Jindal Saw Limited (JINDALSAW) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Jindal SAW Ltd. Q4 FY26 earnings conference call hosted by ICICI Securities Ltd. As a reminder, all participant lines will be 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 has been recorded. I now hand the conference over to Mr. Vikas Singh from ICICI Securities Limited. Thank you and over to you.

Good afternoon, everyone. A warm welcome to Q4 F526 Jindal Shop Conference Call. From the management side, we have with us Mr. Narendra Mantri, Chief Operating and Financial Officer, Mr. Vinay Kumar, President and Head Treasury, and Mr. Rajiv Goyar, Senior Vice President, Corporate Finance. Without taking any much time, I'll hand it over to Mr. Mantri for his opinion and remark. Over to you, sir.

Yeah, hi. This is Mr. Mantri would take up the question. So, I'm Vinay Gupta. So, let me give the preface and Rajeev, Mr. Mantri, me all sitting together. We would be addressing the questions of the participants. So, if it is okay, can I start?

Yes, sir.

Okay, fine. So, good afternoon, everyone, and welcome to the Jindal Storch FY26 earnings call. I'm Vinay Gupta from Jindal Soh. We'd like to extend our thanks to the ICIC direct team for organizing this session and facilitating the discussions. The Board of Directors approved the audited financial results for 2026 on April 27, 2026, which has since been filed with the 12 exchanges. We trust you have reviewed these documents. Now, let me present the highlights of the financials. And some brief about that. So first of all, performance in Q3 improved relative to the immediate previous quarter of FI26. And we expected and we mentioned in last call that Q4 is expected to be better than Q3. This is what we mentioned on the call for Q3. On the contrary, the performance of Q4 of FI26 Dropped across if compared with the previous quarter, which is Q3. Performance of FI26 also dropped as compared to FI25. Now, before we go to prognosis and what is happening, let me very quickly cover the numbers, the highlight numbers of standalone consolidated quarter and full year. So, for... For the financial year, on a standalone basis, the company registered a total income of 3,852 crores, representing a decline over Q3 FY26. By approximately 7%. EBITDA for Q4, FY26, to debt to Rs. 413 crore, showcasing a decline over Q3, FY26, which was 527 crore, representing a decline of 22 crores. Debt for Q4 is reported at Rs. 114 crore, showing a decline over Q3, FY26, which was 227, which represents a decline of 50%. On a consolidated basis, for the quarter quarter, the total income stood at 4, 6, 5, 7 crore, as compared to Rs. 4963 crore in Q4 FY26, representing a decline of 6%. EBITDA 4 stood at 504 crore, showcasing a decline of Rs. 632 crore, which was a decline of 20%. That for Q4, F826 is reporting 124 crores, showing a decline of Declined over Q326, which are 248 crores representing the kind of 50%. Now, let's talk about the full year, FI26 and FI25. On a standalone basis, the company registered total income of approximately Rs. 14,745 crore, representing a decline of approximately 19% as compared to FI25, where the total income was 18,178 crore rupees. Ebitda for FY26 is Rs. 1835 crore rupees as compared to 3,456 crore rupees for the previous year, representing a decline of 47%. Tax for FI26 is reported at Rs. 784 crore, against Rs. 1874 crore, should representing a decline of 58%. On consolidated basis, the total company registered a total income of approximately Rs. 17987 crore. As compared to 20,948 crore fees, representing approximately 14% decline. Vita for 26 is 2,306 crore as compared to 3,548 crore of the previous year, showing a decline of 35%. Pairs for 26 is 48,925 crore, against 1,458 crore fees, representing a decline of 37%. In terms of our inductedness, As on 31st March 2026, companies stand-alone net debt reduced to Rs. 2,453 crore as compared to Rs. 3,154 crore on the previous year, and this includes long-term debt of 529 crore only. Next, institutional debt on console basis has reduced to Rs.2528 crore as compared to Rs.3346 crore, which was on 31st December 25. Long-term debt on 31st March was Rs.692 crore only. So debt profile of the company remains robust despite the business volatility. Now, the prognosis for the results are, number one, Q4 and FI26 saw decline in overall sale, primarily driven by weakness in the dictatorian pipe segment amid ongoing water infrastructure sector challenges. Despite positive policy announcements, under the Jaljian mission, project execution on ground remains sluggish, impacting our total water pipe business during FI26. Despite a robust export order book including 6 lakh metric ton of Jogak contract from Saudi Arabia, all export shipments have been suspended since March 26. This is due to the activation of the first major charges following the outbreak of the military conflict in the MENA region. So no shipment has gone from 1st of March 26. Export business typically yields higher margin. As compared to domestic, the deferment of all the planned export shipments to MENA region of all kinds of pipes in March 26 resulted in lower Q4 profitability as compared to Q3, missing our original expectations. This will get reflected in 26-27 once the shipment will start. So this is basically a deferment or postponement on the time scale. The company also reported a 48 true rupees foreign exchange cost during this quarter following the revaluation of US dollar denominated exposures. This was driven by the rupees sharp decline over the quarter. It fell from 88.88 rupees per dollar to 94.84 rupees per dollar. So, this is perhaps one of the quarters in the last so many years reflecting a... Depreciation of more than 5 rupees. Now, some update on our carbon seamless pipe segment. On February 26, 15th February 26, we reported to staff exchanges about developments in our carbon seamless product. It was reported following an API audit, non-conformances were identified. A suspension letter was issued, providing the use of the API monogram on our seamless pipes. All requested data has since been presented to API authorities within the specified timeframe. All NCs have been formally addressed and closed as per the requirements of API authorities. Auditors appointed by API authorities are scheduled to revisit our factory in NASIC. In May 2026 for verification. Following this, the final approval to use the API monogram on seamless pipe is expected in due course. Given this, providing a specific timeline for approval at this stage would be very speculative, and due to this regulatory timeline, we anticipate a temporary impact on our sale of API seamless pipes. But to mitigate the impact, the company is leveraging flexible