Jai Balaji Industries (NSE:JAIBALAJI) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to JAIBALAJI Industries Limited Q1 FY 'twenty seven Earnings Conference Call. 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. Please note that this conference is being recorded. I now hand the conference over to miss from Go India adviser. Thank you and over to you ma'am. Thank you,. Good afternoon everybody and welcome to JAIBALAJI Industries Limited earnings call to discuss q one FY twenty seven financial performance.

0:49 We have on the call mister Aditi Rajodhya, chairman and managing director mister Raj Kumar Sharma, joint chief financial officer, mister Jai Balaji, president finance, and mister Ajith Antia, company secretary. We must remind you that the discussion on today's call may include include certain forward looking statements and must be therefore viewed in conjunction with the risks that the company faces. May I now request Mr. Aditi Jaijoliya to take us through the company's business outlook and financial highlights, subsequent to which we will open the floor for Q and A. Thank you. And over to you, sir. Thank you, Sona. A very good afternoon to everyone.

1:35 We are pleased to welcome you all to our Q1 FY 'twenty seven earnings conference call. Our investor presentation and the financial results have been uploaded on the exchanges, and we hope that you have had the opportunity to review them. We are very pleased to report a healthy start to FY 'twenty seven with Jai a very resilient performance in Q1 revenue. The adjusted EBITDA and the PAT increased by 24%, 4621% year over year, respectively, which reflects the benefits of price normalization, operational efficiency and our continued focus on improving the product mix. Talking about the industry environment, the Tata guided pipes market continues to remain subdued in the near term, primarily due to the slow government ordering and project execution.

2:30 However, we believe that the underlying requirement for water and irrigation infrastructure remains very strong with a meaningful pipeline of government led projects supporting the medium to long term demand outlook. A key structural drivers a key structural driver is the Dulgeba Mission 2.0, which has been extended up to December 2028 with a total outlay enhanced to INR 8.69 lakh crores, including INR 3.5 lakh crores of central assistance. The restructured mission moves beyond infrastructure creation towards reliable and sustainable water services and with also greater emphasis on service delivery, source sustainability and operations and maintenance.

3:18 The AMROOK two point zero also continues to provide a meaningful opportunity for the DI pipe industry with its focus on urban water supply, transmission and distribution networks, sewage and water treatment infrastructure. In addition, the progress on major river interlinking and irrigation projects, including the Cham Bedwa and the Kolabaram Gudapri Krishna Link provides further visibility for DI pipe demand over the medium to long term. While the near term environment remains measured, we remain constructive on the recovery in government ordering and project execution as fund releases improve. We will continue to monitor the pace of execution closely and remain prepared to ramp up our expanded DA fabs capacity as demand conditions improve.

4:10 On the Ferrova industry front, the segment continues to witness strong momentum with realizations improving consistently over the last five quarters. This is supported by a very healthy steel demand and increasing requirements for specialized and high performance steel where ferroleye alloys play a critical role in enhancing strength, durability and other performance characteristics. We, therefore, remain very positive on the medium term outlook for this particular segment. Now coming to our strategic initiatives in Q1 FY 'twenty seven. We have committed to strengthen our capacity base. Our DI5 capacity has increased from five lakh tonnes to 5.5 lakh tonnes per annum, positioning us well to ramp up utilization as the demand revised and market conditions improve.

5:01 In parallel, our specialized capacity has also been enhanced to 1.9 lakh metric tonnes per annum from 1.66 lakh tonnes. And our blast furnace capacity will increase to 7.5 lakh tonnes per annum from 6.3 lakh tonnes capacity and central capacity to 12.08 lakh tonnes from 9.08 lakh tonnes. These announced capacities are expected to be commissioned by Q3 FY 'twenty seven. These investments are in line with our broader strategy of increasing the contribution of value added products, improving operating leverage and strengthening the balance sheet. As part of our Jai Balaji 2.0 strategy, we remain very focused on specialized products like ductile pipes, specialized chlor aloes and also on cost reduction and sustained debt reduction.

