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Good morning, ladies and gentlemen. Welcome to the Q4 FY '22 Results Conference Call of Welspun Corp Limited, hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhineet Anand from Emkay Global Financial Services. Thank you, and over to you, sir.
Thanks, Susan. I am Abhineet Anand. Let me first thank the management of Emkay -- of Welspun Corp for giving this opportunity to host the call. I will hand over to Mr. Abhinandan Singh, Head, Group Investor Relations. Over to you, sir.
Thanks, and good morning, everyone. On behalf of Welspun Corp Limited, I welcome all of you to the company's Q4 and Full Year FY 2022 Earnings Conference Call. We have with us today, Mr. Vipul Mathur, Managing Director and CEO; and Mr. Percy Birdy, Chief Financial Officer of Welspun Corp Limited.
Along with us, we also have Gaurav Ajjan who heads Investor Relations for Welspun Corp Limited. We will, as usual, start this program 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 post today's earnings call, you can reach out to either Gaurav or myself, our [indiscernible] are available both on the website and the press release is available on our website.
With that, let me hand over the floor to Mr. Vipul Mathur, MD and CEO, Welspun Corp. Over to you.
Thank you. Good morning, everyone. Thank you very much for taking time out today on Monday morning. Welcome to our Q4 and FY '22 conference call. First, let me take you through the key highlights of our operational and financial performance during the quarter ended 31st March 2022.
Please note that in line with the accounting standards, all prior figures, including the year ended March 31, 2021, have been reinstated after consolidation of our demerged steel undertaking of WSL and WSSL. Some of the key highlights are we have won the single largest order valued at INR 5,000 crores plus for supply of pipes in the U.S. market.
Our current order book stands at close to 925,000 tonnes at the start of this year with an active bid book of 1.2 million tonnes. Our revenue for operations for Q4 FY '22 stands at INR 2,011 crores, up 39% quarter-on-quarter. Our sales volume on quarter-on-quarter basis is Line Pipes is up by 58%, Billets is up by 65% and SS Pipes is up by 32%. We have achieved a consolidated EBITDA of INR 1,023 crores for FY 2022.
Let me give you some outlook and brief update as how and where we see the market and what are the key drivers for our growth. I'm sure all of you are monitoring very closely the invasion -- the turmoil -- political turmoil, which is happening in the Ukrainian -- in the region of Ukraine. This has been driving up the global energy market prices to an unprecedented level.
We have seen crude oil prices remaining above $100. The sanctions on Russia has contributed to the rising crude prices with significant market uncertainties about the potential for future supply disruptions. Even the gas prices in Europe and Asia have also gone up in tandem and are now currently around $25 MMBtu and while they are around $9 per MMBtu in U.S.
We are in -- this has -- in this adversity, there are a couple of opportunities which have emerged, and we are seeing a surge or tailwind in terms of our Line Pipes export business. And right now, we are in active discussions for several orders in the export market, which has seen an improvement of the prospects for the pipelines due to oil price, increase of energy demand and Europe looking to diversify its energy supply.
As regards to India, the government has set a target to raise the share of natural gas in the energy mix to 15% by 2030 from about 6.7% now. Various steps have been taken by the government in this direction, including expansion of National Gas Grid Pipeline, expansion of City Gas Distribution network, setting up of LNG terminals, et cetera.
The PNGRB, which is the petroleum and natural gas regulatory board has authorized approximately 34,000 kilometers length of Natural Gas Pipelines across the country. Out of the 8,000 kilometers length of Natural Gas Pipeline, including spur pipelines are operational and a total of 15,000-odd kilometers length of pipeline are under various stages of construction. The length of operational pipelines have increased from 16,000 kilometers in March 2019 to 20,000 kilometers in December 2021.
PNGRB has also authorized 268 geographical areas for development of CGD network in the country. Further Letters of Intent have been issued for '21 in geographical areas. Also, PNGRB has launched 111 -- 11 CGD -- launched 11 CGD bidding round for develop CGD network. After that, the CGD network will potentially cover 98% population and 88% geographical areas of the country. The number of CNG stations established by various authorized entities have increased from 1,700 in March 2019 to 3,800 in January of 2022.
The pipelines being laid by the CGD entities have also increased from 162,000 inch kilometers to 353,000 inch kilometers as of January 22. The CGD sector is still in a nascent stage in India, and the demand for ERW pipes is likely to remain healthy going forward.
Pradhan Mantri Krishi Sinchayee Yojana, the umbrella irrigation scheme launched in 2015 will provide central grants to the State Governments for Accelerated Irrigation Benefits Program and Har Khet Ko Pani. This will continue until 2026 with a total funding requirement of almost INR 93,000 crores. The plan includes INR 37,000 crores central assistance to states and INR 20,000 crores of debt servicing for past loans availed under PMKSY scheme. States are also expected to part-fund the scheme.
So the total additional irrigation potential created during '21-'26 under AIBP scheme is almost 14 lakh hectare. Apart from focused completion of 60 ongoing projects, including 30 lakh hectare command area development, additional projects will also be taken up. The inclusion criteria has been relaxed for the project under tribal and drought prone area.
The coordinated focus by the central and the state government in irrigation is expected to drive the demand for the large diameter HSAW pipes. The government has levied an export duty of 15% on all major steel products to drive volumes to the domestic market and make steel price affordable for domestic consumers like auto, MSMEs, infrastructure, line pipes, et cetera.
The procurement of steel, which has become a challenge in the past and by virtue of this measure would boost availability in the domestic market. So in India, if we see, we are looking for an upsurge in demand in line pipe, both in the oil and gas sector, the CGD sector and the water sector.
Coming to the U.S. As you are aware, we recently announced the single largest order we had booked in our U.S. market. With the clean energy transition, interrupted due to soaring prices and the disruption caused by geopolitical events in Europe, there is a clear revival for fossil fuels in the U.S. market. Government is now releasing strategic reserves, lining up new supplies and urging oil and gas producers to pump up production.
