Welspun Corp Ltd

NSE:WELCORP

Earnings Call Transcript 2023-Q2

[Operator]

Good day, ladies and gentlemen, and welcome to the Q2 FY '23 Results Conference Call of Welspun Corp hosted by Emkay Global Financial Services. [Operator Instructions]. Please note that this conference is being recorded.

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

[Abhineet Anand, analyst]

Thanks, [indiscernible].

I'd first like to thank the management of Welspun Corp for picking Emkay [ Globals ] to host this call. I would like to hand this call to Mr. Abhinandan Singh, Head, Group Investor Relations. Over to you, sir.

[Abhinandan Singh, executive]

Thanks, Abhineet, and good afternoon, everyone. On behalf of Welspun Corp Limited, I welcome all of you to the company's Q2 FY '23 Results 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 also along with us, we have Gaurav Ajjan, who leads Investor Relations for this con call. We will start, as usual, 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, please feel free to reach out either to Gaurav or to me. Our codes are available on our website.

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

[Vipul Mathur, executive]

Thank you, thank you, Abhinandan, and very good afternoon to all of you. I really appreciate you -- all of you taking time out for today's call, our earnings call for Q2 FY '23. Let me start -- let me start with the key highlights and the performance during the quarter ended 30th September 2022.

We have seen a strong business outlook earning -- clear earnings visibility for the next several quarters. Our order book for the line pipe is approximately 1 million tonnes and an active bid book of close to 1.5 million tonnes at this point in time. We are also pleased to highlight that we have won a significant order under the New Energy Space, which is a carbon capture pipeline project in the U.S. We have started our regular dispatches for the Ductile Iron plant. We have also acquired the specific asset of ABG Shipyard.

We also have a little downside in terms of our earnings, mostly on account of the inventory cost, the inventory cost what we have been carrying in our Steel Vertical, and which I'm going to talk about it in my subsequent part of the conversation.

So for the quarter, the production and the sales volume in line pipes for our total operations, including Saudi, stood at 215,000 tonnes and 218,000 tonnes, respectively. 215,000 tons was of production and sales was 218,000 tonnes, out of which India sales volume -- out of this 218,000 tonnes, India did 140,000 tonnes, U.S. did close to 9,000 tonnes and Saudi did something close to around 70,000 tonnes.

Let me now give you a brief outlook and an update on each of the every verticals and the geographies in which we are present. So for you to -- for your better understanding of the business.

So first, let me talk about the pipe vertical, which is about line pipes. The line pipe has seen a robust performance, with a global sales volume of 218,000 tonnes and an EBITDA of INR 256 crores for the quarter. This EBITDA includes INR 104 crore from the sale of land and civil structures in the [indiscernible]. Further, the U.S. production has also significantly ramped up, and the dispatches against the project will start end of Q3 or early Q4, and thus, we will see a significant contribution coming in our FY profitability.

The confirmed order book of line pipe business is close to 1 million tonnes, and the company is in favorable position for a few additional large orders. This gives us a clear business and earnings visibility for the next 5 to 6 quarters till the end of FY '24.

If you see, OPEC+ has also taken a decision to cut a massive 2 million barrels per day of oil production, which is equal to 2% of the global supply in their meeting held in early October to try and create a tighter demand-supply balance in the global market. It is just estimated that the oil demand and price, both are likely to stay firm for the foreseeable future.

On the Steel side, we have seen significant downturn correction in the prices owing to the recessionary pressure, lower demand conditions in Europe and worries about the Chinese housing market -- the China housing market. In India, the steel prices have also corrected significantly, more than 20%, after Ministry of Steel has imposed an export duty of 15% in May 2022.

As regards what -- how it reflects, pan out for India, the current environment of reasonably high energy prices compared with a decline in global price of steel will lead to -- we feel will lead to a robust CapEx cycle in the oil and gas sector globally, which has been dormant for the past few years. We are seeing resurgence of various installed projects and are in active discussion for several export orders across the world with focus on Europe, Australia, South America, Southeast Asia and Middle East. The Indian government also has envisioned a very clear road map for the energy with a major focus on gas as a cleaner fuel. The gas demand prospects in India remains strong as the government has set a target to raise the share of natural gas in the energy mix from current 6.7% to 15% by 2030. Gas demand will be driven by fertilizers, CGD players, petrochemicals and refineries. This will result in continuously expanding the gas and the CGD pipeline network on timelier basis and will be a key driver for the growth for the line pipe industry.

Similarly, the correction in the domestic steel pricing has brought back the demand in the water sector, as there is an accelerated need for the development of irrigation facilities. We are also seeing increased engagement across the states of Gujarat, Maharashtra, Tamil Nadu, Karnataka, Madhya Pradesh, Punjab and Rajasthan. There is a strong intent to meet the ambitious target as envisaged in the various government schemes. The focus both by the central and state government on developing the water infrastructure is expected to drive the demand for large diameter pipes for water applications.

As regards to U.S., after a year of under investment in oil and gas exploration and infrastructure, the U.S. is now focused on boosting its oil and gas supply to cater to their domestic energy needs as well as for exports to cater energy needs in Europe. The number of active oil and natural gas drilling rigs in the United States have risen by 229 or almost 42% in the past year to the highest point since March 2020.

The increased drilling activity is necessitating the need for creating additional gas export clients. Volumes are set to reach more than 21 Bcf per day by the end of November, according to an EI report, and it will be a record high and up by 9% since last year. The Permian basin, where the maximum drilling activity seems to be happening, will need additional 2 or 3 large gas pipeline projects for the evacuation of gas to the Gulf Coast in the coming 3 to 5 years.

There is also an extremely strong focus on new energy, including carbon capture and ammonia pipelines. We recently announced winning a significant order for a carbon capture pipeline project in the U.S. This order is for supply of almost 1200 kilometers of HFIW pipes, and will be used for transporting captured carbon dioxide. The pipes for this order will be produced at our Little Rock plant in the U.S., and the same will be executed during FY '23, '24.

Given the commitment for reducing greenhouse gas emissions and the incentives attached to this sector, we would see a very robust demand for such pipeline for the next couple of years. With Welspun being one of the largest players in the Northern American continent, we are confident of maximizing our capacity utilization and earnings and profitability for these assets in subsequent year also. It is also very pertinent to mention that at this point in time, we have a large order book which is taking us till the third quarter -- at least till the end of the first quarter of the next financial year, both for our spiral pipe as well as for our HFIW pipe.

