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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the JTL Industries Limited Q4 FY '24 Earnings Conference Call hosted by Nuvama Wealth Management. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Sneha Talreja from Nuvama Wealth Management. Thank you, and over to you, ma'am.
Thank you, Manoja. Good morning, all. On behalf of Nuvama Wealth Management, we welcome you all to the JTL Industries Q4 FY '24 Conference Call. We are joined today by the senior management of JTL Industries, represented by Mr. Atul Garg, CFO; Mr. Pranav Singla, Whole-Time Director; Mr. Dhruv Singla, Whole-Time Director. We will now start with the opening remarks by the management, followed by the Q&A.
I would now like to hand over this call to Mr. Pranav Singla for his brief opening remarks. Over to you, Pranav.
Thanks, Sneha. Thanks, Nuvama, for hosting the call. Good morning, everyone. Thank you for joining us today. I'm delighted to welcome you all to the JTL Industries conference call, where we will discuss the financial performance for the quarter 4 year ending 2024 and for the whole year as well, which we'll overview of our current capacity expansion and recent acquisition as well.
Before we delve into the details of our quarterly results, let me briefly introduce our company to those who may be less familiar. With 3 decades of experience, JTL Industries have transformed into a rapidly expanding company in steel tube manufacturing. Our product lines span various offerings from ERW black steel tubes to pre-galvanized and galvanized pipes, large diameter steel tubes and pipes, solar structures and hollow structures -- hollow sections. Our specializations line in crafting VAP products, focusing on galvanized pipes, ensuring superior quality standards and impeccable finishing across our plants.
JTL operates 5 cutting-edge manufacturing facilities across India, located to secure raw materials at competitive rates and facilitate our expansion into global and domestic markets. These facilities consist of 3 plants in Punjab, 1 in Maharashtra and 1 in Chhattisgarh, collectively capable of producing over 1 million tonnes as a whole. Recently, we acquired controlling stake of 67% in Nabha Steels and Metals located in Mandi Gobindgarh, Punjab. The acquisition provides JTL with ownership of an advanced steel product manufacturing facility. The newly acquired plant boast our manufacturing capacity of 2 lakh tonnes and specializes in coil and long steel products such as billets.
The strategic move enhances JTL's backward integration capacity, increasing coal production from 1.5 lakh tonnes at Raipur plant to 2.5 lakh tonnes and augmenting long product output by additional 1 lakh tonnes across Chhattisgarh and Punjab. JTL is set to enhance its production capacity in Maharashtra and Chhattisgarh through a substantial expansion initiative. The initial phase targets drives overall the capacity from 0.6 million tonnes to 1 million tonnes by incorporating DFT and traditional forming technologies for manufacturing galvanizing steel tubes and pipes. This move will enhance plant capacity utilization and manufacturing efficiency and diversify our range on value-added products to new geographical markets.
Regarding our financial performance, JTL has achieved a remarkable milestone by attaining its highest-ever sales volume, reaching an unprecedented of around 3.4 lakhs metric tonnes. This surpasses the sales volume of the previous year, which stood at 2.4 lakh tonnes, showcasing a robust growth of over 24 -- 42%. Additionally, JTL experienced a significant rise in the sales of value-added products with 35% increase, climbing from 74,000 tonnes in FY '23 to around 1 lakh tonnes in FY '24.
Our revenue grew 31% to INR 2,040 crores in FY '24 compared to INR 1,550 crores in FY '23. The company witnessed a significant uptick in revenue attributed to robust demand of products and strategic expansion initiatives undertaken during the year. On the profitability front, we remain committed to gradually increasing the same, since EBITDA for the financial year -- fiscal year was reported at INR 153 crores, with an EBITDA margin, which was healthy at 7.5%. The performance was supported by several critical factors, including the increase of VAP share, overall scale of operations and continuous focus on enhancing efficiencies across all our plants.
Turning to our future-looking guidance. We anticipate a 35% growth in the revenue for FY '25 compared to FY '24, while maintaining a EBITDA metric tonne of INR 5,000 plus for the whole year. After this, CapEx remains consistent with expectations for the upcoming period.
Thank you for joining us today, and I look for an engaging discussion.
[Operator Instructions] The first question is from the line of Nitesh Dutt from Burman Capital.
My first question is I want to understand what is your primary versus secondary mix? And also within secondary, are we manufacturing from patra re-rolling kind of material or sponge iron-based HR -- slit HR coil?
Thank you for your question. So our capacity, as a whole, in the company is 50%-50% for primary secondary. So the output for the same for this year was in the same ratio as well. 50% of our billets this year were converted to primary market and 50% was to secondary market. And for listing secondary product, we procure billets and reuse them into narrowed coils at our hydro plant. So yes, that's patra, which is the same thing which you mentioned. And for our Mandi occasion, where we have a capacity of 2 lakh tonnes, we procure our secondary coils from the local players in the market as well. So that's how we created our primary and secondary. And for primary, we procure material from JSW and TATA at our Derabassi plant and our Maharashtra plant, each having a capacity of 1 lakh tonnes and 2 lakh tonnes each, respectively.
