Ratna Man i Report

7/30/2019 Ratna Man i Report

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Transcript - Conference Call of Ratnamani Metals and Tubes Limited 1

Transcript

Conference Call of Ratnamani Metals and Tubes Limited

Event Date / Time : 30th May 2011, 04:00 PM IST

Event Duration : 49 min 39 sec

Presentation Session

Moderator: Good evening ladies and gentlemen. I am Ram, moderator for

this conference. Welcome to the Q4 results call of Ratnamani

Metals and Tubes Limited hosted by Networth Stock Broking

Limited. We request Mr. Viral Malia from Networth Stock Broking

Limited for the opening remarks.

Viral Malia: Good afternoon everyone. Thank you for joining us on this call.

We have with us Mr. Prakash Sanghvi, Chairman and Managing

Director of Ratnamani Metals and Tubes Limited, accompanied by

Mr. Vimal Katta, the CFO. They would be sharing with us the Q4

and annual results as well as recent developments which have

taken place in the last quarter. I request the moderator to please

hand over the call to Mr. Prakash Sanghvi for the same.

Moderator: Mr. Prakash Sanghvi, you may go ahead sir.

Prakash Sanghvi: Good evening to everyone. About Ratnamani Metals and Tubes

Limited, we are the manufacturer of stainless steel tubes and

pipes as well as carbon steel welded by all categories. I am giving

just little bit of the company. We are a unique company, where

our number of segments operated in the tubes and pipes sector,

in stainless steel, welded as well as seamless construction,

starting with instrumentation tube, heat exchanger tube,

condenser tube and filter, filter tube, then general piping in both

the construction, seamless and welded. This very wide range of

diameter wide pumps, quarter inch to 64 inch diameter, at the

same time very wide thickness range, 0.5 millimeter to 50

millimeter thickness. At the same time we are in carbon steel.

There we are operating ERW pipes that is for oil and gasdistribution, drinking water, irrigation and general structure

purpose. Then we are having helical SAW welded pipes, that is

mainly for trunk line cross country pipeline, then any Greenfield

project, then water irrigation, drinking water pipeline, then

general purpose of structural also. At the same time, we are

having a LSAW plant that is purely for project piping, any
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Greenfield refinery, petrochemical, fertilizer, power plants. It is

very much equipped with very wide size range, it is a project

piping with some niche category, LSAW. And we have a

circumferential pipeline, where we do diameter right from 1.5

meters to 4 meters, varies with bigger diameter and thicknessrange, with 8 millimeter to again 50 millimeter and its being used

for various thermal power plants, for cooling water, then general

drinking water pipeline, water pipeline, then this offshore

platform building, piling pipes, jacket or something like that. So,

and apart from this, we have a coating facility that is what is

required for both stainless steel as well as carbon steel. Any line

pipe or gas distribution pipe, they require this Epoxy coating,

internal, external, at the same time 3 Layer PE coating. So, this is

what our products and company is operating in number of

segments within the pipeline, tubes and some of the niche

products, some of the standard products, our 80% of the products

is made to order against tender requirements, against the enquiry

requirement of EPC contractor, of fabricator, we quote and we

get the order. So, its a pure on tender business, made to order

business, and thats the reason each order is kind of special

requirement and we manufactured according to ASTM standard,

also according to DIN standard, according to IS standard and in

carbon steel according to ASTM 672, 671, at the same time APL

5L. We do have all type of such monogram, approvals and all this

ISO 9000 to 14000, 18000, IBR approval and number of other EPC

contractor and consultants we have an approval from the

international market at the same time domestic market.

And looking to this last quarter results, we have a sale of net

about 256.5 crores, corresponding compared to 321 crores. Of

course, our sales is not comparable on quarter to quarter or

month to month, because it being an engineering product, some

quarter it goes in a more quantity, some quarter its been

produced, but the inspection had not taken place. Because, in our

product, most of the items goes to third party inspection or client

inspection, something like that and with the release not done, so

many other formalities of the project, we do dispatch it or export.