Coming to Saudi Arabia. Saudi Aramco reported its highest quarterly profit for the period of June 30, 2022 since the company went public in 2019, boosted by higher oil prices and refining margins. The company expects both the oil and gas demand to continue to grow for the rest of the decade. Saudi Aramco stands ready to raise oil output with maximum sustained capacity of 12 million barrels per day, and have announced a CapEx enhancement from [ SAR 31.9 billion ] to almost close to [ SAR 50 billion ] for this year.

On the water side of it, SWCC, which is the largest deceleration corporates in the world and is providing water to over 34 million people. For the distribution of decelerated water, 7 additional large water infrastructure projects are planned, which would result in a total demand exceeding 3 million tons of pipe over the next 3 years' time.

So with the high oil prices, increase in the demand, the current geopolitical situation in the world, we see a robust business opportunity for the next 5 or 7 years in oil and gas as well as in water sector in KSA. This, again, with we being Welspun, or our company's East Pipe being one of the largest players in that domain, we are confident of maximizing our capacity utilization, earnings and stability for this H2.

Now, let me draw your attention to our Steel Vertical. In our Steel Vertical, we have 2 legs. One part is with respect to Pig Iron and DI pipes, and other leg is all about the long products, which is TMT. Let me first address the Pig Iron and the DI pipes.

As you know, that our state-of-the-art blast furnace was commissioned in July 2022, and is running efficiently with a consistent output of more than 1,000 metric tons per day of hot metal, where we also have a potential to ramp it up to 1,500 metric tons per day. However, this is currently being regulated as the production of DI pipes is being ramped up on a gradual basis. We are using -- this hot metal is primarily will be used for making the DI pipe, so we are reducing a little bit. Our DI plant, which have a capacity of 400,000 tonnes and equipped with the latest cutting edge technology, has received its BIS certification and its approvals in the key states of Gujarat, Uttar Pradesh, Madhya Pradesh, Rajasthan, Maharashtra, Chhattisgarh and Punjab, achieving the first major milestone. The quality of the product is widely accepted by the customers, and as on date, we have more than 70,000 tonnes of order for the DI pipes valued at more than INR 500 crores.

The operational performance of both our steel and DI facilities are absolutely in line as we have planned and envisaged and meeting our expectations. Two, the profitability for this quarter has been impacted on account of high inventory costs, especially the coke, as being faced by all the major steelmakers at large. This was also impacted by the lower sales realization of the steel product, which is Pig Iron, on account of imposition of export duty at a rate of 15%, thereby softening the domestic steel price and making it difficult for the company to sell overseas. The overall impact, the overall financial impact of these 2 itself is close to INR 200 crores for this particular quarter. However, is this being a one-off stand of loss, which is -- which has been provisioned, which has been factored in this particular quarter.

However, moving forward, the product quality, our expansion in customer base, the production ramp-up, which is happening at a very smooth pace, and the commodity buyers pricing getting now more predictable, the financial performance of the business will significantly improve in the subsequent quarters.

From a demand perspective, we see a continued focus on -- we can see a continued focus on the demand for creating drinking water supply infrastructure in India under the Jal Jeevan Mission, where there is an allocated budget of INR 3,600,000 crores. Till date, we still have an unspent amount of INR 3,001,000 crores. This gives a very clear visibility of demand growth over the next few years.

Let me talk about our Steel Vertical. In our Steel Vertical, the second part, which is our long product, TMT. We have already, as I said, we will be commissioning our TMT mill in the second quarter of this year. We have done that. This is a really state-of-art TMT plant having a capacity of 350,000 tonnes. It has also received its BIS certification, and it is all set to commence the [indiscernible]. The key growth drivers continue to be spent on infrastructure, housing and construction. Our key market area would be Gujarat, which has a consistent annual demand of more than 3 million tonnes per annum, of which close to 2 million tonnes is only produced in the state of Gujarat and the balance comes from outside. With our quality, customer center approach, and the brand, we are confident to establish -- we are confident to establish our product as a leading B2C brand in the Western market.

Let me also give you an update about WSSL, I'm sure you must have seen the results announced by WSSL as being a separately-listed company. The order book for the stainless steel bar stands at 1,387 tonnes, and for the [indiscernible] pipe at 1,853 metric tons valued at INR 170 crores. The pipe volumes for the Q2 FY '23 were up by 96% on Y-o-on-Y basis. The total income from operations for Q2 FY '23 was at INR 93.7 crores, up 351% on Y-on-Y basis, and EBITDA was at INR 0.3 crores versus a loss of INR 4.3 crores in Q2 FY 2022.

The key demand is from the sectors like oil refineries, petrochemicals, pharmaceuticals, defense and power. Our healthy order book, approvals and acquisitions across the sectors, incremental performance demonstrated on a quarter-on-quarter basis, quality acceptance both in the domestic and the export market, and the government has on Make in India initiative, all will lead to improved earnings and better margins in quarters to follow.

Gentlemen, what I want to highlight here is that it has been a journey, a company which has been in red is now, with our sustained efforts and diligence working, is now into black. And from here on, it is only going to see one trend, which is the upward trend.

I also do want to take this opportunity to give you updates on some of the key events which has happened in this particular quarter. One of them happens -- one of them is the asset acquisition of ABG Shipyards. Welspun was a successful bidder in terms of the process, memorandum for the private sale of -- express of ABG shipyard. WCL and its wholly-owned subsidiary, [indiscernible], has paid on September 21, 2022, INR 659 crores towards the entire purchase consideration. The partially-built ship equipment and metal square acquired under the WCL is estimated to be over 15,000 metric tons. It is estimated that the metal and metal square will not be required for the business purpose and will be disposed over 12 to 15 months' time.

However, post making the payment to ABG's liquidator and upon the shift of the sales certificate corresponding to that, the liquidator has achieved a provisional attachment order from ED [indiscernible]. The company, the liquidator and the lenders have all filed separate repetition between the Order of Gujarat High Court against ED provisional attachment order. We are making best efforts for an early and a favorable disposition of the same.

Fintech. As said, Welspun growth strategy entails creating a diversified product portfolio, repurposing its business to add new target segments, expanding its offering to address both B2B and the B2C market and making well-considered strategic acquisitions. In this regard, we have acquired fintechs and BPA's non-convertible debentures with an outstanding amount of -- amount of INR 1,223 crore for a purchase price of INR 418 crore as on date by our wholly-owned subsidiary, Mahatva Plastic Products and Building Materials Private Limited.