Got it. That's helpful, sir. Secondly, I want to understand over the last 2, 3 years, has the secondary segment been a big driver of growth for us because the secondary prices have been lower than primary sales. And hence, there was a market sort of tailwind because of low prices. And also, one of our large listed competitors has been claiming that the market is potentially shifting to primary because, number one, consumers' preference for better quality. And second, as the new HRC capacities are coming up, the primary steel prices are expected to go down. So just want your perspective on both of these things on how you see the market will move, if at all? And how you are prepared to handle that?
Yes, to answer your question there, there has always been a primary and secondary market in the majority of the products in India, be it long products, such as TMT and I beams or other channels, so there has always been a primary-secondary divided into the Indian market. As for the ERW pipe segment, it is more of the usages of the product and the gauge of the product, which is available for a primary and secondary option. So in the recent past, where a lighter gauge structure is required for, say, probably your steel gauge, like the load-bearing structures, such as carports, sheds, just a shade shed. So all these applications wherein a lighter gauge steel is required, which from a primary source of product becomes even more expensive with the deltas of thinner gauge.
There is the main utility of the secondary product and with the increase of usage of steel as regards to wood, a direct replacement of wood, we've already seen an increase in demand in secondary product in the last few years. That's why we've grown, say, equally in both the segments. Yes, going forward, since we are expanding our product profile, we are going from -- earlier, we used to do only 5 to 6 inches. But last year, we started up to 12 inches. Going forward, we're coming up with [ BS6 ] nail, which is essentially a 20-inch nail. So we are going towards a broader product profile wherein, yes, we have to use more of the primary product, so -- and for different user and applications. But it's safe to say that there will be a good demand for the secondary products as well. The use of new technologies.
All right. That's clear. Just last question, sir, on this. In your -- in the secondary segment, who is your core competitors, right? Are these smaller players and, hence, you are able to take advantage of your bigger scale distribution, et cetera? And secondly, all the big players, right, at least in the prime -- on the primary side are putting up huge capacities. So everyone is on the listed side. Everyone is increasing capacities by at least 2x over the next 3, 4 years. And demand is not growing at 15%, 20% CAGR. It's likely growing at 8%, 10% or low teens CAGR, right? So do you see an overcapacity risk on both the primary and secondary side of the market?
In the secondary market, there are numerous players. Plenty of them are not in the listed space. And they are scattered across pan-India. So it's hard to name a specific person or a specific company. In the primary segment as well, the demand, maybe you forecast that in the low teens because of the whole election scenario and the steel demand is low now. Otherwise, the market has been growing at a rate of 12%, 13%. And this is what we're expecting or maybe higher what we're expecting is going to happen post-elections. And so there is no tailwind that we are expecting in the market and it's a growing industry and the use case scenarios where expanding as well as Dhruv mentioned. So the industry, for the primary and secondary, both, is growing at a good 13%, 14%.
So basically, you expect that the incremental capacities that are coming up, for those capacities, there is enough demand in the market to absorb the incremental capacity?
See, when we are increasing our capacity in the market, we are not increasing capacities in the product profile that we were doing previously or the same product profile over and over again. So when we are going forward, we're focusing more on value-added products, which open up more space and more market for us to venture into. For example, DFT will open up newer export markets for us, newer markets for structural applications, for multistorey buildings for us. So what we essentially are doing is not following the herd and just putting up capacities into the same black pipe manufacturing up to 3 inches or 4 inches, which is the lowest strata of the value chain of ERW pipes. So that is not what we are aiming for.
We are aiming for an increase in our product profile by increasing our size range in value-added products. So even if there is multiple capacities being installed in India, where there are only a number of -- couple of players who are doing this in a value-added segment rather than more of the players are going into the commercial grade pipes for volume increase.
The next question is from the line of [ Pradeep Rawal from Yogya Capital. ]
So my question is regarding the abnormal fixed asset turn that we generate right now. Can you shed some light on it?
Can you please repeat the question?
Yes, my question is regarding the fixed asset turn. It's quite high right now as compared to industry peers. Can you like shed some light on it?
Thanks, Pradeep, for the for your question. So our asset turn was extremely high because the mergers and acquisitions that the company has done in the recent past have been on book value. Whatever acquisitions the company has been doing in this year, if you will look at the gross block as well, which has increased from around INR 90 crores to around INR 150 crores. So this is getting our asset turn down from -- down to 14, 15 from levels of 18, 19 before. So this is the gradual shift, which will happen over time. And the -- as an [indiscernible] as well, you see the number coming properly as well. This year as well, we are expecting to deploy close to INR 150 crores, INR 200 crores on CapEx. So hence our gross block will come down -- our asset turn will come down further to 12, 13 numbers, which will be across -- similar across the industry. It's just that previously, whatever asset purchase we did for the Mandi plant and the merger we did was around book value. So hence, the asset turn seem bigger right now.
