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Transcript - Conference Call of Ratnamani Metals and Tubes Limited 1
Transcript
Conference Call of Ratnamani Metals and Tubes Limited
Event Date / Time : 30th May 2011, 04:00 PM IST
Event Duration : 49 min 39 sec
Presentation Session
Moderator: Good evening ladies and gentlemen. I am Ram, moderator for
this conference. Welcome to the Q4 results call of Ratnamani
Metals and Tubes Limited hosted by Networth Stock Broking
Limited. We request Mr. Viral Malia from Networth Stock Broking
Limited for the opening remarks.
Viral Malia: Good afternoon everyone. Thank you for joining us on this call.
We have with us Mr. Prakash Sanghvi, Chairman and Managing
Director of Ratnamani Metals and Tubes Limited, accompanied by
Mr. Vimal Katta, the CFO. They would be sharing with us the Q4
and annual results as well as recent developments which have
taken place in the last quarter. I request the moderator to please
hand over the call to Mr. Prakash Sanghvi for the same.
Moderator: Mr. Prakash Sanghvi, you may go ahead sir.
Prakash Sanghvi: Good evening to everyone. About Ratnamani Metals and Tubes
Limited, we are the manufacturer of stainless steel tubes and
pipes as well as carbon steel welded by all categories. I am giving
just little bit of the company. We are a unique company, where
our number of segments operated in the tubes and pipes sector,
in stainless steel, welded as well as seamless construction,
starting with instrumentation tube, heat exchanger tube,
condenser tube and filter, filter tube, then general piping in both
the construction, seamless and welded. This very wide range of
diameter wide pumps, quarter inch to 64 inch diameter, at the
same time very wide thickness range, 0.5 millimeter to 50
millimeter thickness. At the same time we are in carbon steel.
There we are operating ERW pipes that is for oil and gasdistribution, drinking water, irrigation and general structure
purpose. Then we are having helical SAW welded pipes, that is
mainly for trunk line cross country pipeline, then any Greenfield
project, then water irrigation, drinking water pipeline, then
general purpose of structural also. At the same time, we are
having a LSAW plant that is purely for project piping, any
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Greenfield refinery, petrochemical, fertilizer, power plants. It is
very much equipped with very wide size range, it is a project
piping with some niche category, LSAW. And we have a
circumferential pipeline, where we do diameter right from 1.5
meters to 4 meters, varies with bigger diameter and thicknessrange, with 8 millimeter to again 50 millimeter and its being used
for various thermal power plants, for cooling water, then general
drinking water pipeline, water pipeline, then this offshore
platform building, piling pipes, jacket or something like that. So,
and apart from this, we have a coating facility that is what is
required for both stainless steel as well as carbon steel. Any line
pipe or gas distribution pipe, they require this Epoxy coating,
internal, external, at the same time 3 Layer PE coating. So, this is
what our products and company is operating in number of
segments within the pipeline, tubes and some of the niche
products, some of the standard products, our 80% of the products
is made to order against tender requirements, against the enquiry
requirement of EPC contractor, of fabricator, we quote and we
get the order. So, its a pure on tender business, made to order
business, and thats the reason each order is kind of special
requirement and we manufactured according to ASTM standard,
also according to DIN standard, according to IS standard and in
carbon steel according to ASTM 672, 671, at the same time APL
5L. We do have all type of such monogram, approvals and all this
ISO 9000 to 14000, 18000, IBR approval and number of other EPC
contractor and consultants we have an approval from the
international market at the same time domestic market.
And looking to this last quarter results, we have a sale of net
about 256.5 crores, corresponding compared to 321 crores. Of
course, our sales is not comparable on quarter to quarter or
month to month, because it being an engineering product, some
quarter it goes in a more quantity, some quarter its been
produced, but the inspection had not taken place. Because, in our
product, most of the items goes to third party inspection or client
inspection, something like that and with the release not done, so
many other formalities of the project, we do dispatch it or export.
