Operator: Ladies and gentlemen, good day, and welcome to the APL Apollo Tubes Limited Q2 FY 2027 Earnings Conference Call hosted by ICICI Securities 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 this conference, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vikash Singh from ICICI Securities Limited. Thank you, and over to you, sir.
Vikash Singh: Thank you, Darwin. Hello, everyone. Good evening, and a very warm welcome on APL Apollo Tubes Q2 and H1 FY 2027 results conference call. From the management side, we have with us Mr. Sanjay Gupta, chairman and managing director; Mr. Rahul Gupta, director; Mr. Deepak Goyal, director for operations; Mr. Anubhav Gupta, chief strategy officer; and Mr. Chetan Khandelwal, chief financial officer. I will hand over the call now to Anubhav for his opening remarks. Over to you.
Anubhav Gupta: Thanks, Vikash, and thanks to ICICI Securities for hosting APL Apollo for its Q2 FY 2027 earnings call. We have delivered our best quarter in terms of sales volume, EBITDA, and net profit. The volume of 960,000 tons was not easy to achieve in the Q2 given our UAE operations remain disrupted due to ongoing Middle East disruption and high swings in the raw material prices, plus the shortage of steel in the domestic markets, along with the disruption in the container trade for export sales also. What we did to achieve this performance was we focused on our core strengths, which are, number 1, brand APL Apollo.
Anubhav Gupta: So we ensured that the products in the Apollo category get better pricing and we achieve better realizations and better EBITDA spreads on those sales numbers. Number 2 strength was our highly increasing focus on the value-added products beyond the construction and renewable sector. We have started to seed the product line for defense and aerospace sectors also on the back of recently commissioned specialized tube mill, which can produce sizes from 250 by 250 millimeter dia with 16 millimeter thickness. So these products are going in the defense and aerospace sector.
Anubhav Gupta: We have mapped the applications, and we have started producing samples and giving to various authorities and agencies, which shall bear results in the next 2 to 3 months. If you look at the Q2 volume, APL Apollo and roofing products sale volume increased by 20% on YOY basis in the first half. We expect that this momentum will continue in the second half with double-digit volume growth. So in the absence of export sales and UAE operations, these are the two product verticals which are supporting superior volume growth and also the margins because of better pricing and better brand value.
Anubhav Gupta: In terms of EBITDA, which has been our bone of contention, I am glad to share that we are on track to achieve 20% growth on the absolute basis by March 2027 fiscal. Again, we are getting boost from the better pricing, increased sale of value-added products in all categories, and the Q2 EBITDA per ton of INR 6,000. We believe this is sustainable now as we enter into the H2 because the contribution is coming from brand APL Apollo products and roofing category again, which are high value-added products.
Anubhav Gupta: If the UAE operations recover in the H2 on stable geopolitical situation, we may do better than our expected 20% EBITDA growth, which we are guiding for FY 2027. On our balance sheet front, the working capital days remain zero, and the cash on books increased by 15% as at September 2026 to INR 16 billion versus INR 14 billion in June quarter. So our prudent working capital cycle remains intact, which continues to generate solid cash flows.
Anubhav Gupta: Our CapEx also is on track, as we target to achieve 7 million tonne of greenfield plus brownfield capacity, plus 1 million tonne of debottlenecking capacity, which we have targeted to achieve in the next two years. That is it from our side. We will be happy to take questions.
Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Darshan from Dolat Capital. Please go ahead.
Darshan Mehta: Thanks for giving me the opportunity, and congrats on a very good set of numbers. Just wanted to know your volume guidance for FY 2027. Earlier we had guided for 15% volume growth, but now for H1, given our volume growth is at close to, I think 20%, just wanted to know what is our revised volume guidance for FY 2027?
Sanjay Gupta: Good evening. Boss, now if you see our volume growth of profitable business like APL Apollo brand and the roofing product, we are intact with the guidance of 15% growth. But due to Dubai problem and the shortage of steel in country, we are unable to focus with the low margin business products. So there we are not in position to commit any type of volume growth. What will happen, we don't know right now. But in our main products where our margin is there, we are very confident that we are going to achieve our volume growth.
Darshan Mehta: Okay. Heartening to hear that. Sanjay, also, I think there was some element of inventory benefit that we can see in Q2. Just wanted to know from you whether
Sanjay Gupta: No. Boss, we never have inventory. We have inventory of 1.5 to 2 lakh tonnes in total. Out of that, our OEM order book and dealer network order book is 75,000 to 1 lakh tonne. So you can say that 50,000 to 60,000 tonnes of material is spare with us. It includes scrap as well as a lot of products. So 2,000, 4,000, 5,000 tonnes of inventory, I can't say anything.
Darshan Mehta: Okay. And sir, in financial assets, in the balance sheet, the amount has fallen to INR 57 crore versus INR 282 crore in March 2026. So can you let us know what is that number as such?
Sanjay Gupta: Wait, boss. People with knowledge of this will tell you. What is it?
Chetan Khandelwal: These are the FDs more than one year.
Darshan Mehta: FDs more than one year.
Sanjay Gupta: Yes.
Chetan Khandelwal: FDs of more than one year now reclassified within one year. If you see the other financial assets of the financial current assets, there the amount has been increased.
Darshan Mehta: Okay. So that amount has basically moved there. Sir, quarter-on-quarter interest cost has increased. Also, if I remove the one-off gain on account of stake sale in subsidiary, I think your other income has fallen quarter on quarter. Just wanted to know the reason for both of these things. Hello?
Anubhav Gupta: Yeah. So other income, if you see for the quarter, it is around INR 80 crores. The interest income has increased from INR 25 crore to INR 46 crores. So INR 20 crore increase is the fixed deposit interest income.
