Maharashtra Seamless Ltd

NSE:MAHSEAMLES

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to Maharashtra Seamless Q3 Earnings Conference Call, hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vikash Singh from PhillipCapital India Private Limited. Thank you, and over to you, Mr. Vikash Singh.

[Vikash Singh, analyst]

Thank you, operator. Good afternoon, everyone. I'm pleased to welcome you on Maharashtra Seamless Q3 FY '23 Earnings Call. From the management side today, we have with us Mr. Saket Jindal, Managing Director; Mr. Kaushal Bengani, Senior Manager and Investor Relationship. I'd just like to just announce that unfortunately, due to some urgent work, Mr. D.P. Jindal has to travel at the last moment, and he could not join the call right now. We are still hoping that in the second half of the call, he would be able to join us. But Mr. Saket and Kaushal are there to help you out with your query.

Without taking much time, I would like to hand over the dais to Maharashtra Seamless management for the opening remarks. Over to you, sir.

[Saket Jindal, executive]

Welcome, everybody, and we are here to answer investor queries and give the outlook of the company, and Kaushal shall start with it.

[Kaushal Bengani, executive]

Thank you, sir. Good afternoon, shareholders. Thank you for taking time out and joining us in our discussion of quarterly results for the December quarter. We have had another good quarter where margins have been very good and enabled us to maintain absolute EBITDA despite taking a maintenance shutdown in one of our senior pipe mills. This shutdown was targeted for the first quarter of FY '24. But in view of our large order book, it was taken in the third quarter of FY '23.

We've undertaken maintenance activities and repaired and overhaul the furnace, motors and gears, which has enabled us to improve our production. We expect production volume in this mill to improve by 10%, and this increase will be immediately apparent in the fourth quarter of FY '23. Generally, such maintenance activities are conducted once every 2 to 2.5 years, and therefore, we expect uninterrupted production from this mill going forward.

In the third quarter of FY '23, we've also undertaken prepayment of long-term debt of INR 315 crores, thereby bringing down our interest cost substantially. We've also completed bonus issue in the ratio of 1:1, thereby doubling equity capital of the company. We are set to meet our EBITDA guidance given at the start of the year as margins have remained firm throughout the year and our order book remains strong. We also have good visibility of orders for next quarter as well.

I would like to quickly take you through our presentation before opening the stage for queries. At consolidated level of Maharashtra Seamless, margins remain consistent, and we've generated similar level of EBITDA despite having lower production. This is clearly evident that our operations and sales are at a very strong level, and we expect similar pattern to continue going forward.

In United Seamless, we are pleased to announce that we have maintained absolute EBITDA and, in fact, improved our margins despite having slightly lower dispatches in the third quarter of FY '23. Our profit margin has also improved and so as the earnings per shares in United Seamless. We've provided a comparison of these profit and loss statements of Maharashtra Seamless and United Seamless in the next slide.

On the front regarding amalgamation of United Seamless with Maharashtra Seamless, the first motion has been approved by NCLT Mumbai and the second motion has been admitted with them. Next hearing is scheduled in February 2023, and we are hopeful that the amalgamation will go through within this financial year.

On Slide 10, we've detailed operational and financial performance indicators. And again, we talk about the steady margins, which have remained despite taking a production dip on account of maintenance in one of our mills.

Slide 11 talks about the EBITDA mix. As you can see, more than 80% of the EBITDA is generated through the Seamless segment. And we would -- we would want the participants to be -- to take note that the seamless segment of Maharashtra Seamless and United Seamless are the growth drivers of the entire organization.

ICDs continued to reduce gradually as was committed. Currently, they stand at INR 95 crores, and we expect ICDs to be fully realized by next year, March. Our cash balances have improved. We've reached a level of INR 640 crores as total liquid investments of Maharashtra Seamless. And our net debt is minus INR 469 crores after prepayment of debt of INR 315 crores. This is indicative of the cash generated from our strong order book and good margins.

Corporate guarantee and SBLCs continue to reduce as was committed, and we expect them to be fully discharged by September of 2024.

