicated...

Request you to rejoin the queue. [Operator Instructions] We have our next question from the line of [ Yash Ridani ] from Integrity Ventures. Congrats on great set of numbers, sir.

On volumes, I understand you said you shall not look at volumes on a quarterly basis. But if I compare this on a quarter-on-quarter basis, we are seeing a volume degrowth. So is there any reason for that or the orders are getting executed in next quarter that is the reason for this?

As I said, yes, this volume degrowth -- see, volume degrowth or growth is a factor of what you are producing in that particular quarter, right? I really do not know that whether it is a degrowth. I don't think so it will be a degrowth. But assuming for a minute, it is a degrowth. That's specifically validating my point that I do not want to discuss on a quarter-on-quarter basis. We really want to discuss it on a year-on-year basis for a simple reason that you really do not know what product mix you are running, what type of sales you are booking. That sort of a visibility, that sort of a granular visibility is so very difficult to predict on a quarter-on-quarter basis. On a yearly basis, we know that, okay, this is the volume we are able to do. This is the top line revenue we are able to do. And with the steel completely hedged and the margin profile what we have, we are able to give a clear cut guidance on the EBITDA number. I think so we would like to keep it that way. We would not like to comment on quarter-on-quarter growth or degrowth basis, please.

Okay. Got it. The second question would be on basically the domestic business. So since you mentioned domestic business has seen muted demand, but we have seen that Sintex's negative margins and margins are increasing negatively. So how are you looking at that number specifically?

No, no, no. See, please do not see Sintex margins as negative. We are -- this is an iconic brand, #1, Yash. #2, and this is a B2C play, right? If I'm heavily invested into branding and marketing, whether the market is good, bad or ugly, it doesn't matter. There are 3 things fundamentally we will do. #1, we will continue to expand our base, which is the distributor, the retailers and the influencers. Come what may, #1. #2, we will continue to invest into the CapEx what we have already announced so that we are able to capture on the growth when the growth comes in. And #3, this is a B2C business. You understand that unless until you do not have the branding and the marketing expense completely embedded into that, this B2C business don't grow. So we don't see this as a seasonal business. We see this as a long-haul business. We are preparing ourselves for the long haul. This is a crown in our jewel. We are more than confident about this company. And don't be surprised that when the market conditions improve, it would be one of the most successful turnaround story in the country.

We have a next question from the line of Sohan Joshi from ASC Consultants.

Am I audible sir?

Yes, Sohan, good afternoon.

Sir, my first question is with regard to the expansion of East-West pipeline by the Saudi Arabia to the Red Sea, so that you can transport the oil surpassing the Strait of Hormuz. Is this discussion gaining any momentum? I mean, are you aware of these discussions?

Sohan, we are, #1. And what we are hearing and what we are seeing on the ground are 2 different realities. What we are hearing is much less than what is happening on the ground. Definitely, East West is a very active project, which is under discussion. And I think a lot of steps the government of Saudi Arabia and especially Saudi Aramco is taking with respect to that. but do not -- we should not look East West only in isolation. East-West is only one part of the strategy of what they have been talking. I think so there are multiple lines which they are talking at this point in time, multiple augmentation of capacities is what they are talking. And as I said earlier in the call, earlier, there was an internal discussion. Now they have moved to an engagement stage. So there's an engagement which is happening with the stakeholders. So that is reinforcing that what is being discussed internally within government and Saudi Aramco is now coming up on the table and being discussed with the various suppliers and various stakeholders on the table, and that is reinforcing the trust. So it is East-West for sure. And apart from East West also, there are multiple things being talked about or engaged about.

Okay. My second question is, there are some reports, and of course, it was even highlighted by President Trump that some of the data centers in U.S. are getting shifted from the city area to the rural area because there were some protests from the citizens and even President Trump twitted about it. How are we seeing this affecting our demand? Is it going to increase since the location of the data centers itself has changed?

See, a data centers typically, to the best of my understanding, they were never coming into the cities for the simple reason that the large cities cannot accommodate this type of data centers. So these data centers were typically moving towards more on the rural side of it always. They were always -- that was always the case. Now there could be 1 or 2 which would have further moved for which this noise would have been coming. I'm not privy to that. But at least all the data centers are coming in Midwest and in the Arizona region and because what you need there, you require a huge land parcel, #1. #2, a lot of water; and #3, a power connection. Now the cities have all the 3 challenges. They don't have too much of a land space. They cannot give you that type of water, which is required. And in any case, all the cities are on the grid. And the grid infrastructure in America is so fragmented that if they start giving power from the grid to the data center, the grid could collapse. So all these 3 factors are deterrent. Everyone in the data centers are aware of it, and that is the reason they are all moving to Midwest, Arizona regions and all that stuff. And I think so that growth with what we have been talking, what we have been hearing is the growth is much more than what we have been hearing about. I think so the way they are coming up on the table, the way their demands are going up. I think so what also needs to be seen, Sohan is you -- another data point to track is the turbines, the gas turbines. Just to give you an example, 2 years back, the gas turbines, there were hardly -- hardly 5 or 7 or 10 gas turbines, which were sold in America, right? This year, if you look at it, the order book is for more than 300 gas turbines. And this is the demand for the next 4 or 5 years. So if you look at that data point also, it is very clearly giving an indication that this business of data centers is going to exponentially grow. And where these turbines fit because these data centers will have their own power plant, each power plant would require those turbines. And this number of turbines, incremental exponential growth in turbines is also giving a very clear indicator that this journey is a very, very -- it is going to happen. And once you have that gas power plant out there, you would need a pipeline to connect to that. And that is where we come into play. So today, if you look at it, we have become a sort of an integrated part of a data center value chain. That's the way things are panning and shaping out in America. I hope that answers and addresses your question, Sohan.

