Bansal Wire Industries Limited (BANSALWIRE) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '27 Conference Call of Bansal Wire Industries Limited. From the management, we have Mr. Pranav Bansal, MD and CEO; Mr. Ghanshyam Das Gujrati, CFO; and Mr. Manu Jain, Head of Investor Relations, to take the discussion forward. We also have an Investor Relations team from Adfactors PR Pvt. Ltd. [Operator Instructions]. Please note that this conference has been recorded. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning these risks and uncertainties are on the disclaimer slide of the Investor Relations presentation that has been shared earlier. I now hand the conference over to Mr. Pranav Bansal for the opening remarks. Thank you, and over to you, sir.

Thank you. Good morning, everyone. Thank you for joining us for the Banco Industries Q2 and H1 2017 Earnings Call. I hope you had an opportunity to go through our financial results and investor presentations. Joining me today is our CFO, Mr. Ghanshyam Das Gujrati. I would also like to welcome Mr. Manu Jain, who will join us recently as Head of Investor Relations and Strategy. I am extremely pleased to share that this has been a landmark quarter for Bansal Wire Industries. We have achieved our highest ever quarterly revenue, EBITDA and profit after tax. More importantly, our EBITDA has also reached its highest ever level. This improvement has been supported by a combination of factors, including better operational efficiencies, improved cost management and a favorable product mix. And of course, benefits of economies of scale that are gradually coming in and are visible as our expanded Agri facility ramps. Another important highlight has been our cash flow performance through our continued focus on working capital optimization and disciplined financial management. We have generated strong operating cash flow, coming close to achieving our full year guidance within the first 6 months itself. And perhaps 1 of the most satisfying development has been our improvement in our return on capital employed. We have consistently maintained that our near-term objective is to achieve 25% growth. Based on our second quarter performance alone on an annualized basis, our ROCE stood at approximately 22%, bringing us significantly closer to that objective. What makes these achievements even more meaningful is that they as immediately after a challenging first quarter. We were able to overcome the operational challenges faced during the first quarter, including industrial gas disruptions and higher input costs. This demonstrates our ability to recover quickly and move closer to our strategic targets. I believe this quarter represents an important step in the evolution of Bansal Wire Industries, from a business focus primarily on capital and volume growth to 1 increasingly focus on higher profitability, stronger cash generation and superior return on capital. Coming to our operations, we continue to see healthy demand across the various industries we serve. One of our biggest strength of Bansal Wire has been our diverse presence across sectors such as automotive, infra, agriculture, power and transmission and general engineering. We remain positive about the medium- to long-term outlook for the steel wire industry in India, supported by increasing industry activity, infrastructure development and growing demand for specialized wire. Our strategy is to strengthen our market position by expanding our product portfolio, improving our manufacturing capability and continuously developing new applications to capture the growth opportunities across the Indian economy. Our Specialty Wire business continues to progress well and remains an important part of our growth strategy. The IHT line is progressing as planned, and our Steel Cord line is also moving forward very well. Customer approvals and related processes are progressing within the expected time lines. Another area where we are making encouraging progress is our B2C business. Historically, we have largely been focused on industrial customers. Now we are expanding our reach into farming, sensing, poultry and other retail-oriented applications. We have introduced several products, including great tellers, wires, poultry wires and specialized farming and fencing products. Our objective is to build a stronger distribution network to reach new customer segments and establish Bansal Wire as a recognized brand beyond our traditional industrial markets. Moving on, the capacity front. Our plans remain on track. We will add 60,000 tonnes of capacity at Dadri as brownfield expansion. Further, we are also progressing with our client greenfield facility in Southern Gujarat with approximately 90,000 tonnes. This facility will strengthen our presence in Western India and bring us closer to the customers and improve supply chain efficiencies. With these expansions, we expect our overall manufacturing capacity will increase from 6.8 lakh tons and reach approximately 8.3 lakh tonnes by the end of next year. Our indicated annual capital expenditure remains in the range of INR 200 crores to INR 225 crores. However, I would like to emphasize that our approach to expansion remains disciplined. Our objective is not simply to add capacity, but to ensure that new investments contribute positively to profitability, cash generation and return on capital. As communicated earlier, we are targeting cumulative operating cash flow generation of approximately INR 800 crores over FY '27 and '28 combined. We remain committed to funding a significant portion of our future investments through internal cables. We believe this approach will allow us to scale the business while continuing to strengthen our financial position. As we enter -- the second half of FY '27, we remain confident about the opportunities ahead. Our priorities are clear to strengthen our leadership in the steel wire industry, increase the contribution from specialty wire products and expand our B2C business and execute our capacity expansions efficiently. At the same time, we will continue to focus on improving operational efficiencies, generating healthy cash flows and working toward our near-term ROCE target of 25%. The performance of this quarter gives us confidence that the strategic initiatives we have undertaken are beginning to deliver tangible results. For us, the most encouraging aspect of this quarter is not just that we have achieved record financial numbers, but that we are seeing improvement across all parameters that matter for sustainable growth, profitability per tonne, cash generation and capital efficiency. Our ambition is to build an server into a larger, more profitable and capital-efficient organization, creating sustainable value for all our stakeholders. With that, I will now hand over our call to our CFO, Mr. Ghanshyam Das Gujrati, who will take you through the financial numbers.