manufacturing capabilities to relocate production towards alternative seamless pipe products to minimize the loss on account of the overall volume center business. Profitability in API business typically is competitively better than the non-API business. Now, the MENA region has impacted all the businesses who are catering to MENA region or any inflow or outflow to that region. And we would like to address that point also. Now, you know, like following the escalation of conflict in the MENA region, starting 28 February 2026, we are experiencing severe logistic disruption, including non-ability of vessels. Consequently, all shipments from India. And Abu Dhabi facilities in Middle East are suspended until further notice and further, until safety conditions allow for safe passage. Abu Dhabi plant sales are restricted to customers in the countries which are within the trucking range. So we are continuing the business, but wherever the trucks can go, but where the ships have to go, that business is temporarily suspended. This has impacted Q4 and FY2526 sale and profitability at standalone and console level, and where the revenue recognition is deferred to 2627. Now, this ongoing crisis in Wiena region has necessitated a strategic shift towards securing energy infrastructure, generating new opportunities for pipeline extension, repair, and replacement. Particularly for projects designed to bypass volatile maritime choke points. This transition is accelerating investments in infrastructure that bypasses high-risk areas, offering substantial opportunities for pipe manufacturing and EPC providers. We expect the countries in Minasin to invest significantly in the replacement and new pipeline infrastructure for oil, gas, and water. Similarly, India will also need to invest significantly to work on energy security. We may expect new pipeline requirements in the next couple of months. In March 26, the government has issued a landmark order to fast-track pipe gas rollout across the country. Bureaucratic delays, excessive charges, and local bottlenecks that once showed or projects are now being swept aside, and time-bound approvals and decisive central backing. Apart from this, ONGC has also announced in March 26th, Deepwater Exploration Projects of approximately $20 billion. Now, what is there for us in all of this? While conflicting MENA region presents significant challenges, the resulting shifts are creating new avenues for growth. Jindal Shah is actively capitalizing on these emerging opportunities. Through strategic expansions and local manufacturing in the region itself. As you know, the company has already announced its investment plan to set up a carbon-seamless-size plant in Abu Dhabi through our subsidiary. There are good developments in the project. A developed piece of land with some civil infrastructure has already been secured. Ordering for equipment with advanced payments and opening of LCs has started. Project company has signed long-term lease agreement with AD Port for land parcel. In Saudi Arabia, company has established a joint venture company with its investments of 51% and balance 49% is by Google Group in KSA. This JV will set up also an ATSA facility. Land for one of the projects has already been secured. LC has been established for few of the equipment. Our endeavor will now be to set up all these plants in Abu Dhabi in Kaysay on a fast-track basis. Now, let us discuss a couple of other matters including subsidies and joint ventures. In UAE, the regional conflicts in MENA regions have disrupted the operations of the Abu Dhabi facilities also. The facility remains in a highly impacted area in this region. Due to these circumstances and with employee safety as our top priority, operations have been reduced to meet essential demand. The sales from Abu Dhabi plant are restricted to customers which could be served from the trust. In this backdrop, in Q4 of FI26, Abu Dhabi company delivered approximately 48,000 ton pipes as compared to 52,000 ton in Q3. And as of March 31, 2026, the subsidiary holds the order book of approximately $180 million, which is close to $171,000 metric ton, giving a visibility of approximately 9 months of operation. And this is independent of the order book of Jindal Sol Ltd. In general, hunting joint venture, The joint venture where Jinder has 51.1% and Hunching has 49%. We generated a revenue of approximately 149 crore with 43.2 crore of a PAT. This is a bit lower as compared to previous year where the top line was 177 crore and 51.5 crore was a PAT in FI25. In case of our ongoing litigation with NTPC, The matter is moving with the NTPC in Delhi High Court at double bench. Majority of the arguments by both the parties are completed. There may be one or two more dates before the court reserves its order. So now, with this bear graph, before I conclude this presentation, let me summarize. The Q4 FI26's performance did not meet our expectation. of exceeding Q3 results, primarily due to the reasons we mentioned above. Factors contributing to Q4 muted performance persist, and we expect its impact on Q1 results of the current year also. If situation improves, we have capability to ramp up the business very quickly, but as of now, as we speak, This quarter, at least a few more weeks or a few couple of, some time looks to be getting infected. Improved conditions in MENA region will enable the company to rapidly accelerate export shipment because our order book comprises of roughly 29 to 30 percent export to MENA region. Thank you. The tile pipe business would take the lead, and this will be helpful for the operations of the company and the industry as a whole. Complete new initiatives in Abu Dhabi for seamless projects and in Saudi for saw pipe projects are expected to yield good results once these plants are set up and become operational. In today's volatile time, our high liquidity provides a critical buffer. With a deliberate balance sheet and strong working capital lines available with the banking system, we are well positioned to fund future growth. We have made capital expenditures across our Indian facilities to drive growth. These expenditures focus on debottlenecking, enhancing operational efficiencies, and providing infrastructure to our staff at the plant. Note. To end this presentation, we would still like to add one more line that we are witnessing unprecedented time where projecting the business for future is very unpredictable. The management is taking all possible steps to safeguard its interest and see how best we can ramp up the operations and business in domestic markets, pending the export markets opens up. With this note, let me request if there is a question, we can open the floor for the question and answer.

