Usha Martin Ltd

NSE:USHAMART

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the earnings conference call of Usha Martin Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Devrishi Singh from CDR India. Thank you, and over to you, sir.

[Devrishi Singh]

Thank you. Good evening, everyone, and thank you for joining us on Usha Martin's Q1 FY '24 Earnings Conference Call. We have with us Mr. Rajeev Jhawar, Managing Director of the company; Mr. Anirban Sanyal, Chief Financial Officer; and Ms. Shreya Jhawar from the strategy and growth team of the company.

We hope all of you have had the opportunity to refer to the earnings documents that we had shared with you earlier. We would now like to initiate the call with the opening remarks from the management following which we will have the forum open for a question-and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation.

I would now like to invite Mr. Rajeev Jhawar to make his opening remarks. Thank you, and over to you, sir.

[Rajeev Jhawar, executive]

Thank you. Good evening, everyone. On behalf of the management team of Usha Martin, I would like to welcome you all to our earnings conference call. As I had mentioned in our last conference call, we remain committed to conducting such forms on a regular basis. Our aim is to foster transparency and strengthen the communication channels with the investor and analyst community. I would like to begin by sharing quick operational and strategy-related updates on the company. Following which our CFO, Mr. Anirban Sanyal will run you through the key financial highlights.

We are pleased to report that all our strategic initiatives including the emphasis on enriching our product mix by focusing on higher value-added ropes have assisted us in reporting healthy profitability during the quarter. On a year-on-year basis, our operating EBITDA increased by 24.2% with operating EBITDA margins improving by 2.5 -- 2.4% basis points to 17.9%. Furthermore, a better contribution from higher realization international markets supported margin improvement. The share of the wire rope in our consolidated revenue further improved to 68% in Q1 FY '24 compared to 67% during FY '23. The share of revenue from international operations also increased to 56% during Q1 FY '24 compared to 55% during FY '23. Further, the share of value-added industry segments in our consolidated revenue increased to 50% during Q1 FY '24 as compared to 44% during FY '23. Moreover, within the wire rope, the value-added segments constituted 71% during Q1 FY '24 compared to 65% during FY '23.

The balance sheet continues to remain significantly derisked with the net debt at INR 99 crores, end of Q1 FY '24, despite a CapEx spend of approximately INR 68 crores during the quarter, emphasizing the significant improvements in operating cash flows before tax generated during the quarter. As we have discussed previously, we aspire to consistently undertake efforts to increase market share in international geographies to further enhance profitability and our global market presence. We are already witnessing significant traction with international customers, particularly for technical advanced wire ropes. In line with this, the company is strategically focusing on higher-value specialty grade ropes. It is important to note that producing these wire rope requires substantial amount of engineering know-how and technical expertise.

To maintain a competitive edge on the global stage, our global R&D center located in Italy plays a pivotal role in designing advanced viral, utilizing proprietary software to develop products that meet and exceed global standards. Through our focus on R&D, we have been successfully competing with global competitors and garnering a growing base of direct international clients. This achievement stands as a testament to our capabilities and positions us among the best in the world.

Our CapEx initiatives are progressing smoothly. The increased capacities will predominantly cater to diverse array of critical applications and value-added products, including mining ropes, non-rotating crane ropes, compacted ropes and plasticated ropes. Our wave 1 expansion at Ranchi is on track and is expected to be substantially completed by end of Q3, supporting our revenue growth endeavors.

In conclusion, I would like to express our confidence that the various strategic initiatives undertaken by Usha Martin will certainly yield positive results and drive significant growth for the company. Our team's dedication and hard work and their relentless pursuit for excellence has enabled us to achieve notable milestones over the last 3 years. The company remains guided by its core values of innovation, integrity, financial discipline and customer focus. These values have been the foundation of our success and will continue to drive all our future endeavors.

With this, I would like to hand over to Mr. Anirban Sanyal, our CFO, who will present the operational and financial highlights for the quarter ended 30th June 2023. Thank you.

[Anirban Sanyal, executive]

Thank you, and a very good evening to everyone. I will now briefly take you through the company's operating and financial performance for the quarter ended 30th June 2023. The consolidated net revenue from operations stood at INR 814.4 crores in Q1 FY '24 as against INR 758.7 crores in Q1 FY '23. The company achieved a 7.3% year-on-year increase in revenue, largely due to improved realizations from our value-added and solution-based offering. Our international operations also played a key role, recording a significant 13% year-on-year increase in their top line performance. Our operating EBITDA for the quarter registered a healthy 24.2% increase on a year-on-year basis at INR 145.7 crores. Moreover, the operating EBITDA per ton also demonstrated 25.8% year-on-year improvement at INR 32,227. The operating EBITDA margin of Q1 FY '24 rose to 17.9% from 15.5% in Q1 FY '23. This improvement in margin performance is also attributed to our strong focus on value-added products as well as our efforts to enhance our international presence.