So, the quarter to quarter comparable is something not right
figure or right sense we will get. But at the same time, at the yearend, we see both, whether we have utilized our capacity or how
the top line and what the bottom line. Ultimately, its because of
its all made to order, sometime raw material is also, mostly we
are doing on back to back, so sometime the issue of the raw
material and the delivery gets shifted to next quarter, so target
will not be achieved. So, these are the figures, 256.5 crores for
the quarter ended and the year ended, it is total for the four
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quarters, 812 crores, as compared to 851 crores last year. But, if
you can see the bottom line, we have saved lot many and rotated
and in expenses and this and that and like that we have
maintained a little more, you can say some percentage in net
profit as compared to last year, you can say 81.42 crores, this yearit had reached up to 83.17 crores. This is what our net profit. And
in last quarter what we did, we have in hand the expansion of our
ERW mill that is we are taking up to 18 inch diameter. Right now
it is up to 16 inch diameter. And in this segment also we are
having quite reasonable booking and a quite reasonable demand
is also coming up. So, we are increasing one more site. So, that
expansion is going on and it will be over by the July-August this
year. At the same time, spiral also we have put a second offline
also in use, so now it becomes, both the mill is with offline
welding facility. So, the capacity is two more.
And if you can look at our order position, because overall in the
last whole year, first three quarters was not that good in booking
of order, but third or fourth quarter, we have jumped to good
order booking in power sector, in refinery sector. So, normally
our order booking was (inaudible), but this last quarter, what we
have reached up to 800 plus crores total order booking in various
segments, in stainless steel as well as carbon steel, almost 50-50
or so. And one more new order what we got in South and we are
establishing our mill over there, dedicated facility near Bangalore.
Its about 18,000 tonnes order what we got from L&T, EPC and
thats how we would like to develop our new facility. Right now
we are working at L&T Koradi side. This is a 660x3 power plant ofMahagenco and constructed by L&T and we got some order worth
40 crores as a job work over there to manufacture pipes, laying
and some civil work. So, these new activities what we have
already started in our group and this is how we have to increase
our top line in the coming future. These are the two. And at the
same time, we have expansion in stainless steel division. We are
putting some additional capacity in condenser tube and there the
civil work is going on, building construction is going on, the
equipments are inspected and (inaudible). So, the additional
capacity will be available over the second half of the year. So, this
is what the new development took place in the last quarter.
At the same time, now future vision that we are planning is still
we are looking at some expansion on stainless steel, seamless
capacity. At the same time, we are putting some additional
facility and some modernization. This is what the brief about our
future expansion in stainless steel, seamless tubes and pipes. At
the same time, in extrusion, our own hot extrusion press, we have
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the capacity right now about 300 tonnes a month, but we would
like to, we could look into a good demand in our power sector as
well as oil and gas. So, we are expanding there also. And in
carbon steel, of course we are consolidating and we are utilizing
some more location to utilize the capacity, because at onelocation, right now the facilities are at three locations with us.
And two new locations we have started, one is in Maharashtra,
near Nagpur, one is in Bangalore. Near Bangalore, again it is a job
work, we receive material from the party, but there is a good
scope for doing business over there, because the pipe is a
locational business nowadays in carbon steel pipe, especially
bigger diameter. Because, the transportation cost is very huge, so
we transfer our facility to different location in the country and
utilize the capacity. So, this is what the things. And major
expansion we would like to go for stainless steel, seamless tubes
and pipes, thats all. And some going on in ERW and stainless
condenser tube that will be over by this in three to four months
time. Thank you.
Question and Answer Session
Moderator: Ladies and gentlemen, we will now begin the question and answer
session. If you have a question, please press * and 1 on your
telephone keypad and wait for your turn to ask the question. If
your question has been answered before your turn, and you wish
to withdraw your request, you may do so by pressing # key.
The first question comes from, Mr. Ram Modi from Dolat Capital.
Ram Modi: Hello.
Prakash Sanghvi: Good evening.
Vimal Katta: Yeah, Ram. Good evening.
Ram Modi: Good evening sir. Just wanted to have, what is the kind of top line
growth we are looking at in this year, because as you said earlier
that our order book actually started building up in Q3 and Q4 and
thats why the muted top line growth? So, what is the kind of topline growth which we are looking at this year, so that will help?
Prakash Sanghvi: Mr. Ram, we are targeting 1000 plus.