Darshan Mehta: No. Other income you are saying is INR 80 crore.
Chetan Khandelwal: Yes. For H1.
Anubhav Gupta: Q1 and Q2 put together, from INR 40 crore it has gone down INR 30 crore.
Chetan Khandelwal: Yes.
Darshan Mehta: I am just saying that as of 26 September versus 26 June, if I am seeing, and I am removing the INR 10 crore divestment gain from other income. So INR 30 crore versus INR 40 crore in 26 June. Just wanted to know reason for that.
Anubhav Gupta: Some forex currency gain and losses between the two quarters.
Chetan Khandelwal: INR 12 crore.
Anubhav Gupta: Around INR 10 crore.
Darshan Mehta: Forex currency losses you are saying.
Anubhav Gupta: In Q1, there was some foreign currency.
Sanjay Gupta: We have to look at the P&L, but I think it must be that. We have not done such a deep study of what it is.
Chetan Khandelwal: Gain
Darshan Mehta: Okay. That's okay. Okay, sir. Thank you.
Operator: Thank you. Ladies and gentlemen, to ask a question you may please press star and 1. Our next question comes from the line of Sailesh Raja with 361 Capital Market. Please go ahead.
Sailesh Raja: Yeah. Thanks for the opportunity. Congrats, sir, for the great set of numbers. Sir, our roofing sheet volumes appear to have improved significantly, which I believe could be one of the key drivers of improvement in EBITDA per kg. So what is driving the sales growth in this segment, and who are all the competitors? What is our right to win? How do you see this business scaling up in the next 2, 3 years?
Sanjay Gupta: This business is our capacity right now 60,000 ton into 12. 7 lakh ton capacity है हमारा. I think we have done 135 किया है तो 7 lakh divide by 4. तो अभी 175 तक quarterly हमारे पास जाने का scope है. और इसमें हमारा competition किसी से नहीं है क्योंकि हमारा brand है और हमने अपने niche products सब develop किए हुए हैं. So we are doing very well in this segment.
Sailesh Raja: Okay. Sir, which dia we are focusing, sir, in this roofing sheet?
Sanjay Gupta: यह building material भी है, sir, कुछ solar का भी part है। इसमें कुछ industrial roofing sheet होती है, उसका भी part है। और कुछ PUF panels होते हैं, जो heat को absorb करने के लिए बनते हैं, उसका भी कुछ part है। This is all put together. पांच छह product है हमारे इसमें अलग-अलग।
Anubhav Gupta: Just to add to it, Sailesh, 50% goes into housing, 25% go into commercial and industrial, and 25% go into other applications.
Sanjay Gupta: Other applications.
Sailesh Raja: Okay. Sir, these are all above 2mm dia or how it is? Thickness I am talking.
Sanjay Gupta: Thickness में mix है. 0.4mm to 3.5 thickness.
Sailesh Raja: Okay. Sir, around 2 years ago, we had targeted a reduction in power cost by INR 2 per unit.
Sanjay Gupta: Yeah.
Sailesh Raja: Bringing down the cost to INR 5 per unit. So where do we stand against that target today?
Sanjay Gupta: Our 6.2, 6.3 के आसपास आ गया है।
Sailesh Raja: Okay.
Sanjay Gupta: और थोड़ा सा improvement होने से हमारा cost भी अभी next year we are targeting कि हम ₹500 तक achieve कर लेंगे। अभी हमारा 6.2, 6.3 के आसपास है।
Sailesh Raja: Okay. Sir, also the freight cost, sir.
Sanjay Gupta: Cost is our main focus area. Cost पर तो हम हमेशा काम करते हैं। इस quarter में हमने freight cost भी 150 plus से कम किया है अपना। Electricity cost भी कम किया। Employment cost हम नहीं कम कर पा रहे हैं due to volume. जिस दिन हमारा volume ramp-up होगा, employment cost भी बहुत बेहद कम होगा।
Sailesh Raja: Okay. Sir, including other financial asset, our total cash balance is around INR 2,500 crores. So what is our plan for deploying cash efficiently? Have we ever evaluated the possibility of making upfront payment to the suppliers in exchange for yearly payment discount, thereby improving margins? Or is there any other plan?
Sanjay Gupta: Boss, अभी हमारा net cash balance INR 1,600 करोड़ के आसपास है।
Sailesh Raja: Yeah.
Sanjay Gupta: अभी इस हिसाब से हम कोशिश करेंगे अगर हमारा INR 1,200 करोड़ का EBITDA आता है, तो हमारा cash balance जो है INR 600, 700 करोड़ और बढ़ेगा। INR 1,600, 2,300 करोड़ हो जाएगा। उसमें से INR 200, 300 करोड़ हमारा CapEx में जाएगा। तो INR 2,000 करोड़ के आसपास we are targeting कि हम अपना cash positive बंद करें FY 2027. Then we take a call according to our big shareholders and with the board, कि हमें उस पैसे को कैसे use करना है।
Sailesh Raja: Okay, sir. Thank you, sir.
Operator: Thank you. Participants may press star and 1 to ask a question. Our next question comes from the line of Bharat Shah with Bharat Shah Capital Ideas Private Limited. Please go ahead.
Bharat Shah: जय जी, नमस्कार।
Sanjay Gupta: नमस्कार, भरत भाई, नमस्कार।
Bharat Shah: नमस्कार. Once again, hearty congratulations. I think a difficult quarter like last quarter, but I am glad that our focuses remain unstinted on profitability rather than just getting carried away by volume or this and that. I think overall focus on expanding the total profit pool, whether it comes from the mix, whether it comes from the volume growth, it comes also from the cost efficiency. All of that adds levers for improving the profits. I think, I personally believe that in a difficult environment, challenging situation, this is wonderful focus and excellent outcome which has been attained. So really glad about it.