5:57 Our integrated operations are further supported by three dedicated railway sidings, which provide significant logistics advantage by enabling efficient movement of raw materials and finished goods and while reducing transportation costs and turnaround time. We have also continued to make strong progress on deleveraging with our net term debt reducing significantly from INR 3,408 crores in FY 'twenty one to INR 188 crores in Q1 FY 'twenty seven. Our net term debt to debt equity ratio stands at a healthy 0.07 in FY 'twenty six and providing us with a strong financial foundation and ample headroom to support future growth.

6:45 We remain committed to further strengthening our balance sheet to sustain debt reduction. On the CapEx front, we have made strong progress on our ongoing expansion program. We have already invested INR $10.76 crores, mostly through internal accruals, while the overall project outlook has been revised from around INR 1,000 crores to INR $11.12 crores, primarily due to technical upgrades, additional ancillaries, some inflation and some time overruns also. The balance of around INR 35 to 40 crores is expected to be completed by the end of this current financial by the end of this current year 2026. These investments will further strengthen our capacity base and support the next phase of our growth.

7:35 Coming to our operational performance. The production accounts across e products remained very healthy during the quarter, while offtake was led by pig iron, TMT, millets, ductile iron pipes and ferro alloys, and the sales remained broadly stable, reflecting the current market environment. Importantly, value added products accounted for 42% of the total sales in Q1 FY 'twenty seven, highlighting the continued progress in our product mix. Realization improved across key products during the quarter, led by a strong 46% year on year increase in ferro oil prices and a 15% year on year improvement in pig iron prices, while sponge iron and billets remained broadly stable.

8:21 Specialized ferro oils continued to be a key driver group, contributing around 27% of revenues in Q1 'twenty seven, supported by the specialized product portfolio and long term customer relationships and premium realizations. Coming to our financial performance. Revenue grew 24% year on year to INR $16.83 crores with value added and specialized products, now contributing around 40% to 45% of revenue. Adjusted EBITDA and PAT increased by 46% to 21% year over year to INR 154 crores and INR 85 crores, respectively, driven by price normalization and operational efficiencies. Operational EBITDA stood at 9% and the PEC margins stood at 5%, respectively.

9:12 To conclude, we remain encouraged by the structural opportunity in the price industry supported by the DELGI VAN two and Amrut 2.0 irrigation and dual interleaving projects. And with our DI5's capacity now at 5.5 lakh tonnes per annum, expanding specialized capacity, increasing contribution for value added products and continuous focus on financial discipline, JPI is very well positioned to capitalize on the next phase of the industry recovery. We remain focused on strengthening operating efficiencies, improving our product mix and creating sustainable long term value for our stakeholders. We can now open the floor for question and answer. Thank you, and over to you, moderator.

9:59 Thank you very much. We will now begin the question and answer session. Participants are requested to use handset while asking a question. I repeat, anyone who wishes to ask a question may press star and one on their restaurant telephone. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jyoti Singh from ICICI Securities. Please proceed. Yeah. Hi, sir. Good afternoon.

10:46 Hello. Yeah. So I have a couple of questions. The first one is with the journeyman mission two point o extended until December 28, when do you expect the increased government spending to actually translate in the DI five dispatches? Hi,. This is working out of the marketing. Yeah. Yes. Recently, this year already, around 10,344 crores has been released by the center. And gradually, the matching share will be also given by different states. So we will be looking at a post monsoon recovery in the different dispatches and the payments. And from... Until the third quarter, things should improve now.

11:34 Okay. What are the key bottlenecks currently delaying this pipe orders in case, like, tendering project execution, funding, or is there anything else? It is coming from the government's backlog. There was... There's a big backlog happened last year. As the last year from the budget of INR $15.60 crores was released by the center. So that backlog remains the constraint. Now think that once the fund has released, the things will be coming into shape. And post post monsoon, the lifting and the laying will be taken place. Got it. Got it. If you can provide us the volume guidance for DI pipes and ferroalloys for FY twenty seven. Also, if you can just give a difference in terms of how much is expected from the DI and the other segment.