Okay. Okay. So my second question is regarding that you -- earlier, you have regarded that we will outgrow our competitors. Like we can expand our market share from 9% to 25%. So can you -- what gives you confidence to outgrow our competitors? What is our edge?
If you look our numbers for the whole financial year, we've done a tremendous 40% growth over the last financial year. This has been done because we have been adding our SKUs and gathering more market share from our competitors. The -- following the approach would be that we'll be adding more SKUs itself as well and [indiscernible] for us in the market. Plus, that we are a debt-free company, this gives us the encouragement and confidence to make the pricing comparable according to us. I'm playing with the margin as well. So hence, growing and expanding and increasing the VAP share is easy for us because of the debt-free status.
The next question is from the line of CA Garvit Goyal from Nvest Analysis Advisors.
My first question is on the industry side. Like do you witnessing any kind of slowdown happening at the industry level due to this political events going on?
Thanks, Garvit, for your question. We don't see any slowdown in the industry because of the scenario what is happening. Obviously, in the quarter, we see faced a little slowdown because there were no government-demand assets. But apart from that, after the elections are over, we expect the demand to pick up again because the missions where we supply products, it's a basic demand for the country and this mission is bound to happen, Jal Jeevan Mission, no matter which government comes or how elections turn up. This is the kind of industry where we cater is very safe.
And apart from that, we don't have our major sales happening towards the sector. Around 20% of our sales is towards government sector and the rest is towards dealers and exports. So we always prefer to maintain a healthy mix of supplies. So whenever there's a slowdown in one kind of industry, we can at least cater the other industries a little more.
And secondly, on your value-added mix, it is not -- it is also improving in terms of absolute numbers. But your value-added mix in terms of percentage are not getting improved. So what is the reason for that?
So if you understand to get the value-added product into production, the first step is to increase the black-pipe production because a few times I don't have black pipes, I can't make galvanized pipes. So adding galvanized pipes is something that I've been doing every now and then in every quarter. But the major outflow would be happening when all my galvanized pipes are commissioned. And going down the line, I'm adding GL line, color-coated line, DFT structures this year itself, in which, as a whole, the VAP share should be increasing altogether.
So like you mentioned, this year, we are going targeting 5,000 tonnes of EBITDA. So what is exactly that, that is giving you the confidence to reach to that number considering the kind of EBITDA per tonne that we are currently doing.
So right now, the products that I'm offering is galvanized pipes and black pipes. Going down the line, when I'm talking about adding my VAP products, I'm adding products from GL line, color-coated line and DFP. These products are valued-added from day 1 itself. So [indiscernible] in the higher 7,000, 8,000. So once the grade products come to production and [indiscernible] market, these products from day 1 are value-added and will obviously show increase EBITDA per done.
So are these products going to start contributing to the revenues from this quarter only or the upcoming quarters?
No, not this quarter. You should start expecting everything to be commissioned talking about DFT in quarter 2. And from H2, you should start looking at the proper numbers. We'll obviously see the trial phase of DFT in H1 itself, but the proper numbers in efficient manner will be visible from H2.
And are you people also like [indiscernible] about the incremental supplies taking over the demand? So is there any real fear of oversupply in this industry going ahead?
Can you repeat the question? You were not audible.
Like is there any kind of fear in terms of the oversupply in this industry going ahead, considering the plans of your peers as well as plans of JTL Industries?
As we mentioned before that we venture into adding our SKUs every -- like when we're expanding, we are adding our SKU. If we were just adding the same product, then it would be a fear for us. But as we are diversifying ourselves and adding more SKUs, then every growth rate that we are conquering, so this fear is not anyway close to us and these products that we are adding are fully value-added from day 1 itself. So there is no fear as such that it may be a slowdown or there's oversupply in the industry for our products.
But you are saying these products are value-added, but value-added products are also manufactured by the peers as well, that is why I'm asking this question.
The DFT products are not manufactured by a lot of players in India right now. We'll be essentially the third one, second one in India to get this technology. So there's a lot of humongous demand for the product, which we will be supplying. There are not many peers of us who do DFT products.
The next question is from the line of Dhananjai from ASK Investment Management.
Congratulations for good set of numbers. Just wanted to ask you a couple of questions. A, how much is the total CapEx we're doing for the next 2, 3 years? And b, what is the update regarding the warrants? And how are we looking in terms of inflow of the world money?
