Vardhman Special Steels Limited (VSSL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1FI27 Earnings Conference Call of Werthamon Special Skills Limited. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantee of future performance and involved risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this call is being recorded. I now hand the conference over to Mr. Sachin, Chairman, and Managing Director, Vardaman Special Speaks Limited. Thank you, and over to you, sir.

Thank you so much. Good morning, ladies and gentlemen. Thank you very much for continuing to show an interest in our company and being with us here today. We closed that one quarter, and overall, some of the highlights of the quarter have been, first, of course, we signed the technical assistance agreement for the forging unit with IT Steel.

Japan.

So the forging project is going on as scheduled and looks like the project cost is going to be a bit lower than what we had estimated. And we'll update once we have a better fix on the numbers. But clearly the project cost is going to be less than what we had estimated. As far as this quarter is concerned, volumes have been good. And the price revisions have taken place because costs have gone up. Some prices have been agreed. Some are in the process of agreeing, meaning the OE has agreed to a particular amount, but it's likely to upwards increase the price because other companies have not accepted that kind of increase. Anyway, that will happen when it happens. Demand scenario is good. We are, in fact, finding it difficult to meet the requirements of the customers, so we are scrambling how we can make sure that we are able to increase capacity. Further, we have applied to the Environment Ministry for approval to increase capacity to 360,000 tons of melting, but that will happen when it will happen. Meanwhile, some of the other things that we have been doing is the new re-heating furnace has been stabilized, new entity line will be commissioned by September-October of this year, and new cleaning line will be commissioned by September-October of this year. After this, the bottlenecks in our smooth flow of production will get removed. Currently, we continue to have a pileup of material that is ready as a customer wants, but because of lack of testing capacity, is not able to go through. Even peeling, we need to get some peeling material done on job work from outside. All those things will come in-house and we'll be able to improve the product mix and quality of sales in the second half of this year. The solar plant, we've got a full quarter of savings. We've had 2.3 crore units this quarter, and roughly 43% of our total power consumption is coming from solar. There have been further changes in the government policy, which means we can enhance the solar project. We expect in about a year or year and a half time. We'll be going ahead and we'll be increasing the capacity by almost 50% of our solar plant. So that will add to the bottom line and to reduce the carbon footprint. Already our carbon footprint is below 0.5. So it places us with the best domestication companies in terms of carbon footprint and improvements. So there is, there isn't any other company which is near us and Carbon Footprint, which has the improvements. This enables us to be in a very strong position for exports to Europe. Overall, EBITDA numbers are within our range of 8 to 11. We would like to remove part of the EBITDA. For your calculation purposes, because some of the EBITDA in other income is from the earnings we have got from the funds or surplus funds of high change we have deployed in money markets. That is really not business income, so we have removed that in our calculation. And if we remove that, our EBITDA for this quarter comes to 10,700. So, I'm gradually getting the confidence that for next year, we can improve our range. Today, our range is 8 to 11. But next year, we should be able to increase the range from 8 to 12. So, I can see product profitability improving. And that is a result of cost reductions and bigger production. So, fixed cost being spread over a bigger volume. That's all from me in the opening remarks. I'm sorry, one last thing. As far as the new steep plant is concerned, we are partly reconfiguring the plant to reduce carbon footprint further and improve energy efficiency. So things like scrap preheating, which was not emphasized earlier, and some other equipment that we had not emphasized earlier, including testing lines. Today, we had planned only one continuous testing line for the new plant, but seeing the way market is changing and demand for continuous testing and automatic testing lines, we will have to need more, need to add more lines, which means the project cost is going to increase as well as the capacity will decrease of this plant. So again, details are still being worked out. I think by next board meeting, we will be able to have a clear picture and we'll present a refined project with increased capacity and try to keep cost per ton similar to where we had in this stage. Maybe a little higher because of the Iran war. Metals have gone up everywhere as well as Ruchi has depreciated. So the cost of machinery is going to be also better. So those are being worked out, and we will have a better estimate in the next quarter. As of now, we are still on track to commission the project in the financial year 25-30. That's all from me for now, the opening remarks. I think I need to add some numbers and then we can have just Q&A decision.

