Usha Martin Gdr 144A

Ladies and gentlemen, good day and welcome to the earnings conference call of OSHA Martin Limited. As a reminder, all power-spin lines will be in the 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 star and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Devashi Singh from CDR India. Thank you and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on Usha Martin's Q4 and FY24 Earnings Conference Call. We have with us Mr. Rajiv Jawar, Managing Director of the company, Mr. Anirban Sanyal, Chief Financial Officer, Mr. Abhijit Paul, Finance Controller, and Ms. Shreya Jhawer from the Strategy and Growth team of the company. We hope all of you have had the opportunity to refer to the earnest documents that we shared with you earlier. We would now like to initiate the call with the opening remarks from the management, following which we will 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 Jhawer to make his opening remarks.

Thank you and over to you sir. Good afternoon everyone.

On behalf of the management team of Usha Margin, I would like to welcome you all to our earnings conference call. I will begin by sharing some updates on operations and strategy, following which Mr. Anirban Sanyal will run you through the key financial highlights. I am delighted to share that we have concluded the financial year 2024 on a positive note, supported by our stronger operating cash flows and balance sheets. Our focus on diversifying our product mix with an emphasis on higher value-added ropes has been instrumental in driving our performance throughout the year. On a year-on-year basis, we achieved a 16.6% increase in operating EBITDA, driven by a 290 basis point improvement in operating EBITDA margins. In FY24, the wire rope segment's contribution to our consolidated revenue increased to 71%, up from 61% in FY23. At the same time, the overall share of the value-added industry segment in our consolidated revenue stood at 51% compared to 44% in FY23. Notably, within the wire rope category, the contribution of the value-added segment rose to 71% in FY24, up from 65% in FY23. Additionally, revenue from international markets accounted for 55% of our total revenue during the same period. These trends have driven the improvements in our margins. The past financial year saw progress in our Rashi Facilities Phase 1 CAPEX program. This expansion is primarily focused on increasing capacities of high-value added products. Commercial operations of these expanded capacities have begun from Q1 this year onwards. We expect to ramp up production at the facility gradually over the next 9-12 months, which will help to significantly enhance our performance going forward. Following Phase 1 CAPEX program, we are advancing into the next phase of CAPEX with an investment of Rs. 167 crores at our Nashi facility. This phase is expected to be completed within the next 18 to 24 months and is funded all by internal accruals. During the financial year 24, the company also made considerable progress in deepening engagement with major global OEMs and extending its international presence. Regarding the development of our expansion strategy in Saudi Arabia, which we discussed during the last earnings call, I am pleased to state that our plans are progressing as per schedule. With the establishment of a step-down subsidiary through our Dubai subsidiary, Brunton Wire Ropes, we are well-placed to offer value-added wire rope products and services in this region. As we closely monitor market dynamics and strengthen our presence, we maintain a positive outlook on the growth opportunities in this entire region. Moving forward, our strategy would largely focus on value-driven volume expansion. With a strong emphasis on our YRO business, we are committed to maximizing the utilization of our existing resources. We are confident that this approach will continue to positively contribute to both operational and financial performance. In conclusion, I would like to emphasize that our commitment to the growth initiatives at Usha Margin remains strong. the company remains dedicated to meeting the diverse demands of the global market in the wire rope sector. With a promising demand outlook for our products and our strong position within the sector, we are optimistic about further improving our results in the future. Before I close, I would like to cover some developments on the management side. Our CFO, Mr. Nirbhan Sanyal, has decided to step down from his position for personal reasons We sincerely thank him for his valuable contributions over the years and wish him well for the future endeavors. Moving forward, Mr. Abhijit Paul, a dedicated member of our finance team with over 18 years of experience in finance accounts taxation, will take over as CFO from 1st May 2024. I would now like to invite Mr. Nirbhan Sanyal to present the operational and financial highlights for the quarter ended 31st March 2014. Thank you and over to you Anirban. Thank you and a very good afternoon to everyone. I will now provide a brief overview of the company's operating and financial performance for the quarter and year-ended 31st March 2024. The consolidated net revenue from operations stood at Rs. 829 crore in Q4 of FY24 as against Rs. 865.2 crore in Q4 of FY23. This 3.1% year-on-year reduction can be primarily attributed to decreased contributions from both the wire and strand and LRTC segments. However, it is noteworthy that our wire rope segment maintains steady revenue, accounting for almost 73% of total revenues. The sustained performance of this segment played an important role in supporting our overall revenue performance during the quarter. Our operating EBITDA for the quarter stood at Rs 151.5 crore as against Rs 154 crore in Q4 of FY23. Our operating EBITDA per term stood at Rs 31,784. Furthermore, the Q4 FY24 operating EBITDA margin increased to 18.3%, up from 18% in Q4 of FY23. This consistent overall EBITDA margin position can be attributed to the company's sustained focus on value-added products and its expanding global presence. Additionally, our net profit for the quarter, stored at Rs. 106.3 crores, reflecting a 1% increase from Rs 105.3 crore in Q4 of FY23. On a full year basis, net revenue from operations amounted to Rs 3,225.2 crore compared to Rs 3,267.8 crore in FY23. Notably, the wire rope segment's contribution to total revenue grew to 71% in FY24 from 67% in FY23. Moving forward, our strategic focus remains on further increasing our contribution from value-added products while gradually reducing the share of low-value offerings. International markets continue to play a pivotal role, accounting for 55% of our FY24 consolidated revenues. The company recognizes international markets as a significant avenue for growth and is committed to further enhancing its penetration in these markets in the future. Operating expenses stood at Rs. 598.6 crore in FY24 as against Rs. 513.3 crore in FY23. Profit after tax for FY24 stood at Rs. 424.1 crore registering a 21% year-on-year increase. On the balance sheet front, our net debt as of March 31, 2024 stood at Rs. 124 crore, a significant improvement from Rs. 184.8 crore as of 31 March 2023. This improvement is reflected in our net debt-to-equity ratio, which improved to 0.05x as of March 24, compared to 0.09x as of March 2023. Despite the capped spend of approximately Rs. 278 crore in FY24 and the allocation of funds for different disbursements, our net debt remains at comfortable levels. We continue to proactively maintain higher inventory levels, considering the complexities of global logistics, particularly amidst the current geopolitical landscape. This approach enables us to adeptly address the needs of our expanding customer base, including new clients in new geographies, thereby reinforcing our agility and readiness in a dynamic market environment. Coming to our cash flows, we are pleased to report a healthy year-on-year improvement. The cash flow from operations before income taxes for FY24 stands at Rs. 561 crore, representing 94% of operating EBITDA, compared to Rs. 345 crore during FY23, accounting for 67% of operating editor. These robust cap flows, combined with ample headroom on working capital lines, will continue to support our planned capital allocations. In conclusion, I would like to emphasize that overall, with the positive outlook for demand for our product and our strong position in the markets, The company remains committed to engineering strong financial discipline. Going forward, Pusha Madan remains focused on consistently improving its financial performance and run for it to create more value for all its stakeholders. This brings me to the end of my address. I would now request the moderator to open the line for the question and answer session. Thank you.

