Jai Balaji Industries Limited (JAIBALAJI) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Jai Balaji Industries Limited Q1FY27 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. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Tana Kapoor from Go India Advisors. Thank you, and over to you, ma'am.

Thank you, Huda. Good afternoon, everybody, and welcome to Jai Balaji Industries Limited's earnings call to discuss Q1 FY27 financial performance. We have on the call Mr. Aditya Jajodhya, Chairman and Managing Director, Mr. Rajkumar Sharma, Joint Chief Financial Officer, Mr. Vijay Bhaji, President Finance, and Mr. Ajay Tantya, Company Secretary. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company faces. May I now request Mr. Aditya Jajodhya to take us through the company's business outlook and financial highlights, subsequent to which we will open the floor for Q&A. Thank you. And over to you, sir.

Thank you, Sana. A very good afternoon to everyone. We are pleased to welcome you all to our Q1 FI27 earnings conference call. Our investor presentation and the financial results have been uprooted on the exchanges, and we hope that you have had the opportunity to review them. We are very pleased to report a healthy start QFI 27 with JBL delivering a very resilient performance in Q1 revenue. The adjusted EBITDA and DEPAT increased by 24, 46, and 21% 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 ductile iron pipes market continues to remain subdued in the near term, primarily due to the slow government ordering and project execution. 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 The restructuring 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. The AMRUT 2.0 also continues to provide a meaningful opportunity for the DI-5 industry with a focus on urban water supply, transmission, and distribution networks, sewerage, and water treatment infrastructure. In addition, the progress on major river interlinking and irrigation projects, including the Ken Bedwa and the Polavaram-Godavari-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 DIPAPs capacity as demand conditions improve. On the fellow alloy 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 fellow 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 F527. We have committed to strengthen our capacity base. Our DI-5's capacity has increased from 5 lakh tons to 5.5 lakh tons per annum, positioning as well to length of utilization as the demand revives and market conditions improve. In parallel, our specialized for roller capacity will also be enhanced to 1.9 lakh metric tons per annum from 1.66 lakh tons, and our glass furnace capacity will increase to 7.5 lakh tons per annum from 6.3 lakh tons capacity, and central capacity to 12.08 lakh tons from 9.08 lakh tons. These enhanced capacities are expected to be commissioned by Q3, F527. These investments are aligned with our broader strategy of increasing the contribution of value-added products, improving operating leverage, and strengthening the balance sheet. As part of our Zyabalaji 2.0 strategy, we remain very focused on specialized products like ductile pipes, specialized hollows, and also on cost reduction and sustained debt reduction. Greater operations are further supported by three dedicated railway sidings which provide a 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 deal averaging with our net term debt reducing significantly from Rs. 3,408 crores in FY21 to Rs. 188 crores in Q1 FY27. Our net term debt to debt equity ratio stands at a healthy 0.07 in FY26N, providing us with a strong financial foundation and ample help to support future growth. 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 it is 1076 crores, mostly through internal accruals, while the overall project outlay has been revised from around 1000 crores, 112 crores, primarily.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. Remove yourself from the question queue. You can request the two hands up while asking a question. Anyone who wishes to ask a question may press star and one on their touchtone telephone. Ladies and gentlemen, may we wait for a moment while the question queue assembles. The first question is from the line of Jyoti Singh from ICICI Securities. Please proceed.

I have a couple of questions. The first one is, with the Jaljivan Mission 2.0 extended until December 28th, when do you expect the increased government spending to actually translate in the DI pipe dispatches?

This is Varun Jodhya, looking out for the marketing. Recently, this year already, around 10,344 crores has been released by the center, and gradually, the matching share will be also given by the different states. So, we will be looking at a post-monsoon recovery in the dispatches and the payments, and from the third quarter, things should improve now.

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 a big backlog that happened last year. At the last year, from the budget of the 1560 crores was released by the center. So that backlog remains the constraint. Now, once the fund is released, things will be coming into shape.

Okay.

And post-course monsoon, the lifting and the laying will be taken place.

Okay. Okay. If you can provide us the volume guidance for DI pipes and ferro-alloys for Fi27, also, if you can give a difference in terms of how much is expected from the DI and the other segments.

Ma'am, DGI contributed around 15% of the first quarter, sir. As 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. Some of the states have started giving orders. Some of the states have still opened up. It has not opened up entirely for pan-India. So, it will be very difficult for...

Okay. Any guidance in terms of what sort of utilization you are targeting with the expanded 1.9 lakh ton per annum ferro alloy capacity in F-28? Is there any projection that has been kept for this?

Madam, for all of us, we achieved a capacity reduction of more than 50% in the last quarter, and it is 57% of the turnover currently. So, as we commission the new model by December-January, capacity reduction in parole will remain at 80-90%.

Got it. That's it from my end. Thank you for all of us.

Thank you.

A reminder to all participants, anyone who wishes to ask a question, may press star and run on their touch-tone telephone. I repeat, anyone who wishes to ask a question, may press star and run on their touch-tone telephone. The next question is from the line of Rajesh Bhangari from Nakoda in June. Please proceed.