Officer, please start the Q&A.

Thank you, sir. Thank you. We will now begin the question and answer session. Anyone who wishes to ask question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assemble. The first question is from the line of Dhananjay Babrathia from Alchemy. Please go ahead.

Hello. So, firstly, congratulations on a good set of numbers and tough environment. I just want to ask you, how are we getting feelers from these other regions or demand? Are we seeing much more volume uptick, let's say in FI27, any numbers we can think of?

Yeah, hi, Dhananjad, this is Vinay Dupta. So, Dhananjad, at this point of time, the interaction with If you're talking about the export business, if you're talking about the MENA region, the interaction with a lot of customers is not happening on a phase-to-phase basis. What we are trying to accumulate the information and intelligence is from the public, let's say, public platforms. And public media. We, of course, since we now have presence in Saudi and Abu Dhabi, our people are trying to get some sense from various stakeholders, including the oil and gas companies there. That's how they are perceiving, how they want to go forward. But having said all this, there are, if you're tracking, there are a lot of media news there. The projects which were in the cold storages, the projects which were stuck for whatever reason, there is an urgency to push those projects. So I'm not saying they will come overnight, but they would cut short the timelines and there will be urgency in doing this. So that, like, if this stalemate...

And what about India? How is the India demand? How are we seeing that come along?

So, India's water demand remains. The only thing was the water business, Jal Jeevan Mission. So, Jal Jeevan Mission gave rise to another kind of, let's say, business opportunity where the state governments are arranging the funds and state governments are giving the orders. So, this is independent of Jal Jeevan. So, whatever business has happened in the sense of… Fund released from the JG1 was on account of the state. That is a bit competitive, but we expect that the macro-level demand has not died down. Macro-level demand remains the same. It is only deferment. Hopefully, this year, the business should pick up and the industry should respond very quickly. So, everybody has the capacity, everybody has the order book, we are gearing up. We, in fact, our fourth quarter sale is completely better than the QC sale for water business.