12:29 Ma'am, DI contributed around 15% of the first quarter. Things are opening up, we don't know how it is going to pan out in next three to four quarters, what will be the demand. So as of now, we are not giving any projections, but definitely, we are ready to encash it as the market progresses. Okay. So... And for your... Hello? Sorry. Giving any numbers, I think it will be speculative right now because there are a lot of moving parts. Different states are giving... Started. Some of the states have started giving orders. Some of the states have. It has not opened up entirely for Pan India.

13:20 So it will be very difficult for us to improve volume guidance right now. Okay. Any guidance in terms of what sort of utilization you are targeting with the expanded 1.9 lakh tons per annum ferroalloy capacity in FY twenty eight? Is there any projection that has been kept for this? No. Perola, we achieved the capacity addition of more than 50% in the last quarter. Okay. And it is a... Some percent of the turnover currently. So as we commission the new model by December, January, capacity, the decision is will remain at 80 to 90%. Okay. Got it. Got it. That's it from my end. Thank you for calling. Thank you.

14:09 A reminder to all participants, anyone who wishes to ask a question, may press star and one on their touch tone telephone. I repeat, anyone who wishes to ask a question, may press star and 1 on their touch tone telephone. The next question is from the line of from. Please proceed. Good afternoon, sir, and congratulations for good results. Good job, profit. Sir, I wanted to know the basic breakup of our revenue that is $16.82. What is the... Exactly the item if I can get the breakup? Because I couldn't get breakup anywhere else. Yeah. I'll read out the numbers to you.

14:56 Sponge iron is 7.4%. Pig iron is 19.13. Ferrolyte is 27.33%. Billets are 3.54% minimum amount. PMP bar is 14.83%. Ductile iron pipe, the basic amount that I have is 14.95%. Some amount of coke was also sold. That is only 7%. Apart from this, there is 1% of scrap and the fines which have got sold. This complete the $16.83 total. Sir, in general detail.

15:48 Sir, you can write it to or me. My email ID has given. Mhmm. So, yeah, I will definitely send it to you. Okay. So that's why I did in this combination is around 42%, which we can set aside. Apart from this, EMP bar is another 14.8. Our intention and the plan... Client is designed to cater to value added ferroalloy and the and around 70% of the sales that we want to do.

16:33 Now that the market is not the the orders are not coming. Therefore, we had to go for alternate product, the commodity side, pig iron, EMT, fillet, and all those. Yeah. Yeah. But now we expect this JAIBA pipe order to come? So the expectation is definitely over there, but given it is a government backed sector, whether it's meeting buyer is directly or indirectly the government. Mhmm. I it will be somewhat speculative. Yeah. I know. I know. But would there say, Jai Balaji mission or mission two?

17:22 So we'll scan that the way government will be spending, it is expected to improve. Yeah. Yeah. Last year was very bad. Yeah. Yeah. Yeah. Yeah. Correct. Yeah. And what we assume is that last year, we hit the bottom. So, no question on by FY 'twenty eight and FY 'thirty, what kind of turnover can we expect? Turnover and the profits?

18:20 Sir, with the given capacity, probably, which is getting completed in Q3 of this year. You can see end of this calendar year to December 2026. With the given capacity, it should reach 7,000 to 7,500 crore in a normal mic... Market. Mhmm. In the '28. And what about thirty two zero three zero? Sir, by that time, what will be the capacity? What will be the capacity addition? Right now, we have calculated. We are mainly focused on the type capacity running or the model bigger than the MP fillet in the existing plant that we have, we

19:58 have almost occupied the entire because of land. Mhmm. Certainly, conditions So things will improve for us? See, that plan will put up as a trial module. But the last around 50 only.

20:46 But so far, we've not been able to sell even a simple piece of pie. Why we have put up this plant? Because certain people in the industry, they were sometimes telling us we were very skeptical about it. We will not have actually... We will replace certain plastic pipes or steel pipes or also. Nick, which email ID should I send for breakup request? My email ID,.

