Bansal Wire Industries Limited (BANSALWIRE) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Bansal Wire Limited Q2 FY '26 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Parthiv Jhonsa. Thank you, and over to you.

Thank you, Hina. Good evening, everyone. Belated Happy Diwali and Happy New Year to everyone who's joining the call. We at Anand Rathi are pleased to host Bansal Wire Industries Limited Quarter 2 FY '26 Earnings Conference Call. From the company, we have with us Mr. Pranav Bansal, Managing Director and CEO; and Mr. Ghanshyam Das Gujrati, CFO. We would now like to invite the management for the opening remarks, which will then be followed by question-and-answer session. Thank you, and over to you, sir.

Thank you, Parthiv. Good evening, everyone. I welcome you all to our Q2 and H1 '26 earnings call. I trust you've had the opportunity to review the results, earnings and press releases that are available on the exchanges and on the website. I hope you guys had a good Diwali. Now, we are pleased to report another resilient quarter. This also marks our fifth consecutive quarter of delivering high revenues, volume and EBITDA after getting listed. Despite the challenging business environment on account of heavy monsoon and labor shortages, we were able to do our highest ever revenue, volume and EBITDA. This consistency in performance reflects our disciplined execution and our ability to respond effectively to evolving market dynamics. But more than this, I would say it was a defining first half for everyone at Bansal Wire Industries as we shifted our focus completely towards cash flow positivity and moving towards higher ROC. Now, to do this, we reevaluated every business decision we were taking and recalibrated a lot of lower ROC investments; and in fact, doubled down on our core business because, of course, that's what we do best. We made a lot of changes in the way we work to create a more sustainable growth model and have set a target for ourselves to achieving 25% ROC by '27 and INR 600 crores plus of positive cash flow within this year and next year combined. Of this, the first step we have already taken this first half by realizing almost INR 150 crores of free cash flow from operations. And by doing this, we will create a self-sustaining model by reinvesting free cash to meet our growth requirements and reduce our dependency on [indiscernible]. Apart from this, we've also performed on 3 fronts, which will have a major effect on our future growth. First is that we've made significant progress on steel cord as we have received 2 samples approvals already from major tire companies. The next phase of approval has also started, and we remain on track to commercialize our product by mid of next year. Second is that we were able to penetrate in the B2C segment of our industry, which also contributed already 5% of our total revenue this quarter. This is a product on which we've been working for the last 5 years, and not only did it contribute in volume, but in fact, we were able to fetch better margins in this product than our B2B segment. We are quite confident that this segment will grow and contribute meaningfully in the coming years. Third is the introduction of our induction hardened and tempered wire as part of our specialty wire division with a capacity of about 9,000 tonnes annually. These wires are widely used for manufacturing high-performance springs in automotive components such as suspension and valve springs. The introduction of this product marks another important milestone in our specialty wire journey, further strengthening our presence in the automotive value chain and expanding our high value-added product portfolio. We have already received encouraging responses from our customers, and we expect commercialization of this product within the second half of this year. Now, for the second half of the year, the domestic economic environment continues to be highly supportive of the steel wire industry. Strong demand from infrastructure, automotive and industrial sectors, coupled with India's expanding manufacturing footprint has provided sustained volume and pricing tailwind. Bansal Wire remains strategically positioned to capture these opportunities through our broad product base and nation-wide distribution reach. Therefore, we are confident that we will be able to achieve better numbers than our guidance in Q1. We are now looking at about 30% to 40% volume growth within this year and more than 20% EBITDA growth as well. Another positive I would like to highlight is that our Dadri facility is also now finally stabilizing and continues to operate effectively, supporting higher volumes. During the quarter, total sales volume from Dadri has increased almost 50% as compared to Q1. As of September '25, our total installed capacity stands at 4,20,000 tonnes at Dadri and 6,18,000 tonnes overall. Our capacity utilization for the quarter stood at 74%, demonstrating strong operational execution and consistent demand momentum across segments. Our long-term thought process to grow at 20% 25% every year remains intact, but now we have a target of better ROC and cash flows with it. That's all from my side. I would like to now hand over the call to our CFO, Mr. Ghanshyam Gujrati.