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and 1 on their touch-tone phone. If you wish to withdraw yourself from the questions, you may press star and 2. For instance, I request that you use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the questions keep assembling.

The first question is from the line of Kunjan Kabra from Nivesha.

Please go ahead. Hi, thank you for the opportunity. So I wanted to ask you a question. Firstly, the CAPEX has got delayed by a quarter or so. So last quarter, you guided of a volume growth of around 15,000 tons from the new CAPEX. So is that guidance still hold that they'll be able to ramp it up? Do we have that kind of a demand visibility also? And just from that perspective, I wanted to understand that You know, are the customers visiting us and we have that kind of order visibility from our new customers as well? Secondly, what kind of, you know, what's the tenure of the order visibility that we have right now? For example, if we are getting what, for how much period do we have order visibility in this business in terms as I wanted to understand both of you?

Thank you. For three years, the CapEx just got completed in Q4, and we expect to ramp up the production during the coming quarter. And we are still on line to achieve the 15,000-20,000 quantity increase, with almost 12% to 15% increase in volume, as we had mentioned earlier. And we do expect that to happen gradually coming in the coming quarter. To your next question on the order book and the overall demand situation, I would say that this is stable. And particularly from all the various actions and initiatives the company has taken by developing customers in Europe and different parts of the world, I'm happy to say that we have got a good response. for all the supplies which we have made and we expect the order book to continue to support the increased volumes which we are looking at in this year. Coming to the order book position, generally we have one to two months order but because 85% of the business comes from the replacement market and through our own distribution and dealer network, this is which is normal in our business, and we continue to get healthy order booking. For big projects, sometimes for our European, say, for example, for our Brenton Shaw business, we see an order book, generally an order book for six to eight months for the large projects, and I'm happy to say that we have a fairly healthy order book on that front as well.

Okay, okay. So, secondly, wanted to understand that quarter on quarter are EBITDA per ton, not talking about the margins, but EBITDA per ton has decreased from 34 to 31,000 per ton approximately. So, is that because of the product mix and realizations have been quite steady? So, is it because of the, you know, product mix change or why has the EBITDA per ton come down this quarter? See, what we have been always saying in our previous calls on similar questions, that we should... We have maintained the margins of what we have guided of 18% that we have maintained, but just wanted to understand, is it because of the product mix?

