Welspun Corp Ltd

NSE:WELCORP

Earnings Call Transcript 2023-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Welspun Corp Q1 FY '23 Earnings Conference Call hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Abhineet Anand from Emkay Global Financial Services. Thank you, and over to you, sir.

[Abhineet Anand, analyst]

Thank you, and good morning, everyone. On behalf of Emkay Global, I would like to welcome you all to the Q1 FY '23 Earnings Conference Call of Welspun Corp Limited.

I would now like to hand over the call to Mr. Abhinandan Singh, Group Head Investor Relations, Welspun Group, to introduce the management team and take it forward. Over to you, sir.

[Abhinandan Singh, executive]

Thanks, Abhineet, and good morning, everyone. On behalf of Welspun Corp Limited, I welcome all of you to the company's Q1 FY '23 earnings conference call. We have with us today Mr. Vipul Mathur, Managing Director and CEO; Mr. Percy Birdy, Chief Financial Officer of Welspun Corp Limited; and Mr. Akhil Jindal, Group CFO and Head Strategy. Along with us, we also have Gaurav Ajjan, who is Investor Relations for Welspun Corp.

We will, as usual, start this forum with opening remarks by Mr. Vipul Mathur. And after that, the floor will be open for your questions. Should you have any queries that remain unanswered after today's earnings call, you can reach out to either Gaurav or me.

With that, let me hand over the floor over to Mr. Vipul Mathur, MD and CEO, Welspun Corp. Over to you.

[Vipul Mathur, executive]

Thanks, Abhinandan. Thank you very much. Good morning to all of you, gentlemen, and thanks for taking time to attend this call for Q1 FY '23 results of Welspun Corp. To start with, I just want to run through the key highlights of our operational and financial performance during the quarter ended 30th June.

We have a very robust order book of 1 billion tonnes and an active order book of 1.9 million tonnes at this point in time. We are preparing to execute the Welspun Corp largest -- single largest order ever valued at INR 5,000 crores in the U.S. Our business growth and diversification strategy is on track. As you would have noted, we have completed the commissioning of our state-of-art blast furnace and [ center ] plant and our TMT bar facility. We have voluntarily published the first business responsibility and sustainability report as an early adopters.

For the quarter, the production and sales volume for our total operations including Saudi was at 158,000 tonnes and 157,000 tonnes, respectively. For India operations, our sales volume was at 92,000 tonnes. For U.S. operations, our sales volume was 7,000 tonnes. And for our Saudi operations, our sales volume was at 58,000 tonnes.

Let me give some outlook and a brief update. And what we see as the key drivers for each and every market where we operate in. As you would have seen, oil prices have moved in the range with concerns about supply as western sanctions from Russian crude and fuel supply have disrupted very close to the finance. On the other hand, there are rising that Central Bank efforts to aim surging inflation which trigger recession that would cut future fuel demand.

As spot steel prices the world have remained under pressure in the last few months, recessionary pressure, lower consumer confidence and renewed fear of a lockdown in China have led to a downward pressure on the prices of the steel. We have noticed the steel prices have dropped significantly, domestically in India after the Ministry of Steel impose and export duty in particular in May 2022.

The current environment of high energy prices, coupled with a decline in the global prices for steel angles extremely well for us. We are in active discussion for several export orders across the world, which we hope to win in due course of time. This comes at a strategic time when even the European Union seeks to beem off into Russian gas flow, following the invasion in Ukraine and is seeking alternative sources.

In addition, there is a significant demand for pipes in Southeast Asian market, Middle East market and African market, which should create a robust order pipeline for exports for us in the near future.

Let me talk specifically about India, the gas demand prospects in India remain strong as the government has set a target to raise the capital, raise the share of natural gas in the energy mix from current 6.7% to 15% by 2030. According to IEA, India's total gas consumption is projected to increase by 19% or up to 13 BCM during the period '21, 2025, which is equaling to a 4% annual average growth rate.

The industrial sector will remain the biggest driver for those between '21 and 2025, accounting to about 40% of increase in India's natural gas consumption. Residential and commercial and transport sectors will make similarly strong contributions, thanks to the continued expansion of the domestic gas grid. Gas used in the power generation sector is likely to decline by 14% in the period 2021 to 2025, as high imported and rising domestic prices, rendered gas fired power -- gas-fired power uncompetitive related to other fuels.

Approximately 2/3 of India's incremental gas demand is set to be satisfied with growing domestic production. The remaining 1/3 has to be met with imported LNG. But even after 11% increase in LNG inflows foreseen between 2021 to 2025, total LNG demand in 2025 will stay slightly below 2023 as high prices discourage greater LNG in the years ahead.

The policy framework remains supportive for natural gas in India, although affordability has emerged as a major concern. The expansion of the city gas distribution grid is set to continue and accelerate further after the conclusion India elements build around this year. The size of India's gas transmission network could increase by 75%, and LNG import capacity could grow by an additional 40% during the forecasted period with the completion of project currently under construction.

