Operator: Ladies and gentlemen, good day and welcome to Ratnamani Metals and Tubes Limited Q2 FY27 Earnings conference call hosted by Monarch Networth Capital. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sahil Sanghvi from Monarch Networth Capital. Thank you, and over to you, sir.
Sahil Sanghvi: Yeah, thank you, Yusuf. Good evening to everyone. On behalf of Monarch Networth Capital, we welcome you all to the Q2 FY27 earnings conference call of Ratnamani Metals and Tubes. We are delighted to host the management of Ratnamani, and from their side, we have Mr. Manoj Sanghvi, the Chief Executive Officer, and Mr. Vimal Katta, the Chief Financial Officer. Without taking much time, I will hand over the call to Mr. Manoj Sanghvi for the opening remarks. Thank you, and over to you, sir.
Manoj Sanghvi: Yeah, thank you, Sahil. Good evening, everyone. I warmly welcome you all and thank you for joining us for our performance update for the quarter and H1 ended 30 September. For Q2 FY27, consolidated revenue from operations grew by 13% to INR 1,348 crores compared to INR 1,192 crores in the corresponding quarter last year. Consolidated EBITDA stood at INR 220 crores with a margin of 16.3%. PBT was INR 174 crores and PAT was INR 133 crores. At the standalone level, revenue from operations grew by 18% to INR 1,104 crores. EBITDA stood at INR 139 crores with a margin of 12.6%, while PBT and PAT were INR 106 crores and INR 80 crores respectively. On the profitability front, we have been able to maintain our gross margin, and overall cost structure has remained largely stable.
Manoj Sanghvi: The key exception has been freight and forwarding expenses, which have increased significantly due to the prevailing geopolitical uncertainties and their impact on global logistics. This increase has put pressure on our overall profitability. On the business front, we have witnessed an improvement in overall carbon steel division sales volume. Our standalone business continues to remain debt-free, and the order book has increased to over INR 2,600 crores, around 30% higher than the previous quarter. During the quarter, we have made good progress in specialized product segments. In the fertilizer sector, we have received approval to supply stainless steel seamless U-tubes for carbamate condensers from a leading global technology licensor and engineering company. In the nuclear and aerospace segments, we have secured several important orders and development opportunities.
Manoj Sanghvi: This includes order for HP heater cold finished tubes and hairpin heat exchanger seamless tubes for nuclear projects, along with a development order for steam generator tubes from Nuclear Power Corporation. We have also entered into a global supply frame agreement for aerospace tubes and successfully supplied a critical seamless tube in the size of 138 by 1 mm. On the capacity front, spiral mill three to manufacture pipes up to 18 meters with an annual capacity of 100,000 tons has been commissioned.
Manoj Sanghvi: We have also commissioned our external coating plant with an annual capacity of 25 lakh square meters at Odisha. Further, Ratnamani's standalone credit rating has been upgraded to CRISIL AA+. Now, I would talk a little about subsidiaries' performance. Coming to Ravi Technoforge, quarterly revenue increased to INR 99 crores from INR 96 crores in the corresponding quarter last year. EBITDA was INR 12 crores with a margin of 11.8%.
Manoj Sanghvi: At Ratnamani Finow Spooling Solutions, quarterly revenue increased to INR 157 crores from INR 110 crores. EBITDA stood at INR 86 crores with a margin of 54.7%, while PAT was INR 65 crores. RFSS has secured a new export order worth approximately INR 2,700 crores, taking its order book to over INR 3,000 crores. A part of its expansion project has been commissioned, and production of induction bends is expected to commence next quarter. Its credit rating has also been upgraded to CRISIL AA. Thank you.
Operator: Should we start Q&A session?
Manoj Sanghvi: Yeah.
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 withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, to ask a question, you may press star and 1. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. First question is from the line of Salil Desai from Marcellus Investment Managers. Please go ahead.
Salil Desai: Thank you. Good evening, Manoj. Manoj, this aerospace order you signed the supply agreement with Safran, so that is part of Ratnamani, or is this also under RFSS?