Thank you. Good morning, ladies and gentlemen. On the numbers for the quarter, this quarter we have achieved 59,000 tons of sales, which is higher than the corresponding quarter of last year by 6.5%. And revenue from operations is at 486 Hours higher by 12 percent. It's a combination of both. One is because of higher volumes and secondly because of increase in sale prices. As a result, our EBITDA, this quarter is 68 Hours per quarter and 41 Hours is the pair. Overall, a beta pattern, as I said, has already explained, it is 10,750 per ton, so, And our pad is 41 crores in this quarter, as it is 34 crores in the immediate proceeding quarter, and 20 crores in the corresponding quarter of plastic. This is all on the numbers for the quarter, and now we can open for the question answer session.

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. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants who wishes to ask a question may press star and 1 on your touchtone telephone. The first question is from the line of Shivam Singh from Capital Arc. Please proceed.

Good morning, sir. Congratulations on the good side of numbers. Thank you.

Yes, sir.

Sir, I wanted to ask that we had projected that our revenue was growing exports. Could you please quantify how much the exports were in this quarter?

Here is that part. Can you repeat your question, please?

So, we had projected that our export sales would increase. What about sales was in export?

Sales in export, how much is in export? So, the total exports is still accounting for about 6 to 7 percent direct export and another 5 percent is going as indirect exports which is going to 5G through their trading arm in India.

So, what we are finding is that our estimates of direct exports of steel were off, but more and more customers are wanting to buy from India, but they are wanting to buy components and post products from India. So, a larger part of our business is a lot of our customers are exporting products to Europe and to the US. So, what we will start doing, I think, is that is a valid point, the question that you raised. From next quarter, we try to calculate, again, it will be an estimate, that how much of our product is actually getting indirectly exported out of India as components.

Thank you, sir. That's very helpful. And, sir, I had another question. Sir, with the partnership with Aichi, could you quantify how much of the business is, like, what is the business concentration per client? Because Toyota is a partner of Aichi, if I am not wrong.

Business concentration is low.

Is there growth in our business?

Low, low. We are very well diversified across customers. But our increased focus as we go forward, the concentration with Maruti as a customer will be our target. If we're able to achieve that, that's a separate issue. But we will try to continuously increase business with Maruti more than as a bigger share of our customers. As of now, it's a small percentage. That's about 10%. So we don't have any concentration risk.

Okay, sir. And so, if I can ask another question.

Please, can you wait, come back? Because there's a queue.

Yeah, sir. Sure. Sure, sir. Thank you, sir.

Thank you. The next question is from the line of Jizranj Gupta from Aten PMS. Please proceed.

Hi, sir. Two questions. One is, and I joined late, so if it is at cost of repetitions, then the status of the expansion of the existing plan from 3 to 3.6, if you can share any update on that. And second is on the land acquisition for the 5 million plan that we are planning.

So, the new plant is five lakh tons, not five million. Five million, we will get into big, big guy territory. We have no plans to be in the big, big, big boys. We have a small area. So, land is in the last stage of getting finalized. And machinery is also in the last stages of getting finelined. So, hopefully by August 10th or latest by mid-September, we should be able to fineline everything.

Got it. And on the EC application from 3 to 3.6?

We have made the application. And so, in all probability, next 3-4 months, we should get the approval. Because the, but again, You haven't got it till you have got it. So, fingers crossed. Till that time, we will be close to our final production capacity because we had never, never imagined we would even reach this level. So, I must publicly thank my team who have done great work in figuring out how to keep improving productivity to reach this level. Now, all this is helping us in the new plant. In the planning of the new plant, as I said, what was to be a 5 lakh ton plant is going to be significantly bigger than that. Of course, we'll have to make some more investments in that. And cost per ton is going to be lower than what we estimated in the new plant. And as we have better estimates, next quarter will have better estimates.

Thank you.