Our new SPV, which is Propel Plastic Products Private India Limited, is being acquired and shall submit an EOI as required by the residual professional as per the time it was announced, and the process for the acquisition of the same is likely to be completed within Q4 of FY 2023.

Sale of land and civil sectors at the age. WCL has entered into a Memorandum for Agreement on September 30, 2022, for sale of plant civil structures, excluding the plant and machinery situated at -- the head unit, situated under the head unit of the company in the state of Gujarat. The sale of unit comprises of insignificant portion of the operations of the company, and the management feels that the transaction would not have any material or adverse impact effect on the operations of the company. The consideration received for the sale of the land is amounting to INR 130 crores.

As a responsible corporate citizen, our focus has been -- our sharp focus has been on the ESG initiatives. We emphasize ESG data governance and integrating ESG measurements into internal control framework and internal audit programs. As a part of this, we have implemented an ESG Compass and integrated digital platform for measuring, monitoring and reporting on ESG KPIs. It covers over 90 ESG indicators across all sites and locations in India and present our data in a dashboard format, which helps us to accumulate manual data collection and streamline reporting processes.

I also want to take this opportunity to give you a broad overview of the -- how does the management think about the company's outlook over a medium-term basis for the next 3 to 5 years' time. We feel that with our diversified portfolio, which we have -- in which WML, WDI, PMT, WSSL and Sintex, all has been acquired, or --and they are in the process of being -- or are in the process of being acquired, and will -- and have been in the process of being incubated. We are very confident that we should be able to attach a top line of INR 50,000 crores plus, which should be in a position to give a sustainable EBITDA of INR 1,600 crores to INR 1,800 crores. Our losses could be in taxes of 18% plus. We will be a cash positive driven by strong free cash flow. We target to increase our DTSI score, which is our ESG rating from 41 to 60, and we want to be a dominant player both in the B2B and B2C segment in light of our group's region, [ Halaven ].

With this, I wish to conclude my opening remarks. I will be more than happy to take any questions. I open the floor for the questions, please. Thank you.

[Operator]

[Operator Instructions]. The first question is from the line of Yash from [ Sushil ] Finance.

[Unknown Analyst]

Sir, my question was regarding the Propel Plastic Products and the subsidies which we are acquiring. So what kind of business the subsidiary is supposed to be doing in the near future? Any plans on that?

[Vipul Mathur, executive]

So this subsidiary is being acquired purely from a purpose of participating in the auction, which has been -- the time lines for which has been now been announced by the resolution professional. So this will be the bidding entity going forward for us.

[Unknown Analyst]

Okay. And sir, could you please elaborate more on the plastic and plastic products, which you will be looking at coming -- in the coming months?

[Vipul Mathur, executive]

So all what we are looking at this point in time is to be an active participant for acquisition of existing setup called Sintex. They are currently -- they are the largest tank manufacturer for plastic pipe -- plastic tanks manufacturer in the country. And it is -- this whole exercise is being done, the NCDs which have been acquired. And this participation in this auction, which is being announced by the RP is all being done in keeping in view our intent to acquire this particular company.

[Operator]

We have the next question from the line of Nirav Shah from GC Investments.

[Nirav Shah, analyst]

Few questions, sir. Firstly, from -- if I exclude the operating profit of INR 104 crores on sale of land and infra [indiscernible], we get a pipe -- line pipe EBITDA from INR 152 crores. And our reported operating profit loss was INR 130 crores, of which we mentioned that INR 200 crores is an inventory write-down. So if -- can we give a breakup of the losses in the Steel business? Is it entirely attributable to the Steel business, because India plus U.S. pipe is in the -- is part of INR 152 crores, and we have given the numbers for WSFL? So you can just first reconcile that?

[Vipul Mathur, executive]

Right. So if you see on a -- on the line pipe vertical, we have EBITDA of INR 256 crore in which INR 104 crore is embedded of a land sale at this point in time. .

So pipe business EBITDA, in any case, is close to INR 150 crore -- operational EBITDA is close to INR 150 crore or INR 152 crores, which is what we had expected and anticipated in the quarter 2. And as we move on to the subsequent quarters, Q3 and Q4, and as the product mix will change, and as some export orders which are lined up for execution, they will start getting -- start executing from here, you will see a significant movement, upward movement in the pipe line EBITDA side of it.

And this -- now coming back to the U.S. side of it. In the U.S. also, as you know, in the first quarter, we had no production. All the orders, what we have, we have almost 400,000 tonnes of an order book in U.S. at this point in time, and the production for that has already started in Q2. So as we speak, we are producing. We are parking that as an inventory, and that is the reason you are not seeing that they are hitting our financials in the Q2. And they may also not hit in the financials of Q3 because the deliveries of those pipes have to only start in Q4.

While we are working with the customers, we are -- in terms of to see that can they allow us to start early deliveries because in many of what we are producing, that's a work in progress.

If they allow us to do that, we would see some backlog of earnings into our Q3. Otherwise, from Q4 onwards, all that what would be on the stock or what would be on the ground, we will see the financials coming into that.

And they are very profitable orders. And it is only a matter of a quarter where you will start seeing the profitability coming from the U.S. as well. So there's nothing called uncertainty around that. It is only a matter if we get a recognition, if they are to start dispatching, it will get recognized in Q3. Otherwise, from Q4 onwards in any case, that recognition will start coming up. So that takes care of the pipe side of our business.

And I would just like to reiterate -- sorry?

[Nirav Shah, analyst]

It's part of that INR 152 crores. I mean, U.S. is part of that INR 152 crores?

[Vipul Mathur, executive]

Yes, U.S. is part of that. All I want to reiterate that our mainstay business, which is the line pipe business, is absolutely safe, absolutely secured for complete order book, profitable order book. And as we will move in quarter-on-quarter basis for the next 5 or 6 quarters, you will only see one trend which is upward trend.

Now, let's come on to the Steel side of it. On the Steel side of it, we just commissioned our blast furnace in this particular quarter sometimes in July, right? And so in this -- what we have been impacted today is because of the coke pricing. We -- when you are operating a blast furnace, you have to import coke, and there is a lead cycle of almost 60 to 90 days before you have to order the coke. In that period, there has been a significant correction of the coke prices. The coke prices have dropped down from INR 54,000 to almost INR 41,000, so there has been a correction of close to INR 13,000 to INR 14,000 per ton in a very short span of time. And that has adversely impacted because of the inventory, what we have been carrying which we have no other choice but to carry. So this is one of the major reasons for our dip in this particular quarter.

