Operator: Ladies and gentlemen, good day and welcome to SG Mart Q2 FY 2027 Conference Call hosted by Nuvama Wealth Management Limited. 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 the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Sneha Talreja. Thank you, and over to you, ma'am.
Sneha Talreja: Hi. Good evening, everyone, and welcome to SG Mart's Q2 FY 2027 earnings conference call. We have with us today the senior management team of SG Mart represented by Mr. Rohan Gupta, Executive Director, Mr. Amit Thakur, Executive Director, Mr. Suraj Kumar, CFO, Mr. Archit Arora, VP, Service Center and Distribution Business, Ms. Anamika Gulati, Senior General Manager, Renewables Business, and Mr. Anubhav Gupta, Group Chief Strategy Officer. I would now like to hand over the call to Mr. Anubhav for his opening remarks. Over to you, Anubhav.
Anubhav Gupta: Good evening, and thanks, Nuvama, for hosting SG Mart for its Q2 FY 2027 earnings call. Good evening, everyone. I welcome each one of you to this earnings call from SG Mart Limited. It gives me immense pleasure to announce that Q2 FY 2027 has delivered the performance in a sustainable manner for the last consecutive three quarters, wherein we achieved EBITDA of INR 72 crores. If you see our earning trajectory from Q4 FY 2026 to Q1 and now into Q2, we are finally on track to deliver the performance, where we have changed our business model to trading plus manufacturing, which was earlier only trading when we had started the company. The business model which is being evolved and now has started giving performance, it consists of two main pillars, which are trading plus manufacturing clubbed.
Anubhav Gupta: By trading, what we mean is that we have a very vast group distribution network. We are building our own network of service centers. We have our own brand, APL Apollo and SG Mart, plus we also have an online business sales channel. This is what consists of the trading platform. In manufacturing, we have three products, three verticals, I would say. One is the processing, which is processing of HR coil and coated products. Then second is manufacturing of profiles, which are into construction, renewable, and industrial sectors. Number three is manufacturing of accessories. All these 3 product lines have started contributing to our revenue.
Anubhav Gupta: The platform what we are building in terms of the distribution, in terms of the network of service centers, and in terms of online sales, backed by our strong group brand pedigree, we believe that this performance will continue in the coming quarters. For each of the product line, we have made a business plan for the next 5 years, wherein we wish to increase these capacities by 3 to 4 times in the coming years. I will explain each business vertical one by one. Starting, of course, we start with the trading, which gives the strength to sell our products. One is the service center, which almost 8 are operational today, and every year we wish to add 5 to 6 service centers. We have become more aggressive in acquiring new land parcels, and our target is to have 25 plus service centers by 2030.
Anubhav Gupta: As the ramp-up is better than expected, we believe that we may achieve this number slightly early, and we may increase the number of service centers to 30, 35 by 2030. Idea is to have each service center in the country within vicinity of 200 kilometers. We have represented this in our industry presentation also, wherein we have identified the location where we wish to open service centers. Then second is the distribution network. We already had a kick start from the group distributors who have been present into multiple steel downstream products. We have expanded that base from tubes to rebars to other downstream products. We have almost 1,200 dealers and distributors to whom we have started servicing. Online sales channel we are building, so we will be ready with this platform in next 6 months.
Anubhav Gupta: We have already started investing in the team building and tech stack. We believe that in 6 months we should be ready with this. Now coming to the manufacturing. First vertical is the processing of HR coil. If you see in Q2, we have done a volume of 206,000 tons, which is up 16% on a QOQ basis. This volume momentum should continue as we open more and more service centers in every quarter. What we have seen is that it takes 6 to 9 months for a service center to fully ramp up. We have good runway wherein you will keep on seeing the volume momentum in the coming quarters. Now the second manufacturing vertical is profiles. We have two types of profiles. One is solar, which goes into OEM market for the ground-mounted solar structures.
