BMW Industries Ltd. (542669) Earnings Call Transcript
July 29, 2025
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to BMW Industries Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ronak Osthwal from Arihant Capital Markets Limited. Thank you, and over to you, sir.
Hello, and good afternoon to everyone. On behalf of Arihant Capital Markets Limited, I thank you all for joining into quarter 1 FY '26 Earnings Conference Call of BMW Industries. Today from the management, we have Mr. Harsh Bansal, sir, Managing Director of the company; and Mr. Vikram Kapur, sir, CFO of the company. So without any further delay, I will hand over the call to Harsh sir for his opening remarks. Over to you.
Thank you, Ronakji, Good afternoon, everyone, and a very warm welcome to our quarter 1 FY '26 earnings call. Before we begin, I would like to draw your attention to the safe harbor statement in the earnings presentation. I request you to kindly go through the presentation so that you are well aware of its contents. We appreciate your time today and your continued support. Today, we will be taking you through the key highlights of our business, operational and financial performance for the quarter. We will also share insights into our strategic direction going forward. We are pleased to report that the progress on our key strategic initiatives are advancing as planned. Phase 1 of our greenfield expansion is processing in line with expectations, and we remain on track to commence revenue generation from the color-coated sheet plant by quarter 4 FY '26. During the quarter, we successfully commissioned 2 additional tube mills and a 1.28 megawatt rooftop solar installation at our Jamshedpur facility. These developments have increased our tube manufacturing capacity by 60,000 metric tons per annum, bringing our total to approximately 600,000 metric tons per annum across all our units. Revenue for the quarter stood at INR 148.7 crores, reflecting a 5.4% sequential decline and a 14.4% decline year-on-year. This dip was primarily due to the temporary shutdown by our key customers which impacted volumes in the CRM and rolling mill segments with some spillover into tubes. Operating EBITDA margin stood at 21.2% compared to 24.4% in quarter 1 FY '25. While this represents a year-on-year contraction of 326 basis points, the margin movement was largely due to transitory fixed cost absorption on a temporary lower revenue base. Despite this, our margins remain relatively range-bound and should see an improvement as volumes recover. Profit after tax came in at INR 15.2 crores, a margin of 9.9%. Looking ahead, we remain confident in the resilience of our core operations. As customer activity resumes and plant operations normalize, we expect a healthy recovery in volumes. The Bokaro project is poised to act as a key growth catalyst in the upcoming quarters as well as helping us expand our capabilities across the value chain and we are optimistic about the opportunities that lie ahead. For those who did not attend our last call, wherein we had given our medium-term guidance, over the next 3 fiscals, we anticipate consolidated revenue to grow at a CAGR of approximately 75%, driven by the phased commissioning of Bokaro greenfield project and our organic growth. Operating EBITDA is expected to grow at a CAGR of 45% over the same period with the operating EBITDA margin stabilizing at about 11% by FY '28 as we progressively integrate the new and existing business lines. It is important to contextualize our margin outlook within the evolution of our revenue model. Historically, our conversion business model has delivered operating EBITDA margins in the mid-20s, owing to very limited raw material exposure. With the transition to an integrated downstream steel processing model, our cost structures will change. Steel inputs will now form a part of our cost structure, resulting in raw material costs comprising over 80% of our revenue. Accordingly, consolidated operating EBITDA margins will moderate as the legacy business blends with a more input-intensive model. However, this should not be viewed as a deterioration in performance. Rather, it reflects a conscious pivot towards scaling volumes, deepening the value chain integration, expanding our market reach and enhancing stakeholder value. We would encourage you to interpret margin trends alongside absolute value creation. While margins may normalize, the top line is set to expand materially and PAT is expected to grow at a robust 40% CAGR over the next 3 years, with a PAT margin expected to stabilize at about 5% by FY '28, resulting in a return on capital employed of over 18%. In closing, we continue to execute with discipline and strategic clarity, focusing on long-term value creation. Despite short-term challenges, our fundamentals remain strong, and we are well positioned to deliver sustained profitable growth. We thank our shareholders for their continued trust and support during the transformative phase of our growth journey. Thank you. Over to you, please.
[Operator Instructions] The first question is from the line of Bhavesh, an individual investor.
Can you hear me?
I can hear you.
Sir, in your presentation, you have written that tubes manufacturing contract has been extended until H1 FY '25 with an expected revenue of INR 365 crore over the contract period. So the company had given a -- like they have uploaded on the 31st of December 2024, an intimation of work order received amounting to around INR 365 crores. And there was another work order, which was uploaded on the -- one second -- on the 21st of May 2025, in that also, the order value totals to around some INR 365 crores. So I just wanted to understand whether these 2 orders are separate orders? Or how is it? Because in your presentation, the total order value is INR 365 crores, whereas the...
