Maiden Forgings Limited (543874) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the H1 FY '26 Results Conference Call of Maiden Forgings Limited hosted by Kirin Advisors Private Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Harshil Ghanshyani from Kirin Advisors Private Limited. Thank you, and over to you, sir.

Yes. Thank you. On behalf of Kirin Advisors, I welcome you all on the conference call of Maiden Forgings Limited for H1 FY '26. From the management team, we have Mr. Nishant Garg, Managing Director. With that, I now hand over the call to Mr. Nishant, sir. Over to you, sir.

Good afternoon, everyone. I'm delighted to welcome you all to Maiden Forgings Limited's Earnings Conference Call for the first half of financial year '26. Thank you for joining us and for your continued confidence in our journey. From our beginnings as a proprietorship in 1988 to becoming a publicly listed company in 2023, Maiden Forgings has evolved into one of India's most trusted manufacturers of bright steel bars, wire and pneumatic nails. With over 35 years of experience, we cater to diverse sectors, including automotive engineering, infrastructure, hardware, and increasingly defense and even to an extent now the consumer markets. Our 3 advanced manufacturing units in Ghaziabad with a combined installed capacity of 53,000 metric tonnes per annum serves more than 450 customers across India and international markets such as the U.S. and the Europe. The first half of financial year '26 marked a strong phase of operational progress for us. Despite macroeconomic challenges and price volatility in inputs, we achieved the highest production and sales volume in our history comparable to any H1 results of ours, reflecting sustained customer demand, better utilization levels and increasing traction from our high-margin stainless steel Bright bars, wire and others. This performance underscores our ability to maintain operational discipline while expanding our presence across multiple high-value segments. In addition to our progress, we are preparing to introduce 2 new product lines, GI wire and stainless steel machine components from the next financial year. Both vertical and horizontal expansions have superior margin potential and further strengthen our presence in value-added product categories. A key highlight during this financial year was our registration as an approved supplier with the Ordnance Factory Board, Muradnagar, under the centralized vendor registration process. This comes in addition to our existing registration with OFB, Kolkata, marking another strategic milestone in our association with India's defense manufacturing ecosystem. With this development, we have extended our credentials as a multi-location approved supplier within the OFB network, paving the way for participation in upcoming opportunities with defense sectors such as HAL, NTPC and other public sector entities. The growing traction within the B2B segment further reinforces our strategy to diversify revenue streams and align ourselves with India's self reliance and indigenization goals. Another step that takes our clear intent of contributing towards this segment was our recent registration with CEMILAC DRDO. And alongside this, our B2C vertical continues to gain traction, led by growing demand for coil nails sold within now. We are now in advanced stages of expanding this business to the U.S. and the U.K., supported by our plan to establish overseas warehousing to reduce shipping timelines and improve cost efficiency. This initiative complements our broader export strategy aimed at capturing premium markets and strengthening reoccurring demand across global supply chains. To support this multi-segment growth we are currently in a significant expansion phase. We are executing a structured CapEx program, covering machinery procurement, installation and the shifting of operations to our new integrated pace. At the same time, we are enhancing working capital to support higher volumes, inventory buildup for new orders and larger B2G and export-linked contracts. These steps are essential to ensure uninterrupted scale up as we enter new product categories and serve a broader customer base. We are also making a steady progress on the development of our 4 acres industrial facility at Modinagar located about 25 kilometers from our current line. This modern integrated plant will consolidate 2 of our existing units, streamline operations and unlock meaningful cost efficiency. Once completed, the facility is expected to generate annual savings of around INR 2.5 crores, while enhancing throughput and workflow efficiency. Consistent with our sustainability agenda, the unit will include a solar installation that will meet up our maximum energy requirements possible technically to solar energy, reducing our carbon footprint and extending our cost structure in the long term. The ongoing plant consolidation and process optimization coupled with our solar integration are expected to further improve our cost competitiveness and profitability in the coming years. Our diversified presence across B2B, B2C and B2G segments ensures business resilience and scalability, allowing us to capture opportunities across different economic cycles. What sets us its integrated OEM grade manufacturing model and ability to serve multiple alloy grades and product types under one roof. Our facilities are equipped to manufacture bright bar, wire and nails across mild steel, stainless steel and alloy on ensuring unmatched flexibility and quality control. The same precision and consistency that makes us a preferred supplier for Tier 1 automotive and engineering clients also define our reputation in export markets. As 1 of the few Indian producers of export quality pneumatic and coil nails, we continue to serve high-value clients in the U.S. and Europe, while expanding capacity to meet growing global demand. I would like to take a moment to reflect on our recent performance in H1 financial year '26 despite industry-wide headwinds and pricing volatility, we maintained operational stability and continued our strategic focus on high-margin product segments. During this period, we reported a total income of INR 111.36 crores, with EBITDA of INR 6.74 crores, translating to an EBITDA margin of 6.05%. Net profit for the half year stood at INR 2.1 crores with a net profit margin of 1.88%. This performance underscores the strength of our diversified product portfolio, disciplined cost management and the resilience of our business model amid a dynamic market environment. Looking ahead, our strategic focus remains on scaling our high-margin product lines, our participation in the B2G segment and expanding our export presence through product innovation and brand initiatives. With strong customer relationships, a forward-looking growth pipeline and continued emphasis on quality and efficiency, we are confident of sustaining our growth trajectory and strengthening our position as a premium innovation-driven manufacturer. In essence, we are focused to build a better future for all our stakeholders by enhancing the production and sales of specialty offering while giving utmost importance to R&D so that we can contribute to value to the growing defense technology sector in the near future. The testament to this has been our past month of the current financial year, wherein we acquired multiple B2G segment orders as well as multiple registrations. As I stated in the last IR call, the growth in this segment requires patience, but all these registrations and suppliers have been building blocks to our credentials into this segment and with same focus, we are very confident to rebrand ourselves as an organization known for its innovation in the coming years. I once again thank you all for your participation. as well as your continued trust enough. I now invite your questions on our performance, operations and strategic outlook. Thank you once again.

