Usha Martin Gdr 144A

Ladies and gentlemen, good day and welcome to the earliest conference call of Usha Martin Limited. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star 10 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dev Rishi Singh of PGR India. Thank you and over to you, sir.

Thank you, Sagar. Good afternoon, everyone, and thank you for joining us on Usha Martin's Q3 FY25 earnings conference call. We have with us Mr. Rajiv Jhawer, Managing Director of the company, Mr. Abhijit Paul, Chief Financial Officer, and Ms. Shreya Jhawer from the Strategy and Growth team of the company. We will initiate the call with opening remarks from the management, following which we will have the forum open for a Q&A 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 earlier presentation. I would now like to invite Mr. Rajiv Chhabar to make his opening remarks. Thank you and over to you, sir.

Good afternoon, everyone. On behalf of the management team of Usha 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 our CFO, Mr. Bhaji Paul, will run you through the key financial highlights. In Q3 FY25, Usha Martin achieved sustained top-line growth in the year on rising revenue despite a challenging global environment. The wire rope division remains to contribute. Accounting for 73% of our total consolidated revenue, it reaches to 9.6%.

The wire segment forms a 19.6% The LRPT reported a decline of 1.4% year-on-year due to software demand.

Within the wire group division, value-added products accounted for 70% of revenue in 9 months FY25, with contributions from the elevator sector. International markets formed 55% of total revenue in 9 months FY25. However, pricing softness and margin pressures in geographies impacted our operating profits for the quarter, resulting in EBITDA margins of 15.6%. While these headwinds affected profitability, our focus on value-added segments has ensured steady contributions from both sectors positioning us well for recovery in the coming fiscal year. During the quarter gone by, Ursham Martin continues to make considerable progress in its strategic initiatives, working steadily to support overall business momentum despite facing certain math-led challenges. Our ongoing expansion in our Ranchi plant and Thailand plant remains on track, with expected volume ramp-ups enhancing our market position in the coming quarters. We are also seeing steady progress in our digitalization and automation investments, aimed at enhancing productivity. Our capital expenditure for synthetic skin production in the UK plant is also progressing well, with commercial operations to begin in Q4 of FY25. As most of you know, Usha Martin has undergone a significant transformation in recent years by divesting its steel business. This strategic move not only reduced our debt, but also laid the foundation for a successful turnaround. Following this, the company refocused in its core specialty wire rope segment, enhanced production capacity, improved our product mix, and increase market share in the international markets. These steps make the foundation for the turnaround easy today, enabling the company to deliver steady growth and operational improvements in the future. Building this foundation, I am pleased to share that we have embarked on the next phase of our transformation under the One Usha Martin approach. This initiative is designed to bring greater efficiency across our businesses. The goal is to operate as one cohesive company rather than separate regional businesses, ensuring optimized cost and increased competitiveness leading to stronger financial performance and a sustainable long-term growth. The strategy focuses on on areas such as centralizing operations for certain functions and refining our manufacturing model. On the operations front, we are consolidating certain functions across geographies, example centralizing procurement for various units under one umbrella to achieve economies of scale. Currently, each manufacturing unit is purchasing similar raw materials independently. Consolidating the procurement requirements across the group allows us to negotiate better terms with suppliers across geography, unlocking cost savings and standardizing input quality globally. We are also streamlining our logistics function where we are taking a more centralized approach to negotiations, securing rates across the global supply chain, While execution remains local, the strategy allows us to optimize costs. With better coordination, tracking and analytics, we can also improve delivery timeline for our customers. Additionally, we are also optimizing our back office infrastructure by shifting certain support functions from our high cost subsidiary locations to India. On the manufacturing front, we are advancing our operations with the redefined Renton Shaw UK model. In the existing model, we manufacture wires and strands in India and complete rope production in the UK. The model has been critical in establishing trust with premium customers, particularly in the specialized sectors like oil offshore, elevators, etc., Now that we have successfully executed and built credibility with these customers, we are taking the next step in integration. For certain product categories, we will now supply finished ropes directly from India, leveraging our enhanced capacities and cost advantages here. However, for some specialized segments such as the large diameter end ropes used in oil and offshore applications, the UK will remain a critical hub for final production. This enables us to achieve cost efficiency while maintaining specialization and effectively serving premium markets across the globe. The implementation has already started and we aim to complete this transition by September 2025. These are just a few examples of The many initiatives we aim to undertake in the coming months is a part of this approach. One is a clear step towards future-proofing of our business, spending our competitive advantage, improving margins and improving operating leverage. By integrating our operations globally, we are creating a leaner, more agile business, that it is better equipped to meet evolving customer needs while driving long-term creation for all our stakeholders. With this, I would now like to invite our CFO, Mr. Abhijit Paul, to present you the financial highlights for the quarter ended 31st December 24th. Thank you and over to you, Abhijit.