We have a next question from the line of Deep Gandhi from ithoughtPMS.

Sir, first question is around again on the data center side. So I think one of the previous participants, you had mentioned that in terms of the new order inflow, the share of data center orders is increasing. So can you quantify that, I mean, in the pipeline or for the incremental orders, what share of the orders you are getting is towards data center? And similarly, I mean, also on the margins. So are the margins higher in the data center order? Or are they broadly similar to the oil business?

Deep, I think so I have answered both the questions. I'm sure you are listening to this call since it start. Both these questions I have already answered. I don't think so there is point repeating those answers, please.

I think you haven't shared in terms of incrementally what percentage of orders you are getting from data center. You've given a sense that the share is increasing.

No, I did say that currently, our portfolio would have something like 75-25. But I think so in times to come, we are seeing more traction and this portfolio might change. That's what I answered.

Okay. Actually, I was looking for a number, if you can share what can be the numbers 2, 3 years down the line in terms of future order inflow from data center. That is what I'm trying to understand.

Difficult to predict for us at this point in time because see, at the end of the day, it is also about timing. Now on a given time frame, there is a demand coming for data center and on the same time frame, there's a demand coming for an LNG export. I am not the one choosing for that. right? I am the one choosing for my -- what is the right mix for me to produce at that point in time with the right margin. I would love to do data centers as much as possible. Why I'm saying data centers need to be seen, they need to be seen as an opportunity, as an alternate opportunity, which is coming up on the table. So which is giving us sort of a very long visibility about horizon about this line pipe demand for the next 5 to 7 years' time. I was -- I'm talking data centers from that context.

Sure, sir. And sir, second question is, I think a few weeks back, we had INR 1,600 crores orders for export from India. So can you give us some more sense around which geography are we going to export this order to? And I mean, usually, the understanding was India plant was meant mostly for domestic use. So I mean, are we seeing any new opportunities where the India plant could be used more towards export also? Are we seeing any more such orders in the pipeline?

India has 3 types of plants. #1 is our LSWA plant #2 is our Spiral plant. #3 is our HFIW plant or the ERW plants and #4 is the DI plant. What I am talking here is the India domestic demand being weak, which means it will impact my DIP, it might impact my Spiral. But our LSAW was always export. So the export demand out of India is always going to be robust. It was, it is and it will be. So if you see on a year-on-year basis, we export almost 150,000 to 200,000 tonnes of pipe, which we export, which are primarily LSAW, not primarily, which are all 100% of them are. That demand is very strong, that will continue to be strong. We have a large -- see this -- we are servicing the export market here in Middle East. We are servicing in the Southeast Asian market. And now we are extending our footprint into the Caspian region. So these are the 3 markets in which our India has been supplying the pipes in the past 5 years, and it will continue to do so in the next 5 years for a simple reason that the oil and gas investment is happening all over. It is not only happening in America or it is not only happening in Saudi Arabia. It is happening all over. So from our India, we are servicing the demand in the Caspian and the Middle East and the Southeast Asia region. So that demand is there and will be there.

We have our next question from the line of Parth from Investec.

Sir, just one question, which is on approval. So once our new capacity is commissioned in KSA and U.S.A., typically, how long does it take to get the approvals from Tier 1 developers, owners? Do these projects go through a full fresh technical approval cycle for the new product or facility? Or does our existing track record and company credibility with clients helps to fast track these approvals?

I think so the latter statement is the most appropriate statement part. I think so Welspun, typically, the quality management systems, what is one bothered about? They are bothered -- everyone is concerned about the quality, right? So the quality management system, we have a global quality management system. We have one quality policy, policy, wherever in the world we operate, it's the same one. So nothing is going to change. #2, our relationship with the customer, our past supply track record. I think so these are all factors which only completely accelerate. So for us, getting -- once we are absolutely installed, erected and commissioned, getting approval is a matter of weeks, not months.

And that won't be the case for competition, right?

I don't know. It should not be the case.

We have our next question from the line of Arun [ Sonali ] from Freshwater Capital.

Just one quick question. I think I missed it, but which particular pipe is going into these data centers, which is the type of pipe?

Sorry, Arun, can you repeat the question, please?

Sorry. Which type of pipe? Is it stainless steel? Is it HSAW? Is it LSAW, which is the pipe, the specific pipe that's being used in these data centers?

