Jindal Stainless Ltd

NSE:JSL

Earnings Call Analysis

Navigating Choppy Waters

In the face of global economic challenges, Jindal Stainless Limited (JSL) showcased resilience during the second quarter of FY '25, maintaining a steady sales volume of 554,627 metric tons. This represents a 4% increase compared to the previous year, albeit a slight decline of 2% sequentially. The company reported a revenue of INR 9,746 crores, up 2% from the last quarter, driven largely by an improved product mix and reduced competition from low-end Chinese imports.

Solid Financial Position

The company’s financial health remains strong. JSL's EBITDA for Q2 stable at INR 1,007 crores while the profit after tax (PAT) climbed 2% to INR 589 crores quarter-over-quarter. Despite a 28% fall in export volumes due to external market pressures, domestic sales surged nearly 10%, highlighting robust local demand across various sectors. As of September 30, 2024, JSL has successfully reduced its net debt by 11% to INR 4,312 crores, affirming a disciplined approach to balance sheet management amidst substantial capital expenditures of INR 2,900 crores.

Adapting to Domestic Challenges

Effective strategies are imperative as the company grapples with external markets, particularly in Europe and the U.S., where economic activity has slowed. While JSL aims to fortify its exports, focusing on regions like South Korea, South America, and the Middle East, these efforts are currently not offsetting declines in traditional markets. However, domestic demand signals remain strong, especially with expectations of growth in sectors such as railway infrastructure and consumer goods ahead of the festive season.

Strategic Growth Initiatives

Looking ahead, JSL has ambitious plans, including the commissioning of a nickel pig iron smelter facility in Indonesia ahead of schedule, which is expected to positively impact margins. The ongoing investments in product innovation for stainless steel applications will not only meet increased domestic demands from sectors like ethanol production and infrastructure but potentially solidify JSL's market position in the stainless steel space.

Guidance Revisions and Expectations

Despite initial projections for a 20% volume growth for FY '25, the company adjusted its guidance downward to between 10% and 15%, primarily due to the export market's ongoing weakness. Nonetheless, JSL expects to maintain an EBITDA margin of around INR 18,000 per ton, aiming for prudent margin management while pursuing growth opportunities in segments with better margins.

Capital Expenditure and Future Focus

Investments remain a cornerstone of JSL's growth strategy. The company anticipates spending about INR 5,500 crores in capital expenditure for FY '25, with nearly half already deployed in the first half of the year. This will support expansions and enhancements across various facilities, ensuring they remain competitive and responsive to market demands while keeping an eye on maintaining a strong balance sheet.

Long-term Vision and Investor Appeal

JSL continues to project robust domestic demand for stainless steel as national infrastructure projects proliferate. The company's focus on maintaining a prudent capital allocation strategy, ensuring an ROI of at least 15% on its investments, coupled with proactive debt management strategies, positions JSL favorably for potential investors seeking stable yet growing opportunities in the stainless steel market.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to Jindal Stainless Limited Q2 FY '25 Earnings Conference Call hosted by Investec Capital Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ritesh Shah, Head of Mid-Market Research Coverage and ESG. Analyst materials from Investec Capital Services India Private Limited. Thank you, and over to you, sir.

[Ritesh Shah, analyst]

Thank you, Riddhi. Welcome all for Jindal Stainless quarterly conference call. We have with us the senior management. We have with us Mr. Abhyuday Jindal, Managing Director; Mr. Tarun Khulbe, CEO and Whole Time Director; Mr. Anurag Mantri, Executive Director and Group CFO; and Ms. Shreya Sharma, Group Head, Investor Relations.

I'll hand over the call to Mr. Abhyuday for opening remarks. And post that, we will have a Q&A session. Mr. Abhyuday is available only for 30, 40 minutes. So would request participants to drive the strategic questions in the first half of the call. Thank you so much, and over to you, sir.

[Shreya Sharma, executive]

Thanks, Ritesh. Good afternoon, everyone, and a warm welcome to the call. We have shared our Q2 FY '25 earnings presentation with the stock exchanges, which is also available on the company's website and today's call discussion will be on the same line. Please note, some of the information on this call may be forward-looking in nature and is covered by the disclaimer on Slide 2 of the earnings presentation. And as Ritesh mentioned, Mr. Jindal -- due to some exigencies, Mr. Jindal has a hard stop at 4 p.m. So request you all to please limit your strategic question to one each and after that we will take the bookkeeping questions. Thank you. Over to you, sir.

[Abhyuday Jindal, executive]

Thank you, Shreya, and good afternoon to everyone, and welcome to the Q2 FY '25 Earnings Call. Let me first discuss key business highlights of the quarter ending September 2024, following which Anurag will take you through our operational and financial performance.