You see, the product mix, it's a very diversified product mix between wire ropes, LRTC and wires, and within the wire ropes, also between the GP ropes and the special ropes. And as we have mentioned in our previous calls also, that we should look at the trend year on year. Gradually, we have been able to increase it from 26,000 to 32,000 odd per ton. And quarter by quarter, between 1,000 to 2,000 rupees, there should always be a variation because of the product mix or the demand. the mix between the various product lines we have but overall we hold to our strategy of being closer to the target what we have been able to achieve that these are the numbers we feel that we would be able to maintain with an increased volume we expect the performance to be better.

But now, when we are venturing into value-added products, the expansion is entirely into that, plus we are going to cater to the export market. So, what kind of, you know, as compared to DC ropes versus the value-added groups and plus the export market, so what kind of value growth, 10 to 15 is the volume growth is what we are targeting. But what kind of value growth can be achieved, if you can highlight that, plus The cost efficiency that we are taking towards, you know, our Indian units supplying wires and strands to the European, to the plant and shop plant. So, what kind of cost efficiency can we see from that side plus the market that we are trying to cater to value added and export market. So, what kind of value growth can we see from on that side? I'm sure that in export market, I think the value is a little higher in terms of utilization. So, if you can highlight.

Yeah. You see, as far as margins are concerned, we have, you know, moved gradually from 16% to 18% to close to where we are today, close to around 20%. In a dynamic product mix and also a dynamic market between GP special roles, I would say our endeavor would always be to try and see that we hold on to the margins where we have and gradually definitely keep on improving as the product mix starts getting enriched and the realizations also improve. So, our objective would be, you know, when we have had a 16, we said yes, we will gradually go up to 18 and then we will gradually go on up to 20. it's very difficult to predict that we will go from 20 to 22 or 23. We would rather say that let's focus to see that we maintain and gradually go up and focus on trying to see that how we continue to increase our share of the value added product and gradually ramp up the production by 12 to 15% and get the benefit of both. In this process, depending on the product mix, which market, which that, you know, the margins could fluctuate. And our endeavor would always be to keep on increasing. Coming to the second question of yours, which is the integration with the international business, that I am happy to say that is working well. And in fact, this integration with India and our Thailand plant supplying to Brenton Shaw as well as to our Brenton Wires, this is helping us to become more competitive because of the cost advantage and because of the group making a profit both at the wire supply end as well as the finished product end, we are able to look at the costing in totality. That is helping us to become more competitive and being able to establish a more competitive environment to get more orders and I am happy to say that Grant & Shaw, over the last few months, has been able to win some large contracts giving us a order booking for the first time I would say for 7-8 months ahead which is helping us to plan the wire supplies much in advance from India as well as from our Thailand plant and to answer your question definitely because of being totally integrated on this we are having a cost advantage of 300-400 dollars per ton compared to what we were buying from our European sources.

Yeah, definitely. Thank you so much for answering these questions and good luck to your entire team and get back in the queue. Thank you so much. Thank you. The next question is from the line of Aman Sundhalia from AK Securities. Please go ahead.

Good afternoon, sir. Sir, my first question is the revenue growth as well as opportunity has due to this quarter related to Q4 2013.

What are the reasons for that, sir? Thanks for your question. I can take that.

So, firstly, because of certain logistical challenges, like you mentioned in the international market, because of the Red Sea issue, certain orders have been deferred from Q4 because our materials for the UK were stuck in Sanjay and the orders couldn't be built in the Q4. These are expected to be completed over Q1 and Q2. And as you know, of course, Europe is a high-value market for us. So, this timing issue has had a certain impact on the revenue as well as profitability for Q4. Secondly, in the past quarter, we also had scheduled capital maintenance for the LRTC equipment for about six weeks or so. that did impact our LRTC production and also impacted our revenues to some extent. And also there have been, you know, in general over the past few quarters, some pressure on the LRTC realizations as well. So what we've been doing is reducing our exposure to that segment because we've anticipated this and now going forward we want to focus more on plasticated and galvanized LRTC and those are more profitable as well. And as mentioned, that's the contribution of these increased volumes from the CAPEX program over the next year hopefully will help drive the improvement in the top line and then, you know, translate to the bottom line as well.

Okay. When can the discussions on the wave one expansion start and when it will start showing the top line and bottom line?

