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Ratnamani Metals and Tubes Ltd
Earnings Call Analysis
Q2-2025 Analysis
Ratnamani Metals and Tubes Ltd
In the second quarter of FY '25, Ratnamani Metals reported a revenue of INR 917 crores, contributing to a half-year total of INR 2,039 crores. The EBITDA for Q2 was INR 168 crores, with a half-year total of approximately INR 335 crores. While the EBITDA margin expanded in Q2, it remained consistent within the company’s target range on an annualized basis. This expansion was driven by a better mix of export products and decreased input costs, although a dip in overall revenue is anticipated due to lower metal prices and project delays.
The demand in the oil and gas sector in India has been relatively subdued, though there has been positive traction in the MENA region. Recent months have seen slow dispatch clearance owing to seasonal delays; however, expectations for improvement in these areas are cautiously optimistic. Demand for industrial and export segments has been encouraging, with current plant utilization operating at about 50% to 60%. As of November 1st, the company had an order backlog exceeding INR 2,900 crores, indicating strong future potential.
Ratnamani is taking proactive steps towards enhancing its product portfolio. The company plans to establish a cold finishing project outside India with a projected investment of around USD 40 million. Additionally, a local project focused on heavy-thickness pipe manufacturing has been commissioned, aiming to satisfy specialized market needs. These efforts align with the company’s strategy to invest in high value-added products while improving operational efficiency.
Ravi Technoforge, a subsidiary, reported revenues of approximately INR 138 crores, marking an 11% YoY increase despite soft steel prices. The EBITDA margin stood at around 10%, with a slight year-over-year growth in EBITDA. The company has also achieved a 27% stake acquisition in Ravi Technoforge, enhancing its operational capabilities, including a new 8-megawatt solar power plant expected to be operational within 4-5 months.
The spooling business is set for significant growth, with current orders around INR 650 crores and a target of INR 150 crores for dispatches this year. The company aims to achieve revenues ranging from INR 400 to 500 crores in the next fiscal year. Ratnamani anticipates that spooling products will contribute approximately 75% to the nuclear segment and 25% to oil and gas over the next few years, driven by a solid pipeline of approvals and capacity expansions.
Going forward, Ratnamani provided guidance for FY '26, projecting an overall revenue between INR 5,000 and 5,200 crores, which translates to a growth rate of 8% to 10%. Additionally, the company reaffirmed its EBITDA margin guidance, continuing to target a range of 16% to 18%. The focus on improving order flows, particularly from international markets, is seen as part of the strategy to enhance growth and profitability.
The company faces challenges, notably from softening prices and muted domestic demand in the oil and gas sector, which may affect financial performance in the short term. Despite this, management remains optimistic about a recovery, especially in export markets, as evidenced by substantial order acquisitions from the Middle East and Europe. Establishing a solid foothold in these regions could be key to navigating domestic market challenges.
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Ladies and gentlemen, good day, and welcome to the Ratnamani Metals & Tubes & Limited Q2 FY '25 Earnings Conference Call hosted by Monarch Networth Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sahil Sanghvi from Monarch Networth Capital. Thank you, and over to you, sir.
Thank you, Dorvin. Good evening to everyone. On behalf of Monarch Networth Capital we welcome you all for the 2Q and first half FY '25 earnings call of Ratnamani Metals & Tubes. We are delighted to host the management of Ratnamani. And from their side, we have Mr. Manoj Sanghvi, Chief Executive Officer; and Mr. Vimal Katta, Chief Financial Officer. So without taking much time, I'll hand over the call to Mr. Manoj Sanghvi for their opening remarks. Thank you, and over to you, Manoj sir.
Thank you, Sahil. Good evening, everyone. I welcome you all to this call and hope everyone is doing good. Let me first take this opportunity to wish you all a very happy new year and seasons greetings from Ratnamani. Our results for Q2 and half year have been uploaded on the exchanges, and I believe all had the opportunity to go through the same.