We are seeing demand coming back in the water sector, which has been very muted since the start of the pandemic. With the cooling off in the steel pricing projects that were put on hold are now being proposed to be completed. There is an increased traction across states like Gujarat, Maharashtra, Tamil Nadu, Karnataka, Madhya Pradesh, Punjab and Rajasthan. With our pan-India presence, we are likely see the upside in our business volumes coming from these states.

There's a proud intent to meet the ambitious target as [indiscernible] in various government schemes, the focus by -- both by the central and the state government on developing water infrastructure is expected to drive the demand for large diameter [ SO ] pipe and DI pipes in months to come.

As regards to U.S.A., our U.S. pipeline operators are expected to have benefited from high oil and gas prices and rising domestic production in the second quarter of 2022. Natural gas projects are expected to be the mainstay of growth in coming years as production rises. There's an increased demand for exports into the new customers in Europe, which has been trying to -- who are trying to diversify away from Russian Energy. And in Asia, where many countries are boosting imports of LNG.

EIA estimates that U.S. LNG exports averaged 11.2 billion cubic feet per day in the first half of 2022 compared to 9.5 billion BCF per day in the same period of 2021. It expects LNG exports to average 10.9 BCF in 2022 and 12.7 BCF in 2023.

After the years of underinvestment in U.S., our focus is now boosting the oil and gas supply within the country. The number of active oil and gas drilling rigs in the United States have rose by 272 or 56% in past 1 year to the highest once since March 2020. We recently announced winning of the single largest order in our history for supply of pipes valued at INR 5,000 crores plus in the U.S. This order is for supply -- this order is for the supply 300-odd thousand tonnes of large diameter coated pipes for transporting natural gas from Permian Basin to the coast in Boston.

The pipe ordered will be produced from our little dock plant in the U.S., and the same will be executed over a period of 12 months commencing at second half of FY 2023. This large new order from the U.S. comes on the back of another win we had April 2022 of 26,000 tonnes order from a long-standing customer in North America.

Coming to Saudi Arabia. Saudi Arabia invest to -- intend to invest in fossil fuel production over the next 2 decades to meet the growing global demand and avoid energy shortages. Saudi Aramco aims to boost its CapEx to $40 billion in 2022, with further growth expected until around the middle of the decade. It plans to raise crude oil maximum sustainable capacity to 13 million barrels per day by 2027, and wants to get -- and wants to boost a gas production by more than 50% by 2030. With surging oil prices we are confident that multiple opportunities arise, both in the oil and gas and the water segment in Saudi Arabia.

In July 2022, our associate company Epic, East pipe company, which is in Saudi Arabia was awarded with a contract by SWCC to manufacture and supply of steel pipes. The contract was valued at SAR 324 million, and the same will be executed in this financial year. This is in addition to the recent award of SAR 490 million contract awarded in May and another SAR 497 million contract in March 2022, both of which will also be -- both of these were also awarded by SWCC.

As regards to long product, long steel. The infrastructure investment is witnessing a renewed impetus from the government in India aims to achieve a USD 5 billion economy. A series of structural reforms have been announced that has set the foundation for economic growth on the back of the infrastructure development. Once that reform taken last year was the launch of PM Gati Shakti national market plus. This will be INR 100 lakh crore mega plan was launched with a digital platform to bring 16 ministries together for integrated planning and implementation of projects.

Under the Pradhan Mantri Awas Yojana urban housing for all the central resistance has been provided to the states and union territories since 2015 for giving all users pakka houses to eligible urban beneficiaries, including homeless people. Based on the project proposal submitted by the state and union territories a total of INR 1.2 lakh crores has been sanctioned till March 2022, of which INR 41 lakh crores have been sanctioned in the last two years. Overall, the focus of focus on development is visible and the demand for long products will be supported by increased spending on infrastructure and construction.

Welspun Specialty Steel Limited. Our stainless steel bar volumes were higher 997% and pipe volumes were higher by 93% for the Q1 FY '23 compared to the corresponding period in the previous year. The BI standard for stimulus tubes which is BIS 1775 has been introduce which is favorable for WSS. The company has already initiated that process to opt in that tradition. Welspun Steel has also received its first order from an oil and gas sector PSU for [indiscernible]. The company delivered its first order of high-pressure heater tubings in grade 304M [indiscernible] Overall WSSI is expected to improve performance to sustain on the back of several new customer approvals and accretions.

I would also like to inform and bring you on speed on a few additional business updates. #1, dividend. As you would have noticed, the Board has recommended a final dividend of INR 5 per share, which is 100% of the face value for FY '22. And the same was paid after the AGM on 29th of July 22. We have demonstrated a strong performance track record with average sales volume of more than 1.1 million tonnes [ in a year ], which has led to a generation of healthy cash flows from our business.

This has helped us in deleveraging and strengthening our balance sheet while reinvesting for growth. In addition, this has enabled us to our we have been a consistent dividend-paying company and also did a buyback of shares in FY 2020.