Ram Modi: Okay, 1000 plus. And what is the outlook on margins? Are we
looking to maintain our margins or how is it going forward?
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Prakash Sanghvi: See, more or less we will maintain with the corresponding year.
Vimal Katta: Ram, basically right now there are no indications, negative
indications. So, everything remaining same, we should end up
with the same level of margins, because better capacity utilizationsomewhere will offset lower margins because of expansion of
carbon steel line pipe activity. So, we are expecting that we
should continue to maintain at between 18% to 19% sort of
EBITDA level.
Ram Modi: EBITDA level, okay. And sir, just wanted to know in terms of any
big general development which is happening in sector, either
refinery work which is announced to us or is it the same
continuing CAPEX that you are expecting?
Prakash Sanghvi: Same one. And that we have a good order in both the regions,
stainless steel as well as carbon steel. And the MRPL expansion is
still going on. And now we have just heard about HPCL is seeing
something new refinery in Ratnagiri or somewhere. They are
going to shift Bombay one or something like that, it is internal
movement is going on, still we have to get the correct report.
Ram Modi: So, but doesnt the guidance seem to be conservative, because on
a 800 crores order book we are still looking at 1000 crores of top
line?
Prakash Sanghvi: Requirements are from abroad, especially from Middle East is
more available.
Vimal Katta: Ram, basically all the orders will not be executable during FY012,
certain orders are long term, long delivery orders also. So, this is
what conservatively we are expecting that we should end up
anywhere between 1000 to 1100 odd crores sort of thing.
Because still we are not very bullish on carbon steel line pipe
activity, because their margins are very low. So, for a very low
margin business, we will not be going very aggressive, though we
are interested in expanding our market reach, but simultaneously
we have to ensure that our bottom line does not get any impact.
So, we are very selectively going ahead as far as line pipe activityis concerned. So, that is the only concern area for us also that
how to have a balance between top line growth as well as
safeguarding our margins. Because, we are not used to work at a
very low margin basis, that is also there. So, selectively we are
picking up those orders where, directly, indirectly we end up
recovering our margins, which will not impact the overall
weighted average margins. It is like that. So, we are targeting
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certain global opportunities also in carbon steel, though the
volumes may not be very big, but at least there we will be in a
position to establish our name in those markets and margins will
be comparable to what we are used to get in our other
businesses. It is like that. So, that is the reason we are not goingvery aggressive on forecasting about our top line growth, though
the potential is there, lot of potential is there.
Ram Modi: Okay. And sir just one thing, our debt has actually increased a bit?
Vimal Katta: Yeah Ram see, basically our business is order driven. And we
procure our raw material on back to back basis, though the tax
has gone up, so is the inventory levels. If you look at the overall
debt, so it has gone up from, rather loan funds have come down
from 320 to 356, but liabilities, current liabilities have moved up
from 87 to 221, mainly because of procurement of raw materials.
Because, inventory levels have shot up from 168, roughly 168
crores to 352 crores, that is a big jump. Similarly
Ram Modi: Debtors have jumped.
Vimal Katta: Debtors have more or less remained; debtors more or less have
remained at the same level. Then certain other current assets
have also moved up a little bit, it is like that.
Ram Modi: Okay. Out of this current debt, how much is working capital
related?
Vimal Katta: See, out of total debt, mainly it is related to working capital. If we
look at the long term liabilities, then long term liabilities have
come down from close from 96 crores to 77 crores, remaining is
working capital related only, short term only.
Ram Modi: Okay. And just last question, sir in this current liabilities, what
would be the acceptance or the buyer credit number?
Vimal Katta: See, buyers credit will be hardly 90 plus 5700 and 4700, 48
crores.
Ram Modi: So, that forms a large part of our current liabilities?
Vimal Katta: Yeah.
Ram Modi: Okay, okay, thanks.
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Moderator: Thank you sir. Next question comes from Mr. Neerav Dhalal from
Sharekhan.
Neerav Dhalal: Good evening sir. Sir, I had a few questions. What is the order
book and how is it executable?