As I mentioned, commercial operations of phase 1 expanded capacities has begun from quarter 1 onwards of this year. We expect the ramp up of volume gradually over the next 9 to 12 months, which will help us to enhance our top line going forward. However, I would like to caution that we don't want to push our volumes by compromising on price or margins, but rather ramp up gradually and continue to focus on the value-added products. Having said that, as I mentioned that we expect the volume growth during the year to be between 12-15% compared to the previous year. Sir, as far as my knowledge is concerned, rock cell netting wire is a big opportunity. So, are we in the mountainous terrain to avoid mountain storms from flooding?

So, are we getting in rock meeting as well as what is the plan in that business?

Yes. So, there is a large market for this globally, like you rightly mentioned. And as part of our next wave of CapEx, actually the wave 2, we are getting into certain high-value wires, aluminium zinc wires, which are actually used in this rockfall barrier protection industry as well. So we do expect these capacities to go on stream within this financial year itself, and hopefully we will be able to cater to this market. Like you rightly mentioned, it is a big opportunity.

It's a high-margin product. Yeah, it's within the wire segment and also there are some strengths involved in this. It's, I would say, it's a decent value product.

Okay, sir. And sir, Saudi was expected to contribute from Q125. Has it started contributing and how big is the opportunity there?

Saudi is, as I mentioned in my opening remarks, Saudi is on track and we have started shipments to Saudi Arabia and we expect from quarter onwards the revenues to start coming in from there and we have our management team, our sales team already in place and our warehouse and our facilities for living also getting commissioned now. So we should start getting the benefit from quarter one and gradually we will see the benefit of this coming during the year. It's a growing market within the Middle East. It's a large market compared to the rest of the Middle East and we expect to get a decent share of this market in a year's time. We are excited and we expect good business to start growing, particularly on the oil sector. some big infrastructure side on the grain and the coal sector. We expect good business to come in from there.

One important question is earlier there was an update that company is working on synthetic slings. So what is the status on synthetic slings as a plan, a setup and when it will start contributing to top line and bottom line? And one more thing, is it confined to Europe or will we get business from other geographical demographics as well?

Yes, so to answer the first part, the company is working on launching the synthetic slings as a complementary product line to the core business and the manufacturing would happen in our BSUK facility. The equipment has started coming in and we expect to gradually again begin the operations within Q2 of this year. To answer the second part, the target geographies for this at first would be primarily UK and you know within Europe and then at a later stage we would also like to target the America region once we are able to build a track record and get some traction in the market and for all of these different geographies the key applications for this would be at first in the oil and gas as well as the wind energy sector. The next question is from the line of Tananjay Bakrodia from ASK Investment Managers. Please go ahead.

Hi, sir. Congratulations on our good service in this environment. Just wanted to understand, what is the possible asset terms and utilization for the new facility for the expansion in Rachi?

The asset term would be, I would say, of the new facility would be close to one and a half to two times. of the investment what we have done.

Okay. And utilization could be up to what percentage each one again? Would be same as the previous facility?

Yes. Because you see it would be at a similar level.

Okay. Sure. And so what would roughly OP per ton for this facility be similar to what our current OP per ton is?

Can you come again on this question please?

Like operating profit per ton would that increase would that increase significantly for the new facility or the margin increase?

It would also depend on the product mix what we do but as I mentioned our objective would be to maintain the EBITDA margins which have gradually gone up to close to the current levels of close to 19.5-20% and moving forward as we keep on enriching our product mix as we look at the competitive environment, let's see how we progress. Hopefully, it should get better, but, you know, it is better to gradually ramp it up and, you know, as the volumes grow. This year, we would be looking at more to see that we work at minimum these levels, protect the minimum levels which we have been operating and first start building the volumes and then let's see how we progress, how the new capacities, the new markets, we are able to develop what kind of price we are able to achieve in these markets. Hopefully, we should be able to do better. That's what I can say at this stage.

Sure. I can ask you, how is the competitive intensity playing out domestically compared to domestic players and international players?

You see, as far as the competition will always be there in any business and we need to we need to always try to be better in terms of quality, delivery, service and be able to be having the product at the right time to the customers and we focus on that. In domestic market, we have about 60 to 65% of the market share and we hope to continue with that. In terms of the international market, our competition would be mainly with the European and the American manufacturers and the Koreans. And we are, through our global distribution, as well as integration with Renton Shaw and our European branch, trying to see that how we can gradually get a decent market share from that fund.

Okay, sure. Thank you, sir. Thank you. Thank you.