As a result, we have seen an increase in exploration. The distribution network creation for Shale oil and gas in the U.S. has seen a resurgence after almost 2 years of a lull, coupled with administration's permitting woes. U.S. is now focusing on boosting -- focused on boosting oil and gas supply within the country, but also trying to provide the much-needed backup to Europe for critical gas supply, which has been on the tenterhook considering the huge supply dependence on Russia.
We have seen Permian Oil & Gas in U.S., a big gainer in terms of its contribution in this resurgence. Oil excavation in the West Texas Basin has shot up upwards of almost 5.2 billion barrels a day thereby creating a need to evacuate both oil and gas through some potential long-distance large diameter pipeline.
As I said earlier, we recently announced winning of the single largest order in the history of supply of pipes valued at INR 5,000 crores plus in the U.S. This order is for supply of almost 325,000 tonnes of large diameter coated pipes for transporting natural gas from Permian base to Houston. The price for this order will be produced from our Little Rock plant in the U.S., and the same will be executed over a period of 12 months commencing H2 of FY 2023.
This large new order from the U.S. comes on the back of another win we have announced in April '22 of our 26,000 order -- 26,000 tonnes order from a long-standing customer in North America.
Saudi. With the surging oil pricing, we are confident that the further opportunities will arise both in the Oil and Gas sector. Also water continues to be their key focus area, and we are seeing a huge demand coming up in this sector as well. Saudi Aramco aims to boost its CapEx from $40 billion to $50 billion in 2022, with further growth expected until around the middle of the decade.
CapEx in 2021 was almost close to $32 billion, an increase of 18% over 2020. It plans to raise crude oil maximum sustainable capacity to 13 million barrels a day by 2027, and wants to boost gas production by more than 50% by 2030.
Saudi Arabia is also planning to partner with private sector to deliver 3,500 kilometers of new water transmission pipeline that will distribute more than 4 million cubic meters per day of desalinated water and will require a total investment of almost $16 billion. The projects are the first water transmission PPP project in the Middle East and will be the first water transmission scheme globally to be tendered as separate concession contract without being bundled along with the water supply [Audio Gap].
[Technical Difficulty]
Ladies and gentlemen, the lines of the management have got disconnected. Please stay connected while the management reconnects. Ladies and gentlemen, thank you for patiently holding. We now have the line for the management reconnected. Over to you, sir.
My sincerest apologies for this disruption. I don't know where did I lose, but let me restart with our new acquisition, Welspun Specialty Solutions Limited. As I said, WSSL has been -- has seen a sustained improvement in performance in FY 2022 and obtain several new customer approvals. SS pipe volumes were higher by 82% in Q4 of FY '22 and higher by 50% in the full financial year 2022 compared to the corresponding period of the previous year.
The company restarted steel melting operations during Q3 FY '22, which has helped mitigate challenges being faced in raw material procurement and hurdles in logistics. WSFL continues to win orders both in domestic and export market. In addition, it continues to reap benefit out of country's, Make in India, indigenization projects with several private and PSU companies. Increasingly, customers are preferring to source locally, which is favorable for the entry and the company.
During the quarter, WSSL successfully executed, one, completed the development and manufacturing of SS 347H grade Shot Peened pipes. It's a very -- high value-added product. Established extrusion and cold finishing for Super Duplex stainless steel tubes and dispatched its first order. Manufactured 6 inch diameter pipes with stringent acceptance criteria for a critical nuclear power plant project.
We also entered into another niche market segment by successfully executing first lot of Heat Exchanger tubes in SS317L-grade, again, a very highly value-added product. And delivered the first order for a prominent company in the fertilizer industry.
So we are now making our presence felt across the spectrum where these SS pipes are being used. I would also like to take this opportunity to give you on the few business updates apart from the business. One, dividend. The Board has recommended a final dividend of INR 5 per share for FY '22, which will be paid immediately after the AGM. During Q2 FY '22, the company paid a dividend of INR 130 crores. The dividend amount declared per share for FY '21 was 100% of face value at INR 5 per share. The corporate tax rate -- and just to add, it is the third year in consecution that we -- the company is paying in excess of 100% dividend.
Second, corporate tax rate. The company has fully utilized its existing tax credits in FY '21 and has switched to the new corporate tax rate of 25.17% in FY '22 from 35% in India.
IPO. During the quarter, the company announced the successful listing of joint venture company in the Kingdom of Saudi Arabia, the East Pipes Integrated Company (EPIC) on the Saudi Exchange. The final -- the final price of SAR 80 per share. Post the IPO, WCL owns 35.1% through its step-down subsidiary in Mauritius and will continue to be the largest stakeholder in EPIC.
Welspun Holdings Mauritius received gross proceeds of almost SAR 252 million and has shown as a gain -- and that has been shown as the gain of INR 360 crores under Other Income in our consolidated P&L account.
Next merger update. The acquisition of steel business of Welspun Steel Limited. The transaction was completed on 16th of March 2022 with an appointed date of April 1, 2021, in line with the accounting standards all prior figures, including for the year ending March 31, 2021, have been restated after consolidation of the demerged steel undertaking of WSL and WSSL.
Now I want to turn my focus on the business growth and the diversification. WCL's growth strategy entails creating a diversified product portfolio, repurposing its businesses to add new target segments, expand its offering to address both B2B and B2C markets and making well-considered strategic acquisitions. That diversification into the B2 segment will help the company to significantly expand its base, enhance its brand, penetrate new markets, build a distribution network and provide opportunities to develop new products.
In this regard, we have acquired a polymer company called BAPL's the Senior Secured Unlisted Nonconvertible Debentures with an outstanding amount of INR 1,176 at a purchase consideration of INR 403 by our wholly owned subsidiary, witnesses, Mahatva Plastic Products and Building Materials Private Ltd.