Good morning, everyone. Let me take you through the financial soon the quarter and first half of '27. Our revenue for the quarter is today to this INR 130 crores, up 24% year-on-year. EBITDA for the quarter came into a INR 15 crores. up 29%, year-on-year and net profit for the quarter is to INR 53 crores, up -- we reported highest EBITDA and high to EBITDA per tonne for the first half of FY 2017. INR 76 EBITDA, INR 162 crores and net profit crores. As turnoffs are already mentioned, our sales value for the quarter is INR 29,000 metric tons compared to 1,469 tonne metric tonne in quarter 2 of FY '27. Operations run at normal level in the quarter following the natural disruption in quarter 1, the demand across our end market in the [indiscernible]. On the cash flow side, we generated operational cash flow of coal during the quarter and INR 539 crores in the first half. reflecting our continuous focus on derating in the price flow from the operation and in driving the working capital cycle. This concludes my remarks. We can now open the floor for the questions.

[Operator Instructions] Ladies and gentlemen, we will wait for the moment while the question assembles. [Operator Instructions] We'll take the first question from the line of Parthiv Jhonsa from Anand Rathi.

So before I begin my question, I just want to give some up to the team who actually prepared the presentation is actually 1 of the best presentations since listation genuinely. And Yes, yes, yes. So my first question is actually pertaining to your -- all your wire line product portfolio, IHG, OHT and your seat, I believe you have already given for the trial runs as far as steel diode sector. So number first, when is that expectation that, okay, that will basically translate to some tangible top line and EBITDA number one. Number two, the 15,000 capacity once it happens to an HD right? -- what is the kind of top line and EBITDA growth are we expecting? And it is possibly that this INR 13,000 28 and 29 also can grow from here on as well? So that's my first question.

So our specialized products, we have a few schemes that we are working on. One is steel Bancorp. Steel telco, we got our first trial order last quarter, and we are expecting that we will receive another trial order within the next and 15 days, hopefully. So that I think some other customers, we have at least 2 customers who have given us orders. the customers also second stages of approval, they've already started, and we are expecting some good results in the next 1 or 2 quarters. Hopefully, if everything goes well, we might be able to see some commercialization within this year itself. So that is for steel out. Other strip that we are working on is on IHT and overstress IHG has been performing quite well. We have reached a positive EBITDA last quarter for HD -- and we are now also moving fast on were. So by hopefully, within this year, we will be able to increase our total capacity of IHT 15,000 tonnes. And yes, so capacity utilization there is already good, and I am expecting that we will see some positive contribution within this quarter from IHT and vet.

Okay, sir. Any possibility to give some quantifiable number as far as EBITDA per tonne is concerned for ISG and OHD -- because blended business were about 8, which is, I think we even coastal. So is it possible to defy that number what this can quantify and then we can build that this point your number going towards higher.

Yes. So the role of specialty wire segment, I think on an average for ISG, which still we could take about INR 15,000, INR 20,000 per tonne kind of a number which we already see as generating.

Okay. Sir, my second question is pertaining to your volumes, right? Because I think you have guided for a 20% volume growth in basically translates to almost about 5,500-odd on an annualized run rate considering that you have done about INR 40 in the first half, how confident are you of that low like about 43%. So you still have about 57% of the room to be filled at higher base also. So how confident are you considering quarter we had a lot of festive holidays and all coming in? So how confident are you?

So sir, our infrastructure and our team is geared up to deliver 20% volume growth consistently, and that is still our target. And even after not delivering the best in the first quarter. I think we are still confident of achieving 20%, 20% kind of growth. There have been some issues. For example, right now, there is a shortage. There's an acute hotel in our raw materials. So these are some concerns that we are struggling with. But I think in the medium term, I don't think that should happen our production. So we would still target that 20%.

Possible to give some clarification on the raw material shortages.