Into that, the competitive intensity, we see a little bit more in the GP rope segment, especially in the U.S. and some parts of the Middle East. So our goal is in the Middle East, for example, is to get closer to the customers, go into services and provide the total solution to customers. So, that rigging business that we've been able to do and pivot our business model in places like the Middle East have really helped us retain our market share and even grow our market share and, you know, fight the competitive intensity in that way.

Oh, thank you.

Thank you. The next question is from the line of Pratik Bantia from Zurich Capital. Please go ahead.

I just wanted to understand, you know, what would be the realistic realizations for us in LRDC and YS tactical? They went any kind of downward. So, like, at what number would that stabilize? Is that something you could, you know, give me a sense of?

The prices have, you know, the steel prices over last one year on the wire rod prices have been down by about 6,000 rupees, which is a direct reflection on the LRPC and the wire prices, which is very sensitive to the steel price fluctuation. And on an average, the LRPC prices have come down to around 63,000 from 71,000 last year. And it all depends on the steel prices. Of course, it's become with more competition coming from other integrated layers. The prices are under pressure and that is something which is I mentioned that we are trying to focus to get to more and more of the plasticated and the galvanized LRTC which would protect us from that price fall. On the wire front, the prices have also come down to around 80,000 rupees per ton compared to 90,000 rupees per ton. So, it's almost a 10,000 rupees reduction. The movement is very much in line with the steel prices, I would say.

Yeah, sir, this is Dhawal here. Sir, we are at 1,80,000 odd tons for the past year, 2024.

Over next three year period, what sort of volumes would you be looking at? I would say that we would look at 12 to 15% growth over the next two to three years based on the various CAPEX initiatives already implemented and underway. We expect this to happen. Okay. So, as you mentioned in the presentation that this is going live from Q125, What is that capacity? The Q1 capacity, the total increase is 40,000 tons approximately in the phase 1 CapEx expansion. And phase 2 is around 10,000. And as I mentioned, we will gradually ramp it up during this year. And we should be able to get around 12% to 15% over what we produced last year, what we sold last year. Okay, and if I understand correctly, given our gradual change in product mix over the past three year period, the same would continue and that would result in a better EBITDA growth compared to the volume growth. I would say that we would now look at trying to see that if we can continue to achieve the EBITDA percentage, what we have been able to achieve and focus to see that we take the advantage of volume. And as we develop better products and a better product mix and more into the higher value added product, we will see a gradual improvement on the EBITDA margin. But that's our immediate priority this year would be to try and see that we maintain that and get the advantage of the higher volume this year. And then see gradually how the margins improve with the better product mix.

Okay, interesting. And last thing, so this entire expansion would be done with the cash flow or any other funding requirement would emerge?

All be done with internal accruals. The phase 1 was done with internal accruals. The phase 2 will be done with internal accruals and With the healthy cash flows which we are expecting, we expect to grow and we have no plan for taking any debt or any raising of any funds.

Okay. Thank you, Eras. Good luck.

Thank you. The next question is from the line of Kunal Kothari from Centrum Broking.

Please go ahead. Thank you for the opportunity. Sir, you mentioned about the expected volume growth of around 15 to 20,000 tons in XR25.

Will it be coming from wire rope segment only or it will be divided among three?

It will be a combination of all because you see we have to see you know our endeavor would be to try to maximize the rope path but we need to cater to the demand of all customers. So it will be a combination of ropes, wires, LRPC, plasticated LRPC. We would like to see that we can improve the asset utilization and try to maximize. The endeavor would be to maximize rope, but others would also be there as a part of the increase.

Okay, okay.

Second is in LRPC, can you please help us to understand that what will be the realization for the difference between what is the product range in LRPC that we are selling today and with the new product range that we are coming with in the plasticated and galvanized.

Similarly, both on the realization part and the margin front, both change that we can look forward.

LRPC is a project based business with limited volumes in the market. So it is not that the entire quantity can be converted. We are targeting 300 to 500 tons a month in this year depending on how these projects get coming up. it's only about 7-8% of the LRPC capacity. This is sold at about Rs. 130,000-35,000 per tonne, where we get a contribution of around Rs. 50,000-55,000 per tonne. But the production capacity also gets reduced because it's a much lower process. On the other side, the LRPC normal is sold at Rs. 63,000-64,000 per tonne, with an average contribution of about 8,000 to 9,000 rupees per ton. So, that is the thing. But almost about 90% is sold as the normal RRPC and only, I would say, 7 to 10% would get developed into the plasticated RRPC.

Okay. So, one more question that comes to my mind is that the wire capacity that we are having,

and the LRPC and wire room capacity is much higher so like how is the manufacturing process do is it like one to one ratio so that so you are buying wire from the market to for the additional production of the LRPC and wire because we are also selling wires in the market so how is the you know process ratio from wire to

trying to wire up an LRPC and also we do purchase from the market for the production of the chain.

