Vardhman Special Steels Limited (VSSL) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Wertherman's Special Steel Q2FI27 Earnings Conference Call, hosted by IIFL Capital. As a reminder, all participant clients 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 conference is being recorded. I now hand the conference over to Mr. Pratik Singh from IIFL Capital. Thank you, and over to you, sir.

Thanks, Sharia. Good morning and welcome, everybody. On behalf of IFL Capital, we invite you to Gerdaman Special Steels 2QFY27 Earnings Conference Call. From the management, we have Mr. Satchit Jain, CMD, Mr. Sanjeev Singhla, CFO, Mr. R.K. Rivari, Executive Director, and Ms. Swamya Jain, Executive Director. Before we begin, note that this conference call may contain certain 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 involve risks and uncertainties that are difficult to predict. So without any further ado, I will now hand over the call to Mr. Satchith Jain for opening remarks. Over to you, sir.

Thank you. Thank you so much. And in relation to the team mentioned, we have Sonam, our company secretary, with us. And we also have the AdLabs, AdFactors team with us, our industry relations. And Mr. Rivani has had to step out, so he has left the meeting. He's not there in this call. So we've had a good quarter last one. And one of the big highlights of this quarter has been the foundation stone of a forging plant was laid by The Honorable Chief Minister of Punjab, Sadar Kapodhman, and that happened in July end this year. And in this quarter, we've had record sales. Demand was strong, and partly demand has been strong because of the GST cuts which happened last year on two-wheelers as well as the smaller vehicles, As well as SUV sales have been good, and the other sales also have been good. So, there has been good demand. I also, we are getting the feeling that from the non-automotive space, also demand has increased, which has started affecting various other of our competitors. So overall, material supply for automotive segment was tighter. And there were one or two shutdowns, unscheduled shutdowns from one of the large companies. That led to also a slight shortage in the market and therefore the pull. So, the demand-supply imbalance, we got good price increases in the last two quarters, which has led to good profits. Most of the clients have settled the prices for Q2, and we are talking about price settlements for Q3. Not all have settled for Q2, so that's still on. In addition to that, we have work going on on a new steel plant. We have finalized the equipment for the plant part. Land has been finalized for the SMS, and we should be filing for environmental approval within December this year. And we are on track as of now to complete the project by September of 29 and the stabilization by March of 13. In addition to that, the solar plant has been running well, and we are now expanding the solar plant by another 22.5 megawatt. 20 megawatt for this will be for the current plant, and 2.5 megawatt will be for the entity line, which is being set up in the forging plant. For the forging plant, there will be solar power coming in by the time it starts reaching better utilization. The forging plant is expected to come up by March of 2008 and then of course it will take some time to fill up the capacity. A slight change or thought process is happening on the financial structure of the new plant. We were earlier looking at our debt equity for the company was 0.5 is to 1. It should have been at max 0.75 is to 1. More and more, as we were talking to some financial experts and some well-being of the company, advisors, we are now coming around to this inclusion. We are diluting a bit more than required, and therefore, we may look at a one-to-one rate equity, and therefore, the debt component will become a bit higher, and the equity raising part will be a bit lower. For the equity part, we'll be doing a rights issue, which will happen in the later part of next calendar year, second half of next calendar year. As far as the project cost is concerned, we are also looking at the project cost. Some aspects of the project have gone up in terms of cost. Land is definitely more expensive than the NDCs. As well as for the equipment, the rupee has depreciated after the Iran war substantially. See, freight has gone up, as well as metals have gone up, so all commodities have gone up. So, the project cost is going to be higher than what we had envisioned. Also, certain equipment that we had planned in the second phase, we have pre-ported the first phase. And we are also looking at some product re-configuration to look at to better service the non-automotive parts. So, all that the project is being reconsidered, being modified to the conceptualization. Everything will be finalized by March, April next year. So, but, but, suffice it to say at this point in time, the project cost will be higher than the 2000 growers that we had in this age. But we will also have the ability to have a higher production than 500,000 tons eventually. So we are building a scope to increase the production beyond 500,000 tons to at least 700,000 tons in the second phase. And further after that also with some more additional equipment. The additional equipment that we'll have to add will not be of a highly significant quantity. The other thing we are examining, of course, the decision will be taken by the board, is also to look at examine suspending the dividend for three, four years. It does not make sense to give dividend, pay tax on that, and then ask rights issue for these same investors to put in money and rights issue. We are examining this. A decision, of course, will be taken by the board in the April board meeting. So, overall, I think the business remains good. The demand for the next quarter is also good. And we have finally received the approval from the European OE. Mass manufacturing for that has started. Also, on a major import substitution of domestic major, which is a large quantity and it was a highly, very high-end quality, we have successfully got approval and mass manufacturing for that too has started. Sales for that will start happening from January. So, we are on track in terms of all our workings. Our new entry line will get commissioned by December, and the new peeling line will get commissioned by early November. With this, we'll have some more capacity, more flexibility to serve customer better. So, capacity increase will be for peeling. Overall capacity is still constrained by the environment approval of 300,000 tons. We have applied for increasing the capacity to 316,000 tons. We seem to have got a recommendation. Maybe this may happen, but till we haven't received any letters so far, but till we have not received any letters, we don't have any further information. Thank you.