Additionally, our EBITDA performance demonstrates the strength of our business model and the strong pass-on mechanism for raw material costs that we have in place. Our net profit for the quarter stood at INR 100.8 crores registering an increase from INR 82.2 crores in Q1 of FY '23. On the balance sheet front, we have managed to reduce our net debt to INR 99 crores as on 30th June 2023 compared to INR 185 crores end of March 2023. Additionally, our cash flow from operations before tax was INR 177 crores for Q1 FY '24. The sharp reduction in net debt, robust operating cash flows and adequate working capital line headroom continues to support our planned capital allocations. We also remain committed to optimizing our working capital to reduce the overall cash conversion cycle.

In conclusion, I would like to say that Usha Martin's continuing focus on product portfolio enrichment, steady growth in our international operations, continuing leadership in India and a strong balance sheet will enable us to deliver steady and consistent growth in the future. This brings me to the end of my address.

I would now request the moderator to open the line for the Q&A session. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Gunjan Kabra from Niveshaay.

[Gunjan Kabra, analyst]

I wanted to ask that from EBITDA per ton perspective, that in FY '22 and if you compare FY '23, engineering the general ropes, our share has reduced from 28% to 20%. And our geographic revenue from India has decreased from 49% to 44%. And value-added product segments have increased, so we have seen quite a good EBITDA per ton expansion from 19,000 to 26,000 in FY '22 to FY '23. So now from here on, what kind of EBITDA per tonne or if you can guide on how further this revenue mix you expect to change? Or do you see -- or do you change any product mix or geographic wise, are we focusing a lot more on exports in Northern India now? And how this share will reduce is what I wanted to understand from EBITDA per tonne perspective.

[Rajeev Jhawar, executive]

You see the EBITDA per tonne has definitely improved because, as I mentioned, that the product mix has shifted more towards ropes and within ropes more into the specialty ropes. And that would continue. The progress would continue even after the expansion because most of the expansion is towards the wire rope and that too focused more on the specialty wire ropes. In India, we have a market share of close to 65% to 70%, which is a very healthy market share. And that is something we would continue.

Whereas the -- our presence in the international market there is a lot of -- we are at about 5% of the market share approximately. And that gives us an opportunity to increase our presence in the international market and take more market share at a better value addition. So I would expect that we would continue towards achieving the -- what we had mentioned in our previous call, towards 18% plus EBITDA margin on an ongoing basis. That is something and then slightly keep on increasing as the product mix improves.

[Gunjan Kabra, analyst]

Okay. Sir, is it not a very conservative way because you are targeting export markets where realizations are very high and value-added product is where the expansion is coming, in the value-added products. So is it -- are you very conservative in your estimates? Or how is it?

[Rajeev Jhawar, executive]

You see these products, you see wire ropes while we are expanding and more and more into specialty, it takes time to enter into new markets and new customers. So as we are progressing towards it, as the percentage would increase, I'm sure the numbers would be better, but it is better to be cautious and move on a step-by-step because it takes time to open up new markets and new customers for these special products. So we expect it to be better. As we enter into these new product segments and markets, we definitely expect it to be better, but these take some time, and we definitely would like to see things happen and improve from there on.

[Gunjan Kabra, analyst]

Okay. So how much time for a wire rope facility, if you are starting a new CapEx, which is in Q3 FY '24, so how much time does it take to ramp up because a new plant will definitely take some time to ramp up. So how much -- if you have normalized demand, so does it take -- in how many months or quarters can we see the ramp-up?

[Rajeev Jhawar, executive]

We'll start seeing the ramp-up from -- the most of the projects would get completed in the Phase 1 or Wave 1 CapEx by Q3. So we will start seeing the benefit of volumes coming from Q4. And I would say that it would take 3 to 4 quarters to see that these -- not only from the production side, but from the market side, it would take 3 to 4 quarters to get the full benefit of the full CapEx, start coming in.

[Gunjan Kabra, analyst]

Okay. And sir, with respect to U.S. and Europe, there would a little slowdown in the business environment. So -- and we were in talks with a few customers in the U.S. where you were trying to onboard them. And in the Europe last quarter, you already guided that we have converted to. So how is the order traction going there? And what kind of order visibility do you have from the export market right now?

