Usha Martin Gdr 144A

Ladies and gentlemen, good day and welcome to Usha Martin's earnings conference call. As a reminder, all participants' lines will be in a listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing start and zero on your touch-tone phone. Please note this conference is being recorded. I now hand the conference over to Mr. Anup Pujari from CDR India. Thank you and over to you, sir.

Thank you. Good morning, everyone. And thank you for joining us on Usha Martin's Q4 NFI 23 Earnings Conference Call. We have with us Mr. Rajiv Javar, Managing Director of the company, Mr. Anirban Sanya, Chief Financial Officer, and Ms. Shreya Javar from the Strategy and Growth Team of the company. We hope all of you have had the opportunity to refer to the earnings documents and the investor presentation that was shared with you earlier. We would now like to initiate the call with the opening remarks from the management, following which we'll have the forum open for a question and answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation.

I would now like to invite Mr. Rajiv Chawal to make his opening remarks. Good morning, everyone.

On behalf of the management team of Usha Martin, I would like to welcome you all to our earnings conference call. Our goal is to hold such forums regularly in the future with the aim of increasing transparency and building a stronger relationship with the investors and analyst community. Given that this is our first earnings call, let me give you a brief overview of the company and our strategy going forward after which our CFO, Mr. Anirban Sanyal, will run you through the key financial highlights. Usha Martin is one of the world's leading manufacturers of specialty steel wire ropes with over 60 years of experience. The company offers a wide range of products, including specialty wire ropes, high-quality wires, LRPC, customized end fitments, accessories, and related services. These products are used in industries such as oil and gas, ports, cranes, elevator, mining, fishing, renewable energy, construction and infrastructure, and general engineering, among others. The company has manufacturing facilities in India along with plants overseas in Thailand, UAE, and the United Kingdom. Our business model is primarily to stock and sell through our own distribution centers worldwide in Southeast Asia, Australia, Europe, US, UAE, and also do some direct sales from the plant. We have dedicated service centers where we provide value additions such as cutting, socketing, testing, inspection, and so on. The company has also has a global R&D center located in Italy where it designs wire ropes using proprietary software. In the past, Usha Martin was involved in the steelmaking business which was impacted due to the severe downturn in the industry and high leverage of the company. To overcome these challenges, we undertook divestment of the steel business by way of a slum sale. It is important to note that the company never defaulted did not go for debt restructuring, and there was no haircut by any of the lenders. This exercise enabled the company to significantly deleverage and turn around our financial and operational position. While it was a tough decision at that time, this helped us transform from a commodity business to a value-added high ROC business in which, one, We are able to grow our margins and profitability despite the volatility in commodity prices, that is our raw material, basically the steel. Two, the barriers to entry in the industry are high because of the long customer approval cycles and critical applications. As some of you know, wire ropes are highly engineered products that need to meet the highest standards of reliability and performance. Now with the renewed focus on the specialty wire rope business, Usha Martin has undertaken strategic initiatives to enhance its production capacity for wire ropes, diversify its product range, restructure its cost, secure its raw material sources, and strengthen its financial position. I will briefly highlight some of the key focus areas of Usha Martin at present. First, complete the modernization and capacity expansion plans that are focused on high-value products such as mining ropes, non-rotating crane ropes, compacted ropes, plasticated ropes, among others. Second, grow in international markets by specifically targeting geographies where we have a low market share. Third, leverage our Brunton Shaw UK premium brand to continue to secure businesses from premium customers and OEMs. Fourth, focus on digital initiatives to improve our operational efficiencies and enable closer collaboration between our various subsidiaries. Finally, double down on ESG initiatives across all plants with safety as the utmost priority. Most importantly, we will continue our strong focus on being financially prudent. Post the turnaround and stabilization of our business, we adopted a new dividend policy in FY22. I am delighted to share that the Board has recommended a healthy dividend of Rs 2.5 per share for FY23, amounting to a total cash flow of Rs 76.2 crores after taxes. Our commitment to all shareholders remains strong. and our board will continue to prioritize a balance between investing in the business to pursue growth opportunities and rewarding shareholders through dividends. In conclusion, I would like to say that Usha Martin has successfully navigated its past challenges and has made substantial progress in the last three years. Today, we strongly believe that Usha Martin is in a very exciting phase. We are confident that the company is well-placed to capitalize on the significant growth opportunities which our industry has to offer. We look forward to your continuing support in our journey that we believe will create long-term sustainable value for all our stakeholders. With this, I would like to hand over to Mr. Anirban Sanyal, our CFO, who will take us through the operational and financial highlights for the quarter ended 31st March 23. Thank you.

Thank you and a very good morning to everyone. I will now briefly take you through the company's operating and financial performance for the quarter and year-ended 31st March 2023. The consolidated net revenue from operations stood at Rs 865 crores in Q4 of FY23 as against Rs 767 crores in Q4 of FY22. The company achieved an 11.6% year-on-year increase in revenue during the quarter, primarily due to the improved realizations. We believe that our strong focus on value-added, solution-oriented offerings in both India and the overseas market has largely contributed to the overall improvement in realizations. Operating EBITDA for the quarter registered a healthy 44.3% increase on a year-on-year basis, at Rs. 154 crores. Operating EBITDA per ton improved to Rs. 32,063 in Q4 FY23, registering a strong 65.9% year-on-year increase. Our operating EBITDA margin for Q4 of FY23 increased to 18% compared to 13.9% in Q4 of FY22. This margin improvement is largely attributed to our ongoing strategic focus on expanding our presence across diverse critical applications and value-added offerings in segments like mining ropes, oil and gas, crane ropes, etc. Additionally, our EBITDA performance showcases the strength of our business model and the robust pass-on mechanism for raw material costs that we have in place. Usha Martin's sustained efforts to improve the product portfolio and some of the other key strategic initiatives largely enabled it to register a 55.8% year-on-year increase in PBT performance, excluding the exceptional income of Rs. 31.2 crores recognised in Q4 of FY22. On a full-year basis, net revenues from operations were at Rs. 3,268 crores, as against Rs. 2688 crores in FY22. The wire rope segment's contribution to total revenues rose to 67% in FY23 compared to 61% in FY22. It is important to note that within the wire rope segment, the value-added segment's share rose to 65% in FY23 from 59% in FY22. Going forward, we aim to increase our contribution from value-added products and reduce the share of low-value offerings. Also, our international business accounted for 55% of our FY23 consolidated revenue compared to 51% in FY22. Further, revenue from our international operations registered a healthy 34% year-on-year increase. The company views international markets as a significant growth opportunity and aims to enhance its penetration in those markets moving forward. Operating EBITDA stood at Rs. 513.3 crores for FY23, which was up 33.8% from the corresponding period. Profit before tax for FY23 registered a strong 44.5% year-on-year increase excluding the exceptional income of Rs. 31.2 crores recognised during Q4 of FY22. Profit after tax for FY23 stood at Rs. 351 crores, registering a 20.3% year-on-year increase. On the balance sheet front, our net debt stood at Rs. 185 crores as on 31st March 2023. The company has been able to deleverage and de-risk its balance sheet significantly since the divestment of its steel business and is now in a position to support the company's growth initiatives. We are also focused on optimizing our working capital by reducing the cash conversion cycle. Overall, given the healthy demand outlook for our products, and our dominant position within the sector, we are confident of further improving upon these results going forward and at the same time continue to remain financially prudent. This brings me to the end of my address. I would now request the moderator to open the line for the Q&A session. Thank you.

Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask a question, please press star 1 now. We take a first question from the line of Aman Kumar Sontalia from AK Securities. Please go ahead.