Sure. And with steel prices going up, do we think we have a hit by inflation or will we pass it on on margins?

See, we don't accumulate or hold steel in anticipation of getting the order. So it is basically like it's a very narrow, within a very narrow timeline, we hook the steel the moment we get the order for the pipe. So eventually the volatility in the raw metal prices. Is to the account of the manufacturer. So for us, let's say in this case. So that is why number one, like for example, if these are the steel pipes, then we don't know like what kind of, let's say, diameter, thickness, metallurgy, the new order will have. And that is where the order is played only once. We received the firm order for steel pipes. So, this situation normally does not arise that the steel pipes going up and down is impacting the pipe layer very significantly.

Okay, and so margins, henceforth, we have bottomed out in 26, and margins should now just be onwards and upwards.

Can you repeat your question, sorry?

I'm saying margins, would you be fair to say margins are bottomed out, and now margins would just be higher from here going ahead?

We, so that's what we thought for, at the call of QC, we said that perhaps it has bottomed out. Okay, and it's a function of all the things. Margin is not a function of only like raw material sale price, because if my capacity is under flight, the fig door has to start hitting you. Now, a lot of contracts what industry is today serving, they are delivered products, they are, in case of international, they are due to deliver products. But now, nobody knows like how after 5th of May, what the crude prices will be in India also. Right. So you people are analyst, so you would know like whether the crude price goes up or the thesis price goes up. Right. So the freight cost will go up. So there are a few things which are beyond the control. The assumptions for the profitability normally are made in the, let's say, a stable condition. So as we mentioned in the very last line in the presentation that these are very unpredictable, unprecedented times. Everything is looking way and way. So, if you say that this is bottomed out, may be, may not be.

Okay, that's true. And so, any other risks we can think of in terms of, obviously, one micro risk, any other risk we are seeing at the moment? Because you're trying to understand just from the business risk perspective.

This commentary actually is full of risk, what we said. We have not given you high expectation except that we are setting up the projects in Minan region. But our perspective is to highlight to stakeholders, to all of you, we are living into the risky environment. We highlight it each and every risk. We highlight the mission. We highlight the international shipping issue. We highlighted our API business issue in carbon and steel. We highlighted the water business in Jalji 1. So, I mean, there could be still issues which are very difficult to project at this point of time. As I mentioned, if there is a spike in the diesel prices, all costs will become inflationary. So, there are certain measures which the management can take in terms of, let's say, controlling those risks. There still would be few risks which we may not be able to control. Given the, like, good liquidity, good, let's say, position on the company and the balance sheet, some of the risks we can still handle.

Okay, and so, last question for me. So, what capex number are we expecting for the next couple of years?

The capex?

For the next couple of years. How much more?

Yeah, okay, so... Okay, so a few of the capexes, what we are doing, what we have done in last one or two, three years time, maybe we are at the last portion of those schemes, maybe let's say 5 to 712 rupees all across India in this year, and three projects what we have announced in Saudi and Middle East. They are, of course, sorry, Abu Dhabi. Abu Dhabi, at this point of time, like for a seamless pipe project, we are 100%. So, we are still trying to work out like what would be the debt equity, what is going to be the devised project cost. We are trying to bring some more efficiency in debt project in terms of cost. In Saudi, it is a joint venture where we are 51%, so our net impact of the cost on our relationship will be lower. Otherwise, then, we are not expecting, we are not putting very significant, let's say, brownfield or greenfield projects in India. So, we are trying to, let's say, we try to work with the available capacity within India, but just trying to see, like, how best we can de-risk our business model. For example, if the tile pipes had taken a backseat, we are working out like the facility should not stop and let's try to work out different options for that also. The different sizes, export, domestic, shift, and all those things.

Sure, sir. So, any number we have, only 5 to 600, is that, or will be more than that?

The CapEx number?

Yeah, total.

Yeah, for this year, we expect 5 to 600.

And for next year? Let me try to get a broad base, 27, 28, so 500 for 27, and for 28.