Thanks for your question. So the total outflow of the company expecting in CapEx this year is close to INR 150 crores plus. And we'll be -- and if you compare the next 3, 4 years, we'll be spending close to INR 500 crores plus, INR 600 crores plus in the coming 2, 3 years. Giving like an exact figure would be tough right now because [indiscernible]. And if you talk about the warrants, we are the promoters, pitched in some money as well in the previous quarter, around INR 170 crores is what the promoters -- INR 675 crores is what totally promoter signed up for. And out of that, INR 170 crores is what we already received in the company as well. And other warrants are due to -- the warrants that we did before are due in September. We expect everything to come before that. Around INR 170 crores, INR 180 crores is something that we are expected to get from that.
The next question is from the line of Aditya Welekar from Axis Securities.
Specific questions on capacity expansion plans. So in FY '25, we assume 1 million tonnes -- to reach the target of 1 million tonnes. And then for FY '26, how much capacity expansion you expect? And also if you can outline the sales volume guidance for '25 and '26?
Thank you, Aditya, for your questions. So yes, we'll be reaching the capacity mark of 1 million tonnes before year end. And the guidance that we mentioned for this year is a 30% upward shift over this year. And as our capacities keep coming up, every now and then every quarter, we'll keep upgrading our guidance towards upward section as well and continue to do better as well. And if you talk about the guidance for the next year, which should be again doing a 30% growth minimum for the next 3, 4 years.
And you have mentioned INR 600 crores CapEx in coming 2 years, right? If I heard you correct.
It's 2, 3 years, like not to give exact number, but around 2.5, 3 years is something that we can expect everything for outflowing.
And your plan for 1 million-tonne to 2 million-tonne expansion means that will be contingent upon the funds available, means arranging of funds, right? And any color you want to do on that? Are you on track for 1 to 2 million-tonne expansion? And by when you envisage that, that would also flow through in the longer term?
Yes, there's no struggle that we are seeing in expanding from 1 million to 2 million tonnes. The company has been growing its margins and recently increasing the profit as well. So if you talk about the whole scenario, promoters also helped in by putting in some money as well. So altogether, the company is in very comfortable cash situation right now for the future growth. And there's no stress as such we feel for the coming months. So -- as and when the company requires money, the promoters are flexible to put in the money that time as well. So there's no agenda that we have made that we will be putting in money the last day or last something or the other. As and when the company requires money, the company has adequate money right now. But as and when the company will require money, maybe for advance to the suppliers or to order -- the advance for machinery, we keep putting in the money from promoter side itself.
Okay. And on -- with regards to demand, so this first half of this fiscal, do we expect some softness in demand because of the elections and all? Or you expect that the demand will pick up only from the second half? Any color on the demand pickup?
So we're expecting our -- obviously, the demand should pick up enormously by H2, but our H1 should be strong as well. And we should try and give new all time high in every quarter.
[Operator Instructions] The next question is from the line of Bhavin Pande from Trust Plutus.
Congratulations, Pranav, on great set of numbers and a wonderful year, you guys had at JTL. Just -- first thing, so this acquisition of Nabha Steels, sort of take me back to the previous interaction we had where the key moat cited was the backward integration to the [ core ] that helps company sort of generate economies of scale. So could you just shed light on this, both economically as well as if you could quantify the effect of this acquisition, it would be of great help.
Thanks, Bhavin, for your question. So this acquisition of Nabha Steels will help us basically expand our margins. Right now, in the Mandi plant, we procure around 1.1 lakh tonnes material, 1.2 lakh tonnes material from secondary players, who are locally available and supply the product of secondary coil. Having the acquisition of Nabha Steel will in-house makes the coil itself and it will be from scrap. So effectively, we should be -- like on a black pipe right now if you are making close to INR 2,000, INR 1,500 EBITDA per tonne. So it should be at least 30% more saving on increasing the EBITDA per tonne on the black pipe itself. So it is yet to start. It will take a quarter or 2 or maybe 2 quarters as well right now for the final production from Nabha Steel to start because we're making some changes in the capacity right now. But once everything is set, you can see a significant increase in the bottom line.
Okay. That's wonderful. Secondly, Pranav, on inventory front, the days inventory on hand has declined, so any just sort of reason that to be attributed to it?
Can you repeat the question?
Yes. Inventory days have declined on a year-on-year basis for FY '24. So any reason for that?
So basically, since we're not into the business of manufacturing steel, we're just converting steel. So we tend to make ourselves more leaner when the prices go down and the steel availability is robust. So -- and vice versa when the material availability is not -- so say, frequently available, then we have to stock up. So these are the reasons last year that there was a good correction in prices. And we were able to also move out our finished goods on a timely basis, and that's how we also tended to increase a little bit in our market share, to have tighter deliveries, increasing our product profile. So these are the reasons that we fared better on the inventory days as compared to the previous year.
Okay. Okay. And just one last thing on return ratios. Of course, they would not look as great as they were last year because of expansion that's happening. But could you maybe shed some light on when we could see these numbers inching up in the positive direction?