Thank you and very good afternoon, everyone. I will now provide a brief overview of the company's operating and financial performance for the quarter and nine-month ended April-December 24. In Q3 of FY25, the consolidated net revenue from operations screwed at Rs. 60.5 crore, registering an 8% year-on-year increase from Rs. 797.1 crore in Q3 of FY24. by positive performance of our core wire rope and wire and strand segments, which recorded revenue growth of 9.8% and 17.6% respectively. While the LRPC segments continue to face challenges, we remain optimistic about its potential. With a steady increase in demand for galvanized and plastigate LRPC products, we anticipate improved performance in the upcoming quarters. During the quarter, our operating EBITDA stood at Rs. 142.7 crore compared to Rs. 157.1 crore in QCFI 24. The operating EBITDA margin for QCFI 24-25 was 16.6% down from 19.7% in the same period last year, primarily due to subdued realizations and market dynamics in the international market. The net profit for the quarter stood at Rs.92.3 crores compared to Rs.107.5 crores in QC of FY24. For the 9-month period in late 31st December 2024, the consolidated net revenue from operations rose to Rs.2578.1 crores, a 7.6% year-on-year increase from Rs.2396.2 crores in 9-month FY24. Our wire rope segment accounted for 73% of the total revenue. The operating EBITDA for 9 months A525 stood at Rs. 457.5 crores compared to Rs. 447.1 crores in 9 months A524. The Pax for the 9 months stood at Rs. 305.4 crores compared to Rs. 317.8 crores As at 31st December 2024, our net debt stood at Rs. 168 crore, which is 20% of our annualized operating exista. Despite ongoing capital expenditure initiatives, including expansions in RCN Highland and upgrades at the instability, our debt level remains well within manageable limits. I would like to emphasize that the company remains confident in its ability to improve its overall performance going forward. As we progress, we anticipate further growth in both production-driven volumes and graduate growth. Our strategic initiatives, including the one-smarting approach, along with continued investments in automation and digitalization, will further strengthen our competitiveness and improve operational efficiency across both global and domestic markets. Ushamati remains focused on achieving sustained growth and creating long-term value for all its stakeholders. This brings me to the end of my address. I will 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 their touch-tone phone. If you wish to remove yourself from the question queue, you may press the R and 2. Participants are requested to use handsets while asking a question.

Ladies and gentlemen, we will wait for a moment while the question queue assembles.

Our first question comes from the line of Aman Kumar Kuntalia from AK Securities.

Please go ahead. My question is that Indian market and European market both are having very sluggish demand scenario. So, we have expanded our capacity and at the same time we are seeing the margin prefer. So, in this sluggish demand scenario, how we will increase our volume and at the same time how we will improve our margins.

Thank you so much for that question. So, just answering it in two parts. First, in terms of the India market, actually, the viral volumes, which is the core segment for us, the viral volumes have gone up significantly this year. So, if we look at the nine-month the volumes have gone up from about 28,000 to about 34,000 for the nine-month FY25. So we have been able to strongly focus on the domestic market, especially with the support of our user network. That being said, of course, to your point, there is an expectation of growth in India in terms of construction, infrastructure development, the top-based projects, bridges, We do require both rope as well as transplated LRTC, but the on-the-ground execution of some of these projects in the market has been a bit slower than expected. So, you know, while in the short term, that, you know, leads to certain slowdown compared to expectations in the long term, we hope that we could still see this kind of growth. In Europe, on the other hand, You know, as mentioned in the opening remarks as well, we do see certain challenges, overall slowdown in the international markets, including Europe, which has led to particularly pricing and margin pressure. Our goal is in this market that we make the European setup more lean, more efficient, so that we can optimize our costs. and then in turn become more competitive and then, you know, able to retain and gain our market share.