Thank you, Pranav sir, and good evening, everyone. I will now take you through the key financial highlights for quarter 2 and H1 FY '26. For quarter 2 FY '26, our revenue stood at INR 1055 crores, representing a 27% growth year-on-year basis. EBITDA increased by 20% year-on-year to INR 81.58 crores, while the PAT for the quarter stood at INR 38.3 crores. That was down by 4.3% year-on-year basis due to our higher [ subsidization ], but our cash profit for the quarter rose 17% year-on-year to INR 56 crores. For the first half of FY '26, the revenue grew by 21% year-on-year to INR 1,994 crores, while the EBITDA came in at INR 156 crores, an increase of 19.7% year-on-year basis. PAT profit for H1 stood at INR 77.6 crores, higher by 8.4% on year-on-year basis. Our cash profit for H1 rose by 24% to INR 106 crores. As Pranav sir has already mentioned that our volume was the highest ever for the quarter and it was 114 lakh tonnes as compared to 104,000 tonnes in the quarter 1 of FY '26. Exports contributed around 9.1% to the overall revenue That concludes my remarks. We will now open the floor for the questions. Thank you.

[Operator Instructions] The first question is from the line of Prateek Singh from DAM Capital.

Congrats for a decent set of numbers. The first question is largely a bit more detail, if you can give on the steel cord approvals. So, when we say we got approvals for some samples, does it mean that some clients have reverted that they are okay with it and they will check it again in a subsequent sample? Or is it like some clients have okay-ed and some other clients are left to okay it? How does it work here?

Sure. So, the approval process of steel cord is generally in 2 phases. First is basically a lab approval or a sample approval, wherein we send a sample to the customer, they do extensive testing in their lab, understand all parameters and then they say that whether they can move ahead or not. Second stage is, once they have approved the lab samples, then they go for field trial. Field trial means they will make a tire out of it. They will run the tire for the entire lifespan of a tire, generally 25,000 kilometers. And then once that is there, they will go in for bulk quantities. So, right now, we have been discussing with 3 major tire companies, out of which 2 tire companies, we have already received the sample approvals. The third company is still evaluating our samples. Now when I say we have received 2 sample approvals, that means we have already passed the first phase of testing. And now we have entered the second stage of testing, wherein we will supply them some quantities for making their tires and then doing a field trial on the product.

As a follow-up here, so how long will this second phase take usually, 1 year or so?

So, generally, a field trial takes about 7 to 8 months. But all of that, again, depends on various different factors, whether they run it on a commercial vehicle. Commercial vehicle, the lifespan is quicker. Passenger vehicle, the lifespan can be a little longer. Whether they run it on a taxi or a private vehicle. So, all of those factors are there. But in general, yes, about 7 to 8 months is what it generally takes. That's why we feel that we are a little advanced on the first stage. And we have -- I mean, as per our earlier understanding also, we were looking at commercializing the product by mid of next year. And so, we think that we are a little ahead of that as of now.

Understood. My second question is largely on numbers. So, when I drill down a bit more on numbers, it seems that our selling price actually has gone up on a quarter-on-quarter basis. So, basically, gross margins as well have gone up. But the EBITDA fall that we are seeing is largely driven by employee costs and other expenses. Employee costs have gone up by around INR 500 per tonne and other expenses by INR 1,500 per tonne. So, I want to get a sense what exactly -- so other expenses, as I understand, is largely job work charges, freight and power and fuel. Any of these things rose up very sharply this quarter, which might be a one-off? And what about employee cost? Do we think that this employee cost is stable given that we might have advanced hiring of the capacities?

Sure. So, employee cost has definitely gone up, but that is more or less in proportion with the sale quantity as well. Overall, I think in a broader understanding, our EBITDA per tonne has been quite consistent. We were looking at EBITDA to go down below INR 7,000 level, but that has not happened, or we do not see that happening very soon because we've been able to get a lot of premiumization on our products throughout the quarter. We have taken some tough calls wherein we felt that we can increase some margins in some products. And we felt that there are products wherein there is no replacement of Bansal Wire today. So that was a call that we have taken, and that has progressed well. That has given us good returns, which is the reason why we do not see a big decline in EBITDA per tonne. Employee cost is the only thing that has substantially gone up. And this, I think, will continue to maybe even go further as and when the volume increases.

The next question comes from the line of Aditya Bhartia from Investec.

My first question is on backward integration for steel rods -- stainless steel rods. I think that is something that you are not intending to go ahead with. If you could just kind of explain what is the rationale for that? And with that not happening, how are the CapEx numbers likely to shape up over the next 2 years?