Good morning sir and congratulations for excellent results. Sir, so far so good. Sir, I have few questions regarding the future of the company. Sir, the major turnaround seen in the European business with business and profit rose from 50 million pound to 71 million pound and profit from 2.5 million pound to 8 million pound. This is really, sir, amazing growth seeing the recession in Europe. So, sir, I just wanted to know how sustainable this growth is and from where we will get the next level of growth in Europe.

Thank you so much for your question. I can take this. So as you mentioned, the European subsidiary UMIL has shown tremendous growth in this past year. And the reason for such disproportionate increase, we have about three or four key initiatives that we've taken. One is our organization structure. So all our international subsidiaries are now organized under one unified leadership, and they don't work in silos. Earlier, Europe was managed by a separate management. Two is that front-end, which is our plant in the UK, has performed really well. Previously, they would source their raw materials from other European sources, but now Brunt & Shaw primarily buys their wires and strands from our Indian plant. So there is a strong raw material linkage which has formed within the company that's really helped the UK plant. Third, what we've done is we've rationalized our cost structure and overheads in the European entity that has helped a lot this year. And four, and a very important one, is that we've had breakthroughs with some premium customers and OEMs in the region through a strong technical support by our global R&D center, which is located in Italy. And we really expect to benefit from this over the next two to three years as well. The efforts have started this year, but over the next two to three years, we really expect the results to continue to play out. Thank you.

So which are the sector and market the company foresee as having the best opportunity to grow? And what are the steps the company is taking to capitalize to achieve the growth in this sector?

Thanks for the question. So the major sectors that we see as providing us growth is mining, grains, and oil and offshore segments. And the focus of the CAPEX programs that we have as well in the company are catered to these sectors. Especially the oil and gas and renewable energy sector, specifically offshore wind in Europe, is booming right now and we expect it to show us tremendous growth. Mining sector growth opportunities as well are visible in Australia, America and South Africa. And other than these segments, one of the focus areas in terms of markets for us is both North and South America, especially in segments such as cranes, elevator and fishing and mining as well.

Sir, madam, what is the company's ability to pass on the raw metal prices like steel, coal to the customers?

Wire rope is a highly customized engineered product and therefore its pricing is not entirely impacted through the cycles of metal prices. Average consumption rate of wire rod for us has increased from Rs. 44,000 per ton in FY21 to to Rs. 62,000 in FY23. Operating EBITDA per turn has increased from Rs. 15,900 per turn in FY21 to close to Rs. 26,500 in FY23. The company has not only been able to pass on the increased cost but also managed to increase its EBITDA per turn over the last two to three years. This has been achieved through an active management of its product portfolio to focus on value-added segments like crane, oil and offshore, mining, elevators, and fishing ropes, and also increase the services business. The prices of LRPC and basic LRPC is more indirectly linked to the swings of the metal prices. These are generally the commodity products linked to the commodity prices. Even in those segments, our aim would be moving slowly towards more and more high-value products like the plasticated LRPC, which would have more the speciality flavor, as well as the wire business, more and more on these speciality wires which we would develop. So overall, I would like to say that the company has built up a product portfolio which, to a great extent, insulates it to any of these volatility of steel prices. which is evident from the financials which we have shared with you.

And so the last question is that we have got a lot of success in the European market. I think this US market is a very important market. It's a very big market. So how the management is seeing this US market going forward?

The U.S. market is, Usha Martin has a, you know, as U.S. is a very important market for us. Earlier, we were only focused in the Houston area, which is the Gulf of Mexico. We all know that U.S. is one of the largest economies in the world. And last few years, there has been a lot of investment on the infrastructure in the U.S. market. So what, and we saw that there is a lot of opportunity, there is a lot of shortage of labor and supply constraints in the domestic market. So we have expanded our management, we have set up our own offices in the east and the west coast, and strengthened our management team, built up our stocking position in the US market, and are focusing on the mining, elevator, and the crane rope market in those areas. We have even been able to get some OEM, good OEM approvals in that market. And, you know, while the U.S. market is very large, our percentage of share is only around 2% to 2.5% of the market. So this gives us an opportunity to increase even with – 3 or 4% market share, almost our volumes will double without really having a major impact in the overall market dynamics in the U.S. So we see that a lot of success in terms of mining rope trial results have happened, which has done well. Our acceptance of OEM for elevators as well as the distribution through distribution centers, all these have really helped and we expect the market to to really help us in the coming year.

Okay, sir. Thank you. This is from my side.

Thank you. We take a next question from the line of Kishan Doshnival from Polar Ventures LLP. Please go ahead. Good morning. Congratulations, first of all, on a good set of numbers. I have two questions, basically. The first one is that the, what do you say, out of this working capital cycle that you have shown in the presentation, there your receivable days are more or less flat. It's around 40 to 45 days. And you have guided that you will be getting this cycle to around 150 days, the working capital cycle to 150 days in next one year from 177. I just wanted to know whether you're working on that receivable part because that will go into the cash flows directly. So whether you are talking about that thing or you want to change something else in the working capital cycle so that that comes to 150. My first question.

Yeah, basically, you see the earlier, one of the reasons for all, you know, as I mentioned earlier, that our business model is basically having our own distribution centers across the world where we stock the material so that we are able to be close to the customer, even add services to it by cutting, coiling, and all what I mentioned, and be able to demand a higher price and serve our customers better. while we are able to develop through this process a much higher realization, which you can see in our financial results, and also helps us to get a much higher ROCE. So the focus of the company is that while our business model would actually entail higher working capital involvement because of the inventory, we would more than compensate by focusing towards the higher ROCE. Say, for example, last year, It was 19%. This year we are targeting, we achieved 21%. And our next two to three years target is to go towards 25%. So that is one of the things. And the second important thing is that also which is important for us is the inventory because last two years we have seen the logistics globally went through a very, very difficult position, both in terms of the logistic prices, the freight prices, as well as time taken for the material to receive. As things have now stabilized post-COVID, both the freight rates have come down to lower than pre-COVID levels, as well as the transit time is coming down. We expect with these two, definitely we would be able to achieve the numbers what we have mentioned.

And my second question is, the segment-wide contribution that you have given, wire rope, wire and stand, and LRBC, this segment is more or less fixed for the company, but the ratio remains the same, and is the margin in all three are more or less the same?

You see, the wire rope is, of course, gives you the highest margin, and that is evident from the E1Q4 results where the where the mix was moving more towards the wire rope side, which helped us to increase the EBITDA margin and even the EBITDA per ton. So our endeavor would be to keep on increasing the percentage of the ropes and also within the ropes, more the value-added and the higher category, higher performing ropes compared to the general purpose ropes, which help you to achieve a better better per-turn realization and margins. On the LRPC, of course, the margins, it's a competitive market. The competition is also expanding its capacity. Although the demand is growing, but the competition is also growing. And the margins would always remain, I would say, low in these categories. So the company has already developed plasticated LRPC, which goes into very, very specialized... construction projects and we are we have started producing those in the last few months and we expect that portion of our LRPC business to grow which is significantly higher in margins and will improve the margins in that segment. On the wire side the margins in generally are low and we have also exited from some of the low value added wires and our objective would be to gradually move towards specialized wire, galvanic quality zinc, aluminum wires, and other categories of wires, which would be giving us slightly more margins compared to what we are doing today. And, of course, they will still be not as profitable or as value-added compared to the ropes. But overall, the focus would be to push as much quantity of rope with the coming expansion into place.

So continuing this, the wire rope, as you move towards more and more of wire ropes, the margins that you have guided for a bit of margin of 18%, is there a chance that you'll beat that 18% guidance as well? Looking at the scenario of what you are seeing right now.