Despite lower challenges and disruption in ocean freights, we maintained our export volumes on a quarter-on-quarter basis. The export market continued to face headwinds due to weaker economic activity in the EU and the slowing of key sectors such as manufacturing and construction in the U.S. Though we are continuously targeting to increase sales in other geographies like South Korea, South America, Middle East, however, currently, it is not compensating for the loss of sales volume in the major global economies.

On the domestic front, we witnessed stable growth throughout the quarter. Demand remained steady from railway coaches, lift elevator segment, pipe and tubes and other segments as well. The performance of white goods sector exhibited improvement ahead of the festive season, and we also expect moderate growth in the 2-wheeler segment till the tail end of the season. There have been good developments on the railway front, as the Rail Ministry increases its focus on building a world-class rail network alongside enhancing industrial capabilities. The contract for the design, manufacturing and commissioning of the first 2 high-speed bullet trains is awarded to manufacturer domestically. This was earlier expected to be imported. The contract specifies the car body to be manufactured using austenitic grade stainless steel and we are well equipped to manufacture and deliver this grade as per the requirements.

Additionally, new train sets such as Vande Bharat sleeper train and the NaMo Bharat Rapid Rail are further expected to move the demand for stainless steel in the country. We also expect a healthy demand for stainless steel from the process industries for ethanol, hydroelectric, thermal, nuclear power plants. Moreover, the government's renewed focus on the use of stainless steel in bridges and infrastructure applications in coastal areas will further elevate the demand for the alloy.

I would like to add that our announced projects are progressing very well. I'm happy to share that we have commissioned our nickel pig iron smelter facility in Indonesia in the month of August 2024, which is around 8 months ahead of the scheduled time line. I would also like to highlight that aligning with the Atmanirbhar Bharat mission of Government of India, we have accredited by -- we have been accredited by Brahmos Aerospace as a qualified vendor for the manufacturing and supply of steel sheets and plates for that cruise missile application. We've also supplied low alloy steel sheets for ISRO and HAL satellite launch vehicles.

Now coming to the ESG front. As a company dedicated to ESG objectives towards our efforts in sustainability and ecologically conscious business practices, we have received recognition at multiple industry events. Both our Jajpur and Hisar units have been honored with the prestigious Energy Efficient Unit Award at the 25th CII National Award for Excellence in Energy Management and Jindal Stainless has been awarded the prestigious Platinum Global Environment Award 2024 for its outstanding achievement in environment excellence. With this, I would like to hand over to Anurag to discuss the operational and financial performance. Thank you.

[Anurag Mantri, executive]

Thank you, Abhyuday. Good afternoon, everyone, and a very warm welcome on the call. As highlighted by Abhyuday, we delivered consistent volume amidst challenging global scenario. Let me discuss in detail the operational and financial performance during quarter 2 of FY '25. We delivered a stable sales volume of 554,627 metric tons in Q2 which has increased by around 4% on Y-o-Y with a slight dip of around 2% on a quarter-to-quarter basis. The standalone Q2 revenue increased by around 2% on a quarter-on-quarter basis to INR 9,746 crores with improved product mix and limited sales in a lower-end segment dominated by Chinese imports.

Quarter 2 EBITDA remained steady at INR 1,007 crores, and PAT increased by 2% at INR 589 crores on a quarter-on-quarter basis. The H1 sales volume increased by 5% on a year-on-year basis in spite of our export volumes falling 28% due to global economic selling. So we -- the support of this volume has increased backed by the increased domestic sales, which is almost 10% higher than the previous year. So we saw a good domestic demand across value-added segments. Further, the continuous focus on maintaining a strong balance sheet as of 30th September 2024, our JSL and JUSL net debt has reduced to INR 4,312 crores, which is down by 11% from June '24. This is despite the CapEx and investment outflow of INR 2,900 crores, mainly to -- mainly on account of the Chromeni acquisitions, Indonesia facilities investments. We have achieved this through working capital optimization and achieved this debt reduction as part of balance sheet strengthening. Our standalone debt to equity is maintained at 0.2x and the net debt to EBITDA stood at 0.7x. Our debt service coverage ratio has also significantly increased on back of strong cash flows. To close, we continue to anticipate a big domestic stainless steel demand, and this will continue to rise with the robust economic activities.

With this, I would like to end my discussion and would request the moderator to open the floor for the Q&A session.

[Operator]

[Operator Instructions] The first question is from the line of Amit Dixit from ICICI.

[Amit Dixit, analyst]

Congratulations for a good performance in a very testing time. I have a couple of questions. The first one is that recently we called the ETR initiating investigations into the import of Chinese stainless steel tubes. Do we see any possibility of investigation [indiscernible] protection for our range of products as well because import influx is something that has been troubling the industry and us also for quite a while. So just wanted your thoughts on this.

