Operator: As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. [Sailesh Raja] from 360 ONE Capital. Thank you, and over to you, sir.
[Analyst] (360 ONE Capital): Yeah, good evening, Swapnali. Thank you for joining us for Rajratan Global Wire Limited Q2 of FY27 earnings conference call. During this call from the management side, we will be hearing from Mr. Sunil Chordia, Chairman and Managing Director, Mr. Hitesh Jain, CFO Rajratan India, and Mr. Pranay Jain, CFO Rajratan Thailand. I would now like to turn the call to Sunil sir for the opening remarks, followed by the Q&A. Sir, you may begin now.
Sunil Chordia: Yeah. Good evening, all dear shareholders. Very happy to connect with all of you today. We are in very encouraging times for Rajratan. Our earnings are growing faster than revenue. It is led by operational improvement, higher volumes, led by higher utilization rates in Chennai as well as in Thailand. Our operating margins are moving in the right direction. In a manufacturing business exposed to raw material prices, product mix, and capacity utilization, our ability to deliver these margins is meaningful and will only improve as this pressures changes. Today, Rajratan is amongst top 2 players outside China and amongst top 5 players, including China. This says a lot about how we have continued to focus on making ourselves a force to reckon with in the domestic as well as global bead wire industry.
Sunil Chordia: Our Chennai plant expansion to 60,000 tons is on track and should be completed in the current quarter. We are almost full capacity utilization in the initial 30,000 tons capacity. We had installed, which we had installed in the first phase, and now expanding it to 60,000 tons. Our debt also, debt to equity also is comfortable, 0.6 is the ratio, which indicates a healthy balance sheet. This is also visible in our cash flows. in September, we have generated positive operating cash flow in standalone as well as consolidated business. Overall, we are very optimistic for the remaining 2 quarters of this year, as well as at least 2 to 3 years, we think that Rajratan will continue to gsarow at this pace. Now very happy to answer your questions. Yeah.
Operator: Thank you, sir. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and then 2. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to all the participants, you may press star and 1 to ask a question. We will take the first question from the line of Arnav Sakhuja from Ambit Capital. Please go ahead.
Arnav Sakhuja: Hi. Thank you for taking my questions. My first question is that, you know, we mentioned in our presentation that we are planning a 50,000-ton capacity addition in Thailand. What is the broad timeline of this?
Sunil Chordia: Yeah, as already told you, we are running at full capacity, almost 100% capacity in Thailand, and we are refusing customers locally also. Some of the Chinese companies who buy from us, we are not able to supply to them. It is mandatory for us to now expand in Thailand. Maximum it will take one year. Okay? Within next three to four quarters, this capacity will be up and running.
Arnav Sakhuja: Right. Still focusing on our Thailand business, we saw a strong improvement in the realization at around INR 97,500 per ton. What drove this improvement in realization for Thailand?
Sunil Chordia: I don't think your numbers are correct, but broadly what you are saying is right. We are getting more approvals from major customers, the multinational clients, and more volume will be going to them in the current quarter and next quarter. Also, the export from Thailand is also improving. So, all this will improve the performance of Thailand, and that is why the capacity, if further capacity is planned, and with that capacity, our cost will further come down. Going down the line for next 2, 3 years, we are very bullish on our Thailand business and performance.
Arnav Sakhuja: Okay. Congrats again on strong set of numbers, and thank you for answering my questions. Yeah, thank you.
Operator: Thank you. We will take the next question from the line of Ritesh Shah from Investec India. Please go ahead.
Ritesh Shah: Hi, sir. Thanks for the opportunity. I have a couple of questions. First is, how much is the CapEx number for the Thai expansion?
Sunil Chordia: Ritesh, generally, the brownfield expansions are very competitive, which gives you very good return on the investment. Broadly, we should be able to do it in INR 100 crores, ballpark number. Last year, or up till now, we already spent about INR 20 crores in acquiring the new factory there, where we will be shifting some of the facilities. There is hardly investment in infrastructure. Investment will be there only in the machines and plant and machinery. Total, including everything, it will be INR 125, but from now, INR 100 crores is enough.
Ritesh Shah: And sir, you said shifting some of the facilities. I did not understand that, sir.
Sunil Chordia: No, because we were short on space, we bought one closed factory across the road. So, finished stocks, raw material, tool cages, they are shifted in that location, which is not the same land area. It is across the road.
Ritesh Shah: Okay. Okay. And this closed factory had nothing to do with Bidadi. It was something else. It is just
Sunil Chordia: No, it was something else. Infrastructure khareed raha hai. Land and some sheds.
Ritesh Shah: Perfect.
Sunil Chordia: Yeah. Yeah.
Ritesh Shah: Correct. Sir, second is, can you give some broad numbers on the total exports out of Thailand for H1?
Sunil Chordia: Pranay, you are there?
Pranay Jain: Yes, sir. I am here. H1, we have done 8,500 tons of export from Thailand.
Ritesh Shah: Okay. In Q2?
Pranay Jain: Am I audible?
Ritesh Shah: Yes, yes.
Pranay Jain: No, I am talking about H1. Yeah, it is H1.
Ritesh Shah: Correct. And sir,
Pranay Jain: Q2 is 5,200. 5,200.
Ritesh Shah: Okay. Sir, would you like to Correct. Sir, would you like to call out for any numbers for full year? Will it double or can it be more than double?
Sunil Chordia: This year, total export target from India and Thailand is more than 30,000 tons.
Ritesh Shah: Yes. Sir, India will be how much?
Sunil Chordia: Close to 14,000, 15,000 tons.
Ritesh Shah: 14,000, 15,000 tons. Okay. Sir, second question, I think Chennai expansion, any thoughts on increasing capacities over here? I think we are already marching towards, I would presume, 40 then 60, which is not very far. Do we have I presume we have land in place for the next phase of expansion, but how are we looking at it? I think the incremental growth engine is steel cord, but on Bidadi also, are we looking at something with the next three years, five years in mind?