Anubhav Gupta: Second is the multiple profiles for construction sector which is sold through our distribution network. All in all, if you see, we did volume of around 40,000 tons in Q2, which is up 20% versus Q1 FY 2027. Again, we have capacity like 40,000 tons per quarter, meaning 160,000 tons of annual run rate and we already have a capacity of half a million tons. This ramp up also we will see pretty strongly as we keep on adding more products and as our distribution network keeps on expanding. Third segment is accessories. This also we have launched 5 products already and we are in process of launching 2, 3 more products.
Anubhav Gupta: What we have seen is that accessories also complement the sale of profiles or the solar structures or the processed metal and it is sold through the same distribution channel. It is a very stable and profitable revenue line which will keep on adding to the profitability. The EBITDA margins are also pretty solid and they should remain strong. In fact, they should improve further as we go backward integration for the coated steel which is being used currently for our profile business. Right now we are buying coated steel from the market, but as our first backward integration plant will start in next 9 to 12 months in Raipur, it will inch up our EBITDA margin by 2% to 3%. We expect that our business should be generating sustainable EBITDA of 6% to 7% going forward, which right now is 4% to 5%.
Anubhav Gupta: In terms of cash flows, you can see that we have done CapEx of INR 250 crores in H1. This is on the back of acquiring land for the new service centers plus investment into purchase of plant and equipment for service centers plus the plant in Raipur. We have had a very strong cash flow generation, operating cash flow generation in H1 with working capital days stable at 18 which helped us generate operating cash flow above our EBITDA and we could fund all this from the internal cash flows and the cash on books right now is around INR 700 crores which is slightly lower than what it was in June quarter.
Anubhav Gupta: For the rest of the year, we believe that we may spend another INR 250 to 300 crores plus the residual CapEx for the next 2, 3 years to finish all the service centers plus the Raipur manufacturing plant. We may need another INR 1,500 crores for the CapEx. So that should be funded from internal cash flows and the cash on books. We are pretty confident that the ROCE profile we should be able to maintain around 25% which is our target in the coming years and once these capacities are fully utilized, we may have superior ROCE also beyond 30%. All in all, we are fairly confident that this business model of combining the distribution, the trading with manufacturing and manufacturing with backward integration, it is a very unique positioning, what we are building in the country.
Anubhav Gupta: From the raw material to the finished product being sold through our own service center, it gives a very unique and strong edge for SG Mart to build its business model which should remain competitive for the years to come. It will help us maintain or protect our return profile with the superior ROCE of 25% to 30% and give a lot of strength to the overall group in terms of the downstream steel sector. As far as the guidance is concerned, we have maintained that H1 earnings are up 100% YOY although we have maintained that the business model is capable of generating 50% plus earnings CAGR for the next 3, 4 years. As our manufacturing and trading platforms get ramped up, these guidance should be achieved by us. That is all from our side. We are ready to take questions.
Operator: Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Vikas Mistry from Moonshot Ventures. Please go ahead.
Vikas Mistry: Yeah, thanks Anubhav, and thanks for the great presentation. So what we are trying to ask is that now we are just completely focusing on service center business. However, our presentation shows slightly lower state of ramp-up in service center business. Otherwise, we are guiding for a slightly bit of higher growth. So what is the bottleneck you are finding, either it is a land acquisition bottleneck or other areas where we cannot ramp up it much faster?
Anubhav Gupta: In our slide, what we have said is that 25 plus service centers by 2030. Like I said, the ramp-up what we are seeing in the existing service centers, it gives a lot of confidence to us, a lot of conviction to us that we should be opening service centers much faster than what we have guided for. Let us surprise you in the coming quarters, I would say.
Vikas Mistry: Okay. That's great to hear. One more thing. In last concall we discussed that you will be trying to venture into some contract manufacturing. Have we discussed those plans and what are our plans in terms of doing any contract manufacturing either in this product profile or any other product profile?
Anubhav Gupta: Yeah. That we are evaluating. I mean, nothing has come on table as yet, which is like we can just say, okay, let's start that. Our team is constantly evaluating. I'm sure we should be able to have something concrete in the next earnings call.
Vikas Mistry: Okay. Last question from my side. You have said that we will have 7% EBITDA margin. That is only for the profiles business if I have heard it correct.
