Usha Martin Ltd

NSE:USHAMART

Earnings Call Analysis

Usha Martin's Q1 FY25 Earnings Summary

Usha Martin reported a year-on-year revenue increase of 1.5% to INR 826 crores, driven by growth in its Wire Rope and Wire & Strand segments. The operating EBITDA margin improved from 17.9% to 18.6%, resulting in an overall EBITDA margin of 19.2%. Net profit rose by 3.1% to INR 104 crores. The company's net debt significantly decreased from INR 124 crores to INR 73 crores. Future growth is anticipated through the introduction of value-added products and increased demand in sectors like oil, offshore, and infrastructure. Management remains optimistic about achieving a 10% volume growth for ropes and wires segments while maintaining strong margins.

Quarterly Performance Highlights

Usha Martin Limited reported a consolidated net revenue of INR 826 crores for Q1 FY '25, reflecting a modest 1.5% increase from INR 814 crores in the same period last year. This growth was largely driven by improvements in its core Wire Rope and Wire & Strand segments, which are vital components of the company's revenue structure.

Segment Contributions

The Wire Rope segment continued to be the backbone of the company, contributing approximately 72% of total revenues. However, the LRPC (Low Relaxation Pre-stressed Concrete) segment faced challenges, leading to declines in both volume and revenue. The management remains optimistic about a turnaround in this segment due to rising demand for galvanized and plasticated products.

Operational Margins and Profitability

Operating EBITDA for the quarter was reported at INR 154 crores, representing an increase from INR 146 crores in Q1 FY '24. The EBITDA margin rose to 18.6%, compared to 17.9% from the previous year, indicating improved operational efficiency through a better product portfolio and wider spreads. The net profit for the quarter was INR 104 crores, a 3.1% increase from INR 101 crores year-on-year.

Debt Management and Financial Stability

The company successfully reduced its net debt to INR 73 crores as of June 30, 2024, down from INR 124 crores at the end of March 2024. This improvement resulted in a net debt-to-equity ratio of 0.03x, illustrating enhanced financial stability and prudent debt management, which is favorable for shareholders.

Capex and Future Growth Plans

Usha Martin is in the early stages of implementing a capital expenditure program aimed at enhancing both capacity and operational value addition. Initial capital expenditure has already begun, and management anticipates a ramp-up in volumes over the next 6 to 9 months, which they expect will significantly boost performance in the latter half of the year.

Market Demand and Guidance

Looking ahead, the company has provided guidance for a robust 10% volume growth in its rope and wire segments, while focusing on higher value-added products. The management made it clear that this forecast takes into account current macroeconomic conditions and logistical challenges, suggesting the previously anticipated growth of 12%-15% may be tempered. The expected annual profit after tax is around INR 500 crores.

Strategic Focus Areas

Usha Martin aims to capitalize on the increasing demand from expanding sectors such as Oil & Offshore and Wind Energy. In the domestic market, government infrastructure initiatives are expected to drive further demand for Usha Martin's products. Emphasis on digitalization and operational efficiency improvements will also be a priority.

International Market Potential

International revenue accounted for approximately 56% of total revenue, and the company intends to strengthen its foothold in international markets, particularly in the Americas, where demand in sectors like oil, energy, cranes, and ports continues to grow. The management is optimistic about sustained growth in these regions.

Challenges and Considerations

Despite promising trends, the LRPC segment remains under pressure due to its commodity nature and sensitivity to fluctuations in steel prices. Continued efforts are needed to enhance the quality and volume of this segment, while maintaining strong margins in their Wire Rope business.

Conclusion

Usha Martin's Q1 FY '25 results demonstrate resilience in a challenging global environment. With sound financial management, a solid growth framework, and a clear strategic direction focused on value-led growth, the company is well-positioned to navigate upcoming market dynamics and deliver value to its stakeholders.

Earnings Call Transcript 2025-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, Mr. Singh.

[Devrishi Singh]

Thank you. Good afternoon, everyone, and thank you for joining us on Usha Martin's Q1 FY '25 Earnings Conference Call. We have with us Mr. Rajeev Jhawar, Managing Director of the company; Mr. Abhijit Paul, 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 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 Q&A 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]

Good afternoon, everyone. On behalf of the management team of Usha Martin, I would like to welcome you all to our earnings conference call. I will begin by sharing some updates on operations and strategies, following which Mr. Abhijit Paul will run you through the key financial highlights.

In light of the current macroeconomic and geopolitical climate, we reported positive results this quarter, supported by growth in both revenue and EBITDA. Revenue in our core Wire Rope segment increased by 7.5% year-on-year, and revenue in our Wire segment increased by 8.9% year-on-year, playing a key role in sustaining overall top line. At the same time, volumes in the Wire Rope segment increased by 7.8% year-on-year and volumes in the Wire segment increased by 19.8% year-on-year. The overall performance was achieved despite a notable decline in the LRPC segment, both in terms of the volume and revenue.

Our focus on higher value-added products and operational efficiency has helped achieve an operating EBITDA margin of 18.6%. The overall share of the value-added industry segment in our revenue rose to 54%, up from 51% in FY '24. Notably, within the Wire Rope category, the value-added segment's contribution grew to 72%, up from 71% in FY '24. Specifically, the growth in the Elevator and Mining Rope categories have had a positive impact. Additionally, revenue from international markets accounted for 56% of our total revenue during the same period. These positive trends have contributed to the improvement in our margins.