Good morning, everyone. On the financial part, we have already calculated the million and as per this, our total sales for the quarter has increased on year-on-year basis by 27 percent and revenue from operations is up by 29 percent. Section 6 letzten elsewhere and over the September 22nd and eventually a beta bet, they are up by about 50% for the quarter over the previous over the current quarter of the last year. The main increase, the main reason for the increase in profitability apart from, the robust demand which , Cassisar has already explained. Is also coupled with the operational efficiencies which we have started arriving from the GAPEC, So in more detail about PAPEX, which we have undertaken last year in the form of putting hop sauce mix and reheating furnace, so really we have started now getting some benefit. In terms of cost savings from these capex in the second quarter and going forward it will further increase and of course this power plant is also yielding us a benefit. So this quarter in other income also GSD benefit is a little higher than the corresponding quarter Because the GSE benefit was sanctioned by the government for seven years, and the seven-year period has over by August 26th, and now we are left with only electricity duty benefit, so which will continue for 10 years, and the validity is up to August 29th.

So, that's all on the operational side.

One more thing I think is that our EBITDA per ton is on the highest part of our range, so I will not expect, I will request you not to preach that for now as a standard kind of a thing. We still believe the EBITDA range will be between 9,000 to 12,000 rupees EBITDA for 10.

Currently, we are at the higher end of the application.

Yeah, so that's all from our side as initial opening remarks, so we are open to questions.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and run on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star 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. The first question is from the line of Disha from Sapphire Capital Limited. Please go ahead.

Thank you so much for this opportunity. A couple of questions. Firstly, sir, you mentioned EBITDA VOTAN has sharply improved. How much of this has been driven by inventory gains?

We don't separate out both, but there is an element of inventory gains. As I said, these are not sustainable numbers. If we get it one quarter, maybe we get something next quarter. Those are not in our control. Our guidance remains 9,000 to 12,000 rupees as EBITDA VOTAN.

Just to add that from last year, from 1st July 25, we have shifted to SAP S4HANA, and in that we have, we are doing the evaluation based on the each batch, and whatever the material has been issued, accordingly the evaluation is done. So there is no, the earlier concept which we were re-evaluating based on the last three months of averages. So now it is on batch-wise costing. Each batch is having its own costing at the time of production, and according Accordingly, that cost is carried up till this day, and accordingly, the costability is broken. So there is no evaluation of the inventory at the end of the month or at the end of the quarter.

Okay, okay. And since the volume growth for this quarter. Hello? Yeah, yeah. So the volume growth for this quarter has been very stellar. So you mentioned that the demand you see was very strong. So, do you see this momentum sort of continuing ahead and maybe we'll surpass the volume guidance that we've built? Do you see that as a possibility?