Manoj Sanghvi: No, that is with Ratnamani Metals and Tubes. It is supply of tubes. It is a global frame agreement with them.
Salil Desai: Okay, but there is no kind of order with a specific quantum right now. It is just that you will be a supplier, and then when they need, you will supply, or is there some contract signed for number of types or tonnage?
Manoj Sanghvi: Say, it is a five-year frame agreement with some value which they have indicated. That value, of course, maybe year 1 can be X, year 2 will be 1.2X, 1.3X. So, slow and steady, there will be an increase.
Salil Desai: I see. All right. Okay. Great. Secondly, you said the broader volume growth this quarter was driven by carbon steel, and then there was this freight increase. So, I am saying from a gross margin point of view, if you maintain this, then just trying to figure out if carbon steel was a higher proportion in overall, then why did it not have as much an impact on gross margins?
Manoj Sanghvi: See, in this, basically, in both of this last quarter, major part of the revenue growth came from exports, where deliveries were on DDP basis. So, that element was inbuilt in the pricing, resulting into the margins being so better than what on average we get for the normal order. Because of the grossing up effect, the cost came as part of the freight and transportation cost. So, that is the thing. Otherwise, this 35% sort of thing can be taken as a norm over a longer period.
Salil Desai: I see. All right. Great. Manoj, if you go back to how demand overall has been, then what would you think are the 2, 3 drivers of this 25% volume growth, sorry, order flow, 35% order growth that you are seeing? What in those segments are you seeing this coming from?
Manoj Sanghvi: Historically, for last nine months or, say, 12 months, we have been struggling with the demand outlook, both stainless steel and especially carbon steel line pipe. But now, stainless steel demand, we are seeing it has picked up. Order book is also increasing. As we speak, current order book in stainless steel is close to INR 1,000 crores, and carbon steel is close to INR 1,700 crores. Historically, our order book, which was INR 2,000, INR 2,200 crores, we are seeing that shift. The order book is increasing. It is becoming healthy. Of course, this year, still there are a lot of challenges. We have to see how the geopolitical situation is there for the remainder of the year. But next year, definitely, if we start with such order book, seems to be quite promising.
Salil Desai: And any particular segments you want to call out as driving growth in order?
Manoj Sanghvi: If we see stainless steel, it is thermal power projects, even oil and gas globally, like LNG plants in the US, data center in the US. So, those all are the big demand drivers right now. In India, thermal power plants, of course, some oil and gas, chemical, fertilizer, heat exchangers. So, those are big demand drivers.
Salil Desai: All right. Thank you.
Manoj Sanghvi: Yeah.
Operator: Thank you. Before we move to the next question, a reminder to the participants to ask a question, you may press star and 1. Next question is from the line of Pranav Mehta from Equirus Securities. Please go ahead.
Pranav Mehta: Yeah. Thank you for taking my question. Manoj, I just wanted to understand on the order pipeline that you are seeing on the domestic front as well as on the export opportunity in the standalone business. So, any number that you can share in terms of the order pipeline that is already active in, let us say, Middle East and rest of the world that you guys are seeing or have started participating, and the same for the India oil and gas and water pipe business.
Manoj Sanghvi: Stainless steel, see, there are various projects, small orders, right? So difficult to pinpoint any particular project and inform ki yeh INR 100 crore ka hai ya INR 150 crore ka hai ya INR 200 crore ka hai. Because the order quantum there is maybe INR 5 crores, INR 10 crores, various projects, different projects, exports, data center, different industries. Carbon steel, yes, there are a few projects which are ongoing, big size, in oil and gas. Middle East, of course, has just started. We have just started seeing some feelers, few feelers, not like a major one, which, of course, recently one of the major EPC contractor announced in India. So, those all projects definitely total bidding currently in pipeline, carbon steel, both line pipes as well as in-plant piping, is close to INR 5,000 plus crores.