21:40 It is given at the end of the presentation. Okay. At the end of presentation. Okay. I'll I'll send it there. Yes, sir. Thank you, sir. Thank you. A reminder to all participants, anyone who wishes to ask a question may press star and 1 on their touch tone telephone. I repeat, anyone who wishes to ask a question may press star and 1 on their touch tone telephone. The next question is from the line of Jai Balaji from Inved Research. Please proceed. Yes. Hi, sir. Good evening. So my first question is, sir, you said that from H2 and in FY you'll see recovery in the volume. But sir, how are we seeing the competitive intensity?

22:31 And would we feel any pricing pressure? See, the competitive intensity will be there because currently the industry with our capacity utilization this particular quarter was only 30% of the announced capacity. Similarly, competitors, they also are operating somebody in 45% range, somebody 35% range. So competition intensity will be there during the time capacity utilization process, 50% to 70%. But now for this capacity utilization, again, it is a function of the orders. Once orders are released, immediately, it can ramp up also by everybody. As far as the pricing is concerned, the prices, as already mentioned earlier also, the prices already are at top bottom.

23:18 In fact, the contribution of the pipe business, particularly in this particular quarter, when we attribute it to pipe, it is basically the same similar margins as what we have already figured. So not for value addition was there. So from here, things cannot get worse, it has to improve. Sir, can you please provide any guidance if possible on the EBITDA or EBITDA per ton, sir? This is what you said. Sir, can you provide any guidance on the EBITDA per ton? You want the current quarter of the... No, In future, you are saying that the prices are already at rock bottom. To any sustainable EBITDA guidance?

24:09 So the prices 36%, which are prices up from around 20% to 50%. So what we can only predict in this moment is it cannot get worse. But to provide a really tangible guidance would not be great to anyone. Maybe when you meet next quarter, we'll be in a better position to guide you on the prices. And sir, how are you seeing demand on the front of specialized ferrolyte in domestic versus export market? There's an increasing market always was there for federal noise and our specialty our customer base is constant and it is and we are getting repeat orders with those customers. And we're also utilizing on more than 85% of our capacity, and we have repeat orders. So there's no constraint as such.

25:06 We are currently exporting the more than 42 countries today. And sir, going forward in next two, three years, how much would be the contribution from value added and specialized products? Right now, it says 42%, 43%. And the plant is designed to achieve somewhere in the region of 70. We'll see how the pipeline... Once the pipeline, the capacity utilization is immediately goes up to 70%. It all depends on the ramp up and the demand of Okay, sir. Thank you. Those are my questions.

25:56 That's okay. Thank you. The next question is from the line of from. Please proceed. Hello. Good afternoon, sir. Sir, I would like to understand on your CapEx. So I think 1,000 CR. Now it is close to 1,100 CR. So can you explain what led to the increase? The increase is not much. It is only around 7% to 8%. What happened is there's some shipments from China, etcetera, for equipment were delayed. There was a dollar there was a general inflationary trend.

26:41 And also what a sales increase for some products will be this will be putting a standard machinery, the currency devalue. So this is not much better. And also some technical acquisition while we are putting up the projects that need a couple of new ideas popped up to technically upgrade the plant capacity. So the And that was an estimated figure when we were getting to even with the figure, but it's not potentially last month. Understood, sir. And what is the current order book visibility on DI side over the next two to three quarters of this point? Madam, as for the current dispatch position, it is the equivalent of, say, at the current capacity transition, it is around around four months order book.

27:32 That's it for mine. Thank you, sir. Thank you. A reminder to all participants, anyone who wishes to ask a question may press star and one on their touch tone telephone. I repeat, anyone who wishes to ask a question may press star and one on their touch tone telephone. The next question is from the line of Mihir Vyas from Nine Rays Equity Research. Sir, thank you for the opportunity. I just wanted to know whether we have received any funds for the Jai mission pending dues which we had? Yes, we have started receiving some funds, small parts although, whether it is released from the center or from different state authorities and some departments, it has been coming or just coming with small lots, and it will be coming for increasing in the near future.