No, no. Our raw material starting is wire rods whether it is for LRPC, whether it is for wires or ropes. We buy the steel from the integrated steel producers including our earth-wild steel business now run by Tata. So that's our starting raw material. We don't buy any wire. And then we have dedicated LRTC line which only produces LRTC. And then it is the wire and the rope plant which is all within this. So it is not interchangeable. So LRTC is integrated right from wire rod to finished product. It's not that I can reduce LRTC and increase rope or vice versa. These are independent plants within the same facility. And we do not buy any wires. We are only starting with wire rod which is processed into LRTC or wire rod which is processed into wire or wire rod which is processed into rope. So, that is a very well dedicated plant internally. Not interchangeable.

Okay. Sir, does that mean that we have wire capacity near to 1 lakh ton? So, it is totally sellable or it is being used for the manufacturing of wire rope or LRPC?

It's a separate plant. The LRPC is a separate plant. I cannot use the LRPC wire drawing capacity to make rope. So, those can only be dedicated for LRPC. So, it's not that I reduce LRPC and I can increase wire rope. It is not possible. Okay, so for our utilization from 1 lakh tons, we are doing nearly 35,000 tons of trails in wire itself.

So, why is it so that we are selling just 35% of our capacity?

We only want to produce the low-end, high-end wire products. Earlier, we were part of the steel business where we used to even produce low grain and low margins of wire to work with steel. Over the last three years, our focus has been to focus only on value-added wires, LRTC, plasticated LRTC as it is a dedicated plant and wire ropes. And slowly we have shed out our low value-added wires and that is why those facilities are not fully utilized because they don't add really any market to our business. So, can you give the mix of the high value added wire and low value added wire? So, we don't calculate that way. Mostly, we have migrated to the high value added wire.

Okay.

And the utilization would be 70% of the high value wire?

Around that.

Okay. That's it from us. Thank you, sir. All the best.

Thank you. The next question is from the line of Parish Shah from Prerna Tej Tradecom NLP. Please go ahead.

Thank you so much for giving me this opportunity to ask you a question. I have just one question that is regarding disclosure which has been coming under Regulation 29.2 of CERI wherein one of the promoter and the group promoter company, Caterhouse Investments,

has been disclosing shares sold in the market in that they are writing into the bracket that there is a GDR option available to them which can be converted into five equity shares at the discretion of the holder. Sir, I would like to understand when this exercise, when is it due, by when it can exercise, what will be the price because this can lead to dilution in the equity and it can impact the ratio.

So, can you please elaborate on this GDR stuff that has been done in past?

The GDR car had been issued many years ago and these are the outstanding GDRs. And one GDR can be converted to five shares. It can be done at any point of time and it can be exercised. It is considered as the part of the total share capital of the company. So, it is at the discretion of the GDR holder when he wants to convert it. There is no specific time frame for that. And currently, what is the outstanding GDR you have to apply for? We need to check and get back to you, sir. Okay sir, so I don't know how you will get that to me. So I would request that you can issue a clarificatory note and put it on the site so that all other shareholders can also understand what is happening on GPR.

Sure. Just for clarification, it's already part of the resources in the annual report.

Oh no, I don't understand.

So, I don't think any further clarification is required since it's already disclosed fully in the shareholder's balance sheet as CFO has mentioned. I don't think any specific clarification.

If you need anything, you can write to... So, our CFO will know the exact amount of GDPR outstanding, right?

It is already available in our balance sheet. So, this is already... Yes, correct.

And is there a price which has been decided to convert the share?

It will be at what price? That is not mentioned in the end. No, I don't think that is mentioned. But, okay, we can take this.

I can, you can write to me. I can give you the classification. So, the numbers and the holdings, everything is mentioned in the pattern of shareholders.

Okay, I'll take that but at least you know the conversion at what rate which is going to happen is going to help me. Thank you sir. Thank you for the opportunity. Thank you.

Thank you. We'll take the next question from the line of Rajesh Majumdar from PNK Security. Please go ahead.

Yeah, good afternoon. Thanks for the opportunity. So, I have a couple of questions. One, If the strength of clusters that we are setting up now for the expansion, and it's nearly going to be to the tune of 500 odd cores for operations at the least, against that we have now a second phase of capital expenditure which will run to 100 cores per annum, or maybe 150 cores per annum. And our payout is just about 85 crores. So, do we have any capital allocation plans of increasing our dividend? And a related question is that we have not seen any meaningful acquisitions globally in this space. So, are there any opportunities there where we can increase the excess cash?

