JINDALSAWNSEQ1 FY23August 17, 2022

Jindal Saw Limited

6,885words
128turns
10analyst exchanges
5executives
Management on call
Neeraj Kumar
GROUP CHIEF EXECUTIVE
Vinay Gupta
PRESIDENT AND HEAD TREASURY,
Narendra Mantri
PRESIDENT AND HEAD COMMERCIAL AND CHIEF FINANCIAL OFFICER,
Rajeev Goyal
JINDAL SAW LIMITED.
Vikash Singh
PHILLIPCAPITAL
Key numbers — 36 extracted
Rs. 3,019 crore
unced our first quarter results which is standalone as well as consolidated. The gross income was Rs. 3,019 crore with an EBITDA of Rs. 255 crore, PBT of Rs. 37 crore, PAT of Rs. 28 crore these are all standalon
Rs. 255 crore
ich is standalone as well as consolidated. The gross income was Rs. 3,019 crore with an EBITDA of Rs. 255 crore, PBT of Rs. 37 crore, PAT of Rs. 28 crore these are all standalone numbers. Since the other group
Rs. 37 crore
ell as consolidated. The gross income was Rs. 3,019 crore with an EBITDA of Rs. 255 crore, PBT of Rs. 37 crore, PAT of Rs. 28 crore these are all standalone numbers. Since the other group companies contributi
Rs. 28 crore
The gross income was Rs. 3,019 crore with an EBITDA of Rs. 255 crore, PBT of Rs. 37 crore, PAT of Rs. 28 crore these are all standalone numbers. Since the other group companies contribution in the consolida
Rs. 2,477 crore
dalone numbers a little more. So, if you are now look at these results, Q1 FY-2022 top line was Rs. 2,477 crore which is the comparable quarter, trailing quarter was Rs. 3,345 crore. If you now correlate this
Rs. 3,345 crore
ts, Q1 FY-2022 top line was Rs. 2,477 crore which is the comparable quarter, trailing quarter was Rs. 3,345 crore. If you now correlate this with our order book position, this gives us enough comfort that now th
Rs. 97 crore
cern for all of us. The other matter of concern is finance expenses, which is now moved away from Rs. 97 crore to Rs. 131 crore. The major contribution on one side you have a positive on the top line which gi
Rs. 131 crore
us. The other matter of concern is finance expenses, which is now moved away from Rs. 97 crore to Rs. 131 crore. The major contribution on one side you have a positive on the top line which gives a very good a
Rs. 412 crore
finance charges are something which has caused the EBITDA to drop to Rs. 255 crore as opposed to Rs. 412 crore for the comparable quarter and Rs. 391 crore for the trailing quarter. Let’s first deal with a
Rs. 391 crore
ed the EBITDA to drop to Rs. 255 crore as opposed to Rs. 412 crore for the comparable quarter and Rs. 391 crore for the trailing quarter. Let’s first deal with a simple finance expenses: This is nothing but
60%
ty of the raw material, we had brought down our order book from the usual comfort level to around 60% to 65%. Now, you would see a trend where the order book is going to swell up to our comfort lev
65%
raw material, we had brought down our order book from the usual comfort level to around 60% to 65%. Now, you would see a trend where the order book is going to swell up to our comfort level which
Guidance — 20 items
Neeraj Kumar
opening
“If you now correlate this with our order book position, this gives us enough comfort that now the demand is picking up and we expect the year to end on a very robust note.”
Neeraj Kumar
opening
“So, going forward, the second quarter may still have some residual impact of raw material, but definitely the way the raw material bookings, etc., are happening.”
Neeraj Kumar
opening
“But now we have stabilized, we have found alternate market to buy it from and going forward that should be again stabilized.”
Neeraj Kumar
opening
“Now, you would see a trend where the order book is going to swell up to our comfort level which will be around a billion dollars.”
Neeraj Kumar
opening
“The other is the new segments or the new markers that we are entering which is seamless stainless alloy, and now with Hunting, this combination is going to be very, very formidable, the Hunting joint venture is moving towards a soft launch in this year for sure, we are targeting that if we can do that towards the end of this calendar year or beginning of the first calendar quarter next year.”
Neeraj Kumar
opening
“This time the judge has given two dates and therefore, we expect that the arguments would begin on merits.”
Neeraj Kumar
opening
“Rajeev is sitting, he will note down or, he would expect a mail from you.”
Neeraj Kumar
qa
“It will be in the tune of upwards of Rs.”
Pratiksha Daftary
qa
“We should see margin deterioration even in the next quarter from these levels.”
Neeraj Kumar
qa
“We should see not margin deterioration, we should see pressure what we expect Q3, Q4 to be absolutely fantastic where we should actually see an upswing major.”
Risks & concerns — 15 flagged
Raw material consumption continues to be a matter of concern for all of us.
— Neeraj Kumar
The other matter of concern is finance expenses, which is now moved away from Rs.