With regards to our CapEx plans, our first round of CapEx is on stream, and we anticipate a gradual ramp-up in volumes over the next 6 to 9 months, which will enhance our performance in the latter part of the year. The CapEx is aimed at both increase in capacities as well as value addition on existing capacities.

As a part of the expansion, we have also introduced value-added plasticated LRPC products. We expect this addition in our portfolio to positively impact the LRPC segment, which has faced challenges in the recent past. With the ramp-up in volumes over the coming quarters, contingent on projects, we are confident that this new product line will play a crucial role in turning around this segment and contributing positively to our overall growth in the future.

While our business pipeline remains robust, both in the domestic and international markets, I would like to highlight some demand drivers going forward. The expanding sectors of Oil and Offshore, including Wind Energy, will continue driving increased demand for ropes in the global markets. In the domestic market, planned government infrastructure projects, including bridges, ropeways, high-speed railways and infrastructure development in Tier 2 and Tier 3 cities are expected to sustain and drive further demand for our products.

Looking ahead, we remain committed to expanding our global footprint while continuing to focus on growth within India. I would like to reiterate that Usha Martin's strategy remains firmly centered on value-driven volume expansion. We are focused on maximizing the utilization of existing capacities to enhance both operational and financial performance. Investments in digitalization and automations are improving efficiency across our operations.

In conclusion, despite the challenges globally, Usha Martin has shown resilience in quarter 1 FY '25 and is well positioned to leverage its strength and pursue growth initiatives to address these macroeconomic hurdles and drive strong growth in FY '24-'25.

I would now like to invite our CFO, Mr. Abhijit Paul, to present the financial highlights for the quarter ended 30th June '24. Thank you, and over to you, Abhijit.

[Abhijit Paul, executive]

Thank you. And a very good afternoon to everyone. I will now provide a brief overview of the company's operating and financial performance for the quarter ended 30th June '24. The consolidated net revenue from operations stood at INR 826 crores in Q1 FY '25 compared to INR 814 crores in Q1 FY '24, reflecting a 1.5% year-on-year increase. This growth is primarily driven by higher contributions from both the core Wire Rope and Wire & Strand segments.

Notably, the Wire Rope segment continued to deliver steady revenues, contributing approximately 72% of our total revenues. However, the decline in the LRPC segment's contribution impacted the overall top line performance during the quarter. Despite this, we are optimistic about the growing demand and order inflow for galvanized and plasticated LRPC and anticipate a positive contribution from this segment in the coming quarters.

Our operating EBITDA for the quarter stood at INR 154 crores as against INR 146 crores in Q1 FY '24. The operating EBITDA per tonne stood at INR 32,628. Additionally, the Q1 FY '25 operating EBITDA margin increased to 18.6%, up from 17.9% in Q1 FY '24. Including other income, EBITDA margins for Q1 FY '25 stood at 19.2%, up from 18.3% in Q1 FY '24. This margin enhancement is attributed to our improved product portfolio and increased spreads. Net profit for the quarter stood at INR 104 crores, reflecting a 3.1% increase from INR 101 crores in Q1 FY '24.

On the balance sheet front, we have managed to reduce our net debt to INR 73 crores as of 30th June 2024, down from INR 124 crores at the end of March '24. This improvement is reflected in our net debt-to-equity ratio, which has improved to 0.03x as of June '24 compared to 0.05x as of March '24. Despite our ongoing CapEx initiatives, our net debt remains at comfortable levels. We are happy to share that our credit rating has been upgraded to IND A positive with a stable outlook from IND A.

I would like to reiterate that we remain confident in our ability to navigate market dynamics effectively and drive sustainable growth. The company will maintain strong financial discipline while benefiting from the positive demand outlook for its products and its solid market standing. Usha Martin is committed to continuously enhancing its financial performance and is strategically positioned to create increased value for all stakeholders. This brings me to the end of my address.

I would now request the moderator to open the line for the question-and-answer session. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Aman Kumar Sonthalia from AK Securities.

[Aman Sonthalia, analyst]

Sir, our Minister Nitin Gadkari has announced a CapEx of around INR 1, 25,000 crores for Parvatmala project. So how big is the opportunity for the company over the next 3 to 5 years? And recently, some of the news articles, if I go through that, some of the state governments, like Himachal Pradesh government and Uttarakhand government and Jammu-Kashmir government, they are very excited about this ropeway project. So where do we see our company in Parvatmala project, sir?

[Shreya Jhawar, executive]

Yes, you're absolutely right, there are ambitious plans by the Government of India through the Parvatmala Pariyojana project, and they have planned about 250 ropeway projects in the next 5 to 7 years. Some of these projects, of course, are at early stages and some are also being retendered right now. Also, like you mentioned, various state governments have also initiated setting up ropeway projects. We are well positioned to grab some of these opportunities as the focus of a lot of these projects is also Make in India.

We are working with our project teams, along with our Global Design Center in Italy. They're working with all of the relevant project authorities, consultants, directors in order to capture these opportunities. So I think we are well positioned because we do produce locked-coil wire ropes, stay cable strands and all of these others -- the other products that are required for these projects, not just ropeway, but also the high-speed railway projects, the bridge projects, et cetera, that the government has planned as part of its infrastructure initiatives. So over the next few years, this should contribute positively to our overall performance.