Update on Ductile Iron Pipe. As announced in October 2020, given the industry prospects and synergies with our existing businesses, we are setting up a greenfield facility at Anjar to enter DI Pipes business. We expect to be ready with our product offering at the end of this quarter. This is -- there is a big focus on creating drinking water supply in the country through government programs.
In the Union Budget, the Finance Minister earmarked INR 60,000 for the Jal Jeevan Mission that aims to provide potable water to 3.8 crores households in '22-'23. Overall, the Jal Shakti Ministry was allocated a total amount of INR 86,000 crores higher than from INR 69,000 crores allocated in the previous fiscal year.
Furthermore, our internal forecasts based on interactions with various potential customers and industry participants indicate a robust demand for the DI Pipe over the next 5 to 7 years. Due to the improvement of the project -- due to the improvements to the project plan and inflation, the project cost has been revised from INR 1,550 crores to INR 1,900 crores.
Some of the major reasons for the variance are we undertook some design changes for productivity improvement and increased safety. We also implemented -- we also took this opportunity to augment and increase the capacities of Blast Furnace, [ Sinter ] , Coke and DI pipe itself. Mostly we had thought about an oxygen plant on the BOOT model, but we have not decided to set up on our own.
Also, we have been -- also in terms of energy neutrality and energy efficiency, we have also embedded into novel scheme of building the blast furnace gas directly to the power plant to reduce carbon emission. Also, the cost escalation for the key inputs commodities like steel, TMT, Cement, ocean freight, et cetera, has also impacted in the upward revision of the project cost.
We have also, in order to retain and expand our talent base, we have also invested heavily in terms of creating an expanded residential infrastructure for our staff and associates. The project viability continues to be healthy with the increased investment being opted to productivity gains and increased realization for DI pipes.
The long Steel Product. The demand for long steel products will be supported by increased government spending on infrastructure. The Union Budget '22-'23 has seen an increase of 36% on a Y-o-Y basis in allocation of CapEx at INR 7.5 lakh crore base. The budget has infrastructure push towards 7 engines, roads, railways, airports, ports, mass transport, waterways and logistics.
The allocation for various schemes like Pradhan Mantri Awas Yojana for housing will have a positive impact on long steel players. The government has a fixed objective of increasing rural consumption of steel from the current 19.60 kg per capita to 38 kg per capital by 2030-31. Our forward integration plan of setting up a TMT bar plant Anjar with a capacity of 350,000 tonnes is on track, and we expect to begin the commercial operations by July of 2022.
I also want to take this opportunity that the efforts which the company is doing in terms of sustainability and towards the ESG initiative. During the year, we have taken several ESG interventions aligned with the global ESG standards. WCL was ranked 13th among the 41 companies included and at 68 percentile in S&P Global DJSI Index.
Our key focus areas moving forward are: the management of greenhouse inventory, the Task Force on Climate Related Financial Disclosures. We have significantly improved our governance structure, including we have created an ESG Committee at the Board level. We have separated the role of both Chairperson and Managing Director. We have fully independent audit committees and NRC. We have expanded the scope of -- expenditure scope of Stakeholder Relationship Committee. We have appointed the Lead Independent Director to strengthen Board structure.
Apart from that, there has been a serious and very focused approach in terms of Ethics and Compliance, strengthening of our supply chain and highest level of transparency and disclosure. I'm sure that all these initiatives are the key expectations by all of our investors, and we are absolutely on track in terms of meeting that.
With this, I would like to conclude my opening remarks. We'll be happy to take any questions. I open the floor for the questions, please. Thank you.
[Operator Instructions] The first question is from the line of Nirav Shah from GeeCee Investments.
Sir, 3 questions. Sir, firstly, I mean, if I look at the core operating performance of the company, it seems a little weak compared to -- even if you compare to the previous quarter, so it seems that the core Line Pipes performance has been weak, so any one-off's reasons for that -- for this performance? And also, it seems from the annual numbers that the DRI and Billet performance is also slightly weakened. So if you can just clarify that as well, please?
Yes. Thank you, Nirav. Thank you. On the Line Pipes performance, I think so, Nirav, I will not say the performance has been weak. I think it has been more or less stable. I think there were a couple of factors which have impacted. Number one, if you look at it, that in the very first quarter of this financial year, we had the impact or the residual impact of pandemic impacting us, right, number one.
Then thereafter, we have seen an unprecedented rise in the commodity steel pricing and which has impacted the procurement at a significant level. I think these 2 factors were dominant and they are getting reflected. But I think so as we are coming out of it now when both the pandemic element is also behind us and also when the commodity pricing also seems to be cooling off significantly. I'm sure that this performance is going to go up from here on.
Okay. Sir, second question is, I mean, congrats on the largest order win for us of 325,000 tonnes from U.S. facility. And since this is a large dia order, does it mean that now at least for the next 3, 4 quarters are only inclusively for the ERW segment? And as we are largely booked on the [ HSAW ] segment?
That's absolutely correct assumption. I think so with the largest order, what we have at this point in time, we would be booked until at least the third quarter of the next financial year. If not, and I'm sure there are multiple opportunities which are also getting further created out there, which will see a continued engagement in that -- in the U.S. market for the next couple of years.
As I was telling in my opening call, that we are seeing a complete resurgence in the U.S. market at this point in time. In my previous calls -- investor calls, I have always mentioned and maintained that it is all -- in the second half of this year, we will see the resurgence, and we have seen that. And very clearly, it is getting reflected by the order book, what we have at this point in time. This is bound to stay for a long time.
Now coming back to the HFIW, either the way we are seeing the government is significantly focusing and encouraging for enhanced drilling, right? And that would mean that there would be more wells, which will be drilled, more oil, which will be produced, more oil which will need to be transported, more gas will be coming out and more gas need to be evacuated. So we will see an upsurge in the whole value chain in times to come in the U.S. market. And our next focus will be to build a robust order book around our HFIW business now. With the large diameter pipe business completely booked.
