Kamdhenu Ltd
NSE:KAMDHENU
Kamdhenu Ltd
NSE:KAMDHENU
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Ladies and gentlemen, good day, and welcome to Kamdhenu Limited Q3 and 9 months FY '23 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Satish Agarwal, Chairman and Managing Director of Kamdhenu Limited. Thank you, and over to you, Mr. Agarwal.
Good afternoon, and a very warm welcome to everyone present on the call. Along with me, I have Mr. Harish Agarwal, Chief Financial Officer; and Strategic Growth Adviser, our Investor Relations Adviser. We have uploaded our results and investor presentation.
Hello, am I audible?
Yes, sir, you are audible. Go ahead.
We have uploaded our results and investor presentation for the quarter on the stock exchanges and company's website. Hope everyone had a chance to go through the same. Few days ago on 24 January '23, Kamdhenu Ventures Limited, the holding company of Kamdhenu Colour and Coatings Limited, that is the paint business got listed on BSE and NSE. The team shall enable better management focus, operational flexibility and allow businesses to independently pursue growth plans.
This shall further enable both companies to raise necessary funds, find strategic investors and employ specialized manpower for each businesses and thereby create a platform to pursue next level of growth.
Coming to the Steel business, we have delivered strong growth in Q3 and 9 months of financial year '23 despite high fluctuations in commodity prices. Our company has reported a revenue growth of 23% year-on-year basis to INR 183 crores for Q3 FY '23. For 9 months FY '23, revenue stood at INR 565 crores, delivering a growth of 36% year-on-year basis.
The TMT steel demand continues to grow driven by factors such as rising demand for low-cost reinforcement bars and surge in construction projects, increase in government support for steel and coal production and advantages offered by TMT steel bar over torsional bars in augment -- augmenting the growth of the TMT steel bar industry, which is likely to increase significantly in the coming decade.
Having a differentiated model of franchisees help us scale efficiently and ensure maximization of return with minimal investment. Our presence and brand recall in the market with 38 lakh metric ton capacity through franchisee model places us in the sweetish spot.
We are looking forward towards extension to propel further growth. With the current demand, we expect to achieve a brand sales turnover of INR 20,000 crore by FY '23. Going forward, we can confidently say that the industry and our company will see a brighter future and infrastructure plays a crucial role in growth of the infrastructure. We will continue to focus on innovation and technology from a sustainability viewpoint.
For the quarter, our franchisee volumes as well as volumes from our facilities grew by 25% on a year-on-year basis. Our company constantly monitors their research and development division and the ongoing process. Our company has further enhanced its capabilities by adapting new technologies like converting steel commodity into a high-yield strength weldable TMT steel bars to be 4% lesser in weight and 20% stronger than other normal TMT steel bars.
Going ahead, we are focused on increasing our annual capacity through franchisee route from 38 lakh metric tons to 50 lakh metric tons over the period of 2 years.
To conclude, our company holds a strong market share in the organized retail segment of service steel plant and pan-India presence with a 8,500-plus steel dealers spread across India shall enable us to reach the remotest area. We wish to align the brand as a brand of the people's choice. We are eager to enter our next chapter of evolution with the demerger being effective. We are well set on the path of -- to achieve a growth trajectory going ahead.
With this, I would hand over the call to our group CFO, Mr. Harish Agarwal, for the financials. Thank you, all.
Thank you, sir. I will take you all through the financials for Q3 9-month FY '23. Our steel volume from franchisee route have stood at 7.65 lakh metric ton in Q3 FY '23 as compared to 6.1 lakh metric ton in Q3 FY '22, year-on-year growth of 25%.
For 9 months FY '23, steel volume grew by 22% to 21.77 lakh metric ton. Our TMT volume from owned facilities stood at 26,936 MT in Q3 FY '23 as compared to 21,512 lakh metric ton in Q3 FY '22, year-on-year growth of 25%. For 9 months FY '23, TMT volumes grew by 23% to 78,150 MT.