28:30 Can you quantify, I mean, in terms of what receivables we had at the start of the year and now how much have we received? So the debt numbers are not redeemed immediately. As a ballpark figure, Around... Out of the outstanding, around 25, 30, 35% of the money has been released. And the balance, we expect that now the... You have started to be getting more, I will say, because in the last one month. So we expect that over the next two to three months, four months, The whole outstanding should be. Okay, sir. Thank you. Thank you for the opportunity. Thank you. A reminder to all participants, anyone who wishes to ask a question may press star and one on their touch tone telephone.

29:17 The next question is from the line of, an individual investor. Please Hello. Can you hear me? Yes. Yes, please. Yes, sir. Yes. I was just wondering if you could give us some sense of the margin profile for specialized ferroalloys versus your conventional steel products, if I can guidance on that. So for the managed finished products, the margins vary between 5% to 7%. And for fresh price product, it's around 15% to 18%. Okay. Okay. Okay. A couple of more questions.

30:02 So once the DI5 demand normalizes, what utilization level do you think the 5.5 lakh PPA capacity can achieve? See, the management will always be hoping that we are able to achieve more than 60%. See, only 80% is 100. So if you can see 60%, it will be a good capacity utilization. Okay. And another question, would you expect DI Pipe margins to improve meaningfully with higher utilization given the operating leverage in the business? It all depends on the market demand and the capacity which is in place domestically.

30:52 It is a very complex question to be asked. We will not be able to answer this right now what will be the margin. Whatever Okay. We have achieved in first quarter around 12%, That is good enough. And it should go up to 18 if the prices improve. The one thing which I also mentioned, I think you might have missed it also, is that today we are sitting at the rock bottom. Mhmm. So the prices cannot be worse. Mhmm. But it was to be better only. Okay. Got it. Got it. Anal, if I may ask another question. So are you seeing any meaningful improvement in inquiry levels even though actual order flows remains low?

31:44 The employee levels are there, but The projects are there, which has not been completed. The contractors are already stuck with the old outstanding. So till they get their old funds, they cannot release further orders, and there are still old orders with us or all the manufacturers. But still then we get the funds, Still till then, they get the funds. They cannot ask for fresh supplies. So as soon as the blood comes in the body, things will go go ahead and improve each and every Okay. Okay. That's But I need to add over here. I think we are getting so focused on the AI type, which is important segment for us now. Mhmm. I like to highlight from the manager's perspective, which I did not mention in opening remarks. Because other than the AI type, there are... The AI type definitely will be one major of the.

32:32 And then there are other verticals also. The verticals of the specialized of the commodity business also where we are where the CapEx is also spent to reduce the cost and to increase the volume. So there are also margin expansion should take place. Also, another good event that has happened place is that our 50%, 90% of the capacity is the state of West Mongol. And in the state of West Mongol, there has been a change of government and a lot of activity on the ground in terms of development has started. Something was $10,000,000 the last few years. So now a lot of development is going on. So say, for us that TMT was, which we are already discussing over the last single question on TMT was. So from this segment also, these are not small segments. These are also with large capacities.

33:29 So these segments should also see substantial traction going forward in the first seven months. Okay. So that answers all my questions. So thank you. Thank you for the opportunity. Right. Thank you. A reminder to all participants, anyone who wishes to ask a question may press star and one on their touch tone telephone. I repeat, anyone who wishes to ask a question, may press star and one on their touch tone telephone. Please press star and one on your touch tone telephone to ask a question. The next question is from the line of an individual investor.

34:15 Please proceed. Hello. Good afternoon, sir. So my first question is regarding Yeah. Yeah. So I hope I'm audible now. Right? Yes. Yeah. So what is the current capacity utilization for the BI pipe capacity? And earlier, you have guided that in this financial year, the production is going to exceed four lakh tons. So any numbers on that and future guidance also? Right now, in the first quarter, the capacity utilization was 30% of the announced capacity.