Pranav Mehta: Okay. And by when do you feel that the orders in the carbon steel pipes division, let us say, in India and across the world, should start seeing meaningful pickup in terms of order pipeline? Do you expect it in H2 2027, or it would be more of a 2028 kind of a story, or it might get shifted to H2 2028? Any take on that?
Manoj Sanghvi: No, we have already started seeing some projects where the order. That is how our order book is also increasing, right? The INR 2,700 crore includes both stainless steel and carbon steel. There is a jump, what we see, or there is. Of course, stainless steel is much more, I would say, than the carbon steel pipes. However, carbon steel pipes is also improving. The demand side or the finalization of the project is as we talk.
Pranav Mehta: Sure. What about the Finow JV? What kind of order pipeline you are seeing on that, on a global front?
Manoj Sanghvi: Currently, we already have an order book of INR 3,000 odd crores. There are few projects which are under bidding right now. By the end of this year, we still will have room for, I think, some INR 40 crore, INR 50 odd crores we should book more.
Pranav Mehta: Okay. Sure. That is it from my side. Thank you.
Manoj Sanghvi: Thank you.
Operator: Thank you. Participants, to join the question queue, you may press star and 1. Next question is from the line of Sonal from Prescientcap Investment Advisors LLP. Please go ahead.
Sonal Minhas: Hi, sir. This is Sonal Minhas. I hope I am audible.
Manoj Sanghvi: Yes, yes.
Sonal Minhas: Sir, first question, just wanted to call out the other expense number, which is materially higher this particular quarter, looking at the consolidated numbers. Can you just call out any one-time or any exceptional numbers there?
Manoj Sanghvi: No. See, as Mr. Katta briefed earlier, the domestic demand for both stainless steel welded pipes as well as carbon steel ERW pipes is quite less. However, there is a huge pickup in the demand from the US, right? But all the export orders to the US is basis DDP, so which includes duty, as well as transportation, the ocean freight, as well as the local transportation and custom clearance cost. Now, considering the tariff 50%, so it is reflected in the revenue as well as in the other expense. So that number, that is why you see such a growth.
Sonal Minhas: Basically, major impact is ocean freight and duty components in respect of the orders which we had executed for USA. Got it, sir. Now given the tariff volatility is behind us, and is this number expected to come down? Because quarter on quarter, this is up by roughly INR 100 lakhs.
Manoj Sanghvi: Tariff still continues to remain 50%. So any future or any order which is still there in hand, or any future order that we receive, will have that 50% plus the ocean freight, plus the local transport element. So your actual FOB value is maybe say 100. However, your selling price is 160, 60 being your cost as other expense.
Vimal Katta: Here the volatility effect has been the continuing geopolitical situation which impacted the ocean freight cost basically.
Sonal Minhas: Okay, so your guidance is this is expected to stay elevated basically, this is what you say?
Manoj Sanghvi: Yes, yes. For next 6 to 12 months, yes, it is going to remain. Because that is a market which has the highest demand at the moment.
Sonal Minhas: Got it, sir. And, sir, on the gross margin front, do you want to call out any directional data on whether the margins are expected to improve or stay the same or dip in the subsequent H2?
Manoj Sanghvi: No, next year I feel there should be an improvement. As far as the utilization improves, the demand which we are seeing already now, the demand improving. So next year, the utilization will jump back again to the optimum level. So all your fixed costs and everything remaining same, margins will improve.
Vimal Katta: In the longer run, that 15% to 16% to 18% broader range, plus or minus 1%, can be taken. In a particular reporting period, some fluctuations may be there because of external factors or the product mix. This has unfortunately, external factors have impacted both, cost also and the capacity utilization also.
Sonal Minhas: Got it, sir. So even in H2, this volatility is expected to stay basically. The margins are expected to stay lower than the longer term range that you mentioned. The EBITDA margin, 16% to 18% longer term EBITDA margin range. In H2, you are-
Manoj Sanghvi: We can see a little improvement based on the utilization. However, yes, Q3 also we feel that it will be around same level.