It's the same. Bhaveshji, it's the same, one was a work order and then the contract was officially given. So we disclosed both.
Okay. So it's the same order from Tata Steel?
Correct. From the tubes division of Tata Steel.
Because on the 31st December, you had received a work order intimation, you had uploaded that. And then again, you had uploaded this contract order from Tata Steel. So I was...
Bhaveshji, one is the work order intimation and the other is the contract because they are both material news in nature, we uploaded and disclosed both. But they are the same.
But they are the same. So it is INR 365 crores. And then you have received one more some INR 1,700 crore contract.
Yes, that's for the CRM. That's for the CGL3. That's right.
Okay. So both are from Tata Steel?
Correct.
Okay. So as on date, what is the total order book you have?
I mean these are the 2 major ones. Outside of this, we have some smaller orders.
Okay. And how is the Bansal TMT pipes division progressing? Like how do you see some kind of traction in there, some growth because...
I didn't get your questionn Bhaveshji. I'm not clear on your question, Bhaveshji.
Sir, your pipes and tubes manufacturing business, how is it going exactly right now? Because the Q1, we have seen that there is a revenue decline. So I just wanted to know how is this business going up because this is a high-margin business, right?
Which is the high-margin business, Bhaveshji?
Pipes and tubes.
I mean, you -- for us, it's a conversion business. And the numbers are there in the part of the presentation. So I mean, beyond that, there's not much that I can say, right.
So going forward, can we see an increase of the production?
Of course, because -- and that's the reason why we continue to invest in our capacity expansion for pipes and tubes because that is one segment where we are very optimistic about.
Great. Great. And do you plan to get the stock listed on NSE?
We do. We do. Our team is already in conversation. And as soon as we are able to fulfill all of their queries and questions.
[Operator Instructions] The next question is from the line of Mayank Jung, an individual investor.
Yes, so my question is largely on the PLI scheme. So is it possible you can elaborate on which specific products from our Bokaro facility are eligible under the PLI scheme for specialty steel and the annual and the total production capacities we are planning for that product and the CapEx amount that we have invested?
Sir, most of these data is a part of our disclosures at various times. However, briefly, this is for coated products, alloy, non-alloy coated products, our PLI is approved, as well as for GI and galvalume and ZAM. The total CapEx includes the entire INR 803 crores that we have invested that we plan to invest in Bokaro. And the capacity details are also a part of our disclosure. I mean, I won't be able to tell you the exact numbers of right now.
Yes. So entire INR 803 crores comes under the PLI details -- the PLI specifications?
Correct.
Okay. And what immediate revenue or utilization levels can we expect from the color-coated steel segment in Q4 FY '26 and...
We expect the revenues to start in Q4 '25. I won't put a very high number expectation over there because it will also go through all the ramping up and everything. I think we'll start to get a better sense of revenue and capacity utilization by early '27 -- FY '27.
So is there any target that we have in mind for the utilization level for the FY '27?
Current year, we've actually not put any targets. So whatever we get, we'll treat that as a bonus.
And is it possible to give me the benefit amount that we have received from the solar installation, the 1.28 megawatt...
Not possible. I'm so sorry.
[Operator Instructions] The next question is from the line of Uthsav Banera, an individual investor.
I would like to ask that after the one-off volume drop from a key customer shutdown, what has been the month-on-month recovery curve for CRM and [indiscernible] volumes? Like how does current demand compare to pre shutdown levels?
The current is -- how should I put this, we are closer to normal than not normal.
Okay. And end market sectors like defense, solar have shown the fastest recovery, past shutdown. Like do you see any secular shifts in customer that could alter your product mix strategy?
Not really. I mean we continue to see the sectors that have been serviced with us earlier, the same sector is coming back to more normal levels.
[Operator Instructions] The next question is from the line of Paarth Patel, an individual investor.
The revenue growth and profitability faced pressure in Q1 FY '26. Are there any further headwinds expected in the near term? Should we expect EBITDA margin improvement as utilization picks up in the coming quarters?
So interesting question, Paarthji. A lot of our -- these businesses are dependent on how the customers' facilities operate. And we -- this is probably the most unusual kind of shutdown that we've seen in years, in maybe decades. So I don't expect something like this to get repeated in quarters to come. Having said that, your guess is as good as mine because I would not like to venture a guess on the customers' facilities up or down. I'm not sure if I was able to answer your question.
Yes, sir. Sir, secondly, the net debt has increased from like INR 12,000 lakhs at March '25 to INR 16,000 lakhs by June '25. What is the updated peak net debt estimate through the Bokaro expansion? And how are you evaluating the balance between debt and possible equity financing in order to maintain a conservative leverage ratio?
So we will -- we don't expect to have a stabilized debt equity even at the peak of more than 2:1.