[Rajeev Jhawar, executive]

We have -- while the overall slowdown may be there, but the sectors and the new customers, which we have worked on, particularly on the mining sector, oil offshore sector and the crane and port sector, we see good traction from these markets. And all the fruits of the last 1 or 2 years of efforts by our team, plus we have expanded our team in Europe and U.S., we see a good traction from our products and our segments. So while there may be an overall slowdown, but in our sectors we are seeing that there is a reasonably good demand and we don't see as much of a slowdown there.

[Operator]

The next question is from the line of Aman Sonthalia from AK Securities.

[Aman Sonthalia, analyst]

First of all, lots of congratulations for excellent set of numbers. And you and your team hard work is reflected in the working of the company, quarter after quarter. I have 2 questions. Recently, I've seen, sir, year-on-year, we see our employee cost has increased from INR 89 crores to INR 107 crores. So this is due to whether general inflation or we are investing in human resources for our future expenses and all?

[Rajeev Jhawar, executive]

There is -- in India, the increase is entirely on account of the wage revision, which comes once in 4 years for the workers and the increment of officers. Increase in the international business is on account of new recruitments, particularly to enhance the marketing and R&D functions in Europe and America, so these are the reasons. And now the new capacity is also getting -- coming up in the next few months. So we need to really build our international team to be able to focus more into newer markets and newer customers. So that is the reason we have built this, and that is the reason for this increase.

[Shreya Jhawar, executive]

And just to add to that, like you mentioned in the Americas, earlier, you were focused primarily in the Houston area, but over the past years, we've also had a setup with people in the East region in the Pennsylvania region, as well as the West, in the Nevada region. So I think because of our focus in the U.S. market, we needed to expand beyond just the center to both the coasts to cover the entire spread, which is quite expansive. And along with that, even in the Latin America region, we've put in not resources physically present there, but our team in the U.S. and Europe also travel frequently to Latin America to cover that market as well.

So these are pretty new markets for us. The only way to grow is to hire talent that has familiarity with those markets and the network in those markets. And then on the other side, we've also hired some sector experts. So because we have focused on the higher value sector, we want specialists in elevator rope, in mining rope, in fishing rope as well. So in Europe, we hired more people catering to those specific markets such as fishing as well where we want to grow.

[Aman Sonthalia, analyst]

Okay. Sir, next question is, I've recently seen a video of Brunton Shaw, where we have dispatched rope. I think 2 rope of 329 tonnes per rope. So it is, I think, dispatched from U.K. to Brazil. So what type of rope it is and where it will be used and whether it's one-off order or whether we are getting regular orders like this?

[Rajeev Jhawar, executive]

These ropes are very high end, each single weight of 330 tonnes each. Brunton Shaw, we have the facility to produce rope, single length ropes up to 400 tonnes. And these ropes are crane ropes, which are used for basically lifting oil platforms from one position to the other or even building big wind farms in the deep sea. And these are used in very high tech cranes and go 4,000 meters deep in the water where they are doing all these installations. And these are very high-tech ropes, very high safety requirements and Brunton Shaw has a premium brand in this, there. And these are just not one-off orders. Brunton Shaw has been producing these.

But last, I would say, 12 months, we have seen good traction, and we have received quite a few orders, ranging from 150 to 350 tonnes per reel. And the interesting part is that while the ropes are produced there, the wires and strands are supplied from India, giving us a complete supply chain control on the entire product and thereby also helping us to get a better margin. So these would be continuing. We have got some orders, which would be continuing over the next 3 to 4 quarters. And I'm sure with the few successful breakthroughs we have done, we should be able to do it on a continuous basis.

[Aman Sonthalia, analyst]

And sir, in which markets, we're getting the best traction, whether it is U.S. market, Latin America, Asia or European market?

[Rajeev Jhawar, executive]

You see the strongest market for us, the business for wire rope, Europe is growing well for us. Although the orders may be coming from Europe, but supplies may be going to Australia, going to the Middle East or going to Brazil, as you mentioned. So the growth is what we see the growth for different products in different markets. And we see for fishing market, Europe is going to be -- we are seeing a lot of breakthroughs and growth expected in the fishing markets there. On the mining ropes, we see good markets in South America, North America, Australia as well as South Africa. We have got some good breakthroughs and good business is being done there. And so I would say the strongest market looking forward is Europe, U.S., South America. And also we are looking at Middle East, particularly the Saudi Arabian market growing faster in the coming quarters.