On a stand-alone basis, in quarter 2, our company has clocked the revenue of INR 917 crores and EBITDA of INR 168 crores for the half year. The revenues were INR 2,039 crores with EBITDA of INR 335-odd crores. The EBITDA margin expanded in Q2, but for the first half, it was broadly in line with our target range. A bit higher side of the band due to the better export product mix and lower input prices. We are confident of maintaining our EBITDA margins as guided earlier on an annualized basis. However, on the revenue front, some dip may be witnessed. The dip is basically because of the soft metal prices and delay in some projects and offtake at the end customers end.
As you all know, past few months, demand in oil and gas remains subdued in India but has been good in MENA region. In the last quarter, we witnessed some slowdown for dispatch clearance from customers due to seasonal factors and the project delays, but things are looking better now and expected to improve in future. Due to soft and stable steel prices, our industry has seen good demand in 2 water segments, industrial and exports. However, the domestic oil and gas projects and CGD business is expected to remain muted for near future and yet to show signs of any pickup.
But the business traction in the other segments like water line pipes, industrial supplies and SS pipes and tubes continue to remain quite encouraging. Presently, all our plants are operating at 50% to 60% utilization, except the ERW pipes, where the demand load is quite low. Our orders on hand as on 1st November was approximately INR 2,900 plus crores.
In line with our strategy to invest further into specialized and high value-added products with improving efficiency and utilization, we have decided for setting up cold finishing project out of India. When we meet the -- for the next call, we shall share more details about this project. At this stage, we can only reveal that the broader project cost is estimated around USD 40 million. We have commissioned our project for manufacturing of heavy-thickness pipes. This will further enhance our product basket for specialized applications and have started getting good response from the market for this segment.
As we move forward, we are seeing more sustainable growth with product bouquets and approvals we have, best in segment facilities with benchmark qualities, operating and financial leverage we enjoy.
Now regarding our subsidiaries, Ravi Technoforge has clocked total revenue of approximately INR 138 crores, with operationalized EBITDA margin of approximate 10-plus percentage. On a year-on-year basis, the revenues increased by 11% despite soft steel prices. EBITDA grew marginally by 4%, but profit declined due to higher depreciation and interest costs because of CapEx.
As informed to the exchanges, we have completed the acquisition of another 27% at INR 81 per share, which was based on the financial metrics and customary adjustment as per our agreement. As informed earlier, we are putting up some more automation and value addition facilities. We are also setting up an 8-megawatt captive solar power plant and expect the same to be commissioned in next 4 to 5 months. Our few developed products could not be commercialized due to geographical disturbances at the target customer side. Domestic demand seems to be stable and expecting demand from Europe and U.S. to start showing signs of recovery in quarters to come.
For our spooling business, we have started commercial supplies for basic hangers and support systems. We expect our pipe spool business to commence within this quarter. The order booking and expansion program is largely on track, and presently, the complete focus is on executing jobs and developing capabilities.
That's all from our side. Now I would like to invite questions from the participants.
[Operator Instructions] We have the first question from the line of Muskan from B&K Securities.
Sir, the joint venture with 51% stake that we have with Technoenergy, that is a group based out of Switzerland. What would be the business opportunity from the products and the spooling umbrella and domestic and in exports? And how easy is it to get the customer approval and their acceptance? And also, are there any other competitors to cater in this space?
Okay. So to answer your first question, that is -- as we speak, we have close to order backlog of INR 650 crores for the pipes spool business. Customer approval is in place. Execution will start -- we will see some dispatches in this quarter and some in the next quarter. However, most of it will be dispatched during the next financial year. So this year, our target for the spooling business is close to INR 150 crores.
Okay. All right. And sir, how many competitors are there to cater in this space, in the spooling business, and what's the...
There are a lot of pipe spooling fabricators in India. However, they are mostly into oil and gas segment. Whereas what we have -- what orders on hand we have is from the nuclear division. So not much competition at the moment for the nuclear projects.
Okay. And sir, what's the demand scenario in spooling business in domestic and in exports. What's the opportunity there?
So not only in India, but our partners -- along with our partners, we are bidding for projects overseas also. So we are quite hopeful that going forward, out of the total spooling business, 75% would still come from the nuclear business, and 25% would be from the oil and gas segment 2, 3 years from now.