Before we take the next question, we would like to remind participants that you may press star and want to ask a question. Participants who wishes to ask a question may press star and want to ask a question. The next question is on the line of Anand Kumar Sharma, an investor. Pleased to see you.

Good morning, sir, and congrats for the great set of numbers. Sir, my question is regarding this next project, 5-lacton project. You have said that by first quarter we will be able to start the production of this forging unit. And what will be the direct elimination of the cost, reduced cost? Can you explain, give some light on that? And what are the other projects, apart from this forging project, what about the other projects?

So, forging project is likely to get commissioned by last quarter of 27-28, and then to fill up the project, the plant will take six months to one year, because it's a totally new product. Customers need to come and see the plant, and then approve it, and then business will start coming. So, revenue for that will start coming from the year 20, maybe in the end of 29, end or 2930. Project cost, as I said, is lower than estimated as we have been able to negotiate better terms and some equipment that we have seen as Japanese equipment, we are able to find India substitutes for that. And so overall, those costs are being estimated, and in the next three months, we again, by next quarter, we will have a far better grip on the total savings. But as of now, we can say there is a, from the 475 crore that we had estimated, there is a substantial saving from that. The saving is more than 10 percent.

Okay. My second question is regarding this continuity crunch project. When you expect that to start the commonly lines for the this new state plot?

The new state plot we expect to start in the financial by end of 29-30. So, 6-8 months to stabilize the plot and 30-31 we start getting revenues from them.

No one of 28, sir?

Hey, this is, this is... 29.30. This is a new steel.

New steel plant. This is a new steel plant. I'll just think capacity. In the function, I'll just think capacity. 3,260.

Once we get the approval, only then we will have to invest some money, so that that will take some time. But till we get the approval, we can do nothing.

And just to add that for the current year, we don't have any capacity constraint because whatever our plans are there for the current year, so we have enough license capacity, and once this approval comes, so it will be helpful for in the next year.

Okay, next year. Thank you, sir. Thanks. Again, congrats for a good set of numbers and for your hard work. We salute you. Thank you.

Thank you. Before we take the next question, we would like to remind participants that you may press star and want to ask a question. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Deepak Podhar from Sapphire Capital. Please proceed.

Hello, am I audible, sir?

Yes, please go ahead.

Thank you very much, sir, for this opportunity. I just wanted to understand, now you mentioned we don't have any capacity constraint this year, so what's the volume growth we are targeting for FI27?

We are targeting, for this year, we are targeting about 250,000, 55,000 tons for this year. This year, we passed 270.

270. Okay. So, I mean, in terms of growth, we are still quite nominal, right? I mean, the target in terms of our growth on FI28 itself, it's 7-8% only. So, what will drive our revenue growth? Will it be more value addition? So, how should one look at revenue growth?

So, I think, see, what we are looking at in the future is diversifying away into non-automotive teams also. So, there's a whole category of non-automotive teams that we were not interested earlier. One, we didn't have the capacity. Two, we did not have the technical capability in terms of equipment. In-cut casting is the rule which is going to be used for many of these products. In-cut casting is something that we plan to establish in the plant by third quarter of this year. And by fourth quarter, we hope to stabilize. So this year, we would have established and stabilized the in-cut casting. Now, we intend to get into diced teas. India today imports a thousand crores worth of diced teas. So, that's a big area for us to grow into. So, that is die steel. Railways, the big for axles, there is a big demand for steel for that. Windmill shafts, there is a big demand. A lot of it gets imported. So, we have been moving it a lot into import substitution. Earlier, we didn't have that capability. So, by end of this year, we will have the capability. So, we will start a second engine of growth. Today, we have only automotive steel as an engine of growth. Tomorrow, we will have a second engine. This is non-automotive steel. And once the forging plant comes up, then the third engine of growth. And the fourth engine of growth will come up. That will come up maybe a year and a half down the line as we start working towards aerospace and steels for nuclear plant and so on. So that is the fourth. So, just now we are constrained because our capacity is 3 lakh tons, which is the licensed capacity. We can't go more than that. So, we can keep saying that you are very conservative, growing only 7-8 percent, but when that is our capacity, we can't go more than that. We are also examining, can we get imports, import units from outside and roll it outside and do some job work and develop that market. So if you are able to find a credible source, and because you have to have complete supply chain for that. So if you are able to do that, then we have a chance of growth again. So meanwhile, what we will do is, if we don't have growth possibility, then we will work on internal, how to keep improving margins and better product mix. Meanwhile, the new plant will come up. So, once the new plant comes up, then again, then there is massive growth possibility.