Sanjay Gupta: Thank you, भरत भाई।
Bharat Shah: यह मुश्किल quarter था। Last quarter भी बड़ा मुश्किल था।
Sanjay Gupta: हाँ, भरत भाई। ऐसा हमारी मुश्किल क्या थी भरत भाई कि दुबई हमारा 40% के आसपास चल पा रहा है। क्योंकि ना तो वहाँ से material in हो रहा है ना out हो रहा है। Number two, जो India से हमारा export था 15-17 महीने का लगभग वो सारा tap हुआ हुआ है due to very high container freight prices। तो दो sector really we have bure time se hat hue हुए हैं, but उसके बाद भी we are quite comfortable कि हमने जो भी अपना guidance दिया है, उससे ऊपर ही करेंगे हम।
Bharat Shah: जी. And profit per ton at operating level of close to INR 6,000.
Sanjay Gupta: Plus में ही रहेगा भरत भाई, plus INR 6,000 से ऊपर ही रहेगा। क्योंकि भरत भाई हमारा non-profitable business बंद किया हुआ है, तो उससे हमारा profit per ton तो काफी बढ़ रहा है। क्योंकि जो भी volume हमारा lose हुआ है, उसमें profit तो हमारा गया ही नहीं। वो तो पहले भी no profit business था।
Bharat Shah: बिल्कुल। Anubhav, on the free cash, I wanted to understand, relatively last year our free cash generation was stronger. Anything which is impacted our free cash generation in the H1 this year?
Anubhav Gupta: Bharat bhai, we have paid some capital advances for the CapEx. If you see in the H1, we have spent INR 400 crore already in the H1, versus in FY26, the whole year we spent INR 600 crore. So in H2, the cash outflow will be pretty low in the next six months. So that will improve the free cash flow. Below free cash flow, we did make dividend payments in the month of August, September. So that also impacted the total net cash flow. If you look at the EBITDA to OCF, that will be better in FY 2027 versus FY26 once we close the books annually.
Bharat Shah: तो last year हमारा free cash करीब INR 1,600 करोड़ के करीब था, right?
Anubhav Gupta: Last year it was around free cash flow INR 1,300 crore.
Bharat Shah: INR 1,300 करोड़। नहीं, ज्यादा था मेरे ख्याल से last year. आप उसमें dividend निकाल रहे हो क्या?
Anubhav Gupta: Before dividend, Bharat bhai. If you look at our presentation, slide number 19, we have shown the cash flow. Haan ji.
Bharat Shah: एक minute, 19. One second. Okay. 19 में H1, how much is the free cash that we have generated?
Anubhav Gupta: So far, we have generated INR 700 crores, near about.
Bharat Shah: H1 में।
Anubhav Gupta: H1 INR 700 and then CapEx of INR 400. So free cash flow is around INR 200 crore.
Bharat Shah: हाँ, तो last year INR 1,300 करोड़ हुआ पूरे साल में और यह साल में INR 180 करोड़ first half में हुआ।
Anubhav Gupta: One is that dividend payment has been fully accounted for the dividend payment in the H1.
Bharat Shah: बराबर है।
Anubhav Gupta: Yes. Now for the H2, we generate, like Sanjay Gupta mentioned that we should do around INR 1,200 crore EBITDA, and minus taxes and zero dividend and hardly INR 200 crore towards CapEx. We would reach, like we will surpass INR 1,300 crore of free cash flow which we generated last year on whole.
Bharat Shah: Last year के 1300 के सामने ज्यादा ही आएगा यह साल।
Anubhav Gupta: हाँ जी।
Bharat Shah: Okay, perfect. I think that is about it. And congratulations once again to the whole APL Apollo team. This is really entrepreneurial delight, I suppose, of Sanjay Gupta in a difficult year to achieve this. Congratulations.
Sanjay Gupta: Thank you, Bharat Shah, thank you.
Operator: Thank you. Ladies and gentlemen, to ask a question, you may please press star and one. Our next question comes from the line of Akshay Chheda with Canara Robeco Mutual Fund. Please go ahead.
Akshay Chheda: Yeah. Thank you for the opportunity. Sir, I just have one question. Basically, if I just see that the product mix has improved QOQ or YOY, at least in the volume terms. But the same doesn't get reflected in the GP. Actually, if I just see the GP per ton, that has contracted QOQ. The entire EBITDA per ton improvement that has happened QOQ appears to be more from the operating leverage and the cost efficiency that we spoke about. So what explains this GP per ton contraction? Logically, it should have improved, right? That is the only question I have.
Anubhav Gupta: Akshay, you are right. It is just one fact that, I mean, the Apollo brand also has now light structures. So realization on light structures is slightly lower than the overall APL Apollo product portfolio. So that's why the GP per ton is around INR 500 per ton lower on quarter-on-quarter basis.
Akshay Chheda: Yeah.
Anubhav Gupta: This is mainly because of light structures where the realization is low and NSR is low and the GP per ton is also low.
Akshay Chheda: What could be the contribution of these light structures in APL, if you could quantify?
Anubhav Gupta: 25% of the mix.
Akshay Chheda: 35%? What was it in the pre-
Anubhav Gupta: 25.
Akshay Chheda: 25% in Q2. What was it in Q1?
Anubhav Gupta: Earlier it used to be like mid double digit to high double digit.
Akshay Chheda: Okay. Thank you.
Operator: Thank you. Participants to ask a question you may press star and one. Our next question comes from the line of Sneha from Nuvama. Please go ahead.