Sunil Chordia: Yeah, yeah, definitely. The Indian tyre market is growing at a rate to 10% now. In the last entire year, we did not see a dip in demand. We did not see even 2, 3 months where customers had cut down their production. Okay? Looking at the demand and the number of export of tyres, which is increasing from India, I think within next 2 years, we will have to put up another 60,000 tons in Chennai. But we cannot commit anything now. Okay? Everything depends on how market is. If there is a return on investment, we will do that. Yeah.
Ritesh Shah: Perfect. And sir, any specific update on steel cord, the progress? I think earlier you had given certain numbers on revenue and margins.
Sunil Chordia: Which steel cord for conveyor belting, which we are doing in Pithampur. We have started trials. It is a small project, and again, a very quality-sensitive product. And we have some capital equipments yet to be bought and installed. But till that time, we will be buying the semi-finished goods from the market. And I think next month, we will be able to submit samples to our customers. But in all our projections, we are not taking any number of revenue or tonnage in our presentations. But I am confident that it will be up and running in full scale next year. And this remaining 6 months of this year, we will go in trials, submitting samples, maybe one lot, two lot. We will keep doing that. Yeah.
Ritesh Shah: Perfect. And sir, last one, would you like to comment on how the competitive intensity is in the local market? I think we are going ahead with playing on the operating leverage market share, which is great. But from a top-down standpoint, how should we look at it?
Sunil Chordia: As I told you, we had decided to continue capturing market share, or at least maintaining our market share. You will see in the numbers, at all premium customers, we are close to 50% of market share. Low-cost, low-price customers, we are not able to supply, and we do not want to supply. Okay? As it is, our capacities are running at full scale, so no need to do that. I am sure there will be some change in the dynamics in maybe one or two quarters, and we should be able to improve the pricing. That is what I can say. But very difficult to comment on the competition in the market. Yeah.
Ritesh Shah: Sure, sir. Thank you so much. All the very best.
Sunil Chordia: Yeah.
Operator: Thank you. A reminder to all the participants, you may press star and 1 to ask a question. We have the next question from the line of Pranay Roop Chatterjee from Burman Capital Management. Please go ahead.
Pranay Roop Chatterjee: Hello, sir. Am I audible?
Sunil Chordia: Yeah, yeah, very much.
Pranay Roop Chatterjee: Great. My first question is regarding the Thai expansion. Historically, we have been very conservative in terms of how we expand capacity, or I should say prudent, and only when you have optimally utilized your existing facilities, you go for CapEx. It is heartening to see the 50,000 expansion after we have fully utilized the facility. My question is more around at the pace at which you expect to utilize it. I will tell you where I am coming from. Globally, the bead wire industry is growing somewhere in the 3% to 4% range. If I look at your Thailand numbers over the last five years and last 10 years, and go to the eight years, both come to about 12% to 13%.
Pranay Roop Chatterjee: If I assume you will continue growing at 12% to 13% after the capacity comes in, it will sort of take you five to six years to fill the facility. My question to you, sir, is, has there fundamentally something changed in the global competitive landscape which can allow us to grow faster and fill the capacity ahead of that five to six-year timeline? I am alluding to an interesting point you made in the last con call, where you said that there was some, I do not remember exactly, but some environmental norms which were favoring sourcing from Thailand to Europe, is one thing you mentioned. Then you also mentioned that after one and a half years of effort, you have finally cracked some global premium MNCs. These are two of the things you mentioned.
Pranay Roop Chatterjee: Sir, if you can help me understand, what has fundamentally changed and what is allowing us to get confidence to utilize it faster, if at all?
Sunil Chordia: Yeah, so very long question. I will give point-wise answer in brief. Yes, your numbers are correct for global market growth and everything, but if you look at regional growth, Thailand capacities are growing much faster. Which are growing at 10% to 15% locally, domestically, Thailand tire industry is growing. That is point number one. Point number two for us in Thailand, we have got major approvals from world leaders in tires. Whom we were supplying locally, now we are supposed to supply them in their different locations in Europe, America, and Southeast Asia. So that will take our capacity, or that is already happening. We had to shift a lot of supplies from local customers to those MNCs, and we are short of capacity in Thailand. So my projection for utilizing this capacity is not more than three years.
Sunil Chordia: As against your estimate of five to six years. So I am really confident that this capacity will be utilized in next two years. Yeah. One year of implementation and two years of utilization.
Pranay Roop Chatterjee: Interesting, sir. So my second and last question.
Sunil Chordia: Yeah, about the green norm. Yeah, sorry. So Thailand, we are the only company in bead wire space who can supply green bead wire. Because our source of raw material is green, and which is not available in India, which is not available elsewhere in the world. It might be available some places, but not available easily. So, especially European customers are inclined to buy major quantities of green bead wire from Thailand. That encourages us to quickly ramp up the capacity. Yeah.
Pranay Roop Chatterjee: That is very interesting, sir. Sir, my second and last question. Is there any one-off impact in the other expenses of this quarter? I saw two comments in the presentation. One was freight cost inflation and one was fuel cost inflation. Both of which I don't consider as structural. These are one-off and should eventually wear off. So, what would be the one-off impact this quarter? Because I would expect with higher volumes, margins ideally should have expanded, but they have been under pressure quarter-on-quarter.
Sunil Chordia: Yeah, so freight, you must be talking to other companies. Freight remains very volatile, okay? We are supposed to supply material on DDP basis, delivered to their door of customer. And freight rates are fluctuating. So to mitigate that risk, some places we have built up a markup or kind of freight surcharge. Some customers have agreed. And then there is CBAM in Europe. There is a quota which has started in Europe. So, Rajratan being an agile and smart company, we are able to supply bigger quantities in those markets. And we are, of course, taking risk of all this volatility. Yeah.
Pranay Roop Chatterjee: Thank you so much, sir. All the best.
Sunil Chordia: Yeah. Thank you.