[Aman Sonthalia, analyst]

And sir, one last question that recently, sir, TATA Steel and JSW steel has increased a lot of capacity in LRPC. So I think LRPC has become a commodity market, so whether we are planning to go for value addition in this LRPC?

[Rajeev Jhawar, executive]

LRPC, definitely. It is -- JSW has come out with a large capacity, a new plant. And so has TATA Steel also plans to expand its capacity. The demand in India is growing, but the margins are, of course, going to be under pressure because the steel companies like TATA and JSW would like to take market share. As far as we are concerned, our -- the margins, of course, are under pressure on the LRPC. But our strategy is to go into more value-added. Almost 10%, out of our 5,500 tonnes production, about 500 tonnes per month, we would convert -- we have already established markets into plasticated LRPC and galvanized LRPC, which both in the domestic market and some success in the export markets.

And over the next few quarters, our objective would be to continuously keep on increasing the share because they give you a much better value addition. And those are, again, high quality, high technical products, just not selling LRPC as a commodity. So that is a lot of engineering sale goes into that category. So our focus would be to improve the percentage of plastic rated LRPC in the coming quarters.

[Aman Sonthalia, analyst]

And sir, one last question, whether we have received the TATA money completely?

[Rajeev Jhawar, executive]

We received -- now total INR 78 crores is left and we expect some land transfers and some land lease transfers to be completed, and we expect this money to be received by Q4 FY '24.

[Aman Sonthalia, analyst]

Okay. So by that time, we will be virtually debt-free company.

[Rajeev Jhawar, executive]

Yes. We hope so.

[Operator]

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

[Rajesh Majumdar, analyst]

Congratulations once again. Sir, I had a technical question on the segment-wise revenue breakup. If you add wire ropes, strands and LRPC, it's 90%. Now what is this other 10%? And what is the contribution of that to our EBITDA or PAT? That was the first question.

[Rajeev Jhawar, executive]

Anirban, can you take this question, please?

[Anirban Sanyal, executive]

Yes, sure. So the other -- Rajesh, the other 10% includes direct services as well as the sales from our subsidiary, UM Cables.

[Rajesh Majumdar, analyst]

Okay. And the contribution of EBITDA or PAT from this?

[Anirban Sanyal, executive]

We don't give out individual segment-wise EBITDA, but services are always higher that what is the blended EBITDA margins for the company as a whole. UM Cables, obviously, is a little lower compared to the overall EBITDA margins of the company.

[Rajesh Majumdar, analyst]

So how do we look at this 10%? Will it be growing with the company in an equal way? Or will it come down as the CapEx gets completed and Ranchi starts delivering more business? How do we look at this number?

[Anirban Sanyal, executive]

No. So FY '23, if you see, Rajesh, it was 8%. And in Q1, it is 10%. So it will be in this range because UM Cables typically annually is in the range of INR 100 crores to INR 110 crores of top line. And then the -- it depends on the services, which is primarily coming out from our European subsidiaries, typically in wire ropes. So it would continue to be in the 8% to 10% range.

[Rajesh Majumdar, analyst]

Right, sir. And sir, my next question was on the Ranchi CapEx. What should be the asset turn from there in terms of the turnover we anticipate to get from the INR 360 crores, INR 380 crore CapEx we're doing there?

[Rajeev Jhawar, executive]

You see we are -- from the CapEx of INR 310 crores, we are building a capacity of almost 47,000 tonnes. So if you look at the selling price, would be a blended price, so it would be close to INR 900 crores. So I would say that by the time we get the full capacity, it would be close to, I would say, between 2 to 3 times.

[Rajesh Majumdar, analyst]

This is including the value-add mix change you are contemplating, right?

[Rajeev Jhawar, executive]

Yes. Yes.

[Rajesh Majumdar, analyst]

Okay. And this will be incrementally margin accretive in terms of the product mix as well?

[Rajeev Jhawar, executive]

Yes, because most of the -- almost 60% of the volume of 47,000 is towards wire rope and more towards the higher value-added wire ropes. So -- and the balance is LRPC, plasticated and wire, and that too in the higher segment. So we expect the percentage of wire ropes to be higher in the overall mix, even with the new expansion.

[Rajesh Majumdar, analyst]

Okay. And sir, is it possible to give us a breakdown of the subsidiary performance for the quarter as you've given for the year for Usha Martin, International Usha Martin Singapore, Usha Siam Steel and all these companies?

[Rajeev Jhawar, executive]

Anirban?

[Anirban Sanyal, executive]

Rajesh, we typically give the performance of the international operations, if you look at our presentations on. But initial subsidiaries, we would have been giving on an annual basis, but we'll consider your suggestion.