So if you're talking about the ROCE and ROE, so INR 62 crores (sic) INR 60 crores of amount is still work in progress. And when these assets will come after setting, they will start generating the results. And -- so this is a phase where we have raised capital for further growth and, hence, there is a temporary blip, which will eventually reach this level in the coming year itself. And if you talk about the margins of the company, it's better to look at the company's performance on EBITDA per tonne basis and not the percentage manner. Because the percentage obviously keeps varying depending on the HRC fixed prices. So the EBITDA per tonne has been altogether in a healthy growth manner and -- so we don't see any downfall, which has happened except maybe the ROCE and ROE.
The next question is from the line of CA Rajesh Mangal Agrawal from Rajesh Mangal & Company.
I have just 2 questions. Why the Q-to-Q, quarter-to-quarter, sales has been reduced near about 17% from INR 567 crores to INR 466 crores? And second one is why the promoter shareholding is reducing? I'm a retail investor.
Thanks, Rajesh, for your question. So the company's goal is to supply products in the market having a good margin as well. If you look at the numbers last quarter, we did a 1 lakh tonne of the volume. And that quarter, our VAP product share was low. Hence, the absolute EBITDA and actual profit the company did is almost same to what we did this year -- this quarter. And so it really doesn't make a difference if we are -- it's basically a dice, it fits in that side or this side. So the focus of the company is to eventually increase the VAP share. And this will be happening in a phased manner every now and then quarter.
In this quarter, we expect the volume should be good as well, again, reaching a new all-time high, with the increase in VAP share as well. So that's how we aim to get the market in the future. And if you talk about the shareholding of the promoters, the promoter shareholding has gone down because we converted some warrants, which was like to the decreasing shareholders. There are no sell offtake from the promoter or any of the promoter entity. So the promoter is not selling at all. It is just some conversion of warrants which have been happening every now and then in the quarter, which decreased the shareholding.
Now if you talk about the situation now, we've done the -- we issued the promoter warrants as well in December. So post that, our shareholding is supposed to go up. So it's just a phase manner in which maybe 1, 2 quarters we keep seeing the shareholding is going down because of the warrants conversion from the public category. But eventually, when the promoters will convert their warrants, the shareholding should go back to 60 level.
Okay. And the last question is, why this ROCE and ROE is reducing drastically? Near about 50% has been reduced as compared to last financial year?
So as I mentioned, around INR 65 crores is in working progress for the advances of machines that we've sent -- given. So when these assets come and when they will start sweating, they will generate results and give numbers as well. So it's just a temporary blip that is visible. I think that too itself by end of H1 itself, we should see the ROCEs and ROEs going back to 30 level.
The next question is from the line of Pallav Agarwal from Antique Stockbroking.
Just a question on the 1 million-tonne expansion plan. So are there any concrete time lines as of now? By when can we expect production start from that?
Thanks, Pallav, for your question. So we're expecting anything to be set up or commissioned by fourth quarter. The same numbers would be evident in the next financial year fully.
Okay. And what about the additional -- I'm talking about the additional 1 million, from 1 million to 2 million tonnes?
For the additional 1 million to 2 million, the company's plan is to set up everything by '27, and the same production for the entire will come by '28. So by '27 and/or maybe before we expecting anything to be set up across the Maharashtra plant, obviously, it's going to happen in the phased manner. So every now and then, every quarter, if you see the numbers flowing in because of some machines coming in, but the entire scenario of the whole 2 million tonnes should be evident post FY '27.
Okay. And also just on the EBITDA per tonne metric, compared to peers, we have significantly done better in the fourth quarter. So are there any still old galvanized contracts under Jal Jeevan mission still in place? Or now are those out of the system and this -- we can probably maintain or increase the EBITDA per tonne due to higher backward integration? Is that the scenario going ahead?
For the Jal Jeevan Mission, right now, since a new government is under formulation and soon we will see it up and running, only after that, the full budget -- when the full budget is declared, only after that, the allotment will happen and new orders will come in. We only have a little bit of tickled orders from last year, which as I said, we're trying to be completed. But the full flow of all these projects will come in only after the full budget is declared. So after that we can see a good rise in orders from these entities.
But due to a recent correction in prices and market being stronger, we've seen a good demand in this month. And going forward, we see that there is going to be a good flow of material with an increase in range that we are coming up with. Also, the export market is doing better as compared to last year's performance with increasing prices worldwide. So we see that most of the legs are covered. And since we are not stuck in supplying to one organization or one sector, we have the opportunity to increase supplying others. So yes, we see a good flow of the business right now.
Sure. So basically, our advantage in being present in both primary and secondary markets and backward integration is already showing up in the superior EBITDA per tonne, and this should continue going ahead. So is that broadly correct?