You see, as we said that over the next few years, we expect, of course, quarter four, we achieved 18% whereas our guidance... Of course, depending on how much we are, because you see, one thing is important for the wire rope business, for especially the specialized products, and when you go for premium customers, while your margins are higher, but it takes a lot of time to get into these customers, build a track record, and then build the volume. As we will grow in that sector, I'm sure that there could be a possibility of even increasing it over time.

Thank you. Thank you very much. Thank you. We'll take the next question from the line of Kush Tandon from Ananta Capital. Please go ahead. Good morning, sir. Congratulations on significant turnaround in operations over the last few years and a very good result. Sir, just continue on previous participants' conversation. We are already at 18% EBITDA, and the guidance was that we'll reach 18% in the next one or two years. Sir, is this, was there any one time in this quarter in terms of margins or realizations or should we, can we assume that 18% is lines are based now, going ahead?

You see, going forward, we should, you know, we would suggest using the FY23 numbers as a benchmark. Quarter on quarter variations may happen based on product mix volumes and various dynamics at play. But overall, compared to FY23, we definitely expect sustainable growth in absolute volume and profitability numbers. And the ROC as well as EBITDA margins would continue to grow. Now, there was no exceptional gain in the quarter 4. But there was a higher mix of wire growth compared to a slightly lower mix of LRPC and wires in this quarter, which gave us this. But I would suggest again, at the cost of repetition, take the FY, you see over the FY22, FY23, it has improved. I would definitely say that quarter by quarter, we should not look at it quarter by quarter, but if you look at year by year, definitely you will see upper trajectory going forward. And as the expansion is getting completed, which is more towards wire ropes and also towards the specialized wire ropes, and as we develop these markets, Definitely, we see a higher traction both on EBITDA margin and ROCE. You will see an upper trajectory.

Thanks for that, sir. Sir, the second question would be, what is the kind of capex that we are looking to do, FI24, FI25, sir?

For our phase one, we are doing 310 crores, which is underway, which we expect to complete by the quarter three of FI24. So this is something which is on track and is expected to complete by the third quarter of this year, this financial year. Then we have taken another plan of 160 crores, which is 167 crores, which is expected to start almost by the time this is completed, and that would take almost 18 to 24 months to complete, which is which is as far as our plants in India is concerned. Along with this, our plant in Thailand, which has also turned around and done well over the last couple of years, particularly last year, we have taken a plan of modernizing this plant and expanding its capacity by investing 62 crores. And this is going to enhance its wire drawing capabilities, stranding and closing. The capacity of the plant capacity of rope is expected to increase primarily in the value added segments like compacted non-rotating ropes as far as the Thailand plant is concerned and as far as Indian plant is concerned we are further increasing the capacity of grain ropes, mining ropes as well as some of the special ropes to be able to cater to the higher demand based on some of the success which we have got in the current year. So It's a 167 crore over the next 18 to 24 months after completing this first phase of CapEx.

Okay. Thank you, sir. And all the best. Thank you. We'll take the next question from the line of Ankit Gupta from Bamboo Capital.

Please go ahead. Thank you for the opportunity and congratulations for a great set of number. Sir, you know, I just wanted to seek one clarification on the CAPEX that we are doing. So the first phase of CAPEX that we are doing, which will be completed in Q3, will increase the capacity, wire rope capacity by 30,000 metric tons. And the second phase of 167 crore, how much capacity will we be expanding in phase two of the CAPEX?

It will be around approximately 10,000 tons of wire rope.

Sure, sure, sure. And so, you know, on the end industry segments that we look at, you know, currently the value-added segment is around 65%, and our focus has been majorly on to increase the value-added segment contribution further. So how do you see the value-added segment contributing in our revenue, let's say, two, three years down the line in wire rope segment?

So within the wire rope segment segment, Right now, the value-added ropes, like you mentioned, is around 55 last year, 62 this year, and I think going forward in this year, once the new capacity is added, we can find that within the wire rope, value-added would be upward of 65% or so. Now, that's just within wire rope, but if we look at the overall, all product segments together, right now, our value-added would be around 44% for this year, and in the next In this coming year, again, with the capacities, around 47% to 48%. But going forward, I think long-term, on a two- to three-year view, overall as well, if you look at all products together, value-added, we would aim to be around 50%.

Sure. And on LRPC and the wire segment, we have been making efforts to increase the value-added segment, like plasticized LRPC. So if you can... Talk about the strategy of which all products we are increasing. How much is the plasticized LRPC capacity currently? How much will it increase? Or in wire segment, any value-added product that we are doing and how do you see the growth for that segment? If you can broadly explain about the strategy for value-added products in wire and LRPC segment.

Yes, thank you. So on the LRPC segment, The plasticated LRPC current capacity what we have created is 500 tons per month. So out of the total 60,000-65,000 tons of capacity of LRPC, we would be in the first phase, which we have just completed, we would be achieving 500 tons per month of plasticated LRPC. Going forward, I expect this tonnage to go to 800 to 1,000 tons a month. Now, this is all project-related business where you need to work with very renowned consultants and on special projects. With the thrust of the Government of India towards the infrastructure projects, I see that this sector's demand will go up and it has a very good synergy because the plastication, it is the infrastructure is very similar to the wire rope business where we also do plasticated wire ropes and so this is something which has a good synergy and we expect within next 18 to 24 months to take it to almost 800 to 1,000 tons a month. That is on the plasticated LRPC. On the wire front, a very quick, I would like to mention that, you know, as we have seen also volumes of wires have come down because when we were part of the steel business, a lot of wires of the even low value because that was used as a opportunity to even evacuate our steel. But now that once we have started looking at our business on a standalone basis after the divestment of steel, we have taken a conscious decision of getting out of these wires. So that is the reason why the wire numbers have come down. And now we are gradually moving into specialized wires. We have just, in our new CapEx of 167 crores, We are setting up a galvan line, which is a zinc-aluminum combination. We are creating a capacity of 10,000 tons per annum. Again, this will take gradually one or two years to build up this market. We have some markets, both for the galvan wires and some of the applications are even on the galvan wires, which are used for rope making. So that is something which we are creating this infrastructure. The company already has the technology for this, so that is not an issue. And also we are looking at other wires which are going in for high-end applications on the spring wire, on the ultra-high power, ultra-high tensile ACSR wires, which is used through our patenting furnaces. And these are the products which would give better margins than the normal wire margins. So this is approximately we are looking at building a capacity of 10,000 to 12,000 tons. in addition to whatever we are doing today. So 10,000 tons of galvan and 10,000 tons of these special wires. So about 20,000 tons we intend to build over the next two to three years.

Sure. And sir, on the service business, if you can talk about how has been the growth in the service revenue over the past two, three years, and how do you see this segment growing for us over the next year or two? Yes.

Basically, the service business, you mean to say our international businesses which we do cutting, coiling and servicing?

Yes, sir.

Basically, we have three businesses under the European substitute business. One in Aberdeen which supplies these services to the oil field sector in North Sea and one in Rotterdam which takes care of the ports and the services. And we have started, and the turnover of these two businesses are close to almost 700 crores a year. And we expect to, along with this, the two businesses in Thailand, in Singapore, as well as Dubai, we have recently started our services business. So over the last two years, we have been able to increase the business from 450 crores to close to 650, 700 crores. We expect to grow by about 15% to 20% on an annualized basis over the next three years.

And the margins in this segment will be in what range in the service business?