Vimal Katta: See Neerav, total order book position is, carbon steel is close to
875 crores, stainless steel is close to 332 crores. And out of this,
exports will be close to you can say almost 100 odd crores will be
the total exports figure. And here certain orders are long delivery
orders, which will be executable say up to, maybe up to second
quarter of next financial year also. Because, everything is linked
to how the project is going to progress, based on which this
fabricator will be placing order and certain items are long delivery
items also. Because, in our case majority of the things will be
made to order, specialized items where raw material will also be
manufactured as per the specifications given by us. So, it is like
that. So, some items are long delivery items, particularly in
stainless steel. Carbon steel will not be that much long delivery,
mainly carbon steel; everything is executable within 2012 itself.
Neerav Dhalal: Okay. Sir and you spoke about CAPEX in the stainless steel
division. What capacity would be added and what would be the
CAPEX amounts?
Vimal Katta: See, total capacity addition in stainless steel and this is right now
in condenser is roughly around 2000 metric tonnes, capital cost of
around 22 crores rupee roughly. ERW is basically we areincreasing the range, diameter by adding new tooling. So, till date
we are limited to 16 inch only, at the higher end, now we will
have capacity to go up to 18 inch in diameter.
Neerav Dhalal: Okay. So, your capacity would not increase, its just that
Vimal Katta: Capacity will not go up significantly,
Neerav Dhalal: Value addition would happen.
Vimal Katta: Mainly it will be value addition and plus it will increase the sizerange which is available, which we will be in a position to offer to
our customer. And see basically in carbon steel what happens,
there is somewhere an overlapping in ERW and SSAW as far as the
lower diameter range is concerned. In our case, SSAW starts at 18
inch and ERW ends at 16 inch. So, if ERW up to 18 inch is
available and even higher maybe in future, so then we will be in a
position to offer ERW, which is much more cost effective
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compared to SSAW, where production is also higher, without
compromising on the other quality.
Neerav Dhalal: So, this would be for the carbon steel, right?
Vimal Katta: Yeah. ERW is for carbon steel only.
Neerav Dhalal: Okay and condenser would be for the
Vimal Katta: Its stainless steel. Mainly condensers are used in power projects.
Neerav Dhalal: Okay. Right sir. And what is the expectation on the debt you
would take on in FY10?
Vimal Katta: See, on the working capital requirements, incremental
requirements maybe there, based on the how order book position
grows. Otherwise, there are no plans to borrow any additional
amount. Long term there is no plan.
Neerav Dhalal: Sir, one more question is that, just now it has been mentioned in
the discussion that carbon steel pipe is a locational business and
our transportation cost is a sizable cost in that. So, could you
please quantify this?
Vimal Katta: Basically carbon steel pipes, normally size will be going up to 12
meters that is 40 feet. So, based on the diameter of the pipe,
usually from one to five pipes maximum can be accommodated or
maybe seven, if it is not ERW. In case of ERW, maybe more,because diameter is lower. So, in case of line pipe or even project
application pipes, mainly carbon steel pipes we are supplying to
mainly power projects for carrying the cooling water from
reservoir till plant site. So, there the transportation cost
sometimes is higher than maybe even the fabrication cost.
Because, if each trailer is going to accommodate a single pipe,
because there we are fabricating pipes going up to 140 inch plus
in diameter, where you have to pay extra charges because of over
dimensions also on the trailer. So, there transportation cost is
very heavy. So, what we are doing? PMS, Mr. Prakash Sanghvi
has already mentioned that one mobile plant we have set up nearNagpur for execution of one order for L&T for this Mahagenco
Koradi power project. So, it is mainly cooling water pipe project.
So, there we will be fabricating the pipes on job work basis, laying
the pipes also, site preparation and other things will be there.
And similarly, one order for L&T, ECC division in Tamil Nadu, Tamil
Nadu and Karnataka border is there. So, there also we will be
shifting one of our manufacturing facilities to fabricate the pipes.
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These are basically the orders which will be executed over a
period of say maybe fifteen to eighteen months time. Thereafter
either we may shift back the facility or if more orders are there, so
we may shift the facility to those locations, it is like that. So, just
in order to be more competitive, we are taking this step.
Neerav Dhalal: Okay. Sir, also it has been mentioned that you dont use, keep
some of the low margin businesses, where because of that you
are not going aggressive in some of the (inaudible) part of your
segment?
