Usha Martin Gdr 144A

ladies and gentlemen good day and welcome to the earnings conference call of osha martin limited as a reminder all participant 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 start and zero on your that shown phone please note that this conference is being recorded I now hand the conference over to Mr. Anup Bajari of CDR India. Thank you and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on Usha Martin's Q2 S525 earnings conference call. We have with us Mr. Rajeev Javar, Managing Director of the company, Mr. Abhijit Paul, Chief Financial Officer, and Ms. Shreya Javar from the company's Strategy and Growth team. We hope all of you had the opportunity to go through the results documents shared earlier. We will initiate the call with opening remarks from the management, following which we have the forum open for a question and answer session. Before we begin, 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. Rajeev Jawa to make his opening remarks.

Good afternoon everyone. On behalf of the management team of Pusha Martin, I would like to welcome you all to our earnings conference call. I will begin by sharing some updates on operations and strategies, following which Mr. Abhijit Paul will run you through the key financial highlights. We are pleased to report resilient financial performance and strong operational execution in Q2 FY25. We have delivered healthy results with volumes increasing by 11% year on year and top line growth of 13.6%. Our core wire rope division performed well across both international and domestic segments contributing 73% to our overall consolidated revenues. Revenue from the wire rope segment grew by 19.2% year on year. while revenue from the wire segment grew by 16.2% year-on-year. The LRPC segment continues to face challenges this quarter, reporting a 6.7% year-on-year decline. Our focus on higher value-added products has enabled us to maintain an operating EBITDA margin of 18% in Q2 FY25. The contribution of the value-added industry segment to our revenue rose to 54% in FY25 up from 52% in FY24. Within the wire rope category, the value added segment share increased to 72% in FY25 compared to 71% in FY24. The elevator and oil and offshore categories in particular have been key drivers at this expansion. Additionally, the international markets contributed 55% to our total revenue and we also saw favorable performance in the domestic market. These strengths have played an important role in supporting markets. With our newly expanded facilities, our teams in domestic and international markets are well equipped to promote sales of our high-quality viral for critical applications. This position runs to capture a larger share of the global market while consistently meeting our clients' regular standards. Additionally, our ongoing expansion efforts in Rajin and Thailand are expected to further ramp up volumes gradually over the next few months, enhancing our performance. In parallel, a portion of our CapEx initiative has been dedicated towards investments in digitalization and automation. These initiatives will elevate operational efficiency, further enhancing our ability to respond to market demands while maximizing productivity across our operations. An important strength that complements our CAPEX initiative is our machinery and technology. Our in-house team's capability to design, develop, and maintain our own machinery sets us apart from competition. This capability allows us to operate with greater efficiency and agility. By building and maintaining a number of our equipment in-house, we reduce dependence on outside sources, enabling us to swiftly address maintenance needs and exercise strong control over our processes. This distinct advantage is vital to Kusha Martin's long-term resilience and growth, reinforcing our market position as we continue to expand. In our UK facility, a dedicated capital expenditure has been allocated to support the production of synthetic slings with commercial operations expected to commence by the start of Q4 FY25. Trial runs are already in progress and we plan to initiate marketing activities this month. Synthetic slings represent a high potential segment that is experiencing promising demand across leading markets. We are excited about the opportunities this product line presents and is successful. It has the potential to evolve into a major vertical for Usha Martin in the years to come. The company continues to prioritize the domestic market, where Usha Martin is implementing essential strategies to leverage its well-established dinner network to capitalize on robust growth opportunities. Looking ahead, various government infrastructure projects are expected to drive ongoing demand for our products in the domestic market. In conclusion, I would like to emphasize our commitment to expanding Usha Margin's global footprint and strengthening our operational strategies to capture growth opportunities across all markets. The company's strategy is firmly centered on value-driven volume expansion, focusing on maximizing the utilization of existing capacities to enhance both operational and financial performance. By modernizing plant operations and expanding our global distribution and marketing efforts, Usha Martin is well positioned to leverage its inherent strengths to drive sustainable long-term growth for all our stakeholders. With this, I would now like to invite our CFO, Mr. Abhijit Paul to present the financial highlights for the quarter ended 30th September 24. Thank you and over to you Abhijit.