You see, margins are, I can only say margins are generally higher than just selling wire rope, but it again depends on which product, which customer. Generally, we see that the margins are at least... 4 or 5% higher compared to the normal margins what you will get selling wire ropes. But it all depends on project orders, what is the quantity, but overall what it helps you is not only the margin, it helps you to be working very closely with the customer. So your ability to even penetrate these markets along with the service side of your business is much higher than just going and wanting to sell them your product as a commodity or not as a commodity, a product as a product. So the service angle makes you much more acceptable to the customer because they see the product and the continued service and your people on the ground to support them. So I look at it more a very big enabler apart from the margins which is definitely there is a faster way of breaking through Some of these high-end customers, which we have been able to, as Shreya mentioned, we have been able to successfully develop in the last 12 months.

Sure. And this last question on the new customers that we have developed. So, you know, if you can talk about them and how are we scaling our businesses with them?

Sorry, sir, could not get your last question.

The new customers that we have developed on oil and offshore companies elevators, mining, and even fishing sites. If you can talk about them, you know, about these customers, how are we ramping our volumes with them, and any other customers in pipeline which you think can become big for us over the next 12 to 18 months?

You see, as Shreya mentioned, that we have got these customers. Brunton Shaw has been our premium brand, which the group acquired in the early 2000s. And now with this close linkage of raw material and getting the margins both higher and making them more competitive, along with our development center, we have been able to make breakthrough with three or four of these customers. I would say last year was the first year after working for last two, three years that we have been able to make this success. I would say that this is just the beginning. Of course, this has been supported by... from demand, from the oil sector, from the wind energy sector, as well as there has been an opportunity where supply disruption for the European manufacturers have been there. So this gave us an opportunity to enter into this market. What it really helps us is that once you have got three or four of these large customers who become your sort of a showcase, and in terms of you have been able to successfully deliver your products and services to them, This gives you a very big reference, which then other players in the market are able to do. I would say that it is just the beginning, and I would say that next two to three years, these premium products, we should be able to grow at the rate of almost 30%, and at least three or four more large customers are in the pipeline, which are under advanced stage of discussions to start the relationships. So I would say next two, three years is exciting period for this segment.

Sure, sir. Sir, just one last request. If you can give us the number of the brief financials of our subsidiaries, like let's say revenue, EBITDA, and PAT in our quarterly presentation, it will help us. And thank you and wish you all the best.

Thank you. Anirban, can you please take the last question?

I've taken that.

Thank you. We'll take the next question from the line of Nitin Reheja from Julius Bear Wealth Advisors India. Please go ahead.

Hi, good afternoon, sir, and congratulations on a good set of results. Sir, I have a couple of questions from a clarification perspective. Can you give a little more understanding from the CAPEX program? You know, I see that, you know, your first phase is of CapEx, which is almost close to 300 odd crores, is giving you an addition of almost about 40,000 tons of capacity, while the second phase of 167 crores is giving only 10,000 tons. Is there a difference in the complexity or, you know, can you just give a broad understanding on the CapEx?

You're right. The first phase is 40,000 tons, which is... creating the facilities what is required for the different types of ropes what we mentioned. The second phase, which is 167 crores, is predominantly for mining rope and some of the new customers what we are trying to develop, which I just mentioned, in the European market. Some of these ropes are single lengths of 300 tons, 400 tons. Those require very, very heavy machinery. And the capacity of that machine would be much more than those 10,000 tons. The capacity would be 25,000 to 30,000 tons a year. But looking at the market, looking at the opportunity, we feel that in the next three to four years, we will be able to produce or get 10,000 tons out of this business. And of course, gradually, if the demand grows, it will be higher. So the installed capacity may still be higher, but As the demand, so this 10,000 tons is something what we feel that we would be able to produce and sell in the market. So that is the thing. So capacity inherent would be close to 30, but we are only taking the capacity which we feel that in the next three to four years, we should be able to get out of this.

And both these capexes that are happening, What would be the incremental return on capital that you would be earning?

You see what we mentioned because the percentage most of the capex is towards building the capacity of the high value ropes as well as the wire ropes which goes for the critical applications and some of the service. So our projections what we are seeing that over the next two to three years we should be able to get to close to what we have mentioned that we are moving towards 25% capital employed. And this will help us to even increase our EBITDA margins from the levels of 14-15% to 18% plus in the coming. So not only the existing base is improving, but it is also being helped by the products of the high value which are helping us to take it to close to 25% ROCE.

Okay. So, so my next question has got to do with the margins, your EBITDA per ton. We've seen from 21 to 22 and in 23, you've seen your margins, you know, from an average of 25,000 odd go to 32,000 in your last quarter. But for the year as a whole, you were at 26 and a half thousand roundabout margins with all the new products that you're talking about. A, what do you see is the long-term steady state EBITDA margin that you would get to over a period of time? And if I have to sort of say, you mentioned that 50% would be value-added and 50% would be the older wires and ropes. What is the difference in the EBITDA per ton between the value-added and the older wire and ropes?

Let me tell you, I will answer this question. But the other question, I would refrain from giving specific numbers for the future. But I can tell you two things. One thing is that the higher value-added products, what we are talking about, grain ropes, mining ropes, as well as those products would be in excess of 50,000 rupees per tonne. Because those are very critical applications. You need to work very well. So they would be 50,000 rupees plus those products. Some of the products what we are talking in the international market where the realizations are in excess of 270,000 tons per ton which you have seen in our results. Those would be all 50,000 rupees plus. General purpose ropes would all be between 20,000 to 25,000. So the blended average is something which is helping us. And of course, the LRPC and wires are the lower category, what we are talking about. So I would say that one of the reasons why the EBITDA margins will go up is because all the CapEx initiatives and all the various working which we are doing with our international businesses is more towards getting a higher percentage of of mix of the value-added products.

Okay. My last question has got to do with your working capital. And as I see, while your receivables and creditors are almost closely aligned, it's really inventory that is the largest component of your working capital. Is there a risk in terms of when there are fluctuations in prices you know, taking write-downs in inventory or having inventory losses? Is there, I mean, how does this business work?

Two things. The last three years, the steel volatility has been very, very high. From 44,000, it has gone to 62,000, 63,000 rupees. So almost 18,000 rupees per ton, the steel prices have fluctuated. And we have seen that the company has been able to, been able to withstand all this volatility and has been able to continue to improve your margins. And as you go into the higher value-added products, the percentage of the steel is automatically coming down as a percentage. When you see it is almost 23% for value-added products in the international market. It is 36% of the value-added products like wire ropes Indian market and between 67 to 78% of the commodity products like wire and LRPC. So yes, wire and LRPC is generally a path through. There is very difficult, it is, you know, it is, it is. But when it comes to these higher value added products where your steel margins, your steel component is much lower and also the pricing power of the company when it comes to these things, at least in the last three years, I can tell you that we did not have any such instance where we had to take a write-down on our inventory. We have been able to manage it. And that is evident from the way our EBITDA margins have been going even in this volatile or in this steel market. So I don't see a risk on that.

Okay. And is it fair to assume that most of this inventory that is there is finished goods inventory?

I can tell you it is when it comes to all our overseas business other than Brunton Shaw and our Dubai plant which is manufacturing facility. There it is raw material which is produced in India and finally it is converted in either Brunton Shaw or in our Dubai facility. So they have a combination of finished product as well as semi-finished or wires and stands from India, whereas all other subsidiaries which are purely distribution and services, it is finished goods from India.

Okay. And so my last question has got to do more with the macro demand environment. How do you see this macro demand environment? You have sort of talked about a 15% growth currently, but is there some sort of structural drivers Or are you also taking market share from competitors in some other countries? How does India get positioned out there? And from your perspective, how do you see the visibility of growth?