Operator: Thank you. We will take the next question from the line of Bhargav Buddhadev from Ambit Asset Management. Please go ahead.
Bhargav Buddhadev: Yeah. Good afternoon, sir, and congratulations on a good set of numbers.
Sunil Chordia: Yeah.
Bhargav Buddhadev: Sir, you mentioned that the CapEx in Thailand is closer to about INR 100 crores. So, is it fair to say that if you are able to utilize in about two years' time, then eventually the payback can also come back in two years of this INR 100 odd crores?
Sunil Chordia: Payback again depends on the profitability, margins, everything. Okay? As told you, our focus is to consolidate our market share, and I believe once you have a bigger market share, your profitability always improves. Okay? And we don't see business on absolute bottom line. We see it on a comparison, how our competition is doing, how the market is doing, how the other industry is doing. And we find Rajratan in a very, very consolidated position today. Okay? So, very difficult to commit that payback will be two years, but it is absolutely necessary from the point of view of supplying to marquee customers, this increase in capacity. And INR 100 crores is nothing. It would have costed us maybe close to INR 300 crores for a greenfield project in Thailand, which we are doing for only INR 100 crores. Yeah.
Bhargav Buddhadev: Secondly, sir, if you look at EBITDA per ton, it has sort of declined by marginal 3% on a YOY basis. Now, we are seeing a very strong revenue growth, but essentially the operating leverage benefits are not coming at the EBITDA level. So, when do you see the operating leverage benefits also coming to the EBITDA in terms of EBITDA per ton?
Sunil Chordia: Let me tell you, it will not reflect in numbers because lot of our inputs have gone up. The gas price, the electricity, the transportation, diesel cost, lot of consumables, packing material, everything has become expensive since this war has started. Okay?
Bhargav Buddhadev: Sure.
Sunil Chordia: In spite of all those increased costs, we have been able to maintain the EBITDA per ton. I think
Bhargav Buddhadev: Sure
Sunil Chordia: which is commendable. Okay? If you do not appreciate it, at least I would like to appreciate that we have been able to do that.
Bhargav Buddhadev: Sure.
Sunil Chordia: Our strategy also is to not reduce production or not walk out of the market. As told you, we want to consolidate on the market shares further.
Bhargav Buddhadev: Sir, in terms of profitability on the export side, given that exports will be driving the volume growth going forward, is it fair to say that exports are more profitable on a per-ton basis compared to either selling in the Thailand local market or selling in the Indian domestic market?
Sunil Chordia: Export overall are good. It is a good business, profitable. In India also or in Thailand also, in our conversation, we have said there are marquee customers. For us, marquee customer means who gives a good price, where our product is appreciated. There are customers who do not want to pay good price to us. So, export is better than those customers. So, if we are not exporting means we will have to sell it to customers where profitability is very low or probably there is no profit left for us. So, in our priority, our marquee customers are number one, export is number two, and then some 5%, 10% we continue to sell in the customers where profitability is not there.
Bhargav Buddhadev: Lastly, sir, if you look at rubber prices for your customers, it has actually gone up more than 50% on a YOY basis. We have seen some impact in terms of profitability for the tyre companies as well. So, given that your customers are going through a tough time, are they also trying to squeeze you or because you are not a very big sort of cost in their overall tyre manufacturing, you are able to pass through easily?
Sunil Chordia: Nothing is easy. Whether rubber prices are going up 50% or 10% or it is going down, the purchase manager of a company will always bargain. But he always have an argument कि क्या हमारे bead wire से आपकी balance sheet ठीक होती हो तो ले लो, free में ले लो. उससे होगा नहीं कुछ क्योंकि we are only 3% of your total tire cost. So, end of the day, we are getting reasonable support from our customers also.
Bhargav Buddhadev: Great, sir. Thank you very much and all the very best.
Sunil Chordia: Yeah. Thank you, Marcus.
Operator: Thank you. We will take the next question from the line of Nishita from Sapphire Capital. Please go ahead.
[Analyst] (Sapphire Capital): Yes. Hello, am I audible?
Sunil Chordia: Yes.
Operator: Yes, you are audible.
[Analyst] (Sapphire Capital): I had a few questions. On our Chennai facility, you mentioned that we will be able to the rest of the 30,000 ton capacity, we will be able to start the commercialization from this quarter, right?
Sunil Chordia: No. It is not that something new we are starting here. We were already having a capacity of 30,000. We started adding more machines, and machines are modular. If you ask me today, our rated capacity in Chennai is 40,000 tons. Few more machines will be added next month. It will go up to, on a monthly basis, from 3,500, we are targeting 4,000 tons. From 4,000, we will start making 4,500 tons. So gradual improvement and gradual increase in production per month to ramp up the capacity up to 60,000 tons. That is the plan. So there is no starting date or ending date in this.
[Analyst] (Sapphire Capital): Okay. By end of FY27, can we expect that the capacity will be improved till 60,000 tons?
Sunil Chordia: No, no. To give you a flavor, this year from Chennai, we will be at least making 37,000 to 38,000 tons in the current financial year, which is already more than the 30,000 tons overall capacity. The balance will come in the coming years.
[Analyst] (Sapphire Capital): Okay. Understood. What is the incremental cost in adding each machine? You said, gradually we are adding the capacity. What is the incremental CapEx that we are spending there?
Sunil Chordia: I recall we had spent INR 270 crores for a facility of 30,000 tons, and we spent another INR 30 to 35 crores to complete it to 60,000 tons.
[Analyst] (Sapphire Capital): Okay. Understood. My next question is on our Thailand capacity. You mentioned that our CapEx, the brownfield CapEx that we will do will be of INR 100 crores. How are we going to fund this CapEx? Is it going to be from internal accruals?
Sunil Chordia: Yeah, both. It is a combination of internal accrual. Thailand balance sheet is accruing cash month-on-month basis, and there are banks. Loan is also at a very competitive rate, below 4% we borrow from bank. So it will be combination of loan and internal accrual.