Also, the second aspect, which has contributed to the loss in the Steel sector is that, as you know, the government of India has imposed the 15% duty on the exports of semis -- the steel product. We had anticipated, which means that we had anticipated that we wanted to export Pig Iron, and which is not possible at this point in time. So we have -- there is a slump which has happened in the market, domestic market. The prices, steel prices have corrected by more than 20%, so we have the impact of the inventory on the Pig Iron as well. So there are 2 -- this loss is embedded into 2 things. One is the coke inventory and other is the Pig inventory.

[Nirav Shah, analyst]

Okay. But if -- I think that INR 200 crores of inventory loss that we have mentioned, so that still leaves a gap of around INR 75 crores to INR 80 crores.

[Vipul Mathur, executive]

Why would you say that? What...

[Nirav Shah, analyst]

So reported numbers, our operating loss is INR 130 crores. And if I just look the line pipe EBITDA of INR 152 crores with an inventory loss of INR 200 crores, that gives a negative INR 50 crores. So the gap from negative INR 50 crores to negative INR 130 crores, I just wanted a reconciliation, if possible, of that number.

[Vipul Mathur, executive]

I mean, let me -- I would mark this question and we can get back to you with respect to this thing. But somehow it should not be like that. But nevertheless, let's pass this part.....

[Nirav Shah, analyst]

Sir, second question is, I mean, we are seeing the change in the debt numbers from INR 116 crores to INR 1,600 crores of net debt now. And as you see the balance sheet that, for the reasons you mentioned, that inventory from March levels has increased from INR 1,000 crores to INR 3,500 crores. But just from Q1 to Q2, if we can just reconcile the cash outgo of around, say, INR 1,700 crores, that would be really helpful.

[Vipul Mathur, executive]

So it has 2 or 3 components to that. Number one, the one component of cash outflow is for buying the NCDs of Sintex. Right. The next outflow was with respect to the ABG. And of course, third, the most important part was the project, the WML, WDI and all -- and the TMT projects, all the 3 projects went into the project phase, and that was the earning. So these were the 2 reasons, the ABG acquisition and this was...

[Nirav Shah, analyst]

So entire ABG outgo has been part of the balance sheet number? I mean, this INR 1,600 crores of net debt number?

[Vipul Mathur, executive]

Yes, please.

[Nirav Shah, analyst]

Got it. And sir, just a clarification. I mean, the 70,000 ton of DI pipe order is over and above the 956,000 tonnes of line pipe orders?

[Vipul Mathur, executive]

Yes, yes.

[Operator]

We have the next question from the line of [ Chintan Mehta ] from [indiscernible] Broking.

[Unknown Analyst]

Sir, if you can throw some light on Sintex, BAP acquisition, what is the current status? And in what scenario we have been open to acquire the company?

[Vipul Mathur, executive]

See, it's a work in progress, Chintan. It's -- while we have taken a significant position of acquiring the debt NCD to a particular level. But there is a COC, there is a process which is now being initiated, and there is a time line which has been announced to that. We have to participate in that process. Apart from us, there are -- I think there are 3 or 4 more bidders around that. But we are reasonably -- we stay completely glued and plugged to this particular asset. We are confident of going forward with that, but it will take its time.

We are hopeful that it might -- the whole process can get completed in -- by the fourth quarter of this year.

[Unknown Analyst]

Okay. So by the fourth -- any -- I mean, by the fourth quarter end of this year, we will integrate the asset with us, correct? If everything goes in...

[Vipul Mathur, executive]

That is what we're expecting. That is what see. Again, there is -- it's more of a regulatory process, which is not completely in our control, right? But the way I think that the things are moving at an accelerated pace, as the way the time lines have been identified, we are very, very hopeful that this asset can get integrated by quarter 4 -- in the quarter 4 of this year.

[Unknown Analyst]

Okay. Okay.

And sir, what is your strategy for the ABG assets and what we have planned for that?

[Vipul Mathur, executive]

See, right now, as you know, we have acquired this ABG asset, but there is a provisional ED order for attachment at this point in time. Ourselves, the liquidators and the lenders have appealed against that particular order. At this point in time, the matter is little subjudiced and we all are working in that direction, how it can be resolved at the earliest. So at this point in time, our complete analogy and focus is in terms of resolving, getting this matter resolved. And then, we will start working around that, what would be the next steps around that.

But having said that, as you know, it's a very strategic asset. As Welspun, we have some strategic thinking and captured [indiscernible] with us that what could be potentially done with this asset over a period of time. Are we going to do anything immediately around it? The answer is no. But we would like to evolve this particular business, which will absolutely be a great value creator in times to come.

[Operator]

We have the next question from the line of Abhishek Jain from [ Arihant ] Capital.

[Abhishek Jain, analyst]

Sir, are we seeing any more inventory losses in this particular quarter?

[Vipul Mathur, executive]

Abhishek, looks unlikely. But these are -- see, we are dealing in commodities. Today, the commodities are extremely volatile. It is completely unpredictable. Tomorrow, the steel market gets further corrected by 20%, 30%, who knows that, so then there would be a potential impact. But the sense on the ground at this point in time is that I don't think so that there would -- there is any major correction left at this point in time. But everyone has been proven wrong on that, so I would say that I don't want to speculate. But we are -- I mean, if there is no major corrections in the commodity which will happen, I don't think that there would be anything -- any further surprises like that what has happened in Q2.

but if that happens, the market -- if the commodity gets corrected significantly, then there could be potential impact. But that is true for all. It is not that we will be the only one who will get impacted, everyone is getting impacted because of that. And we are hoping that there is no major correction of the quarter.

[Abhishek Jain, analyst]

Sir, I have 2 more questions. One is on the ABG side of acquisition right now. Sir, what kind of growth do you see going forward of the ABG [indiscernible] trend? How do you see this particular business in the next 2, 3 years?

[Vipul Mathur, executive]

See, today, as I said, ABG is a very strategic acquisition. It fits into our long-term scheme of things. There is nothing called short term or mid-term. We are contemplating the ABG. It's a very, very strategic asset. It is -- if you see, it is an asset which has been working in the ship building domain, and it is one of the assets which have been extremely -- which has been working in the defense sector as well, the defense shipbuilding sector as well.

So we have a couple of options up on the table. We have a long-term strategic plan for that. Right now, what we have only invested is in the asset because this asset is a nice strategic asset, and that is how we would like to keep it at this point in time. When -- our first and foremost and our primary target at this point in this time is that there is a matter which is subjudiced at the Order of High Court in Gujarat. We are all pursuing that it gets addressed, properly addressed. And once that happens, then we would like to start putting a couple of business plans and a couple of options upon the table and see what will create the best value for all us and the stakeholders. And that is -- then we will start -- then we will keep you posted about that.