You see, you rightly said that last two, three years, once the whole structure, as Shreya mentioned, that our international businesses, we all put under one umbrella, not only as a they were all 100 subsidiaries but running in silos on an integrated basis we we when we have realized and put all our energies together we could see that there are big opportunities in the market and because of the the the inflationary trends as well as some of the other challenges during the uh during the pandemic as well as in the with the geopolitical crisis it gave us big opportunity and we could see that our cost advantage with linkage with India was there and there were great opportunities for us to go and take market share from other established players and even these customers were looking at because it is not only our cost competitiveness but also the integration with our global development center where we work together to not only be competitive, but even offer good quality. And having said that, with few big successes, what we have made in the last two, three years, I see that the reference and the opportunity of growth with the current environment, I see that it is possible to do it. And it is just not the growth which is taking place, but it is also how we take the market share from competition. So it's going to be a combination which is going to help us to get to 15%.

Okay. And you are fairly confident in terms of the visibility at the present moment.

I would say next three years, we have a fairly good visibility. All right.

Great.

Thank you so much.

Thank you. We take a next question from the line of Alicia Mahavla from Envision Capital. Please go ahead.

Hi, sir. Good morning. Thank you for giving me the opportunity. So I just wanted to know what is our current capacity in wire to wire strength in LRC?

Our total current capacity is around 296, around close to 300,000 tons. And our total current production is close to 204,000 tons. It's about 70% utilization. This is our current overall capacity. Our LRPC is close to 60,000 tons, between 60 to 65,000 tons, depending on the size what we produce. The rope is Rope would be close to 126,000 tons, and our current production is close to 101,000 tons.

And on the rope side where we have 126,000 tons and we're almost at 75% utilization, is this peak or can we go up to 85-90%?

You see, wire rope is, while the capacity, nameplate capacity is higher, but the product makes some of the capacities, you know, equipments can, there's definitely possibility to go up, but it may, it is, the rope capacity is not by just the nameplate capacity because the product makes, a machine can produce between, say, 13 millimeters to 26 millimeters. The production is almost half if you produce 13 millimeters compared to 26 millimeters. So, it is It is an average capacity, which is possible. All depends on the market size. But on a general thing, what we have seen worldwide, to get to 70-75% capacity is a fairly decent capacity for wire room.

So it is fair to assume on an average, we are currently operating at peak volume, obviously depending on what product mix and the capacity that will come in phase one in Q3 is when we will be able to see a significant jump in volume.

Yeah.

Sure. And is there any volume growth aspiration that you would like to share for next year or over the next two or three years?

You know, we have mentioned that we expect to grow by about 15% to 18% compounded in terms of our top line. Our focus is apart from just the volume is also going to be the value. So we expect around 15% growth in terms of deliveries on an annualized basis for next three years.

How do we expect the mix between wire ropes, wire strand, and LRPC to be three years down?

You see, LRPC, we are not expanding our capacity, so it's not going to grow. So as the volumes will grow, the percentage would keep on, you know, we are not adding any capacity. On the wire side also, we are just replacing some of the low cost with high cost. So we are not, again, from the low value to high value items. So our percentage of rope will continue to grow, whereas the wire and strand and the LRPC would be almost at similar levels of what we are doing. The wire side may grow with the zinc-aluminum wire, what we mentioned, as well as some of the other high-value added wires. But also, there would be some low-value wires which we would continuously flush out of the system. So percentage-wise, Our rope will continue to grow and we expect it to be close to around 70 to 72% of our revenues will come from ropes.

And obviously we've seen very healthy increase in our EBITDA per ton from about 15,821 to 32,000 Q4. And we expect the share of wire rope to continue to grow. So is there an aspiration of where we see this EBITDA per ton in light of the more value-added products also that we are targeting towards?

This question I've already answered. And I would not like to give any specific guidance of any burden going up. I think what we look at is 15% to 18% is the compounded growth we expect in the next three years. And the ROCE, which is a combination of all the various financial numbers we talked, we came from 19% to 21% in these two years. We gradually go up to 25%. The per turn EBITDA is something which you should not look at on a quarter by quarter basis. We should look at what was the growth over 21 to 22 and 22 to 23. And I can only say the trend on an annual basis will be going up. I would not say that you should look at one quarter and say that becomes the benchmark for the year. We should look at our business annually. on an annual to annual that we will definitely continue to improve the trend going forward.

And just one last question. There has been significant reduction in steel prices in China and expectations that probably the prices will continue to trend lower in India also. Will this lead to any significant inventory losses for us? And also, with lower steel prices, will it have any negative impact on our EBITDA per ton?

Can you come again? I couldn't get you this question.

Just wanted to know if the sale prices continue to trend lower, one will be what is the kind of inventory losses that we can face because we do hold significant amount of inventory, and two, how will this impact our EBITDA pattern?

I don't think there is, you know, as I mentioned, I've already replied to this question recently, just a couple of questions ago, that there has been a volatility in steel prices. It has gone up from 44 to 62. And even the prices have gone up and down in between. The company has, based on the strength of its value-added product, improvement of its product mix, changing the mix between domestic, increasing our sales to the higher-end sectors in the international market, we have been able to ensure that our EBITDA has continued to improve in these coming times. I don't see any, with the current and the steel prices as they are happening right now, I don't see any inventory loss coming to the company in terms of any inventory loss to the company. I don't expect anything to happen.

Okay, thank you.

Thank you. Our next question comes from the line of Koshik Mohan from Ashika Broking. Please go ahead. Hi, sir.

Thanks for the opportunity. Congratulations for the good set of numbers. So my question is basically on the coming CapEx, whatever you're doing, what would be your revenue mix in the coming years? Majorly, I wanted to understand on LRPC.

As I mentioned, LRPC volume is going to remain table as they are not increasing the capacity of the LRPC. Our main capacity increase is taking place in the wire rope and the specialized product and services. So as a percentage of revenue, I expect the rope side to continuously keep on going up in view of the new capacity which is being added plus some of the new markets and opportunities which we are building up. Assuming that the new capacity is more towards wire rope and the specialized products of services and wire rope, the percentage of LRPC and wires would keep on coming down. And it would keep on tilting towards the wire rope. And I would expect the rope size to go from current level of about 65% to close to 70-72%.

Got it, sir. Sir, and this CAPEX is happening and you are guiding on that Europe you have the clients. So what can be the Europe revenue segment in the coming years? Any thoughts over there, sir?

I would only say that last year we grew from 15 million to 70 million. In 2021-22, we were our European business clocked a turnover of 50 million. we did 70 million, almost a 40% in last two years. Based on the various success and the attraction of demand which has come from the various success what we have got, we expect it to grow significantly in the next two to three years.

Got it, sir. Sir, the last and final question. Sir, another question is found. Sir, how much of your entire revenue has been segmented towards...

value-added products and only the replacement products which will be like replaced every year or every two three years and some coming years what is the difference between these two yeah so you mean between the oem and replacement market right so i think yeah the oem market would be around 20 or so whereas the remaining would be uh the replacement market

What is the replacement market time duration? Is it one year or two years you're having the replacement orders?

So the replacement cycles can vary depending on, you know, we have a diverse range of products, right? So I'll just give you a few examples. For example, for port cranes, it can be around six to 12 months, whereas for drag lines and shovels in the mining industry can be two to three months. Dump ropes, which again in the mining industry can be about 15 days, but elevators, for example, can be longer, four to five years. Fishing is seasonal, so that can be around, you know, it can either last one or half season, six to 12 months. So it really depends. So it varies from a few days to a few years as well, but that's just to give you a flavor.

Thanks, ma'am. Ma'am, if possible, can, from the next... Can you please add this also into that so that we'll get more understanding on how the company is going towards?