[Abhyuday Jindal, executive]

Absolutely, Amit. That is definitely on the cards. And just as you know, the stainless industry being a little bit unorganized. Data collection from various MSME and other competitors is taking a little time to organize, but we are working on it. And we expect that soon we would be also applying for some kind of anti-dumping duty.

[Amit Dixit, analyst]

Okay. That's nice to know. The second question is essentially on the ongoing projects. So I just wanted to understand the ramp-up of Rathi and Rabirun. Where are we now? And also the NPI project, of course, you commissioned ahead of the schedule. So is there a chance that the stainless steel project that we are contemplating could also be commenced in what we have actually envisaged?

[Abhyuday Jindal, executive]

I'll take the last part first. So definitely, it's a 2-year time period that they have taken for the construction of the new stainless steel melt shop. But looking at their speed and looking at exactly like you're saying, the speed that they've completed the initial project. Our expectation is also it should come up before 2-year period, but it's still too early to give any kind of clarity. Maybe a few coming quarters later, we can give you a better picture on that. And for the other things, Mr. Khulbe?

[Tarun Khulbe, executive]

For Rathi, like in this H1, we have produced around 50,000 tonnes, which is almost aligned to our projection. So we believe that this year, our Rathi utilization should be around 65% to 70% capacity utilization. On Rabirun, we are still figuring out -- I mean, this is the ramp-up and still figuring out that -- what we -- or how do we take our business plan over there. But on Rathi, we are -- but it is still on the rebar, it is gradually picking up because as you could have seen that very recently, Mr. Nitin Gadkari has also made 2 statements in public where he has recommended the use of stainless steel rebars at least in the coastal areas. That also, we believe, will help the industry and because a lot of circulars within the NHAI and their related entities, they are reinforcing the policies of use of the stainless steel rebars into the coastal area.

[Abhyuday Jindal, executive]

So there are some good tailwinds coming up for long products, and we feel that volumes should pick up there.

[Amit Dixit, analyst]

One related question here. Have we broken even on EBITDA in Rathi?

[Anurag Mantri, executive]

Not right now, Amit, because initially, as mentioned is that it's not a rebar. We are more focusing on the wire rod. So gradually, it will move to rebars and it's more a stabilization phase. So initial fixed expenses are higher. But as we move forward, we are on track on our plan.

[Abhyuday Jindal, executive]

Fixed expenses are higher and because it's a stabilization kind of phase, so we started producing vanilla grades, where always margins will be a little under pressure. And now that confidence has come, and we are also moving now to higher grade, better variants. So from volume side and from margin side, there should be improvement in the coming quarters.

[Anurag Mantri, executive]

Yes. So this -- at the end of this year, we will surely be at -- because we are on track for the breakeven and some margins over there -- better earnings over there.

[Operator]

Next question is from the line of Ritesh Shah from Investec Capital Services.

[Ritesh Shah, analyst]

A couple of quick questions. We had given volume guidance number of 20%. Do we still stay put to it? Or would we look to downward revise the number? That's one. Secondly, on the spread guidance, we have indicated INR 18,000 to INR 20,000 as standalone. Do we still stick with it? Or is there any change? And third is basically on the capital raise, we have taken an enabling resolution, any thought process or any variables that we are looking for before we tick that box? I think these are 3 quick questions.

[Abhyuday Jindal, executive]

Good, Ritesh. Thank you for asking. I think we would definitely like to bring down our volume growth guidance. We had initially said 20%, looking with the expectation that export would pick up. And basically, we were bullish on export side. And that has not happened, and it's further actually Europe and U.S. has just not recovered. In fact, Germany which is the strongest market from a volume standpoint and economic power standpoint is actually in a very bad situation. So that is why at this point, we would like to refresh our guidance from -- down from 20% to 10% to 15%. We're still quite positive on the domestic growth story. It's just that export is a bit of a dampener still for us.

And in terms of your EBITDA per tonne guidance, we are trying to maintain it at around INR 18,000 at the moment because we still want to push our volumes. We still want to, yes, basically grow our volumes, not to the factor that we are able to hurt our margins to a large extent. So looking at factor of both of them, volume, 10% to 15% and EBITDA margin of around INR 18,000 per tonne. And the third question Anurag?

[Anurag Mantri, executive]

And the third question was on the capital raise. As you mentioned, this was only enabling resolution, which includes all sort of instrument on equity, quasi equity as well as on the foreign currency bonds and everything. Right now, as you would have seen in last quarter, consolidated debt has been reduced by INR 500 crores -- more than INR 500 cr. So we have done a few of the -- quite a few working capital optimization, and that has helped us to release a permanent capital in -- the permanent cash in the system. And therefore, the debt has not reduced despite outflow of INR 2,900 crores of -- in last H1 itself. So we will see the -- our focus will always be a very prudent capital management and a stronger balance sheet. Depending on that and depending on our growth plan, whenever opportunity comes, we'll see that, but there is nothing on the card immediately at this stage.