Sir, you mentioned in the con call that JV will help to cater oil and gas and thermal business and nuclear plants like you mentioned right now. Can this spooling product contribute to this INR 500 crores revenue in the next 4, 5 years? And also, can you please guide us on the EBITDA margins that we get under spooling and auxiliary products?
So as we speak, we already have orders on hand close to INR 650 crores. INR 150 crores is our dispatch plan for this year. Next year, we will target anywhere between INR 400 crores to INR 500 crores. And EBITDA margin would be similar to our blended EBITDA of metals and tubes today.
[Operator Instructions] We have the next question from the line of Abhishek Ghosh from DSP Mutual Fund.
Just wanted to understand in terms of the bid pipeline, how is it looking both in the line pipe and the process pipes both at the carbon and the SS segment of it?
So as indicated in my opening remarks, line pipes, oil and gas, the demand is still quite muted. We are expecting some tenders. However, the timelines at the moment, it is very difficult to say. SS process -- SS and carbon steel, both process pipes, the demand in India is a little bit on the lower side. However, there is a lot of traction from Middle East, and we've been receiving a lot of orders from Middle East for the same.
Okay. And sir, in terms of the water projects and the oil and gas in India, anything in terms of traction in the second half or going forward? So far, we had election and the monsoons, how should we look at it from a 12- to 15-month perspective? Anything to demarket between oil and gas and water segments, sir?
Yes. So water -- see, we had -- if you see the order backlog, we had quite a good substantial order backlog from water segment also. However, because of monsoon, the uplifting of pipes in this quarter -- in the previous quarter was less. So in this quarter and the next quarter, normally, all the water pipes because laying activities are much faster. So we -- in the next 2 quarters, we are going to see covering up basically.
Okay. And if you've kind of set out earlier, but broadly, you'll be able to maintain the growth of 8%, 9%, all that kind of a growth one should expect in the current year given that second half is going to be strong or give a higher upliftment and other things?
So stand-alone basis, I would say we would still be close to between INR 5,000 crores to INR 5,200 crores. So yes, we still maintain that there would be a growth of 8% to 10%.
Okay. So that visibility is there. It's just that for FY '26, you will need to see higher inflows to be able to grow from there on?
We are seeing some visibility, especially from Middle East, Europe, some projects. So we are -- and if we see the order backlog also, it has started improving. So going forward, next year, maybe in the last quarter, we will be able to give you the exact numbers. However, 8% to 10% should not be an issue.
And sir, just in terms of capital allocation, how should we look at it over the next 12 to 15 months, which are the large CapEx that we'll incur? And which are the new capacities which are coming in terms of cold roll or any other products, if you can you help us with that?
We had two expansions which were ongoing. One was our spiral plant in Orissa, which will be commissioned in the next financial year, first quarter of next financial year. Then we had another project of increasing our capacity in stainless steel cold finishing plant. That will be operational in this quarter. Other than these 2 projects, we have 2 projects which has been approved in the current Board meeting, which is setting up a greenfield plant in Middle East for cold finishing activities. .
And setting up another plant for manufacturing of auto parts in RTL. These are the 2 projects. The 1 in Middle East, our, say, budget is close to USD 40 million. And the 1 in India, where we plan to expand capacities in RTL is close to INR 240 crores, INR 250 crores.
Okay. So overall, INR 550 crores, INR 600 crores of overall capital allocation. Growth CapEx, the new ones which have been announced?
Yes, yes.
Got it. And this -- what is the timeline for these 2 to come through in terms of commissioning?
So 18 to 24 months for both. 18 for, say, start of the production. However, the approvals and everything in place within 24 months.
And that is because you're seeing a lot of strong opportunity as far as your exports of SS pipes are concerned. I'm saying the greenfield unit which are putting up in Middle East. Is there a lot of good options coming through?
Yes, we've been already catering to this market. We have a substantial market share. One is, of course, looking at the market size and what we are supplying from here. Another is these days with the countries being protective and the local content required. That is another reason for us to set up this plant in Middle East.
Got it. And sir, just 1 last question in terms of the RTL expansion. Is it the same product profile of Ravi Technoforge? Or is it newer products which you will into -- with this expansion?
It will be newer products, which we will add to the basket, plus the existing products can also be made on the same machine. But our aim is to have diversified product portfolio over there.