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 half year ended 30th September 24. The consolidated net revenue from operations 2.891.2 crore in Q2 FY25 compared to Rs.784.7 crore in Q2 FY24, reflecting a 13.6% year-on-year increase. This growth is mainly supported by increased contributions from our core wire rope and wire and sand segments. With the wire rope segment showing consistent revenue performance and accounting for around 73% of our overall revenue. Despite a traditionally softer quarter due to the monsoon season, our core railroads division performed strongly, recording a 18.5% growth in volume and 19.2% increase in revenue. This performance highlights the strength of our operational execution across domestic and international markets. Despite the LRTC segment's contribution declining this quarter, We remain positive about the increasing demand and order inflow for galvanized and plastified LRTC products. We expect this segment to make a favorable contribution in the upcoming quarters. Our operating EBITDA for the quarter stood at Rs. 160.8 crore as against Rs. 144.3 crore in Q2 A5-24. The operating EBITDA part-turn stood at Rs. 32,253. Additionally, the Q2FI25 operating EBITDA margin stood at 18%, which is marginally lower from 18.4% in Q2FI24. Net profit for the quarter stood at Rs. 109.3 crores as against Rs. 109.5 crores in Q2FI24. Tax for Q2FI24 included a one-time income of Rs. 18 crores. For the half-year period, net revenue from operation stood at Rs. 1717.5 crores compared to Rs. 1599.1 crores in H1-FI24. Notably, the warehouse segment's contribution to total revenue grew to 73% in H1-FI25 from 71% in H1-FI24. Operating EBITDA for H1-FI25 was Rs 314.8 crore up from Rs 290 crore in H1FI 24. Profit after tax for H1FI 25 stood at Rs 213.2 crore compared to Rs 213.3 crore during the same period last year. On the balance sheet front, our net debt stood at Rs 127 crore as of 30th September 2024 compared to Rs 124 crore As of 31 March 24, this slight increase in net debt is attributed to our ongoing CapEx initiative. Despite these investments, our net debt remains at a comfortable level. The company aims to maintain strong balance sheets going forward. As most of you are aware, our credit rating was also upgraded in H1525 to in-day positive with a stable outlook from in-day. As we move forward, we remain committed to driving growth in both volume and value. We are confident in our ability to sustain and enhance our performance for the remainder of the year, particularly with the stronger demand typically seen in the second half. In conclusion, I would like to emphasize that the company is dedicated to maintaining strong financial discipline while capitalizing on its inherent strengths. Usha Martin is committed to enhancing its financial performance and is well positioned to deliver greater value to all the stakeholders as we move forward. This brings me to the end of my address. I would now request the moderator to open the line for question and answer session. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rajesh Mazumdar from BNP Securities. Please go ahead.

Yeah, good afternoon, everyone, and congratulations on a steady set of results. I had a couple of questions. The first one sir is that despite an enrichment of the product mix in terms of wire ropes and a lower volume of LRPC, the EBITDA margin in percentage terms as well as per ton terms is lower on a quarter on quarter basis and slightly lower even on a YY basis.

What is the reason for this?

Thanks for the question Rajesh. That's a good question. So on the margins front, we have been facing pressures in certain segments for general purpose ropes and also certain categories of crane ropes as well. But despite these pricing pressures that we've been facing because of the enhancement in product mix that you mentioned, we have been able to maintain the EBITDA per ton at the 32,000 rupees level as well as maintain the margins at the 18% level. The goal was value-driven volume growth, right? So we have seen the volume stick up in the wire segment nearly by 19% year-on-year and also in the wire segment by 22% year-on-year. The goal is that we want to continue this volume growth in light of our expanded capacities while not compromising on our prices and keeping our, you know, product mix, you at that level where we have that 73% mix of biotopes as well, so that we're able to maintain these margins and gradually grow as the product makes entry.