We have given some more inputs on our capital allocation plan. The total capital expenditure that we are targeting is INR 852 crores, and this will be entirely funded from internal accruals. Of the projects detailed in this slide, 2 have been given priority. The heat treatment and finishing line at United Seamless so that we are immediately able to double production at United Seamless and cold dreawn pipes, which we want to expand in Maharashtra Seamless.

We are also targeting setting up our OCTG line and billet pre-heating surface in this -- sorry, in next financial year as demand for seamless products is expected to remain consistent. We reiterate that there will not be any requirement of any debt, and all capital expenditure and working capital requirements will be met from internal accruals. Order book has improved from last quarter and we expect similar levels of order book to continue going forward. In Maharashtra Seamless, we have an order book in the seamless segment of INR 1,660 crores and in United Seamless, we have an order book of INR 122 crores. The sustained order book will translate in improvement of capacity utilization by 5% in FY '23.

We've also received value-addition products -- sorry, we've also received orders for value addition products, especially drill pipes in Maharashtra Seamless. We received 3 new tenders, and we've completed supplies against our previous tender. We are talking about dispatch target of 365,000 tonnes in Maharashtra Seamless, maybe we'll fall short by a few thousand tonnes, but we expect to come very close to the given targets, both in Maharashtra Seamless and United Seamless.

The next 3 slides talk about the development undertaken by the company towards its customers and the marketing initiatives that have been undertaken. We've also dispatched subsea sour service seamless pipes in the previous quarter and are continuing our dispatches in the current quarter and we expect more orders to come in this new value-addition product that we have developed. Similarly, in United Seamless, we are rapidly expanding our customer base, and we expect to capture a greater share of the market.

In terms of general visibility of orders, we expect orders to remain strong because rig counts have not declined. They remain consistent and the strategic petroleum reserve in the U.S. continues to be at an all-time low. Therefore, crude is expected to remain strong, and so will our order book. The impact of the Russia-Ukraine war remains in the seamless pipes industry as it does in quite a few other industries. And despite the longevity of this situation, it does not appear that there will be any abatement. And we can expect good orders to come from our export market going forward.

Promoters continue to increase their holding in the company, thereby reiterating confidence for all shareholders. And we've had some marquee investors in our company, and they continue to remain invested.

I would now like to open the floor for questions and hand over back to Vikash.

[Vikash Singh, analyst]

Thank you, Kaushal. Operator, please announce the Q&A session.

[Operator]

[Operator Instructions] The first question is from the line of Pratiksha with Aequitas Investment.

[Pratiksha Daftari, analyst]

Congratulations on good set of numbers. My first question was on the order book front. So what would be the execution period for this order book? And what gives us the confidence of like basically, I just wanted to understand that in the Q4 targets -- volume targets seem to be pretty high, so what gives us the confidence that you'll be able to do that kind of in Q4?

[Kaushal Bengani, executive]

In the fourth quarter, we expect a good level of production because we've undertaken refurbishment activities and maintenance activities in 3 of our mills in the past 3 quarters. In the first quarter, we've undertaken maintenance activities with our 7-inch mill at Nagothane. In the third quarter, we've undertaken maintenance activities to set up 14-inch mills, at Nagothane. In the second quarter, we had undertaken maintenance activities in our ERW mill. So production is expected to increase, and we are confident of achieving our stated targets because mill efficiency has increased. This is because we've overhauled motors, gears and furnace in our largest mill and therefore -- and also in our 7-inch mill. And therefore, we are quite confident of achieving our stated targets.

Regarding the order book, this order book of Maharashtra Seamless is expected to be executed over a period of 4 months and that of United Seamless in 1.5 months.

[Pratiksha Daftari, analyst]

Okay. And on the ERW front, just wanted to understand the mix in terms of as an other sector? And how should we look at the margins going ahead since you've had very volatile margin in that segment?

[Kaushal Bengani, executive]

Right. So in the ERW...