No. See, second quarter is always the best quarter because this is a build-up for inventories for the festive season. So, unlikely that we've eaten up our inventories of finished words and willits. So, this type of volume is unlikely, but clearly, we will be at the higher end of our, we'll be a bit higher than our initial forecast. So, we expect sales of about $260,000 now for the year. Budget for about $260,000.

Okay, okay. And so, also on the realisation, there's been a sharp improvement. Do you see that, you mentioned because of the demand, supply imbalance, so what sort of average realisation should we expect for this year and going forward?

Average realisation, I think it will continue at this same pace because we are getting the price increase from, in the first quarter also the price increase was a safe, second quarter also, so first quarter also expecting some price increase. So, this, every administration will continue for the two years, but maybe a little higher. Okay.

I think the other companies have set out letters for price increases, which are ranging between 3,500 to 4,000 rupees a turn. Those are the letters that have gone out. What will be the final settlement will be seen?

Thank you. Anyone who wishes to ask a question, may press star and 1 on the touch-tone telephone. The next question is from the line of Jusei Haveliwala, an individual investor. Please go ahead.

Hello. Yes, hello. Am I audible to you, sir?

Yes.

Thank you for the opportunity, sir. So, my first question is, so the capacity is at 3 lakh tons for billets and 2 lakhs, 70,000 for rolled bars and 48,000 for bright bars, right? So, what are the current utilization levels and the principal bottlenecks and the near-time opportunity to improve it without any major incremental capex, sir? Rolling mill capacity is also 3 lakh tons of input,

which is at least 270,000 tons of output. After the new reheating furnace was commissioned, which was commissioned in March, after that, the capacity has gone up to the full rate rate. So this is the full capacity. We cannot produce more than this because of environmental approval. So, if we get the environmental approval to go up to 360,000 tons, then we will be able to produce more.

Okay, okay. And, sir, basically, borrowing has been increased to 162.93 crores as of, you know, 30th September, which was, you know, 92 crores at the end of Q4, while our trade receivable rose to 410 CRs from 277. So, what explains this moment, sir, and what are the actions we are planning to take to improve the cost conversion cycle and the working capital efficiency, sir?

Actually, there is a reclassification this time because of the changes in the NDIS. Earlier, there were some creditors which were against discounting of the LCs were clubbed under trade table. So, now, because the changes in the NDIS, those have been re-classified in the borrowing, so, otherwise, in total, if you will see taken together borrowing and the creditors, there is no increase, rather, there is a increase, there is a decrease. Okay.

Yes. And then, are raw material inventory carried forward from the previous quarter? Can you come back to you, can you come back to the queue, please? Okay, okay, got it, sir, okay.

Thank you. The next question is from the line of Ritalik Sheet from Vanap Financial Consultants, Private Limited. Please go ahead.

Yeah. Hi. Good morning, sir, and congratulations on a great set. Sir, two questions. Firstly, on the brownfield expansion, you mentioned that the EC has already recommended, but you are awaiting final approval, right?

There has been a recommendation of a committee. Now, when the final approval will come, whether some conditions will come, those are all awaited. So, till we have something in our hands, we don't know.

Right. And so, once the final approval comes, say, January 2027, hypothetically, how long can we take to increase our capacity from 300 to 360?

There is not also a when, there is also an if question. If the approval comes and when it comes, it will take, so, about a year or December next year, whichever is later.

Right.

Got it. Got it. And indicated CAPEX for this? I am saying December, if the approval comes in October end itself, in the next one week, it will be December because we need a 15-day shutdown. Right. And shutdown cannot be taken in the season, so we have to look for a lean period for a shutdown. And typically, the leanest period is December end when the OEs go on a shutdown, maintenance shutdown for a week, 20 days. So, that is the leanest period. So, most probably, we will plan a shutdown at that point in time. Again, if the approval comes and when the approval comes.