So, an added question is how should we look at the EBITDA pattern because we have seen over the last four years our EBITDA pattern has gradually been improving also the EBITDA margin. So, now do we come to a period where we will not expect the native growth in the EBITDA pattern or will it still grow after the new category kind of starts giving us reasonable volume?

As we have been maintaining that this is a level which we would like to definitely maintain And of course, as the overall economic situation globally and within India improves and as our new volumes start growing up, we should start getting some advantage of our increased volume and operating leverage. And if that happens, it may take a few quarters. We can expect it to be moving gradually upwards.

Right, sir. And so my other question is on the working capital. We have seen a deterioration in the working capital in both inventory and data days for the first half. And probably some of it is to do with the ongoing Gulf issues. But how should we read into it in terms of full year basis and going forward on the working capital side?

Very good question and of course the Red Sea crisis has especially for our exports to Europe and US the transit time has increased by almost three to four weeks because of the route through South Africa which is taking this extra time so this is unfortunately building some inventory in the system but we are looking at the inventory as a whole for the whole organization and I would only say that some very major actions we have taken in terms of this and we hope to see that we start seeing a gradual reduction in coming quarters as these strategies get implemented.

Thank you sir. Thank you.

Thank you. The next question is from the line of Aman Kumar Sundhalia from EK Securities.

Please go ahead. Good afternoon, sir. Sir, we have seen that there is significant increase in the cost of fire road and there is also due to Red Sea crisis, there is a significant jump in the freight rate. So, how we will manage this situation going forward?

So to your first point of the increase in the wire rod prices, yes, for this quarter, wire rod prices were at about 55,000 rupees per tonne compared to 52,000 rupees per tonne in Q1. Going forward, there still might be an increase in the upcoming quarter, but we do have some wire rod inventory in place that should help us manage this in Q3. In terms of the Red Sea crisis, in terms of freight rates, yes, freight rates also have increased, but we think they have peaked now and we are seeing a reversal and slight gradual decrease in the freight rates with more availability of containers. In, you know, 50-70% of the cases, we are able to pass on this rate increase, but in some cases, we are impacted and we have to absorb that cost.

Okay. And madam, recently we have seen lot of landslide all in the all the mountainous area. So, when our this calcine wire division will start production and what are the chances scope of further expansion and further this what are the margins we are expecting from this?

The zinc aluminium line which we are setting up is a capacity of around 7000 to 8000 tons per annum. The coal trials are going on, the plant is under commissioning and we expect next two months we should be able to start producing from this and stabilizing the plant and we expect the commercial production to start end of this quarter Definitely in Q4. And there is a fairly good demand both within India and international market for these products. And we expect to gradually ramp up the capacity to the 6,500, 7,000 tons in next financial year. But of course, it will start from the fourth quarter itself. And the contribution per ton is close to between 35,000 to 50,000 rupees per ton. depending on the different products for different applications. So this is, I would say, it's a new product line. It's a higher value added, both export and domestic market. And it should do well. In terms of expanding the capacity, of course, first we have to ensure that this plant stabilizes and we are able to achieve the rated capacity. And if the demand looks to be good, we should definitely look at adding further capacities either in India or Thailand over the next 18 months.

And sir, in the month of April, we enter Saudi Arabian market. So, when you will see noticeable top line and bottom line from there?

You see, Saudi Arabia, we have got the, we have our setup is up and running. We have our team there now. It took us some extra time to get all the regulatory approvals. And I would say that we have got some good response from customers having local fascinating and being able to serve from them locally. And we expect from Q4, Q3 also we have started getting some good orders, but supplies based on these orders would commence partly in Q3. Q4, we should see a significant increase in volumes coming from Saudi Arabia. But by the time we get all the approvals from the various big customers like Aramco and others, it would take towards the end of this year of the local infrastructure and stability we have created. In real sense, I would say to see next year would be a very important year for us to see Saudi Arabia really going all out with all approvals with regulatory as well as with important customers. to take the business a major leap in Saudi Arabia next year.

And sir, any update on synthetic sling project?

