Welspun Corp Ltd

NSE:WELCORP

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, welcome to the Q3 FY '23 Earnings 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. Thank you, and over to you, sir. .

[Abhineet Anand, analyst]

Thanks, Jorgen, and a very warm welcome to everybody. Today, we have the post results conference call for Welspun Corp. I will hand over the call to Mr. Salil [indiscernible], Head of Group Investor Relations. Over to you, sir.

[Unknown Executive]

Thank you, Abhineet. Good morning to all of you. I welcome all of you to the Q3 FY '23 earnings call of Welspun Corp. Present along with me today on this quorum are Mr. Vipul Mathur, Managing Director and CEO; Mr. Percy Birdy, Chief Financial Officer of Welspun Corp. I also have with me my colleague, Gaurav Ajjan, who leads Investor Relations for Welspun Corp. You must have received the results and investor presentation of the company. which are also available on the BSE and NSE as well as on the company's website, which is www.welspuncorp.com.

As usual, we will start the forum with some opening remarks by our leadership team. We'll then open the floor for your questions. During the discussion, we may be making references to the presentation, which has been uploaded. Please do take a moment to review the safe harbor statement in our presentation.

Should you have any queries that remain unanswered after this earnings call, you can reach out to us any time. With that, let me hand over the floor over to Mr. Vipul Mathur, MD and CEO for Welspun Corp. Over to you, sir.

[Vipul Mathur, executive]

Thank you, Salil. Thank you very much, and good morning, everyone. Welcome to our Q3 FY '23 conference call. I sincerely appreciate for taking time to attend this call, and I hope all of you are doing well. Let me run you through the key highlights of our performance during this quarter ended 31st December 2022.

We commenced operations in our U.S. facility and have also started dispatches. As you know, we have a strong outlook and order book in the U.S. market. We are also ramping up sales for our state of our [indiscernible] plant and TMP plant, which got commissioned in this quarter. We have also received position of the specified assets of ABG shipyard. We are -- as we are committed to ESG, we have published our and sustainability report and tax transparency report in this quarter.

As regards to order book, we still have -- we have a very healthy order book of almost 928,000 tonnes and an active bid book of 1.7 million tonnes. For the quarter, the production and sales volume in line pipes for our total operations, including Saudi, was at 330,000 tonnes and 281,000 tons, respectively. For our India operations, the sales volume was at 126,000 tonnes. For U.S. operations, the sales volume was around 38,000 tonnes. And for our Saudi operations, the sales volume was around 118,000 tonnes.

Let me give you some views on the outlook and a brief update as to where do we see the 3 geographies in which we are present for the next quarters to come. Let me first talk about the pipe vertical. In the pipe verticals where we predominantly produced line pipes. The line pipe business has seen a robust performance with a global sales volume of 281,000 tonnes and an EBITDA of INR 202 crores for the quarter. The production in the U.S. has significantly ramped up and the dispatches again the projects have started in Q3. The full impact of this will be seen in Q4 FY '23 onwards.

It is expected that 2023 will be another strong year for the oil and gas industry as consumption is expected to increase. According to IEA, global oil demand is set to rise by 1.9 million barrels per day in 2023 to a record high of 101.7 million barrels with nearly half the gain from China following the lifted of COVID restrictions. In addition, the EU will need to buy a lot more gas to refill its storage and will continue using oil products that is no longer available from Russia.

Global oil prices are forecasted to average around $80 per barrel, which is a fairly healthy level and should spur further investments in pipeline. For India, the Ukraine crisis has reaffirmed the importance of energy security as governments around the world are trying to secure gas pipelines at affordable prices. The EU is pivoting away from Russia to other regions to secure the gas it needs. The current environment, along with a reasonably high energy prices will lead to a robust CapEx cycle in the oil and gas infrastructure globally. We are seeing a strong revival in various pipeline projects and are in active discussion for several export orders across the world with a focus on Europe, Australia, South America, Southeast Asia and Middle East.

The Government of India has also set a target to raise the share of natural gas in the energy mix to 15% by 2030 from currently 6.2%. Various steps have been taken by the government in this direction, including expansion of national gas grid, expansion of city gas distribution network and setting up LNG terminals. PNGRB has authorized approximately 33,000 kilometers length of natural gas pipeline network across the country. Out of this 21,000 kilometers length of natural gas pipelines and operational, including 6,600 square meters of partly commissioned pipelines. In addition, there are 12,000 kilometers of metric gas pipelines which are under construction. We have seen a healthy demand from pre-ASU oil and gas companies. The overall CapEx target for FY '22, '23 is INR 11,350 crores, for which INR 77,000 crores has been spent in April to December 2022. We expect a steady demand from these companies to continue for several years.

There has been a revival in the water sector with a cooling off in the steel prices in the quarter compared to the previous year. We have seen increased demand across the state of Gujarat, Maharashtra, Tamil Nadu, Karnataka, Madhya Pradesh, Punjab and Rajasthan There are several schemes planned by both the central and the state government to ensure optimal sustainable development, maintenance of quality and efficient use of water resources to match the continuously growing demand across the country.

As regards U.S., Europe energy crisis is expected to keep the LNG market tight for the next few years, supporting cash flow donation for the U.S. LNG players. Rising global demand for natural gas is a growth opportunity for U.S. LNG producers. But delivering on opportunity will depend on timely construction of natural gas pipeline infrastructure to support new U.S. energy supply.

In 2022, the EU imports of LNG hit 101 million tonnes, which was a 58% surge compared to 2021 as Russian gas exposed to EU got shut down. Meanwhile, China reduced their domestic demand in 2022 allowed Chinese importers to redirect their contracted LNG volumes to the higher-priced European spot market and help Europe to avoid major shortages. A potential recovery in the Chinese market in 2023 will bring back the risk of natural gas supply in Europe.

European demand may accelerate LNG capacity expansion in the U.S. This, in turn, would spur further capital allocation for constructing new pipeline capacity to connect the largest U.S. gas producing regions like the Permian basin to the new export infrastructure. Our SO plant in the U.S. is fully booked until December 2023. The current business environment is extremely conducive, and we are in active discussion to book new orders beyond 2023 for our spiral plant.