Both, both Spiral as well as LSAW. Two things you have to take care -- Arun, you have to take note of. See, data centers are now coming in hinterlands, right? Now they have to cross multiple urban areas. And there, the code requirement, the safety code requirements are very different than when you are taking it to the -- from the Permian to the Gulf Coast because that particular corridor is not that habitated, right? So depending on what area it is, how much is the habitation in between, what is the safety code, which is in application, that is determining spiral versus LSW. So we are seeing a strong demand coming up in the data centers because they pass through -- the pipeline passes through a much thicker habitation area. So that's the impression we are getting. But to your question, whether both the pipes are acceptable, the answer is yes.

Got it. And I mean, this is for the U.S., but there was also a large data center announcements in India. So I don't think they've fruition as yet, but one would suspect that this would also create demand.

It should. It should. But the good part here is, Arun, that there is already a gas grid, which is in place, number one. Now I think so to the best of my understanding, these data centers will be hooked to this gas grid, the national gas grid. right? Instead of developing an independent line to their data centers, which is the case in the U.S., I don't think so that will be the case here in India. There will be a requirement. They will like to go through the national gas grid and which is where the companies like GAIL and they participate. And we are seeing that in their forecast, they are indicating that they want to add additional 10,000 kilometers of pipeline to complete the gas grid. So this demand, I'm sure, will come at an appropriate time.

We have a next question from the line of Ritesh Shah from Investec.

Sir, I'll just start where we left. Sir, you indicated securing a substrate is something which is a challenge, say, for FY '29 order book. Sir, how are we going about it then? That's first. And secondly, are there any regulatory policy challenges that you foresee, which could actually derail the train where everything is going right at this juncture?

So Ritesh, with respect to substrate sourcing, I think so it is a sort of a joint approach we follow. When we work with the local steel suppliers, we enjoy a credible relationship with them. And there's nothing called speculative. They have their skin in the game. So I don't -- I never said that it is going to be a challenge. I'm saying that it needs to be strategized. All -- as we are discussing requirements for -- we just concluded for FY '28. Now when we are getting into FY '29, we are putting -- jointly putting together a strategy, what should be our strategy for FY '29, and that means along with the steel guys as well. So I don't think so it is a challenge, but there's a work to be done, #1. #2, regulatory policy and challenges. Yes, there are challenges, but those challenges will be to the imports. See, one thing is we are very, very clear that in America, there has been -- we have seen certain imports still coming in, small diameter or someone had ventured and small quantities of large diameters also trickled in. I think so that will stop. So we are absolutely plugged with to the government to all the regulatory authorities and the bodies out there. Earlier, there was no capacity, no capabilities available there. But now when in America, all the capacity, the full capabilities are available. So it is only a matter of reinforcing that things has to come to a standstill and for which we are gaining a very favorable traction. So I think so the regulatory challenge is more for the importers rather than domestic producers.

Sir, last question. I'll just put a hypothetical scenario of Section 232 and 301 is completely rolled back hypothetically tomorrow. How does the nature of operations -- how does the economics change for us?

Two things. #1, both 232 is by statute of law. It is not that by statute of precedent. It is by statute of law. So it cannot be rolled back, first and foremost. It has survived 2 terms of 2 different parties. So I see no reason whatsoever that this is going to roll back. For a simple understanding that in U.S., they completely understand there are 3 or 4 pillars of U.S. economy, automobiles, oil and gas, steel, tech. These are 3 or 4 pillars they completely understand. They are -- there is a bipartisan support around all these 4 things. I think so they are formulating and they have formulated an ecosystem that anything and everything has to be around that. So with the bipartisan support, which they have in the Senate and the Congress and through legislation, it is impossible to roll back something like this. things which can be -- things which have an impact are the stack up duties here and there. So they are marginal in nature. So they are not going to move the needle. But if that 232, which is the cornerstone, which is 50%, that is not going to go away anywhere for sure. Do we have any questions left?

No, sir. This was the last question. Ladies and gentlemen, that was the last question of the day, and I now hand the conference over to the management for closing comments. Over to you, sir.

Yes. Thank you. Thank you, gentlemen. Thank you all for participating in this call. I think so we tried to answer most of your questions. I still feel that if there are any further clarity which are required, you can definitely reach out to Mr. Percy and Mr. Goutam to get those answers. But fundamentally, what I'm trying to tell you, gentlemen, that, a, the company -- your company is on a very, very strong wicket. I think so this -- our performance is a testimony to that. Our future order book is also -- gives you a clear visibility as to what is going to happen over next 10 to 12 quarters' time and maybe even more. The market -- we are seeing the tailwinds in the market. We are present into those markets where the tailwinds are there. It is definitely going to offset some setbacks what we might have in the Indian domestic market, but they are going to be largely offsetted by miles into the geographies what we are present. And I'm sure that the best of the company is yet to come. So continue to have your trust, continue to have your faith, and we look forward for all your support what you have given us till date. Thank you very much for joining us and all the very best. Good day to you.

Thank you, sir. On behalf of 360 ONE Capital Market Research, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.