Sure, sure.

We'll add those details to the presentation going forward. And the last and final question, how about your cash flows, ma'am? How are you projecting your cash flows? What will be the conversions of your EBITDAs to cash flows in the percentage terms? Anirban, can you take this question, please?

Yes, yes.

So the operating capital for FY23, if you see, Kaushik, it's been 345 crores before income tax for this year. And percentage of operating EBITDA, it is already at 67%, which was 13% in FY22. So there's been a significant improvement. And this OCF generation is actually supporting the company's capital allocation plans. And going forward, we hope to maintain as a percentage of operating EBITDA anywhere around the 70% mark. We consider it as achievable and maintainable.

Got it. And so can I assume that it would be around 65% to 70% in the coming years?

That would be the range, yes.

That would be the range. And that would be majorly reduction on the inventory side and your focus will be more on the inventory days.

So, here I would like to mention, so even in absolute terms, if the inventory increases, you need to take into account that in percentage terms, networking capital to turnover would remain in that 29% bracket. So, as we increase in terms of revenue, if we can continue to limit the NWCT turnover at around 29 to 30%, you would see that this operating cash flow conversion from EBITDA would keep on increasing.

Got it. So, on the total current capex, whatever is done, what can be the optimum utilization of capacity utilizations on that number, sir, on this 10,000 as well as on the 40,000 tons of metal, that whatever the capex you have done?

I would say a similar level of 60, 60, between 65 to 70 percent.

65 to 70 percent capacity utilizations. Okay. Thanks, sir. Thanks, sir. That's all. Thanks, sir. Thanks.

Thank you. We take a next question from the line of Aditya Nahar from Alpha Enterprises.

Please go ahead. Thank you so much. It's been a fantastic presentation that you all have put out and that is continuously being put out. I just hope that the number of slides only increases and doesn't reduce in terms of the disclosures and the clarification. I mean, it's one of the best presentations I've seen. So, sir, there's been too much time taken up already. I just wanted to pick your brain on if you would be open to doing, instead of in lieu of dividends, you would be open to doing buybacks. I understand this is a board-level decision, but just wanted to check whether you would be open to doing a buyback because your policy also states you're open to doing capital reduction and buyback as well.

As you rightly said, sir, this is a board decision and for me, individually, will not be right to comment on this. So, So I can only say that as the cash flows improve, what the board policy is on dividend, anything else we would, you know, we always need to take first any discussion is at the board level.

Great, sir. I just wish you would consider it even at the board level. Thank you so much. And it's been a fantastic call and a presentation, sir. Thank you.

Thank you. Thank you. We'll take the next question from the line of Amanvij from Astute Investment Management. Please go ahead. Good morning, team. My first question is on the capacities and utilization across our international subsidiaries. So if you can talk about what is the capacity and utilization in the UK, in Thailand, in Dubai.

Our capacity utilization as far as Dubai is concerned is around 83%. Our capacity is 15,000. We did about 13,500. UCIL is around 86%. These are all on the rope side, I'm telling you. It's around 86%. And on Brunton Shaw, it is close to around 50%. But this is something we expect to grow with the various attractions that we have got in the international market.

And you have talked about next phase of expansion in Thailand and in Dubai, but not in Brent and Shaw. So any particular reason you're not expanding there?

You see the capacity utilization is 50% there. And there is still scope for growing based on the new customers what we have got based on the supply of wires predominantly from India, which is at a decent price and value. We expect still some capacity available to take care of the newer customers and orders what we get. Once we get further closer towards... 75-80%, we would definitely look at it. But right now, I feel there is a headroom to achieve more there.

Sure, sir. My next question is on the order book and in terms of the cycle to execute the same. So you have talked about we have possibility for next three years. So if you can talk more about is it the order book which we already have and normally what is the typical order execution cycle in our business?

We have dedicated dealers in India who are buying regularly because wire group there are no, you know, there are other than these big European companies or big giants where they give you orders for six months, 12 months because the lead time is high. Most of the others as we said that the replacement market is 80%. So we have a strong distribution network in India as well as our own distribution companies there. So there is a regular sale which is taking place. So we generally have an order book of two to three months in pipeline. But it is, we know that 80% is the replacement market and the demand keeps on coming. The dealer network keeps on getting and selling and replacing. So we see that the order book is generally two to three months, but based on the consumption and the forecast, we see that next two to three years, we can expect the growth levels what we are talking about.

So on the Thailand subsidy, we have become positive this year. So In next two to three years, do you think it can reach the profitability of the India business or even can it reach the profitability of Brenton Shaw and all the other players as well?

Brenton Shaw is a different kettle of fish, you know, they produce products which are each, you know, their premium product is between 200 to 350 to 400 tons single weight rope which goes into very, very high critical application crane rope. So that level of margins is much higher and very few players in the world produce that and that took us a long time to get a good stability or at least a good entry into that business and next two, three years we see an advantage of that. Thailand is generally the smaller range up to 52 millimeters which is Generally, the Koreans, the other players in the world do it. The EBITDA margins were only around 6%. We have come to close to 11%, 12%. And with the new investment of 62 crores, which we are doing, our whole objective is to get into higher value-added crane ropes, elevator ropes, and some of those high-end products, which will ensure that we continuously keep on improving the volume of as well as get into a higher EBITDA percentage. To answer your specific question, whether the EBITDA levels would be similar to India or to Brunton Shaw, I don't think so, because the product mix of India and the product mix of Brunton Shaw, there is a large product mix which is of a very, very premium product. But I can only say Thailand, which has also shed out some of the low value-added products and come to 12%, will also grow at the similar level. So while the base is low, they will also keep on improving at a similar level. But I would still say that India and Europe will be our prime drivers of EBITDA and profitability.

Sure, sir. Coming to the international business, we had the aspiration to increase our market share in Europe. and maybe in LATAM and Middle East also. So you have talked about this strategy in US from 2-3% market share to 4-5%. What is the similar strategy we have for Europe, LATAM and the Middle East market? What is our current market share? What we are aspiring it to become in next 2-3 years?

Middle East market, Brunton Wire is the only producer in the GCC. We are the only raw producer there. We have a fairly decent market in that region. The area where we are seriously looking to, we are exploring and probably we'll get into is the Saudi Arabian market because that is a market where we feel that both services and rope demand. It is not only on the oil side which they are doing well, but there are big growth plans in Saudi, the new regime or the current regime over there. They are having very big aspirations for growing the infrastructure in that country over the next 20 to 30 years. So that is something we are seriously looking at and we expect to definitely increase our presence and grow in that market. And I see, apart from the Middle East, that would be the fastest growing economy in the time to come. And we will definitely play an important role for our rogue business there. Coming to LATAM, we have hired a very senior guy within the industry, from the industry, from one of our competition in Europe, based out of Spain, who is helping us develop our global markets. And it's like a global growth center looking at opportunities. And South America, which is mainly Portuguese and Spanish-speaking country, He has made in the last one year a few trips, and we have got good leads, and we now plan to expand in that market. U.S., I already mentioned, U.S. is a very big market, U.S. and Canada. Our presence is very low. It's close to just 2%, 2.5% of the total market, and there we see a big potential. We have made some good breakthroughs, and I feel that this will be a very important market for us. Europe, Usha Martin is a very well-established brand. Brenton Shaw, Usha Martin, and with our own manufacturing and distribution centers working closely, we have a very good brand name also. Altogether, we do about 19,000 tons of sales of wire ropes in that market, including a lot of services we add. As I mentioned, from £50 million to £70 million revenue growth in one year, we will see substantial growth in the European market. We will further consolidate our position. Norway Germany are two markets where we are targeting to expand our position in the coming year.

