MAHSEAMLESNSEQ1 FY232 August 2022

Maharashtra Seamless Limited

7,001words
145turns
12analyst exchanges
4executives
Management on call
D. P. Jindal
CHAIRMAN, MAHARASHTRA SEAMLESS LIMITED
Saket Jindal
MANAGING DIRECTOR, MAHARASHTRA SEAMLESS LIMITED
Kaushal Bengani
SENIOR MANAGER – INVESTOR RELATIONS, MAHARASHTRA SEAMLESS LIMITED
Vikash Singh
PHILLIPCAPITAL (INDIA) PRIVATE LIMITED
Key numbers — 40 extracted
93%
has been the best quarter for Maharashtra Seamless in terms of EBITDA. This revenue has grown by 93%. EBITDA has grown by 83%, profit after tax has grown by 59% and earnings per share has grown by 6
83%
r for Maharashtra Seamless in terms of EBITDA. This revenue has grown by 93%. EBITDA has grown by 83%, profit after tax has grown by 59% and earnings per share has grown by 60%. Such phenomenal growt
59%
f EBITDA. This revenue has grown by 93%. EBITDA has grown by 83%, profit after tax has grown by 59% and earnings per share has grown by 60%. Such phenomenal growth has been made possible by signifi
60%
%. EBITDA has grown by 83%, profit after tax has grown by 59% and earnings per share has grown by 60%. Such phenomenal growth has been made possible by significant increase in export and domestic dem
Rs.530 crore
g in view the elevated demand position right now. Going forward we will earmark a total amount of Rs.530 crore which will be utilized for repayment of Rs.300 crore of bank loan taken for acquisiti
Rs.300 crore
e will earmark a total amount of Rs.530 crore which will be utilized for repayment of Rs.300 crore of bank loan taken for acquisition of United Seamless, Rs.150 crores for capacity enhancement in
Rs.150 crore
for repayment of Rs.300 crore of bank loan taken for acquisition of United Seamless, Rs.150 crores for capacity enhancement in United Seamless so that we are able to have better capacity utilizat
rs,
d on the impetus given by the management for developing new products and adding value to customers, we have been able to obtain an order for subsea sour service seamless pipes, these pipes are an im
rs. 70
pacity utilization and improved profits. The industries that we serve are known to a lot investors. 70% of our exposure is to the oil and gas segment, the balance 15% is to other industries and 15% to
15%
erve are known to a lot investors. 70% of our exposure is to the oil and gas segment, the balance 15% is to other industries and 15% to boiler segment. On consolidated level, Maharashtra Seamless has
96 crore
nsolidated level, Maharashtra Seamless has performed really well. The profits have increased from 96 crores to 153 crores on an year-on-year basis. And from 99 crores to 153 crores on quarter-on-quarter b
153 crore
vel, Maharashtra Seamless has performed really well. The profits have increased from 96 crores to 153 crores on an year-on-year basis. And from 99 crores to 153 crores on quarter-on-quarter basis. This gro
Guidance — 20 items
Kaushal Bengani
opening
“We continue to maintain our market share and we want to improve the market share that we have going forward.”
Kaushal Bengani
opening
“Going forward we will earmark a total amount of Rs.530 crore which will be utilized for repayment of Rs.300 crore of bank loan taken for acquisition of United Seamless, Rs.150 crores for capacity enhancement in United Seamless so that we are able to have better capacity utilization.”
Kaushal Bengani
opening
“In the current quarter and based on the impetus given by the management for developing new products and adding value to customers, we have been able to obtain an order for subsea sour service seamless pipes, these pipes are an import substitution product and it will be the first time that they will be supplied in India by an Indian manufacturer.”
Kaushal Bengani
opening
“Further we have been able to add new customers and going forward we want to add more customers so that we are able to have better capacity utilization and improved profits.”
Kaushal Bengani
opening
“This growth of more than 50% is phenomenal, and we believe we will be able to sustain this level of growth.”
Kaushal Bengani
opening
“At EBITDA level also we have been able to generate extraordinary growth and we believe that we will maintain the new levels of EBITDA as per our guidance given in the call for the previous quarter.”
Kaushal Bengani
opening
“United Seamless has been the biggest driver of growth for Maharashtra Seamless and we expect it to sustain going forward.”
Kaushal Bengani
opening
“In the call for the previous quarter, we had given guidance of Rs.15000 a tonne for Seamless and Rs.8000 a tonne for ERW.”
Kaushal Bengani
opening
“However going forward we will stick to the guidance that we have given because we believe that we will be able to do better but for the moment we don’t want to make a statement which we will not be able to adhere to.”
Kaushal Bengani
opening
“We like surprising investors and for that reason we would want to maintain the guidance given.”
Risks & concerns — 3 flagged
So, the impact of steel prices is that, simply the steel prices have been corrected and that has led to increased margins and increase profit and going forward is expected to remain range bound and not too much fluctuation and we expect to maintain our margins going forward and maintain the profitability.