Okay, let's put it this way. We have roughly 10 locations in the country. Right. Earlier we used to say 250, 300, but every time it works out to not less than 400, 500, and sometime when one or two more schemes are going on, some replacement, all these things. So maybe like this year we have done 700 to 800. So 25, 26 we did work. 800. Maybe you can consider 500 to 600 this year, 400, 500 next year, something like this.

Thank you, sir. Thank you so much.

Thank you.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your two questions to per participants. Should you have a follow-up question, we would request you to rejoin the queue. Thank you. The next question is from the line of Digan Haria from Green Edge Wealth.

Thank you. Thank you for giving me the chance. I had one question. See, the macros are very uncertain and we may not want to guide. That's perfectly fine. But I just wanted to know that in all the products that we have, you know, basically saw pipes, seamless pipes, ductile iron, stainless steel, and HPD, do you see any overcapacity in the system? Like, you know, if the demand bounces back, say, water in the next 12 months and, you know, oil and gas after, say, you know, another six, nine months, you know, will we again go back to the old levels of profitability or is the capacity in the system high that we may need a higher level of demand to go there? If you can just, you know, segment-wise explain how do you see the overcapacity or, you know, in each of these segments where we operate.

Yeah, Rajiv, would you explain this? So, as you mentioned, that overcapacity position, if there is a demand, which is coming dead, so what we feel that in ductile and spikes, there may be some oversupply in terms of capacity, but apart from this, other segments are well-placed, like longitudinal, electrical, as well as seamless. So, if in future demand is there, the capacities are available to cater the demand, there will not be any over-capacity, but the ductile iron pipe is something which we feel that over-capacity position is there.

Okay, okay. And then, you know, in these ductile iron pipes, can we do something else in those lines or no? We'll have to live with the lower utilization for some time.

So, honestly speaking, yes, there will be, we have to live with this condition, because the major capacity expansion in the DI pipe was in the estimation or in anticipation of demand from the GERD-1 mission. And multiple projects at the state level. But as of now, because the G1 mission scheme is not kicking off very well. So this position seems to be remaining as it is for quite some time.

Got it, got it. One data point is how much sales did we lose in, you know, because of the Middle East war, you know, like not getting ships, not delivering products. How much would we did like 13.76 lakh, you know, tons of volume this year. Like how much would we have lost? Just in this quarter, how much would we have lost in terms of crores of rupees? Like what would be the revenue loss?

So, definitely, there is no loss. Per se, it is a deferment, because shipments are going to go. Once the situation is improved in this region, so approximately 30 to 40. So, apart from this, there is no loss as such.

So, this deferment would be worth, say, 30 to 40 crore rupees, right?

So, in terms of value, it would be more than that, but as of now, we have the quantities available which got deferred.

Okay, fine, thank you so much, I'll come back from the queue.

Thank you. The next question is from the line of Gaurav Ninga from Tunga Investment. Please go ahead.

Yes, sir. Thank you for taking my question. Sir, I have two questions on the stainless steel pipes business. The first one is on the stainless steel seamless pipes business. We are hearing a lot of piercing players adding capacity and they are receiving approval in the critical piping segment as well. So, what did you get a sense from you on its impact on our overall business, both in terms of capacity, overall industry capacity and on the margins in this business? That's question number one on seamless steel pipes, and second one is on the varied stainless steel pipes, and I wanted to get a sense from you because I think there has been some decline in the overall margins in this business. So how are the things shaping up and how do you think about that business going forward?

Okay. In stainless steel pipe business, we are trying to capture the upper end segment of the customer who requires more stringent quality. So, the impact of that will come. I think in this year, the second half. So, but otherwise, otherwise I must say that the company business of the extended society will face the margin challenge.

Okay. Sorry, sir, are you talking about the seamless business or welded or both?

Both. I'm talking both. So, we have to capture the value-added product, and for that, as you mentioned, we are trying to get the approval from the customer end for our facility and for our product.

Thank you. But sir, on the welded side, is there upper segment as well? I thought that that would be true for the seamless business. Is there upper segment within the welded as well? Welded also. Okay, we are trying to move up the ladder in terms of quality.

Yeah, that is the only way to capture the high-end or high-margin business.

And that margin expansion will happen from the second half of FI rotation. Is that the expectation? Yeah.

Yeah. Actually, as I already mentioned by Mr. Vinny Gupta, that at this point of time, everybody is a little slow in investments and slow in giving the order.