[Analyst] (Sapphire Capital): The capacity, like we can start operations in that capacity from FY29 start, right? Because it will take a year to build the machineries and start the capacity.
Sunil Chordia: FY28.
[Analyst] (Sapphire Capital): No. Like you mentioned that it will take a year for the capacity to start.
Sunil Chordia: Yeah. So one year from now.
[Analyst] (Sapphire Capital): Okay. One year from now.
Sunil Chordia: Yeah.
[Analyst] (Sapphire Capital): H2 FY28, we can expect the capacity to start. That will be of additional 50,000 tons.
Sunil Chordia: Yes. It will take two years to utilize that capacity based on the current demand. This is our projection.
[Analyst] (Sapphire Capital): Right. I just wanted to understand, now our margins have been under pressure, and like you are doing all this CapEx also. Can we expect the margins to improve gradually from here on? Do you think this is the bottom part of the margin?
Sunil Chordia: I can say that our current margins are rock bottom. It should not go below this. Anything from here will improve. Okay? But we have decided to compete head-on in the market. We do not want to leave the space for competition to grow.
[Analyst] (Sapphire Capital): Right. My next question is on growth. Like we have had very good growth, revenue growth in Q1 and Q2 year-on-year. Can we expect this growth trajectory of around like 27% to 28% to continue for the full year and for FY28 as well?
Sunil Chordia: Yeah. As I can talk about volume, revenue is a function of price and other dynamics also work. As I have been saying, 15% to 20% volume growth year-on-year, you can safely consider for Rajratan. It is combination of growth in Thailand, in Chennai, and some in Indore. This will continue for next at least 10 to 15 quarters. Yeah. We have been consistent in saying this.
[Analyst] (Sapphire Capital): Right. Okay. Understood. Yeah, that is it from my end. Thank you so much.
Sunil Chordia: Thank you.
Operator: Thank you. We will take the next question from the line of Abhishek Benkar from Genuity Capital. Please go ahead.
[Analyst] (Genuity Capital): Yeah, hi. Am I audible?
Operator: Yes, Rajat.
[Analyst] (Genuity Capital): Yeah. Thanks for the opportunity. First, my question is about EBITDA per ton differences between Thailand and India. What is that difference? On blended basis, where are we going? How are we going to improve that?
Sunil Chordia: Let me tell you, we never compare India EBITDA per ton and Thailand EBITDA per ton. Thailand has different set of customers, different market, different source of raw material. Their cost of manufacturing is different. You have to divide your question in two parts. India business is very different. The source of raw material is different. Prices are different. In Thailand, we source globally raw material. Thailand is a market which is open for Chinese competition. Very difficult to answer your question. If you can break it down into two questions, I will be happy to answer that.
[Analyst] (Genuity Capital): Yeah. My other question is that Thailand expansion we are doing, are we targeting similar set of customers? I mean, same customer mix, or are we going from current customer mix to premium or export customers from there?
Sunil Chordia: Let Pranay answer this question. He is better connected to all the customers than me. Pranay?
Pranay Jain: Yes, sir. So, I would answer that Thailand itself is a growing market, and we have recently got good approvals in our marquee customers, which sir has just mentioned, and they are very hopeful with two or three good counters which are renowned all over the world. So, the growth which we are expecting will be, of course, with the premium customers increasing their shares, and the balance will be in the Southeast Asia and European market. So, that is the target for the growth, what we are presenting now, and what we are going to get the new customers.
[Analyst] (Genuity Capital): Okay. That's it. Thank you.
Pranay Jain: Yeah.
Operator: Thank you. We will take the next question from the line of Parth Sheth from Smith & Thomson Capital Advisors. Please go ahead.
[Analyst] (Smith & Thomson Capital Advisors): Am I audible?
Sunil Chordia: Yes.
[Analyst] (Smith & Thomson Capital Advisors): Yeah. I wanted to ask the declining other income. Is there any one-time reason, or what is the sustainable other income, like absolute number we can assume?
Sunil Chordia: Other income, because we are a company having a subsidiary in USA, a subsidiary in Thailand, and the consolidation happens. A lot of revenue items also, when we consolidated, reflects in the other income. Other income is not extraordinary income, which generally is not part of the EBITDA. I will say this is very much part of the EBITDA for us. Otherwise, what is your question? I did not understand.
[Analyst] (Smith & Thomson Capital Advisors): Like, what is the reason for, like, on a Q1 basis, the other income has declined significantly? Like, earlier it was 3.4, and now it has declined to 0.66.
Sunil Chordia: I think kuch galti hai aapke numbers mein. Other income on standalone basis has gone up, and on consolidation, because of consolidation, that has gone down.
[Analyst] (Smith & Thomson Capital Advisors): Hmm. Haan, consolidation mein.
Sunil Chordia: Haan, toh woh kuch US ki balance sheet jab consolidate karte hain, toh other income knock off ho jaati hai. Yeah.
[Analyst] (Smith & Thomson Capital Advisors): Okay. Got it. Thank you.
Sunil Chordia: Haan ji.
Operator: Thank you. We will take the next question from the line of Ritesh Shah from Investec India. Please go ahead.
Ritesh Shah: Hi, sir. Just quick questions. Sir, what percentage of our volumes will be premium for India and Thailand? The reason to ask this question is, you indicated that as we move more towards premium customers, we will get rid of the bottom customer base. Just trying to understand the impact on profitability it can have, say, over next 2 years, 3 years. So, if you could help us understand the percentage of premium volumes, and how much is the difference in pricing for a standard customer versus a premium customer?
Sunil Chordia: Yeah. So, Ritesh, it won't make a big difference in India, because in India, premium customers, we are already at more than 50%, 60% counter share. Okay? So, we are not projecting to further consolidate that market share. Something may happen because of our Chennai location. Okay? But that is not our projection. Definitely, the big difference will come in Thailand, where the price difference also between a premium customer and a Chinese customer is, in some cases, up to THB 10,000 per ton, which is, in Indian rupees today, close to INR 25,000, INR 26,000. Okay? So, that should make a difference. Yeah.