[Ritesh Shah, analyst]

Sure. And just a follow-up, one last question for Mr. Jindal. Sir, what is your priority in order of ramping of the different variables that we have, including [indiscernible], SMS, Rathi, RVPL and Chromeni. I was just perplexed when I heard the comment we are trying to figure out on RVPL, is it something on track? Or how should we read into that?

[Abhyuday Jindal, executive]

Priority is definitely Chromeni, our Mundra asset because that is where our overall, let's say, CR output was also less in the company and the demand and requirement coming from our customers is maximum for a cold rolled high-quality product. So capacity-wise, also it is the largest. So our -- and investment wise also is one of the largest. So priority is definitely Chromeni. And I mean, others, I would all put at an even footing. I don't want to say one is higher priority than the other. But Chromeni, definitely because immediately it can add to our bottom line, top line volume growth, that is our main focus.

[Operator]

The next question is from the line of Rajesh Majumdar from B&K Securities.

[Rajesh Majumdar, analyst]

Congratulations again on maintaining your profitability despite a bit difficult quarter. Some of my questions are answered, but I would like to ask one question for sir, is that -- on the NPL venture, now you have commissioned that ahead of schedule, is it currently viable at the $17,000 nickel price? Or what would be the viability of this project at nickel -- what average price of nickel have you considered in terms of a longer-term viability for this project?

[Anurag Mantri, executive]

Rajesh, as you -- in our business, we have seen the nickel and we don't take a call on nickel. Let me tell you, I think frankly because we have moved away from that business model, and we started doing the mostly on that how we should maintain a consistent inventory when it's not that when nickel looks down, we take a higher inventory and when it nickel. So even this project was -- has 2 larger objectives, if I recall. One is the backward integration to raw material security, which remains as it is, in fact, that strategic objective is completely remain intact as it is. Second was on that process was also on to help expanding the margins through this -- going back into the value chain, which obviously, as I mentioned, because once you maintain more as a static nickel inventory, it may go up and down, but payback may deliver slightly in that case. But typically, we have seen it does not remain in those levels. So on an average basis, we expect it to be on track. So I think strategic objective remains, that was the first objective. That is completely intact.

Profitability-wise at this current level, it may sometimes not look good -- as good as what we would have invested at that point of time. But in our business, as you were saying, it's more we are working on a stable inventory management level. So from that perspective, we will continue to hold stable margin range into this project also.

[Rajesh Majumdar, analyst]

And just a related question on the investments you make, say, over a longer term, what is the kind of return you kind of envisage on these investments? I mean, over longer-term frame in terms of the ROI on these projects?

[Anurag Mantri, executive]

So our defined capital allocation policy, which we have published, is that at least 15% ROI for all the growth investment in the projects.

[Rajesh Majumdar, analyst]

Including NPI, yes?

[Anurag Mantri, executive]

Right.

[Rajesh Majumdar, analyst]

Okay. Because you mentioned earlier that I think despite the project being commissioned on time, the actual volumes of this may come a little later. So I was just wondering why that is happening.

[Tarun Khulbe, executive]

That is a common and I mean that is the way these projects work once they get commissioned then 1 or 2 quarters they take to ramp up. It is not that quick ramping up. That's a very normal thing with these projects.

[Abhyuday Jindal, executive]

Correct. That's with any company, any facility, any factory, any country, ramp-up is always a long drawn process.

[Tarun Khulbe, executive]

And that ramp-up part is irrespective of when you commission. Even if you commission that after 2 years, the same period it will take to ramp up. Yes.

[Rajesh Majumdar, analyst]

Okay. And my last question is that now that we have reduced the volume guidance somewhat. I think the new expansion of -- in Jajpur will take now 3 years to kind of come to full utilization instead of the 2 years you were looking at earlier. So in that case, will we undertake any large CapEx before that? Or even if you look at first this utilization getting -- so this facility getting utilized before we look at larger kind of investment.

[Abhyuday Jindal, executive]

We are not changing that. We still feel utilization should come up quite fast. And for next year, we are quite bullish again. We're not revising our guidance for next year volume growth because there is real no reason for volume dip other than shipping times has increased, your container availability is less, your costs have gone up, which you're not able to pass on to your customers at this moment because in their own markets, all your stainless steel companies volumes are down. So which is why they are also quite competitive and they're quite aggressive there. So absolutely, the minute, any respite comes in one of these wars or something, again, our volumes will pick up because we are in constant dialogue with our customers. They want our material, they're requiring our material. But obviously, because of -- we also don't want to dip our margins and still maintain a steady volume growth. This is the situation at the moment.