In the last 1.5, 2 months, a lot of our raw material suppliers have diverted their production from bot creating a shortage in iron. And there have also been some breakdowns in at our suppliers end creating some shortages in the whole industry. And although until September, we were able to manage. This month, we have taken some hit in terms of nonavailability of raw material, but that's -- I think that's a small duration. And I think we back again already. So you have these kind of small blips here and there we are facing right now.

But sir, I believe you carry 2 months of inventory, right?

On the -- we carry about 1.5 months of inventory. So therefore, September, we did not take a lot of it, whereas the whole industry suffered in September. But in October in some of our plants, in some of our sections, we were lacking in our production, which is now up and running again. These are small things, again, we still remain confident on 20% volume growth.

Okay. And sir, last question on the opening most mentioned INR 800 crores of CFO 2 years.

INR 800 crores this year and next year combined, but we've already done about INR 350 crores in the first half of this year. I think we will be able to surpass this.

We will take next question from the line of Vinil Shah with Dalal & Broacha.

So my first question on the media segment in the element how much was the revenue continuation on the C segment from this quarter. We had already clarified that software project. But just on a sequential basis, what has been the performance?

So we did about 10% to 12% of our total volumes in B2C even in the last quarter, which is 1 of the lightest quarter there is for B2C. But we were still able to maintain our overall total volume even after an increase of about 15%, 20% in our total volume, we were able to push that in B2C.

Okay. And I just want to clarify, like a follow-up to the previous financial. So the 20% growth of volumes that we are anticipating that is only for H2 of FY '27? Or the 20% guidance is for the annual volumes for the whole?

No, I would say that is only for H2 of FY '27, whatever we lost in Q1 we can order. But at least for Q3 and Q4, our general volume should be higher by 20%.

And as you mentioned, so it is no supply tension right now, the demand looks really positive for us. So guidance in the U.S. due to the land issue, but if not like product ability is to protect, then we might take our volume growth, correct?

Yes, that is true. But I mean, through these years, we faced such issues before. This is -- and this is temporary, this I do not see as a long-term glitch in our system. So even if we lose 10 days of sales in 1 particular month, we will make up for this in the next month. So I don't think that is also going to hamper our total volumes so much.

And my second question was related to the EBITDA protestant. So like we had a range of 7,000 to 8,000 quarter EBITDA margins, and we have a upper limit of the votes. -- looking this is a running for until we handful of mix.

So sir, this EBITDA that we've received that we've gotten this quarter. I think this is a mix of a lot of factors. One is a sustainable factor that is economy scale. We are finally in the benefits of the other coming in. As the utilization ramps up, those economies of scale benefits are coming. So those are some things that are sustainable and to only increase in the future. Apart from that, this has also come from a onetime stock inventory gain, because the prices of steel have shot up. So some impact of that is also there in this. And third, we entered this quarter only with a higher margin. from Q1 -- first half of Q1, we reduced our margins. But the second half of Q1 itself, we had this kind of margins. So yes, I mean, if the demand that we see in our industry sustained, I think this margin should be sustainable. But otherwise, also have INR 500, INR 600 a tonne here and there can always go -- so -- yes, so this is that.

So sir, could you just quantify with 7,500 gold members to going forward?

Sir, our thought process is that we should maintain our margins at about 7%, 7.5%. That has been out for this year.

We will take the next question from the line of Aditya Bhartia from Investec Capital.

My question is on EBITDA per tonne in sales. We had almost 8 this quarter. What could be the inventory valuation gain in this quarter? And if we kind of exclude that, then what is the number that we arrived at? Is it at the upper end of 70, 5,000 range that you speak about?

Sir, if I was to, I would say, inventory gain would be maybe INR 200 a tonne in this. So not more than that. Rest of it has come from just better margins in the industry or our Dadri facility honestly is also contributing a lot. And this we have seen those positive trends in all kind of costs.

Then. So as a B ramps up, I think that is something that is sustainable. So in that context, when you are speaking about 7,500 per tonne, do you think you're being fairly conservative and the numbers are likely to be higher than that, especially with slightly kind of improvement mix?

Sir, yes, I mean we've delivered INR 8,000 of EBITDA this quarter in this one-time stock inventory gain is only INR 100 a tonne. So we still delivered INR 78 crores, INR 70, INR 900 here. So if everything goes as it is, I think we should continue delivering this but our own estimates or our own strategy has been at 7%, 7.5%. This is just something that we are getting. We honestly not work very hard to get this.