So, the quarter to quarter comparable is something not right

figure or right sense we will get. But at the same time, at the yearend, we see both, whether we have utilized our capacity or how

the top line and what the bottom line. Ultimately, its because of

its all made to order, sometime raw material is also, mostly we

are doing on back to back, so sometime the issue of the raw

material and the delivery gets shifted to next quarter, so target

will not be achieved. So, these are the figures, 256.5 crores for

the quarter ended and the year ended, it is total for the four


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quarters, 812 crores, as compared to 851 crores last year. But, if

you can see the bottom line, we have saved lot many and rotated

and in expenses and this and that and like that we have

maintained a little more, you can say some percentage in net

profit as compared to last year, you can say 81.42 crores, this yearit had reached up to 83.17 crores. This is what our net profit. And

in last quarter what we did, we have in hand the expansion of our

ERW mill that is we are taking up to 18 inch diameter. Right now

it is up to 16 inch diameter. And in this segment also we are

having quite reasonable booking and a quite reasonable demand

is also coming up. So, we are increasing one more site. So, that

expansion is going on and it will be over by the July-August this

year. At the same time, spiral also we have put a second offline

also in use, so now it becomes, both the mill is with offline

welding facility. So, the capacity is two more.

And if you can look at our order position, because overall in the

last whole year, first three quarters was not that good in booking

of order, but third or fourth quarter, we have jumped to good

order booking in power sector, in refinery sector. So, normally

our order booking was (inaudible), but this last quarter, what we

have reached up to 800 plus crores total order booking in various

segments, in stainless steel as well as carbon steel, almost 50-50

or so. And one more new order what we got in South and we are

establishing our mill over there, dedicated facility near Bangalore.

Its about 18,000 tonnes order what we got from L&T, EPC and

thats how we would like to develop our new facility. Right now

we are working at L&T Koradi side. This is a 660x3 power plant ofMahagenco and constructed by L&T and we got some order worth

40 crores as a job work over there to manufacture pipes, laying

and some civil work. So, these new activities what we have

already started in our group and this is how we have to increase

our top line in the coming future. These are the two. And at the

same time, we have expansion in stainless steel division. We are

putting some additional capacity in condenser tube and there the

civil work is going on, building construction is going on, the

equipments are inspected and (inaudible). So, the additional

capacity will be available over the second half of the year. So, this

is what the new development took place in the last quarter.

At the same time, now future vision that we are planning is still

we are looking at some expansion on stainless steel, seamless

capacity. At the same time, we are putting some additional

facility and some modernization. This is what the brief about our

future expansion in stainless steel, seamless tubes and pipes. At

the same time, in extrusion, our own hot extrusion press, we have


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the capacity right now about 300 tonnes a month, but we would

like to, we could look into a good demand in our power sector as

well as oil and gas. So, we are expanding there also. And in

carbon steel, of course we are consolidating and we are utilizing

some more location to utilize the capacity, because at onelocation, right now the facilities are at three locations with us.

And two new locations we have started, one is in Maharashtra,

near Nagpur, one is in Bangalore. Near Bangalore, again it is a job

work, we receive material from the party, but there is a good

scope for doing business over there, because the pipe is a

locational business nowadays in carbon steel pipe, especially

bigger diameter. Because, the transportation cost is very huge, so

we transfer our facility to different location in the country and

utilize the capacity. So, this is what the things. And major

expansion we would like to go for stainless steel, seamless tubes

and pipes, thats all. And some going on in ERW and stainless

condenser tube that will be over by this in three to four months

time. Thank you.

Question and Answer Session

Moderator: Ladies and gentlemen, we will now begin the question and answer

session. If you have a question, please press * and 1 on your

telephone keypad and wait for your turn to ask the question. If

your question has been answered before your turn, and you wish

to withdraw your request, you may do so by pressing # key.

The first question comes from, Mr. Ram Modi from Dolat Capital.

Ram Modi: Hello.

Prakash Sanghvi: Good evening.

Vimal Katta: Yeah, Ram. Good evening.

Ram Modi: Good evening sir. Just wanted to have, what is the kind of top line

growth we are looking at in this year, because as you said earlier

that our order book actually started building up in Q3 and Q4 and

thats why the muted top line growth? So, what is the kind of topline growth which we are looking at this year, so that will help?