Okay, thank you. Madam, our next question is regarding this LRPC. So, LRPC market, I think, is very competitive and I think it's not very competitive because lot of big players have come in and there is quite oversupply in the market and infrastructure spending is not picking up in India. So as far as I know that we have stopped begging for some hellos rope which is being used in cold India and some of the other mining area which is not as profitable as other ropes but it is much more profitable than this LRPC. So instead of putting our energy in selling LRPC if we concentrate more on selling in this market, so I think it will improve our profit compared to LRPC.

The LRPC plant is very different to the plant producing the haulage ropes. So, as far as you are right, the LRPC demand and markets are very subdued at the moment because of our supply situation and the slow uptake of of these projects. However, our objective to continuously keep on upgrading our facility, using our facility to produce plasticated and galvanized LRTC continues to be our main focus. We have got certain orders both from domestic and export markets which we expect to ramp up in the coming quarter depending on the demands of these projects and we feel that that is the right strategy to improve the profitability of the LRPC and the facility to produce these LRPC strands particularly galvanized and deplasticated comes from our rope making facility which is having a big advantage to us and we think that should really go up in the next financial year. On the haulage rope as well as ropes for the domestic market for whole India Definitely, we have started bidding for these orders also. And as Shira mentioned that we have increased our market share in India. We have been able to increase some of our volumes in these markets also. And as a part of our strategy going forward, at every market opportunity in India, we will try to increase our share. So, your point is taken. In any case, that is a part of our plan.

And so next question is what is the update of the fine wire plant and synthetic string plant?

As far as the synthetic strings plant is concerned, the plant is completely ready including the most important testing facility of the 2000 tonne proof load testing machine in the UK. And we have started getting some small orders using our distribution and our service, vReuter and EMM, our subsidies. And we expect to start commercial production in this quarter itself in Q4. And next year would be the first year where we start working with all the end users to get their approvals. There is a process of getting the approvals, especially for the specialized teams. And our team is confident that we should be able to achieve that in the next financial year. Coming to the Gelsan, we are naming it as Gelsan, which is our zinc-aluminium line. I'm happy to say that we have commissioned our plant, and it is under trial production. And we hope to stabilize the operations in this quarter. And we should start getting the full benefits of this from the Q1 of the next financial year. And of course, some quantities of trial supplies will also be made in this quarter. But we expect this to get fully commissioned in the next financial year.

And so the last question is what about the Saudi market?

The Saudi market, we have all our team in place, all the approvals in place and we have started our rigging facility and the distribution facility there. The feedback from the customers, they are very happy that we are there with all our facilities and we have started approaching customers and started getting orders. We have been supplying there to our customers Brunson wire plant but now having this facility I think there is a fairly good demand and we expect good orders to flow in and next year we should be having significant increase in volume from that market.

Okay. Thanks a lot. This is from my side. Thank you.

The next question comes from Dawal Shah from Virat Capital. Please go ahead.

Yes.

Hello, sir. Sir, just one question. Like you see, compared to the last conversation we had in the last quarter call, which is now today we are seeing some sort of, you know, bearishness in terms of European and Indian markets. Indian markets, we can understand, you know, there has been, you know, the lack of spending and capex activity in the country. which is a direct, you know, and our company is a beneficiary of that at this impact on the volumes. But in Europe, if you could explain us more in detail, you know, where are you seeing the slowdown? So, if I understand, if our key markets in Europe would be, one would be the, you know, the one application would be in the fishing application plus in the rigs plus installation of wind and, yeah, So, where is the slowdown you are witnessing in which of these business segments? Secondly, talking about US, so we are very close, we have started sending material for the mining application and it was a great achievement for our company. So, there was a progress there and also an auxiliary started sending. So, is that segment giving performing X-ray expectation? So, overall you know where is that growth going to come back because I was expecting a much better performance this quarter and for the year. So, how you know how could we meet the shortfall in terms of whatever guidance we have given and going forward what sort of volume guidance would you like to share with us? Thank you these are my questions.