That's very helpful, sir. And my second question is on your Japanese tie-up. I mean, we have done this tie-up. So, what sort of potential is there? Can you throw some more light on how we are looking at the tie-ups that we have done?

So, for example, approval for Toyota, which happened for global approval, we got because of that tie-up. The approval for localizing imported steels for a customer like Maruti, we are getting because of our partners. Then there are internal improvements in terms of overall quality, safety, so many other improvements that are happening. So Yota in India is expanding, DKM is expanding with a new plant in Orangabad, or what's it called? So anyway, Orangabad, the earlier Orangabad. So, with the new plant coming up, we are looking at us for more steel, but we are the only green steel, Sambajianagar, sorry, Sambajianagar, where very clearly they need more green steel. We are the only company which can provide green steel with all the improvements. So, as green steel becomes more and more important, we become the only players which can provide that. And with our expansion coming up, we will be very well placed. And most companies have targeted by 2030 to have a large part of green steel coming in. Yeah, and structural economy is maroon. So, and I am reasonably confident if we will get this approval. But again, I said till we have not got this approval, we don't have it.

Okay, understood, understood. Yeah, that's very helpful, sir. I mean, that would be it for my name. Thank you so much.

Thank you. The next question is from the line of Ritwik State from one of financial consultants. Please proceed.

Hi, good morning, sir. So, a couple of clarification. Sir, in the opening remarks, you mentioned that the greenfield plant, we are looking to increase the capacity from 5 lakh tons and because of inflation, metals, and ionization depreciation, the cost will increase. Is this the right understanding? Right. That's right. Okay. Okay. Sure. And, sir, you mentioned that F528, you'll be increasing the EBITDA per ton, add in some 8 to 11,000 this year to 8 to 12,000. So, can you quantify that or can you give us a color, what will be the key drivers for this increase by 1000 rupees per ton?

The key drivers are three. First, that we will have... Bigger production, and therefore, the fixed cost will be spread over a bigger volume. Two, there are operating costs that have come down and are further coming down as we go ahead. We can see all those things happening as we go along. Third will be, we still have job work and outside processing going on. Uh, which will start coming down from second quarter partly. Uh, no, not second quarter. From third quarter you'll see that coming down. Okay, these are three levels, and the fourth level will be in a year's time roughly, we will have to see, we have not given an exact forecast of when the new solar plant will come up. So, when the new solar plant comes up, again, there will be cost savings based on the cost of that.

Okay, so this is just a brownfield expansion of the solar plant which we have right now?

No, it will be no solar plant capacity.

Okay, with similar cost savings. No, because now the government has changed the rules, the solar panels, the cells have to be, as solar panels are locally made, the cells have to be also locally made. So the cost of panels is now higher than earlier.

Okay.

So the savings on account of the solar will be lower than. In this first phase, which came out.

Right. And so, just one last question from my end. We are working with a European OEM to supply materials. Any update on that?

I don't have an exact update, but that should happen by later part of this financial year.

Okay. So, we expect to start commercial supply to them in H2.

Yes. Great.

Okay, sir, all the best, and thank you.

Thank you, that means the sample are cool.

Okay, the samples have gone, all the work is going on and try.

Thank you. The next question is from the line of Arpit Dapadya from IGE India. Please proceed.

Yeah, hi. Thank you for the opportunity and congratulations on a good set of numbers. I just wanted to know how does this EBITDA per trend drive into your company, which is within the range given, and what makes you the change of range this time, and what will be the outlook going on?