Sneha Talreja: Hi, team. Good evening and congratulations on great set of numbers. I just wanted to understand how is the current demand scenario. The reason I am asking is Q1 versus Q2, we have seen a very big jump in volumes. Although we understand that Dubai has more or less remained muted. But leaving apart the roofing sheets where we have seen expansion happening, why did the APL Apollo Tubes volume increase so much? Where is this demand uptick coming from? That's the first one.
Sanjay Gupta: Sneha, APL Apollo demand is very good right now also. We leverage the brand value totally. Whether it is Disco or anything else, we are using it completely in our retail. Earlier, our focus was on SG Premium as well. Our entire focus is on Apollo brand. As you saw in Q2, Q3 also recently is going good. We are not seeing any decline. We are looking at more than double-digit growth in this quarter and H2 also. The roofing products have started in some of our lines as well in the month of July. I think this quarter we are targeting roofing product INR 1,75,000. We are targeting INR 1,75,000 roofing product also.
Sneha Talreja: Understood, sir. You are saying the same mix that is going on now, which we saw in Q2.
Sanjay Gupta: UAE operation and SG Premium brand, these two I cannot commit anything because we do not have any visibility here yet. APL Apollo brand and roofing product we are very confirmed.
Sneha Talreja: Understood, sir. How has October been for us, sir, so far?
Sanjay Gupta: October is good. As per our guidance, we are moving above that.
Sneha Talreja: Understood. Sir, secondly, with respect to previous few quarters you used to give that EBITDA bridge of how your margins are increasing, Anubhav. We have seen a big swing happening from 5500 odd levels to now around 6000 odd levels. So where is the majority of the contribution coming from with respect to EBITDA margin?
Sanjay Gupta: Sneha, we have changed our system a little because we were facing a lot of difficulty in competition. What used to happen by giving EBITDA product by product was that the other players used to hit the same segment more. So we have eliminated that system. You can talk to Anubhav anytime one to one and take it.
Sneha Talreja: Sure, sir. Will do that. This is
Sanjay Gupta: As a strategy, we have closed it.
Sneha Talreja: No problem at all, sir. But what I wanted to know is that this now EBITDA pattern of INR 6,000, this looks sustainable.
Sanjay Gupta: It will come more than this. Q3 is much better than this.
Sneha Talreja: Q3 will be much better than this.
Sanjay Gupta: Yes. Q3 will come above 6,000.
Sneha Talreja: Understood, sir. That is
Sanjay Gupta: Sneha, you check the whole channel. What price label do you see for APL Apollo in the channel for the black pipe?
Sneha Talreja: No, sir. That I completely agree that is a premium.
Sanjay Gupta: One minute. Do you see the black price anywhere around INR 70,000 everywhere?
Sneha Talreja: Yes, the other players have INR 68,000, INR 69,000 types.
Sanjay Gupta: The other brands are below INR 68,000. Our coil is around INR 60,000 now.
Sneha Talreja: Yes.
Sanjay Gupta: INR 60,500. We are getting a conversion of ₹10 per kg. Out of that, our freight of ₹1,500 is deducted, and our manufacturing cost of ₹1,500 to ₹1,600 is deducted, and our Delhi office expense of ₹500 to ₹700 is deducted. So our worst quarter, we are making a margin of ₹6,000 on that as well at this time.
Sneha Talreja: Understood, sir. That was really helpful. Thanks a lot, team, and all the very best.
Sanjay Gupta: Thank you, Sneha.
Operator: Thank you. Participants, you may press star and 1 to ask a question. Our next question comes from the line of Bharat Shah with Bharat Shah Capital Ideas Private Limited. Please go ahead.
Bharat Shah: Anubhav, on slide 18, I think EBITDA of pattern of the H1, we have mentioned it is some INR 11,000 odd. I think it looks to be a typo.
Anubhav Gupta: Yes, it is. Thanks for highlighting. We will correct it.
Bharat Shah: Yeah, cool.
Operator: Thank you. Ladies and gentlemen, if you wish to ask questions, you may please press star and one. Our next question comes from the line of Onkar Ghugardare with Shree Investment. Please go ahead.
Onkar Ghugardare: Sanjay, my question was, if you target 10% volume growth, then for that you will have to show at least 20% volume growth in the next few quarters. Is that possible with you? As you said that H2 will be better than H1.
Sanjay Gupta: Boss, I cannot say about UAE and SG Premium. In Apollo brand and roofing product, 100% is possible. It will go above that.
Onkar Ghugardare: What are you doing in the entire company level?
Sanjay Gupta: Boss, we have the capacity. It takes more than a month for us to cover all those brands and segments. It is difficult to commit anything in that right now.
Onkar Ghugardare: तो मतलब overall company level पर अभी तक आप कुछ guidance नहीं दे सकते।
Sanjay Gupta: Boss, हमारा इसमें दो चीजों पर focus है। हमारा absolutely EBITDA किसी भी तरह 2,200 cross करे। Number two, हमारा जो Apollo brand है और Roofing Product brand है, जहां पर हमारा premium होता है। दुबई में हम कुछ नहीं कर पाते। दुबई में हमारा premium अच्छा होता है, but वहां पर हमारे हाथ में नहीं है कुछ। Apollo brand और Roofing Product brand में हम कम से कम 15 से 20% का growth year on year लेकर जाएं।
Onkar Ghugardare: आप अगर बता सकते हैं कि दुबई operations का currently क्या state है? मतलब क्या progress हो रहा है?