Update on [indiscernible] pipes and TMT bar projects. The commissioning of our blast furnace and interplant and TMT manufacturing facility in Rajarat was completed in July of 2022. The blast furnace can produce approximately 500,000 tonnes, 0.5 million tonnes per annum, which will primarily be used for manufacturing of [indiscernible] and [indiscernible] pipes. The trial for [indiscernible] pipes have also started and the duplicity has recently received its first phase of BI certification.

The integrated complex -- steel complex is equipped with a cutting technology, which includes the blast furnace, a center plant, BCI plant, oxygen plant, oven, beside of 400,000 tonnes per annum capacity plant. The TMT manufacturing facility has also a capacity of 350,000 tonnes per annum. We have an existing manufacturing setup of BIS 25 steel billet, which will be used as an input for the manufacturers of these TMT pipes.

The acquisition of [ Sintech's ] BPL entity. As much our growth story entails creating a diversified product portfolio, repurposing its business and to add new target segments, expanding its offerings to enter both B2B and B2C market and thus making well-considered strategic acquisitions. In this regard, we have acquired [ Sintech ] BAPS nonentities, with an outstanding of INR 1,222 crores for a purchase price of INR 418 crore as on date by our wholly owned subsidiary, that is plastics.

On the ESG initiative, maybe as I just want to update that we have stated that, that will effect from the financial year 2020, '23, filing of BR SR will be mandatory for the top 1,000 listed companies by market population and sell the replay the existing business responsibility report. Filing of BRSR is voluntary for the year, financial year FY 2021 and 2022. As a proactive measure, we have mapped ESG information with the requirements of BRSR. In the coming years, our strategic focus will be to undertake action and allocate adequate sources to achieve our ESG goals in alignment with our associated business goal.

Some of the key priority areas for us are energy efficiency measures, prioritizing renewable energy strategies, [indiscernible] on the wellbeing and prosperity of employees and stakeholders, monitoring targets and communicate to stakeholders on a timely basis while prioritizing our involvement and social goals, sustainable supply chain program and highest level of transparency and disclosures. We have a holistic long-term vision align with our business, social and environment objectives aimed at establishing a healthy ecosystem of economic growth in source -- and societal value creation.

As we move into the future, ESG will be the corner store of our financial success, competitive advantage and future accomplishments. I also take this opportunity to update you on our future performance drivers. Number one, hydrogen. As the energy demand across the world evolve rapidly, we are undertaking strategic interventions in new opportunities and segments. We have joined a global S2P pipe joint JIP, global IP for the design and operation of hydrogen pipelines launched by leading industrial certification body, DNB.

We are helping to develop a recommended practice for design, requalification, construction and operations of pipelines for our hybrid gas transportation. As a steering committee member, we will be collaborating with the top 24 world premier energy companies to provide technical expertise in this project and aiming to lay the foundation for the hydrogen infrastructure. We have made an MOU with Tata Steel to develop the framework was subsequently manufacturing steel and pipes for transporting of pure hydrogen, and that will get blended hydrogen. The green energy strategic partnership is to assess the suitability of various pipe manufactured pipes for the transportation hydrogens. Apart from hydrogen, we are also very focused on carbon capture and emission reduction technology, greenfield and investment in our renewables community carbon reduction targets.

#2 is about the DI pipes. The [indiscernible] Ministry has allocated approximately INR 86,000 crores for FY 2023 for developing the DI infrastructure network in the country. Our internal -- based on the interaction with various industry participants indicate a lower demand for DI pipes over the next 5 to 7 years. With the projected demand outstripping supply. We currently estimate that almost 2.3 million tonnes of DI pipes are likely to be bought in the financial year FY 2023.

Stainless steel tubes and pipes, there's a big push for localization of these projects as [indiscernible] Bharat implementation the quality order, mandatory BI certification and restriction on imports from China are the key drivers to the growth of this sector. The key areas where we would be servicing or supplying steel prices would be power, nuclear and defense where we see a [indiscernible].

TMT Bus. As I explained, there is a demand uptick stemming from the government trust on infrastructure, particularly in the rural market. Apart from a pickup in the construction activity, this will lead to an increased uptake product. The government has a big objective of increasing ruler construction of steel for current 19.5 kg per capita to 38 kg per capita by 2030, '31.

Polymers. India per capita consumption of polymer stands at 11 KB, which is 1/10 of that what United States and less than 1/3 that what China consumed. There has been a rapid increase in the polymer consumption in India in the last 2 years. It is estimated that the polymer consumption will continue its growth momentum and record a CAGR of more than 8%. Consumption is expected to double by 2030 and thereafter quadruple for the current level between 2030 and 2040.