That's correct. It's -- for the -- going down, it will further increase as well, as we mentioned, because of the addition of Nabha Steel, how the numbers will add up and like they will effectively not be hovering in the top line, but they should be hovering at the bottom line.
The next question is from the line of Darshil Pandya from Finterest Capital.
I just want to understand, have you implemented the DFT technology, which was supposed to be commissioned in Q1 FY '25?
No, the DFT technology is, talking to you, is right in the way right now and is being imported from China. It should be reaching the plant by this quarter or maybe beginning of the next quarter and should be commissioned by end of H1.
So it's kind of delayed...
Yes, it's been delayed by a month or 2.
Okay. And what will be the capacity post this DFT technology also commissioned? By the end of FY '25, it should be 1 million and, before that, once this technology is commissioned?
So we are adding capacities in Raipur plant as well, in our Maharashtra plant as well. So we're adding around 2 lakh tonnes of capacity, including DFT in the master plan. And similarly, we're adding capacities of 2 lakh tonnes in our Raipur plant as well. So altogether, we should have 1 million tonnes of capacity by -- before this year-end.
Okay. So I just want to understand, sir, as the guidance has been given for 30% to 35%, but if I am not wrong, as we have done some acquisitions as well. And as this capacity numbers will be obviously live by next year. So I just wanted to understand, is 30% to 35% achievable or we can do more than that. Given this acquisition is also done and EBITDA per tonne we are expecting some good uptick in this next year.
So the expansions that -- the acquisitions that we've done right now, it's a backward integration. So this won't be really evident in the top line or the volumes. The numbers that we have given of 35%, 30% growth is without accounting for all the expansions that we're doing this year itself as well. So as and when the machines come, we'll keep upgrading our guidance for the coming year itself. So it's a matter of time when the things come and we'll maybe upgrade our guidance.
Okay. Got it. And this year, VAP product share was around 34.5%, right, and we are expecting 40%?
Yes. This year, our value-added product was around 35%, 30%. And going down the line, this year, we expect to cross the 40% mark.
All right. One last question, sir. As you know, Q4, we see some demand slowdown. How has this quarter been like as of date as we speak today?
As of date today, we have been seeing very good demand from the export market as well. And we are very confident that we should achieve a new all time high this quarter.
Got it. On export share, are we seeing this number to go still up because we are seeing some good uptick in the export numbers overall?
We have accounted exports for this quarter and then given the new targets. Visible demand in exports, but we know that the domestic market will recover now than maybe by end of this quarter or beginning of second quarter. So given the exact number on how much percentage of exports we will be doing this year, it would be hard right now because the domestic market itself is very strong.
The next question is from the line of Nikhil Agrawal from VT Capital.
Sir, I wanted to understand how do you hedge yourself against the RM prices? Like in the last 1 month about HRC prices have been on an uptrend. So how do we see our margins shaping up going forward just because of the RM price hike?
To continue our production in a, say, full manner, we do have to keep inventory of about 12 to 15 days. But it fairly depends upon how we are shaped up against if there are back-to-back orders. To give you a broad overview, like currently, we have 2 products, primary and secondary. In the primary market, we are procuring materials from JSW, Tata, SAIL. Herein, we do have a monthly pricing with then. We are able to procure so much material from them that we are able to sell in a month. That is fairly covered from those entities. And in the secondary market, there is a daily pricing. So whatever the increase or decrease in the market there is, it's on a daily basis and [indiscernible] basis. So there, we are able to hedge our raw materials on a back-to-back basis. So these are fairly the points that let us cover our raw material hedge.
When we talk about a supply to our end user, say, the government organization, supply to a government entity, there is a price variation clause. Even if I do a pricing with them basing on the year, the prices that is applicable on the basis of the month that the material has been supplied to them. And from the period as well just sort of monthly price basis, on a contract to contract price basis. So we are fairly covered on our purchase and sales in that manner. And it's both as well, we have a fixed price basis wherein we are only occupying orders, which we can complete in prime time of 30 to 45 days, which does not allow us a lot of time for, say, you have an effect of the increase or decrease in prices. So that's fairly how we work on these orders.
Okay. So to a fair extent, you can basically pass on the price escalations or the reductions to the end customers?
Yes.
All right. And sir, reason why your volumes fell down in Q4, like on a quarter-on-quarter basis, if you look at it that way?
So if you talk about the volumes for the fourth quarter, it's basically, as I mentioned, a dice, which I can throw this side or that side. So if I'm just doing more volume, we are not focusing on the main product that I do want to increase my sale for the future, which is value-added product. So then I was actually -- eventually, taking a hit on my margins. So like if you look at the whole numbers like the numbers of the whole -- for quarter 4 versus quarter 3, just being the same in the bottom line and EBITDA, everything. And in fact, the EBITDA per tonne has increased in a very good manner. So the company's goal is to not spoil the market, to have the margins, increase the market share with proper distribution of these value products as well, that's the company's approach.