[Aman Sonthalia, analyst]

Next question is, madam, recently, we have seen a lot of landslides. Over last 2, 3 years, we have seen a lot of landslides in the mountain area. Recently, a big tragedy happened in Wayanad in Kerala. So we are coming up with this galfan wire in our Ranchi plant. So how big this opportunity is for rope knitting in coming future?

[Rajeev Jhawar, executive]

Yes, our galfan line is getting commissioned in the next 3 to 4 months, and there is a very big opportunity. Unlike the Western world, particularly Europe, in the Alps, they have a very large program for constantly putting the rockfall barrier, which is produced out of galfan wire. And Usha Martin is very much working with GEO Group of Switzerland to partner with them to build up this industry, and there is a good opportunity, and we see in the coming years, there should be a good demand coming from this.

[Aman Sonthalia, analyst]

And sir, in the last conference call, we have indicated that you are expanding our capacity in European venture. So how you -- since Europe is going through a recessionary period, so how we see our products demand in Europe and whether we will be able to sell that expanded capacity in Europe?

[Rajeev Jhawar, executive]

You see the Europe, of course, there is a general slowdown in the economy, but the areas where we are currently focused is in the oil and offshore and the wind energy sector, which has a fairly strong demand because most of the countries are looking for their energy security. And therefore, there are big projects which are going on. And we are expanding our capacity in these areas, especially for the high-end ropes for these projects. And the order pipeline looks to be fairly strong. The inquiry pipelines are fairly strong. And we expect that the new capacity increase, which is expected to be completed by end of this year, should be able to get a comfortable order booking to be able to ramp up the production there.

[Aman Sonthalia, analyst]

One last question, sir. Indian Tier 1, Tier 2, Tier 3 cities is seeing housing boom, so how we see our elevator rope demand in India? And at the same time, I think U.S. market is also witnessing a very huge demand for elevator rope. So whether we will be able to expand our capacity and how we foresee our future in this elevator rope.

[Rajeev Jhawar, executive]

The elevator rope market, both in India, overseas, are fairly, fairly strong. With the big push for Tier 2 cities for the building, especially with higher story buildings, there is a good demand of elevator ropes, and we see a very good order book and a very strong demand in the coming time. We expect the growth should be between 10% to 15% per annum based on the current situation.

Also, the demand for elevator ropes internationally seems to be fairly strong. And once we have acquired our 50% stake in our joint venture with Tesac, which we started running it independently from February this year, I'm happy to say that, that facility, which also produces only elevator ropes is also fairly -- doing fairly well, and we expect a fairly good offtake of elevator rope from that venture itself. So overall, I would say that elevator rope growth could be between 10% to 12% per annum.

[Aman Sonthalia, analyst]

And sir, last question, our slogan was value-led volume growth. So in the first quarter, we have seen a flat -- virtually flat growth in the volume. So can we expect in the coming quarters value-led volume growth?

[Shreya Jhawar, executive]

Yes, definitely. I think the focus is still very much on value-led volume growth. I would say we can still expect, say, a 10% also increase in volume in our Rope and Wire segment, which is very much achievable. With regards to the LRPC segment, of course, like we mentioned, the market dynamics change and our focus in that case is going to be more on the value-added products rather than the volume. And so we'll focus on our plasticated and galvanized LRPC in that particular segment.

[Operator]

[Operator Instructions] We'll take the next question from the line of Kiran from Peepul Tree Capital.

[Unknown Analyst]

One of the most interesting slides in your investor presentation was Slide 8 for me, where steel prices reduced, and yet, we were able to hold on to EBITDA per tonne or EBITDA per kg. So my general question is, given the steel prices are probably at an all-time low and all the large steel players are complaining of Chinese imports. Would this gap between EBITDA per kg and steel prices continue? Or are you seeing some pressure on EBITDA per kg? Essentially because we use wire rods and wire rod prices may not have reduced as much as the steel prices. So if you could just elaborate on the dynamics around raw material prices, spread, and how the entire steel and wire rod dynamics happen.

[Rajeev Jhawar, executive]

You see, as far as you are very right, while the steel prices globally -- in India have been all-time low, but on the high-carbon wire rod, which is our primary raw material, the prices have remained reasonably firm in the coming -- in the past few quarters, the reason being that there has been shut down by a few of the steel producers and some shortage of supplies from them, which prevented the prices to come down.

So while the global prices have been sluggish on the wire rod prices, the prices in India have not been as low as it is in the international market. However, having said that, we have been able to maintain our EBITDA margins close to INR 32,000 per tonne by having a fairly strong product mix on the value-added products and ensuring that we work with our product mix and the value-added products and to see that our margins are protected. And you would have seen in the last few quarters, even though there has been volatility in the steel prices, our business model and the way our teams have worked, we have worked towards making sure that we maintain the EBITDA margins what we have been able to over the last few quarters on a sustainable basis.

[Unknown Analyst]

Got it, sir. So essentially, the outlook is we're not going to have severe EBITDA, INR 32,000 in and around will be maintained, maybe improve because of value-led volume growth, but not reduced for this year, at least, sir. Is that your view as well?

[Rajeev Jhawar, executive]

Our objective would be to see that we at least maintain these levels, and we are reasonably hopeful that we should continue to maintain at these levels. And of course, as the market would progress in the future, we could -- as we develop newer products, it could -- we could have some positive changes. But as of now, I would say that this is something our business model, we are reasonably confident of maintaining these levels.