Saudi Arabia. We have seen a very strong performance in our associate company, East pipe Epic with a 266% Y-o-Y jump in revenue and operational profit of INR 61 million during the quarter. The outlook for the oil and gas sector in Saudi Arabia is encouraging. The Master Gas System Phase 3 is being planned by Saudi Aramco for transfer of gas from East to West in Saudi Arabia. Saudi Arabia is also trying to speed up conversion of a number of power plants from oil to natural gas. In that perspective, Saudi Aramco is extending the existing Master Gap system to Western province in order to supply the power plants located there.

The planned new pipelines and distribution network to be operated by Saudi Aramco will add to the existing Southeast pipeline capacity. Apart from above, Saudi Aramco is also keenly focused on developing their offshore infrastructure and are rolling out a plan, a 10-year plan in terms of development of their offshore infrastructure. This will also mean a substantial increase in the pipeline capacity tends to come -- the demand for the pipes to come.

SWCC is also investing in increasing its capacity to desalinate, transmit and store water to meet the increasing demand and further enhanced water supply security. Today, Saudi Arabia can store 21 million cubic liters, which is equivalent to 2.2 days of current minimal water demand. Projects are ongoing to expand storage capacity by 14% and the expansion of -- to a further 225% is planned to reach 7 days of strategic storage by 2030.

On desalination, around 9 million cubic meters per day can be produced today. The market share of SWCC is around 66% of the total current production capacity and projects to increase degeneration capacity by 60% are under construction. Moreover, Saudi Arabia plans to increase decent capacity by 17.4% back to 2030.

Given the vast geography of Saudi Arabia, transmission of desalinated water to its demand center is of key importance. Today, around 13.9 million cubic meters per day can be transferred across the country. The capacity is currently being increased by additional 56% and a further expansion of 44% is planned by 2030. That's both Saudi Aramco and SWCC put together are showing a very robust sustainable demand for the next few years. Our associated company, Epic recently announced signing contracts for the supply of steel pipe for water transmission with a total order value of around SR 570 million with Neo and PetroJet company. The huge trust on oil and gas and water infrastructure will result in a strong demand for pipeline as we expect to win more orders in due time to come.

Let me now shift to our other verticals, which is our steel vertical. The big item and the DI pipes During the end of the quarter, we announced the commissioning of our [indiscernible] through Weltman Metalic Limited, a wholly owned subsidiary of the company. The [indiscernible] has a production capacity of approximately 210,000 tonnes per annum, which will primarily be used in the blast furnace for manufacturing of hot metal. This will help with continuous supply of high-quality [indiscernible] at a very competitive cost, we would run the plant efficiently. This is a significant milestone in our quest to manufacture high-quality DI pipes. The [indiscernible] is built with the latest technology and adherence with the highest safety and environmental standards.

The EBITDA -- in this quarter for the steel vertical showed a loss of INR 34 crore as compared to the previous quarter, which was a staggering INR 293 crores. We are ramping up production in a calibrated manner to ensure that we deliver pipes of the highest quality to our customer. In the month of January 2023, our production has already touched close to 10,000 tonnes of DI pipes. The removal of 15% export duty on iron has also given a boost to selling -- the selling of DI pipes iron in the market in both domestic and the export market. We expect the financial performance of the business to significantly improve in the subsequent quarters.

As a big iron, sales will also get ramped up as the prices for the pear iron are also firming up and so as our capacity on the DI pipe has also significantly ramped up and we produce in January 10,000 tonnes of pipe, which is sort of a milestone in a start-up DI company if we see any historical data.

To make provisions of portability water supply to every rural household of the country by 2024, Government of India in partnership with State is implementing the [indiscernible] mission [Foreign Language]. With an estimated outlay of INR 3.6 lakh crores. As on 20 January 2023, out of 19.36 crore household in the country, 10.96 crores households are reported to have tap water supply in their home.

Overall, the demand environment is extremely robust. And as on date, we are already having a backlog of close to 88,000 tonnes of order valued at INR 665 crores. Now shift my focus to the billet and the TMT. Our newly commissioned state-of-the-art plant has started dispatches of TMT bus. The initial response has been extremely encouraging with a healthy traction both in the B2B and the B2C sector. We are creating a unique and industry-first digital platform for distributors, dealers, retailers and influences. This will have a social economic impact and will also help to analyze an early trend buying patterns of the consumer in every region. This can help our production and make supply chain operations more effective while staying customer-centric.

Our key target for the TMT bar will be the state of Gujrat, where we estimate an annual demand of 3 million metric tons per annum, driven by the spending on housing and construction. Of this, approximately 2 million tonne is manufactured within the state and while 1 million tonne is procured from outside states. Thus, it opens up a huge opportunity for us to capture this market from our production facility.

I also draw your attention to our subsidiary Welspun Speciality Solutions Limited. WSSL recorded a turnaround in performance with a cash positive and return cash positive in this quarter. Going forward, the company expects its improved performance to sustain on the back of several new customer approvals, attritions, development of new products and penetrating new markets. Pipe volumes were higher by 45% for Q3 FY '23 and 70% for 9 months FY '23, both compared to the corresponding period in the previous year.

The total income was 175% higher for Q3 '23 compared to the previous year. EBITDA for quarter 3 stand at INR 9.4 crore versus a loss of INR 1.6 crores in Q3 of FY 2022. The total order book of WSSL for stainless steel bar stands at 2,134 tonnes, amounting to INR 60 crores and for the tube and the pipe stand at the order book stands at 1,426 metric tons amounting to approximately INR 100-odd crores. The finance ministry has approved a direct notification for antidumping duty on stainless steel pipe and tube, Chapter-7304 imported from China. This is expected to significantly improve business prospects for our plants and for the -- all the mills in India.

The BI standard for seamless pipes and fuels, which is BIS17875 has also been introduced, which is favorable for integrated player Lake. The company has received acquisitions certificate by BIS for a wider range of product date and sizes. Let me onto some other updates with respect to our acquisitions on ABG and fintechs First, about ABG. The company has received the position of the mobile asset properties from the liquidator of ABG. Further, the company's wholly owned subsidiary, Navin Chipa Private Limited has received the position -- the partially built ship equipment and metal scrap acquired under Navian is estimated -- under WCL is estimated to be over 150,000 tonnes.