Yeah, as I mentioned already the synthetic sling plant is under commissioning and we should be able to start trial productions in this quarter and we should make a hot launch in quarter 4 this year. And the facilities are, including the testing facilities, all are coming up very well. Our team is also getting ready to launch this in quarter four. And I think if this, as I mentioned in my opening remarks, that this is a very important step for us towards synthetics. And the market is very, is decent, is buoyant. We are getting a lot of, for our initial marketing, we are getting a lot of positive signals from the prospective customers. But, you know, it will take about, because this is our first foray into this, it may take before a month for us to really get into the, you know, relationship with these customers, initial trials. I would say next year should be a fairly decent year where we can see, you know, good progress quarter on quarter growing this business.

Okay, sir. And sir, any update on Parvat Mala? Because I think it requires a lot of certifications. So, whether we are able or I think in our security, whether we have to change something to get big orders in the Parvat Mala project?

As far as Parvat Mala project is concerned, let me tell you that we are in touch with all the customers. The customers are in touch with us. We are the only producers of lock coil wire ropes or the other types of ropes which goes into these types of projects. And we have started giving provisional offers and technical offers and our global development center is working very closely with our team in India to work for these contracts but it takes time for these contracts to mature so we need to be patient because these projects don't happen overnight even if we secure orders the supply will start only two to three years from now because there is initial construction and lot of other works involved before you get the rope supply. So we need to be patient on this but I can assure you our team is on the job as far as working with most of the prospective customers. Coming to the approvals, yes there are approvals required. The CE certification which is from the European Union and our Global Development and Design Centre and our team in India working closely And I am told that we are in the final stages of getting this approval. It's a tedious process. We have been on it for a few months now. Once that comes in, of course, then we are certified. And then we go back to them, to the customers. And, you know, hopefully that should even help us moving faster on this.

Okay. And, sir, last question. When will we see volume growth in plasticated LRP system? Is it involved in growth?

The plasticated LRPC, that is, you know, as we mentioned, a project-based business. Monsoon is generally a bit of due period for LRPC overall in general, but we are seeing both for plasticated as well as for galvanized LRPC, the demand now picking up in the domestic as well as some of our export markets. So, we expect to have a demand of about 400 to 500 tons per month on average for this product starting in the upcoming quarter. Okay.

Thanks a lot.

Thank you. The next question is from the line of Kripanshu Shah from Thinkwise Wealth. Please go ahead.

Thank you for the opportunity. So just on Pervert Mala's scheme, so I wanted to understand like for a typical project of say 100 crores, how much wire rope is required? Like if you can speak in volume terms or value terms as well. And so over the last two years, I think project rendering has been in the range of 7,000 to 8,000 crores, right? And the government has laid out a plan for 1.25 lakh crores. to be executed on this. So, it has been a little slow over there. So, I just wanted to understand is it actually a big tailwind for us going forward? Could you speak a little more about it? That's my first question.

Good question. You know, the ropeway projects are typically taking minimum 3 to 5 years before you see them actually after they have got the order in at least three to five years because there are so many clearances required and depending on the terrain. So it is a slow process. There are a lot of projects and a lot of charging going on, but as I mentioned earlier, it is going to take a lot of time. On your question that what is the component of percentage of viable, it could be between two to 4% of the entire project cost. So if it's a 100 crore project, it could be between 2 to 4 crores depending on the length of the ropeway, the terrain, the total passenger or the total traffic on it. So that depends on this thing. So to your question that whether it is a good opportunity and is it going to happen soon or it is going to take time, yes it's a good opportunity but the real benefit of the real projects coming on stream where ropes will be required and start getting into the starting of the ropeway because this will be the last part of the project when they require this rope because the construction and the other activities take and the carriage will take maximum time the wire rope supply comes absolutely in the in the last 20% of the project execution time. So, I would say it is medium to long term. It's a good opportunity. Short term, it is just the process of sending and technical evaluation and working with customers.

Good. So, roughly 2 to 4% of 1.25 lakh crores are addressable market rate. As I understand it.

Yeah, that would be if those projects actually come on ground, that would be the percentage we are looking at.