Anubhav Gupta: Yeah, that is right because the processing of HR coil through service centers, that is like 2% to 4% EBITDA margin. So on blended basis right now what we are making is 4% to 5%. On blended basis we can enhance these margins by 200 bps.
Vikas Mistry: Okay. Blended basis for the complete company or just only for profile section?
Anubhav Gupta: No, for the whole company. Because see, if you look at the H1, our margin is 4.5%.
Anubhav Gupta: Right? At EBITDA level. So I am saying this can be 6% to 7%.
Vikas Mistry: Okay. For complete company. It is a really positive surprise on that side.
Anubhav Gupta: Yeah.
Vikas Mistry: Okay. That is all from my side. I would come back in a Q&A. I have couple of more questions.
Anubhav Gupta: Thanks.
Operator: Thank you. The next question is from the line of Akhilesh Kumar from Astro Technologies. Please go ahead.
Akhilesh Kumar: Yeah. Hi, Anubhav. I wanted to know about the one product you launched on the welding rod side. Have we done any tie-up with someone or we have our own technology and whether we are competing with established player there?
Anubhav Gupta: So right now we are not manufacturing it. We shall set up the manufacturing line once we scale up the business. As of now we are buying it from the third party factories. Once we scale this business up we shall be putting our manufacturing line.
Akhilesh Kumar: Okay. Do you see any ramp-up here? Particularly
Anubhav Gupta: Yeah. So initial response is pretty encouraging. Okay. Then in next six months, we will take a call that how we can put up our own manufacturing line for this.
Akhilesh Kumar: Okay. Since we have many businesses related to building constructions, are we contemplating anything related to pre-engineered buildings? Anything where we can have our service centers doing those kind of work?
Anubhav Gupta: Of course. There are two products within our portfolio which are supplied in the PEB industry. One is the steel plates, which we process in our service centers. They are sold directly to the PEB vendors. We have India's top 100 PEB companies which are buying from our service centers. Second is the purlins, which are used as the roofing structures in the industrial sheds and warehouses. That also we are manufacturing and supplying.
Akhilesh Kumar: Okay. That sounds good. Thanks a lot. I will come back in the queue for further questions.
Anubhav Gupta: Thanks.
Operator: Thank you. The next question is from the line of CA Garvit Goyal from Serene Alpha Analytics LLP. Please go ahead.
CA Garvit Goyal: Hi, am I audible?
Operator: Yes, sir. Audible.
CA Garvit Goyal: Thanks for the opportunity and congrats for a very good set of numbers. Finally, we are in the directions that we used to speak about over the last 1 to 2 years, right? Just wanted to understand on the margins front, does this quarter include any kind of inventory gain arising maybe because of higher steel realizations or anything like that?
Anubhav Gupta: Not really. If you see, our inventory is 15 days. Okay? In fact, 14 days, if you look at the 30 September balance sheet. Now with such a low inventory days, such high churn, you don't get much exposure to the swing in steel prices, okay? This is what we have learned from our sister company, APL Apollo Tubes also, that our job is to churn the inventory 15 to 20 times in a year, and which should protect our P&L and balance sheet from any steel prices swings. Right? So same business model we are applying here, where we don't wish to have any inventory losses or gains. We wish to work with very lean inventory, and idea is to churn it as much as possible to generate higher ROCE and without hurting the P&L due to steel prices swings.
CA Garvit Goyal: Got it. So considering the execution we had in this quarter, and H2 is usually better, I'll assume that than H1. Are we in line with crossing that earlier EBITDA guidance of INR 300 crore for FY 2027?
Anubhav Gupta: See, we have already achieved INR 131 crore in the H1. We need INR 170 crore in the H2, which means INR 80 crore run rate. We should be able to achieve this. I don't see any problem.
CA Garvit Goyal: Got it. In last con call you highlighted about the interest rates getting increased, right? That can potentially lead to some macro challenges which can impact our business. Where we are on that in terms of kind of traction are you people seeing because recently RBI hiked the interest rates. What is your internal analysis saying on that and how it can impact?