[Unknown Analyst]

Super, sir. So, sir, second question, sir, then as we look ahead to the next year, is there a step-jump in terms of any particular product or any particular segment, sir? Because I mean, the way that we were kind of discussing over the last 3, 4 quarters, we were kind of closing in on about INR 500 crore profit after tax in this year, I mean roughly, plus or minus. But is there any step-jump from here? Or are the ambitions a little more tempered? How do you see the outlook, sir, for the next couple of years or next year at least?

[Rajeev Jhawar, executive]

I would say that as we are commissioning our projects and as we are developing our products in the international and building our product pipelines in the international market, we expect definitely the volumes to grow. But, of course, we need to be mindful of the geopolitical situation as well as the overall macroeconomic situation. But having said that, I personally feel with the various initiatives, which the company has taken over the last few years along with our global development center, along with our international distribution centers, we are slowly inching up our volumes as well as the value-led volume growth across all segments.

And -- we need to understand that we are not a commodity business. We are an engineering business, engineering product, which has -- which takes its own time to get into newer customers, newer territories. And we are confident with the various initiatives which we are taking that we should definitely see a positive jump in the coming 2 years.

[Operator]

The next question is from the line of Prolin Nandu from Edelweiss Public Alternatives.

[Prolin Nandu, analyst]

So a few questions on margins from my side. So Rajeevji and Shreyaji, when you look at your business, how do you evaluate margins? Is it more on a percentage basis or EBITDA per tonne basis? Because where I'm coming from is that if we look at the very simplified version of your business, you take raw material, which is a commodity and then you add value and convert it into a specialty product, right?

And also, despite the fluctuation in steel prices, our EBITDA margin on a per tonne basis has remained very -- in a very narrow range, so how should -- how do you look at the business? And just to add to that, when it comes to the pricing of any specific product, I understand that majority of our sales are more on a spot basis or very short cycle kind of orders. But is there any element of commodity price linkage in any of the contracts?

[Rajeev Jhawar, executive]

Let me tell you, first of all -- let me answer your question in 2 parts. Number one, we generally look at our EBITDA as a percentage because while we have 3 product lines, the Wire Rope, and within Wire Rope also specialized rope and the GP ropes, then we have the Wire segment and then we have the LRPC segment. So when we look at it, we look at the blended margin and try to see that we are maintaining a similar where we -- as you have rightly said that we have been fairly stable in the last few quarters, so our objective is to continue to maintain that level even though there is variation in terms of the percentage moving between the 3 segments, as I mentioned in my opening statement. So it is 18.6% in this quarter, and that is something between 18% to 19%. We try to ensure that we maintain within that.

Number two, as far as the commodity is concerned, of course, within our product segment, LRPC is -- the normal LRPC is a commodity product, and it is very sensitive to the steel prices. So if any fluctuation in the steel prices, going up or down, it has an immediate impact on the LRPC product. And currently, it is having a fairly low EBITDA margin within the entire product portfolio. So this is probably the only product which is purely a commodity linked, whereas the Wire Rope business is having a much more resilience, and it is having a lot more technology and engineering and pricing power within this segment, which we work towards ensuring that we work towards the blended margin at the levels at which we are operating.

[Prolin Nandu, analyst]

My second question is, in a way, slightly linked to the same margin related query. So if I look at your Slide #6, right, where you have given product mix and energy mix and industry mix and geography mix. So -- and you also mentioned that you are aspiring to have this value-led volume growth, so -- and the big part of EBITDA margin improvement that we have seen in last 4 to 5 years is driven by increasing share of some product, increasing share to some industry and probably growing international as well, right?

So when I look at this slide, are we -- I mean, have we optimized all the levers on product and industry and geography part or there are yet a lot of levers that are yet to be optimized which will not only help us in terms of value-led volume growth, but also in terms of mix improvement, which will also impact the margins? So yes, on the 6th slide, if you can just let us know whether that optimization has already taken place or there is still enough and more to do to improve our product, industry and geography mix?

[Shreya Jhawar, executive]

So you rightly pointed out that -- with different levers that have helped us grow our margins and our overall performance. When it comes to value-added products within Wire Rope, I would say that right now, it's at about 72%, and the total value added is about 54%, right? If you look at FY '23, it was about 44%. So between FY '23 and Q1 FY '25, we've gone 10% higher from 44% to 54%. Now, will we be able to get that same growth rate? Probably not, but at the same time because our CapEx is more focused on the value-added segment, we should be able to incrementally increase it as our volumes from the new CapEx ramp up.

When it comes to the geography aspect, of course, our focus is still to continue to grow in new geographies. Middle East, for example, we've roughly maintained at about 9% from FY '23-'24, even in Q1 FY '25, but now that our Saudi Arabia facility is on stream and is finally kicked off, hopefully, we will be able to increase our share in the Middle East as well. Similarly, in Americas and Europe, as we mentioned earlier, the efforts are on within Americas, not just the U.S., but also the Latin America market where Brazil is seeing strong growth. So I would say that it's not that our -- we're at kind of the end of this value migration, it's still very much part of our overall plan, maybe the rate that we saw from FY '23 to now has been really good. Now I think incrementally, we still continue to...

[Rajeev Jhawar, executive]

And one more point I would like to mention on the LRPC, which I mentioned is a commodity product, we have successfully developed the plasticated and galvanized LRPC, which is much more value-added than the simple, pure LRPC. Although this is a project-based business where we are expecting a good pipeline, hopefully in the coming months and quarters as well as we have made some good breakthrough in the export market for these products in both in Southeast Asia and now even looking at Middle East and Europe for these products. And over the next few quarters, even we expect to ramp up this production. So even on the LRPC, where we have very muted margins in the simple commodity product, we expect the margins to be better once we have the more and more percentage of plasticated and galvanized LRPC as a part of the portfolio.