Okay. And also in wire root volume, now I understand that 70 to 80% of it is recurring in nature, but can you tell us how much in volume terms is it recurring? What I mean by that is now say for elevators in that space, so do we have an annual replacement that comes through? So can you speak about in tunnels,

So, to give you a specific example of elevators, if we do as a group 12000 tons of elevator per annum, I am giving you a rough number, it would be plus minus 10%. So, 85% would be replacement and 15% would be. So, if we are doing 12000 tons of elevator, almost 10000 tons would be replacement and 2000 to 2500 tons would be going for new elevators. and if you talk about the entire industry the way we we our products are being it is almost at a similar level 85 to 90 percent would be replacement as well as 10 to 15 percent would be for original equipment okay so uh let's see if done roughly 94 000 metric tons of

volume in FI24 for a year, right? So 85% of that would be this recurring in that sense every year. Is that a fair assumption to make? And then additional volume growth can come through new clients?

Yes, absolutely.

Okay. And I have just one question on steel prices. In our presentation, we've put that it has sequentially increased. But as per our understanding... fuel prices were on a declining trend month on month say from Q1 right and even our LRPC realizations have actually improved sequentially so could you explain the dichotomy there and has our plasticated LRPC share increased from say 200 metric tons per month that was there in Q1 has it increased?

Thanks. The wire rod prices you see the overall steel price there are two types of steel generally in the industry one is the flat product which goes for auto manufacturing those prices has been subdued in the country but for the wire rod prices all over the country uh being just three or four suppliers these prices have been formed uh they were formed in the monsoon period they had come down before monsoon the prices had gone up then they have come down during the monsoon period we have been able to secure some quantities at decent prices and the prices are expected, we will get some advantage of that in the going forward. So, the wire rod prices have actually gone up in the country compared to the fat products. And we have been able to perform that increase in our wires and LRPC. And of course, when it comes to the rest of the products, these are more engineering products where this percentage is small compared to the final realizations what we are able to get. Coming to the classicated LRPC as Shreya mentioned we were doing about because of these are project based business and because of the monsoon and the overall demand of construction is generally no this period we were doing about 200 to 220 tons a month. In the coming quarters once monsoon is over we are expecting to go to between 400 to 500 tons per month based on the projects which we have secured within India and some good export orders which we have got. We expect to stabilize at 400 to 500 tons in the coming months. Our current capacity is 500 tons. We are looking at even optimizing to see if the demand goes up, how to increase it. But as of now, we expect it to be at this level.

Thank you. Just one last question. So, KPEX, we have done 120 crores in H1. Can you tell us how much is in plan for H2?

You see, as we have said that we have done about 308 crores in our phase 1 project which we completed in March and we expect the second phase Total out of 590 crores of project we have done completed 310 crores last year and then 120 crores this half year. We expect to spend a similar amount in the remaining part.

Okay, so another 120 crores in each two years expected. Yes. So debt levels, do we assume that there will be in this range itself? gross of 300 crores.

Gross and net debt should remain at these levels or should even be slightly better as we progress through this.

Understood. Thank you.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address the questions from all participants, we request that you please limit your questions to two participants. If you have a follow-up question, you may rejoin the queue. The next question is from the line of Shraddha Kapadia from Share India. Please go ahead.

Hello, I'm on the phone.

Yes, you are. Please go ahead with your question.

So, Aashni, I just want to have a basic understanding on how the country is moving in the path to melt up the fluctuating government-led crisis. So, you have given a presentation where EBITDA falls down and this needs to be revisited. But how do we actually manage it?

Shweta, I am sorry to interrupt you. We are unable to hear you. Your voice is coming very low, Shweta. Can you speak a bit louder?

Hello?

Yes, please go ahead.

Am I audible?

Yes, now you are.

Yeah, yeah. So I really wanted to understand that how do we actually manage the fluctuating raw material prices? Like you have given in the presentation with regards to the EBITDA price turn and the sale prices, how they have shot up and how EBITDA price turn is managed.

But do we have a future content or how do we go about it?