Anubhav Gupta: No. I'm sorry. Your voice cracked. What was it you asked? Can you repeat please?
CA Garvit Goyal: Yeah, I can repeat that. Yes. Is it fine now? Right.
Anubhav Gupta: Yeah. Go ahead.
CA Garvit Goyal: Okay. I was asking, in last con call you highlighted about the macro challenges arising because of rising interest rate environments for our kind of business model. We are seeing that is happening, right? I wanted to understand from you what kind of impact can be visible, not in this financial year, maybe in FY 2028, which can hamper maybe our relative growth rates.
Anubhav Gupta: So there are two, three factors, right, which are impacting the macro environment. One is, of course, the swing in commodity prices since Middle East crisis started. Steel prices specifically they shot up by 25% to 30% in the last six, seven months. This is one that when the base raw material prices move with such a spike, it does impact the end demand because ultimately the end customer of steel is either a construction company or an automobile company or a white good company, right? These are the three main application sectors. It does impact demand to some extent, which we are grappling with. Second factor is, of course, freight for exports or imports. Ocean freight prices have shot up significantly. Any business which is dependent on the international sales or imports, that business is getting impacted a lot.
Anubhav Gupta: Any of our customers who is into international trade, demand from that customer obviously gets impacted. Third is overall sentiments with crude prices and other commodity prices at sky high. That also hurt the regular business sentiments. This is what is impacting the overall macro sector in India, I would say. But SG Mart is a very young business model. We have just started our journey one and a half, two years ago, when we stabilized our business model where we are combining trading with the backward manufacturing. We don't see macro factors impacting us too much that could derail our growth in the coming quarters. But yes, we are being cautious and what we are doing is that we are not keeping high inventory. We are keeping very high inventory churns and we don't wish to take debt.
Anubhav Gupta: So whatever CapEx we do, it is being done from the internal cash flows and the existing cash on the books.
CA Garvit Goyal: Got it. All the best for the future, sir. Thank you very much.
Anubhav Gupta: Thanks.
Operator: Thank you. The next question is from the line of Akhilesh Kumar from Astro Technologies. Please go ahead.
Akhilesh Kumar: Yeah. Anubhav, can you give a breakup, like how many service centers you said eight are working. So all eight are fully functional and quarter-wise, how much numbers we can expect, like say this quarter, any more operational will be coming up?
Anubhav Gupta: Yeah. So 8 are fully operational. If I have to name, like the Hyderabad, Jaipur, Ahmedabad, Pune, Bangalore, and Raipur. Then we are in process of acquiring land at locations where we see a very quick turnaround, like Jammu, Punjab, Rajkot, and then Coimbatore, Chennai, Visakhapatnam, Bhubaneswar. So we have mapped the whole India, and we are going after those locations with the game plan. Number one is to acquire 8 to 10 acres of land parcel where we can have our processing centers, we can have our profile manufacturing center, plus we can have our warehousing infrastructure where we can keep finished goods for the steel downstream sector.
Akhilesh Kumar: Okay.
Anubhav Gupta: This CapEx also-
Akhilesh Kumar: This quarter-
Anubhav Gupta: Yeah.
Akhilesh Kumar: Which center is the new one? I think you said this quarter also, I think we were gone up by one, right?
Anubhav Gupta: This quarter, we added Indore.
Akhilesh Kumar: Okay.
Anubhav Gupta: Right. Jaipur was started 2 months ago. Ahmedabad was started 2 months ago. All these centers will show significant growth in the December quarter and March quarter. Then we will have next leg of 2, 3 service centers which will be operational by April, May. Every 6 months you will see addition of service centers.
Akhilesh Kumar: Okay. Volume side for service centers, if I see year on year, I think we have got it reduced little bit even though we have service.
Anubhav Gupta: No. If you look at the footnote here, service centers. Earlier we used to have B2B metal trading also. Now that is completely stopped. We are showing the merged volume. Whatever little B2B volume we are having, that is very minuscule. That is going through service center only. If you look at the pure service center sales, they are up 30% YOY.
Akhilesh Kumar: Okay. So in the presentation it was, I think, not written, so I thought it is reducing.