Ritesh Shah: And sir, what percentage of our volumes
Sunil Chordia: Premium customer volume growth takes time. It is happening. Every year, we add more volume to that. Pranay, tu kuch bolega ispe? I will answer that question. Currently around 30% to 32% of our sales are towards the premium customers. As sir has mentioned, it will take a time to grow, but few marquee customers are already approved and we will supply them. We expect this to grow by 40%, means 30% will become 40% in the coming year. Product mix.
Ritesh Shah: Correct. And sir, how much is the differential in working? That is helpful. Related question, basically when we look at exports, how much is the difference in working capital days? Basically, when we are catering from India to say Europe or US, likewise from Thailand to Europe to US?
Sunil Chordia: Pranay.
Pranay Jain: Working capital for European customers is around 70 to 80 days. What is the credit? It also includes around 40 days of transit time. Transit time to Europe is 40 to 50 days from Thailand. That is the reaching time, and after that, 30 to 40 days is the credit time. We can say around 70 days is the working capital for exports to Europe.
Sunil Chordia: And as against local I think is 30 days in terms?
Pranay Jain: Yeah, local is 30 days. So on an average is 40 days is the receivable collection days for local.
Ritesh Shah: Sir, I did not understand. Sorry.
Sunil Chordia: अरे, local बेचते हैं अगर Thailand में, तो 40 दिन में पैसा आ जाता है, average. If it is exported to Europe, 70 to 80 days because 40 days is the shipping time, shipping time. Yeah.
Ritesh Shah: Correct.
Sunil Chordia: And for US it is 90 days.
Ritesh Shah: Perfect. Sir, my second question is, you did indicate Thai facility has the benefit of probably scrap usage and its green bead wire. Are we getting any benefits out of it?
Sunil Chordia: Yes, definitely. We got few quick approvals only because those European customers were very keen to buy green bead wire because of their targets of making green tire and reducing carbon footprint. So Thailand also has an advantage, the CBAM, which is applicable in Europe now, EU. Thailand is much competitive when the CBAM will be applicable. So compared to India, Thailand is a better position.
Ritesh Shah: Fair. And sir, Indian exports, do they target Europe or is it largely towards US? How should we look at it?
Sunil Chordia: From here we are exporting to both the continents. It is depending on which product is approved from which location.
Ritesh Shah: Correct. But sir, there will be a negative impact because I think, I do not know the source of our feed for the Chennai and Pithampur plant. It will not be scrap-based wire rods, so the carbon intensity will be higher.
Sunil Chordia: No, it is higher. It is higher. So those customers are not supplied from India. We cannot.
Ritesh Shah: Okay. Fair. This is helpful. Thank you so much, sir. Thank you.
Sunil Chordia: Yeah, thank you, Ritesh.
Operator: Thank you. We will take the next question from the line of Varun Sharma from Corporate Investments. Please go ahead.
[Analyst]: Hello.
Sunil Chordia: Yeah, Varun.
[Analyst]: Congratulations for the good set of numbers, sir.
Sunil Chordia: Thank you.
[Analyst]: My first question is that what were the tariffs on our products when we were exporting to US when the tariffs on India were 50%?
Sunil Chordia: For long time, the tariff on our products is 50%. Our product falls under Section 232. So all the steel products exported to US face a 50% duty. From India or from Thailand or from anywhere else. Against China, it is little more. They have an additional duty of 12.5%.
[Analyst]: Okay, sir. My second question is that who would be our main competitor? Would it be Bansal Wire or would it be Tata Steel?
Sunil Chordia: Both.
[Analyst]: The main competitor, would it be Bansal Wire or Tata Steel?
Sunil Chordia: नहीं, we consider both of them as competitors, but Bansal is new. Still, according to us, he is not in all the counters able to supply. So more competition with Tata than Bansal. Yeah.
[Analyst]: Okay, sir. Okay. Thank you, sir.
Operator: Thank you. We will take the next question from the line of Sanjay A. from Elara Capital. Please go ahead.
[Analyst] (Elara Capital): Yeah, good evening, sir. Thank you for giving me this opportunity.
Sunil Chordia: Yeah, Sanjay.
[Analyst] (Elara Capital): I just wanted to ask you regarding this green bead wire, as you mentioned. You said that you are the only supplier which is supplying from Thailand, and you also got the approvals regarding the same to export it to Europe because of the green, I mean, whatever the globalization it is, the green thing. Can you highlight some more details on this? Why don't we have some other competitors in this green wire?
Sunil Chordia: नहीं, very simple reason. Thailand में the source of raw material, he uses 100% scrap. Okay?
[Analyst] (Elara Capital): Okay.
Sunil Chordia: The material coming out of the scrap
[Analyst] (Elara Capital): Yeah
Sunil Chordia: is called green steel. Okay?
[Analyst] (Elara Capital): Okay.
Sunil Chordia: In India, nobody is making wire rod out of scrap. They are still using the iron ore and pellets and those raw material. That is the difference.
[Analyst] (Elara Capital): Okay.
Sunil Chordia: Our Thailand source, he uses 92% to 95% scrap as his raw material. So we use that wire rod for making green bead wire. That is it.
[Analyst] (Elara Capital): Okay. The technology is open or is it that any competitor can come in and make this thing?
Sunil Chordia: नहीं, if we want to make in India, we are not able to do it. Some customers who are doing some trials, they place a small order on our Thai company and we supply them from there to make some prototype tyres and trials and everything is going on. तो यह अभी it's more of theory. It is more aggressive in European market, but other companies are also, because of their commitment to become a green company or reduce carbon emission globally. There is a flavor, there is a pressure, there is a need for green. Yeah.
[Analyst] (Elara Capital): Perfect, sir. Perfect. Thank you so much for this answer. May I know, sir, I understand that this is very initial and nascent stage that we are heading towards green revolution and everything. Are we expecting some huge amount of good amount of margins or it is just for green energy and everything? I mean, the introductory stage, as you said. What kind of margins can we expect once this scales up?