For, you know, looking at our three product lines, as we mentioned, for wires and for LRTC, finally, it is purely pass-through for the steel prices. For the wire rope, for the handle purpose wire rope, also in most cases, it is a pass-through. For the most specialized engineering products, if there is a small increase or decrease, since it's a very small percentage of the overall realizations that we get, it's not a pure pass-through, but if there is a meaningful shift in the steel prices, then that, you know, the prices and realizations would also be adjusted accordingly.

Okay, okay. Thank you so much for answering the question. Also, it was mentioned that we had a very sharp recovery in the government and market.

So, any specific industry or changing trend which was observed

You see there are basically this is linked to the wire rope is mainly consumed wherever there is construction or where there is infrastructure growth. So areas where we saw significant growth in India, one of course is the elevator industry where we see a very strong demand coming not only from the tier one cities but even from the tier two and tier three cities and we see that continuing to grow in the coming years. So that has been one area. Number two, for all our products which goes into ports or into construction like the high speed railway project or even the big bridges and the roadways lot of construction activities so we see a lot of demand coming from train ropes and from our elevator ropes and from our engineering products and we see that our distribution network is very strong and we are working very closely with them to understand wherever the opportunities are there to proactively work together to their arm market share. And this is something which is going to grow as India's capex condition keeps on growing in the near future.

We should see a steady increase in the domestic market.

Sure, sir. Thank you, Komal.

Also, if you could just give a brief guidance for the next two to three years, that would be great.

Over the rest of this year as well as FY26, as we mentioned before, 10% to 12% volume growth is what we expect in line of the capex that we've done. In terms of the top-line growth as well at similar levels because we want to get this volume growth without compromising on our prices. In terms of the EBITDA margins, Like you were saying earlier, we have been able to maintain at the 32,000 rupees per ton level. As our product mix increases, the wire rope in the product mix as well as the value added product increase in the product mix, we hope to gradually increase the EBITDA per ton as well.

For months from what I remember previously we were guiding for approximately 19 to 20% of the EBITDA margins.

So do we stick to that or do we revise it?

As we said that we would try to maintain at 32,000 and close to between 18 to 20% and that is something which we feel confident about. that we should be able to achieve that.

Okay, sir. Thank you so much for answering all my questions.

Thank you. The next question is from the line of Dhawal Shah from Gillick Capital.

Please go ahead. Hi, thank you for the opportunity.

So my question is regarding the US mining... Sorry to interrupt you, Dhawal.

We are unable to hear you.

yeah am i audible now yes please go ahead yeah sorry uh my question is regarding the u.s uh mining opportunities uh if you could uh help us understand uh you know how many order wins have we had uh what is the share of business uh right now and how and what outlook would you have for it uh also uh you know along with that u.s oil and gas and australia mining

We have made decent breakthroughs and we have got almost 4 or 5 different big mine where we are supplying those in the US and 3 or 4 in Australia and I am happy to say the products are well established and the quality and we are getting liquid orders but at the same time growing the mining business is not as simple as going and selling in engineering, simple GP row business because changeover from one supplier to the other supplier means a lot of working with the mining at the lower level and I'm happy to say that the relationships which we have built, we have been able to successfully maintain and keep on growing our share with them. But if it is exponential growth, Probably it will take some more time before we are able to see a major growth coming in the mining. But steadily we are growing in both Australia and the U.S. And the good part is that the only way you can continue to increase your market share if your supply and your quality of product is equally good, it's not better to your competition, the basically European and the Australian manufacturers. So that part has been successfully achieved, and our products are well accepted. The customers are also, and also they come in annual contracts. Some of them come in once in two years contracts. So we are waiting for the right opportunity. Once the trials are over, we'll participate in those contracts. So it will take two to three years, and I'm sure that we will continue to grow. And this is an important area, a high margin, decent business. So we are on track to do that. Coming to oil and gas and renewable energy, that business is very strong in Europe, in US, South America, and probably the rest of the world, including the Middle East. And that is an important area for us. Almost 18 to 20% of the share of our business comes from this segment. And this segment, as we are growing our volumes, we are also seeing a good demand from both these sectors, renewable as well as the regular energy all oiling offshore business and we expect this to at least continue the feedback what we get from our customers based on the various projects they have then next two to three years should be a fairly decent market for oil and gas.