So now it seems more sustainable like what we did 3 years back, I mean where we had a very solid for our U.S. operations, and we were doing around 4 lakh tonnes a year. So we can do that, say, that momentum can come from say FY '24 onwards.
The momentum has started. I think the things are panning out much more favorably than they were doing 1 year, 1.5 years back. And I'm sure that we will be back to the past glory.
Third question is on our CapEx front. I mean how much have we spent on the DI Pipes till March and what -- I mean, the residual number will be in FY '23? And how does the overall company-level CapEx looks like for '23?
So at this point in time, our still at the end of March 2022, we have done a total CapEx of close to INR 1,400 crores. This includes the CapEx also in our upstream TMT facility as well. So total CapEx is at INR 1,400 crores. The balance CapEx will happen in the FY 2023.
Got it. And sir, just last clarification. I mean, we purchased the NCDs of Sintex BAPL. So is that initial outgo from INR 3.9 billion part of our FY '22 balance sheet? And second question relating is what's the strategy medium-term strategy at Sintex, how much will we need to invest over there? And just your medium-term strategy, how do you proceed with this acquisition over a 3 to 5 year period.
Answer to your first question is yes, that's a part of our balance sheet, number one. Moving forward, our strategy for very clear, see we are trying -- we are very clear to have a significant presence felt in our B2C segment. This is one of the platform which we are contemplating to you. As you know, that company has more than 900 distributors and 13,000 retailers. So -- and it's a pan-India brand. And it is our intent to significantly leverage our B2C [ 4A ]. And that is how -- and that is why we are slightly -- we are focused on this particular company.
Thank you. The next question is from the line of Sailesh Raja from B&K Securities.
As you mentioned in the opening comments, so Europe is now looking to diversify it's energy supply.
Sorry to interrupt, Mr. Raj we are not able hear you.
Yes. Can you hear me, sir?
Sir, your voice is sounding very muffled.
Can you hear me now?
Much better. Thank you.
As you mentioned in the opening comments, Europe is now looking to diversify it's energy supply. So what kind of export opportunity do you see for both India as well as Saudi operation? So currently, what is the exports mix in the outstanding order between India and Saudi according to you, how the exports mix will change over next 1 or 2 years?
Right. Thank you, Mr. Raja. See, in Europe, there would be a paradigm shift, which is now going to happen in terms of meeting the energy requirements. I think so there will be a lot of focus, which will happen in terms of renewable energy and also in terms of hydrogen these are the areas where as an organization, Welspun, we are completely focused with. As you know that we are working on multiple JIVs, which are the Joint Investigation committee, which are in the process of developing the technical specification for global standards. And we are a part of some -- we are part of 2 or 3 international committees working around that.
So these are the opportunities, which are going to up significantly in the European market in very short times to come. And we want to be into a sort of a pole position to capitalize upon that. So that's how we see the European market as emerging in times to come.
As regards India, from India, as you know, we are primarily being exporting our longitudinal product, which is being produced out here. And our -- and from our Saudi market, the Saudi market is more or less a captive market at this point of time, not that it's stops them to do export, but the market itself, the domestic market itself is so very huge and the demands are so very high, both in the oil and gas sector as well as in the water sector that I see a very latent potential for them to explore anything outside that market because that market is from a volume perspective, from a demand perspective and from a remuneration perspective is very, very strong.
So I don't think from that we would be under any pressure whatsoever to look at the export market. However, from India, we will continue to focus on exports. We have, as you are aware, in the last year also, we did a major export to the North American continent. We supplied the highest operating pressure pipeline. This year also our export order book is looking very good. We have recently announced orders. We are exporting our longitudinal pipes to -- in the Australasian market and we are also supplying pipes into the in the South American market.
And as I earlier said that we are also pursuing multiple opportunities where we are favorably placed. So export potential from India, all our signature longitudinal products is looking extremely nice.
So what is the export mix, sir, currently? In percentage terms?
So at this point in time, we have -- from India, we have -- we have close to, let's say, our order book is around 350-odd tonnes here in India. And out of it, almost 50% is close to exports.
Okay. Great, sir. Sir, the domestic market outstanding order book, what is the mix between oil and gas and water? Basically wanted to know rough EBITDA per tonne will be doing in India? Also, can you please give EBITDA per tonne guidance for each geographies? And India also product wise guidance if you would give that would be helpful sir?
In the domestic market, as I said, we are seeing -- we are seeing a very significant uptick -- upswing in the oil and gas market. The oil pipelines, the gas pipelines and the CGD network, all 3 of them are going at an unabated pace. And so we are seeing a clear uptick and this is going to further go up in times to -- in times to come as we are seeing the pressure of the energy coming on to the Indian economy.
So we will see a major CapEx investment coming up there as well. So I'm very, very buoyant about the oil and gas market in India, number one.
As regards to water sector, I think the water sector has taken a little bit of a beating in the last 1, 1.5 years because of the -- water is basically a state subject and the states are more focused in terms of addressing the pandemic. Once the pandemic got over, the commodity pricing, they were at an unprecedented high level and which were making all these products completely commercially unviable.
Now with the tapering of the commodity pricing as what we have seen in the last 15 days to 3 weeks' time, we are seeing a complete resurgence in this water sector also. And that is now also going to play a significant growth. It has always played a significant growth in terms of our balance sheet, in our profitability. But last year, it had an impact. But this year, as the commodity pricings are settling down, we are seeing that this will also have a major play. So our -- in India, both in terms of volumes, and both in terms of earnings, we are seeing that there will be a growth which is going to come up.
Coming to your second question, we do not generally give any guidance around our earnings. However, and on average, we have always seen that our India business is always getting close to [ INR 10,000 ] per tonne EBITDA guidance, we have always been able to maintain. And this is nothing else. But if you see our past 5, 7 years data, it will give you a clear reflection around that. So I am sure that it is only going to north -- going to go up from here, not down.