Sanjay Gupta: Boss, हमसे ज्यादा आप लोगों को मालूम होगा। यह हमारे से बाहर है अभी। ना कोई वहां माल आ पा रहा है, ना कोई जा पा रहा है। अभी we can't commit anything. हमें तो अपना वहां पर down होकर बस अपने खर्चे निकालने हैं। Thanks to God कि हमारा वहां पर कोई loss नहीं है।
Onkar Ghugardare: Okay.
Sanjay Gupta: क्योंकि वहां मेरी जो capacity है, half a million ton की capacity ready पड़ी है। जब भी वह चालू होगा, वहां मेरा 10,000 ton का EBITDA का business है, मेरे पास ₹500 करोड़ का business ready करा है। But मेरे हाथ में नहीं, मैं क्या करूं?
Onkar Ghugardare: आपने FY28 के लिए बोला है कि 7 million ton का capacity ready हो जाएगा। उसमें आप utilization level कितना देख रहे हैं?
Sanjay Gupta: Boss, अभी sales में volume पर ज्यादा focus नहीं कर पा रहे। EBITDA पर focus है कि INR 2,200 करोड़ के आसपास इस साल करें। Next year INR 2,500 करोड़ से cross करें।
Onkar Ghugardare: Sir, बराबर है। यह बात होगी EBITDA level पर। Sir, मैं capacity utilization की बात कर रहा था।
Sanjay Gupta: Capacity utilization का UAE और SG brand का मैं कुछ नहीं कह सकता। मैं Apollo brand और Roofing Product का कह सकता हूं कि मैं अपना 15-20% growth लेता हुआ। उन दोनों जगह पर क्या growth आएगा कि नहीं आएगा, मेरे को अभी नहीं मालूम। मैं कैसे commit करूं?
Onkar Ghugardare: Okay.
Sanjay Gupta: कुछ तो sir नहीं पता ना, क्योंकि वहां पर SG Premium brand में हमारा margin तो खाली है, इसलिए हमको कोई फर्क नहीं पड़ता है।
Onkar Ghugardare: pricing जो है, उस पर आप क्या course ले रहे हैं? मतलब आपका जो revenue growth है, वह volume से ज्यादा है तो ऐसा ही continue रह सकता है?
Sanjay Gupta: एकदम continuous रहेगा।
Onkar Ghugardare: मतलब second half के लिए भी आप यही predict कर रहे हैं।
Sanjay Gupta: 100%
Onkar Ghugardare: Thank you, sir.
Operator: Thank you. To ask a question ladies and gentlemen, you may press * and 1 on your touchtone telephones. Our next question comes from the line of Shaleen Kumar with UBS India. Please go ahead.
Shaleen Kumar: नमस्ते संजय जी।
Sanjay Gupta: Good evening, Shaleen.
Shaleen Kumar: संजय जी, मैंने call थोड़ा late join किया था। अगर आपने already answer कर दिया हो तो sorry for repeating.
Sanjay Gupta: कोई बात नहीं Shaleen, आप बोलो।
Shaleen Kumar: संजय जी, यह साल अभी जैसा आपका performance रहा है, अपना 6,000 के ऊपर की बात कर रहे हैं तो 2,200-2,300 तो आ रहा है। है ना? अभी साल का 2,200 से 2,300.
Sanjay Gupta: 2,300 मत बोलो यार, 2,200 ही बोल। 2,200 में आए हैं, तो 2,300 मत बोल।
Shaleen Kumar: नहीं sir, आ रहा है तो आ रहा है। बात सही है। जो आप कर रहे हो, 6,000 के ऊपर की बात करें तो आएगा ही ना, जो volume की बात कर रहे हो आप तो। 2,200 से 2,300 आ रहा है। अगर मैं यह बोलूं कि दुबई हमारा normal होता, right तो आराम से यह मान के चलें कि 2,500 हो जाता।
Sanjay Gupta: इस साल 2,400 तो 100% कर लेता।
Shaleen Kumar: हाँ चलिए, आप conservative रहेंगे, ठीक है। तो अगले साल, जैसे पिछले participant का भी question था, right तो अपना realization अच्छा है। Assume करके चलते हैं कि दुबई आ जाता है with pent-up demand, right?
Sanjay Gupta: हाँ।
Shaleen Kumar: तो अपना base pay-
Sanjay Gupta: हमारा 5 million ton का EBITDA ₹6,000 का है। ₹3,000 करोड़ का EBITDA कोई मार सकता है।
Shaleen Kumar: ₹3,000 करोड़ कहीं नहीं गया ना। वह तो आता हुआ दिख ही रहा है। क्योंकि दुबई की demand जोर से आएगी। है ना?
Sanjay Gupta: एकदम मान सकता हूँ।
Shaleen Kumar: एकदम मान सकते हैं कि ₹3,000 करोड़ तो आ ही जाएगा। अगर दुबई पूरी तरह से वापस आए, कुछ तो वापस आएगा। ऐसा नहीं कि पूरा देश
Sanjay Gupta: दुबई पूरी तरह से आएगा पूरा वापस। अगर साल ही रहता है।
Shaleen Kumar: मैं यह बोल रहा हूं कि FY28, जो अभी पांच महीने दूर है, right, उसमें कभी ना कभी तो वापस आएगा दुबई। ऐसा नहीं कि पूरा का पूरा wipe out हो जाएगा। Right?