Interesting. Sir, on oil and gas and both mining I would like to understand what is the life of our product I mean what is that you know after how much time do we get a repeat order?

For mining, there are different applications. For example, a dump rope which goes into one part of the rag line is 15 days. Then some are 30 to 90 days. Some are even one year. So these are different products where different applications are there. And it could be anywhere between 15 days to one year as far as the mining is concerned. For drain line rope for the oil and offshore, For the cranes, it could be between 1 to 3 years depending on how often they are used. And if it is drain line ropes, it could be between 6 months to a year. And if it is going to be anchor mooring ropes which go into the anchoring of the basically the oil platform, it could be between 3 to 5 years depending in which kind of see they are working is it very very very you know yeah so so it's very relative also depends on how how deep it is and how often it is being used but but we see generally that it's a fairly recurring business and again here also we get about 85 to 90 percent repeat business uh through the replacement market and 10 to 15 percent through

Got it. Sir, there is a comment regarding we expanding our sales distribution and we are growing volumes capacity. Now, so how should we understand the employee cost figure on the P&L? So, by the time you are done with the CAPEX and you fully utilize it. So, what are next 3 to 4 year period? How will this employee cost move? So, FY24 we had 428 crore. now current quarter we are emitting at 120 crore quarterly uh uh so how will how will this uh employer cost figure be so because and because we mentioned about the operating leverage coming in for the company uh so uh yeah so how will how will this number stabilize going forward uh this is a very good question and this is something which we are looking at it very carefully because we are expanding the volumes

On one side we need workforce pushing the volumes into the market but at the same time we are also conscious that the costs need to be controlled. I can only tell you that there is a strong focus to optimize this and you will see some good benefits coming from Q1 of FY25 when you see these things. So next two quarters we are putting a lot of efforts on this. to optimize it, re-looking at every single penny which is being spent and you will see, it's not possible for me to comment on numbers, but you will see a decent progress on this in Q1 2025-26 onwards and that is where I personally feel we get the full benefit of the volume growth kicking in and the operational leverage which I mentioned earlier would start kicking in. So, you will see some good results on this.

Got it. And last question. Now, again from a three-year perspective. So, the incremental 1000 to 1500 crore sales which we will do over next three to four year period. Should that come in at around 30-32% margin? Is my understanding correct? Because we are doing everything value addition largely. and so that our total margin should range towards 20-23%. Am I being too optimistic or is it possible with the kind of trajectory we are going to follow now and we are following already?

You see, this is the question which we have been replying every time. We have gradually pushed it up from 14-15% to you know, 18 to 20%. So, as of now, we, based on the, you know, it also depends on how we manage our product mix, how we manage our volumes, how we manage our cost. So, all these are very dynamic in a global environment which is pretty uncertain at this moment. So, our endeavor is to definitely try to keep on improving it as much as possible based on what we have been able to achieve. But what we feel is confidence as of today is maintaining 32,000 and maintaining between 18 to 20%. If the overall market situation and global situation changes, probably things could get better, but it would be better to go cautiously because on one side, we have to also see that we get more market share, increase our volumes. Increasing and getting more volume market share always doesn't happen at the same price. So you need to complete So, there are so many dynamics involved in this.

Yes, definitely.

I cannot say that we remain at this level and hopefully we should get better. That's all I can say.

Yeah, and sir, sorry, one question. I mean, we changed our logo. So, could you spend two minutes and just, you know, spell out like, you know, why this juncture, you know, have we decided to do this and what other things have you seen in the organization changing?