[Operator]

[Operator Instructions] Next question is from the line of Jasdeep Walia from Clockvine Capital Advisors.

[Jasdeep Walia, analyst]

My question...

[Operator]

Jasdeep, sorry to interrupt you. Your audio is not coming clearly. Can you please speak through the handset?

[Jasdeep Walia, analyst]

Yes, is it clear now?

[Operator]

Slightly better.

[Jasdeep Walia, analyst]

Yes. Sir, you said that you want to gain market share in international markets. So what gives you an edge to gain that market share? So would you be pricing your products, which are of similar quality to global wire rope majors at, let's say, a discount so that you will gain market share because of that? Or what would be your strategy?

[Rajeev Jhawar, executive]

You see, we have 2 Usha Martin -- it's a good question. The -- we are -- as we mentioned earlier that our focus is to more and more increase our market share in the international market. And there, we are competing with the largest players in this industry, in our industry. Our pricing would be definitely lower than them because those are -- but those are not significantly lower because it is just not the business you don't get only on reducing price by 3% or 5%. Our strategy is, a, to not only be competitive because of our entire integration and cost advantage. So we may be 4% to 5%; some places, 7% cheaper. But more important is the service we provide through our own distribution network and our own stock points in different parts and our own marketing and service team.

So being closer to the customer, we are able to get -- to give you an example, in U.S., we got a big contract of mining rope and we started supplying to them small quantities. And they had a problem may not be related directly to the wire rope performance, but they wanted our people to be flown in within a few hours. So our people went and we were able to resolve that and had a very good impression of the customer. So we landed up getting a big contract versus some of the big American competition and which is valid for next 3 years. So being close to the customer, taking advantage of our own distribution and service center, being competitive and getting some price advantage to the customer, I think the combination of this is helping us get more traction into the market.

[Jasdeep Walia, analyst]

Got it, sir. Got it. And sir, you mentioned that you have started supplying raw materials to your U.K. subsidiary to India. So what kind of cost advantage has it given you in your U.K. subsidiary? If you could quantify it in terms of dollar per tonne or any such measure?

[Rajeev Jhawar, executive]

You see, earlier, we used to buy wires from the European sources and supply -- for the ropes being produced out of our Brunton Shaw. But with -- we have now integrated all our international businesses and we all run a united team rather than running them in silos as it was when the company was with the steel business. Now that we are focused on our wire rope business, we all work as 1 integrated team. So we looked at all the opportunities and what we did was, looked at the -- and we, of course, modernized our Ranchi plant facilities, particularly the wire drawing and the patenting facilities, thereby building the capability to supply all these wires from India. So having done that we have got 2 advantages. Of course, the cost advantage, I would say it would be close to $300 to $400 per tonne. But also it gives a higher value-added wire product from India, which is being supplied and that is also helping us to become overall more competitive.

So earlier buying wire from local European sources, in many cases, we were not competitive also. So once the competitiveness has improved, the supply chain control is within the company, and that is also helping us to get a higher market share for our products in the international market. And a win-win situation for the stand-alone wire -- for our rope plant in India, which is supplying the wires and strands. And, of course, giving a competitive advantage to our subsidiaries to get higher market share at competitive prices.

[Jasdeep Walia, analyst]

Sir, I just wanted to understand the competition profile in your industry. So let's take a large market and when you operate -- in which you operate like Europe, could you give us the market shares of various players in Europe?

[Rajeev Jhawar, executive]

You see every country wherever you have your own manufacturing, I think Bridon-Bekaert and WireCo, which have got large manufacturing facilities, they will be having the largest market share. Usha Martin Group, we would be close to selling 25,000 to 30,000 tonnes into that market. I don't have that number with me. Let me -- we'll get back to you with specific answers on that.

[Jasdeep Walia, analyst]

Got it. And are Chinese companies dominant in the export market in this business?

[Rajeev Jhawar, executive]

No. Chinese, we are not seeing Chinese other than the very small cords, which they outlined in the U.S. market and in some other markets, low-end products. It is mainly the Koreans, which are dominant players from Asia in this market.

[Operator]

[Operator Instructions] Next question is from the line of Dhara Mehta from Centrum Broking.

[Dhara Mehta, analyst]

Congratulations, sir, on the previous results that you've reported. Sir, I have 3 technical questions. One is, sir, how should 1 visualize your volume perspective of these 3 divisions, given the fact that I'm assuming you've taken a strategic decision to show a decline in the wire and strands division, which has declined very sharply. So how should one perceive your volumes for FY '24 and '25, sir?