In this regard, we have taken a strategic position of acquiring the entities for BABS. As you know, [ Sintech ] is a lateral brand with more than 10% market share in 2018. It has three major lines of business. One is the water tanks, other was OEMs for automobiles and third was fuel tanks for auto. Before getting [indiscernible], [ Sintech ] has a turnover of more than INR 1,700 crores in FY '19 and an EBITDA of INR 270 crores, is complying the 15% margin. The diversification into B2C segment will help WCL to significantly expand the base and then the brand, penetrate new markets and then build a distribution network and provide opportunities to develop new products.

[ Sintech ] [indiscernible] is a popular water [indiscernible], which had a strong brand connect with the consumer. It has a wholesale and a distribution network of approximately 900 distributors and 13,000 retailers. There are potential synergies for deleveraging this excessive distribution platform all our products within the group. In addition, the distribution leads can help us to incubate and launch new projects and establish a new building material vertical NWCA.

With this, I would come in my opening remarks. I will be happy to take any questions if you have. The floor is now open for the questions, please. Thank you.

[Operator]

[Operator Instructions] First question comes from the line of Vikash Singh from PhilipCapital.

[Vikash Singh, analyst]

Sir, I want to understand the subsidiary performance, what kind of losses we had in the U.S. subsidiary this quarter? We understand that [ assess tubing ] has INR 3 crores kind of the losses. So is the remaining INR 47 crores of the EBITDA loss coming from U.S. alone or there are something else to it?

[Vipul Mathur, executive]

So in the U.S., as you know, that we have the order for almost 300-odd thousand tonnes, which will and execution from the second half, obviously, commencing September. But we also have additional order for which the production have just started. So in this particular quarter, it was -- there were losses because there was -- the production volume was absolutely low. All what we are producing was only the BI pipes in there. So I'm sure that in the second half of the year, we will see the complete production coming back on pace. And then for the next 4 to 6 quarters, it will be continuously operational.

Now coming to the stainless steel part of it, there was a -- we had an EBITDA neutral there. We had come out from the red for the very first time, the company seems to be in black, and that is what we were anticipating. And from here on, the order book and the market potential -- I think from here on quarter-on-quarter, we will see things only improving from here.

The other subsidiaries was our big M&A businesses. As you know, they were into the project stage at this point in time. So there were certain losses which not have been capitalized. Those losses have been coming up.

[Vikash Singh, analyst]

So that BL subsidiary losses, can we quantify how much that was, at least?

[Vipul Mathur, executive]

So because at the EBITDA level, as Percy mentioned during WSSL, we had a positive EBITDA of INR 1 crore in the public domain because SSL is a listed company. And in the other startup businesses, which is WML, WTI, that's the DI business and also the BI business and the greenfield venture of AT&T. All put together, we had about INR 13 crores of EBITDA negative. So that's why you will notice that the stand-alone number and the consolidated numbers, you will find that these startup operations subsidiaries are making that the stand-alone EBITDA looks a little higher.

[Vikash Singh, analyst]

Understood, sir. Sir, just recently, this [indiscernible] pipeline has gotten signed by almost all of the interested party. Just wanted to understand the opportunity representing that geography? And would that opportunity is also addressable by us? We are looking somewhere else, et cetera. So if you could just give us a little bit of thought about the European diversification point of view?

[Vipul Mathur, executive]

When you say [indiscernible], I guess, you are reflecting to the [indiscernible] pipeline?

[Vikash Singh, analyst]

Yes, yes. So recently, that INR 13 billion, I think the project cost pipeline deal has been signed last week only, which was basically -- so that pipeline, which was supposed to go through Nigeria, Algeria and transporting cash to Europe, basically.

[Vipul Mathur, executive]

Yes, it is -- the name of that pipeline is the [indiscernible] pipeline. I think so [indiscernible] for quite some time, we have been adequately pursuing that pipeline line for the couple of years. It looks like they still have some financial challenges around that. But I'm sure that it will come to a logical conclusion within the financial year that development we are getting. It's a project from [indiscernible] as a frame contract signature with [indiscernible], we are actively participating into that particular project. We are there into the game. But we have to see that in what direction it will go because they have option to buy either a longitudinal pipe or even an ERW pipe. So we have positioned ourselves for the longitudinal pipes. If they buy longitudinal, then we would -- we are there actively with them.

But if [indiscernible] pipe, then they will have to look at some other options. So right now, it is a work in progress. We have voice there. We are active there.

[Vikash Singh, analyst]

And sir, some thoughts on the European gas certificate in Russia, how do you see that panning out? Or any thought process any progress which has happened in that geography?

[Vipul Mathur, executive]

There is going to be a robust demand, which is going to come up from Europe, specifically in two particular areas. Number one is hydrogen, as they are looking for alternate fuel. And also, we are seeing some business opportunities coming up in Turkey. We also some -- we also are hearing about revival of the East Med pipeline.

So there are quite a few activities. Those who have gone to a back burner now they are coming back on to the screen; and we are actively involved in pursuing each and every opportunity of them. I hope that in the -- by the end of the -- this financial year, the Q4 of this financial year and over the next year, there would be some opportunities which will come up and be an active participant in those particular -- in all those opportunities, please.