Sonal Minhas: Got it, sir. And sir, the stainless steel pipe order that you were talking about in thermal, can you give some subjective guidance on the fact that do you expect more of these to come in the next quarters to come? Are we seeing competition in these orders? There are six, seven people all bidding for the same orders. If you could just give some guidance on competition and the volume of these orders, that will be helpful.
Manoj Sanghvi: The demand will continue to be strong, maybe not only for the remainder part of the year, but next two, three years in this segment. Because a lot of thermal power plants are being announced not only by the government, but also by private players. Yes, on the competition side, now since we have competition from the players who manufacture through other process route also, yes, the intensity of competition is higher. However, the demand also is quite strong.
Sonal Minhas: Got it, sir. Thank you. I will follow back in the queue, sir, for more questions. Thank you.
Manoj Sanghvi: Thank you.
Operator: Thank you. Participants, if you wish to join the question queue, you may press star and one. Next question is from the line of Madhu Agarwal from Agarwal Family Office. Please go ahead.
Madhu Agarwal: Hi, good evening. On RFSS, is it possible to share what is our realization per ton, or what would be the max revenue potential once we expand our capacity to 4,000 tons?
Manoj Sanghvi: Revenue per ton will vary on the input material of the spool. It is quite difficult because carbon steel, alloy steel, stainless steel, titanium, nickel alloys, so very difficult to say or throw one number. At full potential, depending on the material, INR 1,200 to 1,500 crores.
Madhu Agarwal: Got it. Would we-
Vimal Katta: We can see realization between INR 2,500 to INR 2,500 per kg roughly.
Madhu Agarwal: Understood. Would you say the 50% EBITDA margins we are doing right now are sustainable in that segment?
Vimal Katta: Sustainable, but long-term margin should be 25% to 30% at EBITDA level. For any reporting period, these can keep on fluctuating based on the material which has been dispatched.
Madhu Agarwal: Got it. Thank you.
Manoj Sanghvi: Thank you.
Operator: Thank you. Next question is from the line of Chetan Thacker from M3 Investment Private Limited. Please proceed.
Chetan Thacker: Good evening, sir. Am I audible?
Manoj Sanghvi: Yes, sir.
Chetan Thacker: Good evening. So, three questions. One is, like you mentioned, given that a lot of supplies are to US, which are inclusive of freight and duties, on a per-ton basis, is the profitability better compared to where we were? Because it will have a knock-on effect, like you said, on both revenue and other expense. So, per-ton profitability, how does that look for these supplies?
Manoj Sanghvi: No, I mean, better than what?
Chetan Thacker: Better than the margins on the domestic side.
Manoj Sanghvi: No, domestic, first of all, that kind of demand was not there or is not there. So, if there is demand, yes, domestic still would have a better margin because here, say, 50% to 60% is the cost part, right? Which is built up in revenue.
Chetan Thacker: Yeah. Sir, just wanted to understand, if you knock off that and look at it on a per-ton profitability basis, is it better than historically what our average profitability for these products has been, or is it similar? That is what I wanted to understand.
Manoj Sanghvi: Similar.
Chetan Thacker: Got it. The second is on the order book itself, given that the order book has seen a good increase, is that also a function of these duties and freight, or it is purely on account of higher volume getting ordered?
Manoj Sanghvi: Partly yes. Whatever is for the US export order, that would have this inflated or artificial number of tariff, and freight, of course, is always there. But this 50% tariff is, and earlier it was 25%. Yes, 25% to that is, I would say, it is built up in this value order book.
Chetan Thacker: What proportion of our order book is US at the moment?
Manoj Sanghvi: I do not have that number offhand, but I think around 20%. Yeah, roughly.
Chetan Thacker: Understood. The last question is, what we are seeing is there is fair bit of bidding activity, especially on the hydrocarbon side from the Middle East region. In terms of the timing of ordering, where does that fit in, and is there some visibility on next year if we start getting orders from those tenders that are getting executed, or how does that look like?