Sure, sir. So, as I said a little briefly on my note as well here, we have recalibrated a lot of investment decisions, all based on the thought process that we want to have positive cash flow to a tune of about INR 600 crores this year and next year. And with that, we are -- we've also set a target of 25% ROC for ourselves by next year. To do this, when we looked at backward integration as an investment, we felt that that was an investment wherein, first, of course, both of these numbers were not happening. Second, we were also kind of moving away from our core competency or the core business to a very non-core and a different kind of a business. So therefore, when we relooked at all our business decisions, I think the leadership team decided that it is best for us to right now double down on our core business. That's what we have been doing for the last 85 years. And we see a lot of potential in our existing business to grow at 20%, 25%. And now with specialty wire adding up, I think we can grow or there are opportunities for us to grow even higher. With that being said, I think because of backward integration not happening in the near future, we are not looking at any major CapEx or finance costs coming on our balance sheet anymore because to grow at 20%, 25% in our current business portfolio, we need about INR 200 crores -- INR 150 crores to INR 250 crores of investment every year, which we will be able to comfortably do from our cash accruals itself. So, earlier, wherein we were leveraging our balance sheet, now we are looking at, if not reducing our debt, at least not increasing it further.

Perfect. That's great to hear, Pranav. My second question is that earlier, we were fearing that EBITDA per tonne can go down significantly from here on. And in fact, you had spoken about maybe EBITDA growth this year being only around 10%. Now we are sounding lot more confident in terms of profitability and in terms of growth. So, what really has changed? Is it just the change in strategy and therefore, you thinking about focusing a little more on profitable products? Or is there some change in the macroeconomic conditions as well?

Sir, I think the first thing is, of course, whenever we try to commit a number, we try to be a little more conservative because I don't want to take any pressure on our current structure to deliver something that we promised. So of course, there is definitely always room there. But other than that, I think what has also happened in the first half of this year itself is that we have shifted a lot of our focus to profitable businesses. When we, again, worked on ROC, we also relooked at a lot of products that we were making. We increased sales in B2C, which has given us better ROC, better EBITDA per tonne. We've increased our sales in other B2B but higher ROC businesses also. In fact, for example, our low carbon wire vertical, we were not expecting that to grow at the same pace as the company is. We were expecting more of high carbon and stainless steel to grow. But when we looked at ROC, we felt that low carbon business is where we get the maximum ROC. It might be a little lower EBITDA per tonne, but our return ratios are the best there. Plus the B2C angle has also come in from the low carbon wire business, wherein we are able to fetch a reasonable premium from the market. So, I think overall, it's a bit of our thought process moving towards ROC and better profitable businesses, but also just being a little conservative as well on the numbers when I commit to you something.

Understood. And Pranav, when we speak about roughly 70% capacity utilization and as this capacity utilization ramps up over the next few quarters, should we be assuming some operating leverage gains as well? Is that something that should be bringing in much better profitability also? And related question is that when you speak about 20%, 25% growth, are you speaking about revenue growth or EBITDA growth? How should we kind of think about that?

Sure, sir. So, of course, as and when we grow in volumes, there will be a bit of operational leverage that we will have. But I do not want to actually comment or increase my volume or EBITDA estimates because of this, because there might be some uncertainties in demand or margins that we have to play around. So, I think EBITDA per tonne, we would still want it to remain constant. But of course, moving forward, I think due to the product mix also evolving, we will be bringing in higher EBITDA businesses to specialty wire. That will definitely gradually take my volume -- take my EBITDA per tonne to an increasing trend from next year. And of course, this year, I think we have done most of the rationalization that we had to do in product mix. So, from here on, the 20%, 25% growth that we are looking at would both be in revenue as well as EBITDA -- absolute EBITDA.

Understood. And for next year, specifically, once specialty wire kicks in, steel cords kick in, then should the EBITDA growth be stronger than that? If revenue growth is 20%, 25%, then I assume EBITDA growth should be stronger? Or the other way to think about it is that EBITDA…

[ Mr. Yash Sharma ], sorry to interrupt. As we have to ensure that the management is able to address questions from all the participants, we need to move on. You can come back in the queue and you can ask a question again, later. [Operator Instructions] The next question comes from the line of Aditya Bhartia. Okay. So, there is a connection problem from Mr. Aditya. The next question comes from the line of Yash Sharma from Veritas Research and Advisor.

I hope I'm audible. So, I just have a bookkeeping question Pranav. So, see, there is a strong growth in the revenue and the volume side, but the same is not reflecting into the profitability, which is bad. So, is that because of the line items like interest or depreciation, right? And we're also seeing the debt actually has gone up during the quarter too from the last quarter same year. So, does there any technical reason like the lower realization that we are…

Sure. So, first thing is, the debt level, it has actually reduced from last year, although it is not a big difference, but yes, it has not increased. That's one. But second, yes, of course, our profitability or PAT is not showing the same kind of growth as our revenue and EBITDA is, majorly because of depreciation and some interest costs that we were earlier capitalizing of Dadri. Now 100% of investments in Dadri has now been capitalized. Therefore, we see some increase there. Depreciation, of course, has increased by almost 3x. But to understand it better again, we have also this time shown our cash profit number, because as a company, we will keep on investing and our depreciation might increase. But at the end of the day, my cash profit is still increasing. In fact, even this year or this quarter, our cash profit has increased by about 20%, 17% to be exact, INR 256 crores.