Right. Got it. And, sir, my second question is the EU OEM. What kind of contract is this going to be? Is it going to be on a spot basis or it's a long-term contract? And what kind of volumes?

I mean, we don't operate on any spot contracts. Prices are fixed in every quarter. Those prices change based on the negotiations that various steel companies have in various OEs. So, the prices change as per that. Now, this European OE is new to the Indian market. So, they will figure out with us whether they want to go with the Indian system or they'll go with the European alloy system because Europe has a difficult manner of pricing. We are flexible. We are open to both because of the lag, both match eventually.

Okay.

So, actually, I think from the volume perspective, sorry,

like, is there any fixed volume that they've committed?

We don't disclose volumes of each customer like this. And since they're anywhere full, so, eventually, if the volumes increase, we will be reduced to a less paying customer.

Okay. Okay. So, sir, I have a couple of more questions. I'll get back in the queue. Thank you.

Thank you. Participants, in order to ensure that the management is able to address questions in the conference, please limit your questions to two per participant. The next question is from the line of Divyanj Gupta from Latent PMS. Please go ahead.

Hi, sir. Good afternoon. First question regarding financial. So, the incentives that we receive from the government, right? In the other income, is it recognized based on accrual or only when we receive the money? And if it's on accrual, then what is the typical timeline between accrual and the receipt of the money and any delays in government that we have experienced?

There are two types of incentives. One is GST and another one is electricity duty. So, electricity duty, regularly we are getting in our monthly power deal. Secondly, GST refund, GST refund is basically it is a centralized, managed by the central government. So, GST refund is agreed by the state government. So, normally it is a lag of two, three years time So, we are recognizing on a global basis, but it takes to get the money in cash from the state government, normally it takes three years.

Got it. And therefore, the second related part to the question is, if we see the financial, we see a large jump in the account receivables. What is driving such an increase in account receivable, if I just look at it from a number of days perspective? I know sales has increased so amount should increase, but on days basis also it has increased.

Yes, it is directly in proportion to the increase in sales because if you will see the sales numbers are also during this quarter is more than 70,000 tons of sales which in quarter one was only 59,000 tons. So, the difference the incremental sales of 11,000 tons which happened in the last 2 months Augusta and September, is leading to this higher receivables and some. Got it.

So, there's no increase in days on a BAU basis. It's just the batching of days.

In number of days, it has increased by four to five days only because of some sales to the customers who are having a higher credit period.

Got it. Got it. And the second question is, what would be the export sales deemed or direct in this quarter?

It is almost in the same ratio as was there in the last year. So, 6 to 7% is direct and another 6 to 7% is direct to two ITs. Understood.

And so, just the last question, I know there is a limit of two, but just the last question. Can you come back in the queue, please?

Thank you. The next question is from the line of Anand Darshan from T61 Capital Market, Private Limited. Please go ahead.

Good morning, sir. Congrats on the great set of results. My first question is regarding the new revised CAPEX. You had mentioned there has been an upward revision for the CAPEX numbers, no sir? So, what is the risk for both the new steel plant and the folding plant and what payback period we will be assuming for the new numbers here?

As I said, we will be, we are still revising all those things. This has not been declared as yet. So, we are not, this will all be done by March, April. So, we will have a better idea, but we are still reconfiguring some of So, we have a lot of things to service the non-automotive segment, which are becoming very attractive now.

So, did we see like any 20% upside of cost or something like that, sir?

We are not, as I said, we are not sharing any information at this point in time.

Okay, okay, right, sir. So, my next question is regarding the forging facility.

Forging the cost will be lower than what we had budgeted.

Oh, right, sir. Okay. So, regarding the folding structural design, we have around 475 tons of GAPET's plan. So, can it roughly absorb like around 65,000 tons of steel, sir, from our facility?