Sure, sir. That is very helpful. If you can talk about the next two, three years, there are a lot of tailwinds in the industry. We are also talking about good growth, but a little bit longer if I take five years and maybe beyond. the industry is going at single digits so is it possible for us to keep going at this double digit for next five seven years as well or only two three years visibility you think and then afterwards we will go at single digits only for next five years i can see that we'll be able to get to this with the with the sort of cash flow we are generating with the sort of growth plans we have and the

the organization capacity to go into the markets what I've mentioned. I see that we have significant opportunity to increase and take market share. So I cannot comment for 10 years or beyond, but next five years I can see that we'll be able to manage this growth based on our current levels of performance and the expected levels of performance.

Final question on the, we will be generating a lot of cash and we have a dividend policy. At the same time, we are also entering into newer areas, maybe like synthetic ropes. And if you can talk about a strategy there and is there an opportunity to acquire some companies in Europe which are not doing well given the today's scenario. If you can talk about these two things.

First of all, I would like to tell you very clearly that, you know, Synthetics is a different market altogether. I'm not saying it's a good business. There's a very few area where synthetics and steel wire ropes have a common ground. It's a very interesting business, but right now I think there are big opportunities in our steel wire rope business which we have plans. I think the focus would be over the next two, three years to first focus on and try to see what this is the business we know best and we see still a lot of opportunity to grow in this area. So that is something right now we don't plan to venture into synthetic rope manufacturing at all. Secondly, I am very conscious of one thing which I even mentioned in my opening statement that I've gone through, we have seen very tough times with high leverage. So anything which is not going to increase our leverage to a level where it becomes unsustainable, I would not like to go back. That's been a key learning for me in my past. And I would not like to do that. But if small opportunities are there or something which fits into our financial model, I would definitely look at opportunities which will help us to get into newer markets or better brands like what we have in Brunton Shaw. We would be open to but not something which is going to put the balance sheet at a risk once again.

Sure, sir. That is very helpful. All the best to you. Thank you. We'll take a next question from the line of Pankaj from Affluent Assets. Please go ahead.

Thanks for taking my question. Am I audible?

Yes, you are. Please go ahead.

Yeah. Well, Sir, just wanted to understand, you have current capacity of around 3 lakh metric tons. You'll be adding 40,000 in first phase at the expense of 350 crores and another 10,000 at the expense of 150 crores. So can you please help us with the timeline as and when these capacities will come on scene? And if possible, how would be the revenues to the other term, if you could explain?

As I mentioned that we will, based on these capacities, you know, these capacities are all put at one time, you know, this 40,000, because equipments are all put at one time. The market development product makes, takes a while. So, based on this capacity expansion, we expect 65 to 70% of the utilization. So, Assuming that we are adding 45,000 or 41,000, 65% to 70% would be the volume which will be coming up. And I would say more than the manufacturing capability. Manufacturing capability to push up the volume is there, but it also needs to be dovetailed with the demand side and the way we are developing the market. So I would say this is going to help us to get to 15% to 18%. growth in terms of our deliveries or volumes on a year-on-year basis. So it is partly improving our current efficiencies and it would also come out with the expansion. So next three years, we expect 15% to 18% year-on-year deliveries to improve from the new capacities as well as some of our existing efficiency improvements.

Well, so roughly at 950 crores of net block, you'll be adding another almost 500 crores. So will it be safe to assume that from 3,000 crores, we are going closer to 5,000 crores over next two to three years?

It is not proper for me to give you any absolute numbers, but I would say that one should look at 15% to 18% growth on a compounded basis, you know, on our current levels of revenues.

Okay. So, our EBITDA pattern has improved from around 16,000 per ton to, say, 26,000 per ton on annual basis over the last two years. So, and meanwhile, fuel prices also have moved up. So just wanted to understand this improvement in the beta margin, what was the function, this improvement of the beta margin was the function of what? The steel price rise or internal efficiency?

No, no, it is definitely not the steel price rise because steel price rise is something which is generally part through. The majority of the improvement which has come is with the improvement of our product mix like what Shreya mentioned, that our percentage of wire rope has increased. Our percentage of wire rope year on year is increasing. Even last year, our wire rope increased by 9,000 tons, whereas the LRPC and wires actually were marginally lower. So it is changing the mix to... Shreya, do you want to mention? Please.

Yeah. In addition to the change in the mix, I think also important to highlight that... It's been driven by more sales in the international operations compared to the domestic operations. The EBITDA per ton on average for the international operations for FY23 was around 27,600 per ton, whereas the domestic operations was around 18,700. So I think that also gives an idea of where the increase in margin is coming from.

And our share of our international business also has improved. year on year, it has come to almost 55%. From 51%, what was being part of the international business earlier, it has gone up to 55%. And the international business gives, because of the markets and the prices of the products, we get a much higher EBITDA per ton. So that is how I would say that the percentage and the absolute numbers have gone up.

Lastly, how sustainable is it? And second thing, one of our competitors, though very small as compared to our top line, has reported margins to the tune of 24-25%. Will it be possible for us to reach that number in near future?

I can only comment on Husha Martin. You know, we have three verticals, wire rope, wires, and LRPC, whereas the other may be just wire rope business. And as you have seen, the wire rope gives you a much higher EBITDA per ton and higher value addition per ton. That being said, we at Usha Martin look at ROC closely to ensure the minimum, optimum utilization of all our assets across all these three product verticals. And as we mentioned that the wire and the LRPC are definitely more in the commodity grade with of course some high valued LRPC in terms of plastication which is just getting into the product mix. So I would be more keen to talk about Usha Martin that we would continue to grow on the manner in which we have based on the strength of all three verticals. So ours is a blended margin, whereas probably the competition is on the rope side. So I would not like to comment on them. I would rather comment on the way we look at going forward.

You also mentioned that you'll be exiting certain low value added products. I suppose those are the likes of wires. So going forward, will it not help us improve our margins?

Definitely it will help us improve our margin as we increase our percentage of ropes and reduce the wires or get into higher value added wires and plasticated LRPC. It is all going to help us improve. So I would look at Usha Martin, how we are converting ourselves into the new model and how we are progressing our ROCE and EBITDA pattern. And I would say that this is something which we expect to grow year on year basis. As we have seen it has happened in the last three years for us.

Sure, sir. Thank you. Thanks a lot.

Thank you. We take a next question from the lineup. Rupesh Tatia from Intel Sense Capital. Please go ahead. Hello, sir. Can you hear me? Yes, please go ahead. Yeah, thank you. It's good to see, it's good to meet with you Rajivji again, and it's a good initiative we have taken, and also it's very nice to see Shailaji also on the call.

Thank you.

Thank you. Yeah, so my first question is, you know, thinking kind of like in terms of risk to whatever guidance we're giving, Uh, I was trying to think about the risk and one of the observation I have is some FY21 to FY23. We look at the steel prices. For Indian kind of like producer, the prices have gone up by, you know, roughly $150 per ton. And for European or American players, they have, you know, kind of gone up by let's say 300, $400 per ton to various regions. And with this kind of, you know, arbitrage, I mean, it's bound that we will be, anybody, you know, any of the kind like who uses steel as raw material, they will be able to sell their product at a higher price. So my question is this, whatever this EBITDA per metric ton improvement we have, can we split it into what can we kind of do a EBITDA per metric and walk, right? What is due to service business? What is due to product mix? And what is due to, you know, this kind of like this arbitrage?

This is my question. I don't have that kind of information right now readily available. You know, I will request CDR and, you know, we can arrange a call with you and where our CFO can take you through this. But right now, I don't have a definite answer to this on a detailed basis.