Prakash Sanghvi: Mr. Ram, we are targeting 1000 plus.

Ram Modi: Okay, 1000 plus. And what is the outlook on margins? Are we

looking to maintain our margins or how is it going forward?


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Prakash Sanghvi: See, more or less we will maintain with the corresponding year.

Vimal Katta: Ram, basically right now there are no indications, negative

indications. So, everything remaining same, we should end up

with the same level of margins, because better capacity utilizationsomewhere will offset lower margins because of expansion of

carbon steel line pipe activity. So, we are expecting that we

should continue to maintain at between 18% to 19% sort of

EBITDA level.

Ram Modi: EBITDA level, okay. And sir, just wanted to know in terms of any

big general development which is happening in sector, either

refinery work which is announced to us or is it the same

continuing CAPEX that you are expecting?

Prakash Sanghvi: Same one. And that we have a good order in both the regions,

stainless steel as well as carbon steel. And the MRPL expansion is

still going on. And now we have just heard about HPCL is seeing

something new refinery in Ratnagiri or somewhere. They are

going to shift Bombay one or something like that, it is internal

movement is going on, still we have to get the correct report.

Ram Modi: So, but doesnt the guidance seem to be conservative, because on

a 800 crores order book we are still looking at 1000 crores of top

line?

Prakash Sanghvi: Requirements are from abroad, especially from Middle East is

more available.

Vimal Katta: Ram, basically all the orders will not be executable during FY012,

certain orders are long term, long delivery orders also. So, this is

what conservatively we are expecting that we should end up

anywhere between 1000 to 1100 odd crores sort of thing.

Because still we are not very bullish on carbon steel line pipe

activity, because their margins are very low. So, for a very low

margin business, we will not be going very aggressive, though we

are interested in expanding our market reach, but simultaneously

we have to ensure that our bottom line does not get any impact.

So, we are very selectively going ahead as far as line pipe activityis concerned. So, that is the only concern area for us also that

how to have a balance between top line growth as well as

safeguarding our margins. Because, we are not used to work at a

very low margin basis, that is also there. So, selectively we are

picking up those orders where, directly, indirectly we end up

recovering our margins, which will not impact the overall

weighted average margins. It is like that. So, we are targeting


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certain global opportunities also in carbon steel, though the

volumes may not be very big, but at least there we will be in a

position to establish our name in those markets and margins will

be comparable to what we are used to get in our other

businesses. It is like that. So, that is the reason we are not goingvery aggressive on forecasting about our top line growth, though

the potential is there, lot of potential is there.

Ram Modi: Okay. And sir just one thing, our debt has actually increased a bit?

Vimal Katta: Yeah Ram see, basically our business is order driven. And we

procure our raw material on back to back basis, though the tax

has gone up, so is the inventory levels. If you look at the overall

debt, so it has gone up from, rather loan funds have come down

from 320 to 356, but liabilities, current liabilities have moved up

from 87 to 221, mainly because of procurement of raw materials.

Because, inventory levels have shot up from 168, roughly 168

crores to 352 crores, that is a big jump. Similarly

Ram Modi: Debtors have jumped.

Vimal Katta: Debtors have more or less remained; debtors more or less have

remained at the same level. Then certain other current assets

have also moved up a little bit, it is like that.

Ram Modi: Okay. Out of this current debt, how much is working capital

related?

Vimal Katta: See, out of total debt, mainly it is related to working capital. If we

look at the long term liabilities, then long term liabilities have

come down from close from 96 crores to 77 crores, remaining is

working capital related only, short term only.

Ram Modi: Okay. And just last question, sir in this current liabilities, what

would be the acceptance or the buyer credit number?

Vimal Katta: See, buyers credit will be hardly 90 plus 5700 and 4700, 48

crores.

Ram Modi: So, that forms a large part of our current liabilities?

Vimal Katta: Yeah.

Ram Modi: Okay, okay, thanks.


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Moderator: Thank you sir. Next question comes from Mr. Neerav Dhalal from

Sharekhan.

Neerav Dhalal: Good evening sir. Sir, I had a few questions. What is the order

book and how is it executable?