Sunil Chordia: नहीं, देखो, क्या होगा, margin-vargin का we cannot project today because of our ability to supply green bead wire, we got approval faster in bigger counters, European tyre makers. Okay?
[Analyst] (Elara Capital): Okay.
Sunil Chordia: That is the advantage. They got attracted. In short time they said, "Okay, okay, if you are supplying that product, we will approve." तो entry हो गई और business चालू हो गया।
[Analyst] (Elara Capital): Understood, sir. Basically initiation of market share.
Sunil Chordia: That green bead wire I can sell at $300 more.
[Analyst] (Elara Capital): Okay. Initiation of market share. I agree, sir. Entry to the new market.
Sunil Chordia: Yes.
[Analyst] (Elara Capital): Agreed, sir. Agreed. As you said that on the steel rod which is for conveyor belts, you said that it is in the nascent initial stages.
Sunil Chordia: Yeah
[Analyst] (Elara Capital): Just wanted to understand any other products in the pipeline other than this which you might be testing?
Sunil Chordia: Not right now. Our focus is on building up capacity in Chennai and Thailand. Which I can see will be consumed very quickly. So right now, nothing beyond this.
[Analyst] (Elara Capital): Okay. Thank you so much for this and good luck for the future. Thank you so much.
Sunil Chordia: Yeah. Thank you, Sanjay A.
Operator: Thank you. A reminder to all the participants, you may press star and 1 to ask a question. We have the next question from the line of Saket Kapoor from Kapoor & Co. Please go ahead.
Saket Kapoor: नमस्कार, sir.
Sunil Chordia: नमस्कार।
Saket Kapoor: मेरी आवाज़ पहुँच रही है, sir? जी, sir.
Sunil Chordia: हाँ, अच्छी से पहुँच रही है।
Saket Kapoor: Sir, firstly just, sir, just to reiterate two points. You mentioned that firstly our EBITDA margin will be in the vicinity of this 12.7%, 13% band. H2 expect करते हैं। Minimum यही रहेगा margin?
Sunil Chordia: मैं कोशिश करूँगा कि better हो जाए। this is the minimum.
Saket Kapoor: जी।
Sunil Chordia: I think this is the lowest margin because our volume and our efficiencies, we are able to click this double-digit volume. But when I look at other balance sheets of our competitors, none of them globally is making double-digit EBITDA margin. Yeah. So इससे नीचे गिरने का संभावना कम लगता है।
Saket Kapoor: Sir, volume के front पे we are getting additional 7,000 from the Indian domestic operation, that is the Chennai part for H2.
Sunil Chordia: Yes. Mm-hmm.
Saket Kapoor: That is what the volume growth will be, expected volume growth for H2 from the Indian part is-
Sunil Chordia: India से 14% growth हुआ है, year on मतलब H1 to H2. We are on track to continue growing in H2 also. Consolidated growth of 17%. Thailand has grown by 22%. This year we should end up more than close to 160,000 tons of business.
Saket Kapoor: 160,000 for the entire both the profile?
Sunil Chordia: Consolidated. Yes, yes.
Saket Kapoor: Haan. So last year we did what, 150?
Sunil Chordia: Yeah, yeah. We are targeting 160.
Saket Kapoor: 160, out of which we did 71,045 tons.
Sunil Chordia: हाँ जी, हाँ जी।
Saket Kapoor: One second. Okay. Sir, secondly, when we look at our balance sheet part, sir, हमारा capital working progress closing balance INR 90 crore का है for standalone. So, for INR 90 crore standalone, it is for both the steel wire project, cord project, as well as the Chennai capacity. That is what the closing balance is and how much is going to capitalize.
Sunil Chordia: नहीं, इसमें करीब ₹70 करोड़ का तो सिर्फ यह steel cord project है। और छोटा-मोटा Thailand का है, कुछ Chennai का है।
Saket Kapoor: एक बार फिर से कहें।
Sunil Chordia: INR 70 crore is for steel cord project. Okay?
Saket Kapoor: Okay.
Sunil Chordia: Which is still not capitalized. Okay?
Saket Kapoor: Okay.
Sunil Chordia: And-
Saket Kapoor: So, INR 90 crore.
Sunil Chordia: 10-10 करोड़ आप दोनों जगह का ले लो, मोटा-मोटी। Chennai as well as Thailand.
Saket Kapoor: Okay, because then that figure is 115 when we look at the console part.
Sunil Chordia: Yeah, yeah. The real number for Pithampur is INR 80 crore. Okay? And Chennai must be INR 15 crore and INR 20 crore in Thailand.
Saket Kapoor: Okay. And out of that INR 80 crore, sir, which we are doing for the steel cord purpose, that will get capitalized when, sir?
Sunil Chordia: I think by end of this quarter, we should be capitalizing that. क्योंकि अभी trials चल रही है। Once we start regular production, we will capitalize it. फिर depreciation चालू हो जाएगा उसका।
Saket Kapoor: Okay. What should be the expected revenue contribution for H2, sir?
Sunil Chordia: For H2, अभी in all our discussion, we are not counting, you know, steel cord revenue.
Saket Kapoor: Okay. But sir, उसका फिर हमारे H2 पर प्रभाव रहेगा on account of depreciation and interest.
Sunil Chordia: Not very big, क्योंकि उसमें बहुत volume growth अभी हम नहीं expect कर रहे हैं H2 में. Trials होगी, customer को sample जाएंगे, approval होगी. We need ISO certification, we need BIS certification. You know, all these formalities will take lot of time. But I am confident that next financial year it will be full, मतलब it will be running at good capacity utilization.
Saket Kapoor: Okay. And sir, when we look at our borrowing part also, on a consolidated level, the borrowings have gone up. So, what explains this INR 90 crore difference for the consolidation? When we look at consolidation, it is only, I think, with Thailand that gets consolidated. So, in the borrowing and as well as in the inventory part. So, can you explain?