[Vikash Singh, analyst]

Sir, my second question towards the billet and SS segment, when you think that you would be able to turn around these companies on the PBT level and there was some being a drag on the cash flows of the pipes?

[Vipul Mathur, executive]

On the bill, the whole purpose of putting an upstream, the TMT mill was to derisk our business of billet. Because selling or billet is much more challenging than selling off [indiscernible] and that is what the whole rationale of our investment is. We are absolutely on track by the -- in the quarter, we would be done with the complete commissioning of our project, of the PMP project. And from the third quarter onwards, you will see a TMT margin into the particular market. And I think that will possibly help us in terms of stocking. And any drag which was happening on the balance sheet.

[Vikash Singh, analyst]

Understood. And sir, lastly, some update on the [ Sintechs ] do we require more investment there? What's the road map there, basically?

[Vipul Mathur, executive]

It is a work in progress. At this point in time, it is under going process. And we are -- as you know, that we have taken some [ LCDs ] or almost INR 418 crores deals that we have already purchased. It is a work in progress. It is going to take some time. And once we are absolutely onboard then we are trying to be able to try and hopefully do further good strategy for that.

[Vikash Singh, analyst]

Understood, sir. Understood. And sir, just one last question, if I may ask. So since you don't give guidance, but can we assume that since the second half, a significant portion of the U.S. order will start going in, then we would be seeing the performance like in what we have seen in FY '20. First half significantly lower and second half tremendously good and making up for the -- all the dull first half basically?

[Vipul Mathur, executive]

Vikash, that's a very good question. Let me just give you a little background to this. See, the first half performance cannot be a reflection of the yearly performance. First half performance is also a deflection of the commodities what we have seen during the Q4 and the Q1. The buying pattern has completely stopped. The commodity pricing was extremely high. There was quite a bit of a slowdown, which has happened because of that.

Since May, things have started cooling off, and we are seeing that the commodity prices are now coming back on to the track, which means that -- which means that the production is also -- the buying is also coming on to track. And as the buying comes on track, the executions will start maybe a quarter thereafter.

So you are absolutely right in your resumption that in the second half of the year, you will see a sort of a superlative growth coming up into the performance. And on a yearly basis. And we have always said that this company needs to be watched on a yearly performance rather than a quarter-on-quarter performance. I'm sure that you will be able to meet, if not exceed the expectations of the rate.

[Operator]

The next question comes from the line of Sailesh Raja from B&K Securities.

[Sailesh Raja, analyst]

Sir, generally, you give geography wise EBITDA per tonne guidance for India around USD 70, around USD 200, USD 250. And Saudi, around USD 150. And we were having only [indiscernible] now only have mentioned into multiple products like steel billers, TMT bar and DI pipes and stainless steel pipes.

So can you please product-wise normalized EBITDA per tonne guidance? And also from when we start seeing this normal EBITDA for certain new products?

[Vipul Mathur, executive]

Giving a while on the pipe side of it, it is a very steady state established business, and we have -- there is a long history around those products and you have been monitoring the performance and the EBITDA deliveries on that. That's why it is easier to give a guidance around that product.

At this point in time, for the new products like the TMTs and all that stuff, I think as and when they come on to the stream, which is going to happen in this particular quarter. I think so once the whole businesses come on stream and they start stabilizing. I think that will be a very appropriate time, Suresh, to give you a guidance. We don't want to give any guidance if we don't -- we cannot live up to.

So kindly allow us some more time to settle down that businesses and then start giving guidance around that, please.

[Sailesh Raja, analyst]

And also in the last 5, 6 months, our order books have jumped sharply. So of these incremental new orders, how much is back-to-back RM is hedged and how much it is still to open? And also in U.S., the new order is expected to start executing from 3Q FY '23. So how is the flow of the aggregation will be done INR 3.7 lakh tonnes in USD spread over 5 to 6 quarters or ability 4 quarters, we can in the entire [indiscernible].

[Vipul Mathur, executive]

Sailesh, that's precisely the to highlight. If you see January, February of this particular year, we had an order book of almost 0.5 million tonnes, right? From then till June, we have now almost doubled our order book, which is a very clear indication that we have been -- our success rate has been higher, we have been able to book orders and more than 1 million tonne of an order is now under your belt, which we are going to execute.

So there is nothing called uncertainty about orders in this point in time. It's only about the timing part of it. We -- as these orders have been booked in the last one quarter or so, it takes time before it come into execution. Most of these orders will come into the execution in the second half of the year. And that is where we are saying that the H2 performance is going to be completely different what you are going to see in H1.

As regards to the U.S. order, it is also falling into that particular category. It will start the production and dispatches around that order, some time around September. And this quarter, which is almost more than 300,000 tonnes will get executed over at least 5 quarters.

[Sailesh Raja, analyst]

And then my last question is so could you please talk about the hydrogen pipe in detail. What value add you are going to do? And what is the opportunity you're seeing in the long term?