[Operator]

We'll take the next question from the line of Gunjan Kabra from Niveshaay.

[Gunjan Kabra, analyst]

I missed the starting commentary of yours, but just wanted to understand that if we talk about the construction sector and interactivities across the sector that we cater to have been really good plus the export market that you have been guiding, the pipeline in the U.S., Europe and Middle East has been really good. But I guess, the volume growth in the business was -- has not been coming in a good time because maybe we were in the expansionary phase and operating at full capacity utilization, that also I understand. But some kind of volume growth was also expected this quarter, maybe our -- in Q4, our capacity got commenced in Q1. So can you explain how are we seeing this growth to come in? And if we are still on track of the 15% volume growth or has it been reduced from 15,000 tonnes to 10,000 tonnes which you were explaining in the previous question? So if you can explain that.

[Shreya Jhawar, executive]

I would say that like we mentioned that the 10% increase in the ropes and wire segment is definitely achievable. So previously, we had mentioned 12% to 15% in light of, of course, our current macroeconomic climate as well as other logistical challenges as well. We would say that 10% is more realistic at this stage.

[Gunjan Kabra, analyst]

Okay. And what would be the value realization that will increase with this -- with respect to value-added and export market? So if you can guide on that as well.

[Rajeev Jhawar, executive]

See, our focus would be to increase value-led volume growth. And with the success which we have seen in the European market and the American markets, particularly on the oil and energy sector, cranes and ports. And we have seen also within this quarter -- that the prices of our international businesses and have -- has continued to increase, and it is mainly on account of the product mix, which we have focused on, and we expect this trend to continue.

[Gunjan Kabra, analyst]

Okay. Sir, but the Phase 1 of the CapEx has commenced, right?

[Rajeev Jhawar, executive]

Yes, it has. And we are gradually ramping up the production.

[Operator]

The next question is from the line of Anil Shah from Insightful Investment Managers.

[Anil Shah, analyst]

So just again, coming back to the volume numbers, we had spoken about 15,000 to 20,000 incremental tonnes in this fiscal, which I thought was a combination of Wire Ropes, Wire & Strand as well as LRPC. We did about 1,81,000 of volumes last year. So the increase that we were looking at was broadly in the region of about 20,000 to 22,000 tonnes in the splits between Wire Ropes, Wires and LRPC. Is that a fair understanding?

[Rajeev Jhawar, executive]

Yes, it is a fair understanding, and we should be in a position to get that during this year.

[Anil Shah, analyst]

Despite the first quarter being slightly on the lower side as far as expectation in terms of volumes are concerned.

[Shreya Jhawar, executive]

Yes, I would say that, like we said earlier, rather than looking at all 3 together, probably keeping LRPC aside when we talk about volumes because again, the focus with LRPC is not as much on the volumes, but more on the plasticated LRPC, right, which will not have the same level of volumes as regular LRPC does. But in the Ropes and Wire segment, definitely, that is a realistic target, like we mentioned, 10%.

[Anil Shah, analyst]

And by which quarter does the LRPC, the galvanized and the plasticized, really start kicking in?

[Shreya Jhawar, executive]

So we have the capacities on steel for that, but this is a more plasticated, especially the more project-driven business, and there are projects that are there in the pipeline. But as they mature, we should be able to see it. But it's not -- it's more a project-driven business.

[Rajeev Jhawar, executive]

Right now, we are doing about 200 tonnes a month. And based on these projects, which we are hopeful of bagging, both in domestic and international market, we should be gradually able to ramp it up to 500 tonnes a month.

[Anil Shah, analyst]

So at least by exit of fourth quarter, we should be there at about 500?

[Rajeev Jhawar, executive]

Of course, we should be there.

[Anil Shah, analyst]

Sir, one question on the basis of what you just discussed. So clearly, Wire Ropes as an overall volume contributor will be significantly higher than last year. And within Wire Ropes, obviously, higher value add because that's where the CapEx would happen, should be even more higher. So from that perspective, the EBITDA per tonne should see 2 trigger points to take it even further higher, as I said, because LRPC, which is lower margins will have lower -- as a percentage lower contribution to volumes. And two, within Wire Rope, we should have higher value-add coming through. So is that again something which is fair assumptions to make?

[Shreya Jhawar, executive]

I would say that our goal is, of course, right now, value and volume, a combination, right? So as we increase volumes, the goal would be to maintain at the least the EBITDA per tonne and the margins. Of course, depending on the product mix, it might go a little bit higher, but that really depends on the market conditions, the demand from the market and how we're able to cater to that.

[Anil Shah, analyst]

Yes. But market condition as of now, they seem okay in terms of what you had just given us in terms of global markets as well as Indian markets. There seems to be reasonable demand, which is still very much prevalent, right?

[Rajeev Jhawar, executive]

See, market demand for wire ropes and -- the Wire Rope segment and the Wire segment is fairly strong, but LRPC segment, it is pure commodity. The first quarter, the elections were there. There were less orders and projects which were there, which impacted our volumes of LRPC. And the margins of LRPC has practically been very, very low. And the second quarter, because of the monsoon, the LRPC volumes are again very low. So we need to understand that the rope and the value-added rope and the wire volumes are fairly strong and stable -- stable and strong. But LRPC is something which has a significant volume in our product mix, and on a per tonne basis, can have a fairly strong impact in the EBITDA moving plus or minus because of the lower margins in the LRPC currently.