So, why we are we stick with the range is because we deal with the auto OEs and the auto OEs change the prices upward or downward based on cost parameters so because of cost raw metal cost goes up therefore they were they would increase the price of So, that gives us a range. We remain protected within a range. And every few years, the range gets bumped up or lower depending on market circumstances. In addition to that, as I said earlier, with an increased production, cost per ton comes down. With the current modernization that we have done, Certain costs have come down, yields have improved. We've already said that earlier. With the new re-eating furnace, yields have improved and they have improved. Then outsourcing that we are doing, the job work that we are doing, that is going to come down. So these are the factors and that gives us the confidence. And then with the new solar plant coming up. That will add further. Once the solar plant gets commissioned, then we will like to change the range to 9 to 12 rather than 8 to 12. So for next year, it will be 8 to 12. And I hope all goes well. The year after that, we should go to 9 to 12. Then the other picker that's going to come in, once we are able to establish our iced teas and bail-based teas. These are all high-margin products. Very difficult to make. Fortunately for us, Aichi, our partners, they make Dice Tees also. So it is very, very important for Dice Tees to have a foreign know-how. And we have our partners, Aichi, who know this business and who make, they are the largest forging company in Japan. They have about 150 or 170,000 tons of forging in Japan. They are about 50% market share in Japan. And they use their own die-steel in their forging. So it's tried and tested in their own in-house. That know-how is going to be available with us.

Got it.

And for our new complete greenfield plant, what are the next footsteps to check, let's say, from one to two years of perspective?

So the next steps to track will be purchase of land, second is placing of orders, third is status of environment clearance, and then it's progress of the plant.

Thank you.

Funding is not a problem for us because, one, we already have reasonable funding available with us already. Cash has come in. And second, sometime next year, depending on when we need refunds, we will be doing capital raising. Both the large shareholders, the largest shareholders, and IG, they have given their commitments for putting in as much capital as required. And then we are also in touch with certain large institutions. There is a certain appetite to put money in the company. So raising equity is not a problem. And then we are probably in touch with banks to raise the debt is also not a problem. So funding is not a problem. And lastly, Punjab government, because we intend to protect this plant in Punjab, is very keen for this project. So, government support is also fully assured. Got it.

Thank you.

Thank you. Before we take the next question, we would like to remind participants that you may press star and want to ask a question. The next question is from the line of Kagam Shah, an investor. Please proceed. Thank you.

Thank you. Hi, sir, am I out of here? Yes, please go ahead. So, just one most of my question, just one clarification, you said the brownfield capacity will require the environmental approval of this. So, when do you, let's say this comes by next quarter or 3-4 months. So, what will be the ramp up to for the revenue to come kicking?

So once his pre-approval comes in, If approval comes in, then we will up the sales target for next year from 270, we will up it up to something like 290, because we can improve production up to a point without any further cappings. Beyond that, we will need capex. So, we want to finalize everything for the new capex and sign it immediately once the approval comes. And it will be roughly a little over a year for the new capex to come in. So, we should be able to reach 330, 340 in the year 2930, 2829.

Okay. And also, you mentioned that you are looking at non-automotive areas for this year. So, is there a potential upside also coming from there? Yes.

To just give you an idea, Dice T's prices currently are average prices about 85,000 rupees a ton. Dice T's are about 2.5 lakh rupees a ton. Non-ESR. And as we get into ESR, if they cross 3.5, 4 lakhs would be the ton. The volumes are small, but ice is high. Of course, there's a lot of heat treatment and you need pressing and other things. So there are other processes. It's not that the profit jump up by that much. So the costs are also higher to make it. But the margins definitely are higher in those products and the sales value per ton is higher.

Okay, okay.

But the die-casting plant will also come up in 28-29, right?

No, no. We are going to start that process. No, no. Again, die-steel. So there is a porging plant which is separate. Die-steel is a steel-making process. For that, you are putting in ingot casting, which will be ready by second half of this year. In Q3, we should have the ingot casting ready. Now, then it is a stabilization process, learning this thing and so on. That should take six months. So, in the financial year 28, 27 and 28, we should have production of dice seeds as a regular thing.

Okay. Okay.