[Vipul Mathur, executive]

Hydrogen on the hydrogen pipe, we are working on two strategies: number one, on once we are a part and an active member in terms of working on the specification. And what should be the processes and all that stuff, and that is where we have joined GIP with DNB, that is on one side of it.

On the other side of it, we are also collaborating with the steel supply globally including India with Tata.We have been trying to work around development of steel, how that can be converted into that pipe and those pipes are compatible for taking 100% hydrogen as a carrier. So we are working on these both, right? I think so it's a journey. And we this journey -- we are seeing this journey is getting -- it's very fairly accelerated at this point in time.

And I'm sure that in next -- maybe in next 12 to 15 months' time, we could potentially see the hydrogen pipes coming into play. It's a huge market -- it's a huge demand, which is going to come up for the same, and we on that our future when we have of FY '24 or '25, there could be a significant portion of our revenue and our earnings can come from this particular market. That's how we -- that's what we are anticipating. That's what we are hoping. And it is in that particular direction, we are working for.

[Operator]

Our next question comes from the line of Krishna Agarwal from Niveshaay.

[Krishna Agarwal, analyst]

My first question is on the side of BI price. Are we getting any order or have you got any order from the BI segment?

[Vipul Mathur, executive]

On the DI side of it, as you know that we have just commissioned the plant. Right now, we are into the trial mode. We have already got able of BIS approvals in the Phase 1 of our BIS approval. We are seeing, as I just mentioned in my opening remarks that there is a huge tailwind for the order. I think so the demand, the demand projections are looking extremely robust at this point in time.

And we -- at this point in time, we do have some order, and also we are working in terms of our approvals and acquisitions with the various [indiscernible] teams. That work is already in progress. We have been very successful in a few states. And then some other set also, we are making our outreach and in times to come, I think so in the next 1 quarter or so, we should have our dominant business or we should prove it in most of the states where we want to make average impact.

So I think that's a work which is absolutely working in the direction, and we are also getting the good support and a good traction from the market. And we do have some orders coming in, tying into our system, which we are aiming to execute in the second half of this year.

[Krishna Agarwal, analyst]

My next question is regarding this that -- do we have any difference in EBITDA margin, defense in EBITDA margin as [indiscernible] pipe and BI pipes? And what exactly fully put our numbers is that demand and supply does? How much tonnes capacity we have? And how much on capacity we are forecasting?

[Vipul Mathur, executive]

In terms of capacity is kind of is almost close to full capacity. And our intent would be to use it to the maximum extent over a period of time. It is not that in the very first year, we are going to use the fullness of the capacity. It is going to be a drag will ramp up. And that is how we want to do it. It is because we want to be very responsible in the quality conscious learning. So called little unorganized market. So we are taking our right steps in the right direction. And I think so in the -- it would be our intent to at least do our [indiscernible] to the extent of 25%, 30% in this year and then gradually ramp up over the next 2 or 2.5 years' time.

[Krishna Agarwal, analyst]

Okay. And EBITDA margin defense, do we have any EBITDA margin defense in BI and [indiscernible]?

[Vipul Mathur, executive]

See, EBITDA margin -- this EBITDA margin completely depends on the input raw material. I think so we are seeing a significant correction in the commodity pricing with respect to both in terms of iron ore as well as gold because they play a major role in the pricing of that.

Right now, what everyone has bought -- everyone has -- is having an inventory including us, which is of -- which is a high price because they were bought like 3 months back. And at that point in time, the commodity prices were extremely high. But as things have started tapering off, I think the commodity started coming down, the balancing of the pricing has also started coming down. So we will see -- so EBITDA margins maybe in this particular quarter, it could be very skewed. But In the subsequent quarters coming up, I think will be very harmonized.

And as we get into an execution mode. Right now, we are just completing our trials, and we are just starting getting into an execution mode. I think I will be much better placed to give you a much more clearer and a firmer guidance on the EBITDA margin once we ramp up our production to a certain level .

So kindly help up and bear with us for some more time, one more quarter, and then we will be able to bring a far more clarity on this particular subject with respect to the margins.

[Krishna Agarwal, analyst]

Also which regions we are going to cater in the IFI segment?

[Vipul Mathur, executive]

India. [indiscernible]

[Operator]

Next question comes from the line of Nirav Shah from GeeCee Investments.

[Nirav Shah, analyst]

I have a few questions. Firstly, sir, if you can just share the run twice breakup of the order book and of the [indiscernible], what is the proportion of exports on the India book question? That's the first question.

[Vipul Mathur, executive]

We have closed -- we have almost closed to 1 million tonnes of an order book at this point in time. If you look at our Saudi business, let's start with India. Our India business is almost close to 350,000 tonnes, our U.S. business is also 170,000 tonnes and our Saudi business is also close to 300,000 tonnes. So what -- so it is a very equal and a uniform split across all of the three geographies, making up to -- or almost making up to 1 million kind of the business.

[Nirav Shah, analyst]

And what's the proportion of export book out of the India, order book of INR 3 lakh, 50,000 tonnes?