Sunil Chordia: 27% revenue growth हुआ है. So, majority of this is working capital borrowing. And it is more so because working capital cycle for export is higher than the local.
Saket Kapoor: Correct.
Sunil Chordia: Majority of this is borrowing for working capital and it is in proportion to the growth of business.
Saket Kapoor: Okay. And sir, lastly, जो हमने अभी 6 महीने का जो CapEx किया है INR 51 crore का standalone में, that will be major आपका steel cord project के लिए ही है, the major part of it that we have invested.
Sunil Chordia: Yes.
Saket Kapoor: Okay. And sir, इसमें हमने infrastructure क्या create किया है? It is only the plant and machinery, I think so.
Sunil Chordia: Plant, machinery and entire shed is No, no. हमारी जो first factory थी, उसको dismantle करके हमने काफी बड़ा shed बनाया है. Almost 2.5 lakh square feet. Okay? With a capacity to, मतलब with a capability to take more machines and more volume in future. तो उसमें भी पैसा लगा है.
Saket Kapoor: Okay. And lastly, sir, when we look at our EBITDA growth, EBITDA growth sir, 10% ही रही है. मतलब सब 10% रही है quarter on quarter.
Sunil Chordia: 12% रही है।
Saket Kapoor: नहीं sir, मैं Q1, Q2 की बात कर रहा हूँ। When we look at the console level, Q1 का EBITDA था INR 41.71 and Q2 was INR 45.39.
Sunil Chordia: हाँ, but okay, year-on-year that is 14.
Saket Kapoor: हाँ, so that translates into 10% Q1, Q2. Taking into account जो आप volume growth expect कर रहे हैं, यह number की क्या trajectory होगी in terms of the growth part? और यह अभी 10% पर ही expected रहेगा?
Sunil Chordia: नहीं, actually our projection for Thailand is better. You will see better number from Thailand in the coming quarter as far as EBITDA is concerned. We do not expect much improvement in EBITDA in the remaining two quarters in India. As I told you, market is competitive. We are also one of the head-on competition with other two names which were discussed earlier. But in console, you will see improvement coming from Thailand.
Saket Kapoor: Okay. So, to conclude, Thailand से margin contribution आएगा and volume India से आएगा. That is what
Sunil Chordia: नहीं, Thailand से दोनों आएगा। Thailand से volume भी आएगा और margin भी आएगा। Okay? और India से volume आएगा, margin contribution percentage में नहीं बढ़ेगा।
Saket Kapoor: Because of Thailand, we have done 29,000. तो 60 की capacity मोटा-मोटी उतनी रहने वाली है कि उसके ऊपर भी हम-
Sunil Chordia: हाँ, अभी तो इस साल में तो वही रहने वाली है।
Saket Kapoor: Correct. ठीक है, sir. बहुत-बहुत धन्यवाद, sir. Thank you.
Sunil Chordia: हाँ जी, thank you.
Operator: Thank you. We will take the next question from the line of Pranay Roop Chatterjee from Burman Capital Management. Please go ahead. Mr. Pranay, please proceed with the question.
Pranay Roop Chatterjee: Hey, sorry, I was on mute. Am I audible now?
Operator: Yes, Pranay.
Pranay Roop Chatterjee: Yeah, yeah. Sorry about that. My question is with respect to the India capacity. After Chennai scales up, our total, let's say, I am talking with respect to Q4 of FY27 as an example. By then, our annualized capacity in India would be 132,000 tons, 1 lakh 32,000, which is effectively 1 lakh 20,000 of bead wire, and the remaining is the other product.
Sunil Chordia: 10,000 tons of steel cord.
Pranay Roop Chatterjee: Total is 132,000 tons, right? Including steel cord.
Sunil Chordia: 142 हो जाएगा।
Pranay Roop Chatterjee: Okay. Let me then be sure about this. I am looking at your presentation. Pithampur has total capacity of 72,000 tons, of which 60,000 is bead wire. That is correct?
Sunil Chordia: Correct. Yeah, yeah. We are adding 10,000 tons of steel cord also.
Pranay Roop Chatterjee: अच्छा, because I think the last time I spoke with the team, I was under the impression it was being that black wire is being converted into steel cord and it is not incremental. That is wrong then?
Sunil Chordia: No, no. I also told in the call that few more, right now we will be buying raw material, semi-finished goods, but we are installing few more equipment and lines to have in-house capability, yeah.
Pranay Roop Chatterjee: Okay. If I then, for a second, ignore that additional 10,000 because anyway we are not building anything into this year, it is probably next year.
Sunil Chordia: Okay.
Pranay Roop Chatterjee: I focus only on the 132,000 tons and I divide it by four. I get 33,000 tons for the quarter, which is the capacity. What is the maximum we can produce on that 33,000 tons, even if we stretch ourselves to the max?
Sunil Chordia: 90% of that.
Pranay Roop Chatterjee: 90% of that.
Sunil Chordia: Doing that in Thailand, we are stretching to that capacity.
Pranay Roop Chatterjee: हाँ. Hence my question, sir. In Thailand, aren't we doing almost 100%? Because I think we sold 15,260 and our quarterly capacity is 15,000 tons.
Sunil Chordia: Yeah, yeah. You are right. Production was a little lower than this. It was 4,600 something. Yes, we are doing some debottlenecking, some change in the sizes. Okay. When we say capacity, it is based on some assumptions of sizes and beads.
Pranay Roop Chatterjee: Understood.
Sunil Chordia: Okay. If there are orders for thicker wire, थोड़ी capacity बढ़ जाती है. Those complications are difficult to explain you on phone. Yeah.
Pranay Roop Chatterjee: No, no. Perfectly understood. Sir, the reason I am asking this is obviously at the start of the call you said that basically now nothing is approved on Chennai going beyond 60,000 ton capacity and obviously this is how it gets utilized and this is the return on investment you will decide. I am just thinking, India if it continues growing in 13% to 14% range, sometime in the second half of FY28, likely you will be fully utilized. Chennai completely utilized and Pithampur completely utilized on the bead wire front.