[Anurag Mantri, executive]

So all this, if you see, Rajesh, is a temporary one, I would say, is that like West Asia war crisis that see higher time, lower pickup in the Germany and some of these geographies. We believe I think -- and then domestic demand remain very strong. So if you see even domestic side, we have still achieved despite all these challenges, the 10% volume growth in this, and we will have a higher volume growth in H2 in domestic market. So -- and as the premium domestic segment continues to grow faster than the normal stainless steel growth rate, we will continue to tap those opportunity. So it's not -- it's -- see, we have seen -- it looks more temporary at this stage, and we wanted to be prudent at this time. If quarter 4 also if the export volumes really pick it up and a good thing is that our inventories levels in Europe, the channel is very low. So that you can see from our Iberjindal, which was earlier having a stocks of the inventory that has been completely exhausted now. So in fact, the channel level inventories are at almost -- is completely exhausted in that system. So whenever the demand picks come up, it will eventually, we'll get the opportunity to tap that.

[Operator]

The next question is from the line of Vikash Singh from PhilipCapital.

[Vikash Singh, analyst]

I just wanted to understand one thing from the NIT project. By which quarter do you think that entire plant will be ramped up and would give us economic hedge in terms of the nickel prices? And once this plant is ramped up, what are the plans with the cash flow, which would be ending from that project?

[Anurag Mantri, executive]

So FY '26 onwards, as Mr. Khulbe mentioned is that it takes 2, 3 quarters to ramp it up. So FY '26, we should see a good utilization under this project. Cash flow wise, that obviously, idea is to bring the cash flow. It should strengthen the current company cash flow, it's 100% subsidiary route. So -- and there is a mechanism to have a regular dividend from that entity to -- coming to India level or our Singapore subsidiary level. And we'll continue to have, as per our overall capital allocation pool. So it will be part of the overall cash pool which we have.

[Vikash Singh, analyst]

So that the 1 million tonne [indiscernible] which we are putting up there, for that, the cash flow firstly would go from India and this cash flow probably arriving later on, so would come back later on. Is that the right understanding? As INR 750 crores, which we were supposed to invest in Indonesia further?

[Anurag Mantri, executive]

So it's not that -- the downstream subsidiary route is different. It's not that Indonesia to Indonesia, we can -- we will transfer the money. Both projects are completely separate and as a separate entity. Overall cash pool, you can say, yes, but it's not that one RKM money will immediately be diverted without bringing to India. The answer is no.

[Vikash Singh, analyst]

Understood. And this -- one last question. Any updates on...

[Operator]

Sir I would request you to come again in the queue for a follow-up question.

[Vikash Singh, analyst]

Okay. Sure.

[Operator]

The next question is from the line of Anupam Gupta from IIFL Securities.

[Anupam Gupta, analyst]

Just a couple of questions. Firstly, you said the Chromeni is the priority. So when do we see sort of ramp up starting from Chromeni and what sort of volumes we should build in for this year?

[Tarun Khulbe, executive]

Chromeni, by the end of this quarter, we are expecting it to start. And then immediately after that, we believe it should start getting ramped up. And we are very confident looking at the equipment and the conditions over there that we should be able to ramp it up very fast.

[Anupam Gupta, analyst]

Okay. I understand. And secondly, on the debt side, now that you have seen a reduction in this quarter, what is the expectation of debt for the end of this year?

[Anurag Mantri, executive]

So our end of year guidance because since some of the volumes guidance we have been reduced, what we are saying that we will not have increased debt and because of all this reduction of working capital optimization, which we are doing, and that will help us to make up that cash. So we are maintaining that around INR 5,500 crores of year-end debt guidance.

[Operator]

The next question is from the line of Ashish Kejriwal from Nuvama Wealth Management.

[Ashish Kejriwal, analyst]

Sir, 2 quick questions. One, though export market we have seen -- witnessed weakness in demand and all, but if you look at even in the domestic market, we have delivered around 11% Y-o-Y growth in the first half, which is very much lower than 20% what we had expected earlier. So is it really because the overall demand is relatively weaker than what we expected? Or there are certain segments which we don't want to go because that will hurt our margins again? That's my first question.

[Abhyuday Jindal, executive]

Yes. That is -- the second part is the main reason, Ashish, because domestic market being fairly decent volume and decent size, so we could have definitely increased our volumes, pushed more volume in domestic market, but that would have severely hit our margins. So we took a call that we should definitely increase volumes, push volumes, but in those areas where we have good margins and earnings. So that's why it was more a strategic call from this angle. Otherwise, definitely, I can show you a very high growth in India very easily.

[Ashish Kejriwal, analyst]

Understood. But this was the expectation in the beginning of the year also.