Yeah. First of all, let me tell you that while the domestic market, there is a slowdown in the infrastructure and project execution in India. But with our initiative to work with our dealer network to have a better penetration in the market, we have actually been able to increase our market share in India and increase it almost by 18% year on year. And that is something which has helped us to get a better market share in India. We expect that in the coming period, the domestic market hopefully should start getting better and we are well prepared to take care of the English market if that happens. Coming to your next question, and we feel that focusing on our domestic market and keeping a very strong focus to ensure that we take the full opportunity of any growth taking place, we are well prepared for that through our own marketing as well as through our distribution partners. Coming to the European market, I would say that there are three major segments which we operate apart from our rigging and servicing which is there. One is, of course, the elevator market, which is fairly stable. And as a part of the new model which I mentioned in my opening remarks, That is something which we were supplying from India's plants to our UK plant and then finishing and supplying the ropes to our customers in Europe. I am happy to say that we have been able to convince them. They have come and looked at our facilities that yes, we are equally competent to supply the entire product from India and that has already started from this month. So, that is something gradually both the plants would be supplying but as the India ramps up, So this is going to help us not only be able to get a bigger market share but also help us to reduce the working capital in the business as the double freight and as the direct supplies improve from India. Secondly, on the fishing market, we have been able to establish a fairly strong market base through our BSUK facility. Those customers have also 90-95% of them are ready to buy the products directly from India. So that is something also we have started gradually. And I think by September, we should be able to ensure that everything starts going from here. This is also going to help us to be more competitive. faster delivery and be able to be much more faster response to the customer needs. This is also a stable market and a stable demand. The area where we see a lot of competition as well as demand challenges coming is the oil and offshore. And that is something because the competition also because of the lower demand is being aggressive to trying to get the, you know, everybody is trying to get a pie of the same market. So, we have to be competitive and part of the strategy is to supply directly from India and part would be continuously to be producing out of our U2 operations.

Sorry to interrupt. So the competition which you are mentioning, which geography are these competitors from? Is it coming from the South Korean and the Chinese market or these are the... Chinese are not there.

South Korean is definitely an important player in this rope industry and it is also the European and the American, mainly the European manufacturers. the European manufacturers and the Southeast Asian. Chinese are not there in this market. So, you don't see any competition from them.

So, European competition is so, it's competing against our cost base of Indian cost base, right? Because we are doing power production here and spending there and then we are so, there is a cost of production difference which is coming versus our competitive European and still they are competitive. Is my understanding correct?

If they keep on reducing price, suppose they are supplying at 100 rupees today and tomorrow and we are supplying say at 97 and their plants are also getting, you know, because of the lower demand, If their plants are also getting, so they want to be aggressive in the market. They also want to reduce their margin and probably keep their plant running. So that will also force us to reduce and match prices. So in a demand supply situation where demand is weak, So, I think pressures will come and we need to continue to keep our market share and fight on price with them. So, this is something which will certainly in the marketplace. This is a normal business. When demand is strong, everybody is happy. When the demand becomes less, people try to pitch for a lower price. So, you have to compete with them. So, our margin, what we were telling earlier, will definitely come down.

Okay. Okay. Okay, got it, got it. Yeah, yeah, sir. And with regards to the American mining and Australian mining business?

The business is, our quality is well established and the supplies are continuing and both to the American market and the Australian market and our endeavor would be to slowly keep on pushing the volumes but I am happy to say that our quality is well established now.

Okay, okay. So, if we see then in terms of the guidance what we had given product-wise, we might be quite short of it in the wire and strand category. So, that's where you think, you know, the current range of volumes what we are doing on a quarterly basis, you think next quarter we could see some improvement? How is it going?

Overall, on the volume front, actually for both ropes as well as the wire and strand category, over the nine months, we've done quite well. Even from a top-line perspective in wire ropes, we saw about 12% growth. If you look at the nine months, about 10% for this Q3. And wires as well in the nine months, about 14% top-line growth and strong volume growth as well. you know, over the next year as well, with support from these core segments as well as some of these other initiatives he talks about that hopefully will reduce our cost base and make us more competitive, we do aim to grow by at least 12% overall.

12%? FY26?

Yes. Yes, the next upcoming year, yeah.

upcoming. So this year we should be overall should we be touching around 1 lakh 90,000 tons in terms of total volume for FY25 the current year by March? Yes, we should be able to do that. 1 lakh 90,000 and 12% volume growth on 1 lakh 90,000 base.

Yes.

God, there could be some trouble sir? Yes.