It is estimated that the metal and metal scrap not required for the business purpose will be disposed over the next 12 to 15 months. We have already initiated the proceedings with respect to that and expect to see significant cash flow coming in from this state on a quarter-on-quarter -- for the next couple of quarters. During this period, we will also evaluate new business areas like defense, greenfield, offshore wind, oil and gas structures to ensure optimal utilization of the asset. As regards fintech Welspun growth strategy entails creating a diversified product portfolio repurposing its business to add new target segments, expanding its offerings to add both B2B and B2C markets and making well-considered strategic acquisition.

In this regard, as you know, we have acquired fintechs. We are in the process of acquiring fintech DAPL, nonconvertible debenture with an outstanding value of [ INR 1,231 ] for the purchase consideration of over 451. This is only accomplished. The process of -- the whole process, as you know, it was under IBC is nearing completion, and we are hopeful that it will be over in the next couple of months, but on quarter 1 of FY 2024.

ESG, Welspun published its made and sustainability report for FY '21, 2022. The report is significant in helping WCL comprehensively reporting its sustainability performance across the environmental, social and governance domain. The report also highlights the progress made by WCL over its sustainability goals and in alignment with the global friar like the GRI, US SDGs and SASB standards.

In addition, we published our first-ever tech transparency. It is essential that we explained not only our compliance with tax laws and disclosure requirements and guidelines, but also our overall approach that sets the context for tax liability. The voluntary disclosures through the report rate that we strive to afford the highest standard of transparency and governance. With this, I would like to conclude my opening remarks.

I will be happy to take any questions. Now the floor is open for you guys. Thank you.

[Operator]

[Operator Instructions]

The first question is from the line of Niraj from Arihant Capital.

[Abhishek Ghosh, analyst]

This is Abhishek. Congratulation on a good set of numbers. Sir, just a question on -- 2 questions. One is, why is the debt increase and it is because of the CapEx, which we are ongoing through? And how much -- when we are going to see the debt peaking out? Second question, on the Fintech BPL side, are you seeing any challenges because as per our initial country was supposed to be completed maybe sometime in January, and now we are talking about Q1. So what is the reason for the delay? And what is the current state of total debt?

[Vipul Mathur, executive]

As regards to your first question, you're absolutely right. The debt has increased from -- because of the CapEx cycle we have gone into. We have invested into our steelmaking day, our DI making facility acquisition of ABG and acquisition of NCDs for the [indiscernible]. So these were -- so these are the key factors for our debt increase at this point in time. And as this company will start operating and as they are ramping up their production, as you see, the DI pipe companies ramping up significantly.

The steel plant is doing extremely good job at the -- the TMT business is also in the process of stabilizing. ABG acquisition has also taken place and the scrap sales has started in the next couple of days. And once fintech also comes on board, I think so the debt will be -- you will see the gradual reduction in the debt which will start happening. And as we have already said that it is our endeavor that we would like to again come back to debt-free level in the next 3 financial years.

So we are absolutely focused on that. We have committed -- we have devised a clear road map for that, and we will be continuously monitoring and looking towards that. As regards to your second question with respect to [indiscernible], it is a process. It's a regulatory process. We are expecting that it can get over even before 31st of March. But just to be a little bit of a caution side, I'm saying that if it might slip by a few weeks here and there, it is quite possible because there are -- we have no control on the regulatory process. But as regard to process, I think it is moving absolutely in the right direction. And we are very, very hopeful and we feel convinced that this transaction will get close ASAP.

[Abhishek Ghosh, analyst]

And can you throw some light on the ABG? What was our thought process now once we acquire like the ABG? And what growth we are doing, what is our plan of action going forward? And at any point of time, do you see any kind of opportunity like maybe a technical tie because any global player at any point of time? Do you see this kind of opportunity for ABG also?

[Vipul Mathur, executive]

See, ABG, as you know, is a wonderful asset, right? Our first priority was to take the asset under control. That mission has been accomplished, number one. Number two, we are -- then we have embarked on the journey of seeing what is lying there, what is our views to us and what is not used to us. So we have also completed that exercise. Now what is not used to us, we are -- we have created a separate team which is completely focused on disposing of those things. So we would like to bring in that cash flow into our plan.

On the business side of it, we are already -- we have already discussing with few reputed companies and concerts at what should be the best way ahead of the road map product, which is value-accretive we are exploring quite a few options. Option number 1 happens to be shipbuilding, ship repair. We are also looking at offshore marine substructure. We're also looking at it in terms of can this facility be converted into where we can have some green steel making facilities all these options are up on the table.

And at this point in time, we are exploring each and every option absolutely in detail, so as to come out with a very clear cut road map for the next 3 to 5 years' time. that what will be the best sustainable offering and which will be value accretive. So this is a work in progress. And as we will move forward, we'll keep you appraised about the same.

[Operator]

The next question is from the line of Vikash Singh from PhillipCapital.

[Vikash Singh, analyst]

First of all, congratulations on some of the smaller business unit turnaround. We were waiting for this for a long time. Sir, I want to understand 1 thing. What we have seen in the last couple of quarters or prior to that, our India order book has not been growing in a significant way. While if I look at some of your competitors, they have the orders at a much faster rate than you just wanted to understand our strategy with respect to Indian list. Are we purposely keeping these mills free or we are just looking for a higher margin order? So what is our strategy here?

[Vipul Mathur, executive]

Okay. Vikash, I think so, thanks for the compliments on this turnaround and will the turnaround is both in the smaller and the larger companies, both. The steel setup is a large setup and it is a great turnaround there as well. So I take that complement. As regards to Indian pipe business, we have -- as you know, we have assets in Anjar. We have asset in Bhopal and Mandya. These are the 3 operating assets that we have in India. Primarily, our strategy is that from our Indian assets, we will -- we are trying to do a majority of the water business and a significant portion of the oil and gas business and CGD business. .