[Operator Instructions] The first question comes from the line of Kartikeyan Sitaraman from HNI Corporation.

I have 2 questions. One is from the audit financial results. I've seen that there is a U.S. made advance for the land change, right? Will this end by this second half of this year? Or it will be completed by...

Yes, yes. No, no, no. This will end by March -- before March 31.

Okay, sure. Okay. So you're planning to reduce your debt or you're planning for the -- what is -- the dividend?

There would be further -- see there should be further land paid in January, February or maximum in the first quarter of next financial year. So there would be add-on to this figure in -- by March 31 also and then post that also in the next H1 as well, okay? So because we have more of assets to be sold once we are consolidated at some place, okay? And there are multiple assets which are not -- which would be of no use once we have shifted. So all these would be adding on to it. There would be multiple nations. And as well as we are doing some fundraise, which is under process right now. So all this combined, once we have realized all this or in part as and when we are doing, definitely, the scheme of things is to firstly, to ensure that whatever CapEx we are doing are well funded in terms that we are doing installing machines and technology, which saves our long-term cost. So first, agenda is that. Second agenda is to ensure like we are introducing 2 new products as well as well as we are very much aggressively going for B2G now. Like last year was because we just started, so we also need to gain. So second agenda after realizing all these points is that we are already going aggressive, we will be going more aggressive, so we will be needing some more working capital in terms of building the inventories as well as credit terms with the B2G segments as well as our export sector. So second objective utilization of those ones would be to -- in the working capital needed for enhanced operations or enhanced revenue. And third would be loan repayment, debt repayment to an extent where it doesn't have such working capital or the CapEx. But at the same time, in the end, we would be reducing debt to a substantial amount. That's our calculation estimate.

The next question comes from the line of Prashant Shah, an individual investor.

Sir, my question is, what are your plans for forward integration into specialty and how large is the addressable market for import substituting products?

See, Prashant, first and foremost, is like a specialty theme, we are already doing to an extent. The contribution is minor, that's why we don't mention it like in a big way. The next expansions that are planned recently are GI wires and stainless components. Stainless steel components is our forward integration of stainless and wires. We will be making those components out of these 2 products. For that, we already have LOIs from our existing customers who want to offload some of their components to us so that they can supply to the Tier 1 vendor of auto sector and multiple defense, oil and gas, new sector. So that's why we have received LOIs from that and from those customers, and we are going ahead with that. as well as second products like GI wire, again, this is a product for which we already have about 800 tonnes of monthly market in hand even before the installation of that plant. We were doing -- for last 6, 7 months, we have been experimenting. And to ensure that the quality is at par. We don't have the full setup right now, but we had partial. So we were testing qualities on that. And I believe by first quarter of next financial year, we would be having both the products in hand like sales will be starting. So these are the 2 primary focus areas in product lines that we are focused on for the next 6 months to 8 months, let's say. And specialty -- as far as specialty steel is concerned, definitely, when we are trying for B2G and defense sector, particularly, right? So there, the demand was -- we are already capable of producing bright bars and wires and those type of deals. But we didn't have that kind of market and focus much on marketing of that in the last year. But now we are highly focused and what we see is whatever analysis is that the maximum traction would come from the defense segment for those and they have huge demand for it.