Yes. Okay. And the second question on the -- give us some color on the market share from last year to this year, if you could give, and the segment-wise volume growth trajectory, especially on the specialty wire side?

Sure. So, I would not have market share numbers off hand. But yes, I think as a whole, what we can understand is the market was about 7 lakh tonnes this year. And if everything goes well, we should be able to do about 4 lakh tonnes, 4.2 lakh tonnes -- about 30% growth, so maybe 4.5 lakh tonnes or something like that. So, we would have about 7%, 8% market share in general. This is our understanding. But again, these are not the exact numbers. In terms of volume mix, I think we -- the first 2 quarters, we have done a substantial change in the volume mix already as compared to last year. That is why there is a recalibration in the EBITDA per tonne levels. Again, product-wise EBITDA has not gone down, it was only the product mix that has changed the number. Going forward, I feel that our specialty wire vertical will start to contribute from the second half of next year. Therefore, our total product mix will get healthier as higher profit business will start on increasing. In specialty wire business, we have already started 20,000 tonnes of steel cord. That was the first CapEx. And last quarter, we have done 9,000 tonnes of IHT wires. So, we've already done 29,000 tonnes or we've built a capacity of 29,000 tonnes to service a market of more than 3 lakh tonnes. Therefore, we, in the coming years, will definitely be banking on specialty wire to a large extent to give us or to contribute higher in EBITDA.

The next question comes from the line of Prakhar from Anand Rathi.

My first question is, our blended EBITDA per tonne, which is somewhat around INR 6,700 there, are what is the target you are targeting for this year and FY '27 and '28?

Sure, sir. So, sir, EBITDA per tonne this quarter is about INR 7,100 -- not in the INR 6,000 level. That is one. Second, towards the start of the year in Q1, we were expecting the EBITDA per tonne level to go down because we thought that we will -- there will be a substantial change in product mix, but that has not happened, nor have we had to pass on any margins to the customer to grab a higher market share. When we actually worked on it, we realized that there were a lot of areas in which Bansal Wire was just not replaceable. So even after increasing our margins in a lot of businesses, we were still able to grow at a certain level on volume. In fact, from our earlier guidance, we have already grown at about 40% in first half in volume with -- while keeping our EBITDA per tonne, product-wise, intact. In the future also, we would be looking at similar kind of levels. We do not see any increase in margins going forward even after increasing our volume by 20%, 25% every year. In fact, with specialty wire coming in the picture from next year, EBITDA per tonne levels after that should only start increasing.

Okay. And my second question is over -- as you said, you are recalibrating the business model, what is the expected installed capacity across high carbon, low carbon, specialty and stainless?

Sir, our total installed capacity is 6.2 lakh tonnes. This is 60,000 tonnes of addition that we have done last quarter. One addition of another 60,000 tonnes is already underway, which will be completed within this quarter, taking our installed capacity to almost 6.8 lakh tonnes. As a company, we would want to operate at 80%, 85% kind of a capacity utilization. That's the sweet spot for us. But of course, because we want to keep on growing at 20%, 25%, we want to keep some headroom every year through investing in various products.

Also, like I just wanted to know over the breakup of capacity between high carbon, low carbon, specialty and stainless?

Sir, although most of our products are fungible, but just to give you a basic color on capacity; in a broad way, 60% of our total is what we want as low carbon wires. And about 25% is high carbon and 15% is stainless. That's a very broad perspective. It keeps on changing a little bit depending on the demand side.

Okay. And just one more question. What is the average EBITDA per tonne across bead wire, steel cord and IHT?

Sir, for specialty wire as a business, we would want to look at about 20% to 25% EBITDA. It will -- it might change between IHT and steel cord. But as a business, we would want 20%, 25% kind of EBITDA in specialty wire. This does not include bead wire. Bead wire is a part of our high-carbon wire product portfolio, which has the same kind of EBITDA as other high carbon wires we have.

The next question comes from the line of Akash from Dalal & Broacha.

Pranav, actually, I wanted to understand, since you have backtracked on this [indiscernible] CapEx for stainless steel backward integration. So, we have completely canceled out that plan, right? Now we are really investing in the stainless-steel wires, that INR 150 crores that you have mentioned in PPT?