[Saket Jindal, executive]

Let me explain the ERW. In the past quarter, there was less margin. And last quarter, it came back because previously there was certain quality control issues where there was testing happening for IOCL projects. So there, we took some time to complete the testing process. And in the last quarter, we made a double shift. And also, there was regularization, means it came back to normal operations and the shift also increased. So the production was better in the last quarter. And also the margins were intact because we are supplying to the oil and gas sector, where API [indiscernible], that is a product which is being used.

[Pratiksha Daftari, analyst]

Okay. The current quarter margins are a good trajectory further ahead, right, if they are more or less sustainable?

[Saket Jindal, executive]

Yes, that's right.

[Operator]

Our next question is from the line of Saket Kapoor with Kapoor Co.

[Saket Kapoor, analyst]

Sir, as has been articulated by you in the opening remarks Kaushal Ji and Jindal sir that we have taken refurbishment -- there would be better yields that we are expecting. So if you could give us some understanding what kind of key benefit in terms of tonnage or EBITDA we can expect over a period of time with the overhauling done?

[Saket Jindal, executive]

So if I understand clearly, the refurbishment is basically to regularize and to also avoid any breakdowns. So it wasn't any upgradation in technology as such. It was just a regular maintenance where we have to overhaul certain equipments to avoid any -- as a preventive maintenance. So it will be regularized and yield and everything will be maintained. So there is no additional increase in the yield. It is the same, and we continue and post the same kind of output as earlier.

[Saket Kapoor, analyst]

Sir, in the presentation within the order book breakup also, we find a very strong client concentration that is from the PSU basket of ONGC and Oil India. So going ahead, taking the nature of the business and we having a dominant market share in seamless side, what other steps of mitigating the client concentration rate can we look forward? Or how are we going to tap the export market in terms of -- in your commentary it was mentioned that because of the Ukraine crisis, many European companies have stopped participating in the Seamless segment.

So if you could give us some more color of steps in the annual or the nature of the business is such that we will be having a larger price on dependence would be from ONGC and Oil India?

[Saket Jindal, executive]

Right. So let me address the second part, which is the export target. So Canada has opened up for us recently because the normal value or the floor prices have been revised, which is making it more conducive and workable to export. So Canada, OCTG, the oil and gas sector, has opened up again and line pipe we were doing earlier also. So the market in Canada and U.S.A. combined is significant volume where there is no shortfall as such. So additional requirements for orders besides domestic can be exported to U.S. and Canada.

So we did not focus on other markets besides these 2 because this is sufficient enough, but we still have our eyes open for orders in Middle East, North Africa and South America. But this is may not be essential because U.S. and Canada is sufficient. So -- but at the same time, we have to keep our trust on the marketing initiative where our quality is well established. And looking at even domestic market, our quality complaints are bare minimum, which is very encouraging. And the U.S.A. customers also are very happy with the quality.

So minor complaints are there, but at the same time, we are well established, reputed vendor. And also the China -- Chinese pipes are restricted in these markets. So -- by WTO. So the restriction on Chinese pipes, we are more open for these markets because we're in India, there is a level playing field because it is avoiding the dumping of goods by China. So we are confident with the domestic market and the export, we will have a healthy order book, and there is no risk as such, that way.

[Saket Kapoor, analyst]

Right. And lastly, sir, about our investment in this rig segment, although as in your commentary mentioned that rig counts have reached the pre-COVID level and the demand for more oil exporting activities is on an uptick globally. Even since the nature of the investment, the returns does not commensurate with our main business. So those will get diluted with the ROIs. So taking that aspect into account, since we are contracted for a 3-year period with ONGC, does this debarred us for contemplating any selling of our rig? Is it a virtual proposition? Or we will be -- the ownership has to be there with the person with whom the same has been contested? in the case, there is a significant demand or there is an option where you can sell the rig even if it is contracted. Just understanding, is that -- that is the option or we can only think of it once the contract get over?