Vimal Katta: See Neerav, total order book position is, carbon steel is close to

875 crores, stainless steel is close to 332 crores. And out of this,

exports will be close to you can say almost 100 odd crores will be

the total exports figure. And here certain orders are long delivery

orders, which will be executable say up to, maybe up to second

quarter of next financial year also. Because, everything is linked

to how the project is going to progress, based on which this

fabricator will be placing order and certain items are long delivery

items also. Because, in our case majority of the things will be

made to order, specialized items where raw material will also be

manufactured as per the specifications given by us. So, it is like

that. So, some items are long delivery items, particularly in

stainless steel. Carbon steel will not be that much long delivery,

mainly carbon steel; everything is executable within 2012 itself.

Neerav Dhalal: Okay. Sir and you spoke about CAPEX in the stainless steel

division. What capacity would be added and what would be the

CAPEX amounts?

Vimal Katta: See, total capacity addition in stainless steel and this is right now

in condenser is roughly around 2000 metric tonnes, capital cost of

around 22 crores rupee roughly. ERW is basically we areincreasing the range, diameter by adding new tooling. So, till date

we are limited to 16 inch only, at the higher end, now we will

have capacity to go up to 18 inch in diameter.

Neerav Dhalal: Okay. So, your capacity would not increase, its just that

Vimal Katta: Capacity will not go up significantly,

Neerav Dhalal: Value addition would happen.

Vimal Katta: Mainly it will be value addition and plus it will increase the sizerange which is available, which we will be in a position to offer to

our customer. And see basically in carbon steel what happens,

there is somewhere an overlapping in ERW and SSAW as far as the

lower diameter range is concerned. In our case, SSAW starts at 18

inch and ERW ends at 16 inch. So, if ERW up to 18 inch is

available and even higher maybe in future, so then we will be in a

position to offer ERW, which is much more cost effective


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compared to SSAW, where production is also higher, without

compromising on the other quality.

Neerav Dhalal: So, this would be for the carbon steel, right?

Vimal Katta: Yeah. ERW is for carbon steel only.

Neerav Dhalal: Okay and condenser would be for the

Vimal Katta: Its stainless steel. Mainly condensers are used in power projects.

Neerav Dhalal: Okay. Right sir. And what is the expectation on the debt you

would take on in FY10?

Vimal Katta: See, on the working capital requirements, incremental

requirements maybe there, based on the how order book position

grows. Otherwise, there are no plans to borrow any additional

amount. Long term there is no plan.

Neerav Dhalal: Sir, one more question is that, just now it has been mentioned in

the discussion that carbon steel pipe is a locational business and

our transportation cost is a sizable cost in that. So, could you

please quantify this?

Vimal Katta: Basically carbon steel pipes, normally size will be going up to 12

meters that is 40 feet. So, based on the diameter of the pipe,

usually from one to five pipes maximum can be accommodated or

maybe seven, if it is not ERW. In case of ERW, maybe more,because diameter is lower. So, in case of line pipe or even project

application pipes, mainly carbon steel pipes we are supplying to

mainly power projects for carrying the cooling water from

reservoir till plant site. So, there the transportation cost

sometimes is higher than maybe even the fabrication cost.

Because, if each trailer is going to accommodate a single pipe,

because there we are fabricating pipes going up to 140 inch plus

in diameter, where you have to pay extra charges because of over

dimensions also on the trailer. So, there transportation cost is

very heavy. So, what we are doing? PMS, Mr. Prakash Sanghvi

has already mentioned that one mobile plant we have set up nearNagpur for execution of one order for L&T for this Mahagenco

Koradi power project. So, it is mainly cooling water pipe project.

So, there we will be fabricating the pipes on job work basis, laying

the pipes also, site preparation and other things will be there.

And similarly, one order for L&T, ECC division in Tamil Nadu, Tamil

Nadu and Karnataka border is there. So, there also we will be

shifting one of our manufacturing facilities to fabricate the pipes.


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These are basically the orders which will be executed over a

period of say maybe fifteen to eighteen months time. Thereafter

either we may shift back the facility or if more orders are there, so

we may shift the facility to those locations, it is like that. So, just

in order to be more competitive, we are taking this step.