All this would be within the overall limit of 3 lakh tons. Okay. We get environmental approval.

So, what will happen, what mistakes will go to improve?

So, in terms of growth, the inflation point will come up, come up from FI 28 onwards, right?

Once, long things come on. Yeah, if we get the approval 27, 28, it will improve automatically. Then again, the throttling of say that we have that 7, 8 percent kind of, I think that limit is gone then.

Okay, okay.

Just now we have a limit that we can't do more than that.

Okay, thanks.

Thank you. The next question is from the line of Arnath Darshan from 361 Capital. Please proceed.

Hi, sir. Good morning, sir. Good morning, sir. Let me set up numbers. I just want to know the export volume guidance for... Hello? Yeah, go ahead. Just let me know the export volume guidance for this time, sir, and how much is towards 80 still?

Yes, you see, export volumes are small. It is about seven, eight percent. So... No need to track it specifically, and it will not be very high. At max, it will go up to about 10%. So we, as I said earlier during the call, we had erred, we made a mistake in our assumptions. At that time, it seemed exports will take a bigger chunk. But today, we are finding we are not able to meet the requirements of our existing customers. So its force is not high on our agenda. Whatever is growing organically will continue to grow a little bit. So out of this. 7-8 percent, I see is about half?

Yes. Little over half. Little over half. So, total direct and indirect will be in the 9 to 10 percent.

Yes. Sure, sure, sure. The numbers are small. I think there is no need for you to drag that specifically. IT is less than half, sorry. So IT is about 40% of this export.

Total export.

Thank you.

One more interesting thing, I think, which is a follow-up of all the questions that you have raised. So when we are talking of this non-automotive steel, which is whether it's dye steel or railways and so on, initially these volumes are going to be low. But what we are doing is we are creating an option that once a new plant comes up, Then we have the capacity, once the business has been established and we have seeded the business, to grow after that faster becomes much easier, which will help us in filling up the capacity of the new plant faster. So that is the other objective of why we are pushing so hard on these products right now.

Yeah, go ahead. Next question.

Thank you. The next question is from the line of Divyaj Gupta from Latest DMS. Please proceed.

Hi, sir. Just one question. In the deck, we have mentioned that for the long-term aerospace and everything else, it would be under a dedicated JV. So, the question around that is, is there a shortlist of player identified or is it probably IG? And is it a purely legal transmit, there will be a separate subsidiary under a JV structure or is it a technology JV that we are aiming, like we have with IG that they take stake and then they transfer the technology?

So, we are... Talking to a few people, we are looking for more people. So this will be a non-IQI JV. There's a partner. IQI is strong in automotive steels. They're strong in stainless steels, including medical steels, and as well as they are strong in tight steels. So the volumes are not that big because they use largely for internal consumption. Thank you. So for the advanced metals, we are looking at the Advanced Metals Division. We will be looking for a partner outside. So, that process of finding a partner will take its own time. It will take a couple of years and we are in no hurry because one, this is a slow process of finding the right partner with the right understanding is important. So this is just a directional thing that this is what we want to do in the future. For your forecast, for looking at valuation, etc., for getting a hang of the numbers, these numbers will be too small and it will outside your horizon to think too much about it. But it will be a separate company. It will be a JV because nobody is going to pass. There is no how without being an equal partner in it. So, once we find the right partner, we make the announcement. Understood. Understood. That's it. That's it on my side.

Thank you.

Thank you. The next question is from the line of Vyash Parker, an investor. Please proceed.

Hi, sir. Am I audible? Yes. Firstly, sir, congratulations on great set of numbers. Most of the questions are answered already, but just a few questions. You mentioned that better realization came from OEM price revisions during the quarter. Could you help us understand whether these revisions are largely complete or should additional pricing benefits accrue during the year going forward?

So for Q2, we've asked for further prices, price increase. So Q2 process will happen later. Q1, the price settlement has been completed with some of the OEs, but some of the OEs, it is still not complete. So it is likely to rise higher. So, the Q1 price for the settlement is likely to rise higher. If that settles higher, then our ask for Q2 will come down a bit. So, Q2 numbers will not change, except that certain profit of Q1 will be spilled over into Q2.