[Rajeev Jhawar, executive]

I would say that we are looking at 13% to 15% growth in our volume. And overall, I would say, 15% growth overall between last year and this financial year. That is something what we expect to grow in this financial year. You are right, our focus is more and more to increase the percentage of wire ropes and within the wire ropes the specialty wire ropes. And that is something we would continue to grow. Our focus on wires and LRPC, LRPC as we discussed earlier, it is a commodity product. Margins are coming down because of stiff competition in the market. But our focus is to increase the percentage of or increase the plasticated and specialized LRPC, which gives us much better revenue. And on the wire side, we would continuously keep on adding higher value-added wires, both galvanized, aluminum-zinc wires as well as critical wire applications for the auto sector, that is something which we would keep on adding.

Percentage-wise, it could keep on changing between quarter-to-quarter depending on how each sector is doing. If the demand of LRPC grows, we would look at even increasing our market share. While the margins may be low in LRPC, but still, it adds to the bottom line. And we have a capacity of LRPC, which cannot produce ropes. So even if it is giving us decent contribution over our manufacturing cost, we would like to go ahead with that. In those quarters, our overall volumes may look higher, our overall profitability may look better, but our EBITDA per ton may be slightly coming down because the mix of LRPC has gone up. So we, as a company, would like to see that our capacity utilization particularly in the commodity products is there, and we are able to make positive margins on that.

But the long-term endeavor would be to keep on increasing the wire rope percentage and more so in the value-added prices. So -- and to the -- again, to repeat the answer, about 15% plus minus we should be able to increase the volume in this financial year compared to last year.

[Dhara Mehta, analyst]

So sir, given the fact that you've seen a decline in this quarter, the -- should I imply that the next 3 quarters the volume growth will be upward of 20%?

[Rajeev Jhawar, executive]

I would say that overall, there are seasonalities in this business. With the heavy monsoons in different parts of the country, the construction activities have slowed down. So the LRPC gets affected because of that. So there are seasonalities. But I would say that let us look at it on an overall perspective, we should be able to still clock that kind of increase in the whole year.

[Dhara Mehta, analyst]

Sir, second question is, sir, if I look at my EBITDA per tonne, that has improved substantially, and we've actually reported the highest EBITDA per tonne in this quarter, that is the quarter 1. If I take that as a number, then my revenue growth is actually looking at a 20% to 23% upward, because you just stated that a 15% volume growth can be accepted. Should that be our accepted number for FY '24?

[Rajeev Jhawar, executive]

No, no. As I mentioned to you, we have 3 product portfolios: wire rope, LRPC as well as wires. Our LRPC and wires, volumes have been lower and partly because of seasonality, partly because of strategic reasons and converting into plasticated LRPC. So it would not be proper to always say that the blended margin would remain the same. If the percentage of LRPC goes up because of the demand and volume or the wires go up, so your turnover may go up, but your overall profitability may go up, but your blended margin may be a bit lower and if this percentage of wire rope as a percentage of the total volume goes up, then it could be slightly higher.

So because we have 3 different segments and all 3 contribute at a different level of margins in the total turnover. So depending on which one is having a higher percentage, like in this quarter, we are seeing that LRPC and wires are lower and ropes have been higher, so we have seen our blended margin going up. But I would say that overall, we would say that 15% increase and we should be looking at that whole year. Nothing -- I would not like to comment on any absolute EBITDA numbers for the whole year.

[Dhara Mehta, analyst]

Sir, last question is, sir, have you seen any facilities being mothballed in Europe, given the fact that you've all us haven't gained a lot of market share across the world?

[Rajeev Jhawar, executive]

No. No, no capacities have been mothballed, I would say. But definitely, with a strong integration between our international subsidiaries, international manufacturing and our parent company in India, we -- and we are -- as Shreya mentioned, that we have built a good marketing team both in Europe and U.S. for these specialized sectors, we are being able to get a higher market share in some of these sectors like the large diameter ropes, what we discussed earlier or the fishing rope or the crane ropes and the new capacities, which are going to be added we see through our distribution network and the marketing team, which we are creating, we should be able to get higher share from those markets. But it is not that there are capacities which are mothballed. But definitely, we are trying to be more competitive and take some share out of those people.

[Dhara Mehta, analyst]

Sir, what will be the industry growth rate, sir, then in this particular rope market of the world?