Okay. Okay. And so sir, how do you view competition in this bright bars and stainless steel wires? What differentiates us, I mean, for your 48-hour delivery model from industry peers?

See, it's not exactly 48 hours. But yes, we are the fastest in the industry because like you said that in this 1, maybe the revenues didn't increase that much because there was an overall stress on the steel price, and they were the lowest, I think, at a 2016 or '17 year level in terms of pricing. But that being said, H1 [Foreign Language] and that is approximately 17,000 tonnes in H1 itself, which we have never done before. So it's like exact figure is 16,873 tonnes. So we have done approximately 17,000 tonnes. And there is -- definitely, there is competition, but what sets us apart is that most of the companies in our sector are unorganized. For example, there are numerous processes that we are performing in now, which completes the entire range of bright bars and wires. For example, we are doing cold wire, we are doing peeling. We are doing multiple types of annealing, quench treatment et cetera, et cetera. I mean there will be more than 10 processes that we can perform, not applicable to every product, but every product has a different process that it has to go through. That's why we have more than 3,000 FTEs, so what happens is whenever any bigger company, let's say, it belongs to defense sector or auto sector or the engineering sector, if they are making any assembly or component, they will require multiple types of these products and they also need high-quality tech level. So once we have onboarded a customer like that, okay, which we already have numerous customers like that. So once we have onboarded that customer, so they don't -- because their approval processes, then their quality parameters are tough to maintain. So they trust that vendor and go for a long-term partnership with them. That is how we have retained customers as old as from 1991 or 1992. So that is 1 differentiating factor that we have all the capabilities in house and we can deliver the most -- maybe the steel grade itself is not special but the operations that we are doing, the consistency required, that is special so that why it comes under the specialty steel kind of order. So that is 1 thing. We are organized. We have everything in house and if someone has to replicate such kind of model as well as credibility associated with it, it will take minimum 5 to 10 years for them to copy this model. That's why we are quite different and differentiate. That is our differentiating factor.

Okay. Okay. Sir, with your land solar plant installation, what percentage of your energy requirement will shift to renewable sources? And how will this impact long-term cost structure?

See, right now, we have applied for the connection of about 1,300 kilowatts or say near about 1.3 megawatts, okay? That is normal connection, electricity connection not solar. Okay, this is because there is like till now, we had connections lower than 1 megawatt. So we, first of all, the saving that we will be doing is that we are going for a private buy and sell of electricity model, okay. So there would be electricity sales. Along with this, at least, I think, around 400-kilowatt of solar installation we are looking for, that has come up after analyzing. So roughly around, you can say, 20% of our demand will be met by solar energy. And that is not due to the CapEx involved initially or anything. That is only based on the 400 kV that has come out, that is purely based on the technical feasibility. What percentage it would be, around 20%.

Okay. Okay. And sir, 1 last question I have is that with the B2B digital platform and expansion into e-commerce channel, what shares of sales do you expect from digital initiatives over the next 3 to 5 years?

That is too soon to say. Reason being, like I said, that, that is under development from last 6, 7, 8 months. But our primary focus is for right now is B2G segment because we have gained a good traction in that. And I see a huge potential in coming 1, 1.5 years from that segment. So maybe I can get back to you on this after 2, 3 weeks because I'll have to analyze that. You can connect with Kirin and then to me, we have chat about this.

The next question comes from the line of Vinod Shah from VS Ventures.

Sir, like I have like 3, 4 questions. So like -- how do you expect the recent registration with Ordnance Factory Board going forward in the next 2, 3 years and the first HAL order?