Vimal Katta: Basically, within the country now the capacity, over capacity
situation is there in particularly in respect of carbon steel SSAW
spiral pipes. So, there margins are not as per our expectations.
So, that is the reason we are not going very aggressive. And
secondly, we are at a disadvantage compared to our competitors,
because we have manufacturing facility only there in
Gandhidham, whereas others, certain bigger players; they are
having facilities spread at two-three more locations also within
the country. So, because majority of these orders will be on FOR
terms, so it does not make sense to bid for these orders and then
end up not making money.
Neerav Dhalal: So sir is it the margins pressure or the theme of thinning margin
here is because of the competition inching up and more of the
players are coming up with lower pricing? Or, you see that
because of some other reasons?
Vimal Katta: See, in carbon steel SSAW segment only, I am talking about one
segment only. There we foresee the margins will continue to
remain low for not only us, but for majority of the players,
because of fierce competition, because huge capacity is available
within the country. Because, everybody has gone ahead with
capacity built up in last couple of years time and now global
requirements have come down, global markets are not there and
lot of opportunities are there within the country. And now
majority of the tenders are finalized based on reverse auction. So,
you dont know where one may end up, when the tenders are
finalized. So, this is a situation we foresee. But, in othersegments, because in stainless steel, of course competition has
gone up now with the global scenario, but still we continue to
enjoy our market leadership position. Similarly, in case of ERW
also, because for oil and gas sector, again there a number of
players are limited, so ERW is also a reasonably good business.
And coating, of course depends on the opportunities which are
there in the market from time to time.
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Neerav Dhalal: So sir finally, do we see the same kind of EBITDA per tonne kind of
or you see some difference in that also on the companys level?
Vimal Katta: Basically, going forward also we foresee, because as the top linegrows up, share of carbon steel overall will continue to increase,
which is comparatively a low margin business. But, that low
margin will get offset with better utilization of capacities and
better absorption of fixed cost. So, more or less at around 18%
sort of thing, we should see EBITDA settling down.
Neerav Dhalal: Okay sir. Thank you sir. Thats it from our side.
Moderator: Thank you sir. Next question comes from Mr. Ankit Shah from
SPA Securities.
Vimal Katta: Ankit good evening.
Ankit Shah: Hi, good evening sir. Sir, I just wanted to know the reason for the
substantial drop in our sales in this quarter.
Vimal Katta: See Ankit, I will just like to share one thing. Because, as per the
requirements, we have to share the turnover figures, net of excise
duty and other things. One interesting thing is there, at gross
level last year in 2010, we did 888.58 crores of turnover, it is there
in the published figure. This year we did 864.36 crores. So, that
drop is not very significant. Of course, of course, there is a
reduction in the volumes of carbon steel business. Overall, if welook at the carbon steel volumes, then stainless steel has shown
an increase from 10,349 tonnes of last year, this year we did
12,397, whereas in carbon steel from 113,305 metric tonnes,
there has been a drop to 83,850. And as had been shared earlier
also that first two quarters were not very good as far as carbon
steel business is concerned. And now order book position has
started building up from third quarter onwards. So, this year,
carbon steel business is having very good order booking. Right
now also, out of the outstanding order book position, close to 875
crores is from carbon steel only, whereas stainless steel stands at
332 crores. So, it depends on the opportunities which are there inthe market. Last year we didnt, lot of tenders were there, mainly
from GAIL. But, unfortunately we were not in any advantageous
position to bid very aggressively for those orders, because
majority of the orders were from South India, where we dont
have any manufacturing facility. These are the things.
Ankit Shah: Sir did any of the shipments got deferred in the Q4?
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Vimal Katta: See, as such there is no deferment. In our case what happens,
basically lot of third party inspections are involved or it maybe
customer clearance also. So, we have seen that every year there
will be certain orders, which though we might have planned to
ship in the March quarter, but they may be shipped in either Apriland they may be deferred to May also, depending upon the
customer requirements. Because, customer will not like to hold
an inventory, if there are certain delays by his ultimate customer
also in buying approvals and other things, because he cannot take
up the final fabrication. Because, ultimately our products go for
fabrication or the plant commissioning, so everything is linked
with each other. So, there are sometimes customer requests also
to defer the delivery. But, those quantities will never be very
significant.