[Operator Instructions] The next question is from the line of Bhavesh, an individual investor.
Sir, if you remember on the last con call, I had suggested for a mixture of equity and debt for the capital raise. So have you thought about it? How to approach the fundraising plans and -- or just go in that debt form?
We'll currently continue to work with debt and internal accruals, Bhaveshji. I'm not discounting future capital raise but at these levels and at this market, I don't want to dilute company equity.
Sir, I understand that, but the debt -- net debt is also rising. So the market is also rising. There is a lot of money in the market. So if you...
No, no, I'm sure. I'm sure. And if you can connect me to people who are willing to invest at good valuations, I'm happy to look at it.
Sir, I can connect you with the legal counsels because I'm from that background myself...
Sure. I'll have my -- I have people from [ Euritus ] and I'll have them connect with you post the call.
The next question is from the line of Mohan, an individual investor.
2 questions, sir. One is this unexpected shutdown. Is this cleared? And is that plant up and running, the customer plant?
Largely, yes.
Okay. And the second question is around, you have guided around 75% CAGR the order backlog looks around INR 200 crores -- sorry, INR 2,000 crores at this point of time. And we are more concentrated around one customer Tata Steel at this point of time. Is there any plan to diversify the customer base? And any strategy that you have in place to hit that 75% CAGR in the next...
Sir, the -- most of the growth in terms of the 75% that we have projected over the next 3 years, if you recall, we had said that this is on account of the Bokaro greenfield project coming online in phased manner. We expect FY -- like we've earlier mentioned, we expect FY '28 to be our first full year of operations for Bokaro, where all facilities will have commissioned. And by then, the numbers that we have indicated about the CAGR growth, it's basically through the Bokaro. The organic growth in the existing conversion businesses where there is a higher capital -- sorry, customer concentration, as you said, we'll see organic growth in terms of, let's say, some tubes, maybe some other growth in CGL, maybe some in the rebar PMT segment. But largely, most of the growth and the CAGR growth will come from Bokaro.
And one final question. I see a lot of individual investors taking up this call. Any plans to promote the organization of the company to analysts or rather institutions...
Of course, we are in touch with a number of them. And I'm sure you'll get to hear it as and when things move. But you'll appreciate that these things take time.
[Operator Instructions] The next question is from the line of Darshil Jhaveri from Crown Capital.
Hopefully, I'm audible.
Yes, you are.
So sir, just wanted to -- some of my questions have already been answered. So I just wanted to kind of get a summary of it. So currently, I think our Bokaro plant is going to come towards the end of the year. So as good as -- as you said, it will be bonus, whatever revenue we can get in the first run of it. So current year, we can expect as good as FY '25, like that is how the business expectations would be roughly?
No, I think we will be better than FY '25. But we've not put a short-term indication because I'm hesitant to say by how much. However, a more, let's say, a 3-year indication is what we've given by when all my growth triggers will be activated.
Fair enough, sir. And sir, just a 3 -- just a small clarification. So the 3-year thing that we are saying, so that starts like FY '26, '27 and '28 will be the year where we have the major chunk, right, as the Bokaro plant is going to be fully...
That's correct.
Okay. Okay. Fair enough. And sir, I just wanted to know like currently, like at what cost are we be able to raise debt, like, so just wanted to know that.
I think, Darshilji, that is not something which I can independently talk about only debt and all that. However, your point is well taken, and we'll try to include the weighted average cost of capital kind of a metric in subsequent calls.
Yes. Because I think major CapEx is now going to be funded by debt, right? It's going to hit in a phased manner as we commercialize the plant, right?
Correct. Correct. The idea was also, Darshilji, that as we continue to execute and draw down on the debt, we will also start cash flows and be able to kind of service part of it. So there will be a blend of new debt but also new revenue and new margins will -- that come into the picture.
[Operator Instructions] The next question is from the line of Dev Mehta, an individual investor.
Firstly, sir, I just wanted to understand that is there any trading revenue as a part of our total revenue this quarter?
No.
So it was just the last quarter, which we did a trading revenue.
I mean, majorly, yes, there is always some materials which are sold, but not as much as last quarter, I'd say.
Okay. So the EBITDA margins were mainly affected because of the plant shutdown, right?
Correct, Correct.
Okay. And sir, secondly, when we are seeing that we have an aspiration of doing a INR 3,000 crore of revenue, just wanted to get an idea like how will it materialize? Have we -- are we in touch with all the distributors in line? Is there any possible demand visibility? And if yes, then in which sector? Is it solar, defense or there are a lot of towers which are made out of pipe nowadays. So I believe that is also a very growing sector. So major chunk is from which sector?