And sir, both DI and TMT, we are going to commission from 2Q FY '23. By when do you think we can see that capacity with -- and also with higher project costs, what is the payback you are expecting from these 2 projects?
See, the product for both of them would come sometimes by the end of this quarter or early next quarter, the product offering will start coming to the market. But I think to the continued sustained operations, the impact of the operations, you would feel in the H2 of the -- of this particular financial year.
So -- and there is definitely a clear pull into the market. It is -- if you look at the DI segment, there is a definite -- there's a clear mismatch in terms of capacity versus the requirement. There is a demand and supply gap of quality players and Welspun being a brand and being a quality player is being perceived as one of the Tier-1 players and I'm sure that pull will and pull in the market with respect to Har Ghar May Nal, and Nal Se Jal, that mission which is being driven by the government. I think so that is a big enough of a pull for a sustained operation for our DI business.
As regards for our TMT business, we are putting up a capacity of almost close to 350,000 tonnes. We are in Gujarat -- we are a brand in Gujarat. Welspun is a brand in Gujarat. The market itself is more than 2.5 million tonnes. There is a huge push on the infrastructure and I'm sure that we will be able to create our own niche, our own space in selling of this capacity.
So one last question. This is a repetitive question of other participants. In 4Q, the gross margin impacted by roughly 350 bps. So basically, I want to understand how much unhedged portion in the raw material impacted and how much basis points impacted because of unfavorable product mix.
As you know, we are -- this quarter was almost dominant for the B2B play. And the product mix also plays a major role in our earnings and that has been one of the key reasons that we have always -- we have been now focusing in diversifying our product mix. So that about any uncertainty is eliminated, and we bring predictability to earnings. And that is why we are pouring into more commodities. We are pouring into the B2C market in order to mitigate such risks. But in quarter 4, I think it was more driven by the product mix what we have.
Sir, in that case, any pricing pressure witnessed in the oil and gas and Line Pipe sir, in domestic or export market?
I'm sorry?
Any pricing pressure witnessed in oil and gas Line Pipe in domestic or export market?
I am seeing a delivery pressure. People want deliveries yesterday. We are seeing the production pressure. Everyone wants to execute a project yesterday. And I think that, that is the pull which is getting created into the market because of this high pricing and high demand and this demand is now further going to go up.
So I am not seeing any pricing pressure rather I'm seeing the service pressure that people want to execute projects at a much faster pace and be into the game. So I think that is where the bigger question lies, and that is what we really need to augment that is where we will have to work around and without any -- we will have to further augment our product offering and speed. I'm not seeing any pressure on the pricing side of it.
The next question is from the line of Vikash Singh from PhillipCapital.
I just want to understand, our steel business, which we have purchased, it seems that they are actually not making much of the EBITDA level profits and the upper utilization has also been pretty low. So just wanted to understand your thought process by when we can expect these to turn around and ramp up.
Vikash I think the steel business per se has been impacted by -- both by the demand as well as the high commodity pricing, right? And this is what we have seen in the last year -- in the last financial year, number one. Number two, we are now improvising on our value proposition. What we were still now selling was an intermediary product which was difficult to sell to a market.
Now -- and that is one of our key reason for investment into upstream facility of TMT Pipes. It is much easier, much -- better to sell a finished product rather than intermediary product. That is where we have calibrated our strategy. And I think so now with the commodity pricing settling down, the market also coming into full gonzo mode. I think that you will see that this pressure will slowly and gradually get away from it, number one.
Number two, when you merge a company, it takes its own time in terms of amalgamation, bringing the changes and all these companies need to be incubated. I think there is a significant time and energy which is being invested in terms of incubating these companies. And I'm sure they as they will become the core to the Welton Corp growth story, you will see their complete resurgence in times to come. Just give us time and it will be there.
Understood, sir. Sir, in terms of your strategy of going to B2C segments and entering into Pipe space. Just wanted to understand if you -- what are all the related business, which we are targeting, if I may like to get a broad view is exactly what management is looking from 3 to 5 years kind of the growth perspective in the B2C segment?
So see, Vikash we have already extrapolated and created a position what we want to do in B2C at this point in time. If you look, we were purely a B2B player, making Large Diameter pipes, right? We were only a pipe layer. Now we are -- we will be producing Billets, we will be producing TMT, we will be producing Billets, SS alloy, we will be producing SS Pipes and we will be producing Pig Iron. We will be producing DI pipes.
And we are also actively looking at this BAPL. So we want to bring our polymer business into play. And correspondingly to the polymer business is a Plastic Pipe business. I think so we have more or less extrapolated our strategy but speaking to an action. And at this point of time, we are completely focused in terms of bringing them under one force, accumulating them, incubating them and scale them up.
I think so that is what our focus is going to be over the next 2 years' time. And before that, we are not going to think any forward or any other integrations or any other acquisition. I think this itself is good enough on our plate and this is what we would like to do at this point in time.
So at this point of time, this is -- this could be our business mix basically because I was a little bit concerned in 8, 10 years back, we again had a good cash flow, then we invested a lot of money in the other businesses, which didn't turn out to be very well for us. So just wanted to understand that we would -- this time would be more constrained in terms of our choice and more likelihood to be the near about coal business only and not something else.
Absolutely. And these are absolutely well thought out strategies. You can see each and every product, as I mentioned to you, there is a significant pull into the market. It is not that we are trying to create a market for itself. There is a market which is existing. There is a brand which is existing. We only would have to ride that wave, and we have to do it absolutely great. And that is what we would like to low at this point in time.
Understood. Sir, just one more question about our TMT and DI business. We would be commissioning in 2Q. But just wanted to understand the approval, if any, it is required and how much time it would take before we actually start getting orders and executing in the market, especially in the DI Pipe segment.