No, no, no, no, no. Initially, it will absorb about 15,000 tons annually at full capacity. And it will take some time. Sure. And it will take some time to build up to full capacity.

All right. So, this is the phase 1, right sir? 15,000 times to be absorbing.

That is the first plan that you are putting up. That is fine.

Okay. Okay. Sir, and the EBITDA range which you had mentioned as 9 to 12 per kg, is it for the next two quarters or what is your guidance for the next year or something?

No, this is our guidance for the foreseeable future. When we change the guidance, we will change it. We do not look at quarter to quarter. We look annually.

Sure, sir. Sir, regarding the import substitution, which I mentioned.

Can you come back? Can you come back?

Thank you.

Sir, I requested to come back in the question queue. The next question is from the line of Akash Raval from Tangami Family Office. Please go ahead.

Hi, thank you for the opportunity, sir, and congratulations on great set of numbers. Sir, I just want to understand how much KPEX is budgeted for the next three years. So, like FI 27, FI 28, and FI 29, and in proportion to that, how much debt we are going to take?

It will be about 150

crores for the existing plant. And for the steep plant, as I said, we are still comparing the final figures that we will be investing.

Okay. So, the debt amount...

Okay, so sir, if I assume cumulatively, 1,000 crore debt can be taken in the next two years?

When we finalize everything, we will share in the next year, we said in April. Don't make any assumptions. We have no comments at this point in time. Okay, sir.

And sir, just want to understand your strategy around the non-automotive OEM part. So what are the steps taken by the company over here?

So, we are starting with ingot casting, which is the route to make specialized teas. This is something that we will start at the end of November. It will start. It will take a couple of months to stabilize, and then we will figure out the markets. There are attractive segments, and we will gradually get into those segments. School and diastasis is one. Oil and gas is another. Railway is a third. Then bearings later. Eventually, there will be aerospace, defense. So there are several sectors which open up. But today, we don't have much capacity, so we are just going to be seeding some of these segments. And then when the new plant comes up, we will have the capacity to have higher diameter blooms. Some of that will go into automotive for sure. But we will also be able to make steel for railways, for the windmill sector. So we are seeding those sectors now, and the real volume will come when the new plant comes up.

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

Thank you. The next question is from the line of Chaitanya Ramesh Rao, an individual investor. Please go ahead.

Hello, can you hear me?

Yes, sir. Please go ahead.

Yeah, congratulations on a good set of numbers. So, my question was regarding the entry of VSSL into the ring care section that you mentioned in the last conference. So, what is the quantum that we are looking at? And I suppose there was a timeline given of completing the commissioning till next October, that is one year from now. And what will be the capacity and what is the competitive environment currently in India? And, like, what is the plan of VHSL regarding that sector?

So, it will be a fully stabilized commission and so on by March 28. And this is something which is a highly automated line. This is a specialized line, which gives us an advantage in terms of better quality and much better yields compared to the normal methods of manufacturing in India. Yeah. And so already we have got approval and orders from one of the big global tier ones. So the process has started. But this is a new business we're getting into. So it's a slow process. And we do not have any certain plans. Steel will have certain plans, but forging is a slow, and ICR partners, they have nine such lines. So, they are experts in this method of steel making, forging, and they have dispatched a senior level person who is going to be, who has been appointed as president of the forging business. So, IC, the Japanese will be driving this business, of course.

Is there any indicative tonnage that you are looking at and the expected EPITTA levels can do?

At full capacity, it will be 15,000 tons.

And it will take time to build up to that capacity.

And the EPITTA realization will be higher than the current level?

We don't, I think this is a new business. Give us some freedom to start learning this business before we start committing something.

Thank you so much, sir. Best wishes for your journey. Thank you.

Thank you. Anyone who wishes to ask a question may press star and run on the touch on telephone. The next question is from the line of Ritwik Sheth, one of Financial Consultants Private Limited. Please go ahead.

Hi, sir. Thank you for the follow-up. So, on the greenfield plan, is the land acquisition completed, the entire...