So we are not looking at very, very downstream sectors. Broadly, what I'll tell you is that the numbers will come from color-coated. They will come from alloy, non-alloy coated products like galvalume, galvanized or ZAM, and they will come from a mix of all of this. On your first part of the question about the distributors, yes, we are in touch, and we have started to work on that, the distribution marketing strategy. I think part of your question was also talking about the demand visibility, et cetera. With -- I think there is a substantial growth in terms of per capita steel consumption, not just for industrial, but also for domestic users. So today, if you see you travel to most places in rural or semi-ural, earlier, you would typically see a lot of the sheds and structures outside houses made with bamboo or wood. Today, a lot of that has started to get converted into pipes and square and rectangular or hollow sections et cetera. Earlier, you would see people using, let's say, grass or husk for their roofing or wooden -- sorry, ceramic tiles. I'm not saying tiles are over, but now you have sheets that look like tiles, but they are ultimately steel. So earlier, you had more of the galvanized roofing, which was plain silver. Today, it's not rare to drive and keep seeing color-coated sheets being used in every application. So I'm extremely optimistic about the demand scenario in India. I don't think -- unlike the rest of the world, we are even close to a recession kind of a scenario. Today, when India is looking to increase their capacity, we are currently at, let's say, about 130 million, 140 million tonnes. We are looking to increase our annual steelmaking capacity to 200 million tonnes and beyond. there will be a higher and higher need for downstream processing, value-added steel, more people are aspirational buyers. So instead of buying plain silver sheets, they want colored sheets. More projects want longer-lasting coated products. So instead of simple galvanized, they want higher qualities of galvanizing, higher material compositions, things like ZAM. So just to round it up, I'm fairly optimistic about the demand scenario. In terms of capacity, if you talk about 150 million tonnes annual, my peak capacity will be 0.5 million tonnes. So I don't think I am in the category of a market maker. I will be more on the market taking side. You've got the biggies who will continue to build the market with momentum. And there will always be parts of the market that need higher servicing levels, which we can kind of cater to.
Got it, sir. Also, sir, just one last point. Are we in -- when you said that you are in contact with the distributors, so if you can just let me know what will be the geographical concentration because currently, it's in the Eastern part of India. So will you also be in the contact with pan-India or only it will be concentrated to the Eastern part of India?
So because we are located in Bokaro, where we have access to hot-rolled coils, we are absolutely not looking at a geographical concentration. We are actually speaking to people across the country because this also allows us to widen our market base and keep looking at future expansion opportunities. When the time is right, I believe that for some of our products, we will also have opportunities in exporting the products. And so whenever the time is right and we are at a more stable scenario, we will look at exports as an option as well.
[Operator Instructions] The next question is from the line of Uthsav Banera, an individual investor.
Sir I just wanted to ask that the revenue growth and profitability faced pressure in Q1 FY '26. So are there any further headwinds expected in the near term? Or should we expect EBITDA margin improvement as utilization picks up in the coming quarters?
I would expect improved levels. Because like I mentioned to an earlier caller, I have not seen this level of shutdowns and production disruptions in many decades. So this is clearly a one-off exception.
Okay. And what is the breakdown of quarter 1 FY '26 revenue across verticals and which segments are expected to lead the next leg of growth?
So if you look at Slide 9 on the presentation, the breakup of the revenues over there. And this is except for pipes and tubes, where we are seeing higher capacity as well as high utilization, all the others will stabilize at their historic utilization levels.
So these revenue margins will be the same across all the verticals? Or do you expect any of the verticals to increase or change the dynamic?
So we don't comment on individual margin numbers. But yes, in terms of utilization and top lines, I think we should see stabilization in the coming quarters.
[Operator Instructions] The next question is from the line of Madhur Rathi from Counter Cyclical Investments.
Sir, if I look at FY '26 on an overall basis, sir, what kind of EBITDA can we expect from our operations?
So I will stay away from giving annual or short-term guidance, sir. Like I mentioned that we will stabilize to historic levels but specific guidance for FY '26, I would be hesitant to give.
Okay. And sir, our rolling mill production and revenues have gone down, sir, is this because of the plant shutdown that we took.
So there are 2 factors actually in this, if you compare it to Q1 '25. If you look at compared to Q1 '25, the reduction is almost 58% because in the same time last year, we were actually operating 2 tube mills, which we later on mutually along with the customer, we decommissioned 1 mill. Now if you look at quarter 4 and this, there is a reduction of about 35%. This is more because of the plant shutdowns.
Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you, as always, for the very enlightening questions and kind of forcing us to dig deep and think harder. I'm always very, very grateful for everybody who shows up, takes their time to ask the questions and clarify. If there is anything further that we can do, our contact information is there on the presentation. Please do reach out to our investment advisers or to the company directly. We'll be happy to engage with any of you. Thank you so much. Over to you, please.
Thank you. On behalf of BMW Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
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