Ankit Shah: Sir, one more thing that in the previous concall you had
mentioned that the order book for September, that is the Q3
stood at 650 crores and, sorry for Q2 was 650 crores and as of
December ended was 710 crores. But, since our execution time is
just close to four to six months in most of our order books, are we
seeing great jump in our Q1 and Q2 top line figures?
Vimal Katta: It will not be great. Basically, this year we are targeting close to
anything between 1000 to 1100 odd crores sort of thing. So, our
average turnover should come between 90 to 110. It will keep on
fluctuating. So, we should see on average roughly 300, around
300 odd crores of turnover coming each quarter in this year.
Ankit Shah: Okay. And sir, regarding the details of the CAPEX, we are heading
to, as you said we are heading to more lines, so that we can cater,
we can manufacture 18 inch ERW pipes.
Vimal Katta: No, it is not any additional line, only tooling is being added.
Existing line, we are increasing the range, size range from 16 inch
to 18 inch. So, there will be no addition as such of manufacturing
facility, only the tooling will help us in giving more range in ERW.
Right now, we are limited to 6 to 16 inch, later on it will be 6 to 18
inch in diameter. There is an additional facility, manufacturing
facility being set up for condenser, stainless steel welded tubes,which will add capacity of around 2000 metric tonnes.
Ankit Shah: Okay. So sir, then that will take the total stainless steel tubes
capacity to 26,200 tonnes, am I right?
Vimal Katta: Roughly. Yeah.
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Ankit Shah: Okay. Sir, then can you just guide me the CAPEX amount planned
in this year?
Vimal Katta: See, this year will be, right now whatever has been planned will
be close to 50 crores. And if anything additional is planned, sothat will be shared separately with all of you.
Ankit Shah: Okay. And sir, one more thing, in Q4, we have been quite a lower
tax outgo of
Vimal Katta: Basically here again, our normal tax remains at those levels only.
It is the impact of one thing. See, there was some excess
provisioning done last year, which has been written back. Second
thing is that now, because in last two years, no major CAPEX has
been done. So, now instead of deferred tax liabilities, we have
ended up with deferred tax assets. Nothing more than that.
Ankit Shah: Okay fine sir. Thank you. Thats it from my side.
Moderator: Next question comes from Mr. Gaurav Sud from Kanav Capital.
Gaurav Sud: Yeah, hello sir.
Vimal Katta: Yeah, good evening Gaurav.
Gaurav Sud: Good evening. On your earlier calls you had talked about that you
were banking on, for your stainless steel pipes on the Paradip
Refinery. So, what is the status on that project right now sir?
Prakash Sanghvi: That is in both the division, in carbon steel as well as in stainless
steel division, under execution.
Gaurav Sud: Okay, so part of the order book is because of that?
Prakash Sanghvi: Yeah, yeah. At the same time, some orders from power. These
are the two sectors mainly what we are covering, say about 60%-
70% of power and oil and gas and refinery, petrochemical, then
rest all these other chemicals, diary, sugar, pharma.
Gaurav Sud: Okay. Why I specifically talked about Paradip, because its one of
the larger projects.
Prakash Sanghvi: Its about 25,000 crores worth CAPEX.
Gaurav Sud: So, how long will the orders keep on coming from Paradip?
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Prakash Sanghvi: Yeah, it is about 25,000 crores CAPEX by IOCL and it will go on for
next three years.
Gaurav Sud: Next three years, you anticipate orders to keep on coming?
Prakash Sanghvi: Yeah. First, initially it is first MTO of bigger order, then second
MTO, third MTO, its like that. Gradually it reduces also second
year, third year.
Gaurav Sud: Okay sir, so finally yeah, just wanted to check. The other thing
was this; the finance charges for this quarter were pretty high,
any specific reason for that?
Vimal Katta: See basically till last year our order book position was not very
good. So, lot of money got freed from working capital, whereas
this year because of the higher order book position, our
investment in inventories have also moved up, resulting into
utilization of the working capital facility, which has resulted into
higher interest outgo.