[Saket Jindal, executive]

No, let me clarify. The rig oil prices are high currently. And the day rates when the drilling sector is going up. Recently, a group company contracted -- made a contract with ONGC at almost double the price for the previous. So instead of, say, $40,000, it's come to $75,000. So that is encouraging that day rates have gone up. And in our rig, which is an MSL, has also been operated by group company. And once this contract gets over, we will surely renew a contract at a much higher price.

So this is something positive we expect. And at the same time, in the future, if it's lucrative and if it's beneficial to the company, we can hire off the rig to any other company and cash the CapEx. So means that is -- depends on the situation. But currently, it is operational, and it should remain operational in the near future and other rigs are expected to go up.

[Saket Kapoor, analyst]

No, sir, my point was, since we are contracted for a period of 3 years. So whatever the additional benefit that is there in the current rig prices won't be circulating to our numbers indicative that these are the...

[Saket Jindal, executive]

The contract with a fixed price -- during this contract, there will be no change in the financial.

[Saket Kapoor, analyst]

Yes, sir. And since we have just contracted, I think, [ a few ] months -- in the month of May only. So 3 years down the line, nobody can predict what the charter rates are going to be. It may be higher of $70,000 or lower of below INR $40,000. So my point was only a small understanding that in this interim period, wherein we have contracted, can -- does management contemplate change in ownership in depending upon if there is a merger as a buyer or any other understanding where we can hive off or whether it be because of the contractual terms, we have to continue for 3 years? That was my question.

[Saket Jindal, executive]

So, the contract is -- there's obligation to fulfill the contract for 3 years. So we'll have to fulfill the contractual liability. And secondly, talking of hive off, there is no surety as of now, it all depends on the scenario.

[Saket Kapoor, analyst]

Okay. And very last point in the presentation it was mentioned about value-added segments have a good opportunity to address in drill pipes, subsea sour pipes and premium connection market. So if you could throw some more light, what are the advancement we are taking and going ahead, how are these 3 segments going to contribute to the profitability of the company, drill pipes, subsea sour pipes and the premium connection market?

[Saket Jindal, executive]

Right. Drill pipe orders, you already have in hand currently and in Oil India also. And we are executing, and it is as per schedule in -- I mean next month onwards, it will be delivering. So this is a high value-added product where we benefit more than the regular pipes because of more value addition and more margins. So this is number one. Number two is the premium connections. So there, we are talking of license agreement with JFE Premium Connections, and they have audited the mill, and they are very happy with the facilities and they are doing the final stage for signing the agreement and commencing operations.

[Operator]

[Operator Instructions] Our next question comes from the line of Ramanand Venkateshwaram with Emkay Ventures.

[Ramanand Venkateshwaram, analyst]

Just wanted to check, we have the order book, which almost covers 4 months of our production at MSL. And given that we have the order group with the pricing and also inventory that we would have in terms of raw material, how do we see the margins going forward into the current quarter and possibly the next quarter as well? Is it better than the previous quarter? Or is it similar to that? How do you characterize that?

[Saket Jindal, executive]

I mean, I think more or less the margins are consistent and the steel price has corrected slightly towards the lower side. So that might give us some additional margin. And if we do value-added products like we just mentioned, premium connections and drill pipe. So that will add to our overall margins, operating margins and also exports will help. I think, in export, if we are targeting more exports, then actually, overall contribution will be higher because there, we can get higher realizations.

[Ramanand Venkateshwaram, analyst]

So when I actually look at order book over the last few quarters, the share of exports in the order book has actually signed a bit. Is it intentional or -- and back to the lower higher level, how is it like?

[Saket Jindal, executive]

No. I think in the recent past, the Canadian market was a little under investigation for duties. Now it has been crystallized. So the Canada market is once again open to us. So it will come back. In fact, we want to export more than what we did in the past. So I'm sure we shall be able to achieve record exports in the near future.

[Ramanand Venkateshwaram, analyst]

Okay. And one last question. On the -- we talked about the -- we talked about the IOCL...

[Saket Jindal, executive]

Hello? Yes.

[Kaushal Bengani, executive]

Mr. Ramanand, we cannot hear you.