The next question is from the line of Dhiraj Dave from Samvad Financial Services LLP.
Okay. Question I have is basically, we see a significant increase in inventory of finished goods and work in progress as the result, almost INR 120 crores, which was last quarter, INR 60 crores and year before, it was kind of INR 36 crores. So is it like as in previous question-answer management indicated that water demand or water pipes demand project delayed. So is it a buildup of that? And how do management see? Does it mean some kind of adversely hitting margin for the September quarter? If you can elaborate, that would be useful.
So as indicated, most of it was because of the monsoon which -- the water pipes, especially, we had quite a bit of inventory which was there, so that...
If we are to give a broad breakup, approximate breakup so INR 120 crores increase. So how much would be like water pipe or project-related thing and as compared to it what is the normal level?
About 50% of this would be water pipes and balance would be all other products.
And so okay, 50% would be water pipe. And when it will be implemented or the sales will be affected, would we see kind of operating leverage giving some kind of better margin in Q3 and Q4?
So this quarter, most of it will be liquidated and will come to a normalized level of inventory.
Okay. And we do expect kind of a stand-alone sales top line of around INR 5,000 crore to INR 5,500 crores, right?
Yes, it will be INR 5,000 plus. Say, about INR 200 crores.
And any guidance on EBITDA? Would it be at the same level or it would be improving -- affected?
Yes, our yearly guidance will remain same 16% to 18%, in between that.
The next question is from the line of Ashutosh Tiwari from Equirus Securities.
Yes. So firstly, on this spooling JV, for top line guidance of INR 450 crores to INR 500 crores, what kind of investment we need to make in this year or next year?
Yes. So this spooling JV, whatever we have targeted, say, for next year, which is INR 400 crores to INR 500 crores, investments are in place or happening at the moment. Phase 2 of investments for [ FINO ] has been approved. So there, our total investment outlay is close to INR 240-odd crores.
INR 240 crores. And this will be spent in which year?
This will be spent mostly next year? Part of it will be spent, maybe 25%, 30% in this year and balance in next year.
And how much was Phase 1 will it be?
Sorry, can you repeat the question?
What is the Phase 1 CapEx?
Phase 1 CapEx, Katta-ji, can we have that number?
Phase 1 will be hardly around INR 50 crores, INR 60 crores at the most.
Okay. So in total, around INR 300 crores CapEx?
Yes, yes, yes.
And this will be -- because JV is 51-49. So it will be half by us and half by the partner?
Yes.
Okay. And you mentioned -- so right now, you mentioned that line pipe is a bit weak in oil and gas, but exports are doing better and process pipes generally are better off.
Yes.
So that means that, I mean, those are generally better margin products really for us, export and process pipes.
Yes, exports, process pipe, then stainless steel, we have welded also, we have seamless also. So all put together, yes, some margins are better, some are average.
Okay, okay. And so this is -- I think second half will be very strong. And this -- on the export side, I think with this cold finishing line getting completed in this quarter, do you think that there is further addition to order book for SS seamless side because that area where we have been also expanding our product portfolio?
Yes, we will see utilization from this or the next quarter on the added capacity of cold finishing facilities.
So SS order book slightly improved from here, over next 3, 4 quarters?
Yes, yes.
Okay. So between the 2, I mean, can you guide like, say, within SS and CS, where you think the growth will be higher over, say, next 2, 3 years for us?
So stainless steel, definitely, with this cold finishing facilities and another cold finishing facility, which we plan to set up in Middle East, there will be growth from there. However, asset turnover ratio being less in stainless steel, maybe in terms of number -- however, the margins will be quite different. At the same time, the carbon steel revenue growth will be quite strong after the Orissa comes in, plus our heavy thickness plant once it's -- the utilization goes up.
Okay. And how has been the progress in the European market? I mean, there's 1 market that we're focusing a lot.
Europe is overall globally, if you see the prices are soft, but demand uptick is still there.
Okay. So we are seeing improvement in our market share slowly in that market.
Yes, yes.
[Operator Instructions] We have the next question from the line of Dhananjai Bagrodia from ASK.