Okay. Got it. Got it, sir. Thank you.

Thank you. The next question is from the line of Vanshika Jain from Aquentis Investment. Please go ahead. Hi.

Hello, bud.

Sir, the line dropped. The next question is from the line of Salish Raja from BK's security. Please go ahead.

Yeah, congrats, sir, for reporting strong past-use CFO of 1,800 close, even in these challenging times. So, given the lower-order intake expected from the Middle East due to ongoing challenges, I'm talking about the new-order intake. So, how are you approaching our selection in the near term? Is this specific to other helical saw capacity? Do we wait for recovery in MENA region to, you know, secure high-margin orders, or are we open taking up, you know, the lower-margin orders in the domestic helical saw segment And to support utilization level. So what is our near term strategy?

So, Shalish should presume this situation would start working out once the region is fully operational. A couple of regions are there where people are flying for the safety. For example, UAE, right? The life is still not back to track. Saudi is still working operational, but I mean, the business has taken a bit of backseat for everybody. Our stronghold in MENA region are like Saudi, of course, Qatar, Roman, Iraq. Iraq is equally disturbed at this point of time. So, people are not thinking of giving the order immediately. The discussions which perhaps are happening that how they have to create the energy security mechanism in near term. It might take year, two years, three years, whatever. Coming to your second question, let's presume that there is a normality in the region. Everything has been sorted out, shipment is not an issue, ships are available, insurance premiums have come down, insurance is available, and all those things are there. Then, of course, we would like to have the order book. Which should give a reasonable amount of visibility in terms of time and higher utilization. We are still booked. Our facilities are still booked provided that we are allowed to produce and sell. So it's not that we don't, we have a slot available to take the order for immediate next two months, three months. We actually, we are fully booked for a couple of quarters. So, if we have to, given the option to take order, we might not be able to take order for next two or three or four quarters time. So, to my understanding, the industry is reasonably booked for export as well as domestic. The only thing is, the challenge is that you don't have means to transport and dispatch. Okay, okay. And just to give an example, For the job work order, what we have, it's a 6 lakh ton order, and we are sitting off roughly 2 lakh ton of steel, which is supplied by the buyer. We are holding on the steel, and you can't supply the pipes. We are not making the pipes. I mean, storing the pipes will be a larger problem than storing the steel.

Sir, you know, both Indian and local players, including ourselves, are adding capacity. So, do you believe that there is a sufficient demand to support attractive returns like 3-4 years payback on these investments? And also, could you please talk about, you know, the opportunities in the GCC region for Helical Sa, El Sa, and DiPipe?

So, okay, let's talk about the Simplasma VC ductile. We are not adding additional capacity in ductile. It is basically like we are trying to set up a complementary facility of our Abu Dhabi plant. What we are trying to do for our Abu Dhabi plant is that we should be able to have the access to the entire MENA region. Wherever there is some bottleneck, we are trying to, let's say, set up a complementary facility for that. It's not a full-fledged plant of, let's say, starting from blast furnace going up to the finishing and everything. But in case of seamless and soft ice, they are greenfield projects, completely integrated with coating, all kind of coating and everything. And in terms of, let's say, the demand, we are fully conscious that the competition is already there. They have acquired or they are setting up, and we are considering, yes, the competition is always good for a healthy market, but we believe that there is enough demand, and the demand has. So, demand is likely to increase exponentially because of this new crisis which has emerged in the MENA region, this is giving additional, this is a top-up on that plain PISA. So, I mean, we won't like to discuss too much on the call, but we understand that there is enough on the plate.

Okay, so one last question. So, as we plan to undertake significant CAPEX over the next 2-3 years, With current net debt at, you know, that 3,400. So, what do you expect that peak debt level during this capex phase? And additionally, what is the peak net debt to EBITDA that we are comfortable operating at?