[Operator]

The line of the current participant is disconnected. We seem to have lost the current participant. The next question is from the line of Hemant Soni, Individual Investor.

[Hemant Soni]

Sir, congratulations on good set of numbers. Sir, I have basically 2 questions. First question is, like you mentioned in the opening remarks that there was a planned maintenance shutdown. So for how many days the plant was shutdown and what is the loss of revenue? And sir, second question is, you had earlier guided in, I think, Q1 of the conference call that you -- that the company is targeting INR 890 crores of EBITDA in FY '23. So sir, will it be possible for you to throw some light on the EBITDA numbers for FY '24 as well?

[Kaushal Bengani, executive]

Mr. Soni, we had taken a preventive maintenance shutdown in our 14-inch mill in December for a period of 4 weeks. And plant resumed operations towards end of December, and we are getting a higher level of production in that plant as per our standard.

Secondly, regarding EBITDA, we had given a guidance of INR 895 crores. And out of that, we have completed 75% of that in the first 3 quarters. So right now -- actually, we've done more than that. We've done around 85% of that. So I think we will probably end up closer to INR 1,000 crores than INR 900 crores which will be evident in due course.

In the next financial year, if we take an absolutely conservative number and factor in the increased level of production in the seamless segment, then we should have an EBITDA guidance in excess of INR 800 crores, although it is difficult for us to specify a number in absence of orders which extend through the entirety of next year. We will come up with a more accurate guidance in our next investor call after conclusion of quarter 4.

[Hemant Soni]

That is fine, sir. Any tentative number would be fine, like INR 800 crores, we have directed for seamless division. What about the ERW segment?

[Kaushal Bengani, executive]

Sir, INR 800 crores or more than INR 800 crores for the entire organization. This includes Maharashtra Seamless, Seamless, ERW, Wind and Solar, Rig and United Seamless.

[Hemant Soni]

So sir, basically, there will be a drop of 20% in the EBITDA, can we assume that?

[Kaushal Bengani, executive]

You cannot assume that because I do not have enough data to present you with a number. This is just a ballpark number on an extremely conservative basis.

[Operator]

[Operator Instructions] Our next question is from the line of Saket Kapoor with Kapoor & Co.

[Saket Kapoor, analyst]

Just to reiterate what Kaushal Ji just mentioned. Sir, you would be in a much better position, I think, so post your first quarter numbers maybe for the next financial year when a proper EBITDA guidance could be given to us. I think so when you first gave the guidance for annual guidance, it was in the first quarter of this financial year. So whether a INR 800 crore number or INR 1,000 crore number or any number between that are a conservative guidance. I think so if I'm not wrong, you would be in a better position -- the team would be in a better position to guide us on the path during the first quarter. Is that understanding correct? Or we should see look this conservative number of INR 800 crore?

[Kaushal Bengani, executive]

Your understanding is correct, and thank you for clarifying that.

[Saket Kapoor, analyst]

So we will wait for the first quarter to get. But what the underlying fundamentals are? They are getting to a strong story ahead that is very well given in the sheets presented to us. So I think that understanding I should be taken in that way. Sir, it is mentioned that we are also taking steps for this monetization of investments in the Singapore subsidiaries. So if you could give us some understanding what is that current net NAV or net asset value or what are we trying to explain by these steps for monetization of investments, sir?

[Kaushal Bengani, executive]

The value of the investment in the Singapore subsidiary has increased because crude oil is at a higher level and value of rigs have increased. So the opportunities available to us for monetization has increased. However, we will not be able to go ahead with monetization immediately because there is some debt in the -- on the rigs in which the Singapore subsidiary has invested. And once that debt is reduced, then we can probably go ahead with monetization, although there is no such definitive plan at the moment.

So when I say the value has gone up, if you look at our financials, we have to restate the value of the equity assessments at the end of every financial year. There has been a gain of around $2.1 million on the valuation of the investment.

[Saket Kapoor, analyst]

And what is the total value currently for the investment, sir?