I think so from a volume perspective, we are seeing a consistent volume across all the oil and gas business, we are -- if you see we have a consistent order book from the CGD business also, we have a consistent order book. And even from the water business, we have a consistent order book. So in our Indian assets, which are servicing the Indian market, or there is a very consistent approach we have been following, number one. All what we have been holding back is our longitudinal pipe business, which is predominantly our export business. and that business is a high-margin business. So what we are always trying to blend the Indian business and the export business together so that we are able to make a higher EBITDA margins. This is what our strategy has been. This is what our strategy is.

And likewise, this is whatever strategy is going forward. So at this point in time, I think so all the mills, which we have in our India are operating, none of them is idle. And I think so looking at the business prospects and the volume, I think they will continue to work on a quarter-on-quarter basis.

[Vikash Singh, analyst]

Understood, sir. Sir, in terms of our bid book, basically, which is geography has a higher percentage in the bid book, if you could just give us some insight into it?

[Vipul Mathur, executive]

Right now, if you see from a bid book, we have a sort of an active bid book of almost close to 1.7 million. And today, of course, Middle East seems to be leading the pack. I think so we are seeing a significant business potential which might be emerging from Middle East. We are also seeing the business -- a significant business coming up from Europe, and we are also seeing a substantial business coming from Southeast Asia and Australasia. So these are the 3 areas which we are completely focused on.

And if you see our track record we have been extremely -- an extremely successful in these 3 areas. And fortunately, these 3 regions are showing a very, very strong demand over the next couple of years coming through, and that is getting reflected in this bid book.

[Vikash Singh, analyst]

Sir, just a small further clarification here. Even we have mill in Saudi also where we just -- Indian shareholder would have only 35% of the weighted. So this bid book, are these larger part is booked from a bit from the Indian mills or a larger portion would still go to Saudi and Indian mills would have to wait? So just wanted to understand because I believe this 1.7 million tonne bid book is for the entire group and not including Saudi?

[Vipul Mathur, executive]

So this what -- we are not talking Saudi here. We are not talking Saudi here. This is purely what we are talking, 1.7 million tonnes, we are purely talking which could be a potential bid book addressable out of our Indian asset Saudi is over and above this. Saudi is a very localized domestic market. And with our presence out there, you know that we are doing extremely well out there and the prospect looks even better in the years to come. But this 1.7 million book refers to the addressable market which we are looking to service out of India and of course, U.S.

[Vikash Singh, analyst]

Understood, sir. Sir, my third question with respect to your capital allocation policy. So since we have already now got the debt of roughly about INR 1,800 crores. Are we just looking to stop price here or there are further plans which are on the pipeline? And what kind of the debt peak-out we would witness as per your internal assumption by when?

[Vipul Mathur, executive]

This INR 1,800 crore of net debt, what you are looking at this point in time is because of all the greenfield projects, what we are the acquisitions, what we have done. And this was -- and all these acquisitions we have discussed and deliberated in details in our past meetings that they were all thought through acquisitions. And we will -- once we have made these acquisitions over a period of time, this will start yielding benefits and it will lead to an incremental growth into the earnings of vestment comp. So that was the whole genesis behind it.

Answering your question that are we -- at this point in time, we are pretty much done with our CapEx cycle. This is all what we would -- we have clearly set our platform together. We now have a fully operational pipe vertical. We now have a fully operational steel vertical. We will have acquired ABG, and we have Cyntec. So these are the 4 verticals in which we which we were determined to get into. We have bought into that. We have put our skin in the game. And beyond that, at this point in time, we are not thinking anything more other than that. Only operationalizing them and ramping up their operations and making money or to talk to that.

[Vikash Singh, analyst]

Understood, sir. Sir, just one last question, if I may. Sir, could you just give us U.S.-specific performance details, what kind of EBITDA or EBITDA per tonne they have done this quarter?

[Vipul Mathur, executive]

So in this quarter, U.S. produced close to they produce and rather dispatched close to 38,000 tonnes, if I'm not -- 38,000 tonnes of sales because they only started production sometime in September. So while the production started, the production ramp-up happened and then we have made a dispatches of almost 38,000 tonnes. And the bulk of the order, we will start now seeing the dispatches happening from Q4 onwards, going up to the Q3 of the next financial year.

So the next 4 quarters, you will see the order book getting completely executed. In terms of earnings, I think so they made a modest EBITDA turnover of almost close to $7 million. around INR 55-odd crores in this particular quarter by the sale of almost close to 38,000 tonnes.

[Operator]

The next question is from the line of Yash from Sushil Finance.

[Unknown Analyst]

A couple of questions. Firstly, congratulations on gross margins, which have improved significantly since the previous quarter and the previous years?

[Pratiksha Daftari, analyst]

My first question is, could you throw some light on other income, there has been a substantial fluctuation happening quarter-on-quarter? And secondly, there's a line item, other expenses, which have increased from approximately INR 140-odd crores to INR 358 crores year-on-year. So if you could throw some light on the bifurcation of the other expense, which is a major 2 components or measure 2 heads, which are we are having those expenses? That would be great.

[Vipul Mathur, executive]

So if you see our other income in the 2 sequential quarters, I think in the quarter before that, in the quarter 2. We had other income -- we did -- we had the sale of asset at the edge. And it was -- and it was close to INR 104-odd crores, which came from the sale of the headline. Also, there was a mark-to-market earning in the other income, which was close to INR 43-odd crores. So all put together, this was like close to INR 160 crores, INR 170 odd crores of other income that is why you saw that other income higher in the second quarter in comparison to the quarter 3. As regard other expenses, Percy will you take answer .

[Percy Birdy, executive]

Other expected is, of course, a lot of expenses, which are apart from the materials and the manpower cost. And as you know, we have a lot of businesses which are ramping up. so WML, WDI, AT&T, all these are new businesses and all the production expenses, everything is ramping up. So going forward, quarter-on-quarter numbers will be very difficult to compare for all of you because of the newer businesses, which will be ramping up. But on the whole, I think these are all the numbers which are on the predictable line and we add this new business -- we expect these new businesses to start contributing to the bottom line in the next few quarters.

[Unknown Analyst]

Okay. And a follow-up question on the gross margin side, not the EBITDA level, gross margins. Do we see the same level maintaining going forward? And have you absorbed the increase in raw material prices completely? Or do we see something happening in this quarter, coming quarter as well some effects?