Sanjay Gupta: Shaleen, वही बता रहा हूँ मैं आपको कि जब भी दुबई वापस आएगा, हमारा ₹500 करोड़ EBITDA का business वहां पर तैयार खड़ा है।
Shaleen Kumar: तैयार खड़ा है।
Sanjay Gupta: आज problem क्या है कि वहां पर कोई material बाहर से खरीदते हैं ना, आज वहां पर ship को लगने में कब लगेगा, ship मालूम ही नहीं पड़ता। उसको इतना damage देना पड़ जाता है कि हमको हमारी raw material cost ही नहीं मालूम होती कि क्या काम कर रही है। Number two, वहां से सारे exports भी बंद हुए। मेरे container बाहर जा ही नहीं रहा है। India से हमारा सारा export बंद हुआ पड़ा है। यह सब चीजें जैसे ही सुधरेंगी Shaleen, हम बहुत strong platform पर खड़े हैं। बहुत अच्छा काम करके जाएंगे। आज commit कैसे करूं? मैं commit कर दूंगा फिर कुछ चीजें नहीं हुई।
Shaleen Kumar: नहीं, हम तो यह बोल रहे हैं कि क्या बात कर रहे हैं कि दुबई वापस आता है तो 3,000 कहीं दूर नहीं है।
Sanjay Gupta: हाँ, नहीं दूर है वह तो।
Shaleen Kumar: नहीं, ठीक। तो basically आप lower volume इसलिए नहीं कर रहे क्योंकि higher margin business बहुत अच्छा कर रहा है। उसकी वजह से-
Sanjay Gupta: मेरे पास steel भी नहीं है ज़्यादा।
Shaleen Kumar: Steel भी नहीं है।
Sanjay Gupta: अगर market में मालूम होगा steel की shortage है।
Shaleen Kumar: हाँ।
Sanjay Gupta: मेरे पास ज़्यादा steel भी नहीं है low business के लिए। जैसे steel availability, क्योंकि plants सबके काफी shutdown चल रहे थे। November भी खराब रहेगा। December से plants सब अपने own track पर आ जाएंगे। तो December से maybe हम जबरदस्त volume करके जाएंगे। 4 लाख तक महीने का volume करके जाएंगे। Shaleen, हमारे साथ सबसे बड़ी खूबी क्या है कि हम हर चीज़ से ready पड़े हैं और हर weather में हम अपने आप को adjust करने के लिए तैयार रहते हैं। हमारा एक goal mainly रहता है EBITDA। और हमारा जो main business है, जो हमारा branded business है, उसमें हम volume capture करना चाहते हैं। बाकी तो SG Premium है। आप कल मेरे को 2 लाख का माल दे दूंगा मैं।
Shaleen Kumar: Correct, वो तो सब समझ में आता है।
Sanjay Gupta: Volume is not a problem for us. उस समय अगर वो SG Premium का business बढ़ेगा तो उस समय EBITDA per ton margin फिर कम हो जाएगा। Absolute EBITDA वहां पर बढ़ेगा ही बढ़ेगा।
Shaleen Kumar: Correct.
Sanjay Gupta: उस समय आपको 6,000 से 5,500 का EBITDA margin नहीं बोल पाऊँ। उस समय फिर मैं वापस 5,500, 6,500 पर आ जाऊँ।
Shaleen Kumar: बात तो वही है sir. Absolute EBITDA तो फिर भी बढ़ेगा ही। बात वही है।
Sanjay Gupta: हाँ, absolute EBITDA बढ़ेगा। हम कभी business cash flow से नहीं करते।
Shaleen Kumar: Correct. So basically we can if with the caveat that Dubai comes back, we can work with the INR 3,000 crore number in our mind for FY28.
Sanjay Gupta: Dubai and steel availability in the country.
Shaleen Kumar: Normalization of situation.
Sanjay Gupta: Normalization of both the thing as the container rates going to down. These three thing के साथ we are ready for INR 3,000 crore.
Shaleen Kumar: ठीक है sir. Good sir. That's it from my side sir. Thank you.
Sanjay Gupta: Thank you Shaleen.
Operator: Thank you. Our next question comes from the line of Shweta Dikshit with Systematix. Please go ahead.
Shweta Dikshit: Good evening sir. Congratulations on a good set of numbers. Sir एक चीज बस यह समझ नहीं आई कि अभी we are at INR 6,000 per ton of EBITDA but इस time पर steel prices भी supportive हैं. Last time I agree completely कि product mix definitely improve हुआ है but last time when we saw these kind of margins, उस time भी steel prices were very supportive.
Shweta Dikshit: That was in FY23 roughly after the COVID revival. तो यहाँ से अगर prices फिर से normalize होने लगते हैं if from 65,000 HRC falls back to 60,000 or maybe 55,000 तो उस scenario में what kind of margins do we think कि sustainable 6,000 रहेगा या फिर से हम लोग देख सकते हैं कि वह 5,500 या 5,300 के level पर आए.
Sanjay Gupta: श्वेता जी, जो हमारा margin expand हुआ है, उसमें दो-तीन reason है margin expand होने के। One is the reason कि हमारे non-profitable business का volume खत्म हुआ है। एक तो उसके कारण हमारा margin expand हुआ। क्योंकि जो volume खत्म हुआ, उसमें हमारा margin तो पहले भी नहीं था। Number two, the second reason जो हमारा roofing product चालू हुआ है, extra capacity.