[Kaushal Bengani, executive]

Total value in terms of INR is INR 16 crores at Maharashtra Seamless stand-alone level. At consolidated level, it would be closer to INR 300 crores.

[Saket Kapoor, analyst]

No, sir. Come again, INR 16 crore and INR 300 crores is different size.

[Kaushal Bengani, executive]

So at consolidated level, the investment would be at INR 300 crores.

[Saket Kapoor, analyst]

With Singapore's investment only or you are clubbing everything?

[Kaushal Bengani, executive]

No, Singapore subsidiary. Maharashtra Seamless...

[Saket Kapoor, analyst]

Okay. That investment is worth INR 300 crores at the concentrate level?

[Kaushal Bengani, executive]

Yes.

[Saket Kapoor, analyst]

Earlier, sir, I think so Jindal sir also commented on the bonus issue being value-accretive steps taken for the investing community. However, it has its own pros and cons. So going ahead, since I think so we did hire the PricewaterhouseCoopers agency for this merger of USTPL with MSL. So going ahead, we would look the management to take more steps and involve or engage concerned agencies to create value for all the stakeholders. And it is very much evident with the type of kind of cash generation the company is doing and the valuation is being given by the market.

So I would recommend or whether just on my part would be that proper agencies who look after for this value creation for the company must be hired from the company level so that the process can be experienced -- so to get that traction. That is what it is my understanding. I mean in that process, I think just going ahead, we should also look for hiring an in-house or creating an IR team also. That would be another value addition so that the definition of information and the right valuation could be achieved. These were my such suggestion if it's merit any -- if they derive any merit they should be deliberated on.

[Kaushal Bengani, executive]

Okay. On the point of value creation for shareholders, we've completed bonus issue in December. And in the next Board Meeting, we will come out with a dividend policy. We've done a lot of work in the past 1.5 years in making the company simpler and more easily accessible to all stakeholders. We've put in a lot of effort to make it more investor friendly. And the only point which was remaining to -- in our perception was -- is the dividend policy, which we will come out with in the next Board meeting.

[Saket Kapoor, analyst]

Right, sir. And it would be very unfair on my part not to applaud Mr. Kaushal Bengani also. He had also played a very important role in communicating and creating awareness amongst the investing community, so all the best to you, Kaushal Ji also. Thank you Jindal sir for all the replies.

[Operator]

[Operator Instructions] The next question is from the line of Mr. Vikash Singh from PhillipCapital India Private Limited.

[Vikash Singh, analyst]

Sir, I have just a couple of questions. Firstly, regarding our CapEx. So how much we have spent in FY '23 9 months the pending CapEx for FY '23? And what are our targets for FY '24 spend?

[Kaushal Bengani, executive]

In FY '23, Vikash, we have not spent any significant amount towards the CapEx, which is given in the presentation. So we are targeting 2 projects, which we will execute on priority, and we have floated necessary inquiries for the same. Actual expenditures will start in next financial year.

[Vikash Singh, analyst]

So only for that 2 new projects, does the maintenance CapEx probably would go through in the next financial year?

[Kaushal Bengani, executive]

Yes.

[Vikash Singh, analyst]

Understood. And secondly, I just wanted to understand our bid book size basically. The next 6 months, what is the visibility in terms of orders in India as well as in abroad? So if you could give us some insights into that?

[Kaushal Bengani, executive]

Order book remains strong. And going forward, we have good visibility of order. In the export market also, especially Canada, we can start -- we have started exporting OCTG products and we want to expand further both in U.S. and Canada. There is good demand in U.S. and Canada on account of rig counts remaining stable. There is consistent demand on that front. And with the U.S. government buying group from the market, we expect this demand levels to continue.

In the Domestic segment, I put out a point in my presentation that ONGC has a demand of 1 lakh tonnes every year, additional demand of 1 lakh tonnes every year on which is regular. And even in our current order book, out of the total seamless orders of Maharashtra Seamless of INR 1,560 crores, INR 541 crores is from ONGC and Oil India. These orders will be executed over the next 4, 4.5 months, and we expect orders to get replenished and the strong position to continue, both in United Seamless and Maharashtra Seamless.