[Vipul Mathur, executive]

I think the -- whatever hit we had on the raw material side, which was predominantly on the coal and which everyone knows across the industry that it came. So we also had that hit in the quarter 2. I think so that was almost fully absorbed in quarter 2. A residual impact of that was -- is seen in quarter 3. And -- but with that, I think so this history of any raw material impact coming into play, I think, so it's called completely addressed. So moving forward, the gross margin across the businesses are likely to go up only. And as the businesses are ramping up as their performance is happening as the dispatches, sales is happening and the market looks very promising. I am very confident that the gross margins over the next subsequent quarter is going to be better than what we have seen this quarter.

[Unknown Analyst]

Just last 1 question, sorry. The government contracts and subcontracts, which we have. So do we have a price escalation clause in those contracts going forward? Or like the -- some of your competitors are under quest government for price escalation cost. So are you also opt for the same or how is it? Or was it already in place?

[Vipul Mathur, executive]

See, we -- the kind of government contracts in our Indian business is only restricted to the business, what we do with the PSU, in the oil and gas sector, right? And that business is a fixed price contract. And where we always do a sort of a bidding on a back-to-back basis. So I think so we -- they are fully secured contracts or even the raw material is completely taken care of. So I don't think so that there is any impact there is any impact on that, number one.

Number two, when it is -- for the DI pipes, the DI pipes also has some component of direct contracts with the government. And most of the contracts now have been modified on a price escalation basis. So they are index-based pricing now, which is available. And so to that extent, completely insulated on the DI side of it. Earlier, it was because only on the pipe side of it. Now on the DI side of it, whatever is the government contract, the index base. So from a raw material perspective, I think so on both the steel front and the vertical and the vertical front, we are completely insulated.

[Operator]

The next question is from [indiscernible] Kapur from Kapoor Company.

[Unknown Analyst]

I joined a bit late so sorry for any repetitive question, but partial, if you could give me the debt number as on December on a constant basis?

[Percy Birdy, executive]

So our debt number at the end of December on a consolidated basis, net debt stood at around INR 1,800 crores. So this is up from September quarter, which is about INR 1,600. So we are up by about INR 200 crores, largely driven by the project CapEx. And we are approaching now the age completing all the project CapEx. So by this March, we will be completing most of the capitalization as well. So you may virtually say that this is the peak level that we are witnessing right now. And going forward, we will see improvements as our working capital will also get released more and more. And the project CapEx are also coming to an end.

[Operator]

Sir, and what is our capital working progress as on was December? And what is going to be likely for 31st March?

[Percy Birdy, executive]

The capital work in progress is basically an entry, which will get capitalized and go to fixed asset. But I think your question may be more towards the CapEx cash flow. So I think as we stand today, maybe another INR 100 crores odd figure could be there pending for payouts towards the projected CapEx .

[Unknown Analyst]

So how much we are going to capitalize as on 31st Markman what is the working CWIP as on December, 31st December?

[Percy Birdy, executive]

So by December, see, we have capitalized things like the co-cover was capitalized, the filter is capitalized. So the bulk capitalizations are done. On the side, also some of the midst already been capitalized. Some capitalization will happen in Q4 as well. But this is, by and large, just the balance sheet entry between CWIP to fixed assets. And by 31st March, we'll complete all the capitalizations, majority of it.

[Unknown Analyst]

Sir, when we look at now the new businesses and the profile of the company is totally different than what we were only subjected to a line pipe company. So sir, going ahead, as things get aligned, how will mine profile look like? If you could give us a ballpark percentage limits, how what would be the contribution from the various segments going ahead?

[Vipul Mathur, executive]

See, for -- as we say that we have -- now we have 2 verticals, the steel vertical and the pipe vertical. Pipe vertical will continue to be our main stay, number one. And as you know, that it is showing a we are seeing a super a tailwind on the businesses, both in the domestic and the global markets. So pipe business will continue to be our main say. And our new businesses, which are embedded into the steel vertical, I think as they are ramping up, they will also start contributing to that. If I have to say, I think the rate. In terms of back of the palm number if I had to throw. I think so that the ratios will still be close to 60% of our earnings and revenues would still be coming and our margins will still be coming from the pipe business. and the balance would be coming from the -- for the next 2 years will be coming from the steel businesses and other businesses.

I am not -- I am currently discounting in this. The the Syntec part of it because it will be improper to comment on that at this point in time because we will like to make a very judicious call and detriment and gave a clear guidance when we are in absolute control of things. So all what I'm saying about the 60-40 ratio is more on the current businesses on which we have full control.

[Unknown Analyst]

And sir, what has been our investment to the fintech part and the other vertical, how much have we invested? And what's the outlook going ahead? How will these investments will start curing to the P&L going ahead? What's the time line for it?

[Vipul Mathur, executive]

Fintech is close to INR 420-odd crores. So that's the amount we have currently invested into that at this point in time. And as Mr. Percy said, that now we are done with -- and as I also said that we are not done with our CapEx cycle. So all the CapEx which was supposed to happen has now happened both in the steel vertical, the DI pipe, the TMT mill, the ABG shipyard, I think. So we are pretty meant the CapEx cycle. And this is what -- the numbers what we have disposed broadly will remain the same now.

[Unknown Analyst]

Sir, in particular to the investment in fintech and ABG shipyard, how are these 2 assets align to our business model? And the total investment, INR 429 you mentioned for fintechnology, for ABG, how much investment has gone through and what is lined up? And how are these 2 assets going to jump with our total business profile?

[Vipul Mathur, executive]

See, as Welspun Corp aims to diversified portfolio. So we have been a large B2B player, and we wanted to have -- we wanted to create a platform and wanted to have large B2C presence. And that was -- that is the rationale of bringing fintech into play. And and we don't have to talk about the particular brand. I think so there is nothing anyone would like -- everyone knows about what sort of a brand pull it currently enjoys. So Syntex continues to be -- will be leading our B2C play. So synergetically from a pipe company, no synergy. But as Welspun Corp becomes -- is trying to become a conglomerate. So on 1 side, they will manage the pipe business. On the other side, we will try and -- we will manage the steel business. On the third side, there will be a shipyard, and the fourth side, we will have this fintech. .