Anubhav Gupta: No, it is written in the footnote where we have given the quarterly financial performance segment-wise slide. It is there in the footnote.
Akhilesh Kumar: Okay. I think we can separate it and that will help us to finding out.
Anubhav Gupta: Yeah, sure. You can write to us separately. We will give you the data.
Akhilesh Kumar: Okay. One more thing, the Dubai service center, how they are doing because in Q1 they were having some impact. How they did in Q2?
Anubhav Gupta: Dubai also is doing fine in terms of volume is stagnant QOQ. But yes, because of scarcity of steel, margins are slightly better. But yes, we wait for things to become better there in terms of ports getting opened up, then we start inflow of steel.
Akhilesh Kumar: Because margins are better there, do you plan anything there as well expanding?
Anubhav Gupta: We will take a call once the crisis are over, then probably we will see if we have to add more service center in UAE or in any of the neighboring Gulf country.
Akhilesh Kumar: Okay, thanks a lot. That is it from my side.
Operator: Thank you. The next question is from the line of Vikas Mistry, from Moonshot Ventures. Please go ahead.
Vikas Mistry: Yeah, Anubhav. Just in this slide, we have shown that in upcoming products we have CRCA sheets. How do you see this opportunity of CRCA sheets and it has a huge market share to address. What are the margin profiles in this kind of segment?
Anubhav Gupta: Well, CRCA sheet is a cold rolled close annealed product. Okay? It is mainly used for industrial application and furniture application because it gives some ductility to steel. Our service centers are operating in any industrial cluster of each state of the country. Right? In that industrial cluster, you have multiple factories. These CRCA sheets are used for various fabrication jobs inside the factory, in capital goods, in machinery, okay, in furniture application. Yes, idea is to have a presence in that industrial cluster where the existing buyers may be buying from far off locations. Now that we are penetrating right in that industrial cluster with this facility, there is a very solid demand traction, what we see. We think that each service center can generate 1,000 to 2,000 tons per month of CRCA sheets.
Vikas Mistry: Okay. What are the realizations in margins on this?
Anubhav Gupta: HR coil, it is sold around INR 2,000 to INR 3,000 per ton higher.
Vikas Mistry: Okay. That is all from my side. Really congratulations to the team for very good execution.
Anubhav Gupta: Thanks.
Operator: Thank you. The next question is from the line of Rahul Kumar from Vaikarya. Please go ahead.
Rahul Kumar: Yeah, hi. Just one question on the EBITDA per ton, which you used to disclose for the various segments. How are they this quarter versus what it was last quarter? Going forward, how do you see this parameter moving?
Anubhav Gupta: EBITDA per ton, if you see, for service center business, it is around INR 2,000 per ton, plus minus. It has been stable QOQ. Then, in the profile business, one is the steel profiles which are sold through a distribution channel. There we are making INR 4,000 to INR 5,000 and in the solar structures, we are generating INR 3,000 to INR 4,000. That is also kind of stable quarter on quarter.
Rahul Kumar: Hello? Yeah.
Anubhav Gupta: Yeah.
Rahul Kumar: Going forward, I think you mentioned that the backward integration will improve the operating profit in this renewable structure and business. Other than that, are there any other levers to further improve this profitability?
Anubhav Gupta: Once we do backward integration of coated steel, we are going to launch coated steel sheets in our service centers, which is again a high margin product compared to processed HR sheet. One is it will add profitability in terms of better product mix, plus it will also add on to the same store sales growth in each service center.
Rahul Kumar: In terms of upcoming product launches, which you have mentioned, are these products going to be manufactured in the service center or is it more of trading products as of now?
Anubhav Gupta: No, say it again.
Rahul Kumar: In terms of the upcoming products launches which you have mentioned in the slides, decking sheets, wire mesh.
Rahul Kumar: binding wires, et cetera. These are more of in-house manufacturing at the service center or we are planning to do a-
Anubhav Gupta: No, right now, we will start with the trading, as in, we will buy from factories, third party factories, and once any product gets scaled up, then we will plan to put up our own manufacturing.