The next question, before we take the next question, requesting participants to limit themselves to two questions each. If you have any follow-up questions, please rejoin the queue. The next question comes from Rajesh Majumdar from BNK Securities.

Please go ahead. Good afternoon, Rajesh, Shreya and Ravi. So, I had a question on the margins. How do we lead into the 16.6 number that we have got this quarter? Because if we are kind of restructuring the UK operations and sending from India, there would have been some impact on the employee expenses, etc., but that hasn't really come down. So, I assume that this would also entail some kind of ratification of employee costs in UK which would actually lead to some more cost going forward. So, are we going to see more margin pressures on account of these things in the short term before we go back to kind of 18% plus levels? Or are we seeing the bottom of the margin?

To be safe to you, I think this is the bottom of the margin and with the various initiatives of one Nisha Martin where we are looking at rationalizing our costs across all our subsidies and looking at what I mentioned, lot of activities shifting back office to India as well as the new BS UK model where instead of taking wire and stand selling finished products, it should only help us get better from here. So it is a journey for about from now up to September when we complete all these activities. There is a big digitalization program, everybody coming on a similar platform to ensure that all these initiatives are getting. So, I see that things are only getting better from here.

Right. And my second question is, I think you have received some kind of certification, European certification for the ropeway project that India has been talking about. So, any update on the Bharat Mala project and where we stand in that?

Yeah, we have got the CE certification, which is the CE certification for any of these ropeway manufacturers in Europe to start buying products from us. So that we have been able to get it in just about a couple of months ago. And now we are in touch with all the various projects which are coming up. Having said that let me tell you that while there is a big buzz that these projects will all be coming up and I am sure that they will all come up but there is a very big time lag between the projects getting announced and getting all the approvals and the customers ready to buy the products but this is a major step which was important to be able to enable us to get into this business. So having done that We are now closely working with the various projects which are under tendering and the customers who are expected to get the orders. And hopefully, we should start getting the business in the coming years.

Just one added question, sir, here. This certification, does it cover all the global gondola projects like US, etc., the gondola projects?

We are supplying mainly for the projects in India but we supply gondola ropes to the US market from our Thailand plant as well as to some of the European manufacturers to our Thailand plant and there are lot of the special lock coil ropes which is supplied to the American market as US, Canada markets also. But those are for more for the mining projects which require the same ropes but not goes into the ropeway business. Our ropeway business focus is mainly in India.

Thank you. Thank you so much.

Thank you. The next question comes from

from an individual investor please go ahead sir uh regulations on a very decent set of numbers in um globally competitive environment uh my question would more be a general question sir regarding your efforts to change isha martin from a metal converter to a global engineering uh company I think all your efforts are going behind this in terms of your sourcing, your certifications. I would like to have your thoughts on this and since you have a new logo and got everything under one new logo, your thoughts on the transformation of Osho Master. Thank you sir.

The approach of our is that we have the manufacturing facilities in India and Thailand and then we have our distribution and our service and regime facilities in different parts of the world. They are all integrated with us. as they are all 100% subsidiaries of Usha Martin. But our next step is to now even management-wise and try to see that how we can optimize our total cost. So that is something which is a major exercise we are taking, which will help us become much more competitive and be able to take on competition in a bigger way. also on the engineering front with our global design center working very closely with our manufacturing plant. We are working to see how we can come up with new better design products which can help us becoming even more close to the customer with giving them better features and better products which can enhance their life of those products. And we also have a very strong machinery division in Ranchi which is helping us improve all the engineering capability to help us in modernizing our plant over a period of time and we are strengthening that and that is all helping us to ensure that our product quality, our ability to produce better products with better features and ultimately being better than the best in the industry. So I think all these initiatives are at different stages of implementation and I can only say that in the next 12 months you will see some of these big improvements showing up. So we are confident to become you know what you rightly said that what we were steel producers more on the steel side and the value addition but now that we are focusing on this probably we will only get better from here. Thank you sir and best wishes for you and the team. Thank you.

Thank you. The next question comes from Rolin B. Nandu from Eagle Leaf Public Alternatives. Please go ahead.