And this quarter itself, we have a new galvanized land bank, which is being commissioned and starting up in our Maharashtra and our Raipur plant. So after this correction, we'll be able to supply more black pipes, at the same time, supply more galvanized pipes as well. Supplying black pipes and increasing the market share is not a problem for the company. Cutting off INR 200 and selling black pipe is something that can be done overnight. But that's not the goal. It will eventually take a hit on the EBITDA as a whole. So hence, we'll be having an approach in which every quarter we'll be increasing us VAP share as well and at the same time increasing the whole volume as well.
The Next question is from the line of Miraj Shah from Arihant Capital.
I have a few questions. Firstly, regarding to the industry. If in per tonne capacity, if you can tell me what is the industry capacity right now and the demand level for FY '24?
Thanks for your question. It's very hard to give an item exact industry-wise, but we expect the industry would be to 13, 14 million tonnes. And there'll be various industry players in that. And the projection for this year was already mentioned, we'll be going close to like 4.5 lakh tonnes of volume this year going forward, which will be further upgraded when our different CapEx missions as and when come in the plants.
But this 4 lakh tonnes is something that we are adding. Industry-wise, if you could tell me how much capacity is coming in?
It'll be hard to tell exact number how much capacities are coming when there are a few peers who are adding capacities. So neck to neck that we know that around 1 million tonnes is something being added in our peers itself. But getting the number for the whole industry is something we can't really tell right now. And obviously, our goal is not just to increase the same products, our goal is to raise our SKUs. So no matter what the industry is adding, our products are a little different from the others. We are adding more SKUs, which are -- like which are the placement of wood and having ample users and have a good demand in the export market as well. So being a star export house, we see a good demand in the export market for our products itself as well what we will be manufacturing in the future with the CapEx.
Understood. Sir, my next question is regarding the DFT capacity. So what is the current DFT capacity in the 6 lakh tonne capacity that we have? And when we reach 1 million tonnes, so that is by the end of FY '25, how much of DFT will it have?
So we don't have a DFT capacity right now. And -- because whatever capacity that we have is up until 12 inches. It doesn't include DFT in any of our plants.
Going forward, we will -- from a 1 lakh tonnes -- 1 million tonnes of capacity, we would be having about 2 lakh tonnes of capacity as DFT structures and 8 lakh tonnes as the traditional [indiscernible].
Understood. So in the Raipur and Maharashtra, with the 2 places that we are adding capacity 2, 2 lakhs each, so DFT will be added 1, 1 like in each capacity?
By the end of this year, we are adding 1 lakh tonnes of capacity, DFT capacities in our Mangaon plant. And say, by the early next year, we'll be adding another 1 lakh tonnes to the DFT capacity in our Raipur plant. So that's what our plan moving forward is.
Okay. Understood. And there were some areas that you mentioned on call. I just want to confirm this again with you because there were some disturbance on the line for me. CapEx, you mentioned INR 150 crores to INR 200 crores. And in the warrants, out of INR 675 crores, only INR 170 crores has been paid up yet. So the remainder will be done by September?
No. So basically, out of INR 675 crores, the large date is supposed to be having the money that we receive was around in February. So the date for us to make the last payment is 1.5 years post February. So that's effectively August -- for next financial year. But promotors are sticking to that. In fact, promoters will be putting in money every now and then after every -- like maybe after H1 as well and someone early after H2 as well. Basically, whenever the company requires money, we have the flexibility of putting the money that way. The remaining -- the second September, the date, which I mentioned to you was for the [indiscernible] for those people. And the money of amounting to plus INR 170 crores is expected to come before that.
Understood. And EBITDA per tonne, sir, you mentioned that we are expecting to reach INR 5,000 per tonne this year from INR 4,450 that we did in FY '24?
Yes. So basically, actually, the EBITDA per tonne, every quarter is something that we can guarantee about. But obviously, It should be an upskill manner. The company's number as a whole for the full financial year or maybe for the half yearly is something what once you compare with because that's how the growth is visible. Like if you look at the company's numbers this year as well for the full financial year, the company is on growth. Obviously, comparing quarter-on-quarter would be hard.
So like last year as well when we have extremely high EBITDA per tonne. We mentioned it's a one-of-a-case scenario, if you go back to the con calls as well, we mentioned that there was a humongous [indiscernible] that happened because of the merger that took place because of our Raipur entity. The [indiscernible] over there. So all this added up to increase the EBITDA per tonne. But they were not sustainable without adding VAP products, which we have done now. So eventually, we will reach a number written that as well, but this will eventually happen in an organic manner by increasing our VAP products.
Understood. And did you mention, sir, that the 30%, 35% growth that we are expecting, that is without the expansion. Is that the right thought, sir?