Neerav Dhalal: Okay. Sir, also it has been mentioned that you dont use, keep

some of the low margin businesses, where because of that you

are not going aggressive in some of the (inaudible) part of your

segment?

Vimal Katta: Basically, within the country now the capacity, over capacity

situation is there in particularly in respect of carbon steel SSAW

spiral pipes. So, there margins are not as per our expectations.

So, that is the reason we are not going very aggressive. And

secondly, we are at a disadvantage compared to our competitors,

because we have manufacturing facility only there in

Gandhidham, whereas others, certain bigger players; they are

having facilities spread at two-three more locations also within

the country. So, because majority of these orders will be on FOR

terms, so it does not make sense to bid for these orders and then

end up not making money.

Neerav Dhalal: So sir is it the margins pressure or the theme of thinning margin

here is because of the competition inching up and more of the

players are coming up with lower pricing? Or, you see that

because of some other reasons?

Vimal Katta: See, in carbon steel SSAW segment only, I am talking about one

segment only. There we foresee the margins will continue to

remain low for not only us, but for majority of the players,

because of fierce competition, because huge capacity is available

within the country. Because, everybody has gone ahead with

capacity built up in last couple of years time and now global

requirements have come down, global markets are not there and

lot of opportunities are there within the country. And now

majority of the tenders are finalized based on reverse auction. So,

you dont know where one may end up, when the tenders are

finalized. So, this is a situation we foresee. But, in othersegments, because in stainless steel, of course competition has

gone up now with the global scenario, but still we continue to

enjoy our market leadership position. Similarly, in case of ERW

also, because for oil and gas sector, again there a number of

players are limited, so ERW is also a reasonably good business.

And coating, of course depends on the opportunities which are

there in the market from time to time.


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Neerav Dhalal: So sir finally, do we see the same kind of EBITDA per tonne kind of

or you see some difference in that also on the companys level?

Vimal Katta: Basically, going forward also we foresee, because as the top linegrows up, share of carbon steel overall will continue to increase,

which is comparatively a low margin business. But, that low

margin will get offset with better utilization of capacities and

better absorption of fixed cost. So, more or less at around 18%

sort of thing, we should see EBITDA settling down.

Neerav Dhalal: Okay sir. Thank you sir. Thats it from our side.

Moderator: Thank you sir. Next question comes from Mr. Ankit Shah from

SPA Securities.

Vimal Katta: Ankit good evening.

Ankit Shah: Hi, good evening sir. Sir, I just wanted to know the reason for the

substantial drop in our sales in this quarter.

Vimal Katta: See Ankit, I will just like to share one thing. Because, as per the

requirements, we have to share the turnover figures, net of excise

duty and other things. One interesting thing is there, at gross

level last year in 2010, we did 888.58 crores of turnover, it is there

in the published figure. This year we did 864.36 crores. So, that

drop is not very significant. Of course, of course, there is a

reduction in the volumes of carbon steel business. Overall, if welook at the carbon steel volumes, then stainless steel has shown

an increase from 10,349 tonnes of last year, this year we did

12,397, whereas in carbon steel from 113,305 metric tonnes,

there has been a drop to 83,850. And as had been shared earlier

also that first two quarters were not very good as far as carbon

steel business is concerned. And now order book position has

started building up from third quarter onwards. So, this year,

carbon steel business is having very good order booking. Right

now also, out of the outstanding order book position, close to 875

crores is from carbon steel only, whereas stainless steel stands at

332 crores. So, it depends on the opportunities which are there inthe market. Last year we didnt, lot of tenders were there, mainly

from GAIL. But, unfortunately we were not in any advantageous

position to bid very aggressively for those orders, because

majority of the orders were from South India, where we dont

have any manufacturing facility. These are the things.

Ankit Shah: Sir did any of the shipments got deferred in the Q4?


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Vimal Katta: See, as such there is no deferment. In our case what happens,

basically lot of third party inspections are involved or it maybe

customer clearance also. So, we have seen that every year there

will be certain orders, which though we might have planned to

ship in the March quarter, but they may be shipped in either Apriland they may be deferred to May also, depending upon the

customer requirements. Because, customer will not like to hold

an inventory, if there are certain delays by his ultimate customer

also in buying approvals and other things, because he cannot take

up the final fabrication. Because, ultimately our products go for

fabrication or the plant commissioning, so everything is linked

with each other. So, there are sometimes customer requests also

to defer the delivery. But, those quantities will never be very

significant.