Sunil Chordia: Yes, yes.
Pranay Roop Chatterjee: So when assuming everything goes on track, how do you plan to progress in terms of timeline of events? Because first you have to take board approval, then there will be a lead time of the machines being ordered and coming in. And basically your
Sunil Chordia: I have answered in the previous question that we have the land available in Chennai and it is a very good location, very well located. Profitability margins are much better in Chennai. Okay. And our competition is far away from south, which encourages us to quickly ramp up the capacity in Chennai. But unless there is a board approval and there is a firm plan, I do not want to announce. But if you want to foresee, yes, I also foresee that expansion in two years time.
Pranay Roop Chatterjee: Understood, sir. Last question I will ask, sir. Just to gauge how the growth could be from an India front, since you have explained Thailand beautifully. India in FY26, we did about 81,000 tons, 82,000 tons if I round. I can split that 82,000 tons into 62,000 to 63,000 tons of domestic bead wire consumption, about 10,000 tons of black wire if I assume it is fully utilized, and about 9,000 tons of export from India. Is that correct, sir?
Sunil Chordia: I am not so handy with numbers जितना आपको याद है।
Pranay Roop Chatterjee: I think it is correct, sir, because I think I got it from.
Sunil Chordia: It is correct. Yeah, yeah. So it is correct number. Yeah.
Pranay Roop Chatterjee: Yeah. I will tell you where I am getting at. If I were to think about what the growth could be from a more medium-term perspective here, the domestic consumption of bead wire would be constrained, right? Because anyway, it is limited by how much capacity your tyre guys are putting. Obviously, you are confident of gaining market share, but you are already at a high market share. So maybe 10%, 11%, 12% could be the growth on the domestic consumption piece. I am very excited about the export from India piece. This, I think, historically has been in the 1,000 to 2,000 mark. After Chennai successfully ramped up in FY26, that went to 9,000. I think this year you could almost, not double, but a bit less than double, maybe 14,000, 15,000, 16,000.
Sunil Chordia: 40% growth.
Pranay Roop Chatterjee: 40% growth. Sir, what is driving the exports from India, and how much runway for growth do you think there is? Because for me at least, from what I understand your India capacity, this is going to be the material growth engine, where you can gain market share and drive faster growth.
Sunil Chordia: Yeah, what is driving growth is the quality we make. Other than Rajratan, nobody else is able to export. It is also because of our long, long relationship in India, Thailand, with those global customers. We clearly see that there is a demand, China plus one, in our product. People are not very comfortable buying 100% from China. So we are getting, and our hard work of last two, three years of making effort, we now have a subsidiary in US. Very soon we will start a subsidiary in Europe. But our marketing people are already located there. So their efforts, our efforts have given this result. I can say this is only beginning. These volumes will keep growing if everything goes well. Yeah.
Pranay Roop Chatterjee: And would it continue to be driven by Southeast Asia and US? I think these are the two geographies I had captured from past phone calls.
Sunil Chordia: Yeah, so Southeast Asia, I do not see much growth because, you know, China is very competitive there.
Sunil Chordia: But yes, growth in Europe and USA is certain.
Pranay Roop Chatterjee: Got it. And you said 40% is the growth expectation this year from India exports?
Sunil Chordia: Yes. Yes.
Pranay Roop Chatterjee: Okay, great. Thank you, sir. You have been very, very patient in answering.
Sunil Chordia: Thank you so much for your interest. Yeah. I think it is over now?
Operator: Sir, we have one last question.
Sunil Chordia: Okay.
Operator: We have the question from the line of Ajay Kapadia from Motilal Oswal. Please go ahead.
[Analyst] (Motilal Oswal): Yeah. Good evening, sir.
Sunil Chordia: Yeah, Ajay.
[Analyst] (Motilal Oswal): Sir, the last price hike we took was in Q1 when, you know, the steel prices had gone up considerably in the last quarter of the last year. In the last couple of months also, the steel prices have gone up significantly, and we normally take a price hike on quarterly basis. Any hike we have taken at the end of this Q2?
Sunil Chordia: We have been able to take some hike in some cases where prices were not finalized or we were not committed at old price. But remaining will, we have to take end of this quarter.
[Analyst] (Motilal Oswal): End of the Q3?
Sunil Chordia: Yeah.
[Analyst] (Motilal Oswal): Currently the pressure on margin is more due to the freight and the other raw materials rather than steel? Am I correct or steel is also one-
Sunil Chordia: Yeah, yeah.
[Analyst] (Motilal Oswal): part?
Sunil Chordia: नहीं, steel का impact अभी आज जो आप paper देख रहे हैं, result देख रहे हैं, उसमें नहीं है।
[Analyst] (Motilal Oswal): Okay, okay.
Sunil Chordia: उसमें impact ज्यादा other cost का है. Mainly energy, gas, petroleum, packing products, you know, dyes, everything has gone up. Transportation cost, yeah. Export में sea freights and they are like crazy. Yeah. But steel prices, yes, are going up, and I think it will continue till mid of November. But whatever it is, December onwards, we have to pass on the price increase in remaining quarters.
[Analyst] (Motilal Oswal): Okay. Okay, sir. Thank you.
Sunil Chordia: Thank you so much.
Operator: Thank you very much. Ladies and gentlemen, that was the last question. With that concludes the question and answer session. I now hand the conference back to the management for the closing comments.
Sunil Chordia: Thank you all the shareholders for your interest in Rajratan. We are in exciting times. In spite of very turmoil market, very turmoil geopolitical situation, your company has been able to show a good growth, and we are confident of continuing this growth journey for next couple of quarters. Please keep watching us, and we will try to do our best. Thank you so much.
Operator: Thank you, members of the management. On behalf of 360 ONE Capital, we conclude this conference. Thank you, everyone, for joining with us today, and you may now disconnect your lines.