See, we try to communicate to everyone that... Let's differentiate between the working capital debt and the long-term debt. So out of the current debt, standalone 2,500, console 3,200, whatever, the long-term debt is hardly, standalone it is 525 crore, at console it is 650 crore. So this is a good amount of appetite. Of the lenders to lend the long-term debt to the company for setting up the projects. And since we have demonstrated in the UAE in the last couple of years, so there is a good amount of traction among the lenders they want to lend to us. Now, as you know, like, because Indian lenders are also geared up through the gift city or direct presence into the MENA region, they are equally interested to lend this. So, appetite-wise, or can the balance sheet handle increase in the debt? Yes, balance sheet can handle increase in the debt. Secondly, as you mentioned that in Saudi, it's not a 100% subsidy. We would be 51. So, a proportionate, at the best, a proportionate, let's say, impact would come. In terms of debt to EBITDA, again, if you have to increase, if you have to include the working capital debt into the overall indebtedness and then to test it. This, of course, will be on a bit elevated level. It depends, like, what we are talking, when we are talking, because in 24-25, we had a beta of 3,500 crore rupees, and then we thought that in two years' time, we would have significantly higher beta. So, if we go back to that similar level in some time, then we would still be in the range of, let's say, two, two and a half of that two beta. All includes, including working capital, everything.

Yeah, yeah, yeah. Okay, okay. Okay, sir. Thank you, sir. All the best.

Thank you. The next question is from the line of Vanshika Jain from Acquantis. Please go ahead.

Hello. Thank you for giving me the opportunity. My first question is in terms of we have started our business in Saudi, and you mentioned in your opening remarks about how things are not moving there. Considering things as normal in war as to be a better state, how do you think the demand is panning out over there? Also, a lot of our competitors also have their factories based in Saudi. So how do you see the competitive intensity there?

So, okay, Manishika, so first of all, like, normal AC is there in the system. Our domestic facility in India, that will be fully functional and will start executing the export order. We have pipes in store and we will start producing the pipe out of the steel, given free of course by the buyer to us. That's one. Secondly, perhaps you want to mention how the domestic, how the demand in Saudi or neighboring countries would be taken care of. So, in my view, in next one year, the majority of the requirement would still be serviced from the imports in Saudi. Because, like, whatever, let's say, other people are doing, they will still take some time to set up, take approvals, and then meet the criteria and do it. So, till that time, if a major requirement comes, hopefully, that would be service out of India. And in the next two years' time, I think we would also be operational, others will also be operational. Then it would be like how much demand is coming and how this is being serviced from the, let's say, the local units in the MENA region. And it is not only Saudi. We are trying to, let's say, gauge the sense there is likely demand from neighboring countries of Saudi also, which would be serviced. From Saudi and then by India.

Okay. My second question is in terms of call cost increase, which we are seeing. I think the call cost has increased almost 10 to 15 percent. So how is the cost estimation being impacted? How much is the spot and how is it in an order booking?

Can you come back? Which cost you said will increase? Call, call, call. No, so we never mentioned the call. We said we give an example is that how the inflation, inflationary trends can impact the profitability. And then I give the example that if let's say the fuel cost increase or diesel cost increase. Or anything which is pushing the shipments increase, it has an overall impact on the profitability because in case of sale, majority of the sale happens on a delivered basis. So whatever orders are sitting in the order group for last couple of months or a year, then some cost, there will be some impact on the profitability on account of the increased cost. Of course, we would try a level bet to pass on some of the costs, but there is no guarantee that this cost would eventually be passed on to the buyer.

So, earlier, I remember, we used to say that some variable contracts where the total pass on was around 30 to 35 percent. Has this percentage increased for us in terms of variable contracts?

No. So, when we say, like, there is a mechanism, that mechanism is restricted to, let's say, the type of projects. And that was... Based on the, I think, pig iron prices, indexation. So it is not for each and every component of the product. It is the pig iron-based prices. Because pig iron has its index, so pig iron pricing is fairly, let's say, transparent. So that was where, let's say, a lot of volatility was there in the iron ore and coal prices. And then some of the contracts had this escalation clause.

As you mentioned that 30-33% or the strategy was like that in ductile and pipe to pass on the cost or to protect the company from their volatility in raw metal prices, especially for ductile. It was like that. We do have the stocks with us also, whole stocks. We are getting the coal ships every quarter. So that is something which is already inbuilt in the pricing mechanism. Apart from this, certain states came out with the escalation clause, as Venergi mentioned, through which if the prices are moving beyond certain limits, then escalation metrics were there and we could pass on certain escalated costs. So that is the strategy which we are already following. But that is predominantly for this organization.

We are domesticated.

Got it, got it. And in terms of DI5, I think you mentioned in your investor report that you have a one-year order. However, we are seeing that some state finances, we're not getting the amount, etc. So, how is the execution pace right now, and what do you think of newer avenues like Gelsium Mission 2 and PNG, incremental adoption of PNG, how will this help?