Coming back to the shipyard business, we see a huge synergy into that business because that's also a sort of a fabrication job ship building or ship repair and anything that you do on the offshore asset an offshore platform is more than -- is more or less like a fabrication business. And it is very phenomenous and very close to the business what we do on our pipe side of it, in our 5 verticals. And it seems to be a very high growth area at this point in time.

And on top of it, the acquisition was fairly reasonable. So all put together, that made a very interesting proposition for the ABD shipyard. And we are very hopeful that over 3 to 5 years' time, we will make a complete turnaround of that -- and in between that, whatever is our acquisition cost, we will like to mitigate it to the non-surplus items which are there and by virtue of liquidating that. So it makes a great synergy for our business.

[Unknown Analyst]

Sir, our 2 small points. Our investment in ABG is total. What amount have we spent as of now?

[Percy Birdy, executive]

So we have put in about INR 700 crores plus GST so far. And majority of it is, of course, for the scrap that we have gone more than 150,000 tonnes, including the partially completed ships. And we will try and monetize these assets as quickly as possible. So that will, of course, limit our investment exposure. And as far as the business plan is concerned, we will take our time. We will do our due diligence, and then we will come up with a complete proposal as to what do we do with these assets and how do we use them for our business growth.

[Unknown Analyst]

One more question, then one for pipe. For intake in ABG, these 2 stories has been the leverage stories of the 2 promoters, wherein they could not manage the business for one or other reason, and both whether -- for ABG, it was a capital-intensive part and not to quote what was doing done by the total weather or not? And for Syntec also, it was exposure towards the government projects and recable issues. So what are the 2 lending stories and compelling reasons for which other than getting things at a discount what would have made you people believe that these 2 are potential to put together management bandwidth in that? We have a large -- in the pipe segment, and we are also expanding -- we have already expanded in the DIP, which is still offering a lot of business opportunity. So trending towards these 2 unrelated segment, how -- what confidence and how is the management bandwidth in these 2 verticals at the time and energy that we spent would generate the same ROE as the pipe segment in totality is what govern to?

[Vipul Mathur, executive]

I think, so you're asking a couple of questions here, Mr. Kapur. Number one, why were they not managed nicely by the [indiscernible] promoter, I don't think I intend to comment on that. There would have been various factors and so be. As regards Welspun, number one, it is not that they were available to us at an attractive -- they were an attractive proposition. They were completely thought through stories thought to acquisitions and which clearly will be the next engine for fuel for our growth. We have -- Fintech is our play coming to the B2C is our play for the B2C segment.

And we are completely focused to turn it around. We have a clear strategy around that. And we know that what type of brand it is, what can be leveraged from this particular brand? What is the penetration it has. It has more than 800 distributors, 13,000 retailers to create a platform and to have a platform like that into a B2C place is commendable. And I think so this is -- the 1 is the brand, other is the network. And then it could be leveraged into so many other things. So that was our whole contention of getting into fintech, and we are very confident that it will be a clear turnaround story. ABG is -- ABG, why did it not operated well?

I think it has -- also it has to do with the timing part of it. probably that point in time, the government businesses, what was happening was the government or the PSU business was not very encouraging. Today, if you see the over-the government's focus on Made in India, [Foreign Language] India and all that shipping all defense shipbuilding has to happen in India. I think that there is a huge potential of shipbuilding, which is going to be there in the defense sector itself. If you see that all the government shipyards have an order book of more than 7 to 8 years, now if they -- but their demand and the appetite of the government in terms of putting more ships into the water from a defense perspective is so high that there is a lot of business which is expected to come back to the private sector.

And this is 1 of the genesis of which for us to look for the shipyard. Not only this is genesis. But if you see the freight corridor across India, the water transportation in India and the corridor, the economic corridor for the freight, for the shipping lines across India has significantly gone up. It has almost tripled over a period of time.

So that necessiates a huge need for a time ship repair this asset has -- this asset could be a potential -- a global effect in terms of ship repairs as well. Thirdly, we are also -- this asset is the only asset where offshore structures and offshore drilling rigs were -- it was compatible to make. The way things are panning out at this point in time, the way the offshore story the oil and gas story in offshore, the offshore structure story in offshore, the drilling rig business in -- globally, I think so this is 1 particular asset, which has the competency and the capability to do that.

So all put together, when we are seeing -- we are seeing a great potential into that, and that is the reason we ventured into that. withstanding that the acquisition cost was fairly reasonable. So just to tell you, Mr. Kapur, that it was -- it is no near creature. It is absolutely thought through with proper diligence and with a clear road map that we have put our hands into this game.

[Operator]

[Operator Instructions]

We have the next question from the line of Radha from B&K Securities.

[Unknown Analyst]

So first question in the line pipe business, could you give us a breakup of that 18,000 tonnes of sales for this quarter, India, U.S. and Saudi?

[Vipul Mathur, executive]

I think for our India, the sales was 126,000 tonnes. For our U.S. operation, it was, as I said, it was 38,000 tonnes. And for our Saudi operation, it was 118,000 tonnes. So that was the sales for this particular quarter, Q3.

[Unknown Analyst]

And also the breakup for the order book, sir, 928 million breakout? .

[Vipul Mathur, executive]

I think the breakup is very evenly split. We have almost close to in excess of 300,000 tonnes of business in India, close to more than 400,000 tonnes of business in U.S. and close to 200,000 tonnes of business in Saudi. So that's the broad breakup. Almost we have -- that brings us to close to 950 million to almost 1 million tons of business at this point in time.

[Unknown Analyst]

Sorry, I could not get you. How much is you said in U.S. and Saudi?

[Vipul Mathur, executive]

U.S. is more than 400,000 tonnes and Saudi happens to be more than -- close to 200,000 tonees.

[Unknown Analyst]

So sir, this India business EBITDA per tonne has jumped significantly in this quarter. So could you give us the reason for that?