[Rajeev Jhawar, executive]

You see the industry growth rate, it is very difficult to say because each sector, we are in about 8 or 10 different sectors. Mining, elevator, fishing, construction, cranes, ports. But I would say 4% to 5% would be the average growth, but certain sectors are seeing a much bigger traction, particularly the oil offshore, the crane rope and the mining sector, we are seeing a bigger traction coming from these sectors.

[Dhara Mehta, analyst]

So just last 1 question, sir. Sir, should we -- we have a capacity of around 310,000. This quarter, we are running at a run rate of around 177,000. And what will be the optimum utilization for our segment, sir? I mean, can we run a 100%...

[Rajeev Jhawar, executive]

Yes, as I mentioned to you that over last year, against a capacity of 300,000, we did close to 204,000 or 200,000. The new capacities which we are adding would be getting more and more by the quarter -- end of quarter 3, most of it would be done, and getting some benefit of that from quarter 4. But assuming taking the last year's 204,000, as I mentioned to you, we should be 13% to 15% higher overall volumes this year.

[Dhara Mehta, analyst]

So sir, we still have room for growth that means. In case growth comes in, we still have room?

[Rajeev Jhawar, executive]

The growth, one is the manufacturing side. Other is, it takes time to develop these new products and new markets. And it is not that you set up the capacity and you have market. It's not a commodity. It's a highly technical product. It has safety issues. You have to have approvals from customers, so those take some time. Having been in the industry for so many years, we have a good brand and a good name. And we have a better opportunity of doing it faster, but it does take some time to develop this. So yes, we see over the next couple of years to see decent opportunity out of the capacity what we have to increase it also.

[Operator]

Next question is from the line of Aman Vij from Astute Investment Management.

[Aman Vij, analyst]

First question is on the newer customers. So I believe in the last 1, 2, 3 years, we have been able to break into a number of big customers. So -- and we would have also made some supplies to those customers. So if you can talk about the -- what is the feedback we have received from such big customers? And also, if you have gotten some big repeat orders, if they like that product, if you can talk about the same?

[Rajeev Jhawar, executive]

You see, first of all, I would not like to name customers for confidentiality agreements with these customers, but we have made some big breakthroughs with some big manufacturers of OEMs in Europe and some big contractors in Europe. They have not only -- they were only buying ropes from the European and the American sources. So there have been series of visits to the plant, audit of our plants in India and Europe. And some good breakthroughs have been made, particularly in the large crane ropes and some big mining rope and also some crane rope OEMs in America.

So we have been -- as they have some, there was a very, I would say, intense review of the quality and the quality assurance system, the safety and other standards of the product. So we are happy to say that the company has been able to successfully get as our OEM supply to them, we have made some -- we have got some repeat contracts and repeat orders from them. And more important, we expect a lot of business on the replacement market having been successfully suppling to these OEMs in the coming times.

[Aman Vij, analyst]

Sure, that is helpful. My next question is that you have talked about our global market share is around only 5%. In the next, say, 3, 5 years, do you see Usha Martin having like 10%, 15% market share yearly?

[Rajeev Jhawar, executive]

You see wire rope, definitely, you see we are definitely going to increase our market share. But it would be more in the value -- the 5% includes all categories of wire ropes. And we are not expanding and getting into every kind of wire rope. We are only focusing more and more into the high-end products, which gives good margins and has -- and you are competing mostly with the European and the Americans and the Koreans where you are able to get a much better price for your product. So our endeavor would be to focus on these specific sectors, like the mining sector, like the fishing rope in Europe, mining in North America, U.S., Austria and the South African markets. So we would be focusing on these markets and for those specific high-end products.

So we are not targeting that I want to increase from 5% to 10% in every category of rope. And I would say that, that is the better way we have seen because that gives you a healthier EBITDA per tonne because you are able to get the service margins also because you don't only sell the product, you are able to sell services, you are able to work with the customers closely and build a long-term relationship. And that is what is evident of how we have been able to improve our margin, so that would be the endeavor. We may definitely increase from 5% to 7%, 7.5%, 10%, but that would be more sector-specific than looking at the overall market share.

[Shreya Jhawar, executive]

Yes. And just to add to that, the top like 4 to 5 players in the market currently have about 20% market share. So I think to say around 15% would be -- would not be realistic because like you mentioned, a lot of the market is also these general purpose ropes. So definitely, the endeavor is to get more and more market share from the competition in Europe and America and continuously increase the international market share, which is currently 56% of our revenues to around upwards of 60%. But like you mentioned, the market share globally, still we would target around 7%, 8%.