Sure. So understood. And what has kind of contributed to the 70-odd number you have been speaking about for a few quarters. But what has contributed to 7,000 moving more towards 7,800-odd in the last quarter? You also mentioned about mix change. What exactly is the next change? Is it only about B2C? Or is it also that we had a higher proportion of high carbon wires?

So actually, in last quarter, although our estimates or our strategy is that the low carbon should be about 55%, 60% of our total volumes. Last quarter, our low carbon was about 55%. So lower end of 55 and 60 range. Because of that, at the lower end, our blended EBITDA is better. So better product mix is definitely 1 contribution. And within low carbon, our B2C segment has increased drastically, that is also contributing well in EBITDA because in the B2C segment, we see at least 50% higher EBITDA as compared to what the B2B segment. So that is also a major contribution. So we would say a healthier product mix, coupled with Dadri ramping up. I mean dry the second facility in India after Dadri would be at least 1/5 of its -- so we are definitely enjoying economies scale there. I mean if you talk about electricity, if we talk about gas, if you talk about anything, labor cost, everything the other is much superior, much better than any other facility that even we have.

My second question is around the volume outlook. So if you consider last year, fourth quarter was a pretty weak quarter with some challenges around gas supply, et cetera, as well -- so on that basis, the 20% kind of a growth outlook for second half looks to be slightly muted. Again, I just want to understand that, is it that you're being a little conservative -- or we should be sitting, let's say, 145,000, 150,000 kind of a run rate in the next 2 quarters.

So 1 thing is that if I'm committing to you something, I should have the ability to do a little better. I will not want to commit to you some number and then at the end of the next quarter or later company that say these were the reasons. So that is not something that we -- so we would rather be a little conservative than risk not delivering on our guidance. That is definitely the case. But still, I would say 20% is a reasonable number. I'm not talking about 20% increase from first quarter from I'm talking about year-on-year increase. So second half of last year as compared to this second half of this year, we would still be able to see 20% volume growth. And I mean, we have not entered the second half with a very good experience. So in the first month of the second half, we are experiencing to shortages. There are some negative factors at play from the initial time. But we'll try to rectify this, and we'll try to overcome this in the future.

Perfect. And the last is around TCO, you mentioned that we may see some commercialization sometime during this year itself. So if you could just kind of guide us on how things may play out -- how is it that you are seeing it today? How the wrap around steel cars is likely to play out over the next 2 years?

Sure. So sir, 1 of our main customers that we were working with, we already -- we had already received their trial order, which is already gone, and we are expecting a second down from them very soon. hopefully, within a month or maximum. So that customer is progressing well. We've already started making supplies for another customer who we are awaiting a formal PO from should be here within the next 10, 15 years, hopefully. But we've already made a product that the team has already visited us, given us an approval of supplies. So that is that. So that is an increase in the development that we were able to do last quarter. We are samples have also been approved with the third customer. whom -- with which the trial process is not very long. So because of that, I feel confident that out of these 3 will happen, at least 1 of them should be able to take within the next 6 months, if not -- and as the commercial production part, is it that the particular customer start procuring a fairly large of their requirements straight away? Or is it a very slow ramp-up Sir, I would say that the first 2 quarters will be a little slow because that depends on if we are only supplying to 1 customer or 2 customers. But for 1 customer also, I think the first 2 quarters would be a little slow. But after that, we should see a good ramp up. And also, we don't want to depend entirely on 1 customer. So even we wouldn't want to supply more than 20%, 25% of our total sales to 1 customer because they need to be room for me to do trials and supplies for the customers for larger projects that we want.

[Operator Instructions] We have the next question from the line of Kunal Sharma with Veritas Research.

Good set of numbers. So my question was regarding to this sorry -- regarding the split that has happened, the rationale can I love the rationale, if you're open?

Sure. I mean the thought process behind the split was to increase our family. So -- but just to increase our number of shareholders. I mean that was the main thought questioners. Liquidity, we thought that if it is at a better price, we would be able to get more and more shareholders in the mix. So that will only come to us.

Okay. Even from the retail perspective, because I mean I believe this price is not that high for the retail also.

Yes. So that was -- yes, that's the main thing. I mean, to get more retail shareholders because our total holding, I mean, total public at holding is very less in our stock.

We have the next question from the line of Poojan Shah from Molecule Ventures.

The first question is to the steel cords. So title cost post the approval of the customers. And we are also planning to supply and more at retail production for customers I just wanted to know your view in terms of capacity additions. So we have done a 20,000 metric ton of capacity addition and surprise protect. Do we think as and when we move ahead and as a demand from an question, we see our incremental demand this we plan to let to which should come by FY '28 or '29 with the visibility of getting strong orders?