Good afternoon, sir, and congratulations for good results, good profit. Sir, I wanted to know the basic breakup of our revenue, that is 1682. What is 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.

Sir, you can write it to Samha or Me.

My e-mail id Rajkumar Sharma is given.

Okay. We expect these DI5 orders to come? Yeah, I know, I know, but there is a Jaljiwan mission or Amrit mission too. So, the way government will be spending, it is expected to improve? Yeah, yeah, last year was very bad. Yeah, yeah, yeah, yeah.

What we assume is that last year we hit the bottom.

My two questions are more than that. By FY28 and FY30, what kind of turnover can we expect? Turnover and the profits?

Sir, with the given capacity, probably, which is getting completed in Q3 of the year, you can see, end of this calendar, you have to collect capacity,

in 28th, and what about 30th, 20, 30th?

Sir, by that time, what will be the capacity, what will be the capacity addition? Right now, we have calculated the skyline pipe capacity, running our whatever ductile and ferro. Ferro market has been very good. So, we are trying to revise this, and working with the ductile air.

Yeah, yeah, yeah, yeah. Yeah, yeah, yeah, yeah, yeah. War conditions, one time, it will be good. Things will improve for us. I mean, the export level is...

Yeah, yeah. War conditions will improve. We will improve. It is a...

Yeah, yeah. And we are thinking about the alternative to DIY pipes.

That plant was put up as a trial module. It was around 20 crores only. But so far, we've not been able to sell even a single piece of pie. Why we have put up this plant? Because certain people in the industry, they work on selling a supplier with a supplier.

Where did you write, sir? No, which email address should I send for break-up request? Okay, at the end of presentation. Okay, sir. 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 N1 on their touchtone telephone. I repeat, anyone who wishes to ask a question, may press star N1 on their touchtone telephone. The next question is from the line of Yashpurbe from InVet Research. Please proceed.

Yeah, hi, sir. Good evening. So, my first question is, sir, we have said that from H2 and in F512, we will see recovery in the volume. But, sir, how are we seeing the competitive intensity and would we feel any rising pressure?

See, the competitive intensity will be there because currently the industry with our pipe capacity utilization this particular quarter was only 30% of the enhanced capacity. Similarly, competitors, they also are operating somebody with 25% range, somebody with 35% range. So competition intensity will be there during the time capacity utilization crosses 65-70%. But now, but this, capacification, again, it is a function of the orders. Once the orders are released, immediately it can ramp up also by everybody. As far as the pricing is concerned, the prices, as I already mentioned earlier also, the prices already are at rock bottom. In fact, the contribution of the pipe business, practically, in this particular quarter, when we attribute it to pipe, it is basically the same, similar margins as what is according to PBR. So not much value addition was there. So, from here, things cannot get worse just to improve. So what we can only predict at this moment is that it cannot get worse, but to provide a really tangible guidance would not be fair to anyone. Maybe when you meet next quarter, we will be in a better position to guide you on the prices.

Perfect. And sir, how are you seeing demand on the front of specialized ferroloids in domestic versus export market?

There is an increasing market always over there for ferroloids, and especially our customer base is utilizing more than 85% of our capacity, and we have repeat orders.

And sir, going forward in next 2-3 years, how much would be the contribution from Thank you.

A reminder to all participants, anyone who wishes to ask a question, may press star and run on Gekashton's telephone. The next question is from the line of Vidhi from CR Kothari. Please proceed.

Hello, good afternoon, sir. Sir, I would like to understand, on your KPEX, first it was 1000 PR, now it is close to 1100 PR. So, can you explain what led to the increase?

Thank you.

And what is the current order book visibility on DI size over next 2 to 3 quarters of this point, isn't it?

Madam, as per the current dispatch position, it is the equivalent of say, at the current capacity Thank you.

Thank you. Thank you. A reminder to all participants, anyone who wishes to ask a question, may press star N1 on their touchtone telephone. I repeat, anyone who wishes to ask a question, may press star N1 on their touchtone telephone. The next question is from the line of Mihir Vyas from Nine Rays Equi Research. Please proceed.

Hi, sir. Thank you for the opportunity. I just wanted to know whether we have received any funds for the LJ1 mission pending dues which we had?

We have started receiving some funds, in small parts although, because it is released from the centre or from different state operators and some departments. It has been coming, but it is coming from very small lots and it will be coming for increasing in the near future.

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?

Thank you.

A reminder to all participants, anyone who wishes to ask a question, may press star and run on their touch-toon telephone. The next question is from the line of Rishabh Hora, an individual investor. Please proceed.

Hello, can you hear me?

Yes, please. Yes, sir.

Yes. I was just wondering if you could give us some sense of the margin profile for specialized ferro-alloys versus your conventional steel products, if I get a guidance on that.

For conventional steel products, the margins vary between 5 to 7 percent. For specialized ferro-alloys, it's around 15 to 18 percent. Okay, okay.