Total brand sales turnover for Q3 FY '23 stood at INR 5,295 crores as compared to INR 3,973 crores in Q3 FY '22, a growth of 33% year-on-year basis. For 9 months FY '23, total [indiscernible] turnover grew by 38% year-on-year basis to INR 15,520 crores.
Royalty income through franchisee stood at INR 30 crores in Q3 FY '23 as compared to INR 23.2 crores in Q3 FY '22, a growth of 29% year-on-year basis. For 9 months FY '23, it grew by 24.5% to INR 83.7 crores. Revenue from owned facility was up by 29% to INR 147.3 crores in Q3 FY '23 as compared to INR 113.8 crore in Q3 FY '22.
For 9 months FY '23, it grew by 39% to INR 455.7 crores. Total revenue stood at INR 183 crores for Q3 FY '23 as compared to INR 149 crores for Q3 FY '22, a growth of 23% year-on-year basis. For 9 months FY '23, it grew by 36% year-on-year basis to INR 565.2 crores.
Our EBITDA stood at INR 17.1 crores in Q3 FY '23 as compared to INR 10.7 crores in Q3 FY '22, a growth of 60% year-on-year basis. For 9 months FY '23, it grew by 26% to INR 44.8 crores.
Profit before tax stood at INR 16.1 crores for Q3 FY '23 as against INR 8.9 crores in Q3 FY '22, a growth of 80%. For 9 months FY '23, it stood at INR 40.5 crores in a growth of 25% year-on-year basis. Profit after tax stood at INR 12 crores for Q3 FY '23 as against INR 6.6 crores in Q3 FY '22, a growth of 83%. And for 9 months FY '23, it stood at INR 30.3 crores, a growth of 19% year-on-year basis. ROE stood at 26% and ROCE stood at 35% on an annualized basis. Our debt-to-equity ratio is at 0.05 as on 31st December 2022.
With this, I would like to open the floor for question and answers.
[Operator Instructions] The first question is from the line of Rahul Shah, Individual Investor.
Good numbers there. Just wanted to have your outlook for the revenue growth and EBITDA margins for the next quarter as well as the next financial year? Any views on how you plan to just keep improving and the other factors that will help?
In fact, we are looking for a better results quarter-by-quarter. If you can see the trend of last 3 quarters, the results are in the upward trend and we are hopeful that the result would be in the same manner. And it would be in the -- you will see in the coming future that the results are better than the past.
Okay. Any sort of -- so you're saying that you'll be moving forward in the same lines as previous quarter or previous year, so to say?
Yes.
[Operator Instructions] Next question is from the line of [ Akash ] Mehta from [ Caprize ] Investments.
[indiscernible]
May I request you to speak through the handset, please?
Yes. Is it better now?
Yes.
I had 2 primary questions. Firstly, on the franchisee network that you were guiding towards expanding, so how are we planning to do that?
In fact, we are giving opportunity to the existing unit to increase their capacity. And if there is a limitation in any of the franchisee in any particular region, then we are looking for a new franchisee unit.
Okay. And in terms of the branding and promotion expenses, could you just give those numbers for Q3 and 9 months FY '23?
Yes. In the 9 months, we have spent around INR 38 crores on the branding and marketing expenditure. And in this quarter, we have INR 13 crores expenditure.
INR 13 crores. Okay. And just a follow-up on that, what do you expect that to be in '24 and '25?
For branding expenses?
Yes.
Yes, it would be on the increased way. And in this quarter, it would be 50 plus -- in this financial year, FY '23, it would be INR 50 crore plus expenditure on the branding and marketing. And by '24 or '25, we have a plan of aggressive branding. So we are also planning to raise certain funds which is in the pipeline and our application is pending before the stock exchanges and CB for in-principle approval. So we have the plan for aggressive branding also.