So as I said, DI market has huge void at this point in time in terms of a quality player. I think so that will turn to our advantage significantly. We are -- our product offering should start coming up sometimes in end June, early July. That's the way it looks to us very clearly. And I think from an approval perspective, we have initiated all necessary steps what are required to get those necessary approvals, which are nothing else, but the BIS certifications and all that, sir, which is standard statutory approval. And for -- we have taken -- done it for many a times for all of our products. So I don't see that has a great challenge, number one.
More importantly, we are also focused on exports. And we being been at the port and export is also a big and huge and a lucrative market, and that also we will be eyeing very quickly. So these are the 2 areas, both domestic, where there is a significant pull which is going to come and that will accelerate our process in terms of setting down and over an export, which has been our core strength of Welspun Corp. So We will be levering that strength as well. So the hybrid model of these 2, I'm sure that will bring significant value on the table.
Understood, sir. And sir, our pending CapEx. What is the pending CapEx which we'd be incurring in FY '23?
I think it should be close to -- we will be close to looking at something like INR 600-odd crore and that will get completed, let's say, in this particular quarter, but let's say one, it will all be completed.
The next question is from the line of Ravi Sundaram from Sundaram Family.
I have 2 questions. First question is on the Sintex potential acquisition. So I think in our guidance and announcements, and we have been saying we are close to acquiring that. But you only acquired the debt portion of it right now, right? So how will it translate into a line of business for us? And when will it start contributing in terms of revenue?
So it's a work in process, Ravi, at this point in time. There is a very clear sort of road map which we have interpolated around that. We are progressing well on that particular road map. My sense would be that within the H1 of this year -- H1 of this quarter, we should have much more significant play into this particular business. And there are all the efforts which have been done in that particular direction and we are keeping our fingers crossed around that.
Okay. Sir, Sintex BAPL is a beautiful asset, but would you have competition who's trying to buy with you to compete for that asset?
It's pretty natural in an open economy like that. It is bound to happen, and it is there, it will be there -- but -- and we are completely mindful of that aspect. We are watching it very, very closely, but we stay on track on this, Ravi.
Okay. My second question is on DI Pipes. So just want to get a sense because usually, DI Pipes, my understanding is it takes some time before a large order is awarded by the government agency. I understand you're looking at exports business also. If we look at, let's say, something like a little closer towards the end of this year kind of time frame, financial year, what kind of utilization can we think of here?
It's a business which takes its time on. I think there's no denying around that, right? It is not that it is a plug-and-play business. No, it is not. It takes its own time in terms of setting up, but what I'm saying is that there is a huge demand, which is now a huge pull, which is there in the market. If you see in the recent 2 or 3 weeks, the announcements being made by the government of Rajasthan, by the government of Madhya Pradesh, the government in Gujarat and the government in Punjab and Haryana and Chhattisgarh. The demand what they are projecting and they have come out, I think so that is clearly indicating that there is a huge potential, which is lying there.
It is all up to us in terms of how quickly we can stabilize and how quickly we can get into the market, that's something which we will have to work on it. That's the work to be done on the internal side of it. I have a beautiful team of people, professionals who are technocrats, which are there with us. And I'm very, very confident that our stabilization time will be much faster at this point, much faster in comparison to the industry peers and we are all very excited to leverage this opportunity as it is offering us on the table.
The next question is from the line of Siddharth Shah from MK Ventures.
Yes. Thanks for the opportunity. So my question also is on the Q4 numbers. So I can see that there's a huge surge in volumes in Q4 compared to Q3, but still the EBITDA is lower. So could you help us understand what kind of EBITDA per tonne we made in India business and U.S. business in this quarter compared to last quarter?
Siddharth, good question. As I said earlier, EBITDA in a particular quarter in our Pipe business is a factor of the product mix what you are producing. In the fourth quarter, I think the product mix probably was not as well as it would have been in Q3 or earlier quarters and may not -- and could be very different in the subsequent quarter. So it is only getting a reflection of that, number one.
Number two, there was hardly any production at the U.S. entity at that point of time. So that is not contributing that. And that also, as I said, it is going to now it is changing, and it will change significantly as we move forward in subsequent quarters. So I think -- so when we look at this Pipe business, I think so we have to see -- we don't have to see on a quarter-on-quarter basis, probably [Audio Gap].
[Technical Difficulty]
Ladies and gentlemen, the line for the management has disconnected. Please stay connected while we reconnect the management. Ladies and gentlemen, thank you for patience in holding. We now have the lines of the management reconnected. Over to you, sir.
I'm sorry, I don't know where did I lose you. But I was saying that in the Pipe business, looking at on a quarter-on-quarter basis may not be a right way of doing it. Probably, we should look it on a half yearly basis on a yearly basis. And if you look at it, I think from our performance around across on a year-on-year basis have been fairly consistent both in terms of volume as well as in terms of our EBITDA per tonne.
There was a little bit of a dip in the volumes in this financial year because the U.S. did not perform well. But that's not the case anymore. Now the U.S. is coming -- is going to be -- is coming back to the pull bank, and you will see that our historical performance and historical earnings will completely be reestablished and would be in place.
I understand sir. I appreciate that. The only thing I want to understand is, U.S. business, I understand, saw a negative EBITDA for this quarter because there are no orders and rightly so. The India business also saw a significant decline in EBITDA further, is it anything to do with the steel prices or anything like that? Or is it just normal course of business?
No. As you know, steel is something which is always helped in our business. We never keep still open, ever. So steel has no impact whatsoever on our India Pipe business. However, it was a product mix in which created this issue and also the utilization factor of a plant, as I said, our utilization factor around our plants was low because of water business, the volume part of the business was missing. And that is all that is what is going to get corrected in subsequent quarters to come.
Sure. Okay. My second question is on the U.S. order. You've talked about a large order in the U.S. But in past, the margins from the US business vary from $300 to [ $50 ]. So can you just give some kind of guidance? What kind of the range we can -- what kind of margins we can expect in the U.S., especially for the large order?