[Anil Shah, analyst]

Correct. That's exactly the point I meant that we should see EBITDA per tonne actually going up given LRPC is weak.

[Rajeev Jhawar, executive]

But it depends that the LRPC demand picks up and the volume grows, but the margins of LRPC never be the same...

[Anil Shah, analyst]

Then the absolute EBITDA will be higher. Then, I'm saying, aggregate EBITDA will then obviously improve.

[Rajeev Jhawar, executive]

EBITDA would definitely be higher, but on a per tonne basis is what Shreya mentioned that it is the -- we try to see that at least we achieve this, and if we must improve this, it is for the better.

[Operator]

The next question is from the line of Aditya Arora from 4P Capital Partners.

[Aditya Arora, analyst]

Just a couple of questions here. One is on the international segment. If you could help us understand your -- have you been gaining market share in some of your products? And also what kind of additional revenue you have got from new set of customers because in your business, which is specialized product, getting new customers are difficult, it takes time. That's my understanding. And if that be the case, have you won any new customers? Have you got new market share? And what percentage of your revenue is now coming from new set of customers?

[Rajeev Jhawar, executive]

It's a good question. We have, over the last 3 years, developed particularly on the oil energy, the wind. And also in the ports, we have made -- we have worked along with our R&D center. We have been able to make good breakthroughs and built a fairly strong customer base, and it is just not breakthrough, but repeated orders and also a few contracts under negotiation and pipeline. So this is something which particularly in the European, American and South American markets have been fairly strong and -- in these sectors.

In Mining sector also, we have made certain breakthroughs in the North American, South American market. And our products have been well accepted, and we are in the process of getting repeat orders. So this is the only reason why we feel that in the coming quarters, we should be in a position to push our volumes based on the value-led volume growth. And we expect a decent result coming out of these initiatives.

[Aditya Arora, analyst]

Sure, sir. That's helpful. But if that is the case, then is it that the market demand outside India is slow, which is why we are guiding, say, 10% volume growth? Or are there any other reasons? Ideally, in that case, the volume growth should be higher than what we are guiding.

[Rajeev Jhawar, executive]

You see in the Rope industry, there are 2 segments, which we say, one is the specialized segment, which we talked about. So this is something which we are fairly increasing our market share and making more and more breakthroughs and building strong customer relationship in these segments. But the GP rope, the general purpose rope, which goes for the normal engineering applications, because of the slowdown internationally, this part of the business is not strong at the moment and is also very competitive. So while we are focusing on the value-added, specialized products and where our market share is growing, there is a slow uptick coming from the general purpose, which is not allowing the volume to grow the way we would expect to grow if everything was growing at a very good pace.

[Shreya Jhawar, executive]

Yes. And as you mentioned, because this -- the specialized products are highly engineered, right, so even if the market demand is good, it's not going to see the same rate of growth in volume that we would see if we were focused on GP rope so that the volumes are much easier to increase in that. But as we want to focus on the specialized segment, it takes time to build and get those repeat orders and those references as well. But we're on -- the team is working on it, and the segment specifically that we mentioned and even various geographies, we are trying to diversify our presence as well.

So even within Latin America, it's not that we're just targeting, say, Brazil or Mexico. Whether it's Chile, Peru, Colombia, Ecuador, so in each of these markets, we are identifying our channel partners and diversifying our presence, so that should help. But it -- all of this takes time and it can't happen very quickly -- as long -- as soon as the capacity goes on stream. So it will be a gradual process, and that's why we say about 10% is more reasonable.

[Aditya Arora, analyst]

Okay. Clear. Just last question. Have you been gaining market share? And what would be your market share, say, in from the 3 geographies now, so Europe, U.S., Latin America?

[Rajeev Jhawar, executive]

It's -- I think we are -- particularly the newer markets, which we are developing, we are taking market share from the global leaders, Bridon, Kiswire and others in the market, these -- the well-established players. So we are gradually increasing our market share. But to be able to say exactly what percentage, I don't think we have that kind of data. But when we look at the order pipeline and the inquiry and what sort of conversion is there, I would say that, that rate is constantly improving.

[Operator]

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

[Saket Kapoor, analyst]

Sir, firstly, when we look at the Q-on-Q employee benefit expenses, that has gone up from, say, INR 109 crores to INR 126 crores. So what explains the Q-on-Q as well as year-on-year increase in the employee cost? And what should be the annualized number?

[Shreya Jhawar, executive]

I would say that there are a number of reasons. One is, of course, we've hired some new employees to develop the businesses in some of the international markets as we are having this capacity on stream and we need to develop the market for that. So that's number one. Two, we also had increments for our employees. And thirdly, there are, as part of this quarter, some one-time bonuses for rewarding employees for the performance as well. So a combination of all of these 3 has led to...

[Saket Kapoor, analyst]

So, ma'am, annual number [Foreign Language] employee cost?

[Rajeev Jhawar, executive]

It will -- the one-time cost, which she mentioned has been there, but in the coming quarters, they should taper down and we should have -- we should be at our normalized level from quarter 2 onwards.

[Saket Kapoor, analyst]

So INR 110 crore should be the number that which is there. Sir, INR 15 crores is the additional number, which we should factor as one time?