[Vipul Mathur, executive]

As I have always said, EBITDA per tonne is a factor of a product mix. In this particular quarter, we have a very favorable product mix, number one. We have very profitable orders which got executed. And that is the reason you are seeing a high EBITDA per metric ton for our Indian business. I think so moving forward, even for the subsequent quarter, the way the product mix looks to us, looks pretty decent at this point in time. And I hope that we should be able to maintain the same EBITDA per tonne in the subsequent quarters, if not improve upon further.

[Unknown Analyst]

Okay, sir. And in the Saudi business, you said you have 2 less tonnes of order broker is now. So out of that, is the entire order book pertaining to the water segment?

[Vipul Mathur, executive]

Yes. Currently, yes. Currently, 200,000 tonnes -- approximate 200,000 tonnes of the water is businesses purely with the water segment, yes. You're right.

[Unknown Analyst]

And sir, last month, there is a sharp correction in gas prices. So is this expected to impact the order book position or new tenders in the U.S. business?

[Vipul Mathur, executive]

It should rather improve. It should rather improve. We see that they have gone to an abnormally high level, and that is where the consumers have started filling the print and things were slightly -- we were seeing a little slowdown and especially on the CGD side of it, I think so with the sharp correction which is happening, I think so the projects which were on which some rethinking was happening, probably that will be over, and we would see a fresh business oppositive coming up on the table. So I see that as a positive rather than a negative.

[Unknown Analyst]

And in DI, sir, could you tell us how much coking coal inventory we have in terms of lines?

[Vipul Mathur, executive]

I'm sorry?

[Pratiksha Daftari, analyst]

Sir, in the DI business, how much coking coal inventory we have currently?

[Vipul Mathur, executive]

In BI business, we don't have a coking coal inventory. It is in our steel business, we have a coking coal. And we have defined the product. We have defined that the bulk raw material has to be always covered up to a particular limit. We have in -- we have set internal goals that what will be our goal that we need to carry for iron ore, what we need to carry for coal, what we need to -- so we have set internal targets and we are well within that. On the DI business, it is purely a DI pipe.

[Unknown Analyst]

So from the consolidated basis, how much EBITDA are done, are you expecting for the next 1 year or so?

[Vipul Mathur, executive]

As I said, EBITDA per tonne is a factor of product mix and the product mix keeps on changing on a quarter-on-quarter basis. It's very, very difficult to predict at this point in time that what is going to be the product mix for the next quarter. All what we would have a visibility for the next quarter. Let's say, we will have a visibility for quarter 4. But when we talk about -- while we will have a booking until quarter 3 of the next financial year, but there will be some new orders, which will come at what margins they will come, what profitability they will have.

So that will keep on changing. But the way things look like at this point in time. I think so the market seems to be extremely buoyant. I think so this EBITDA per tonne, whatever we are showing in this particular quarter, I think so this cycle should sustain.

[Operator]

[Operator Instructions]

The next question is from the line of Bhavin Chheda from Enam Holdings. .

[Bhavin Chheda, analyst]

Overall congrats on good recovery in this quarter and a strong order book across U.S. and Saudi. Sir, 2, 3 questions. First, on the leverage level. So how much CapEx would be pending? And can we assume this gross debt and net debt levels are at peak level or the same would peak out by March '23? If Percy is there on the call.

[Vipul Mathur, executive]

I think Percy is there. As Percy said, I know that we have -- we are -- we have only a residual CapEx -- projected CapEx which is left out, which could be in the vicinity of INR 100 crores to INR 150-odd. That's the residual projected CapEx, which is leak and it will all be done on before 31st of March. So we will be done with our CapEx cycle. So there is nothing initial CapEx.

[Bhavin Chheda, analyst]

Residual INR 150 crore, obviously are generating strong EBITDA, which means that leverage will come down or we will lead incremental working capital for U.S. order book and all that?

[Vipul Mathur, executive]

The leverage will come down, Bhavin, for sure. And as regards the U.S. part of it, the working capital, I think that is fully secured, fully in place. I don't think that there's any need for any incremental working capital for our U.S. operations. So we have adequately covered ourselves there.

[Bhavin Chheda, analyst]

Sure. And in terms of the order pipeline also, I think you mentioned somewhere bid book of 1.7-odd million. So is there some kind of a geographical breakup in that bid book, how much would be U.S., Middle East and India, just in percentage terms would also be fine?

[Vipul Mathur, executive]

Yes. So as I said, Middle East seems to be having a significant, which is almost 1/3 of the business, it seems to be coming up from Middle East than U.S. and then Southeast Asia and Northeast Asia. So it is in that particular 3 regions that we're seeing...

[Bhavin Chheda, analyst]

I'm saying bid book of 1.7 million. Active book of 1.7 million. That would be also a similar breakup in line with the order book breakup?

[Vipul Mathur, executive]

If you see, it's pretty much close to that. You see in the U.S. side of it, it's pretty much close to that. You may say that.

[Bhavin Chheda, analyst]

Okay. Okay. And sir, DI Pipe breakeven should be there by quarter 1?

[Vipul Mathur, executive]

The DI pipe has ramped up significantly. I think so in the quarter 3, what they were -- they have just started and they were ramping up their performance. But just to give you some reference point that whatever they produce in totality, in the month -- in the whole quarter in Q3. They produce almost close to that, they're producing first month itself. So you can assume that what type of ramp up it is happening, almost close to [indiscernible].

[Bhavin Chheda, analyst]

So what I'm saying is quarter -- so iron prices are also going up, DI pipe prices going up after the export duty have been scrapped. So on the EBITDA breakeven part, we should be there by quarter 1 FY '24 based on the order book and current pricing scenario, obviously, the same can change?

[Vipul Mathur, executive]

Absolutely fair to assume that.

[Operator]

We have the next question from the line of Surbhi Saraogi from SMIFS Capital Markets Limited.

[Unknown Analyst]

Okay. Just 1 question, sir. Can you give some outlook or guidance regarding the revenue and profits for the next quarter and the next financial year?