Manoj Sanghvi: Yeah, most likely next year, end of rather, not even the start of next year, but somewhere middle or end of next year.
Chetan Thacker: Understood, sir. Thank you so much, sir. This is really helpful, and happy Diwali to everyone there. Thanks a lot.
Manoj Sanghvi: Bye. Same to you. Thank you.
Operator: Thank you. Participants, if you wish to join the question queue, you may press star and 1. Next question is from the line of Sahil Sanghvi from Monarch Networth Capital. Please go ahead.
Sahil Sanghvi: Yeah. Hi, sir. I just wanted to understand how are things on ground with respect to demand from water? Are we seeing some improving scenario?
Manoj Sanghvi: Water still not like I would say it has improved. We are seeing some demand, but like no real improvement, I would say.
Sahil Sanghvi: Right. Got it. Fine. That is all from my side. Thank you.
Manoj Sanghvi: Yeah. Thank you.
Operator: Thank you. Participants, if you wish to ask a question, you may press star and 1. Ladies and gentlemen, to ask a question, you may press star and 1 on your touch-tone telephone. Next follow-up question is from the line of Sonal from Prescientcap Investment Advisors LLP. Please proceed.
Sonal Minhas: Hi, sir. Sonal Minhas again. Sorry, I joined the call three, four minutes late. Just wanted to understand, are we holding onto our guidance for the standalone numbers for FY27, or we are toning them down?
Manoj Sanghvi: The guidance from the last call, right?
Sonal Minhas: Yes, sir. Yes, sir. The guidance from the last call.
Manoj Sanghvi: Yeah, about INR 4,000, INR 4,200 crores. That is, we still continue to hold that.
Sonal Minhas: 4,200 to INR 4,000 crores for standalone numbers. Consol roughly INR 54-
Manoj Sanghvi: INR 5,000 to INR 5,200.
Sonal Minhas: Got it, sir.
Operator: Thank you.
Sonal Minhas: Given,
Operator: Yes. Please proceed, sir.
Sonal Minhas: I was just saying that that is a significant ramp-up for H2. We, compared to H1, H2 has a significant ramp-up. On the other hand, the EBITDA margins continue to stay a little depressed. How does the two play out, sir? That is what I wanted to understand, because you are improving utilization, you are booking revenue, you are winning orders, but that is not translating into EBITDA margin. I just wanted to tie in the two numbers and then maybe ask for a comment from you.
Manoj Sanghvi: No, so H2 of this year, we will see an improvement. However, the cost-related challenges or the global shipping ocean freight-related challenges still continue, right? For things to stabilize, once we see them normalizing, then definitely, and utilization increasing at the same time. Next year, definitely, we will be somewhere on the upwards of 15%.
Sonal Minhas: Got it, sir. And sir, given that steel prices have been rising and the input prices have been rising, at what rate are you able to pass on this to your clients? Is there a lag here of 6 months, 9 months, given that the demand is going?
Manoj Sanghvi: Every order, the price is fixed, so there is no pass-on. However, as soon as we receive the order, we close the raw material. We do not leave any open position, right? So, our risk is only from the time we bid or from the time we got the order to the time we finalize the raw material. If in that period, if something increases, then the company has to absorb.
Sonal Minhas: Then the only volatility that is hitting us is in overheads, which is freight, which is logistics link. Is that a fair understanding?
Manoj Sanghvi: Yes. Not only logistics, of course, the transportation, local transportation has gone up. Ocean freight has gone up. The gas prices, the oil prices, the other costs. So all of these factors, which are related directly or indirectly to the oil and gas industry, and the global, this geopolitical situation.
Sonal Minhas: Got it. Sir, at what rate are we able to pass this through to customers, or are these something which are not able to pass on basically, given they have had a significant rise?
Manoj Sanghvi: No, the orders which we have, we are unable to pass. The future orders, of course, what we are taking, we are trying to build that up. But orders what we have, the cost part we have to absorb. Yes, there are some detention, demurrage, which of course we are discussing with the customer. Customer may accept, may not accept. That is an ongoing, I would say, discussion with the customer.