Yes, sir. So, as I said, when we relooked at our investment, we felt that the backward integration project would be holding us back in terms of our return ratios. And we would also be leveraging our balance sheet to a large extent, which we did not want, because we want to have surplus cash on our books to be investing in steel cord as and when required. That is one. Second, what has also changed in the last 6 months is we have been able to streamline our supply chain in stainless steel as well. We are able to get sufficient raw material whichever is needed to get our stainless-steel wire production, which was the main motivation for us to go backward because we felt that we were not able to grow after a certain point because of raw material constraint. But because that has now been taken care of as well. In fact, just to give you an idea, we have increased our sales of stainless steel by 20% or by more than 20% in the last quarter itself as compared to Q1, all because of supply chain issues being resolved. So therefore, we do not see a need to actually invest in backward integration. Rather than that, we would want to reserve our cash and spend on profitable growth in the existing core business that we have.

Understood. But then I -- initially I understand, Pranav sir, we were doing all these measures to be able to achieve double-digit margins in the, let's say, next 2, 3 years. So now that we are focusing all our resources on the existing business and specialty wires, by when do you -- I mean, feel that that double-digit margin should be achievable?

Sir, I think if we look at our EBITDA per tonne, we would want this EBITDA per tonne to maybe go to double digits within the next 3 to 4 years because the specialty wire kicking in anyways. In fact, by delaying backward integration or by removing backward integration as of now, from our side. What we've been able to do are 2 things, actually. First, we have been able to actually get or control our existing business in a better way because that management bandwidth of ours is safe, and we are utilizing it in our current business wherein we see a lot of opportunities, and we are able to tap those opportunities very quickly now. Second, specialty wire also, from our earlier estimates, we feel that we might be able to do it a little sooner, maybe 1 or 2 months before our current estimates for commercialization. And as and when we commercialize it, our next phase of expansion will also start in specialty. So, EBITDA going into double digits, I think is a matter of maybe 3 to 4 years. But more than that, I would want my ROC to be better. So even after a double-digit margin, if I'm not earning enough ROC, that does not make sense. So that's why we have taken a target of 25% ROC within next year. And I think we are on track to achieving that as well.

So, how will we achieve 25%? So, by improving our cash flow, we'll remove our debt. Is that how you're planning to achieve that 25% ROCE figure?

Sir, our internal target as of now is INR 600 crores plus of cash flow. And I think from our existing estimates, we've already shown that we've done INR 150 crores of positive cash flow in the first 2 quarters. In the next 6 quarters, I think we have room to do a little better. And of course, now because we have recalibrated our investments, we are not looking at a very major investment every year. So, for the next 2 years, even if I invest INR 200 crores to INR 300 crores in total, I will have enough headroom to grow. Therefore, we will be able to free up a lot of cash from our existing business. With that, we are also working very closely with our vendors and our customers to reduce the number of -- to reduce the inventory and the number of outstanding days as well. As and when we see some results there, I think we should be able to hit the 25% mark.

Understood sir. This cash accrual we'll be making, we'll be using that to remove our borrowings, right, the debt that we have on the company level.

Sir, as of now, our thought process is that at least when we need to grow at 20%, 25%, for that growth, we should not require debt. That is for sure. Now if we are able to reduce that debt or not, I will not be able to comment now because 6 quarter is still a good enough time there, could be a lot of changes there. But yes, one thing that I can guarantee you is that at least for growing at 20%, 25%, I don't think we will require debt anymore.

Understood. So, sir, just an add-on question. I think our interest and depreciation costs, both combined have tripled on a year-on-year basis, mainly due to the Dadri CapEx. But can you give a headline indication on -- for FY '26, where are these 2 numbers going, and let's say, how will they shape up in the next 2 years, the interest and depreciation numbers?

Sure. So, sir, interest and depreciation, especially the depreciation cost has gone up because the earlier numbers that you were seeing was ex of Dadri. And at that time, a lot of production was happening in our other companies, which we started to consolidate by end of Q2 last year and Q3, in fact. So, therefore, these depreciation numbers are with full Dadri CapEx capitalized which was the major CapEx that we have done till now. And I think going forward also, we do not see a requirement of doing something like a Dadri every 2 years or every 1 year because to grow at 20%, 25%, I need maybe 1 lakh tonnes, 1.5 lakh tonnes a year, which should be done within INR 150 crores, INR 200 crores. So, I do not see such an increase of 3x again happening.

Understood. So broadly, I think the INR 15 crores hit that you've taken...

Mr. Akash, request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. The next question comes from the line of Mayank Bhandari from Asian Market Securities.