— Neeraj Kumar
So, it has gone very volatile and unprecedented level of cost for commodities like coal, iron ore, which has kind of put our inventory and consumption at a very high level.
— Neeraj Kumar
So, going forward, the second quarter may still have some residual impact of raw material, but definitely the way the raw material bookings, etc., are happening.
— Neeraj Kumar
My first question was if you could quantify the Forex expense that is included in our finance cost right now, for this quarter, what is the impact of Forex?
— Pratiksha Daftary
Yes, the steel now we have booked the raw material prices, for future where LCs, etc., I have opened, when the market was very volatile, then the suppliers were also shying away from getting into a contract which was anything beyond that a very short delivery period.
— Neeraj Kumar
We should see not margin deterioration, we should see pressure what we expect Q3, Q4 to be absolutely fantastic where we should actually see an upswing major.
— Neeraj Kumar
Q2 should be a residual impact so it would be under pressure, but maybe a little better than Q1.
— Neeraj Kumar
And as I said, it was a deliberate strategy to keep the order book low so that we don’t get exposed to long delivery versus the volatile raw material prices, now the order book will build, we have a very healthy pipeline at the year end, we expect it to be better than this year, means 31st March 22.
— Management
And if you could just comment on the trajectory for your working capital loan given that we expect the prices to soften, would we expect the working capital loans also to trim down going ahead?
— Pratiksha Daftary
And thirdly, how much inventory do you keep in the sense that you generally contract for three months inventory or maybe six months inventory and if suppose the time such as this, when things are very, very volatile do you keep one month inventory and keep changing on it.
— Abhishek Maheshwari
We have succeeded in persuading the Government to include price variation clause that was one of the strategy that we had adopted, conscious strategy that going forward, we must get this included in our government contracts especially when we went through such volatile and I’m happy to let you know that yes.
— Management
I’ve already explained to you it was primarily because the higher you would have executed the more the impact of the raw material, higher price raw material would have been there.
— Management
If it gets into recession, it will be that much more difficult.
— Management
As far as we are concerned, as I have always been saying, the concern is always there because the market cap if you see of this company is far below than what is desired.
— Management
Q&A — 10 exchanges
Q
My first question was if you could quantify the Forex expense that is included in our finance cost right now, for this quarter, what is the impact of Forex?
Neeraj Kumar
It will be in the tune of upwards of Rs. 40 crore, say between Rs. 40 and 45 crore. Okay, alright. And in the last quarter commentary you had mentioned that for SAW pipes and DI pipes we had covered our raw material, so in the order book raw material was covered. So, if you could just update us on the position for current order book? Again, what you would see that there is a lag in the raw material, but as I explained to you in coal, where we get four large shipments in coal per year. So, there the contract is, it’s a framework arrangement, the coal prices are fixed on the monthly average in w
Q
So, a follow up on the previous question regarding working capital debt. There will be slight reduction in WC debt in coming quarters, can you share the effective interest rate that we are looking at right now including the current data that we had from RBI?
Management
Okay. So, the rate which is a mix of Rupee and the USD was close to 6.5% for the last quarter. We don’t expect significant increase in this quarter because it depends on the pricing done in the sanction. But yes, for the balance period, we expect an increase of roughly 25 basis points in general. And second, in previous concall, you had mentioned about consolidating the organization structure somewhat, you have around 27 subsidiaries and associates and you had said that you will be merging some of your subsidiary companies with your parent company. How is that process going? So, there was basi
Q
I just wanted to confirm, do we have any price escalation clauses, because a lot of our orders are Government based. So, how about these escalations and all?
Management
We have succeeded in persuading the Government to include price variation clause that was one of the strategy that we had adopted, conscious strategy that going forward, we must get this included in our government contracts especially when we went through such volatile and I’m happy to let you know that yes. Now, many of the Government contracts are including price variation clause. Okay. So, out of this US$ 733 million order book position, how much we can presume is from the Government entities and are backed by the price escalation clause? Roughly 60% would be Government, the rest would be E
Q
Sir, regarding the case of Jindal ITF versus NTPC have we received that amount of around Rs. 1,900 crore or not?
Management
Maybe you have missed my initial part. The matter is in the High Court, at this point of time, the hearing is in September first week, 6th, 7th September. We have received an interim award of about Rs. 850 crore against bank guarantee. But otherwise, we will have to wait for the High Court to, there is an appeal available the award is already in our favor, unanimous award. So, the appeal is what is in progress at present. Okay. You mentioned somewhere in the opening comments that due to unprecedented price rise in commodities, hedging mechanism did not work. So, just wanted to understand what
Q
Given that the demand environment is now positive, and the commodity prices are stabilizing, what kind of volume growth we can expect in FY23, in pipe segment, particularly?
Management
Pipe segments you should see a healthy growth in terms of what we ended last year at, so we should see a growth over that. Okay. And would it be fair to say the major growth will come from the DI part of the business? Both DI and large dia.
Q
When we look at the volume data for Q1 and compare it with last year’s Q1, we have seen lower execution on all the verticals except seamless. So, even the pellet is down, so could you explain what was the reason for lower execution for this quarter?