[Abhishek Jain, analyst]

Okay.

And sir, like, we have done -- we had, like, you have already done a specialty acquisition years back. How exactly do you see going forward? The acquisitions have looked like -- what are our learnings for this? And can you throw some more light on the specialty steel business and the [ TMT ] part also? A little bit of [indiscernible]?

[Vipul Mathur, executive]

Sure.

So the WSSL acquisition, which we did the last year, I think that acquisition is moving well. You see that the volumes, the volumes have been increasing both for the pipes as well as for the stainless steel bars. Our customer base is expanding. The company has moved out from red, and it is now in the black. The quality is widely accepted, almost 40% to 50% of the quantity sold is now getting exported. The domestic demand is looking very robust and very, very buoyant.

So it's a startup. One has to be patient in terms of incubating these start-ups. And we have been working on this for the last 3 or 4 quarters, and you see it has already now converted into black. And from here on, its growth journey will start. As regards to the market, the market, the demand, there is a serious demand into the market. And we being one of the integrated players, which means I produce the steel and I also produce the pipe, and -- is going to help us a lot.

One thing which has impacted, temporarily impacted, this business also was this export duty. We were -- and that has really impacted our bar business. We had started our bar. We have supplied our SS bar for the export market. And the quality of that was widely accepted. As we were in the process of increasing our market share in the bar market, this export duty component has come up. We have represented the government for that because this seems to be a little abnormal. I think so in the government quarter, there's an acknowledgment around that. They seem to be thinking in terms of removing this exports limitation or export duties over the stainless steel at least, to start with. And we are very confident that it should get resolved very, very quickly. And from the -- once that happens, then there will be a huge export market which will open for our bar business.

But for our pipe business, I think with our new -- with our approvals, with our acquisition and with our -- the supplies, which are already being supreme, which is -- the pipes have already been supplied to across all the major sectors, I think that there's a great acceptability. And I'm sure this pipe business will also grow from here itself. And the order book of almost 1,800 tonnes plus is a very clear reflection of that.

Coming to the second part of it, about the TMT business. As you know, we have been a producer of a billet, an intermediate product. All what we have done, we have moved up into the value chain. And now, we will be started producing. We have already started producing the TMT bars. If you understand, Gujarat is one of the largest consumption center for the TMT bar. At this point in time, on a year-on-year basis consistently, they have been consuming more than 3 million tonnes of TMT on year-on-year basis. 2 million tonnes of PMT is coming from Gujarat and 1 million ton of PMT is coming from other states.

So if they -- we are setting up a facility for almost 350,000 tonnes in there. And I feel that with the brand what we have, with the quality consciousness which we have in our DNA at Welspun and with the demand, what is there in the state of Gujarat, I think so we should be able to capture our market share sooner rather than later. We have -- from a process perspective, the plant stand installed, commissioned. The trials are going at this point in time I'll be -- speaking. The trials are absolutely successful. Of course, there are some taking issues here and there, which always happen with any project. But our product has already started hitting to the market. And from here on, on a month-on-month basis, we will gradually ramp up from our TMT business.

So we are moving from an intermediary product from our billet to a value-added product to TMT, which had a huge consumption base within the state of Gujarat.

[Operator]

We have the next question from the line of Vikash Singh from Phillip Capital.

[Vikash Singh, analyst]

Sir, I just want to understand our steel business in billet side, basically. So since as long as the duty is there is highly -- is not lucrative for us to produce. As we can see that though the volumes of the stand-alone business has jumped up by 40,000 tonnes, 50,000 tonnes, but EBITDA remained the same. So what kind of losses they are making at this point of time on the EBITDA level?

[Vipul Mathur, executive]

Vikash, you are talking about billets part?

[Vikash Singh, analyst]

Billets, basically. So just stand-alone business, if I look at, my volumes for the pipe jumped up but my EBITDA remains the same. So obviously, the increment -- there has to be incremental losses on the billet side, which could have -- they didn't allow the EBITDA expansion. So I wanted to understand what are the losses they are making right now? And how do you see these 2 tapering down going forward?

[Vipul Mathur, executive]

See, on the billet -- on the billet side of things, the market has been fairly depressed, and it cuts into a further depression mode when the export duties started coming in. When the export -- the 15% export duty came in, so we have been very conscious. And also, if you look at the commodity pricing, the scrap pricing and every -- it has gone up the roof.

So what we have here, we had an opportunity to either pay, either continue to produce and take the inventory losses, or to take a pause and only completely focus on setting up our long product TMT. What we did, we took a conscious call of calibrating our production and focused more on setting up our TMT. I think this is all -- now, our focus will completely move from billet to the TMT side of it. I think so -- as you move up the value chain, you are absolutely insulating yourself to a large extent about the uncertainty which prevails around the billets.

So Vikash, my -- to answer your question, in the billet sales, there was always a little bit of an uncertainty. There was a volatility in the market price, and that being a semi product into the market where you have no control end to end. With this -- with the TMT now coming in, you are in a much better control and you're up in the value chain, so insulating yourself your profitability and the margins.

[Vikash Singh, analyst]

Okay, sir. Sir, just one thing also I want to understand. Since the Steel segment, they have just now started to ramp up. Apart from the one-off losses, what are the startup costs which -- can you quantify which has impacted our results? And how -- and what level of production levels we are seeing the startup cost to get -- or the [indiscernible] get to assimilated and then improving our overall performance going forward?

[Vipul Mathur, executive]

So we have to see it in 2 contexts. Number one, as I said, the blast furnace, I think that the blast furnace has started pretty off well. It is absolutely consistent. It is producing more than 1,000 -- almost close to 1,000 tonnes per day, and that is by design. We are -- right now, we have put it -- resected it to 1,000 tonnes per day. We have the fullest capability and at this point in time to ramp up to 1,300 tonnes to 1,500 tonnes per day.

But we are looking at the inventories, the volatility, and the Pig Iron not being a commodity which can be sold at this point of time that very easily. And as our DI business is ramping up, so we have restricted our blast furnace operations at close to 1,000 tonnes per day. .