[Abhyuday Jindal, executive]

There was a plant shutdown. Yes. Q2 had a plant shutdown of 10 to 15 days, hovering between 2 months. So that is why also volumes in domestic are a little less in Q2.

[Ashish Kejriwal, analyst]

Okay. So overall, you were saying that in second half in domestic market, at least, we can have 20% plus growth. The demand is not an issue.

[Abhyuday Jindal, executive]

We can see, again, we can show you, but it's a factor of margin versus that. So it totally depends on the factor of both of them. But definitely 10% to 15%, definitely, we can.

[Ashish Kejriwal, analyst]

So why am I asking Abhyuday because at the beginning of the year also when we are giving the margin guidance as well as volume growth guidance, the only thing which is lagging mainly because of the export market. Now even if I exclude export market, then even in the domestic market, we are not seeing the same thing.

[Anurag Mantri, executive]

Actually, I understood your question. So basically, what we are saying is that overall volume guidance of 10% to 15% and if we assume export of around 10% mix, then domestic market, what we are saying is that our target is that 15% to 20% of domestic market growth.

[Ashish Kejriwal, analyst]

Okay. Second question is related to that old blast furnace, which they put in a different promoters group company. But earlier, we were thinking that if we can use part of their pig iron that will be economical to us. So any color on that, which we can give?

[Anurag Mantri, executive]

See, Ashish, that project is completely separate out of JSL and JSL has no obligation of the -- to take that material and it will be completely looked at on a -- our arm's length basis on a commercial basis. So that will surely -- obviously, the idea was that for especially the ferritic grade series 400 series it could -- as if we get the material from this group, it could help us in bringing the cost down further for the 400 series. But all this will run the project to start that time can we have a choice, but there's no commitment or obligation for us to take that material.

[Ashish Kejriwal, analyst]

No, I agree. That's what I was asking whether when the projects are going to be started so that we can have some cost benefit, if it's possible.

[Anurag Mantri, executive]

Project is expected to start probably somewhere in the next -- end of the financial year or early next financial year.

[Ashish Kejriwal, analyst]

Okay. Okay. Then we can have a look at cost side.

[Operator]

The next question is from the line of Tushar Chaudhari from Prabhudas Lilladher Private Limited.

[Tushar Chaudhari, analyst]

Congratulations for the good set of numbers despite weak exports. Sir, just a question on Chromeni. You said it's not a priority, and it will start by end of the quarter while earlier conversation, I guess, we were trying to start it in November end. So is there any delays over there? Are we seeing any problems? And what is the -- is there any going to be meaningful volumes in FY '25? How much volume should we expect '25-'26?

[Tarun Khulbe, executive]

So definitely, see, we were for, like you said, looking at early November to start, but now we are saying that towards end of middle of December to end of December. So it's hardly 1, 1.5-month delay but that's only because of when you enter a new plant, there are certain things that we need to rectify and improve upon. And also in October, there were severe rains. So for 15 days almost, you could practically not do any kind of work on the equipment, on the software or anything. So that was another kind of issue that we faced, which now everything has been rectified and if the plant, which we're all on track to commission it by end of this month -- end of this quarter, then we should see some decent volumes in FY '25.

[Tushar Chaudhari, analyst]

Okay. So out of 600, let's say, can we expect around 10,000-odd in FY '25 and '26, I would be more looking out for volumes.

[Tarun Khulbe, executive]

Much more than 10,000. 10,000 is maybe a monthly target almost. So definitely higher than 10,000.

[Operator]

The next question is from the line of Kirtan Mehta from BOB Capital Markets.

[Kirtan Mehta, analyst]

Could you share the series mix for this quarter?

[Shreya Sharma, executive]

Series mix, yes, sure. So I'll say it in the order of 200, 300 and 400 series, it was 35%, 47% and 17% and this is for the quarter.

[Kirtan Mehta, analyst]

Right. And in terms of the -- we said that we are not changing our FY '26 guidance. So that remains basically the 20% volume growth with 18,000 to 20,000 margin. That's what we are sort of reiterating and remain optimistic about. Is it subject to sort of the export mix going back to 15%?

[Anurag Mantri, executive]

No, '26 guidance, we have not given '26 guidance as such per se. What we are saying is that we are on track in terms of the way facilities will be utilized because all these things what we have explained is that are temporary, like Red Sea issue is not expected to be continuous hopefully, West Asia war if we assume that everything is a permanent nature, then it's a different scenario altogether. But all these things -- all these are temporary measures. We believe that we are the kind of domestic demand we are seeing in the market in the premium segment is giving us a robust boost to our volume. So we will continue to hold on that.

[Kirtan Mehta, analyst]

Sure. And one last question was on the -- we had earlier said that will guide on the tax shelter later. Is there any update where you can suggest the available tax shelter from the acquisitions?