I just wanted to ask you, sir, regarding could you give us any color like volumes, this revenue degrowth, how much would be for volumes and how much would be from steel price decrease?
Can you please repeat? I missed in between.
So how much -- as far as revenue, how much would have been volumes decreased, and how much would have been the realization decrease?
For the first 2 quarters?
No, for the second quarter, for stand-alone. Any color on how much would have been the realization decrease and how much would have been volume decrease?
Realization decrease would be anywhere close to 15% approximately.
Okay. And sir, for us, which segment would have done better in terms of carbon steel or stainless steel?
No. So basically, if we see the second quarter, other than line pipes, all other are what we had budgeted for. So line pipes is a little slow as indicated earlier.
Okay, fine. And sir, now one of our competitors has been speaking quite a lot of strong growth in stainless steel. Are we also seeing the same traction globally? And how they've been able to ramp up volumes, I guess, guide for strong volumes going ahead also, would we see similar numbers in our stainless steel?
I don't know which competitor but we still consider that a growth of 15% -- 10% to 15% on stainless steel is what we can continue at. Plus, if we see a lot of competitors, especially on stainless steel seamless are increasing and that too with the piercing technology. We have recently 2 or 3 other manufacturers who have come in and 2 or 3 other companies who have announced that they are putting up a stainless steel piercing plant.
Okay. And sir, there was a company NCLT, which was bought by Jindal Stainless, would we have looked at that because it was a good capacity at a very reasonable price compared to other people's gross or for the same cost -- for the same capacity. Did we look at that?
I am not aware of what company. Was it stainless steel or carbon steel?
Stainless steel, Rabirun.
Which one?
Rabirun.
I have not heard of this company. So I don't know.
Jindal Stainless announced this acquisition.
Jindal Stainless, they would have taken over something which has to do with maybe ornamental and infrastructure pipes. So we are not into that segment at the moment.
The next question is from the line of Sahil Sanghvi from Monarch Networth Capital.
Sir, can you just give me some more details on this, the heavy thickness pipes, I mean, where exactly are we aiming to -- I mean, which are these pockets where we'll be targeting these pipes? And I mean what dimensions are there? And what kind of CapEx have we incurred for this?
Our CapEx total was close to INR 50 crores, INR 60-odd crores. And we would mostly be catering to the offshore industry. It can be offshore oil and gas platform, it can be offshore wind farm.
Okay. And the asset turnover will be roughly 2x?
Yes, 2, 2.5x.
Okay. Also, I wanted to understand, I think in the first half, we have spent about INR 160 crores in CapEx, the number I can see from the cash flow. So what is the targeted CapEx spend for this year and next year, if you can give some guidance.
SO stand-alone, I think so we have Orissa, which is going on. So only that -- and of course, some equipment on stainless steel cold finishing facility. Other than that, most of it for Middle East would come maybe in the next financial year.
And the Phase 2 of spooling also will be there, right?
Yes.
So I mean, this year on the consol side, we should be somewhere around INR 200 crores or less than that?
For the balance, yes, close to -- anywhere between INR 150 crores to INR 200 crores.
Next year, would you be able to give some number?
Next year, all put together, roughly INR 300 crores, INR 350 crores.
The next question is from the line of Dhiraj Dave from Samvad Financial Services LLP.
Sir, can you give breakup about export...
Sorry to interrupt, but your line sounds muffled.
Yes. So what is the breakup of export and domestic sales during this quarter? And how do you see in next year or FY '26?
I'd say almost 50-50. What we have orders on hand is almost 50-50.
See, almost 1/3 of turnover came from exports in this quarter.
Yes. On revenue side, it is 30-70 or 35-65. However, orders on hand is almost 50-50.
Yes, yes. So basically -- yes, so there is a 50-50 export in domestic. But what we understand is that the demand generally -- demand environment as well as volume from Middle East and other markets were better vis-a-vis Indian market, particularly kind of this. So the ratio would remain same or it would change end of it?
And historically, normally, our exports are anywhere between 30% to 40%. But since domestic demand is muted, exports, we see a good demand, so orders on hand also, you can see that visibility that it is 50-50 now.
Okay. So we would be getting into that area.
Yes.