So right now, it is very difficult to say that how much amount is to be allocated on the branding, but we have aggressive plan.
[Operator Instructions] Next question is from the line of Priyanka Singh from Atidhan Securities. The line for the participant is on hold, we move onto the next participant. Next question is from the line of [indiscernible] Jain from Jain Capital. Mr. Jain, may I request you to unumte your line and go ahead with your question please.
Yes. Am I audible?
Yes, sir, you are.
Okay. Yes. I have a couple of questions. So firstly, with this major push in the infrastructure projects in the country, how are you planning to meet the increasing demands for steel?
You see, as you will go through our presentation, we are already on this work, and we have a planning of increasing the installed capacity from 38 lakh ton to 50 lakh ton in next 2 years. Already, we are working on it through franchisee route. And in most of the franchises, the capacity expansion work is in progress and as well the demand of the market, we hope the results of this budget will definitely increase the demand of steel products. And for that, we are just gearing up. And already, we are installing the capacity as per the requirement and hope we will be able to compete the demand in the next 1 year or 2 year.
Understood. That's helpful. Secondly, sir, any new products that you're planning to launch in the next few months?
Yes, the R&D on TMT bar is a continuous effort from Kamdhenu. We have launched so many products during the last 10 years. And some products have already under R&D process and let us hope in the coming year -- coming financial year, we will launch at least 1 new product for the benefit of the community and for the benefit of the society.
[Operator Instructions] Next question is from the line of [ Raji ] Sharma from Ace Capital.
I just have 2 questions. Firstly, our royalty income grew by, I guess, 29% year-on-year in Q3 and by 25% in 9 months. Could you tell the amount of royalty or company charged for them? And secondly, in our steel business, revenues from our own facilities were up 29% in Q3 and 39% in 9 months. So sir, was this growth driven by volumes? Or was it on account of [ high ] realization?
Yes. First, I would like to answer the franchisee rate of royalty. The 9-month average royalty is INR 392 per metric ton. And it was INR 385 in the last year of same period of 9 months. So it has been slightly increased. And the other is, what is the volume growth or the price growth in the last quarter or 9 months?
So the average price of this quarter is INR 64,516, and it was in Q3 of the last year, INR 62,423. If you take the average of 9 months, then the average 9 months is for the current 9 months, INR 68,779 per metric ton as against INR 60,709 per metric ton. So there is an increase in the pricing. And if you see the quantity, this year, for 9 months, quantity is 78,150 MT as against 63,619 metric tons. So there is a growth of volume and also in the price. It is a combination of both.
[Operator Instructions] Next question is from the line of [ Anup Shah from Srinath Securities ].
Sir, can you help us understand the current utilization levels at our steel plant?
That is around 85%.
Okay. And if you can throw some light on the demand scenario for the steel products?
Yes, there is a demand. That is why we are creating premium on the best local brand. So there is a demand of Kamdhenu product. You can see in the turnover also that it has been increased in terms of quantity of the franchisee unit as well as our own manufacturing. In the franchisee unit, we have achieved the sales turnover of 21.77 lakh metric ton as against 17.78 lakh metric ton, that is growth of around 25%. So there is a demand of Kamdhenu product.
Okay. And how has been the change in the prices of raw materials?
In fact, in the steel industry, prices of raw material and finished product move in the same direction. If the prices of TMT bar increase, then the prices of [indiscernible] and billet also increased. So it is in the same direction. The profitability impact only on the stock element.
[Operator Instructions] Next question is from the line of [ Karan Mehta ] from Mehta Investments.
Sir, most of my questions are answered. Just have 1 question. So what would be the revenues and PAT guidance for FY '24 and '25?
In fact, we are seeking a growth of 25% in our own plant as well as in the franchisee network. In FY '23, we have a plan of around 28 lakh metric ton from the franchisee. And in the next year, we are targeting 36 lakh metric tons. From our own plant, we have the limitation of our own plant that the capacity is 1.2 lakh metric ton. So around 95% capacity, we shall be able to achieve in FY '24.