Yeah. Hi, Mr. Jagat. Thank you for taking my question. Few questions from my side. The first will be on competition, right? Now, if we look at your numbers in terms of margin, both on percentage level as well as EBITDA quarter level, and not on a quarterly basis, but let's say from FY21 to FY24, large part of these gains came from, you know, some of your award subsidiaries, right? And this scale also coincided with some of the European manufacturers maybe going off stream because of higher energy cost. Now the energy cost in Europe has far more stabilized. And if we look at some of the numbers of your competition as well, that has also improved a lot. So are you seeing the reverse of some of the trends that benefited us between that period of high energy cost in Europe And then, is this competition going to be there for longer even if the demand factors or demand turns positive? I mean, how do you see that trend?

The demand has, you know, the competition in any business, competition is always going to be there. Last two years, we have seen the demand being fairly strong and that is why everybody was very happy and the prices were fairly decent. But when the demand comes down and everybody is well prepared to take on to the competition, prices do come under pressure and ultimately the margins come under pressure for various people because everybody wants their plant to be run at optimum capacity. So, having said that, this is what the reality of the business is. The European market the European market as a whole and part of the other international markets are seeing some kind of slowdown which is impacting the demand and naturally bringing in more competition. What we are doing is to see that where we can optimize our cost with all the various initiatives which we mentioned in the questions which I have answered or in the opening statement, we expect to bring down our costs significantly through all these initiatives on one side and on the other side with the various CAPEX initiatives which are already underway part of which is almost done and is done and the balance will be done within the next year we should be able to prepare ourselves to be able to take more market share from the competition from both in India and overseas so what happens if your cost structure you are able to bring it back to a You know when you are looking at bringing down your cost structure by different ways and you prepare yourself to take on to the next level of competition which is happening. Having said that we are going to ensure that with this cost cutting we are again more competitive than our western as well as the Korean suppliers. However, if the market improves, the advantage of cost will continue to get what we have been able to do and we should be able to get fairly decent market. So, markets are dynamic. We need to put our house in order to be able to be ready for any kind of competition and I am happy to say that we are on track to do that and by September, all these initiatives will be in place.

No, sir, that's appreciated. I understand that. My question was that has some of the competition which had gone out of the market because of high energy costs have come back in the market? And then on the margin also, right, Javaji, if I remember it correctly, you were always guiding that in percentage we will be at 18%. Now when you are taking on all this transformation journey, are you saying that you will recoup to 18% which means that we will have to do all these cost cuttings just to get back to our original level of 18% or now we should think about the margin also in the next level, not in the next quarter but let's say once all your transformation is complete in September of this quarter, Should we be aiming for maybe a 18% to 20% margin higher than what we had initially thought about?

So, if you, you know, quarter on quarter, of course, the situation is dynamic. But if you look at a nine-month, so this particular year, we are still at about 17.7. So, you know, at the 18% EBITDA margin levels. So, and as mentioned in one of the previous questions, the margins for this quarter, we don't expect it to get any worse from here. We expect it to get better with all of these initiatives. So, I think that the guidance that we had given that still holds and with these initiatives coming into effect from now in phases, but up to Q2, we do expect things to improve.

Understood. Can I push one more if that's fine? Sure, sure. Yeah, so just, you know, on this demand as well, Jawadji and Shreya ma'am, right, see, in one of the past calls, we had mentioned that maybe, I mean, I might be getting this number wrong, but 45 to 50% of our, you know, demand comes from replacement demand, right, which in a way has nothing to do with, let's say, new CapEx coming up or You know, in oil and gas, where is the energy prices going to be? So, does that mix still hold true? And a large part of this slowdown in demand, are we seeing in new projects or is there something happening in replacement part of our market as well?

The replacement market is almost 80 to 85% of the demand. You know, the replacement is not 50 to 55%. 80 to 85% is the replacement market in most of the products. That is point number one. Point number two, say for example, in the oil sector, say in Saudi Arabia, let me give you an example. If there are 350 rigs which were working last year, now based on the current global demand, almost 50 rigs have come down, they have put down 50 rigs out of operation. So, naturally the replacement market for that 50 rigs will not be there. It's not a question of new bit. So, So, when it comes to 85% of the market, which is replacement, holds true. But if the equipment which are in service are taken out of service, would definitely impact the replacement market demand. I am just giving you as an example. However, overall I would say the replacement market is fairly strong. As well as the new builds for certain sectors like elevators, the new builds are going all out. Everybody in most of the developing world, the elevator demand is very strong. New builds are doing well as well as the replacement market is doing well. So, to answer your question, the 80-85% is replacement. And it is a general slowdown in the economy where the demand is getting affected. You cannot say that new builds are completely stopped. So, new builds are also there, but if there is a slowdown in any construction activity, naturally the grains will not be working in that area.