[Rajeev Jhawar, executive]

It should be factored one time.

[Saket Kapoor, analyst]

Yes, this INR 15 crores only that should be...

[Rajeev Jhawar, executive]

Yes. And the rest should be on a normalized basis. But there will be normal increments and -- so those will be there. But this one-time expense, which she mentioned particularly for rewarding our people in the international business, and so that is there. Yes.

[Saket Kapoor, analyst]

Correct me here, earlier you've spoken about our product, our Wire Rope -- our rope product being accepted by the mining companies in the American geography? And therein getting approval takes a period -- long period of 4 to 5 years. But then there is a good chance of getting repeat orders, and there are very strong entry barriers. So are you alluding to this value-added segment and the high-end facility offering in this vertical itself, where we are going to see growth going ahead? And what is the opportunity size, correct me, in this mining segment, especially in the Latin American region, you alluded 2 years ago, maybe some time ago about this?

[Shreya Jhawar, executive]

Yes, definitely, in the Mining segment, we had made inroads, especially during the COVID period where we got our foot in the door to the U.S. market. And since then, we have gotten repeat orders as well as contracts in that region that secure repeat orders for us. Even if you see from our overall topline contribution of mining rope was about 4% in FY '22-'23, but then gradually has increased in FY '24 to about 6% and in this quarter to about 8%. So it has been an important product line for us, and the large part of it comes from, like you mentioned, the U.S. market, the Latin America market as well as the Australia market, internationally. And of course, in India, we continue to supply to mining companies as well.

[Saket Kapoor, analyst]

And the pipeline is also robust there for repeat orders? This can be understood since -- and their strong entry barriers also.

[Rajeev Jhawar, executive]

Entry barriers are fairly strong because the time taken to get the approval is, as you rightly said, between 3 to 4 years. And we are expecting -- the order books and contracts, I think we should be gradually seeing -- improvement on this segment on a quarter-on-quarter, we should be seeing a benefit.

[Saket Kapoor, analyst]

And one more question, sir, if I'm allowed. For the RM part, we are sourcing domestically from how many players [Foreign Language] our dependence is on for the domestic player? How many players are we sourcing the raw material? And what constitute the key raw materials?

[Rajeev Jhawar, executive]

Our key raw material is high carbon wire rods. We are having 4 important suppliers; JSPL, Jindal Steel & Power. They have a plant just 40 kilometers away in Patratu from where we source our rods. Number two is erstwhile our own steel company business, which is now with Tatas, part of Tata Steel. So they continue to be our important supplier. And then Electrosteel, which is 100 kilometers away in Jharkhand. And small quantities, we have also started buying from JSW. Although their plant is in southern part, but some quantities, we are buying, particularly for our northern Hoshiarpur plant, we are buying from them. So these are the 4 important suppliers, and we have an excellent working arrangement, including development of our newer products.

[Operator]

The next question is from the line of [ Viksha Jain ], an Individual Investor.

[Unknown Attendee]

What we want to know is the company has definitely come out of lot of issues, which were there, let's say, 5, 7 years earlier and now on a growth path. But last 2 years, now we are seeing sales have kind of stabilized. Now what are the changes that you're seeing could actually show a positive uptrend on sales?

[Rajeev Jhawar, executive]

So basically, we went through a difficult period and post our divestment of steel business. We first focused on consolidation of our business, the Rope business. We looked at all the latent capacity and used it to ramp up and try to integrate with all our international business. Then we have taken this expansion program, which is underway, which is helping us to ramp up our capacity. As we said in the earlier part of the discussion that we would be ramping up gradually our volumes, and we expect a 10% increase in volumes, particularly in the Wire Rope and the Wire segment coming out of the expanded capacity, and of course, based on the current market scenario, what we see. So that is something which is going to help us improve our volumes and our focus into the -- within the volume into the value-added product segment is hopefully going to enrich our product mix and ensure that we sustain and grow our profitability and margins, including the top line in the times to come.

[Unknown Attendee]

So this 10% growth you are seeing for 1 year, or let's say, for the next -- will there be a hockey stick kind of thing thereafter -- because a lot of these are sticky. So once you start getting the orders in, do we see a higher growth after 1 year?

[Rajeev Jhawar, executive]

Of course, this is -- again, it depends on how the overall market situation would be, but our endeavor would be to continue to keep on increasing. And as we have increased the capacity, and as we said, that it is an engineering product, not a commodity product, which can just be ramped up and we start selling based on price sensitivity. Just we have to ensure that we get the approvals, we get new customers and we continue to supply and get repeat orders. So definitely, if the global demand remains fairly strong, the geopolitical situation doesn't worsen and the -- capacity increase, which we have planned in the expansion, all that should only help us to increase our volume and market share in at least next couple of years.

[Unknown Attendee]

Okay. And any other opportunities which you think could really change -- could be a big -- something which would get you very excited coming up?

[Shreya Jhawar, executive]

That's a good question. One of the things I think that we had talked about in one of the earlier calls is our synthetic slings facility, which we are setting up in Brunton Shaw UK. And the progress is going well on that. And our internal trials have already started on that, and we expect to go live in the upcoming quarters within this year for that as well. That is a complementary product to our steel wire ropes, and -- the R&D team has worked very hard on that to understand the product and also already started approaching quite a few of the end customers, which are sort of common between steel wire ropes and synthetic slings as well.