On the cash flow front, yes of course last year we have gone through a major capex program and phase 2 is also underway here including our Thailand plant is going through an expansion plan as well as our UK subsidiary is also having the synthetic as well as the plant. So there are capex plans within this. It is not limited to 100 or 150 crores. It could be even more depending on the opportunities. And we expect, you know, depending on the cash flow and the capital requirement for our capex, also looking at any opportunity if and when it comes on the acquisition front, we would definitely look at all options. Right now, there is nothing on the table at the moment. Depending on the free cash flow, definitely I am sure the board will consider the various, how to reward the shareholders. I am sure it will definitely look at all these while deciding that.

And sir, my last question, when you consider an expansion in margins, you are also considering the extra cost that you will incur in hiring employees, etc., or other related costs of expanding into new markets?

Yes, you know, as we have expanded our capacity, we have added some people internationally to help us develop the newer markets including the Saudi market as well as the European markets including the Americas, particularly South America. So, we have added some senior people because you need to start developing the market. So, the costs start getting incurring earlier. And hopefully, we should be able to convert that into getting higher revenue and even out in the coming year.

Okay. Thank you.

The next question is from the line of Aman Viz from Astute Investment Management. Please go ahead.

Good afternoon sir.

My first question is if you can give an update on our plans for the US as well as for the mining customers that we were targeting. So what kind of volumes do you see for these two segments for this year and next year and how is the general traction going on? You see on the US market the initial trial supplies has gone up well. with the various customers in North and South America as well as in South Africa and small quantities in Australia also. We started getting some repeat orders. Mining takes a longer cycle time in terms of applying to the customers, their quality feedback and then getting into the other supplies. So, we are currently at about 2500 tons per annum level as far as the mining growth is concerned and our endeavor is to take it to close to 4000 to 5000 tons in the next 2 to 3 years. And similarly for the US sales, what is our current sales and what are our targets for each year? Our U.S. sales is close to about 8,000 tons per annum and we expect to grow depending on which sector, what kind of demand comes there. We expect to grow by 10-15% per annum in that market.

And within the U.S. market, specifically the sectors that we are targeting are elevator ropes, gondola ropes which are also high value ropes as well as mining ropes that we previously mentioned. We've gotten decent traction with approaching new OEMs as well and that is the continuous endeavor to get secure more OEM approvals and be able to cater to the high value segments like elevators and gondolas.

Sure.

My next question is so some of our international peers were facing some issues last one, two years. So both in I think US and Europe. So if you can talk about are they still facing issues because of energy or there were some other issues also or are they coming back in the industry strongly? The European manufacturers went through a high cost of energy, which has definitely come down over a period of time after the things have stabilized in India, but still they are high compared to the rest of the world. In terms of their cost structure, all these are very strong companies, be it Beka Dryden or be it Wireco. And it's a healthy competition and definitely we are trying our best to see that how we can, you know, continue to compete and get a larger market share from that market. But they are all doing well and the overall market is well. Competition is also doing well. My final question is in the opening remarks, you had talked about that increase. we are leaking our relationships with our global audience and especially new customers. So even if like last 1-2 years we have gone to many new customers and we are very big customers. So if we can talk about in terms of scale, say if we started with X, where we are today? Is it like 2X, 5X? And where do you see the solutionship over 2-3 years? My main question is where do you see the trust on us basically leading to much higher orders?

So over the last couple of years, like you mentioned, we have secured new premium customers respectively in the European market, particularly through our two strong brands which are OceanMax, MindMax brands. And we have successfully executed these orders as well. And repeat orders have already started coming in with some of the big OEMs as well. And these orders have also created references within the, you know, with other customers and we've been able to win new customers through these references as well within the region. Going forward, using our collaboration of the Brunson's Hall facility with our service sensors, EMM, as well as the Reuter and the technical sales and support of GDC, we hope to continue to extend in these relationships and continue to grow our relationship with these OEMs.

Yeah, as I see, so do you think it will still take us 2-3 more years to get that trust so that they can give us substantial volumes and not small incremental repeat orders or do you think it can happen sooner also? Oh, you see we have made certain big progress with the European particularly oil offshore and the big wind energy sector and these are all project based business as well as repeat orders from the from the from the previous equipment which they have supplied. So, you know, like in last one year, we have been able to make some major breakthroughs and get decent order. And we expect this to happen not in two, three years. We expect to happen within the coming few quarters.

Sure, sir. That's simple. Thank you.

Thank you. The next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead.