Ankit Shah: Sir, one more thing that in the previous concall you had

mentioned that the order book for September, that is the Q3

stood at 650 crores and, sorry for Q2 was 650 crores and as of

December ended was 710 crores. But, since our execution time is

just close to four to six months in most of our order books, are we

seeing great jump in our Q1 and Q2 top line figures?

Vimal Katta: It will not be great. Basically, this year we are targeting close to

anything between 1000 to 1100 odd crores sort of thing. So, our

average turnover should come between 90 to 110. It will keep on

fluctuating. So, we should see on average roughly 300, around

300 odd crores of turnover coming each quarter in this year.

Ankit Shah: Okay. And sir, regarding the details of the CAPEX, we are heading

to, as you said we are heading to more lines, so that we can cater,

we can manufacture 18 inch ERW pipes.

Vimal Katta: No, it is not any additional line, only tooling is being added.

Existing line, we are increasing the range, size range from 16 inch

to 18 inch. So, there will be no addition as such of manufacturing

facility, only the tooling will help us in giving more range in ERW.

Right now, we are limited to 6 to 16 inch, later on it will be 6 to 18

inch in diameter. There is an additional facility, manufacturing

facility being set up for condenser, stainless steel welded tubes,which will add capacity of around 2000 metric tonnes.

Ankit Shah: Okay. So sir, then that will take the total stainless steel tubes

capacity to 26,200 tonnes, am I right?

Vimal Katta: Roughly. Yeah.


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Ankit Shah: Okay. Sir, then can you just guide me the CAPEX amount planned

in this year?

Vimal Katta: See, this year will be, right now whatever has been planned will

be close to 50 crores. And if anything additional is planned, sothat will be shared separately with all of you.

Ankit Shah: Okay. And sir, one more thing, in Q4, we have been quite a lower

tax outgo of

Vimal Katta: Basically here again, our normal tax remains at those levels only.

It is the impact of one thing. See, there was some excess

provisioning done last year, which has been written back. Second

thing is that now, because in last two years, no major CAPEX has

been done. So, now instead of deferred tax liabilities, we have

ended up with deferred tax assets. Nothing more than that.

Ankit Shah: Okay fine sir. Thank you. Thats it from my side.

Moderator: Next question comes from Mr. Gaurav Sud from Kanav Capital.

Gaurav Sud: Yeah, hello sir.

Vimal Katta: Yeah, good evening Gaurav.

Gaurav Sud: Good evening. On your earlier calls you had talked about that you

were banking on, for your stainless steel pipes on the Paradip

Refinery. So, what is the status on that project right now sir?

Prakash Sanghvi: That is in both the division, in carbon steel as well as in stainless

steel division, under execution.

Gaurav Sud: Okay, so part of the order book is because of that?

Prakash Sanghvi: Yeah, yeah. At the same time, some orders from power. These

are the two sectors mainly what we are covering, say about 60%-

70% of power and oil and gas and refinery, petrochemical, then

rest all these other chemicals, diary, sugar, pharma.

Gaurav Sud: Okay. Why I specifically talked about Paradip, because its one of

the larger projects.

Prakash Sanghvi: Its about 25,000 crores worth CAPEX.

Gaurav Sud: So, how long will the orders keep on coming from Paradip?


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Prakash Sanghvi: Yeah, it is about 25,000 crores CAPEX by IOCL and it will go on for

next three years.

Gaurav Sud: Next three years, you anticipate orders to keep on coming?

Prakash Sanghvi: Yeah. First, initially it is first MTO of bigger order, then second

MTO, third MTO, its like that. Gradually it reduces also second

year, third year.

Gaurav Sud: Okay sir, so finally yeah, just wanted to check. The other thing

was this; the finance charges for this quarter were pretty high,

any specific reason for that?