[Vipul Mathur, executive]

As a policy, we don't give any guidance. I think -- but all what we are trying to help you to understand, I think we have a robust order book at this point in time, a confirmed order book and across all the 3 geographies: India, the U.S. as well as the Saudi. All of these are extremely profitable orders at this point in time. So and on top of it, we are also seeing a huge tailwind across all the 3 geographies in terms of U.S., in terms of India, in terms of Saudi. So I think so the a: order book is good. order book is profitable and the demand projections that are looking -- are looking extremely encouraging, but they need to be converted into businesses and opportunity. And that will determine that what is that is what will be the revenue earnings and all that stuff. .

So we all -- we always fall short of giving a guidance. But I think so if you do a sort of a metrics around these 3 data points, it should be able to give you a satisfactory answer that the company is definitely poised to grow from here on.

[Unknown Analyst]

And sir, 1 more question. Last quarter, you mentioned it was an order regarding urban future pipeline in the U.S. to any a bit on that end?

[Vipul Mathur, executive]

Yes. So we have this carbon capture order from the U.S. This order is -- at this point in time, of course, the production of that order was supposed to start sometimes in May of next year -- May of this year, looks like they are having a little bit of a regulatory hurdle at this point in time. And they have -- they are in discussion with us that can we potentially delay the start of that particular quarter. And there are provisions into the contract. Looks like they are very hopeful to resolve that particular matter. So we are engaged with them, but they do have a provision to request us to delay the start of this particular order. But in terms of carbon capture project, I think so they are gaining a lot of traction in the U.S. at this point in time, not only about this particular project, which is slightly into a regulatory hurdle land acquisition and all that, which is very common, which happens across all over the world. but the demand and the number of projects that is being discussed in carbon capture, or number of projects have been disturbed in the U.S. at this point of time. And one happens to be the navigator, which seems to be 1 of the largest projects coming up immediately after this existing project what we have. .

So to your question that what is the potential and what is the outlook for carbon capture, I think so it is looking extremely promising. Of course, as it is and there are always certain regulatory hurdles around any businesses, which is not very uncommon. So there is a little bit of a hurdle this order is also facing at this point in time. But it's just a matter of time that they will all get resolved, and we will do that. And in any case, we were not supposed to start before May. So we will see that how does it pan out from here on.

[Operator]

We have the next question from the line of Ankush Mahajan from Axis Securities.

[Unknown Analyst]

Sir, this quarter, the employee cost is quite high and despite good gross margins Other expenses are also on the higher side. So would you throw some light, sir? What is the reason behind it? And how is the outlook for upcoming quarters?

[Vipul Mathur, executive]

Other expenses, I think, so in the earlier part of this call, Mr. Percy did explain why the other expenses are going up because all the new businesses, expenses are all the new business have started production they are getting ramped up. So that is where the expenses are getting. They are going in comparison to the last quarter when all these businesses are not there. So you will -- it may not be a direct correlation. And so is the case with the employee cost. I think with the new businesses coming in, the new -- all the new verticals getting created, new employees also joining in headcount significantly going up. That is what is getting clearly reflected in our employee cost. But they are absolutely on the predicted lines. They are absolutely within our budgeted parameters, and they are absolutely in our closest but are in terms of evaluation at any point in time.

[Unknown Analyst]

Sir, any outlook on EBITDA margins, consolidated margins in the upcoming quarters?

[Vipul Mathur, executive]

As I was just telling [indiscernible] just before you, I think that we do not give any guidance around that. Our -- we are very clear that a: [indiscernible], our order book is there, confirmed order book is, they're almost close to 1 million tonnes of an order book is replaced, which is to get executed over the next 4 quarters time, number one. Number two, all of this order book is a very profitable order book. So that's the second point. And the third, as we have been talking the demand the demand pipeline is looking also very strong. As we speak, we are contemplating orders in the U.S. we are contemplating new orders in Saudi. We are contemplating some very high-margin orders in India. .

So all 3 of them that the new order book, which is likely to come is going to be very profitable, the existing order book, which is already profitable and already the order book for next 3 to 4 quarters, I think, sir, these 3 factors would give you a clear sense that we are absolutely into sort of a good space at this point in time and which we will only -- which will only improve from here, please.

[Unknown Analyst]

Yes, we agree with you that this part, there is a good order backlog. And even the execution is strong there, we are looking in the numbers. So just in terms of the profitability that some of you are lacking, so just want to understand that?

[Vipul Mathur, executive]

Profitability or if you see EBITDA per tonne has been improving in this quarter 3, also, it has been significantly higher than in coparent the other quarters. And it was also -- it was a factor of a product mix. And I think so the subsequent quarters also, when very profitable orders will be performed or executed. You will see that quarter-on-quarter basis, the margins are only going to be similar, if not better.

[Operator]

The next question is from the line of Abhishek Jain from Arihant Capital.

[Unknown Analyst]

So 2 questions. First is, is there any inventory loss in this quarter? If yes, then what quantum? And secondly, the second question would be a bit skeptical. But do we have any exposure to any of the companies from Adani Group in terms of business, just capacity?

[Vipul Mathur, executive]

To the inventory loss, I don't think so. May we have anything called inventory loss in this particular quarter, number one. And number two, answering your question with Adani, I think so, I mean, we have limited exposure with them in terms of orders, which we do keep on getting from them for supply of some ARW pipes or water pipes to them. And that's the business exposure of what we have and nothing more than that. It's a business transaction as usual. And not -- and in any case at this point in time is not -- is very insignificant, very, very insignificant.

[Operator]

Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.

[Vipul Mathur, executive]

Thank you, gentlemen. Thank you very much for taking time out to the morning to hear us out and to see -- to hear the growth story of Welspun Corp. I greatly appreciate all the inside -- in-depth paces what you have, and I'm sure that me and my team would have given to your satisfaction. But just in case, if you have any follow-up questions, or you need further more clarity, you can definitely reach out to Mr. Percy, the CFO; and Gaurav Ajjan, Investor Relations at. And I would like to thank that the trust and the confidence you have always shown to Welspun. And as Welspun Corp moves from a stand-alone pipe company to become a conglomerate, I think so your trust and your patience and your support in this journey will be very, very appreciated and that support we have always expensed to us in the past. And thank you very much, and we will continue to communicate with each other and keep on keeping your abreast about what all developments are happening at our place. Thank you very much, and have a good day, please.

[Operator]

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