Now the point in question is the DIP plan, I think so. On our DIP plan, the operations have started very nicely. The equipments have started settling down. The hot zone, the finishing lines and all those things are all absolutely completely seen. We have seen -- the quality has got completely established, the BIS approval is now in place. Our approvals under the various markets, key markets in which we want to penetrate. This was -- this used to be a big challenge earlier. If you see, for years, people will not get an approval for their DI pipes. And today, I'm happy to announce that all the key markets in which Welspun wants to operate, they are all approved now. And it's a very clear reflection that we have an order backlog of 70,000 tonnes. If we wish, we can go for more. And I'm sure that in day weeks to come, this will only get better and better.

And so it's now -- it's all about now stabilizing, ramping up the production at the DI plant. And I think there is a very clear cut road map which has been laid out. I think so we are moving as per the plan. What we will see in Q3 is a much incremental ramp-up of production and followed by Q4, and that is how it will go over for the next 4 to 6 quarters. That is how the ramp-up will happen. And we expect that we should reach to our target capacity in less than 6 quarters from now.

[Vikash Singh, analyst]

Okay, sir. So but then even then, let's say, next year, can we assume that we would be -- still be selling 2 lakh tonnes, 2.5 lakh tonnes kind of Pig Iron and 1 lakh ton, 1.5 lakh tonnes of DI, and that would take time for DI catch up to full potential?

[Vipul Mathur, executive]

Vikash, see, it is -- I would not like that scenario to happen because at the end of the day, we have set up this plan for maximizing our DIP production. The technology what we have used, the manned machine interface, what is not happening. I think so it would be -- it will settle down very quickly.

But yes, you are right. Our capacity is 400,000 tonnes. Are we going to reach to our capacity of 400,000 tonnes for next year? The answer is no. So whatever best we could do, we are very hopeful that there is a demand side on the market. There is no drop of demand, so it all is in our core in terms of now ramping up to maximize the opportunity. And with the team, what we have in place, with the technology what we have in place, with the tailwind that we have in the market, I think our endeavor would be to reach very close to that. But on to the realistic side, I think, so I would like to say that we should be close to 200,000, 250,000 tonnes of DIP that we should be targeting and aiming for the next year.

[Vikash Singh, analyst]

Just one last question, if I may. Sir, in terms of U.S.A., this 460,000 tonnes of order book which we have confirmed. So is that uniformly spread across the next 6 quarters, or is heavily skewed towards some particular quarters? If you could give us some insights into it?

[Vipul Mathur, executive]

This order is -- which is, let's say, the large diameter order, which is close to 300-odd thousand tonnes plus, we have -- as we speak, we should be starting the production for the same in the next 3 days' time. In 72 hours time from now, the production for that will start, and -- so it will be equally distributed over all the quarter. Our endeavor is to complete it by the end of the third quarter of the next year, and so it's going to be a sort of an even distribution.

Even the spinal order, which we would like to start sometime in the very first quarter of next year because we have booked till the end of this year. And this -- when we start the [indiscernible] order, sorry, in the very first quarter of the next year, I think so we will -- it will continue to run for the next 4 quarters from there on. They are evenly distributed now.

[Vikash Singh, analyst]

Okay. So that means we still would be left with some large diameter capacities in U.S. and that is -- some more orders can be taken? 30, 40 kt per quarter basis can be further taken if there is a demand?

[Vipul Mathur, executive]

The demand. If you'll see from -- what you're saying is right, Vikash. But if you see the market, the market is absolutely buoyant. At this point in time, while we have this sort of an order book, we are already in discussions for order execution during -- starting calendar year 2024, so this is absolutely on our radar. And I think there are multiple opportunities which are being explored at this point in time. Real opportunities which are being explored at this point in time.

[Vikash Singh, analyst]

Understood, sir. And this also potential -- full position order would be mostly exports, right? It's not Indians?

[Vipul Mathur, executive]

Yes, there's all most -- it is their export.

[Vikash Singh, analyst]

In case you get it, then there would be a very good margin orders.

[Operator]

We have the next question from the line of [ Jayesh Gandhi ] from Harshad Gandhi Securities.

[Unknown Analyst]

Continuing from an earlier caller's question on inventory, are we carrying 2 quarters of inventory currently?

[Vipul Mathur, executive]

No. Currently, [ Jayesh ], we have completely trimmed down. We have moved on to JIT and -- but of course, there would be an inventory which will be close to 30 days.

[Unknown Analyst]

Okay.

And sir, for example, if there is no major price correction in steel, can we think of going back to our earlier margins of like maybe EBITDA 10%, 11%, 12%?

[Vipul Mathur, executive]

This is a fair assumption to make. And I mean, we are -- if there is no volatility attached with that, this is what is a reasonable level to expect.

[Operator]

We have the next question from the line of Pallav Agarwal from Antique Stockbroking Limited.

[Pallav Agarwal, analyst]

Sir, I wanted some more clarity on how we account for the Saudi Arabian operations? Because since it's a JV, I'm assuming in the consolidated statements, the revenue is not being captured. So for modeling purpose, when we use the consolidated revenues and the consolidated volumes, then is it the right way to -- the right way to blend the realization because the Saudi Arabian JV revenues are not being captured in the consol? Is that understanding correct?

[Percy Birdy, executive]

Yes. So, Pallav, this is Percy here.

Your understanding is correct that the Saudi entity EPIC, we do not consolidate. However, we take our share of profits as a single line item. At the bottom of the P&L, you will see that gets added. So we now own -- our Mauritius Holding Company owns 35% in the Saudi company.

[Pallav Agarwal, analyst]

Sure. Okay. And the related question was, I think on an annual basis, you do disclose the breakup of pipes volumes across geographies. But on a quarterly basis, I was not able to find that. So it would actually help if that also could be shared for probably tracking the company in a better manner?

[Vipul Mathur, executive]

You're talking about the quarterly sales for the future quarters? Is that what you're talking?

[Pallav Agarwal, analyst]

No, no. I'm talking about, let's say, actual sales volume. The breakup between geographies.

[Vipul Mathur, executive]

If you see my opening statement, I said in this particular quarter, we did 218,000 tonnes of pipe. Out of that, 140,000 tonnes was done in India. -- 9,000 tonnes done in U.S. and 70,000 tonnes was done in Saudi.

[Pallav Agarwal, analyst]

Sure, sir.

So I mean -- so just to compare historical quarters, if you have those numbers as well, that will really help.

[Vipul Mathur, executive]

Okay. So if you see that in the sequential quarter, the earlier quarter, we did 19,000 tonnes of -- from India, against which we have done 140,000 tonnes here in this quarter. 7,000 tonnes was done in U.S. as against that, 9,000 tonnes has been done in this quarter. And in Saudi, 58,000 tonnes was done in the last quarter, and in this quarter, it is 70,000 tonnes. So that is how between the 2 quarters, the sales have gone up.