Sanjay Gupta: उसने हमारे margin को extend किया है। Number three, जो हम innovations और costing पर day to day basis पर छोटे-छोटे काम करते रहते हैं। Like अभी काफी item हम ISRO के लिए या DRDO के लिए develop करने के लिए हमने एक line चालू की है। अब उसको हम वहां पर normal वक्त में development के लिए दे दिए तो maybe उसके approval में एक महीना, दो महीना, तीन-चार महीना जो भी time लगता है। वहां से चीजें approve होगी तो वहां सबको फिर हमारा margin बहुत बढ़ेगा। हमने big section पर 1000 square mm पर बहुत काम किया था। तो उन सब चीजों का result आ रहा है। थोड़ा steel price up रहता तो यह तो हम कह सकते हैं कि इतना हमें थोड़ा benefit आता है। ₹2 करोड़, ₹5 करोड़ का जो हमको monthly extra discount देना पड़ता था sale को push करने के लिए, वह तो रुक जाता है। जब थोड़ा steel demand कम होती है तो उस समय हमको ₹4 करोड़, ₹5 करोड़, ₹6 करोड़ amount जो भी marketing tools वाले marketing वाले लोग discount देकर माल बेचते हैं, तो उतना तो आपको quarter में आप ₹10 करोड़, ₹15 करोड़ का impact तो मान सकते हो। इससे ज्यादा उस चीज का impact हमको नहीं आता है। Steel price up हो या down हो।
Anubhav Gupta: Also Shweta in Q2 FY23, the quarter you are referring to. In that quarter, we had very substantial gains in the coated pre-galvanized tubes. Because the difference between HR coil and pre-coated coils was very high. Because of COVID, China exports were shut. So Indian companies were exporting outside India. So there was shortage of GP coils in India and that category did really well for us, performed really well for us and we had backward integration there.
Anubhav Gupta: But this EBITDA of INR 6,000 per ton in Q2 FY 2027, this is much sustainable like the points Sanjay ji mentioned and also the capacity utilization operating leverage benefits what we are getting at run rate of 960,000 ton per quarter. Our utilization rates are almost 70%-75%. So this EBITDA per ton is much more sustainable than what we saw in Q2 of FY23. You may see the repetition in Q3 also in December quarter. So once we are able to deliver INR 6,000 per ton and above in two consecutive quarters, you will feel much more confident that this is now sustainable.
Sanjay Gupta: And then we change our guidelines. Then we are talking कि हमारा 6,000 से 5,500 का अगले साल का target है.
Shweta Dikshit: FY28 के पूरे साल का आप बोल रहे हो।
Sanjay Gupta: Yes. तब हम अपने guidance और एक quarter देखकर फिर अगले साल हम guidance को change करेंगे। अभी हम भी एक quarter और देखना चाहते हैं क्योंकि हमने काफी innovations पर और costing पर काम किया है। freight cost अब तक कम किया है। Power unit cost कम किया है हमने। तो अभी हम और उस चीज को deep study कर रहे हैं कि हम अपने margins को और कैसे improve करें। तो यह margin को हमारा एक जगह से नहीं बढ़ाया है। दो-तीन जगह के factors को मिलकर margin बढ़ाया है हमारा। हां, कल को maybe SG Premium brand का sale फिर quarter का 1 लाख, 2 लाख तक होने लग जाता तो per ton margin हमारा फिर कम हो जाएगा थोड़ा।
Shweta Dikshit: Understand. जस्ट a follow up. इस quarter में भी discount के बाद ही है यह margin या फिर अभी इस time पर demand के हिसाब से-
Sanjay Gupta: इस quarter में जुलाई में discount देना पड़ा था। अगस्त से सितंबर में ज्यादा discount नहीं देना पड़ा था।
Shweta Dikshit: Okay, understood. Thank you, sir. That is it from my end.
Operator: Thank you. Participants who wish to ask questions may press star and one. Our next question is from the line of Kumar Saumya with Ambit Capital. Please go ahead.
Kumar Saumya: Hi, sir. Good evening. Am I audible?
Operator: Go ahead, Kumar, please.
Kumar Saumya: Yeah. So on the Dubai INR 500 crore EBITDA, currently capacity is about 300,000, right? With 200,000 in addition planned by the end of FY28.
Anubhav Gupta: Yeah.
Kumar Saumya: Just wanted to understand the capacity. Yeah.
Anubhav Gupta: Yeah. So this capacity will increase to 500,000 tons as the brownfield expansion is underway. We are adding two new mills. So by March 2027, the Dubai capacity will be 0.5 million tons. On that, we can achieve-
Chetan Khandelwal: INR 10,000 EBITDA.
Anubhav Gupta: INR 8,000 to INR 10,000 per ton EBITDA, because those two new mills which are coming up, they are also a pretty high margin products.
Kumar Saumya: Okay. Secondly, on the heavy and super heavy, if you could give some ballpark number, as in what is the share of this super heavy and heavy during this quarter specifically?
Anubhav Gupta: Again, we have stopped giving that sensitive information. We can take this up privately.
Kumar Saumya: This is ballpark. Okay, sure. Understood. Lastly, we talked about operating leverage helping us, but then again, we are adding 2 million tons of capacity over the next one year. Do you see this 6,000 tons still sustainable after we are adding those 2 million ton capacity over the next one and a half years?
Anubhav Gupta: Kumar, those new plants, which are greenfield, they are pretty small in size, so they will not add to my fixed cost bill too much. Then rest of the expansion is in brownfield, which anyways will not hurt my existing fixed cost to a great extent. That is why we believe that now the capacity expansion does not hurt our EBITDA spread too much like it used to do two, three years ago.
Kumar Saumya: Got it. Lastly, on the price cap that we discussed in the start of the call. Is it possible to maintain the cap when, say, steel price starts to revert back, or if there is a moderation in steel price and the competitive intensity starts to go up? Because right now there is a lot of space between you and the second player and the third player. I just wanted to understand your view, how you are looking at it when the steel price starts to normalize.
Anubhav Gupta: Kumar, see, right now the two main segments, like Apollo brand and roofing products, they contribute almost 92%, 93% to the total volume. Here we are not seeing much of impact from the lower or higher steel prices. Demand remains intact. Our margins remain intact because of better pricing. So no softness in EBITDA spreads as such. If steel prices go down, our SG Premium sales will start going up. That will boost the overall volume.