[Vipul Mathur, executive]

It will be close to more than 50%.

[Nirav Shah, analyst]

More than 50%. Okay. The second question is what did -- you just mentioned that we were carrying some inventory, high-cost inventory and prices deck. So was there any inventory losses in our steel business during the quarter? And second question on this is, what was the EBITDA performance at the U.S. subsidiary for [indiscernible] is there is any loss? I mean, if you can just quantify the loss.

[Vipul Mathur, executive]

There was a marginal loss, which has come up because of no product almost a very into production in this particular quarter in U.S.

I mean what -- we will see a major production jump happening in September onwards, which means in the quarter 3 and the quarter 4. That is where the maximum production and the patches are going to happen, right, in the quarter 1 and quarter 2. And we have the backlog of the order. We have the [indiscernible] product order, Not that there's an uncertain one. It is just a matter of timing when things are going to get started on the ground. And that is going to happen from the quarter 3. So that is where you would see a significant time coming up.

But until that time, they are because of low production and the fixed cost is slightly going up because we are in the process of recruiting us and [ admitting ] the scale of operation. So there is likely to be some losses which are going to come up, not when substantial minor losses that likely to come up. So that [indiscernible] things look to us.

As regards to the inventory, in our typically fee business, you have an inventory -- you have to keep the inventory of almost like 75 to 90 days, which is about iron ore in the core. And like any steel producing company, we also -- we have also taken that on -- we have it also on the ground. And to that extent, the commodity price is then and now has significantly tapered off.

So when we got up in hybrid analysis at the end of the year, we will be okay. But on a quarter-on-quarter basis, it might look a little out of place at this particular point in time. But over the period of the next 3 quarters, which will get completely evened out.

[Nirav Shah, analyst]

Got it. And sir, third question is on Syntex, when do we expect the -- to take over the management control of that entity and all the formalities getting completed?

[Vipul Mathur, executive]

It's difficult to answer. See, it's a process. You have participated into a process. We are -- and from our side, we are making our best effort. But to put a time line to that becomes different because these are [indiscernible] process to that and we no particular order to that.

But we are hopeful that what is of interest and what is of significance, the process seems to be the right direction. It is all the indicators are fairly encouraging. And we are very optimistic and hopeful that things will turn out in our favor in times to come. It could be a little out the back at this unit.

[Operator]

[Operator Instructions] Next question comes from the line of Abhishek Ghosh from DSP.

[Abhishek Ghosh, analyst]

So just in terms of the -- while you did allude to the point that second half for domestic is going to be strong. But if you can just give a broad comment given that commodity prices have kind of seen a fairly good correction, the order inflow, which is coming in from both oil and gas and water because if you look at your last 4 to 5 years, you used to do volumes in the domestic part of the business, anything in the region of 5.5 to 6 lakh odd tonnes.

So should we -- the kind of visibility that you have in FY '24, '25, will you be able to the pass those previous trends given sharp improvement in the overall CapEx that is happening in both quarters and as at the same time? Just some thoughts there will be helpful, sir.

[Vipul Mathur, executive]

On the oil and gas side, I think things are moving as they were planned. I think so there was a very steady state of business, which was there in oil and gas because the drivers for that business are very different. The drive business was strong demand, right, and in a very good pricing, which was available to the oil and gas company. So oil and gas business did not get impacted.

Of course, now with the steel pricing the tapering off, we see more businesses or more projects to come up on the table. But on the [indiscernible], I think so what happened was that because of the commodity of the stenting going up. The steel, domestic steel was almost INR 18,000 per tonnne, right, and now [indiscernible] it has come down to almost [ INR 56, 7,000 ] to be exact.

So that is that correction which has happened over the last 2 months. I think so that is generating confidence into people. And I think that is where the buyer market they have started buying. We are seeing a traction in people buying for those -- all the stalled projects. And we are speaking, we will see that in this particular quarter, we will see a lot of opportunities, which will be converted into business opportunities. And that is what you get when you get converted into a sale in the quarter 3 and quarter 4. So I am sure that in quarter 3 and quarter 4, we will see a much higher production and dispatch volumes in the domestic water sector in India as well.

[Abhishek Ghosh, analyst]

Okay. Sir, just two more things. In the current order book of about 3.5 lakh tonnes to the domestic part of the business. What is the execution timeline for the team?

[Vipul Mathur, executive]

This order book, I would -- in terms of percentage, I would say that most of it, almost 75% to 80% would get excluded in this financial year. Only a small -- only the residual component of some export orders will go over to the first quarter of the next year. And -- but which could be around 20-odd percent, but almost 70%, 75% of the order book will get included in the financial year. In the order book, I'm talking about India order book.

[Abhishek Ghosh, analyst]

Yes, sir, I'm referring to the 3.5 lakh tonnes of India order book. And then also for the order book that you spoke about. I think, almost 1.9 million tonnes, if I'm right, and that's what you mentioned in the presentation as well. If you can give a broad sense in terms of the various geographies that we are in.