[Anurag Mantri, executive]

Tax shelter of -- see, every subsidiary has a different, different sort of tax shelter. In fact, say for Rathi and Rabirun were in the range of INR 100 crores and INR 200 crores of acquisition cost only. So they have a different -- they have some tax shelter. Then Chromeni, some of the losses are there. But I think let's wait this plant to ramp it up and we'll have to see and then test those waters actually. So I would say that don't build it up right now to much on the tax shelter. But yes, definitely, I would say it will always be a good positive tax shelters which we will get.

[Operator]

The next question is from the line of Pallav Agarwal from Antique Stockbroking.

[Pallav Agarwal, analyst]

So just had a question on the outcome of the China stimulus efforts. So we've seen a lot of news flow from there. So what would be your -- the view on that this actually help domestic demand over there and probably reduce some of the dumping into India?

[Tarun Khulbe, executive]

Well, this is what even we expect and we are also happy with the China stimulus because we also believe that this should help the domestic demand in China and should reduce the pressure, the compulsion of those Chinese stainless steel producers to dump outside. However, but we will remain watchful because this is also true that China has much -- what should I say, much larger capacity than what they need for their domestic consumption. So while on one hand, we are -- we always feel good about it, but then we would remain a bit watchful before we conclude on this.

[Pallav Agarwal, analyst]

Sure, sir. And like the carbon steel manufacturers probably are asking for more stricter implementation of quality standards. So is something like that on the annual for stainless steel as well?

[Tarun Khulbe, executive]

Yes, stainless steel industry is also asking for a stricter implementation of quality standards because 2 things on this, what is happening is, one, wherever government has declared the TCO, the need to strengthen the implementation process on the ground, like even checking at the customs and all. So -- but definitely, wherever -- I mean on these aspects, the industry is -- we are in discussions with the government, and we are asking -- suggesting them also the way they need to strengthen the implementation of whatever decisions they are making. And whatever area it is remaining, they are suggesting them and helping them to come out with more such kind of TCO orders.

[Pallav Agarwal, analyst]

Okay. Sir, lastly, so nickel prices really haven't recovered unlike probably some of the other nonferrous prices. So what's holding back like why are the nickel prices so subdued for so long?

[Anurag Mantri, executive]

No, I think we are not rightly placed to answer this question because as a risk management policy, what we have done is that we have stopped taking call on the nickel or any of the ForEx, and that's how you are seeing more consistency in our earnings. We just do have completely natural hedge sort of balancing in our process, so that it remains more with a certain time like 30 to 45 days it goes in -- it gets passed on to the consumer. So difficult for us. I think I can see in the call, you will have a much larger, better people and intelligent people to who can actually predict the nickel prices. But frankly, it's difficult for us to say and commit on this.

[Operator]

[Operator Instructions] The next question is from the line of Prasanth Gopal from Spark Asia Impact Managers.

[Unknown Analyst]

What will be your exposure to government infrastructure projects? Any rough estimate is possible?

[Anurag Mantri, executive]

Sorry, your question -- we could not hear you properly. What is the question?

[Unknown Analyst]

Yes, what is your exposure to government infrastructure projects? Any rough estimate if you have?

[Anurag Mantri, executive]

Directly, it's like this, we have a like project of railways, if you see end user is all government, even whether it's a coach factory, whether it's infra, but it's not direct projects with the Railway Ministry as such. But we would develop with them, but we don't supply directly on that because we supply to like coach factories. We then provide to fabricators. The contractor who is doing the railway infra upgradation. Similar thing happens in the highways and rail overbridges.

[Tarun Khulbe, executive]

So on the infra side, it is picking up, I will say, gradually, stainless steel is getting acceptance. And as we already stated that the MoRTH, Ministry of Highways, they are also now issuing orders for compulsory usage of stainless steel in the coastal area. So with this, we believe that in infrastructure, the stainless steel demand should come up in the coming time in a far more stronger way.

[Operator]

The next question is from the line of Kirtan Mehta from BOB Capital Markets.

[Kirtan Mehta, analyst]

I would like to take the opportunity to ask couple of more questions. We are developing the other exports market like South Korea, Middle East, South America, Japan. What would be proportion of them in our export mix out of the 10%?

[Anurag Mantri, executive]

It's actually very less right now because these are -- see, when you start into any new markets, initially it's only a very starter and you do the more testing of the waters and especially the segment and the product range. So it's starting, we are seeing a positive result. So like -- country like Japan, we never exported earlier in the past. And it was -- so we -- then we have proven the quality, then we can actually get into those markets also. So I think the volume-wise, it's very less. I would say it's still largely dominated by China and Vietnam in our import -- sorry, import side. So your question is on the export side. Export side is still dominated by the U.S. and European markets.