Rahul Kumar: Okay.
Anubhav Gupta: The idea is that in service center you can sell dozens of products, N number of products. Any product which makes sense to have own manufacturing, we are going to have our own plant. Product where the third party job work is feasible, we will go with that.
Rahul Kumar: Okay. So the CapEx figure which you mentioned, INR 1,500 crores, this includes the plant and machinery for the existing products and the land parcels, right?
Anubhav Gupta: That is right.
Rahul Kumar: Okay. Understood. Thank you.
Operator: Thank you. The next question is from the line of Rohan Baranwal from Aryan Capital Limited. Please go ahead.
Rohan Baranwal: Hi, good evening, sir. Thank you for the opportunity. My question is, are coated steel supplies from mills have been fully normalized? What is the current solar order book in terms, and how much of the guided 130K to 150K tons of our emission is contracted versus in pipeline, sir?
Anubhav Gupta: So solar order book, if you look at our quarterly volumes, which is 11,000 tons per quarter, so annual is 50,000 tons. We have order book of more than 50,000 tons currently. We were waiting to book orders because steel prices were going up. Now steel prices have some stability. Also there were some delays from the independent power producers in land acquisition. That also got resolved now. So we booked a lot of new orders in the last few weeks, specifically in month of October. So we have fairly one year visibility as far as the order book is concerned.
Rohan Baranwal: Got it. The next question is on the Dubai service center side. Sir, of the next 18 centers which we are planning, how many of these are in metros versus the non-metro sites? What would be the blended capacity assumption for this whole 25 centers?
Anubhav Gupta: On an average, we put up 8,000 tons of HR coil processing in one service center. Then 1,000 to 2,000 tons of CRCA sheets, and 2,000 to 3,000 tons of pre-galvanized sheets. Which comes out to be 12,000 tons, 13,000 tons per service center, per month. Now, if you annualize this, and you multiply it by 25 service centers, this number will be around 3.5 million tons.
Rohan Baranwal: Got it, sir. On the 18 centers which we are planning for, how many could be in the metros versus the non-metros, sir? If you can provide us some numbers on that.
Anubhav Gupta: So it is kind of mainly non-metros. I mean, metro cities, there are seven, eight large service centers, including what we already have in Ghaziabad, and then Bangalore, Pune, Ahmedabad. Hyderabad, Kolkata, we are opening up. Then there will be tier 2, like Coimbatore, Indore, Kanpur, Patna, Jammu, Mandi Gobindgarh. So it is kind of seven, eight large service centers in metro cities, and all will be in tier 2, tier 3 district clusters.
Rohan Baranwal: Got it, sir. Thank you very much, sir. That answers my questions.
Operator: Thank you. The next question is from the line of Akhilesh Kumar from Astro Technologies. Please go ahead.
Akhilesh Kumar: Anubhav, you mentioned about the SG Buildkart. What we are trying to acquire that and achieve that. Are we planning to launch our own digital platform?
Anubhav Gupta: Yeah. So see, we have started tracking a lot of data points, what all products are being bought by what kind of customers. The idea is to build a simple tech stack model for the time being, wherein we are able to facilitate most of the sales through our online sales channel. Once we are able to attract customers to start doing business through this channel, we are just encouraging ease of doing business. Because a lot of our customers have very strong relationship with us, wherein we are servicing them on daily basis to feed their factories. So at least where the relationship has become very healthy and the dealings are very transparent, those transactions we wish to convert online, which will help in ease of doing business. Then we scale that up once we have our own learning curve.
Anubhav Gupta: I mean, right now we don't want to guide too much, like how it's going to boost our overall sales. Right now the focus is to have a tech stack ready with focus on ease of doing business and collecting and working on the data points.
Akhilesh Kumar: Okay. Any particular reason to have it in separate tech company?
Anubhav Gupta: No, so it's a subsidiary. So, in future, it will have its own P&L. Because it will carry a lot of investment, so we wish to understand that whatever investments we make, they should generate desired ROIs.