Understood, Jayavati. Thanks a lot and all the very best. Thank you.

A reminder to all the participants, please restrict your questions to two each and you can join back the queue for follow-up questions. The next question comes from Sharda Kapadia from Shared India. Please go ahead.

Thank you so much for taking my question. So, I have a question with regards to the current capacity utilization. If you could provide it for your different segments also, it would be very helpful if you could give it facility run.

Yes, so for ropes in Ranchi as well as overall about 50 to 85% of our capacity would be utilized. When it comes to the wires segment of Over the years, we have gone out of some of the low-end buyers that we were manufacturing when we had the serial business as well. So the capacity utilizations for those are still lower, about 50% or so. And for LRPC, our capacity utilization would be about, I would say, 70-75%. And as we get into more you know, plasticated LRPC as well, more of the, you know, capacity will shift to make those as opposed to the regular LRPC. So, if you want a bit more detail on the breakdown, you can always take it offline for various different factories and different activities.

Okay, sure. Thank you so much. It was quite helpful. Also, I just wanted to understand the Parvat Mala project which is expected to come up. So, are we going to have any more certifications in India for this? And also, how much would be the approximate potential which we can expect for the Parvat Mala project for us?

We are the, as of today, we are the only company which has the capability or the manufacturing facility to produce these ropes. And we are, to best of our knowledge, we are the only company who has the CE certification in India for this. Having said that, the demand side, it all depends on how much the projects actually find the final approval and when the projects start getting to a stage where they start building these projects I personally feel that yes there is a good demand but it is more it is not in the short term it will be more in the medium to long term where you will see the you know when you initiate such a project it is 5, 3 to 4 years before you even start applying the first proof Because that is the last part of the Parvat Mala project. Suppose the project needs wire rope. So, that is something which is required right at the end of the commissioning of the project. So, this will all happen. We are preparing ourselves with the certification. We have the plant capability. We are talking to all the customers including the government authorities and we expect to have a decent share. But those will all happen in the medium to long term, I guess.

Yes, sir. Thank you so much. If I could just squeeze in one question, would that be okay? Sure, sure. We are also, like we are doing this one ocean merchant initiative. If you could just give a ballpark number for the expected margin improvement which we expect. It's not, it's not quite exact, I guess. But if we can just give a ballpark number, that would be very helpful.

Basically, you see, these are, you know, the margins just don't come by reducing cost. It also depends on what is the selling price, what is the competition. As we said in our previous question that these numbers are our, this quarter numbers are probably at the bottom of it. things will only start getting improved from here but by cutting cost margins just don't improve you need to continue to increase your volume you need to continue to get the right price for the product which also depends on the competition so having said that what share mentioned that our average has been close to 18 uh close to 18 that is something which we feel that is the base at which we would be working and let's see how the end market prices how the volumes, how the demand and the benefit of these crops all ultimately, you know, span on. So, that is something may not be proper for me to give you an exact number. It is best to see that how the, because we are in a very uncertain global scenario in which we all need to understand that we need to prepare ourselves to face this competition.

Sure sir, sure sir. That was quite helpful. Just for my understanding, so if you are not giving margin numbers, but this will surely help us reduce the working capital.

Of course, it is going to help us reduce our working capital significantly.

Yeah, yeah. I was trying to add to that.

Yeah, Shreya, please continue. Yeah, no, I was just, to the working capital point, I just wanted to mention that, you know, as we said, we are optimizing the grunting firm modules, right? So earlier when you were supplying wires and stands from India, then it would take the transit time to go to the UK, then the inventory before it gets converted into rope. Now with the direct shipments, that have started from India, we will obviously reduce the working capital cycle and also that would help participate to the customer. So, working capital definitely is an important piece in this overall thing which we are trying to optimize.

So, that was quite helpful. Thank you so much and all the best for future. Thank you.

Thank you. The next question comes from Rishika Bajaj from Helios Capital Asset Management Private Limited. Please go ahead.

Hi, am I audible?

Yes, ma'am, please go ahead. Hello?