And a couple of more questions. So, once DI5 demand normalizes, what utilization level do you think the 5.5 lakh TPA capacity can achieve?

See, the management will always be hoping that we are able to achieve more than 60%.

Okay.

See, normally 80% is 100%. 100%.

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. These are very complex.

So, if I may ask another question. So, are you seeing any meaningful improvement in inquiry levels, even though actual order flows remain slow?

The projects are there, which have not been completed. The contractors are already stuck with their old outstandings. So, till they get their old funds, they cannot release further orders, and there are still old orders with us, or with all the manufacturers. Till then, they get the funds, they cannot ask for fresh...

And to all participants, anyone who wishes to ask a question, may press star and one on their touchtone telephone. I repeat, anyone who wishes to ask a question, may press star and one on their touchtone telephone. Please press star and one on your touchtone telephone to ask a question. The next question is from the line of Chidananda Mohanti, an individual investor. Please post.

Hello, good afternoon, sir. So, my first question is regarding the current usage. Yeah, yeah. So, I hope I am audible now, right?

Yes, sir.

Yeah, so what is the current capacity utilization for the DI pipe capacity? And earlier you have guided that in this financial year, the production is going to exceed 4 lakh tons.

Right now, in the first quarter, the capacity utilization was 30% of the enhanced capacity, around 150. And going forward, as per the orders in group, we are ready to incash.

I couldn't, I'm really sorry, I couldn't get the last line.

The production in the first quarter was 41,000, the annual capacity is 5,60,000, it is somewhere in the region of 30, 33%, and if the market improves, it should go or double up. The first target is to achieve 50 to say 60% capacity utilization, and we'll see as per the orders are coming.

Okay, okay. So, my next question is in the lines of ferro-alloy business. So, the margins have improved in last few quarters or, yeah, quarters. Then, how do you think in future, what could be sustainable margin drain, and for modeling purposes, what kind of margin that we can consider should be a good number.

See, for Ferrara's business, as the share of specialty Ferrara is increased in the overall mix, we expect the margin to sustain between 3 to 20%. As you know, India is strategically positioned because of globally available cheap power to Western countries, especially due to war and the Afro-Ukraine crisis, the energy prices are at a very, very all-time high levels. So, India is very, very positioned to supply to the world because of its availability of cheap power in India. And we in Jayabarajee group have developed a very, very good customer and loyal customer base. And we expect the margins to remain at these levels only. Maybe 1-2% plus money because of the cost of rates, margin might change. But by and large, 50-20% can be a long-term guidance.

Okay, okay. So, last time is in the line of KPEX. In past three years, you have done a good amount of KPEX. 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, I couldn't see the same thing in top line and bottom line. So, can you say anything about that, and what can you expect in future regarding this?

If you talk about the KPEGs, a good portion of it was done for the data island pipe as well as the background integration for that. When you compare to top lines, it is not applicable to apply. We have also given you the volume figures of the past and veteran data. As you can see in most areas, the volume, especially in thick island, has increased drastically. And our DI capacity was initially 2.5 lakh tons, which we have almost increased by 100% plus to 5.5 lakhs. Our center capacity was 6 lakhs. Now it is becoming 5 lakh tons. So by and large, a lot of backward integration projects were being done to optimize the cost levels and efficiency as well.

Okay, so you are trying to say these, all these capital impacts will be seen in operating or margins, not in top line.

Yes.

Is I understood it correctly?

Whatever expenditure we have done for ductile iron pipe, which should have increased the turnover, because of the margin, it is not visible in numbers. We will have to wait for some time. Once the market is back, definitely the turnover will go up. As far as the backward integration, the pig items, sinter, power, whatever work we have done, that is actually reducing our cost and increasing the efficiency. That is visible right now. Thank you, group.

Okay, okay, understood, understood. Thank you for taking my questions.

Thank you. A reminder to all participants, anyone who wishes to ask a question, may press star and one on their touchtone telephone. I repeat, anyone who wishes to ask a question, may press star and one on their touchtone telephone. The next question is from the line of Rajesh Bhandari from Nakoda, Ingeniors. Please proceed.

Sir, what is your debt level now?

The term debt is 188 crores. The capital fund base and LCBG non-fund base is 375-400 crores.

The total is about 600 crores.

Thank you.

Okay.

From the last year, debt level, in spite of all the capex and the downturn in the Thailand University, our debt has remained either equal or has come down significantly, the repayable debt.

Yeah, yeah. Finance cost has come down drastically, that I can see.

As far as what we can project, and I have seen the numbers, by the year-end March, it should again see a big dip.

It means we can expect the company is going to perform better and better.

Everybody is working for that.

Yeah, yeah, 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 Team Go India, the moderator also, Sana also, and all the participants for spending the valuable time. In case anyone has any more queries, I think Go India and Mr. Sharma will be able to provide you with more details. Thank you so much once again for your time.

Thank you. On behalf of Go India Advisors that concludes this conference, thank you for joining us and you may now disconnect your lines. Thank you, everyone.