Akhilesh Kumar: Okay. You are saying that right now you are exploring just how it pans out, and later on you may think of making it a digital platform for B2B sales.
Anubhav Gupta: Yes.
Akhilesh Kumar: Okay.
Anubhav Gupta: We do not wish to do a lot of cash burn here. Idea is to work on the existing sales, convert existing sales to the online channel.
Akhilesh Kumar: Okay. Great. Thanks, Anubhav.
Operator: Thank you. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. The next question is from the line of Akshat Beriwala from Nuvama Wealth Limited. Please go ahead.
Akshat Beriwala: Good evening, sir. What is the expected investment per service center, and what level of revenue or throughput makes your center economically viable?
Anubhav Gupta: The simple maths is that the land investment is around INR 50 crore for a 10-acre parcel. Then INR 5 crore investment into plant and machinery, and INR 10 crore investment in the steel shed, the construction of shed. The investment is around INR 70, 80 crore, which can generate monthly revenue of around INR 70, 80 crore with EBITDA margin of 3% to 4%. If you analyze it with 18 days of working capital cycle, we do get 25% plus ROCE.
Akshat Beriwala: Okay. And sir, as the network expands, as I understand, there will be some initial costs. At what stage would operating leverage make the numbers more rosy, like in terms of a timeline of a service center, if we can get?
Anubhav Gupta: No. The new product, what we are going to start, which is pre-galvanized and CRCA sheets for which the backward integration plant is being put up in Raipur. That will add to my top line and bottom line straightaway, because I will have the backward manufacturing margins there. Plus service center is already there, the infrastructure is already there, so it will add to my same-store sales growth. That will be highly ROCE accretive. This should start 12 months from now, 12 to 15 months from now.
Akshat Beriwala: Okay, sir. Understood. That is it from my side. Thank you.
Operator: Thank you. The next question is from the line of Jatin from Nuvama Wealth Limited. Please go ahead.
Jatin Manuja: Hi, Anupam. Good evening. I had two questions. First is, which regions actually offer you the best opportunity for expanding in service centers, and how are you prioritizing which location is better than the other one?
Anubhav Gupta: What we feel is that there is a gap of a good service center, credible service center, pan-India service center, formalized, organized service center in every industrial cluster in India. Punjab itself is a big industry, right? We are putting up two service centers, one in Jammu and one in Mandi, Punjab itself, right, which will cater to various locations like Mandi Gobindgarh, Ludhiana, Jalandhar industrial belts. In Chhattisgarh and Madhya Pradesh, we are putting up service centers in Indore and Raipur. For East India, we are looking at Siliguri, Guwahati, and Kolkata. What we feel is that there is a massive gap of having a credible service center which can feed the industries on daily basis, right, for the Indian manufacturing hubs.
Jatin Manuja: Okay. That's a good idea.
Anubhav Gupta: The ROCE profile remains same because if you are buying a land in Ghaziabad, it will cost say INR 100, and if you are buying in Jammu, the land will cost INR 50, right? So your volume in Ghaziabad will be much higher than volume in Jammu. So, that gets adjusted with the land cost and investment value.
Jatin Manuja: Okay, fair. My second question is on sourcing. Anubhav, correct me if I am wrong, but you might be getting some benefits from the steel mills, right? How important are these benefits or discounts if you are receiving them from steel mills? Can these benefits increase as your volumes scale up?
Anubhav Gupta: If you see, we are processing around 1.5 million tons of steel, right, every year, which would make us among India's top five, top seven steel consumers. As this volume increases from 1 to 2 to 3 to 4 million tons in next three, four years, definitely the benefits should improve.
Jatin Manuja: Okay, fair. That was from my end.
Anubhav Gupta: Thanks.
Jatin Manuja: Thank you.
Operator: Thank you. We take that as the last question from the participants. I now hand the conference over to management for closing comments.
Anubhav Gupta: Thanks, everyone, for dropping by. I wish you good festive season ahead and look forward to see you again during our quarterly FY 2027 earnings call. You may reach out to our investor relation team for any further queries. Thank you.
Operator: Thank you. On behalf of Nuvama Wealth Management Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