Management
I’ve already explained to you it was primarily because the higher you would have executed the more the impact of the raw material, higher price raw material would have been there. So, the whole idea of when is the raw material prices if you see in LSAW, HSAW, DI all of these, if you compare your Q1, FY2022, we are on the lower side which was primarily because we are trying to contain our supplies and trying to curtail the hit on the raw material. And still we are left with a portion of the order book that is the execution? Yes, some part, some residue. In percentage terms, can you give some co
Q
I want to understand what is our bid book position currently versus what it was five, six months back how it has been moved in last six months?
Management
Order book? Bid book position, orders for which we had bided. I have already covered it; growth is very healthy. A lot more demand is being, a lot of inquiries, a lot of serious inquiries in terms of converting it into negotiations, discussions. And we see a very robust and a healthy bid book. So, that is largely on the water side in India, if I believe from your opening remarks? No, I’ll tell you water, oil, and gas and in exports seamless. Understood. In your comments, you said that Europe is currently kind of a gray area where nobody can tell for sure. But there’s another theme which is run
Q
I wanted to know apart from Sathavahana and Hunting JV, you don’t have any other CAPEX lined up at the moment, right?
Management
No major CAPEX, some related CAPEX with respect to Hunting and OSI is there but yes, apart from these, there is no major CAPEX in line. Any measures that we are undertaking to improve our debt to equity and reduce the debt portion, because we are already operating at less than our current installed capacity? When you say debt to equity, I hope you are meaning our long-term debt to equity, which I would put it in a very healthy category, because our long-term debt is less than Rs. 2,000 crore, and the networth is more than Rs. 6,000 crore. Now, when you have a working capital, when you add that
Q
On the volume front, I missed your deliverable for FY23. How are we are lined to end the year in terms of the delivery schedules for pipes. And, I have another question about the value creation ideas taking into account the working environment has been really tough for us because of the decrease of the commodity prices and that is relevant to all pipe companies. But over and above, what step we have only the professional management present here and nobody represent from the promoter side, since they are the largest shareholder, but would like to understand steps like creating separate vertical
Management
You would get a chance to have the promoters, the Chairman in the shareholders meeting. So, there you would be able to ask them if you want to ask them the questions what you have in mind from them. As far as we are concerned, as I have always been saying, the concern is always there because the market cap if you see of this company is far below than what is desired. So, it is a matter of concern, it is a matter of something that we look at very, very closely every day. But we do understand that there is some overhang of a few things, one of them being NTPC. So, we hope once we see some tracti
Q
Thank you. On behalf of PhillipCapital, I thank you all for joining the conference. And Jindal Saw management for giving us the opportunity, over to you Neeraj sir for any closing comment.
Neeraj Kumar
I wish to close this by a big thank you to all of you, as always. We fully have a sense of the anxiety and the concerns that you people have in terms of market cap, not reacting to even though the issue that we are all grappling with is, that if you look at the fundamentals of the company, they are very, very strong look at their credit rating, look at the performance by itself. Compare it over a period of time, that kind of things that we have gone through in the last two quarters, again gives us a lot of confidence that indeed, the fundamentals are very robust. We are taking steps towards va
Speaking time
Management
48
Pratiksha Daftary
14
Saket Kapoor
14
Moderator
12
Neeraj Kumar
12
Vikash Singh
10
Abhishek Maheshwari
10
Sneha Jain
4
Akshay Kothari
2
Anurag Patil
2
Opening remarks
Vikash Singh
Good evening, everyone. On behalf of PhillipCapital, I would like to welcome you all on Jindal Saw, Q1 FY23 Conference Call. From the management side, we have Mr. Neeraj Kumar – Group CEO and Whole Time Director, Mr. Vinay Gupta – President and Head, Treasury, Mr. Narendra Mantri – President, Head Commercial and CFO and Mr. Rajeev Goyal. So, without taking much time, I would like to hand over the call to Mr. Neeraj Kumar for the opening comments. Over to you, sir.
Neeraj Kumar
Good afternoon to all our stakeholders. Friends on Friday we had our board meeting, where we announced our first quarter results which is standalone as well as consolidated. The gross income was Rs. 3,019 crore with an EBITDA of Rs. 255 crore, PBT of Rs. 37 crore, PAT of Rs. 28 crore these are all standalone numbers. Since the other group companies contribution in the consolidation is not very much or very large significance, we would focus on the standalone numbers a little more. So, if you are now look at these results, Q1 FY-2022 top line was Rs. 2,477 crore which is the comparable quarter, trailing quarter was Rs. 3,345 crore. If you now correlate this with our order book position, this gives us enough comfort that now the demand is picking up and we expect the year to end on a very robust note. On all our business segments, we are seeing a healthy demand in terms of the deal flow or in terms of outlook. Raw material consumption continues to be a matter of concern for all of us. Th
← All transcriptsJINDALSAW stock page →