So we do expect to get good traction on this and especially again within the oil and gas and wind energy segment. This has good applications. And this can be -- this is our first foray into the synthetic space, but we're quite excited about this product line, which is adjacent to our current product line, get a little bit of a different product that can -- that has a good growth rate. The industry itself is also growing pretty fast, and there are more applications and more geographies we can even cater to in the future, but we started small with a small investment, about GBP 4 million or so, but it can become a good opportunity in the coming years.

[Operator]

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

[Aman Sonthalia, analyst]

Sir, a follow-up question is that madamji, you have said that in the next few years, we will get higher volume and business from the synthetic sling and mining rope. But after 2 years, can we expect big volume coming from -- if things happen as per plan, we can expect big business from Parvatmala project?

[Rajeev Jhawar, executive]

Parvatmala project is a very exciting project, and -- but as Shreya mentioned earlier, there are 250 odd projects, which have been approved. It -- Wire Rope is a very important part of the whole ropeway system. And Usha Martin is the only supplier in India for these products, so -- and with the Made in India initiative of the government, and we have had presentation to the Parvatmala project authorities, we see a good opportunity. And in fact, we see a good opportunity. It may take a year, 1.5 years for the projects to come to this stage. But based on our interaction with the various stakeholders, we see it as a very big opportunity.

[Aman Sonthalia, analyst]

So it can be a game-changer for the company in the future?

[Rajeev Jhawar, executive]

See, we have many product portfolios and Parvatmala and this special project would be. So LRCP plasticated was an important -- this is also important. We need to understand in Usha Martin, we are not dependent on one sector and one industry. We have a fairly diversified portfolio, whether it is fishing, mining, structural, which is part of the Parvatmala project, fishing, elevator. So having -- and also, we have a fairly diversified geography. So we are not dependent on any particular single geography. So it -- in a way it helps you to diversify your risk and not be dependent on just one market or one sector. So looking at the overall opportunity, Parvatmala is important, but what Shreya mentioned, the synthetic is also equally important, and we are excited about all these. Now, how much of this gets converted into actual reality? But overall, we are fairly optimistic and excited about these opportunities.

[Aman Sonthalia, analyst]

Okay, sir. And sir, one from my understanding, sir, what is the price difference between GP rope and specialized rope in the international market? At the same time, this normal LRPC and plasticated LRPC and this normal wire and galfan wire.

[Rajeev Jhawar, executive]

Let me tell you about the LRPC. The normal LRPC is selling at INR 65,000 to INR 70,000 a tonne depending on the steel price. And the plasticated galvanized LRPC could be between INR 1,35,000 to INR 1,70,000 a ton depending on the specification of each rope, which is fairly -- you can see the difference in that. Of course, the manufacturing process and cost will also be different for these 2 products.

Similarly, for the GP ropes, between -- the specialty ropes, the pricing is fairly, fairly different for different products, whether it is plasticated, compacted depending on the end use. But it could be the GP ropes would be $1,500, $1600 a tonne, and the specialized ropes could be close to $3,000, $3,500 a tonne.

[Aman Sonthalia, analyst]

That means, sir, though the volume increase will be less, but the value increase will be much higher.

[Rajeev Jhawar, executive]

Of course, our whole objective is valued-led growth. So that is going to be something which is going to be our key focus even going forward.

[Operator]

There is a follow-up question from the line of Kiran from Peepul Tree Capital.

[Unknown Analyst]

Sir, Bridon-Bekaert in this recent con call, they also had their best Q2 con call, and they're all over the place, right? They've lost a lot of clients. A lot of clients are unhappy with them. Capacity consolidation has gone wrong both in U.S. and Europe. Are we seeing -- I mean, is it just markets are grabbing from Bridon-Bekaert that we are kind of impaneling others and the growth is coming from there? Or is the overall opportunity expanding? And generally, are we actually winning against Bridon-Bekaert or is it their own internal issues?

[Rajeev Jhawar, executive]

First of all, I would say that the -- we compete not only with Bridon-Bekaert, we are competing with all the international players, and we are at equal -- we are all on equal footing. And we -- based on the strength of our R&D, based on our closeness to the customers and with our continuous efforts with our R&D center over the last 3 to 4 years, we are trying to get the larger share of the market share. I would not like to comment anything on Bridon-Bekaert in their Internal issues because I'm not purview to that. But I'm saying that as far as we are concerned, we are constantly trying to see that how to get into the higher-end products. And that is number one.

Number two, the segments related to the oil offshore, to the wind energy is definitely growing, and it is growing at a very fast pace because every country is trying to both increase their energy footprint. And that is something which is helping us to see a good traction of business coming from them. And everybody is fighting for the pie of business and so are we along with our Brunton Shaw and our other brands. We are also trying our best to see that how best we can get those businesses.

[Unknown Analyst]

Got it, sir. And sir, last question in terms of -- it's a combination. One, do we share any order book number this year as of previous year? And two, are we actually on track for INR 500 crore profit after tax this year?

[Shreya Jhawar, executive]

No, we don't share any exact order book numbers as such. And in terms of guidance, like we mentioned, around the volume growth around 10% for ropes and wires while maintaining our margins and our realizations that what the extent of guidance that we'd like to give at this stage.

[Operator]

Thank you, ma'am. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, ma'am.

[Rajeev Jhawar, executive]

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 to all your questions. The company is dedicated to creating value for its -- 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 the time to join us on this call, and see you all in the next quarter. Thank you.

[Operator]

Thank you, members of the management. On behalf of Usha Martin Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.