[Kirtan Mehta, analyst]

Right, sir. And in terms of the second question was about the -- we have seen another round of nickel weakness during the quarter. So is there a possibility that it could lead to any inventory valuation loss in the next half?

[Anurag Mantri, executive]

See, as we mentioned is that we try to work on a more -- we don't do the inventories build up on -- in anticipation to that, we generally do try to do create a balancing of the nickel in and nickel out strategy and sort of almost a natural hedge with 30 to 45 days time lag. So last time also you would have seen even in a so immediate dip, we -- if it's a very consistent dip then only -- so we try to keep mitigating with the pass on as well as the product mix. But if it's a continuous, say, 9 months or 10 months, then sometimes it could hit, but then it recovers also faster. So it's both sides. So practically, we don't have too much of -- we don't -- we try to keep a static range of the nickel exposure in our system.

[Operator]

The next question is from the line of Ritesh Shah from Investec Capital Services.

[Ritesh Shah, analyst]

Sir, is it possible to provide more color on Chromeni, likewise on Rathi on the monthly run rate, which is possible, say, 3 months out, just to get a better sense from the modeling standpoint?

[Tarun Khulbe, executive]

So Chromeni, I mean, if you talk of the capacities, the installed capacity of the equipment, then the designed capacity is around 50,000 tonnes a month. Of course, these capacities are designed with a certain product specification, and this can go up and down depending upon what product you are actually processing there. So we believe that we should be ramping up towards these nameplate capacities. And in a couple of quarters, we should be closer to good utilization of these capacities.

[Ritesh Shah, analyst]

Right. And sir, Rathi and RVPL, what is the stated capacity?

[Shreya Sharma, executive]

So for Rathi, Ritesh, it's 160,000 tonnes. And for RVPL, it's around 50,000 for the P&T, pipe and tube.

[Ritesh Shah, analyst]

Okay. And specifically, for Rathi, is it possible to quantify the monthly run rate, given we have indicated like 70% utilization for FY '25?

[Tarun Khulbe, executive]

Actually, when this capacity [indiscernible] phase, it is only for wire rod. But when you produce -- again, as I said, that all these capacities start varying depending upon the product you make. So when you make rebar, then the capacity start coming down. So with the certain product mix or the kind of product mix, what we are already repeating, the capacity should be around 120,000 tonnes a year. And I mean that should be the capacity with the product mix.

[Anurag Mantri, executive]

And right now, we are at close to 60,000 tonnes in Rathi. So that's -- right now, we have not moved to a rebar side, but as we move to a rebar, capacity comes down, but the margin also improves then.

[Ritesh Shah, analyst]

Sure. Sir, just 2 more questions. I think in one of the earlier questions you made a remark that had it not been for the focus on profitability, we could have done better volumes locally. So a simple question is, as we look to ramp up all the downstream capacities, is it something where the profitability will be maintained and we are confident on the volume offtake?

[Anurag Mantri, executive]

So see, these are finishing lines. So surely, I think right now, we are constrained with our cold roll capacity. So certain range of the product, and we don't have a choice but to get into a different segment at all. So which will obviously -- so we should improve the margin overall, the volumes which we can sell in the market at our targeted margin levels.

[Ritesh Shah, analyst]

Sure. That's helpful. And last question, sir. Would you like to just rehash on our CapEx number what we have given for 3 years and what we intend to achieve for FY '25? Is everything on track over there? Or if at all any changes would be good to know?

[Anurag Mantri, executive]

No, no, everything is on track. In fact, of this year, INR 5,500 crores we target to spend. Almost half of it has been spent INR 2,700 crores, INR 2,800 crores has been spent in H1. We are on target to that. And we have -- as I mentioned that though we -- some of the volume guidance, we -- it's coming down from 20% to 10% to 15%. But we don't expect the debt to increase because we have managed to with this volume -- reduction in volume and some working capital optimization to release cash in the system through that route.

[Operator]

Ladies and gentlemen, I would now like to hand the conference over to Mr. Ritesh Shah for closing comments. Thank you, and over to you, sir.

[Ritesh Shah, analyst]

Thank you, Riddhi. Over to you, Anurag sir, if you have any closing comments, please. Thank you so much.

[Anurag Mantri, executive]

Let me thank everyone for attending this call. We are positive that strong economic activities will be driving the demand for stainless steel across the sectors in the domestic market, and we are set to take advantage of these prospects owing to our competitive pricing and efficient delivery cycle. I hope that we have been able to answer all your questions in a satisfactory manner. Should you need any further clarifications or if you would like to know more about the company, please feel free to contact our Investor Relations team, and a lot of information is available on our website as well. Thank you so much.

[Operator]

On behalf of Investec Capital Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.