Yeah, so I can jump in here. So in terms of the logo change, there were a couple of reasons, right? So as we're shifting from more of the commodity products to the high value engineering segments, we wanted our logo to also reflect that change. We are on this culmination journey where we are going more towards the specialized products and we do expect to see a growth over the next few years. So that was the primary reason. Previously, we were in the team making business as well and the logo was associated with our legacy businesses. So we thought at this point was the right time to refresh the logo and, you know, come out with this new identity where our focus is on the co-wire of business which is an engineering product. Secondly, you would have also noticed that the logos of our various entities, specifically globally, have also come together under one sort of visual identity. what we were noticing as we were growing in the international market, that customers were not realizing the scale of our business because all the visual identities of our different entities, whether it was Consul Shop, Grunt Enviro, our service centers, DeLoyter, EMN, they all were speaking a different language. And we wanted to come together and want Isha Martin to be able to convey to our customers the scale of our business and how we are working well in an integrated manner. Because operationally, we have, you know, made a lot of changes where we're not working in silos anymore and collaborating overall as an organization. And he believed and he thought it was the right time to reflect that externally in our identity as well. And that has been received very positively. The initial reactions from the customers have been great, especially in the European market where all of our various entities, whether it's the Global Development Center, CSUK, TMM and Heroiter, all have come together under one visual identity. The customers over there have been appreciating that and now relating these entities to each other as well.

Got it. Thank you very much for a very detailed answer and good luck for the future quarters. Thank you.

Thank you.

Thank you. Participants are requested to limit their questions to two participants. The next question is from the line of Sagar Dhawan from ValidQuest. Please go ahead.

Yeah, thanks for the opportunity. Just on the wire rope segment, I wanted to understand about, you know, just wanted to know about the volume growth. So is the volume growth coming from value-added ropes or general purpose ropes in this quarter?

It's coming from both, you know, it's coming from both because we have a mix of both the products and both general purpose and I would say it is growing equally. Whatever growth is coming, I would say it is coming half and half from value added and half and half from BGP growth.

Yeah, it's just, you know, sorry, go ahead.

No, no, go ahead, go ahead. Go ahead.

Yeah, I would say that, you know, since FY23, if you look at some volume terms, the overall mix of, you know, value added by a rope in the overall mix of all products was, you know, under 30%, but in terms of volume, right? But in Q1 FY25 and H1 FY25, overall, it is about 32% also, you know, of the total mix. including, you know, if you look at NRTC, wires, wire ropes, all combined, like 32% come from just the specialized wire ropes.

Got it, got it, okay.

And if you were to look at the wire rope segment, what is the share of value added in terms of volumes within the wire rope segment? I think you share it on the value terms.

I just wanted to understand the same mix in volume terms in wire ropes.

Yeah, in value terms, it would be about 73%. In volume terms, it would be about, you know, ballpark about 60% or so.

Yeah, thanks, thanks. And if you can also give a rough difference in terms of the realizations between the value-added ropes and the GP ropes.

The GP ropes would be around 150. 30,000 to 140,000 rupees per ton and the specialized rope could start anywhere from 220,000 to 280,000 rupees per ton and some products even would be close to 4.5 lakh rupees per ton.

Understood. One last question from my side. If I look at your growth process in the international markets, what would you say would be the volume growth that you will be targeting for international markets within the in the web side value-added product side what is the volume growth particles here and what is the market size return market share within that and the right to win over here you see we are

I would say that in the domestic market, let me first come to the domestic market, we are doing around, we used to do around 37, 38,000. Based on the various initiatives taken, we should be close to 47, 48,000 this year in our domestic market. Because that's the market where we have already strong distribution and distribution network and very close working relationship with all the major OEMs and customers. So we took a strategy that as we are growing our volumes, let's catch the domestic market where we were losing opportunities and get the shares. So that is something which is on track. On the international market also, I expect the growth by 10 to 12% per annum. That's what we are doing. Because it takes time to get to new OEM approvals and takes time to get into that network. But I expect 10 to 12% growth coming from the international market also in the next 2 to 3 years with the various initiatives which we have taken.

Thank you.

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.

I would like to thank everyone for attending this call and showing interest in Usha Matel 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 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. On behalf of Usha Martin Limited, I conclude this conference. Thank you for joining us and you may now disconnect your lines.