Anubhav Gupta: Like we are saying that on a metric basis on Excel sheet, EBITDA per ton may look slightly soft, but then whatever incremental volume comes from SG Premium, it will add to my absolute EBITDA. So we are not concerned per se, if steel prices go down that my EBITDA growth should taper down. No, it will only accelerate with the better volume from the SG brand.
Kumar Saumya: Got it. Thank you. That was really it. Thank you.
Operator: Thank you. Participants, you may press star and one to ask a question. Our next question comes from the line of Shantanu Mishra, an individual investor. Please go ahead.
Shantanu Mishra: Good evening, sir. My question is slightly based on FY28 guidance that you had given earlier of 8 million ton capacity. If we consider that capacity, can we expect slight improvement in utilization post that capacity enhancement?
Anubhav Gupta: So see again, we need to look at our business from four verticals. Apollo brand, roofing product. These two segments, we are pretty confident given the current existing geopolitical situation. We are confident that we will deliver double-digit volume growth in these two categories. Dubai, we are currently at a run rate of 100,000 tons per annum versus capacity, which will be ready by March 2027, will be almost 500,000 tons. So whenever Dubai situation improves, we can immediately hit 200,000, 300,000, 400,000 tons in subsequent quarters. That run rate.
Anubhav Gupta: Once the geopolitical situation improves, we assume that there could be some softness in the commodity prices also, which could lead to decline in steel prices in India as well. Then our SG Premium sales will take over.
Anubhav Gupta: The point what I am trying to make is we are not too much concerned with the movement of steel prices going up or down. Our business model is so resilient that we can drive our profitability if steel prices are going up by having better pricing, by focusing more on value-added products. If steel prices are going down, at the same time, our low value-added product, SG, can add to the momentum with the increased volume.
Shantanu Mishra: Yes, definitely, sir. Thank you.
Operator: Thank you. Our next question comes from the line of Vikash Singh with ICICI Securities Limited. Please go ahead.
Vikash Singh: संजय जी, बस एक question है मेरा। Usually हम देखते हैं कि हमारा housing में almost 50% का exposure है और इस साल rainfall almost 13% deficit में रही थी। तो आपको पूछना है, अपना कुछ पुराना experience है कि जिस साल rainfall काफी deficit में रहती है, because the portion of this would be on tier two, tier three cities and farmers as well in the demand, हमें उसका कुछ negative impact आ सकता है? या ऐसा पिछले कुछ सालों में नहीं हुआ है तो इस साल भी नहीं होना चाहिए।
Sanjay Gupta: ऐसा लगता नहीं क्योंकि housing में demand रहता ही है, boss। ऐसा कुछ लगता नहीं है कि मुझे कोई negative impact रहेगा। और रहेगा तो बहुत slightly दो-चार percent का कुछ ऊपर-नीचे demand में होता तो होता। मुझे नहीं लगता है क्योंकि जैसा कि अभी हम अपने सब जगह order books देख रहे हैं, मुझे quotations जो आ रहे हैं, लोग अभी finalize नहीं कर रहे हैं due to higher steel price. Demand में offer inquiries बहुत आ रही हैं।
Vikash Singh: और sir, अपने ये जो lower grade में जो हम compete करते हैं, वहां पे since domestic material available नहीं है, imported material लेके बनाने में नुकसान पड़ेगा। Imported material भी थोड़ा महंगा है।
Sanjay Gupta: Imported material नुकसान पड़ेगा। Number two, उसके secondary और primary में gap बढ़ जाता है। When the gap increases with the secondary or primary तो उस sector में लड़ने का मतलब cash loss देना है। तो we are in a comfortable position. हमारे अपने दूसरे धीरे-धीरे products तो बहुत launch होते जा रहे हैं। हम अपने आप को दूसरी चीजों में बहुत involve करते जा रहे हैं। तो मेरे को तो लगता है जो हमारा ये segment है, जो paper या secondary material से matching वाला segment है, हम धीरे-धीरे करके उसको 10%, 15%, 20% पे ले आएंगे with a time period of one or two years.
Vikash Singh: समझ गए, धन्यवाद।
Sanjay Gupta: अगर आप तीन-चार साल पहले देखते हो तो हमारे हर call पे आता था कि आज इस quarter में inventory gain आया, inventory loss आया। आज हम तीन-चार साल, पांच साल के एक time period में उस chapter से बाहर निकल आए हैं। तो मेरे को लगता है अगले एक-दो साल में हमारी target है कि हम जो secondary से हमारा माल कम बिकता है, ज्यादा बिकता है, इस segment से ही हम बाहर निकल आएंगे। हम अपने आप को improve कर लेंगे।
Vikash Singh: समझ गया, sir। धन्यवाद। मेरी तरफ से बस इतना ही।
Sanjay Gupta: Thank you.
Operator: Thank you. Our next question comes from the line of Pratik Talvatkar with SMIFS. Please go ahead.
Sanjay Gupta: Pratik, go ahead please.
Pratik Talvatkar: Am I audible now?
Operator: You are audible, sir. You may proceed.
Pratik Talvatkar: Yeah. Sir, thanks for the opportunity, sir, and congrats on a good set of numbers. Just one data point question. Sir, what is the VAP mix for the Q2 and the H2 for FY 2027?
Sanjay Gupta: Which mix?
Pratik Talvatkar: Value-added mix.
Sanjay Gupta: Value added. Pratik, we have given this in our presentation. Barring SG Premium, everything is value added.
Pratik Talvatkar: Okay. Thank you.
Operator: Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Anubhav Gupta: Thanks everyone for joining in. Look forward to see you again in our Q3 FY 2027 earnings call. Thank you.
Operator: Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.