Okay. So, another follow-up question. So, following the commissioning of our block and reheating furnaces, what is the current rolling capacity utilization and beyond operational efficiencies? Are there any bottlenecks remaining before the plant reaches its designated utilization?

Yeah, so the rolling mill after the commissioning of the cost clock and the reheating furthers has reached its capacity of 3 lakh tons of input, and the way our team is working, they are confident that we will hit 330,000 tons capacity. So, they are already confident of 10% higher production. But again, as I said, this is constrained by license today. So, it's running at full capacity utilization.

Okay. So, last question from my end. On the forging and machining project with ICHE Steel, could you elaborate on customer qualification timelines? Should we expect commercial production immediately after commissioning, or will there be a gradual ramp-up before meaningful revenue contribution?

Very gradual ramp-up. So, we are already talking to customers, and we are starting the process. Again, we are very lucky that because our partners are already there, we are already sending steel to IC, getting it forged from there, and sending it to customers for approval. So, at least the process approval will have happened. So, those things will shorten the process off. So, the first thing to do is take a few times, but it will take time because it's a new business, we have to learn this business and the customers have to get confidence also. Their confidence is high because iZ is already an expert in this area. But this area and this method of doing some of the products that you're going to do for the customers is new. So, um... And it has benefits, which is why the customers are also excited, but they have to see this in action.

Correct, sir. So over the next two to three years, we can expect the margins to improve majorly because of the cost optimization as well as value-added grades that are evolving. Am I right in that?

Value added rate will be a very small chunk. But again, I'm repeating three areas which will lead to margin improvement. One is volume increase and therefore spread of fixed costs. Two is operational improvements, and therefore some operational costs coming down, and third is job work reducing, and therefore those costs coming down. And in addition, will be the fourth part of solar, which will happen a little over a year from now. So it will be the second half of 27-28.

Okay, these are because of my questions.

Thank you so much. The impact of the value-added products should start happening in 28-29. So 28-29, we should try to modify our range. From 8 to 12, we like to remove the 8 and say we are confident of 9 to 12.

Okay. Thank you so much, Sir, for the opportunity. Thank you.

Thank you. The next question is from the line of Damodar Das, an investor. Please proceed.

Hi. Yes. Good morning, Sir. I hope I'm audible.

Yes, please go ahead.

So, two questions on the line. First of all, congratulations on the great numbers. So, two questions on the line. One is that, what is our current order book visibility from OEM customers? And secondly, what is your outlook on steam realizations over the next two quarters?

So, one, we never have a strong output. There is no system of a very strong order book. We are completely booked out, and we are refusing order. So, I mean, we required a strong order book or visibility. We are currently having trouble meeting the requirements of our customers. So, demand is very strong. And no customer gives a long-term order that, okay, you have this much coming in in the third quarter or fourth quarter. All depends on their volumes. So the customers are steady. It is all repeat business which comes in. And the next volume increase is going to come from the commercial production beginning for the import substitution for Maruti, which will happen, start having the fourth quarter of this financial year. So... That's all I can say.

We are asking for the price increase from 1st of July. Q2 will be higher prices.

Yes, the realizations will be higher in Q2 than Q1. And Q3 depends on how raw material prices continue to function. So, more or less as of now, Q3 we don't expect a major change. So, it may be either the same or a little bit higher or a little bit lower. But Q2, definitely the expected increase in prices.

Okay, Sean. Thank you so much for your clarification.

Thank you. As there are no further questions from the participants, I now have the conference over to Mr. Jain for his closing comments. Over to you, sir.

Ladies and gentlemen, thank you once again for continuing to be very strongly engaged. The kind of question you've been asking us means that you have deep interest in our company, and you're forcing us to think and find out answers and be ready for... For next quarter, we need to come back again. Thank you so much, and we hope to continue to perform steadily and improve steadily.

Thank you. On behalf of Verdum and Specials Seals, that concludes this conference. Thank you for joining us, and you may not disconnect your lines.