Vimal Katta: See basically till last year our order book position was not very

good. So, lot of money got freed from working capital, whereas

this year because of the higher order book position, our

investment in inventories have also moved up, resulting into

utilization of the working capital facility, which has resulted into

higher interest outgo.

Gaurav Sud: Okay. So, going forward this will continue because of the higher

order book?

Vimal Katta: See, on average, I dont remember whether you were there or

not, when we share this for any projections, I have been telling

the analysts to consider close to 18 to 20 crores sort of working

capital interest every year, because every utilization of working

capital looking to a turnover of close to 1000 crores will continueto remain at around 180 to 200 odd crores. So, even at 10%, 18

to 20 crores sort of interest should be considered notionally.

Gaurav Sud: Okay, got it sir. The other thing is around your windmill. The

contribution from windmills has really come down.

Vimal Katta: Has come down, because last year wind availability was very less.

So, it is you can say the risk associated with the windmill, the wind

energy. If wind availability is less, then you end up loosing on the

generation. Andbut we have to look at longer period, because

on average if we look at a period of twenty years, economic life ofa windmill, then we should end up at an average PLF of close to

20% to 23% sort of thing. Last year, generally it was low all over

Gujarat. At least that has been our experience, because we have

windmills located in Sourashtra region, we have windmills in

Kutch area and in between Kutch and this Northern Gujarat also.

But, everywhere there was a wind drop seen.


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Gaurav Sud: Okay. So, the other thing is, sir what is the break up in the sales in

terms of your ERW pipes and the seamless pipes?

Vimal Katta: See, we are not giving break up of product wise, but within the

stainless steel and carbon steel, of course we are giving.

Gaurav Sud: Yeah, stainless steel and carbon steel.

Vimal Katta: Yeah, so stainless steel is 407.13 crores, product sale. Then other

sales related to stainless steel are also there aggregating to 10.63

crores. And in case of carbon steel, 363.04 crores is the product

sales.

Gaurav Sud: Okay. Sir, when you take the other products, what exactly do you

mean?

Vimal Katta: See, no, like this scrap and which form part of the other, means

the same product group, but not direct product sales, that is also

there of roughly 9 crores rupees.

Gaurav Sud: Okay. Sir, and given the fact that what is your formal dividend

policy in terms of, do you pay a certain percentage of your net

profit?

Vimal Katta: See, really speaking it is a mix of both. One, percentage wise also

board has got something in its mind, plus the management wants

continuously to increase the dividend each year. So, it is like that

only. The main thing, it has not been very aggressive is that, lot ofCAPEX has been happening. And there are plans in future also to

go for major CAPEXs just to take care of the growth which we

have been looking at since last couple of years. Because, with the

existing infrastructure we can achieve a turnover of say 1400-

1500 odd crores, but thereafter. That will also require lot of

capital infusion, plus incremental working capital requirement till

now have majorly been met from internal accruals, but now we

have seen that if there is a sudden jump in order booking position,

then we need to borrow from the market. We need to approach

our working capital banker. So, we realized if we want to control

our interest outgo, then we have to see that some part of cashaccruals continues to be pumped in, working capital built up also

and some part is available for future CAPEX also. It is like that.

So, I think for some years to come, we will continue to remain

more or less a balanced company as far as dividend outgo is

concerned. It will not be very aggressive.


15/18


Gaurav Sud: Okay. And any views on inorganic growth, are you looking at it

or?

Vimal Katta: We, as such we have not ruled out that route. But, consciously

we have not even targeted that thing. Both things are there,because first preference is to continue to increase our presence in

our existing product line. So, once that comfort is there by the

management and opportunity is there, which looks really very

good, so perhaps that can be considered. But, consciously we

have not done anything so far.

Gaurav Sud: So sir, then on the other side then, any new products that you are

thinking of as part of that?

Vimal Katta: Lot of things continue to be discussed internally, because if out of

twenty odd ideas, only one might be acceptable to the

management ultimately. So, there are plans to go for forward

integration sort of things. There are plans to add more value

added products like what we have been discussing, high nickel

alloys or titanium already is there, high nickel alloys or then

nuclear also. Nuclear, right now we are again not talking much

about it, because we want things to be very clear globally post

this Japanese experience. But, once things settle down, then

perhaps nuclear can be taken up at that time. So, there are lots of

things in our existing product line also, which we can do. And

then there are lots of opportunities by way of forward integration

also, which we can do, where being present in the tube industry

and manufacturing our own tubes may help the company.