— Saket Jindal
So, we expect in the near future to maintain this market and also the Canadian market there is investigation happening, it will be known later on, the impact of the duties.
— Saket Jindal
So, is it in line with the fall in the pricing, will we see any major or some sort of margin pressure going forward, or can you see these margins sustainable on a longer-term basis?
— Hetal Gada
Q&A — 12 exchanges
Q
My first question was regarding steel prices. So, post the export duties that have been levied we have seen falling steel prices, so just wanted to understand when can we start seeing the impact on our numbers and does this consequently means that our realizations will also go down for the future order?
Saket Jindal
Right. So, the impact of steel prices is that, simply the steel prices have been corrected and that has led to increased margins and increase profit and going forward is expected to remain range bound and not too much fluctuation and we expect to maintain our margins going forward and maintain the profitability. So, the steel export duty which was put over the debate on whether to remove it or to keep it. So, that is not clear, it is still status quo and if there is removal of the export duty, then the steel price can go up. Okay. So, the steel prices is going down as compared to quarter one,
Q
Sir, what is our capacity utilization in the new unit that we have taken over through NCLT. And what is our overall capacity utilization at this point of time and what kind of order book are we seeing from USA alone in the next two to three years?
Saket Jindal
So, in MSL around 70% utilization and in USTPL also around 60% utilization. So, there is a lot of scope for production increase looking at the capacity available. Okay. So, at 100% capacity utilization what do you feel will be the EBITDA increase? No, EBITDA, if we increase the production through economy of scale the cost will come down. So, it can make a 5% difference in the margin. And what will be stopping us at this point of time is the orders? The order booking is strong otherwise, but in a stiff competition, this year is a good period for orders but it’s been possible to make improvement
Q
So, earlier as per the last concall in Q3 FY22 you mentioned our seamless pipe capacity at around 4.5 lakh tonnes and USTPL capacity around 2 lakh tonnes and ERW capacity at around 1.25 lakh tonnes but in Q2 FY22 presentation an earlier presentation our capacity was showing higher say for example standalone stainless pipe capacity was reflected as 5.5 lakh tonnes, United Seamless was 3.5 lakh tonnes and ERW pipe was 2 lakh tonne. So, what exactly has changed in this capacity?
Kaushal Bengani
The capacities that were mentioned earlier were nameplate capacities which were theoretical in nature. The actual capacities of Maharashtra Seamless is 4,50,000 tonnes in seamless segment, in ERW segment it is 1,25,000 tonnes in United Seamless the theoretical capacity is 3,50,000 tonnes but based on the existing infrastructure that is there it is 2,00,000 tonnes and currently we will produce and dispatch 1,20,000 tonnes and going forward we will put in a capacity enhancement which will ensure that we go up to 2,00,000 tonnes. Okay. And sir other question is that ISMT is our peer and it was re
Q
So, firstly, I wanted to understand, did we have any inventory losses cover in the quarter given that steel prices have corrected for much?
Kaushal Bengani
No, we did not have any. The steel price correction, after the correction we also corrected our prices, but at the same time, the inventory which we had earlier we were covered by the order that high prices for that inventory. So, I don’t think it makes much difference. Okay. And so sir post the correction, you have also corrected your prices. So, is it in line with the fall in the pricing, will we see any major or some sort of margin pressure going forward, or can you see these margins sustainable on a longer-term basis? The correction which we did was nominal and the margins are intact and i
Q
Thank you for the opportunity. Sir, in the results in the other unallocated segment, our EBIT has increased sequentially to 57 crore versus 32 crore last quarter. So, can you just explain what is the reason behind and what are the activities accounted in this segment?
Kaushal Bengani
In the unallocated segment on consolidated level, the reason for increase is United Seamless, United Seamless, and other entities, so since performance at United Seamless level has improved, therefore there has been an increase.
Q
Congratulations on a very good set of numbers. My question was more from a longer-term perspective, given the strong visibility we have on the profitability and the cash flows. Can you outline your capital allocation strategy over the next three years and also is it possible to quantify, what percentage of profit are you open to distributing?
D P Jindal
Well, about 150 crores is required for United Seamless to gear up the production and added value product and we will be repaying the loans which we have taken for the United Seamless. And we will be spending about 80 crores or so for setting up a solar power plant to meet our energy requirement. This dividends, of course, we will be having investors friendly policy to give more and more dividends distribution. So, I just had a follow up there. If we’re looking at say the numbers for this year, we can probably look at the EBITDA of Rs. 900 to Rs. 1,000 odd crores. So, I understand that you had
Q
I have just one question, you mentioned about the spending in oil and gas in US and the rig count, can you help us with the same assessment on what’s happening in the Middle East and how is our order book in terms of exports, is there any meaningful number from there?