The land acquisition for the melting part is completed, and for the rolling is ongoing, and we should be completing it by January of next year, January of next year.

Okay, and then we'll have to apply for the EC, right?

EC will be applied within this year because EC for the steel, for the melting part takes a longer period. So, that will be applied within this year. Okay. So, December should apply for the EC.

Okay. Got it. Okay. And, sir, any ROC or EBITDA to capital employed for the forging plant you would like to lay out?

We are not giving any comments at this point in time. It's one line, it is a small line, it is suboptimal, it is an entry into a business.

Got it.

We have the advantage of our partners who are experts in this area. So we are relying on their knowledge. And once we add two, three lines, that is when EBITDA or Capital Employed and all they start coming in. Sure. Now, our focus is only successful implementation of the project, getting the production lines operating, and getting quality right and throughput right. Those are our objectives.

Got it. And, sir, just one last question from my end. So, the brownfield expansion, if and when we get the approval from 300 to 360 KTPA melting capacity, what kind of CAPEX will be required?

Approximately? It's not substantial, but about 100,

about 100, 100, 150 crores.

100 and 15 crores. Okay. Sure. Okay, sir. Thank you, and best wishes for the upcoming session. Thank you. Thank you.

Thank you. We have the next follow-up question from the line of Devyanj Gupta from Latent PMS. Please go ahead.

Hi, sir. The lander question we just answered was one of the questions. The other question was, we were hearing that one of the other listed speciality steel player is in the process of increasing his capacity by about 40 to 50%. The last time when we discussed it was that the industry is capacity constrained. So, just wanted to understand how do you see, let's say, the request for price increases in view of upcoming capacity by competitor impacting our realizations or even EBITDA pattern.

I don't waste my time on trying to forecast what price increase will come or not. I will focus on our operations. And the price increase will depend on market situation at that point in time. Previous quarter, we got more than, more, a better price increase than what we were anticipating. We can easily get wrong here and there. We focus on our 9 to 12,000 rupees EBITDA per time. But my understanding is any new plant which gets announced will take three years to four years after announcement. For it to start. So, I don't know which company you're talking about, and when they made the announcement, and what is the status of their project. So, I have no idea. So, to my understanding, next two years, no new capacity is coming up. That is my understanding. But I may be wrong.

So, I think I'll take it off, like understood. That's it from my side.

Thank you. Anyone who wishes to ask a question may press star and one on the touchstone telephone. The next question is from the line of Namesh Pandya from NP Investment Management. Please go ahead.

Hello. Hello, sir. Congratulations on good set of numbers.

Can you be a bit louder, please?

Hello. Am I audible, sir? Now? Thank you. First of all, sir, congratulations on the good set of numbers. So, I have a couple of questions. So, what measurable benefits have been realized from the Cox block and re-heating furnace, capex, through both yield, energy consumption, product quality, and cost per tone? What further benefits remain to be capped?

So, with the combination of Cox clock and reheating furnace, we have been able to increase our capacity to 300,000 tons, and we can actually increase this capacity even beyond this, but that depends on once we get the environmental improvement, but we can now go up to 330,000 tons. So, that is one. The second is that quality has improved all around. So, our rework and rejection have come down. Third, we were doing job work from outside. So, that has come back in largely. So, that is why the job work area of our expenditure has come down. And therefore, the margin has gone up, and yields have become better because from a 4.2-meter billet, we have gone to a 5.2-meter billet. So, the wastage happens at each end of the billet. So, now the wastage is happening at the end of a longer billet, and therefore, yields have improved. Understood, sir. And also, because of the better quality, we have been able to stabilize our production at one billet size. So, this will be fully implemented in the next six months. This will give better flexibility. That means we can service customers better using the combination of the billet size as well as the box block.

Absolutely right. So, my next question is, which end markets are contributing most to incremental demand passenger vehicles? Two-wheelers, tractors, bearings, engineering, or other applications? And, sir, are any customers even showing signs of saving?