See. I would suggest that our U.S. business, whenever we are into business there, our margins have been extremely well there. I don't -- sparing 1 year in 2015, '16 when we had a situation where the margins were low. But other than that, the margins in the U.S. business have always been consistent. I think we will be able to maintain that particular momentum.
And I mean I'm not by virtue of our guidance, but generally a back of the farm working, I would suggest that in our U.S. business, we have always seen that we get something like close to $200 EBITDA and all that stuff. We have always spoken about that. And I'm sure that in times to come, also, we should be able to meet or if not exit this margins.
Sure. So that's very helpful. And sir, the last question is on the CapEx side. So the DI Pipes CapEx has increased to INR 900 crores plus soft cost. So all of that [ INR 300 ] crores or something we've always spent [ INR 600 ] is yet to be spent in the current financial year?
That's correct.
And sir, what are the other parts -- what other things -- what other CapEx can be -- are you expecting in FY '23?
Nothing other than maintenance CapEx, which is a routine maintenance there -- other than the routine maintenance CapEx, I don't think that there is any other CapEx. As you know, our CapEx for the only CapEx is happening in the DI and the TMT side of it.
So how much CapEx is spending on the TMT side? And anything further you plan to increase in the fintech equation for working capital or for anything else?
My guess is that the TMT CapEx will be close to 100 -- it will be close to INR 100-odd crores at this point in time. That's the balance CapEx in TMT. And when I say INR 600 crores is the total CapEx it includes that INR 100 crores of TMT as well. So I'm talking both in terms of DI as well as TMT. So that's the total CapEx, which will be done.
And coming back to fintech, we are still -- that's a work in progress. We are in touch with various stakeholders, various market entities, and we'll have to work around that. So -- but I can only assure you that it is well under control. It will -- it is going to be a nice acquisition and if things fall -- come our way, we are planning it, it is going to create an intrinsic value for the company.
The next question is from the line of Dharma Venkateshan an Individual Investor.
Sir, my first question is regarding your investments in the Welspun transformation services. And so the special focus will be for the efforts to further. So can you give us more color on it about what -- how we're trying to do this?
Correct. When we are coming from a one product company to a multiproduct company, multiple entities coming up into play, we have at a very strategic level decided to create a backbone infrastructure where everything gets consolidated. So one way of looking at was our financial consolidation and that is happening in our shared services center. The other part -- other piece of the consolidation, what we are looking is our consolidation of our IT services, HR, procurement activities and all service-related activities.
So we want to create a very niche platform where all the entities will get embedded into that. These are 2 very specific specialized areas where our core competency is required and rather than having these -- all these functions across all the business entities and incurring cost in all the entities, I think from a convergence point of view, this is a platform what we are creating, and that is why we are -- and that is how we're looking to move that. It's absolutely a part of our digital strategy and a business transformation strategy.
Regarding the special purpose for...
Sorry, to interrupt, Mr. Venkateshan we're not able to hear you clearly, sir.
Now you are able to hear?
Sir, it's still the same.
Now it's [indiscernible].
Yes, better.
Sir, regarding the special purpose vehicles for the renewable energy. So what is our plan going forward with this?
We are as we -- as you -- as I mentioned in my opening remarks, we have committed to our ESG goals. And in our ESG goals, we have outlined some energy-related initiatives to be done. They are part and parcel of that. I think we are moving a component of our business to renewable energies portfolio. And it is in that particular direction, all these efforts are being make. I think so right at this point in time, it's a work in -- we have just conceived a particular idea we are working on a detailed modeling around that, what would be our road map, how we intend to implement that. And we -- but we are very focused and clear that over the next 3 to 5 years' time, a significant efforts have to be done, you see that the needle is moving on that particular side. We are committed and it's absolutely important from our ESG standpoint of view.
Okay. So in and my next question is regarding the gross margin for this quarter. So I see for this particular quarter you pressing year-on-year or quarter-on-quarter. There is a short bit in the gross margin. So how much of this is because of the raw material inflation that we are facing? I mean, what is the outlook project?
As I said, the gross margin, again, what we are seeing, there were 2 reasons for that. Number one, our product mix was very different in this particular quarter. It was slightly skewed number one.
Number two, on the commodity side of it, there was a little bit -- there was -- they could have a little bit of impact because of the commodity pricing on the steel side of it. But now that is all history that is behind us. I think things seem to -- the product mix as well as the commodity both seems to be taking the -- moving on the right side of the swing. And I'm sure that in quarter -- in the subsequent quarters, you will see a significant improvement in the gross margins now.
Okay. Sir. And my final question is on the DI segment. So if you see the DI segment there is really large players who control from 30% to 50% of the market, and there are multiple players who are coming up with newer capacity. So if I see 4 or 5 years down the line. So is there a chance of the overcapacity coming into the market [indiscernible] 6, 7 year perspective not from an immediate perspective.
Mr. Venkateshan, my view is a little contrary to that. I think so there is an imperative need of a quality player into the DI market, and that is a space which Welspun intends to capture. We are very confident that given our past given our track record, given our orientation for the quality, given our customer centric strategy, we have always created a value for our stakeholders and all our customers. In this product segment, we will also be able to do that, number one.
Number two, in terms of the -- there are players which are coming up, I don't dispute that. But if you see from a geographical ship, most of the players are coming up in the Eastern region, right? Our area of interest, in any case, is the western, northern and the central region. And that area continues to move. And I think that is where we would like our dominance to be in place, and that will continue to be in there for a long time to come.
The next question is from the line of [ Radha ] from B&K Securities.
Hello, sir. Am I audible?
You are.
Congratulations on the big order win in the U.S. Just a few questions from my side. Can you please share us the guidance -- share us the geography-wise outstanding order book between India, U.S. and Saudi?