And generally, export market is more remunerative.
The export market is more?
Remunerative. Profitability is better or is equal?
It depends from product to product. But yes, for some certain products, you can say that.
The next question is from the line of Muskan from B&K Securities.
Sir, what is the potential revenue from the joint venture with both the phases of CapEx that we have for this INR 300 crores?
So with the CapEx, say, for RTL, our revenue potential can go up to INR 700 crores, INR 750-odd crores. And for FINO with the additional CapEx of Phase 2, same again, we can go between INR 600 crores to INR 700 crores.
Okay, sir. And other question is, what is the current hot extrusion and cold finishing capacity in stainless steel? And how much of cold finishing we are expanding in domestic market?
So our total capacity for seamless products is 30,000 tonnes, which is hot finishing capacity, of which cold finish is roughly 10,000 tonnes. And we are adding another 1,200 tonnes.
Okay. And the capacity number in spooling with 2 phases of CapEx in tonnage numbers?
For?
The capacity number is spooling, the 2 phases that we're doing, the INR 300 crores CapEx, what would be the capacity number in tonnage terms?
Capacity number for spooling will be anywhere close to 3,500 tonnes?
[Operator Instructions] We have the next question from the line of Aasim from DAM Capital.
So 1 clarification I wanted. So on an earlier question of you said realization is down 15%. Is that for the industry as a whole or for Ratnamani's product mix in particular?
No, it must be -- if you have a similar company, it must be for the industry as a whole because steel prices -- stainless steel prices or for that matter, other commodity has gone down by that much percentage.
That is the raw material price basically, right? For us, given our product mix and then line pipe, you said was weak, how much would realization, blended realization been down Q-o-Q or Y-o-Y?
On an average, 10% to 15%.
I'm trying to step in. So in Q2, if you look at stainless steel and carbon steel, both blended, I'm not bifurcating between process pipes and line pipes So it will be close to 16.6%, both, in stainless steel and carbon steel for Q2 compared to the corresponding quarter of last financial year.
How does that compare vis-a-vis Q1?
See, if we look at Q1, that movement will be much lower. It might be close to 8% to 10% sort of thing in case of stainless steel. And in carbon steel, it was better, better than Q1.
So carbon steel, there was a growth Q-o-Q?
There was a -- because see, quarter-on-quarter, so you cannot compare because this prices of process prices were higher. So realization will also be higher.
So theoretically, line pipes being weak in Q2 versus Q1 helped you in realization Q-o-Q?
Yes, yes, yes. Because process side is a better margin business, and raw material will also be different for process pipe.
Understood. And just a theoretical question. When we talk about process pipes and carbon steel, besides the usual coated pipes or painted price, what other product categories are there in process pipes for carbon steel?
It is the same kind of pipes. Maybe the coating is different, the grade is different, the specification is different. But pipes as such, will remain same. The import material, the output sizes, various sizes, that's the difference.
Okay. It's the coating that may defer, not necessarily thickness?
No. It can be coated. It can be bare, Thicknesses size, line pipe is one particular size that goes on for kilometers. So utilization of the plant is much better. However, when it is processed pipe, we have maybe 100 sizes, 150 sizes, so number of sizes are much more. Diameters will vary.
And approximately -- last question, approximately in your total volume of carbon steel, how much percentage would process pipes be?
Of the carbon steel?
Yes.
Yes. I think roughly 20-odd percent, 20%, 25%?
[Operator Instructions] We have the next question from the line of [ Sriram R ], an individual investor.
Sir, can you give a sectoral breakdown of your order book, like how much would be from oil and gas, renewable, steel, cement, et cetera?
At the moment I don't have the breakup, but can be sent if required?
[Operator Instructions] Ladies and gentlemen, we have no further questions. I would now like to hand the conference over to Mr. Sahil Sanghvi for closing comments. Over to you, sir.
Yes. We just want to thank the management for very elaborately answering all the questions, and also thank all the participants for joining the call. Manoj sir, would you like to give any closing comments, please?
Yes, I would just like to thank everybody for their time and listening to us patiently. And we wish you all a great time ahead. Thank you.
Thank you.
Thank you. On behalf of Monarch Networth Capital, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.