[Vipul Mathur, executive]

We -- as I said, you're right. Almost active bid book stands at close to almost close to 2 million tonnes at this point of time. And we are seeing sort growth in every geography. We are seeing Europe -- we are seeing opportunities in Europe as I was just earlier mentioning about on one of the questions raised by Vikash. And we are also seeing a huge traction coming up in Latin America. We are seeing business ramp up in the Middle East market. We are seeing a lot of business monies coming up in the Southeast Asia and the Australasian market. And as you would have seen that we won 4 back to back orders in the [indiscernible] market.

So all in all, if you look at it, if you exclude the U.S. for the time being, we are seeing growth in Europe. We are seeing growth in Latin America. We are seeing growth in -- we're seeing growth in Southeast Asia market. And when I say growth, I mean that there are active projects which are on the table where we are one of the participants that is how we do is looking at close to 2 million tonnes.

So in terms of a positive, I think the significant positive with an emerging globally. And this is a very clear sign. We are seeing this sign up for a very long time and looks like and as I have always been saying that the cycle is going to continue for next 5 to 7 years' time, and we are very optimistic that we will have a major role and a leading role to play in entering the requirements around that.

[Abhishek Ghosh, analyst]

Okay. And sir, just one last question in terms of the active bid book of almost about 2 million odd tonnes that you're seeing now, what was this number, say, precrisis just to get a sense, and if we can get that number for ex-U.S., I think you had before, just a broad sense?

[Vipul Mathur, executive]

It dropped down. See, what happened, it dropped down to almost 1.2 million tonnes at one point in time during the pandemic and that time. But more than that, the decision-making got impacted. It was not that the bid book got down, it was the decision making which was getting impacted. And the moment -- at the moment, we saw that the pricing are forming up, the moment we saw the supply chain, the supply chains are getting restored, the supply chain lines are getting restored. Now we are seeing that midbook also going up and the decision coming up on the table. So there's a little shift which has happened now.

[Operator]

[Operator Instructions] Next question is from the line of Anurag Patil from Roha Asset Management.

[Anurag Patil, analyst]

So, for full year FY '23, can we say around 9 lakh to 1 million tonne total pipe volumes are possible in terms of execution?

[Vipul Mathur, executive]

In terms of the pipe business, you're talking?

[Anurag Patil, analyst]

All pipes. Yes, sir. All pipes.

[Vipul Mathur, executive]

It is possible. It is definitely possible. And if you see, Anurag, you see our track barring 1 year, which was a pandemic year. The second part of the pandemic year. Consistently, we have been delivering a performance of more than 1 million tonnes on a year-on-year basis. So I think these are why should we be now when things are -- the things are showing sign of improvement. We are seeing a tailwind in the business and our operational readiness is also to the -- is even better at this point in time. I see very -- I feel very optimistic that we should be able to deliver and perform more than 1 million tonnes of price this year.

[Anurag Patil, analyst]

Okay. And sir, on the India side now, 50% of the order book is on the export side, where you must be witnessing better margins. So can we say our India profitability will be a little higher compared to historical levels this year?

[Vipul Mathur, executive]

The mix of the business, what we have, is definitely better than what we had in the past. You'll be able to understand the distinction in the past, there were limited opportunities. And everyone was craving for it on those opportunities. That's not the case anymore. I think that there are multiple opportunities and some quality opportunities are coming upon the table within what is the greater business is all about? Deep offshore, critical applications, niche customers. So we are seeing all those people now coming back to the market. So our order book reflects a quality job into our product portfolio. So to that extent, we see our margins also slightly improving in terms what we have seen in the past. So as we execute, I'm sure that you will see -- we will also see the margin improvement coming up into play in comparison to the last year.

[Operator]

Thank you. As there are no further questions, we have reached the end of question. I would now like to hand the conference over to Mr. Vipul Mathur, MD and CEO of Welspun Corp for closing comments. Please go ahead.

[Vipul Mathur, executive]

Gentlemen, thank you very much for taking your time off on your busy day. We greatly appreciate your participation today. And I just want to conclude by saying that please do not -- please look at us from a year-on-year perspective. We have a very robust order book at this point in time on our belt. We will -- you will see a drastically upgraded performance in the second half of this particular year because that's the nature of the business, what we are in. And having a confirmed order book under you build is always -- is the key ingredient for that.

On the deal side of it, we are absolutely -- at this point in time, we have commissioned, we are taking time in terms of not settling down the businesses. And I'm sure that you -- in the quarter 3 and the quarter 4, you would see a robust performance coming up on the steel businesses as well. So we appreciate your [ pay ] and your trust in our company. We will continue to do so.

And with that, if you have any other pending questions you have in mind and if -- please reach out to me or to my team, and they will be completely answered. But once again, thank you very much for taking time off this morning and wishing you very good, all the best and a good year. Thank you.

[Abhineet Anand, analyst]

Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us. You may now disconnect your lines.