Yes, yes. Yes, just a quick question. I just wanted to know if you're getting any rupee depreciation benefits in the current quarter from exports?

Abhijit, you would like to answer this question?

Well, there was, in the standalone financials, there was some impact due to the GDP final exchange rate. But overall on the consolidated basis, there was no impact. Actually, there was slight gain in a CSS domain.

Okay. Thank you. Thank you. The next question comes from Tikshi Jain from Inuit Valley PMS. Please go ahead. Hello. Yes, sir. Please go ahead. Yes. good afternoon so my question I think part of the question is answered but on the LRCC side just wanted to know the margin profile and the acceptance so because the LRCC volume is around 25 to 30 percent right and the sales is

The material margin is close to 12,000 to 13,000 rupees per ton. And so the difference between the raw price and the export selling price and our cost of production would be close to 7,500 rupees per ton, which includes the entire direct cost of production. So the margins are fairly low. If you look at it, the contribution itself is around 4,000 to 4,500 rupees per ton.

This is for the regular LRPC?

This is for the regular LRPC which is the majority of the volume today.

Okay, so in the LRPC side we can say fairly this is the kind of replacement of TMT bar or TMT kind of study in the infrastructure over the building?

I don't know what the TMT margins are but you know these are the very very thin margins. We are not into the TMT market, so I am not aware of what their margins are. But when it comes to our product, these are our margins. No, no, I am saying replacement, not market. No, these are two different markets altogether. Wherever the Sariya market, it doesn't replace Sariya. Sariya has a much wider application. These are both functioning markets. special application mainly for the high rise buildings or for the mostly coming for the big bridges or for the big railway high speed railway projects and also for the nuclear power projects so these don't replace area these have got you know these are post post technical designs which are designed by the contractors mainly by the consultants for these applications and that is where our LRPC goes Okay, okay.

And one broader question on the slowdown in demand in Europe, Korea side, in our country also, what are the indicators you are seeing that the demand will improve in future? What are the indicators you are seeing?

I think the investment on infrastructure across the country is very important. The real estate as well as the bridges the projects which are there, you know, we are seeing a slowdown in new orders or even the government implementation of these projects. So, we have to see that when these projects get announced and when they start the these things from us. Internationally definitely with the current slowdown recession in Germany in UK we see that in certain sectors the demands are low so we have to wait and see whether these governments and these economies start again spending and when those spending come definitely infrastructure comes up and our business starts getting fractured.

Okay, and the margin side, you already alluded that we are at the bottom of the margin. So, due to this cost, cutting measures and the further expansion and some facilities, we can see the margin improvement, right?

Then the demand will take up. I think I have already answered this question that this is the bottom of it. Let us see based on all these initiatives and all the selling plans and all the demand pans out. We expect this to be the bottom as of today we see this is the bottom.

We should only see an improvement going forward from here. Okay, okay. Just last question on the LRPC side what are the initiatives that you are taking to increase or you know increase the volume in this segment because continuously we are seeing year over year the volume is decreasing so what's your view on the LRPC kind of revival in the volume?

I don't see the LRPC is a commodity. Our whole objective is to convert as much into plasticated and galvanized LRPC which is giving a much higher value addition. Again, the LRPC demand is directly depending to the projects and the various government projects, gauges and infrastructure projects going on which is subdued and there are lot of competition in this area and the prices are very, very competitive. I don't see the company looking at this as an area for growth in the future. All the growth on margins for LRPC will come by how much we are able to convert into plasticated and galvanized LRPC. Having said that, plasticated and galvanized LRPC is not a commodity. It is all project driven depending again how these specialized projects are getting commissioned in the country and overseas. We are doing around 300 tons a month. We expect that it should improve in the next financial year. There are a lot of projects under inquiry stage, under finalization stage, but all that depends on how these projects finally get into order. So, we don't see a long future for simple LRPC as far as margin and volume is concerned, but definitely the more we are able to convert to the other varieties, we will be better off as an organization.

We are not seeing the future capex also. No capex at all.

Zero capex.

Okay. Got it. Thank you. Thank you for the answer for all the questions.

Thank you. Thank you. Ladies and gentlemen, we would take that as our 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 Martin Limited. I hope we have been able to answer all your questions. The company is dedicated to creating value for all its stakeholders in a sustainable 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 CBR 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 HUSHA Martin Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.