Gaurav Sud: Okay. So, going forward this will continue because of the higher
order book?
Vimal Katta: See, on average, I dont remember whether you were there or
not, when we share this for any projections, I have been telling
the analysts to consider close to 18 to 20 crores sort of working
capital interest every year, because every utilization of working
capital looking to a turnover of close to 1000 crores will continueto remain at around 180 to 200 odd crores. So, even at 10%, 18
to 20 crores sort of interest should be considered notionally.
Gaurav Sud: Okay, got it sir. The other thing is around your windmill. The
contribution from windmills has really come down.
Vimal Katta: Has come down, because last year wind availability was very less.
So, it is you can say the risk associated with the windmill, the wind
energy. If wind availability is less, then you end up loosing on the
generation. Andbut we have to look at longer period, because
on average if we look at a period of twenty years, economic life ofa windmill, then we should end up at an average PLF of close to
20% to 23% sort of thing. Last year, generally it was low all over
Gujarat. At least that has been our experience, because we have
windmills located in Sourashtra region, we have windmills in
Kutch area and in between Kutch and this Northern Gujarat also.
But, everywhere there was a wind drop seen.
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Transcript - Conference Call of Ratnamani Metals and Tubes Limited 14
Gaurav Sud: Okay. So, the other thing is, sir what is the break up in the sales in
terms of your ERW pipes and the seamless pipes?
Vimal Katta: See, we are not giving break up of product wise, but within the
stainless steel and carbon steel, of course we are giving.
Gaurav Sud: Yeah, stainless steel and carbon steel.
Vimal Katta: Yeah, so stainless steel is 407.13 crores, product sale. Then other
sales related to stainless steel are also there aggregating to 10.63
crores. And in case of carbon steel, 363.04 crores is the product
sales.
Gaurav Sud: Okay. Sir, when you take the other products, what exactly do you
mean?
Vimal Katta: See, no, like this scrap and which form part of the other, means
the same product group, but not direct product sales, that is also
there of roughly 9 crores rupees.
Gaurav Sud: Okay. Sir, and given the fact that what is your formal dividend
policy in terms of, do you pay a certain percentage of your net
profit?
Vimal Katta: See, really speaking it is a mix of both. One, percentage wise also
board has got something in its mind, plus the management wants
continuously to increase the dividend each year. So, it is like that
only. The main thing, it has not been very aggressive is that, lot ofCAPEX has been happening. And there are plans in future also to
go for major CAPEXs just to take care of the growth which we
have been looking at since last couple of years. Because, with the
existing infrastructure we can achieve a turnover of say 1400-
1500 odd crores, but thereafter. That will also require lot of
capital infusion, plus incremental working capital requirement till
now have majorly been met from internal accruals, but now we
have seen that if there is a sudden jump in order booking position,
then we need to borrow from the market. We need to approach
our working capital banker. So, we realized if we want to control
our interest outgo, then we have to see that some part of cashaccruals continues to be pumped in, working capital built up also
and some part is available for future CAPEX also. It is like that.
So, I think for some years to come, we will continue to remain
more or less a balanced company as far as dividend outgo is
concerned. It will not be very aggressive.
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Transcript - Conference Call of Ratnamani Metals and Tubes Limited 15
Gaurav Sud: Okay. And any views on inorganic growth, are you looking at it
or?
Vimal Katta: We, as such we have not ruled out that route. But, consciously
we have not even targeted that thing. Both things are there,because first preference is to continue to increase our presence in
our existing product line. So, once that comfort is there by the
management and opportunity is there, which looks really very
good, so perhaps that can be considered. But, consciously we
have not done anything so far.
Gaurav Sud: So sir, then on the other side then, any new products that you are
thinking of as part of that?
Vimal Katta: Lot of things continue to be discussed internally, because if out of
twenty odd ideas, only one might be acceptable to the
management ultimately. So, there are plans to go for forward
integration sort of things. There are plans to add more value
added products like what we have been discussing, high nickel
alloys or titanium already is there, high nickel alloys or then
nuclear also. Nuclear, right now we are again not talking much
about it, because we want things to be very clear globally post
this Japanese experience. But, once things settle down, then
perhaps nuclear can be taken up at that time. So, there are lots of
things in our existing product line also, which we can do. And
then there are lots of opportunities by way of forward integration
also, which we can do, where being present in the tube industry
and manufacturing our own tubes may help the company.