[Operator]

We have the next question from the line of Viraj Mahadevia, an individual investor.

[Unknown Shareholder]

I have a question regarding your 5-year vision plan. The top line of INR 15,000 crores in the EBITDA indicated of INR 1,600 crores to INR 1,800 crores, does that include the Sintex business? Or is it just your existing pipes business plus the ABG Shipyard business?

[Vipul Mathur, executive]

When we are talking of Welspun Corp, every legal entity sitting under Welspun Corp is included in that.

[Unknown Shareholder]

Legal entity as of today because technically, Sintex is not sitting today, right?

[Vipul Mathur, executive]

So yes, that's why I'm saying it's a sort of a midterm vision and the Sintex will get integrated into this.

[Unknown Shareholder]

Okay. So this includes the assumption that Sintex is part of it?

[Vipul Mathur, executive]

Yes, please.

[Operator]

We have the next question from the line of Anurag Patil from Roha Asset Managers.

[Anurag Patil, analyst]

Sir, our other income has shot up significantly in the Q2. So can you just explain what are the components?

[Percy Birdy, executive]

Yes. One of the items in the other income, as we have disclosed, is the sale of the hedge, land and civil structures, which is about INR 104 crores. If you just want to exclude that, so total other income is INR 177 crores and you were to exclude INR 104 crores, you would be left with about INR 73 crores, which is almost identical with our Q1.

[Operator]

We have the next question from the line of Faizan [indiscernible] from [indiscernible] Company.

[Unknown Analyst]

Sir, can you shed some more light on the whole carbon capture opportunity? Because shifting to green energy will be a move forward....

[Operator]

Mr. [indiscernible], I would request you to increase your volume metric. We are not able to hear you.

[Unknown Analyst]

Yes. So can you just give to some more light on the whole carbon capture opportunity? Because reducing carbon dioxide from the atmosphere remains a very big imperative, and it's almost like a major thing for the next 3 to 4 decades. So is there any possibility that we could be having like a very large share of our revenues coming from this opportunity going forward?

[Vipul Mathur, executive]

Well, this is an emerging area, and we are so delighted and pleased to get ahead in this curve much early in the game. And having 1,200 kilometers of a carbon capture pipeline order almost close to 100,000 tonnes, it is by far the largest carbon capture order at this point in time.

So as you very rightly said, this is what is going -- this is what the future is going to be. This is where the -- post fossil, this is where the markets are going to move. And we are -- and we have made an early dent in this particular sector. Of course, the economy -- the mature economies like U.S. are taking a full position in respect of that, and that is why we are seeing much more accelerated projects coming up of carbon capture in the U.S. and then followed by Europe. But I'm sure this will be a trend which will be followed globally in times to come.

So it is going to be a big business in time to come, and getting into a full position early into the game and setting the right technical context will be extremely beneficial for the company over the next few years.

[Unknown Analyst]

So what could be the total addressable opportunity here?

[Vipul Mathur, executive]

So let's see. In terms of, let's say, metrics tonnes, if you talk at this point in time, it would be very difficult to say that how big this opportunity would be because what is happening is they are also finding the ways. Today, what all is -- what it is doing, it is capturing the carbon, which is emission across the states. And that carbon is now being captured then it has been pressurized, converted into liquid and then sequestered into a place where it can be put to the ground.

Now I think -- so there's a lot of work which is being done at this point in time in the United States with respect to that. And various economic zones across the state, across the U.S. will get eventually covered into that. So if you -- I mean, to give you that, do I have a definite number that is it going to be at 20,000 tonnes or 200,000 tonnes of -- or 2 million tons of opportunity? I don't know at this point in time. But for sure, I know that this is one of the most upcoming opportunities which is not capturing attention, and it was only growing from bounce to bound in times to come.

[Unknown Analyst]

So there will be some kind of a small change in our manufacturing shop floor that we'll need to do to really get into power manufacturing of this, or there are something much more complicated?

[Vipul Mathur, executive]

It's more than the changes at the shop load, I think so it's more on the steel side of it. And that is where you -- as you know, Welspun extensively runs an R&D center globally, and that is where our experience comes into play. So we are jointly working with the steel company in terms of developing some steel and which will be the main play for some sectors or sectors like this.

From the manufacturing side, nothing much has to be done, which would be a very, very minimal intervention in terms of building technologies and all that stuff. Very, very minimal. But mostly, it will be more in terms of developing the steel side of it.

[Unknown Analyst]

So if I could ask, sir, what is the involvement of Chairman, Mr. V.K. Goenka in this? Because he's such a well-respected entrepreneur, and he's done such a lot in one lifetime. What is this involvement? And what kind of handholding does it do for the company and on, say, even on a day-to-day or a month-to-month basis? And what is the kind of vision that he is envisaging for the steel?

[Vipul Mathur, executive]

Mr. Chair, Mr. Goenka is the Chairman of the Board, and Welspun Corp is a completely Board-driven company. Whatever wisdom, he has, he shares, he guides during the Board. But in respect of day-to-day operations, he is not involved, he is not luck.

[Operator]

We have a follow-up question from the line of [ Chintan Mehta ] from [indiscernible] Booking.

[Unknown Analyst]

My question is answered. It was on carbon.

[Operator]

The next question is from the line of [ Raja ] from B&K Securities.

[Unknown Analyst]

My question was on the capital side. So I think I believe INR 6 billion was the target CapEx for this year for FY '23, but we have crossed that. So can you give me a revised guidance for this year and the next 2 years?

[Vipul Mathur, executive]

So we are -- we are pretty much done with our CapEx cycle. All what we have on the -- let's say, on the pipe side of it, it is purely a maintenance CapEx, which we do on a year-on-year basis. So there's nothing which is moving to significantly change out there. It's the maintenance CapEx, which we do there.

On the Steel side of it, where we have set up our steel plant, the DI plant and all that stuff, majority of the CapEx is done. Only the residual part of the CapEx is now getting into the system. I think so we are at the tail end of that. But we would be very much within our CapEx proposals, what we have submitted. So it is now coming to a tail end, back end of it.

The third CapEx, what we have done is in the TMT mill, that is also done. That's also over. And so as I said, that it is now in the commissioning trials in the [indiscernible] state at this point in time.