See, not first HAL orders. Right now, we have second HAL order in pipeline, we have supplied to NTPC, few orders we have supplied to BHEL, Bhopal or Indore, okay? And then -- right now, I think we have 1 more from BHEL Haridwar. There are numerous orders that we are processing, okay? Though the percentage revenue this year would have been till now would have been around 1% or 2% only. But these registrations give us and access of credibility to boost the sales very -- in a very faster manner. To be very honest, the traction to -- in the B2G segment or defense segment, or power segment is going faster than I expected. It suddenly happens that we are getting tenders. And right now also, we have bid for huge tenders. If we get those tenders because -- I am very positive about it because what has been happening is that we bid for the tender and we somehow are getting easy because most of the tenders that we are doing are concerning the specialty steel. There is some kind of a special alloy or something, which we think to be easy because we have been doing it. But I think the offers don't come easily in those tenders. So that is 1 advantage that I have just recently realized in last 2, 3 months. So the traction should be very good. Now I'm quite confident that by next financial year, we should be supplying a good percentage to B2B segment.

So what percentage of revenue we are targeting from B2G and business going forward?

I think the next financial year, we could reach around 10% on B2G segments.

And like what are like receivable days in B2G like...

Because until now, we are in the MSME category because our turnover is below INR 500 crores. Now the norms have been revised. So we fall in the -- sorry, we fall in the MSME center. So maximum to maximum it is 60 days. By the norms, it is 45 days. They have to pay us within 45 days, if they are procuring from MSME segment. That was a norm like 2, 3 years back by the Ministry of Finance. But practically, we are seeing that we are getting 45 to 60 days.

Okay. Not much different but [indiscernible].

Yes, yes.

So sir, like on new facility, like what is the estimated time line on that? And what kind of efficiency and margin expansion we can see?

Sorry, I didn't get you. Your voice got cracked.

Sir, like what is the estimated time line for our new factory and how much incremental capacity efficiency and...

We will be starting in the construction phase should be completed by December and maximum, okay. And by January, we would be starting shifting of 1 of the units as well as installation of the furnace for the new GI thing, okay? And I believe it should be operational -- fully operational. I mean, it will be fully operational by March. But after -- post shifting the second unit as well as everything done in use, it should be by July next year.

Okay. Okay. And how much savings can you expect from this?

INR 2.5 crores annually, minimum INR 2.5 crores.

And that would be from July onwards.

Yes. I'm not including the financial savings in this, like the interest cost reduction but operational as well as administrative, all for electricity. These all costs should be saving us minimum INR 2.5 crores. Overall, I think with interest in everything, it should be INR 4 crores on a lower side.

The next question comes from the line of [indiscernible] from Relax Capital.

We just wanted to understand from a very longer-term perspective, is there a possibility to add some more product segments or you see addition of new industries, just to understand what is the kind of vision that you have for the company from a very long-term perspective?

From a very, very long-term perspective, I want company like I said in my speech as well. it should be something that should be positioned in a way that is known for its innovation. We work hard for commodity business like 5, 7 years back, then we introduced like alloy steels and some items that were basically tailored for the customer, engineered for the customers. So from where that transition has happened. And now the next transition that I see, the main reason for going behind this power sector and the defense sector, is that we would be focused towards R&D and producing those products which aligned with our stronger aligned with our existing products, but ultimately, we should be developing those products which no 1 else is doing in India. And we should be able to either substitute the imports that the B2B segment is currently doing or we should be able to even go beyond that. Producing some things which are innovative, and we should be having certain kind of patents and technology which Maiden should only have. So that is our long, long-term vision.

So could you also quantify as to the stainless steel products, how much of volume and value as of now?

Right now, the quantum is about 15% in terms of volumes like quantity -- full last year's EBIT, I am telling is about 15%, and the revenue contribution is about 40% because the value is 5x like asset is 5x of carbon.

Okay. And could you also understand the operating profit difference, like you mentioned the sales is like 5x or difference between stainless steel and carbon steel?

Right. See, in carbon steel average would be around 10%, 12%, carbon and alloy combined, average. And in stainless steel, it is a minimum, bare minimum 18% to 20% operating profit, right.

And the 15% volume share can increase to how much, say, 3, 4 years down the line?

It can increase to up to 40% also. But like I said that right now, what we have done is because markets have gone very, very dynamic. Today, if you want to make extra profit extra earnings. Then you will have to provide to your customers what the current demand is. So it's not -- like currently, I am seeing that more than stainless steel like common grades are 304, 316, these are common rates in stainless steel. But let's not go for that, but go for a lower alloy kind of grade of stainless steel 430F of the group, okay? That requires some kind of a specialty in terms of the engine treatment that is being done. And we have realized that there are very, very few limited suppliers for those grades, okay. So we are not focusing on them because they have requirements in more critical application.