[Vikash Singh, analyst]

Understood. And sir, just once again, on your steady-state EBITDA per tonne guidance because that INR 800 crores, which is the lower end seems to be quite conservative considering we can have a 10%, 20% volume growth next year.

[Kaushal Bengani, executive]

Right. So you're right. And I don't have any data with me, it was -- it is the bare minimum number, which will come at very low EBITDA per tonne. However, our steady-state guidance for the current quarter would be around 18,000 for Maharashtra Seamless and around 23,000 to 24,000 in United Seamless.

[Vikash Singh, analyst]

Understood. Understood.

[Raghav Jindal, executive]

This is for the fourth.

[Vikash Singh, analyst]

Yes. And lastly, what was the mix of the export orders this quarter?

[Kaushal Bengani, executive]

In the current quarter, in Maharashtra Seamless, exports -- sorry, in the third quarter in Maharashtra Seamless, exports were 18% of total sales.

[Vikash Singh, analyst]

Okay. So despite that, we have done almost 30,000 EBITDA per tonne in United Seamless?

[Kaushal Bengani, executive]

Yes.

[Operator]

Our next question is from the line of Hemant Soni, Individual Investor.

[Hemant Soni]

Sir, do we expect Q4 numbers to surpass Q3? And what kind of capacity utilization are we looking for in Q4? Because I think in Q3, we have 60% capacity utilizing, right?

[Kaushal Bengani, executive]

Sir, in Q4, we expect the numbers to surpass that of Q3. In Q3, capacity utilization was at a lower level on account of preventive maintenance being undertaken in one of our mills. We have clarified that in the notes to accounts in the financial statements and also in Slide 10 of the presentation. Therefore, capacity utilized since the mill will now be working with improved efficiency as per our standard, we expect much better capacity utilization in the current quarter and increased levels of production in the current quarter.

[Hemant Soni]

Any number you can specify, sir, on the capacity utilising impact for Q4?

[Kaushal Bengani, executive]

Sir, they will be better -- I don't want to specify number. There will be better capacity utilization. I can say for sure. And I've given the targets in Slide 18 of the presentation, and we are quite confident of achieving our targets. If we do not achieve our targets, then we will come very close to our targets. Right now, we are despite taking preventive maintenance shutdowns in 2 Seamless pipe mills in the past 3 quarters, we have achieved 70% -- 69% in Maharashtra Seamless and 68% in Maharashtra Seamless ERW segments in 3 quarters.

[Operator]

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Vikash Singh for closing comments.

[Vikash Singh, analyst]

On behalf of PhillipCapital, I would like to thank Maharashtra Seamless management to give us the opportunity to host the call. And I would like to hand over the dais to Maharashtra Seamless management for any closing comments. Over to you, sir.

[Saket Jindal, executive]

Thank you all the investors for the queries. And I hope we deliberated and answered the necessary queries. So we are confident that we will meet the expectations of the investors in the coming year and also in the future. So we are constantly vigilant on the financial numbers and also the operations. So we take proactive decisions in our operations day-to-day for improvements and for -- also on the marketing side for lucrative orders and to maximize margins, returns, control our raw material cost. And also we are doing ERP for operational efficiency, the new version of ERP.

And we are also, as we mentioned, adding value-added products. And also we are doing ventures in license agreements for value-added products. So we are upbeat, means the domestic market, ONGC and others, oil sector, there is a good demand coming for new wells as well as replacement demands. So there is no shortfall of orders, 1 lakh tonne in oil sector, domestic is in the pipeline. So besides, I just mentioned, Canada has opened up. So the industry as such is upbeat and oil prices are holding also. So I would say the outlook is very positive, and investors should be looking at good returns.

[Kaushal Bengani, executive]

Thank you, Mr. Jindal. Thank you, Vikash, and thank you, investors, for taking time out.

[Vikash Singh, analyst]

Thank you, everyone.

[Operator]

On behalf of PhillipCapital India Private Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.