Correct. I think so what we have -- as I said, we have almost close to 900, 000 tonnes -- 950,000 tonnes of an order book at this 925,000 tonnes of order book, out of which almost 350,000 tonnes is here in India, almost 375,000 tonnes is in Americas, and the balance is in the Saudi.
Okay. You mentioned about the CapEx figure, INR 600 crores in FY '23. Can you give a little bit of guidance for FY '24, '25 from a 2-, 3-year perspective?
We are not expecting any significant CapEx in FY '24, '25. As I said, I think for now we will turn our complete focus in terms of incubating all these new businesses, which are going to come under Welspun Corp. I think so there would be a significant time which will have to be invested. There has to be a cultural building, which has to be done around that.
So that is where we will be focusing. Of course, there will be some CapEx, which will be coming in terms of -- in terms of capacity in this math or brand building and all that. To that extent only the investments will be done, but we are not aiming or we are not looking at any significant CapEx there over the next 2 years' time.
Okay. Sir, you also spoke about EBITDA per tonne, give us your thoughts on India business as well as U.S. business on EBITDA per tonne. Can you speak a little bit on the same for the Saudi business?
Yes. If you see -- I think for this data is all in public domain. If you see historically, when we have performed in Saudi. Our -- again, not from a guidance perspective, I want to be corrected on this, we are not giving any guidance. But historically, if you see -- we have seen that we always get in anything and EBITDA of like close to $100, $150 per tonne in EBITDA we are always able to do in Saudi. The reason for that is to because there are a sizable amount of volumes which you are able to always do that and when you -- and that makes us the largest steel buyer and we are able to leverage our global positioning as a largest steel buyer in terms of first of the Saudi business as well.
So we made something like almost in excess of $100 to $150 of EBITDA in Saudi. And I think so in times to come also -- in times to come the next year onwards, I think so there is a paradigm shift. What is more important is to understand that what is the -- how -- what are the shifts which are happening in the Saudi market.
As I said in the opening call, the Saudi market is undergoing a massive transformation at this point in time, especially in the water sector. I'm not talking about oil and gas, oil and gas continues to be a mainstay. But there is a paradigm shift which is happening in the water sector well. They are going to buy almost 3,500 kilometers of pipeline over the next 5 years' time -- 5- to 6 years' time. They are committed to invest more than $16 billion into -- in their Water Infrastructure segment.
And being one of the largest players in the Saudi market, I think that we will have a role to play. Their modality of buying is slightly undergoing a change. Earlier, the government was buying it and giving it as a pre-issue. Now we are seeing that shift happening more on a PPP model. But -- so that the buying modality is going to change. But from a demand perspective and from a service perspective, we are seeing a huge demand, and we were and we are the largest player in Saudi, and we will continue to play a role in Saudi.
Okay. Okay. That's very good to hear. Sir, from the Saudi IPO proceeds that we recently had, on a net basis, how much will the Indian entity receive?
I guess would be it will be close to INR 300-odd crores.
Post-tax.
Post-tax.
Okay. Just my last question, sir. The DI and the TMT projects that are expected to be commissioned this year. So how much total depreciation can we expect just from these 2 projects? Can it be about an increase of about INR 100 crores from these? Or can you just give us some figure around that?
I will have to circle back to you on that Radha. Will that be okay with you?
Yes, yes. Sure. Sure. Definitely. Thank you for answering all my questions sir. All the best to you, sir.
The next question is from the line of Anurag Patil from Roha Asset Managers.
How do you see the debt number panning out in FY '23?
Sorry, Anurag. I didn't get you, sorry?
Sir do we require any incremental debt in FY '23?
Perfect. So as of March '22, as you have seen, we have a net cash position of almost close to INR 175 crores. Since there is a CapEx that is spending of close to INR 600 crores, which will be in this fiscal year. We do see that to this extent, the borrowings will go up. However, our businesses are generating free cash flow as well. So to some extent, this INR 600 crores CapEx will get compensated with the free cash flow, which will be generated by our businesses. You also know that we are on track to make certain acquisitions. So SBAPL, that process is ongoing. And obviously, some funds will be utilized there as well.
But we are very conscious of our capital allocation strategy. And we are assured that any project where we put in money, whether it is through capital expenditures or as an acquisition it has to be very stringent threshold return parameters. So there is no major impact apart from what we just highlighted.
Okay, sure. And second question, sir, as we are getting very strong visibility across the 3 regions. Can you give some rough idea of what kind of volumes we can expect in FY '23?
Anurag, if you look at it even today, when we are almost at the first quarter, we have an order book of close to 925,000 metric tonnes at this point in time. Majority of this order -- majority of this order will have -- will get executed in this financial year. And I'm sure that there would be some additional orders, which will be coming up on the way in the subsequent months and which will also get adjusted and accumulated. I think so we are -- from a guidance perspective, I can tell you that we are still looking at -- we will be still aiming at close in excess of 1 million tonnes of an order execution in this year.
Sir, U.S. order execution will start in second half and it will pan out till FY '24. Am I right?
It will go until FY. Yes, it will get completed by December of 2023 yes.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Vipul Mathur, MD and CEO, Welspun Corp Limited, for his closing comments.
Thank you very much, gentlemen, for joining this call today. As I said, Welspun Corp is on the cusp of a complete transformation and we -- from -- we have been traditionally a B2B player. We are now significantly creating a portfolio for our B2C and that transformation, I'm sure will bring absolutely sustained earnings predictability and value creation for all the stakeholders.
We have always seen your support in the past, and I look forward for your continued support in times to come as well. I'm sure that we have been able to answer most of your questions to your satisfaction. But in case, if you think that there are a couple of things which you still want to get clarified, Abhinandan, Percy and Gaurav are here, and they will be more than happy to address that. And once again, with that, I want to thank all of you for joining on this call today. Thank you very much, and have a great day ahead. Thank you.
Thank you. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.
Thank you.