So, sir, if the arbitrage goes away, if the steel price arbitrage goes away in the next, let's say, two years between, let's say, international steel producers and Indian steel producers, we are confident that whatever margin trajectory and ROC trajectory, we will be able to maintain that.

I don't see... We look at the steel price because we have a plant in Thailand. We have a plant in, you know, UK. There is no arbitrage for high-carbon wire. It may be there for flat products, but for our wire rods, I don't see any advantage. It could be plus, minus $30, $40, you know, depending on this. So that arbitrage was there three years ago, just around the pandemic, but... Right now, I don't see, sir, any major difference between the prices of steel in India or the prices of steel what we buy in Thailand plant from different sources. I don't see that as a big, big gap, sir, on our type of raw material. It's hardly $40, $50 a ton, sir, which is insignificant, I would say.

Okay, so that is good to know. And, sir, can you also give some, like, what is happening in domestic market in terms of, you know, how we will grow there? Because, you know, India is a growing country, a lot of infrastructure announcement, and also some sort of, you know, guidance on domestic market.

India is a very important market for us because for any company, you know, where you are operating, when we are in Thailand, Thailand is an important market for us Similarly for India, India is an important market. We have about 60 to 65% overall market share for our wire rope here. We have a very strong dealer network, very close working relationship with some of the key customers across various segments in India. And I'm happy to say that we would, and it's difficult to keep on, and we will continue to focus in India and keep the market share. Our dealers have been with us for 40, 50 years. They are like our extended arm. And they stock ropes and they really service the customers well. We have a very good brand name in India. We are practically in most of the prime applications we are there. So we are very focused. But at the same time, when I look at India, where we are having 60% to 65% market share, It's difficult to increase the market share beyond a certain percentage. So while we will continue to grow with the way Indian economy is going to grow, particularly with the government pushing the infrastructure, so we will definitely grow. I'm sure those applications will continue to grow. And we will try to maintain and grow our market share marginally. I see a bigger opportunity with the new capacity we are adding where we have very low market share and the opportunities are much more to grow where you are having only 2% or 3% market share or practically negligible market share. So India is important. We will maintain, but we will grow with the economy in India, but the major growth I see percentage-wise coming for the company in the next two to three years also from the international market.

Okay, okay. And, sir, then my final question is we, you know, have won a lot of clients, new clients in mining, for example, in Australia, South Africa. We have one new client support, you know, crane ropes from New York port. So can you kind of, you know, talk about kind of like let's say the sales volume was X, now today where it is at? and where it will grow to in, you know, next two, three years. And who are you, you know, taking market share away from? Our understanding was you were able to take market share away from BBRG, Wireco of the world. So where are we on that process? Are we getting, you know, kind of like better and better in our capability to, you know, and that process of taking away market share will continue for a few years.

First of all, I can't name customers and because that, you know, sometimes it is the confidentiality of the customers also that it is not proper for me to talk. But you are right, we are going in the Australian, the North American, South American market. There is, and with this, every country is trying for energy security. You know, last two, three years, what we have seen, particularly after this geopolitical problem, that every country is trying increasing their energy security and their focus is there. Be it the traditional energy, whether it is oil, gas, power, and it is not that it is at the cost of the green energy. So both of them have started growing because everybody feels threatened after whatever has happened in the last two or three years. So this is something which is giving us a big opportunity. And from our customer's perspective, based on the good work which we have done with our international businesses working together and our global development center, as well as the linkage with the Indian thing, it is giving us competitive advantage. Our international businesses are able to be very close next to the customers, sitting with them, rather than, you know, the customers feeling much more comfortable that, yes, it is a company. We may have their manufacturing in India, but for any issue, they have their local face to communicate, to serve, and have our inventory, not for everyone, but for our important customers on the ground. So it's not that something 10,000 miles away. So this business model of Kusha Martin, which may be slightly higher on the working capital... But it more than covers by getting a much higher realization, much more market share than just being selling as X factory and the customers don't know when the material will come, who the face is. So this model is a unique model which is helping us. So many times I have this question that your working capital may be higher compared to competition, compared to this, that. But I think over a period of time we have realized that It is the strength of our business model and the ability to get these customers into our fold and able to serve them with a better price and ultimately get a better realization pattern and converting into a better higher EBITDA pattern and ROC. So that is the model which we feel is really giving us results and I don't want to say I'm taking away competition from anybody. Every company, I'm sure, is trying to do their best to serve their customers. It is ultimately how we serve our customer, how the customer comes back to us. I feel that is going to be more important for us.

Thank you. Thank you for that answer, sir, and I hope we will become the leaders in the world in quiet shops, and best of luck. Thank you. We take a next question from the line of Siddhant Kanodia, an investor, please go ahead. Yeah, good afternoon, everyone. Sir, I had a couple of questions. So my first question is like recently our transport minister, Mr. Gadkari, had mentioned that India plans to develop around 15 billion of YRO project over the next five year. So being a market leader in the domestic market, Is it safe to assume that the bulk of the order will be getting by Usha Martin?

Let me tell you, it's a very ambitious plan and the wire group content is an important part of it. And these projects take a long time for gestation. And of course, I'm sure Usha Martin will compete and try to get as much as order as possible. So we will do it. But these projects take a long time. Environmental clearance and getting all those things. Usha Martin will definitely try to pitch for maximum orders. We are not into the ropeway business. We supply ropes to these ropeway operators or the builders of this. And we have the capability and ability to service them. So we will try our best to get the market share. Second important thing, let me tell you that these ropes have a very high replacement cycle, maybe 10 years, 8 years. So once you get the project, the replacement comes after 8 to 10 years. So it's not a very, very big volume business, but an important business and a high value business. And we will definitely, we are working with the people who are either got the orders or in the process of getting orders and working with them on these projects. So we hope to get a decent share.

Okay. Got it. And so my second question was, so like you're confident of getting the market share globally as well. India, we are already a leader, but we are confident of gaining market share and growing more than the industry. So is it something to do with the carbon footprint or any of the major global players cutting down on production or has a short shop or something like that?

No, no, no. I have not heard. Yeah. Some plants in Europe are closing. They are relocating or rationalizing. That's what we hear in the media. Bryden is closing one of their plants in Germany. But putting some facility in UK. But I don't think it is something to do with carbon footprint. It's probably some of their other internal reasons.

Okay. And regarding the service segment, are we doing that in India as well?

No, sir. In India, we do it, but in a very, very selective way for some large customers. But we have a strong dealer network who have their own service facility. And whenever they need service support from us, we are there 24 by 7 to do that. But here, we do not wish to change the way we do business in India significantly.

Thank you so much and all the very best. Thank you. We take a last question from the line of Aman Kumar Sonthalia from AK Securities. Please go ahead.

There is substantial pledging of shares of the management, sir. Is the management planning to unplace the CSE?

Yes, the process of the pledge is continuing and is there, and hopefully it should be done in the near future.

Okay, sir. Thank you. Thank you.

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session, and I would now like to hand the conference back over to the management for closing comments. Over to you, sir.

Thank you so much. I would like to thank everyone for attending this call, for showing interest in Usha Martin Limited. I hope we have been able to answer all your questions. The company is dedicated to creating value for all its stakeholders in a sustainable way. Should you need any further clarification or would you like to know more about the company, please feel free to reach out to us or to CDR India. Thank you once again for taking time to join the call. And see you all the next quarter.

Thank you very much, sir. Ladies and gentlemen, on behalf of Usha Martin, that concludes this conference. Thank you for joining with us. You may now disconnect your lines.