And the price -- and it will be multiplied by the price which may vary from 60,000, 65,000, 70,000. Then that turnover will depend on that price -- prevailing price at that time.
Next question is from the line of Deep Goel from Davis Index.
I just want to know, you just mentioned that your capacity utilization is 85%. So is it for the franchisee unit or own unit?
This is for own unit.
And what about franchise unit? How much?
It would be around 70%.
Sorry?
It would be around 70%.
[Operator Instructions] Next question is from the line of Viraj Shah from Shah Investment Consultants.
As 1 of our previous participant asked about TMT bars, just wanted to know who are our major competitors for TMT bars and what is the competitive advantages in that?
In fact, at the national level, we are competing in the retail segment with the Tata Steel. Because Tata Steel has a retail network, and we are having the retail network. We are selling our 90% product in the retail market, Tier 2, Tier 3. So we are directly competing with Tata Steel, if you say at the national level, but at the regional level, there are so many local brands in Raipur, you can see [indiscernible], in West Bengal, some other one. And in Punjab, you may find Amba.
So locally, we are competing with the local brands, but at a national level, we are competing with the Tata Steel.
Okay. And what is the advantage of -- competitive advantage, I think so?
Yes, we have the competitive exam -- advantage because we have the decentralized production base. We have unit in each and every state, so we can supply x quantity within a period of -- within a time of 24 hours, so which nobody can supply the x quantity in 24 hours. So we have the advantage of availability of product as decentralized locations.
Okay. That was helpful. And other question was regarding the steel business. You have announced the fund raise of INR 70 crores. So where we are deploying it? And what are our plans on that? Can you throw some colors on that?
Can you repeat the question?
So it was regarding the steel business. We have announced the INR 70 crores fund raise. So what are our plans in the steel business? You can throw some colors on that.
Yes, yes. We have already mentioned the object of that issue, why we are raising this fund. In fact, we are redefining our franchisee business association model, number one. Number two, we have aggressive plan on branding. We are also repaying certain bank borrowings and we need some other corporate purposes like investment in some -- in the R&D [ and the ] plant.
So it has been clearly mentioned in our object clause of the request letter given to the stock exchange and also available on the website.
[Operator Instructions] Next question is from the line of Parth Vasani from KK Advisors.
I have a couple of questions. I know the demerger is done, but can you tell us how is the demand for paints currently? And also how has been the trend in prices for raw materials for paints?
You are asking for the paint business? I think we are going through the results of Kamdhenu as well as so many other paint companies. Definitely, there was the price escalation for the raw material prices. And particularly, the sales volume are not much increase of any company and margin pressure is there. But during this Q3 results, and hopefully, in Q4, being the financial year closing and March target, we hope the volumes we will achieve the targets. And let us see because if Asian or other big companies are not increasing the prices, then nobody can increase the price earlier to that.
And ultimately, the raw material prices means a lot for paint business. And right now, the raw material prices are almost stable. And let us hope the Q4 should be good enough.
Okay. Okay. Got it. And another 1 also on the price, you have mentioned the INR 1,000 crore revenue by FY '28 for paints. So how do you plan to achieve it? And are we planning any fund increase in there?
Yes. Already, we have given the mandate to EY. They are on the job. They have prepared the IM. And once the market is stable, we will look for the investment through a strategic investor or any other strategy. And once we infuse the funds of at least INR 200 for 1 new unit and other activities for aggressive marketing and branding exercise, we have an aggressive target of INR 1,000 crores by '28. But that totally depends on how -- at what time we get the funds through a strategic investor. And accordingly, the future will be planned.
As no further questions, I now hand the conference over to the management for closing comments.
I take this opportunity to thank you, everyone, for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with me or [indiscernible] our Investor Relations Adviser. Thank you once again.
Thank you very much. On behalf of Kamdhenu Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.