Namaskar Javaji. As alluding to the fact about the breakthrough we have got through the OEM to the mining segment, so the capacity addition that we have undergone and also that we are emphasizing, are these all towards these mining contracts only, the segments which we will be switching to? The phase 2 part which is coming this year would be on the mining. We have sufficient capacity to take care of the current requirement. But for our future requirement of mining, the phase 2 capex which is getting completed in 18 months would be added. So that would only help us improve the capability and the quantity for the mining route. So we have sufficient capacity to take care of that. But our major... growth which is coming through our ocean max and our brunt and shore is mainly in the oil and offshore and the wind energy sector. That is giving us more traction based on the various growth we have done. Mining is of course an important sector but we gradually ramp it up depending on the feedback and our supplies and repeat orders. The good part about the mining business is that once it is established it is a recurring business which continues to happen and not depending much on the project type of business which can happen, you know, with spike.

Just to keep further understanding, what should be the mix, Mane?

Currently, the landscape which we will be operating for the mining segment and the existing ocean nights and the other opportunities, what should be the looking in terms of the protected mix for mining, which you are alluding to me, an energy type work going ahead? Our mining is close to 5-6% whereas the oil and the end energy would be in excess of 20%. Okay.

You mentioned that you will be spending 167 crores for the additional 10,000 tons for the 18 months for this year?

Yes.

Okay. And 40,000 tons would be ramped up from Q1 of this financial year?

As I mentioned, it will happen gradually. During the year, we expect 12-15% growth in total volume compared to last year. But every quarter, we expect to gradually ramp it up to be able to come to the expanded capacity. Correct. Sir, on the other extensive front, did we have any one-off item in terms of which madam was earlier referring to because of the geopolitical issue? No, I don't think there is anything, any expense related to the geopolitical issue which is there. Amir Khan, please. No, there are not. So, you know, if you are referring to the freight, of course, that's also involved into the crisis as well. But no additional expenses per se in other expenses which are related to the geopolitical issue. Nothing. Thank you. Thank you, sir. I'll join with you and all the rest of the team.

Thank you. The next question is from the line of Aman Sondhalia from AK Securities. Please go ahead.

Sir, I have two more questions. Sir, last year we did Usha Siam check purchase from joint venture partners. So, what is the opportunity here?

Yeah, so Utsa Sam, which is the island entity, they acquired the remaining 50% stake of disaster that was previously a JV, like you mentioned. And the plant is already in operation since the February of this year. In terms of opportunity, the plant's capacity, which is of elevator rope, primarily is about 170 to 180 tons per month per year. Again, it's primarily elevator roads, but we would produce some extra elevator and AC roads depending on the demand from the market as well. Other than that, you know, the facility that was acquired, it is a sort of state-of-the-art facility and it does have a lot of space for further expansion as well. So, that is something also that we would consider for our future road plans in Thailand.

And one more question that right now every exporter is receiving that is rate seek crisis. So we have distribution centers across different parts of the world. This helps us to keep the inventory.

So does the rate seek crisis offer the opportunity to give better services to the customers and acquire new customers?

Yeah, I mean we have our distribution centers across the globe where we do stock and we sell and we have been able to proactively stock ropes for the customers in the interior center so that we can meet more of their just-in-time requirements, especially when there are so many logistical challenges. We want to do that. We want to ensure that, you know, like Anirban had mentioned earlier, we proactively build the inventory and we are able to continuously meet the demands of the customers without interruptions in the face of these logistical challenges. So, it has helped us having that marine network.

Yeah, so while the Red Sea crisis we have been able to meet through the inventory at our subsidiary but it is also important to mention that because of the Red Sea crisis the transit time to Europe and US has gone up by between 15 days to 30 days depending on the shipping lines and time which is in a way creating certain delays in achieving the deliveries and also increasing the inventory within our system. You know, because most of it is supplied to our subsidiaries and tend to the end customers. So, while there is an advantage on one side being closer to the customers with stocks on ground, but on the other side, it is impacting higher levels of inventory and higher supply time to meet the customer requirements also. And sir, the last one is that our K. Mantra Vat value led volume soaked. So, will we start seeing this from Q1-25? Yes, we expect to start seeing this from Q1 and with gradual ramp-up throughout the next few quarters, you will get the advantage of, we will see the advantage in our results. Okay, sir.

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

I would like to thank everyone for attending this call and showing interest in Usha Margin Limited. I hope we have been able to answer to all your questions. The company is dedicated to creating value for all its stakeholders in a sustainable manner. 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 the time to join us on this call and see you all in the next quarter. Thank you.

Thank you, members of the management. Ladies and gentlemen, on behalf of Usha Martin Limited, that concludes this conference. We thank you for joining us and you may now disconnect your lines. Thank you.