Gaurav Sud: Okay. Sir, your company was known to grow very fast scale about

two years back and then the downturn happened. So, this is after

a long gap we are seeing the order book growing over the last two

quarters. So, do you feel that this momentum is now building up

again for the future or there are still uncertainties?

Vimal Katta: No, it is building up. Basically, what had happened is that in our

case majority of the projects which we cater to are long term

projects. So, because no new projects were being announced

post Lehman Brothers, so that had impacted last two yearsperformance. And now once that certain or rather optimism is

back, in our country also and globally also in some of the sectors,

we are seeing that now enquiries have started growing up from

global markets also. So, we are very optimistic that our being

present in those segments where at present we are not present,

we have help in continuously growing. Because, wherever we are

present, others are also present now, our global peers are also


16/18


there and local competition will also be catching up sooner or

later. But, more highly value added products, there again it will

help us in ensuring one thing that there is a top line growth,

bottom line is also safeguarded and competition is also less. So,

that is the whole strategy.

Gaurav Sud: Okay. Thats it sir. Thanks a lot.

Moderator: Thank you sir. Next is a follow up question that comes from Mr.

Neerav Dhalal from Sharekhan.

Neerav Dhalal: Sir, thank you, all my questions have been answered.

Moderator: Thank you sir. Next follow up question comes from Mr. Ankit

Shah from SPA Securities.

Ankit Shah: Hello.

Vimal Katta: Yeah, Ankit.

Ankit Shah: Sir, sorry I got disconnected in between the call. Sir, I just wanted

to know if you had given any quantitative details of the fourth

quarter.

Vimal Katta: I will be sending you Ankit.

Ankit Shah: Okay. And sir, one more thing; I had read that in the media

reports that we are setting up a, we had signed a MOU with theGujarat industry.

Vimal Katta: Ankit, basically last to last (not sure) in Gujarat, we had signed up

MOU for total investment of close to 200 odd crores, roughly 199

crores you can say, which more or less has already been over.

Because we have, if you remember, this coating plant had been

set up, high speed tubing plant was set up, then offline welding

facility was set up. Few things still remain to be done, that is

modernization of our existing Indrad plant. So, that we will be

taking up at appropriate time, because that we had deferred

looking to the market conditions at that time, so nothing new isthere right now.

Ankit Shah: Okay. And sir, can you share the order book break up in terms of

tonnage?

Vimal Katta: See, tonnage wise we are not giving.


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18/18


we want to make it as world class as our Kutch plant is. So,

basically here we will be setting up, bringing all the newer

machines, fully automated, which will result into more perfect

products and high productivity, will be there. So, perhaps by the

time we interact on the next concall, that plant should be firm.

Ram Modi: Okay. Any expansion on stainless steel tubes side?

Vimal Katta: See, Indrad is purely stainless steel only, seamless; seamless and

stainless steel. So, it may add up, capacity may be more than two

times.

Ram Modi: Okay, thanks a lot sir.

Moderator: Thank you sir. There are no further questions. Now, I hand over

the floor to Mr. Viral Malia of Networth Stock Broking Limited for

closing comments.

Viral Malia: On behalf of Networth Stock Broking, we thank Mr. Prakash

Sanghvi and Mr. Vimal Katta for sharing their invaluable insights.

And we thank one and all present on the call for joining us. For

the detailed transcription of this call, you may please send me a

request on my e-mail ID [email protected], I

repeat, [email protected]. I would hand over the

call to the moderator.

Moderator: Thank you sir. Ladies and gentlemen, this concludes your

conference for today. Thank you for your participation and forusing Door Sabhas conference call service. You may disconnect

your lines now. Thank you and have a pleasant evening.

Vimal Katta: Thank you.

Prakash Sanghvi: Thank you sir.

Note: 1. This document has been edited to improve readability.

2. Blanks in this transcript represent inaudible or incomprehensible words.
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