So right now, if I'm talking about -- it is with expansion, obviously. Because our DFT will come in as well this quarter end. And our acquisition machines at our Raipur and our Maharashtra plants will come in this quarter itself as well. So it does include expansion part as well. It's just that few products like galvanizing pipe -- galvanized pipes, we've already installed tanks for that in our plants, which will increase the VAP share, simultaneously.
Okay. And just one final question. I'll just get back in the queue after this. We have almost 130 plus acres of land bank. So after 1 million tonnes, we are aiming to reach to 2 million tonnes of capacity. After reaching 1 million tonnes, sir, out of this 150 acres, how much will be required to reach -- to add another 1 million tonnes?
So right now, if you talk about the area, so out the whole 130-acre scenario, around 95, 100 acres is what we have in our Maharashtra plant itself. In our Maharashtra plant, around 7, 8 acres is covered right now. Going down the line to increase the capacity to 1 million tonnes, maybe another 10-acre will be covered at max. So post that, when I'm expanding to 2 million tonnes from 1 million tonnes, there will be any way a lot of land bank still left. I won't be covering more than 40, 50 acres going down the line again as well. So the land bank would be still left over there for further future expansions.
I'll just put this in another way. Out of 130 acres, we'll be using up roughly 40 to 50 acres and we still have 80 to 90 acres left even after reaching 2 million tonnes?
We'll be obviously developing the area and reaching some parts of it for storing some particular sizes of pipes as well. So giving you exact number how much area would be ample that time going down the line, is hard to say right now.
The next question is from the line of Sanjeev Damani from SKD Consulting.
Yes, sir. So now my first question is regarding direct forming technology, which is used on the Page #3 of your media submission, where capacities are also mentioned. So I heard -- a lot of disturbances were there in this conference, but I heard that, right now, we do not have any DFT capacity, we are going to put them up. So can you elaborate what is direct forming technology? And can you also tell me that whether it will start from iron ore to finish the formed products or how it will work?
So see, the direct forming technology, it's a traditional way of making a square and rectangular structure from ERW pipes. With forming a round tube first and then converting into a square, rectangular structure, which does not allow us to make heavier gauge or higher grade steel structures from the traditional machines that we do. And it's also a very tedious product -- tedious thing to do to make any nonstandardized, standardized or special products that are required by the engineering industry. So the DFT technology allows us to have the square rectangular sections produced directly without converting into a round structure first.
And to answer your question about what raw material we will be using, we will be using HR coils only for the production of DFT. It is not from the source of ore, we will be using the same raw material of HR coils, but a higher grade and a higher thickness will be allowed in the production of the DFT structures.
Okay. My second question is whether we manufacture seamless tubes or not?
We do not manufacture seamless tubes.
So all our products are welded only, right?
Yes.
And the backward integration you talked about is 2 lakh metric tonnes because of the acquisition of Nabha Steel. So what exactly that Nabha Steel has facilities to manufacture? Can I know, sir?
So Nabha Steel is backward integrated. How is that? We use narrow width coils for manufacturing of ERW pipes and tubes. Nabha Steel has a melting shop, wherein you can melt scrap to form billets. The billets are then rerolled to narrow and HR coils, which will be used for captive consumption.
Sir, so are we running at full capacity of 2 lakh tonnes in Nabha now? Or we are yet to build?
So we have just took over Nabha Steel. We are still at the process of upgrading and getting it under our nose for its full capacity utilization. After, say, a quarter's time, we would be having a full capacity of Nabha Steel running under our supervision.
So how much is the CapEx here, sir, in upgrading and refitting this unit?
So it's just -- see this, again, is a running plant. It is just a certain minor upgradation and process flows and debottlenecking that we are doing. So there are no major changes that we are doing and it is a great plant itself. So we're just reorienting it as per our needs. So that is what we are doing now.
To reconfirm our capacity utilization will be 100% from next quarter from this plant?
No. We will not be having 100% utilization. The average utilization will be somewhere around 55% to 70% in this plant as well.
Okay. And in Raipur also 150,000 metric tonnes, we are putting up this kind of facility only, that is using scrap to make basic steel and then process it?
We are not doing that here. We buy direct from the market and then we roll that into...
Okay. So in Raipur, you are going to have a rolling plant?
We already have a rolling plant.
Due to time constraint, that will be the last question. I will now like to hand the conference over to the management for closing comments. Over to you, sir.
Thanks, Nuvama, for hosting the call, and thanks everybody taking out time to attend the call as well and asking all the questions possible. We'd like to give the guidance, which is around 35%, 30% growth over this year for the next year. And at the same time, working better with the margins as well because of the whole acquisitions, the company has planned on such a ways of backward integration and forward integration. Thanks for [ tied up ] in a very good manner. And after H2 -- H1 itself, the numbers should be visible as well. Thank you, everybody for joining. Thanks.
On behalf of Nuvama Wealth Management, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.