[Aman Vij, analyst]

That helps. My next question is, we talk a lot about value addition on the rope side. We've talked about value addition on the LRPC side, but there is a very big opportunity in value addition on the wire side, sir. A lot of our global peers do a lot of value addition in wire side. They also do some interesting products like synthetic ropes. So what are your thoughts on value addition on the wire segment as well as on synthetic ropes?

[Rajeev Jhawar, executive]

On the wire segments, we are definitely getting into niche markets of higher value-added wires. When we were part of the steel business, what the objective was to evacuate as much as steel even in the form of wires, so that you are seeing over the last 2 or 3 years, we have slowly brought it down and focusing more on the value-added products. We are -- as a part of our Phase 2 project, we are setting up zinc aluminum line for higher value-added wires, both in the domestic and the export market, and we will see that coming into operations in the next financial year.

Even on the other qualities high-end wires, we are looking at different opportunities and I would say that next 2 years, we would also focus on getting higher volumes of these specialized wires. Because there is a significant possibility of increasing the market share. The wire market is a significantly larger market than the wire rope market, I would say 8 to 10x more. And as you've rightly said, there are big players in this and I see an opportunity to grow in this segment in the coming years.

[Aman Vij, analyst]

And on the synthetic ropes?

[Rajeev Jhawar, executive]

Pardon?

[Aman Vij, analyst]

Sir, you missed the synthetic ropes part.

[Rajeev Jhawar, executive]

On the synthetic ropes, we are definitely looking not on the ropes part, but on some synthetic products, which could have a good traction on the -- which could be complementary to our service business. But right now we have no plans to get into synthetic rope or anything of that sort for the time being. I think there is tremendous scope for us to focus and get a bigger share in our steel wire ropes. And I see that as a big opportunity and we have a lot to -- still lot to cover in the coming couple of years, 2, 3 years.

[Aman Vij, analyst]

Final question from my side on the CapEx, so Phase 1 is almost there for us in the next few quarters and you have briefly alluded about Phase 2 CapEx. So that will be around a similar number of INR 200 crores to INR 300 crores, is my understanding correct? And will this also include, we were also looking at expanding some capacities internationally? So if you can talk about the next set of CapEx and some time lines associated with them?

[Rajeev Jhawar, executive]

The Phase 1 is about INR 310 crores, out of which close to INR 212 crores is completed. And the balance would be completed by -- most of it would be completed by Q3, a little bit maybe in Q4. So that would complete the Phase 1 part. Phase 2 part is INR 167 crores in India and INR 62 crores in our Thailand plant and the INR 167 crores, what we are expanding in India is, again, focused on mining ropes and crane ropes capacity increase and some infrastructure to integrate well with our international subsidiary so that -- and manufacturing plants internationally so that we're able to serve them better and also get the full benefit of the capacity integration between the two. And as far as the Thailand plant is concerned, the focus is to more crane ropes and some high-quality wires and elevator ropes with capacity enhancement over there.

[Aman Vij, analyst]

With all these value addition...

[Rajeev Jhawar, executive]

And the time lines would be, I would say, the Phase 2 would take once -- at least next because some of the equipment have large delivery times, so it would take about another 18 to 24 months, the Phase 2 in India to complete. And Thailand would take about 18 months to complete. We have yet to start placing orders, so it would take about 18 months to complete that first phase.

[Aman Vij, analyst]

Phase 1 and Phase 2 coming in all these value addition which we are doing, do you think in the next 2, 3 years, even margins upwards of, say, 20% is also possible? I'm not talking about 1, 2 years, I'm talking when all this value addition is done, maybe 2, 3 years hence, is that kind of...

[Rajeev Jhawar, executive]

Our endeavor would be to -- our -- yes, definitely, I would say, 2 to 3 years, as we get into these higher value-added products and the service part of it as they get added, which gives you a significant margin. Our endeavor would be getting higher towards those numbers. But there's a lot of work to be done. And with the CapEx as well as enhancing our international capability of our marketing and distribution network. Our endeavor would be towards -- going towards that.

[Operator]

Ladies and gentlemen, as there are no further questions, I will hand the conference to the management for closing comments.

[Rajeev Jhawar, executive]

Yes. Thank you, everyone. I would like to thank everyone for attending this call and showing interest in Usha Martin Limited. I hope we have been able to answer all your questions. The company is dedicated to creating value for all its stakeholders in a sustainable manner. Should you need any further clarification or would you like to know more about the company, please feel free to reach out to us or to CDR India. Thank you once again for taking time to join us on this call, and see you all in the next quarter. Thank you.

[Operator]

Thank you very much. On behalf of Usha Martin Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.