Sonal Minhas: Got it, sir. So there is no materiality clause there in terms of fuel, freight, oil, gas, that if this is beyond this limit, then you have the ability to pass it on to your customers?
Manoj Sanghvi: No.
Sonal Minhas: Okay.
Manoj Sanghvi: Okay.
Sonal Minhas: All right. That is it from my side, sir. Thank you.
Manoj Sanghvi: Thank you.
Operator: Thank you. Ladies and gentlemen, to ask a question, you may press star and 1. Next question is from the line of Shaurya Shah from Equirus Securities Private Limited. Please proceed.
Shaurya Shah: Yeah, thank you for taking my question. Just one or two things, sir. On the water projects and water demand side, right? Of course, it has continued to remain weak, but do you see the situation improving from what it was, let's say, three to four quarters back? Is that kind of light at the end of the tunnel, or is the situation still expected to remain kind of similarly weak, let's say, over the next H1 FY28?
Manoj Sanghvi: It is still the same, I would say. Improvement by when, it is a difficult question for me to answer at the moment. Until and unless the oil prices and everything stabilize, the availability of fund to maybe these water projects is becoming a challenge.
Vimal Katta: Just to answer, Shaurya, majority of the state government finances are under pressure because of these welfare schemes which each government has announced. All these Ladli Behna and others are a drain on the resources of the respective state governments wherever these schemes are there.
Shaurya Shah: Okay, got it. In the Middle East region as well, we have been hearing a lot of desalination projects going on. Would our pipes be also qualifying for such projects and can demand come up from there?
Vimal Katta: Okay, water desalination would be mainly stainless steel.
Manoj Sanghvi: Yes, within the desalination plant, it would be stainless steel and titanium. But once in the Middle East, that desalination plant then to be distributed, then yes, there will be carbon steel lines.
Shaurya Shah: Okay. Understood. Yeah, those are the questions from my side. Thank you and best of luck for-
Manoj Sanghvi: Thank you.
Operator: Thank you. Next question is from the line of Salil Desai from Marcellus Investment Managers. Please go ahead.
Salil Desai: Could you talk about the working capital situation now, and is it likely to improve? We have seen both inventory and receivables spiking and cash flow from operations being negative for the first half.
Vimal Katta: See, basically ours is a working capital intensive business. As the order book increases, the initial impact will be on inventories. Later on, it will get converted into receivables, and then the cash cycle starts. This we have seen on any reporting period, and these figures may seem to be very, very high. On average, around inventory and receivables combined together of roughly five to six months, that will continue. Because nature of business is like that only. This time, because of the geopolitical issues, certain export shipments have to be deferred. That resulted into inventory getting accumulated for a longer period. That impact is also there.
Salil Desai: I see. Just to make sure I understand this right, you are saying a lot of finished goods were ready, but you could not dispatch because of disturbance on geopolitical.
Vimal Katta: Yeah, yeah.
Salil Desai: Availability of it.
Vimal Katta: Yeah, yeah. Goods which were ready. Second thing is on receivables also, till the time the transaction is over as per the Incoterms, those payment will not start. The major Middle East export is to Abu Dhabi, whereas shipment is happening to Saudi ports. It is taking time, basically.
Salil Desai: I see. Okay, understood. Thank you.
Operator: Thank you. Participants, if you wish to ask a question, you may press star and 1. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for the closing comments.
Manoj Sanghvi: Yes. Thank you everyone for joining today. While the global environment continues to present cost-related challenges, we remain focused on operational efficiency, cost management, and profitable growth. Our ongoing capacity expansion and growing presence in specialized application position us well for the opportunities ahead. Thank you for your continued trust and support. I wish everybody a very happy Diwali and happy holidays. Thank you.
Operator: Thank you very much, sir. On behalf of Monarch Networth Capital, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.
Manoj Sanghvi: Thank you.
Vimal Katta: Thank you.