Across the board, the demand is there. And, tractors, what I'm hearing from all the customers seems to be showing down a bit.

Oh, okay, sir. That's it from us, sir. Thank you. Thank you.

Please go ahead.

Hello. Hi. Good afternoon, sir. Congratulations on a great set of numbers. Thank you. So, as the management mentioned that they are targeting a mix of roughly 70% automotive and 25% to 30% non-auto revenue by FY35. Among these verticals, among the non-auto verticals, railway, oil and gas, bearings, and tool and die, which segment are we particularly prioritizing first for the near-term scale? And do we see any growth in the near-term?

Near-term, there is very limited that we can do because we are running actual capacity and we are focused on our current business automotives. So, we are taking trials and we will start taking trials in coolant ice seeds. So, we take trials in each one of these segments, then we will have the products ready. And really, when the new plant comes up, we'll be able to start expanding the product.

Okay. Okay. Sir, the next part of my question would be, what does the management think that we, about the outlook for the domestic automotive segment in the country over the next one or two years? How do you, what do you think about the sector?

We are too small a player to start focusing on what the automotive sector will do. You all have better access to the auto companies that they have on call. But my understanding is the auto companies are bullish on growth. So we don't see any problem. And more so, some of the auto companies are diverting better shares to us for the more sophisticated qualities. We don't see any problem in meeting our volume targets, and in fact, we don't see a problem in filling up the capacity, of course, giving a two-three-year time to fill up the capacity of the new plant, so we don't see much of a problem in

things. Sir, have you identified any downside scenarios such as any risks that you factored in for your growth outlook? Any downside scenarios?

There are several risks. One, there is a project implementation risk.

Two, I think that's the biggest risk that we have.

Mm-hmm. Okay.

Everything else is secondary.

Okay. Okay, sir. Noted. Thank you so much for taking my question, sir. All the best for your future, sir. Thank you.

Thank you. The next question is from the line of Manasvini from Oracle Investments. Please go ahead. Hello.

Congratulations, sir, on the good set of numbers. My first question to you is, revenue growth has outpaved volume growth. So then, how have realizations changed, say, by product category, and what is driving the price? Is it customer mix, value-added grades, market prices, or probably contractual resets?

So, the largest impact is market prices, which means contractual reset, because we don't sell in the spot market.

Right.

So, that's the largest element. The price increase, because of commodity prices going up, the price increase has been substantial, which has led to, over the last two quarters, the prices have gone up for some ways, Some OEs are around 8,000 rupees, some OEs a little less because they are settled with a lag, and some OEs are in the middle of settling, which is not yet fully settled. So, second quarter is still not fully settled just now.

Okay, that makes sense. Also, I have another question. Realistically, what market share or tonnage can the SSL capture here over the next, say, three to five years?

We are too tiny to have a large market share. We are, our capacity is 200, this year we do about 265,000 tons. The market size is about 8 million tons. And there are several products that we are not even present in. So, again, these are all questions when you are a larger player, then you look at market share and so on. For us students, how much capacity we can put up and it's still that capacity.

That makes sense. Thank you so much. Thank you.

Thank you.

Thank you. As there are no further questions from the participants, I now hand the conference over to Musataj Jain for closing comments.

Thank you so much for showing so much interest in our company. And your questions are all well noted. And we will have more precise answers in the next six months. With this capacity that we are putting up, we will become a substantial player in the alloy steel bar market. We still will not have bright wire rods, which is a very large segment of the alloy steel market. We will not be in that segment. And in the bar segment of cars and two-wheelers, we will be a major supplier in India. But overall, we remain optimistic. The business is strong. And there is the tailwind of green steel. More and more customers are coming to us talking about green steel. No price benefit as yet, but share of business benefits clearly seem to be visible as far as trend is concerned. Beyond that, we remain optimistic for the future.

Thank you so much.

Thank you. On behalf of IIFL Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your line.