Kaushal Bengani
We have some sales in the Middle East, but right now our biggest market is the United States. And therefore, we are not focusing a lot on Middle East at the moment. Our export market is also Canada and Europe which is where, the western region is where our focus lies at the moment because we are getting better margins. Domestically, I can tell you some information which we have come across. We have been informed that ONGC has acquired 27 new land rigs and for which there will be sustained demand in the upstream segment. The last comment that you made about ONGC is the domestic market? Yes.
Q
Good evening Sir. Congratulations on excellent results and very good presentation. Plans to obviously get out of the non-core business and reduce intercompany deposits, that’s very exciting. Couple of questions on the business front, what would be the capital expenditure plan mainly in United Seamless, and as well as how much would be the maintenance capex in Maharashtra Seamless for next two, three years?
D P Jindal
United Seamless is 150 crores and Maharashtra Seamless will be normal as in the last two years. So, 20, 25 crore every year. Per annum, okay. And 150 crores in United Seamless would be about 24 months? Right. Unless we take over the OCTL. And how much would be OCTL if we take it over? No, if we take our OCTL then we don’t have to spend this capital expenditure because OCTL is the right product mix, right unit for United Seamless for finishing the pipes. So, 150 crore in either of the case, whether we put up our own finishing capacity or we take out the OCTL. Right. Second is what is our curren
Q
My main question is that one new order 150 crore you’re not specified which customer. So, this is a import substitute as well as what prospects you see in this particular product segment. And what are your plans if you look over to the increase capacity for this product than what is the current installed capacity and how much you want to expand on this particular product line?
D P Jindal
You mean the subsea pipeline. It is subsea pipeline; it is domestic only we got the order. Previously it was being imported. Sir, which customer? ONGC, L&T is the contractor. Okay, thank you and how much you expect in the current year if this product is running successfully on the rigs, then what is the market segment you are looking at and if at all if that goes through then are you planning to increase the capacity in this product line particularly? Total is 70,000 tonne. So, we are expecting at least 40,000 tonne in this segment and certainly we can produce these pipes in the existing capac
Q
Just a small clarification. Firstly, Mr. Jindal you mentioned about some inquiry in the OCTG market in Canada. Could you please dwell further on the same what are you trying to explain us here sir?
Saket Jindal
In Canada there is no duty online pipe, but there was duty which was a floor price on OCTG and they want to revise that so they are investigating and they took data from all exporters. And in due course of time they will decide the revision in the normal value or the floor price. So, that will determine the viability of the exports to Canada. But line pipe we can currently also export, that is the scenario. So, in the product profile we are only exporting line pipes or also OCTG to Canada? No we are exporting OCTG significantly to USA. And the Canadian region also? Canadian we are not doing cu
Q
Thank you, everyone, for joining the call today with us. I’d like to thank again the management for giving us the opportunity. And sir over to you for any closing remarks if you would like to make.
D P Jindal
Thank you. We are looking forward to serve the investors better and we would like to give a free and frank discussions and we would like to share our policies. Now, more and more statements are coming to the investors for whatever is our policy regarding all these subjects we have discussed. Thank you very much. Thank you Vikash for organizing the call. Thank you to Mr. Jindal, Chairman and Mr. Jindal, MD for taking time out from the schedule to participate in the call and helping the investor relations team in communicating better with the investor community. And we are extremely thankful to
Q
Yes.
Management
Speaking time
Saket Jindal
30
D P Jindal
27
Saket Kapoor
20
Moderator
14
Pratiksha Daftari
9
Faisal Hawa
9
Kaushal Bengani
8
Hetal Gada
6
Bhavin Chheda
5
Vikash Singh
4
Opening remarks
Vikash Singh
Good evening everyone. A very warm welcome to all. Welcome to the Maharashtra Seamless 1Q FY23 concall. I would like to thank the management for giving us the opportunity for hosting the call and without taking any more time. Basically, I’ll forward it to the management, today we have with us Mr. D. P. Jindal – Chairman, Mr. Saket Jindal – MD, and Mr. Kaushal Bengani – Senior Manager Investor Relations. Over to you sir, for your opening remark.
Kaushal Bengani
Thank you Vikash. Good evening investors and thank you for taking the time to join us on the quarterly earnings call. We have declared our results yesterday and released our investor presentation. I hope you’ve been able to go through it. The quarter ending June 2023 has been the best quarter for Maharashtra Seamless in terms of EBITDA. This revenue has grown by 93%. EBITDA has grown by 83%, profit after tax has grown by 59% and earnings per share has grown by 60%. Such phenomenal growth has been made possible by significant increase in export and domestic demand on account of increase in drilling activities. This has primarily been brought upon by high crude oil prices. Supply constraints in Europe, the geopolitical tensions in Russia and Ukraine have also aided in improving demand. Internally we have rationalized various processes and have obtained better efficiencies. Our sales and marketing team have developed new customers in the past and have been able to retain existing customer
← All transcriptsMAHSEAMLES stock page →