Beyond that, we are not converting any CapEx at this point in time. Our focus is now completely shifted to incubate all these new start-ups, which is our steel plant, our DI plant, our TMT plant. Of course, WSSL, we have started investing time, you see that how is converted from red to black. So this is what our road map is now going to be. And then we -- so from a -- we are pretty much done answering your question. If I get you correctly, we are pretty much done with our CapEx cycle at this point in time.

[Unknown Analyst]

So the balance, whatever we have in the pipe, steel and TMT, and including the other positions, et cetera, so what could we expect for FY '23 CapEx numbers and for the next 2, 3 years?

[Vipul Mathur, executive]

Our maintenance CapEx, let's say, our maintenance CapEx could be anything around INR 40 crores to INR 50 crores piece. That would be our maintenance CapEx. And the balance CapEx, which would be left in our existing steel plant and the DI plant and the TMT plant will be less than say INR 100-odd crores. .

As I said, we are now coming to almost -- again, so I don't think that anything significant would have been less. It should be close to that. I can ask my team to come back and give you an exact number around that, but I would think that it will not be exceeding that.

[Unknown Analyst]

So assuming INR 150 crores to INR 200 crores CapEx in the next half of FY '23 as well as the next 2 years, are your giving no more acquisitions or -- currently in status quo as of now?

[Vipul Mathur, executive]

No, no. What I am saying is that the residual CapEx would all be done between now and, let's say, end of December. I think in this quarter, we would be pretty much done with our new CapEx part of it. All what we would left on year-on-year basis will be our maintenance CapEx. Our yearly maintenance CapEx is around INR 50-odd crores when we were doing the pipes, that might slightly incrementally go up to INR 60 crores or INR 70-odd crores when all these assets will be running.

So our year-on-year basis or next year onwards year-on-year basis, it will only be a maintenance CapEx which will be in place.

[Unknown Analyst]

Understood, sir.

So INR 150 crores to INR 200 crores for FY '23 and in second half of FY '23, and just [ INR 60 crores ] for the next 3 years?

[Vipul Mathur, executive]

Yes.

[Unknown Analyst]

So with respect to this, how will our debt look like? Total debt?

[Vipul Mathur, executive]

So we have moved from a net cash position to a net debt position. There's no doubt about it because of this CapEx cycle, which we have invested and we have invested for our growth. But when we look at our projections, when we do our sensitivity, I think so it's -- we would again be back to a net cash position. I think so within 3 to 4 years, because we are seeing a strong demand for all the products. What we have got into, there is a huge tailwind around that. It is all -- if we are able to manage it efficiently, which I believe that we should be able to do that, it will generate sufficient free cash flows over a period of time and we should be in a position to be a net cash company in between 3 to 4 years' time.

[Unknown Analyst]

And sir, just lastly on the working capital cycle. So that has also increased primarily because of inventory. So how could we expect that to be for the next 2, 2.5 years?

[Vipul Mathur, executive]

Working capital cycle got increased because of the steel vertical and where we have to -- when we were starting up our operations, the inventory has to be assimilated, accumulated. I think so once this process, now we are -- as we have already started, now it is coming to a regular flow. I think so this working capital cycle on the steel side also will come into a very regulated manner. If you see the pipe -- our working capital cycle on the pipe side of it is so very regulated. So is the case, so is the case which will happen on the steel side of it.

It's just a matter of a quarter or two because when you are doing any startup, when you start -- you have to -- you do all that adequate precautions and everything, which any sensible corporate will do that. We have also done that. I think so over a period of the next couple of quarters, it will absolutely in sync with the best industry standards.

[Operator]

Ladies and gentlemen, this would be the last question for today, which is from the line of Bala Subramanian from [ Arihant ] Capital.

[Unknown Analyst]

This is Abhishek Jain from [ Arihant ] Capital.

So I just want to understand like -- we acquired that...

[Operator]

Sorry to interrupt, Mr. [ Bala ], your voice is breaking. Can you please use your handset to ask a question?

[Unknown Analyst]

Okay. I want to understand like how much will we need to be acquired if we acquire Sintex [ BSL ] asset going forward? And what are the CapEx and how we are going to fund it? And next 2 years' CapEx for the company right now?

[Vipul Mathur, executive]

So answering your question on the second part of the CapEx, I just answered for -- rather, I was asking that question. So CapEx, we are not going to do any major CapEx. We are done with our CapEx sector. All what we would have is a sort of a maintenance CapEx across all the businesses what we have now in our food. That's the answer on the CapEx side of it.

As regards Sintex, I think so that Sintex is now a work in progress. If you see that we have taken a position. We have NCDs around INR 480-odd crores, that all is there. Now there is a clear time line where we would have to submit our bids and all that, so it is now going to be a little competitive bidding, which is going to happen. But we are fairly confident that we bring intrinsic value up on the table, and we should be able to close this acquisition. We are very hopeful to close this acquisition within the budget, what we have kept in our mind.

[Operator]

As this was the last question for today, I would now like to hand the conference over to Mr. Vipul Mathur, Managing Director and Chief Executive Officer, for closing comments.

[Vipul Mathur, executive]

So I want to once again thank all of you for joining our call for the earnings call for Q2 FY '23.

I only want to reiterate that our -- we have to start seeing this business in a couple of quarters. Number one, the pipe vertical. I'm assuring as you see, that the pipe, the business -- there is absolutely robust growth in the pipe business. It is going to be our main state, it's going to be a key focus, continue to be our key focus area. And we have absolutely clear earning predictability for the next 5 to 6 quarters in that particular vertical.

On the Steel vertical, which is a new vertical which we have created, I think so it is a temporary setback what we have with respect to the inventory and because of the commodity pricing going haywire. But fundamentally, if you look at it, and the future, if you look at it, I think it looks very bright. Nobody has any doubts whatsoever that the infrastructure -- water infrastructure sector under the Jal Jeevan Mission is going to get created. There is no doubt whatever in terms of allocation of funds for that particular project. And we are seeing, as I said earlier, out of only -- out of INR 360 lakh crores, only INR 300 crores have been -- is not yet used yet. So that sense, that gives you a feeling that there is a sufficient resource and funding allocation which is available, and that will see us -- so these projects will go through. I think so all what we have to do from our side, we will have to -- we will work on our efficiencies. And I think so with such a great scenario of what we are in, we should be able to capitalize and the company will be able to create value for all of our stakeholders.

And with that, I want to, once again, thank you for joining me this call. And if you guys have any questions whatsoever, you can reach out to Abhinandan Singh or Gaurav, and they will be more than happy to answer that question. Thank you very much.

[Operator]

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