Gaurav Sud: Okay. Sir, your company was known to grow very fast scale about
two years back and then the downturn happened. So, this is after
a long gap we are seeing the order book growing over the last two
quarters. So, do you feel that this momentum is now building up
again for the future or there are still uncertainties?
Vimal Katta: No, it is building up. Basically, what had happened is that in our
case majority of the projects which we cater to are long term
projects. So, because no new projects were being announced
post Lehman Brothers, so that had impacted last two yearsperformance. And now once that certain or rather optimism is
back, in our country also and globally also in some of the sectors,
we are seeing that now enquiries have started growing up from
global markets also. So, we are very optimistic that our being
present in those segments where at present we are not present,
we have help in continuously growing. Because, wherever we are
present, others are also present now, our global peers are also
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there and local competition will also be catching up sooner or
later. But, more highly value added products, there again it will
help us in ensuring one thing that there is a top line growth,
bottom line is also safeguarded and competition is also less. So,
that is the whole strategy.
Gaurav Sud: Okay. Thats it sir. Thanks a lot.
Moderator: Thank you sir. Next is a follow up question that comes from Mr.
Neerav Dhalal from Sharekhan.
Neerav Dhalal: Sir, thank you, all my questions have been answered.
Moderator: Thank you sir. Next follow up question comes from Mr. Ankit
Shah from SPA Securities.
Ankit Shah: Hello.
Vimal Katta: Yeah, Ankit.
Ankit Shah: Sir, sorry I got disconnected in between the call. Sir, I just wanted
to know if you had given any quantitative details of the fourth
quarter.
Vimal Katta: I will be sending you Ankit.
Ankit Shah: Okay. And sir, one more thing; I had read that in the media
reports that we are setting up a, we had signed a MOU with theGujarat industry.
Vimal Katta: Ankit, basically last to last (not sure) in Gujarat, we had signed up
MOU for total investment of close to 200 odd crores, roughly 199
crores you can say, which more or less has already been over.
Because we have, if you remember, this coating plant had been
set up, high speed tubing plant was set up, then offline welding
facility was set up. Few things still remain to be done, that is
modernization of our existing Indrad plant. So, that we will be
taking up at appropriate time, because that we had deferred
looking to the market conditions at that time, so nothing new isthere right now.
Ankit Shah: Okay. And sir, can you share the order book break up in terms of
tonnage?
Vimal Katta: See, tonnage wise we are not giving.
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we want to make it as world class as our Kutch plant is. So,
basically here we will be setting up, bringing all the newer
machines, fully automated, which will result into more perfect
products and high productivity, will be there. So, perhaps by the
time we interact on the next concall, that plant should be firm.
Ram Modi: Okay. Any expansion on stainless steel tubes side?
Vimal Katta: See, Indrad is purely stainless steel only, seamless; seamless and
stainless steel. So, it may add up, capacity may be more than two
times.
Ram Modi: Okay, thanks a lot sir.
Moderator: Thank you sir. There are no further questions. Now, I hand over
the floor to Mr. Viral Malia of Networth Stock Broking Limited for
closing comments.
Viral Malia: On behalf of Networth Stock Broking, we thank Mr. Prakash
Sanghvi and Mr. Vimal Katta for sharing their invaluable insights.
And we thank one and all present on the call for joining us. For
the detailed transcription of this call, you may please send me a
request on my e-mail ID [email protected], I
repeat, [email protected]. I would hand over the
call to the moderator.
Moderator: Thank you sir. Ladies and gentlemen, this concludes your
conference for today. Thank you for your participation and forusing Door Sabhas conference call service. You may disconnect
your lines now. Thank you and have a pleasant evening.
Vimal Katta: Thank you.
Prakash Sanghvi: Thank you sir.
Note: 1. This document has been edited to improve readability.
2. Blanks in this transcript represent inaudible or incomprehensible words.
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