35:02 Around half. Okay. And going forward, as per the orders improve, we are ready to. We have I'm really sorry. I couldn't have... Get the last line. Going forward, ma'am. Production in the first quarter was 41,000. The annual capacity is 550,000. It is somewhere in the region of 33%. And if the market improves, it should go or double up. The first target is to achieve 50% to 60% capacity utilization, and we'll see as well the orders are coming.

35:56 Okay. Okay. So my next question is in the lines of ferroalloy business. So the margins have improved in last few quarters or... Yeah. Quarters. Then how do you think in future, what could be a sustainable margin range? And for modeling purposes, what kind of mapping that we can consider should be a good number? See, for Ferreira business, as the share of specialty Ferreira is increasing overall mix, we expect the margin to sustain between 20%. As you know, the India is strategically positioned for us because of globally available cheap power.

36:43 Western countries, especially due to war and the after Ukraine crisis, the energy prices are at all time at a really, really all time high levels. So India, very well positioned to supply to the world because of its ability of cheap power in India. And we and Jai Balaji Group have developed a very, very good customer and loyal customer base, and we expect the margins to remain at these levels only. Maybe one, 2% customer because of contingent or wrong reports of rates, margin might change. But by and large, 15% to 20% can be a long term guidance. Okay. Okay. So last time is in the line of CapEx. In past three years, you have done, like, good amount of CapEx.

37:28 And then Yeah. Yeah. So my last question is regarding CapEx. So in last few years, you have done good amount of CapEx, and I couldn't... Really, couldn't see the same thing in top line and bottom bottom line. So can you say anything about that? And what can we expect in future regarding this? If you talk about the CapEx, a good portion of it was done for the entire pipe as well as the backward integration for that. When you compare to top lines, it is not applicable to the fact that we have also given you the volume figure of the past and trend data. As you can see in most areas, the volume, especially in pig iron has increased drastically.

38:16 And our DI capacity was initially 2.5 lakh tonnes, which we have almost increased by 100% plus to 5.5 lakhs. Our entire capacity was six lakhs, which is becoming five lakhs tonnes. So by and large, a lot of backward integration projects are being done to optimize the cost levels and efficiency as well. Okay. So you are trying to say these all these CapEx that impact will be seen in operating or margins, not in top line? Yes. If I understood it correctly? Whatever expenditure we had done for ductile iron pipe, which should have increased the term because of the margin, it is not visible in numbers. We'll have to wait for some time once the market is back. Definitely, the turnover will work.

39:13 As far as the backward integration, the the power, whatever work we have done, that is actually reducing our cost and increasing the efficiency. That is visible right now. Okay. Okay. Understood. Understood. Thank you for taking my questions. This Thank you. A reminder to all participants, anyone who wishes to ask a question may press star and 1 on their touch tone telephone. I repeat, anyone who wishes to ask a question may press star and 1 on their touch tone telephone. The next question is from the line of from Nakoda Engineer.

40:02 Please proceed. Sir debt level sir? Sir. $1.88 crores. Mhmm. Capital fund base and LCVD non fund base. Total about 600 crores. That's 600. That is the same. That's what I'm saying. If we allow a cash position, the unutilized position, Repayable, it's what.

40:59 From the last year, debt level, in spite of all the CapEx and the downturn in the has remained either equal or has come down significantly the repayable debt. Yeah. Yeah. Finance cost has come down drastically that I can see. Hello? As far as what we can project and I've seen the numbers by the year end March, it should again see a big dip. Mhmm. Take them out there. Means we can expect the company is going to perform better and better. Well, everybody is working for that? Yeah. Yeah.

41:49 Correct. Correct.. Thank you, sir. Thank you very much. Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you, sir. I would like to thank everyone from India, the moderator also, and all the participants for spending the valuable time. In case anyone has any more queries, I can go India and Mr. Sharma will be able to provide you with more details. Thank you so much once again for your time, please. Thank you. On behalf of Go India advisers, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

42:36 Thank you, everyone.