PNG. So, we are mixing PNG with ductile.

No, no. The first question is for ductile. Let me just break my question. The first question is for ductile. Okay. So, ductile.

Okay. So, let's first discuss ductile. So, on, let's say, very high level, ductile, if six to nine months ago, people were focused on the Jaljeeval mission primarily, And when there were some setbacks on liquidity issues in the delusion mission, then the states also moved to issue the orders based on their arrangement of financing. And that's where the new contracts which were coming, they were coming back by the state funding. So the state was arranging the funds to the multilateral agencies, domestic international, whatever. So, they were not depending on the digital donation funding, whatever it is. And those orders, the executions had also started. And with the pricing and profitability on those orders are different as compared to the pricing of the old orders. We understand that the JLG1 mission, like, there is some momentum in that. And this is paper news also, like, in the open public platform, that center has released funds to some of the states, which has gone to the state government. State has to, let's say, induct their own funds, whatever percentage it is, and then they will start moving the funds to the EPC and all. So, that system is still getting formalized. We understand that there will be a new mechanism of monitoring system. Now, the motto of the Jal Jion mission is also shifting from putting infrastructure to ensuring the service at the end level. So, there might be some initial hiccups in terms of fresh implementation. But once it is set up, then it will be business as usual. There will be more monitoring from the center also, but it will be business as usual, pending that the execution has a higher mix of state. We have funds backed by state funding, and those executions are happening currently, that is also reflected out of our fourth quarter sale, where majority of the sale is for the state-backed funding. Of course, we are supplying to EPC. And then second question is the ENG.

No, the second question is for the GELTS, even 2, the second 2.0, which has come. So when is the execution going to start? Because if the current execution has not been completed and the money has not been received, so how do we see the GELTS, even 2.0?

See, when the system collapses, the system collapses. So, as of now, the whole system, because People like us or any pipe producer is in the value chain. We are in the supply chain only. We don't interface directly with the state or the center. That interface is by the EPC. We supply pipe to almost every EPC who is buying pipe from anybody and everybody. The challenges with the EPC for the liquidity, you would be talking to those also. There are issues with the EPC, they are small, large, medium-sized funds would be released to them, they would settle their initial issues, and then they will start buying it. We still feel that it might still take a month or two before the execution starts in a reasonable way.

Okay, so maybe post-month soon then?

Yes, you're right. Could be. But it does not mean that we are not producing. We have a mix of business or orders, state-backed as well as Jal-G1.

Okay, so state-backed is happening, Jal-G1 is not happening, right?

Jal-G1 is not happening in the full south.

Right.

And if this Meena region logjam. It's clear. We have export consignment, which I don't hold. Even those will go.

Okay. Okay. And for city gas distribution, I was talking about Mr. Vanchika Jan.

Please rejoin the question queue for more questions.

Sure, sure, sure. Thank you. This is Ria, this side.

Thank you. The next question is from the line of Sunil Kothari from Unique BMS. Please go ahead. The next question is from the line of Falgoni Dutta from Mansoor Finance. Please go ahead.

Yes, I just have one question. Can you just give us an idea about the current demand for the seamless pipe industry and in industry as a whole, also the margins there?

So, demand in seamless segment, domestically, it is more or less 1.5 million, approximately, and there are multiple players. So, as the government or the PSUs have announced certain projects in deep water exploration, We can see some opportunities, big opportunities to come when these projects are executed, so announcement is there, intent is there, government is focusing on it, so there will be a demand and there will be a matching capacity to cater this demand.

Okay, you said it's 1.5 million ton, am I right, the demand?

Yeah, yeah, in domestic. Okay.

And sir, how are the margins there? As of now, I mean, if you were to compare it to last year.

So margin product-wise, we are not discussing because we have multiple products. So you can get some sense from the...

No, this is, I'm asking you directionally, that how would be the margins in that segment as of now versus last year, directionally, not in terms of absolute pattern. So, there will

be improvement in margins in seamless segment, because we investors that demand should remain robust, and that will actually result into the little bit better margin.

And, sir, broadly, if somebody were to be buying steel from outside and making steel pipes, then in a rising steel price scenario, should they be in a better-off situation or it's not like that? No, it's not like that. Okay. Okay, that's all from my side. Thank you, sir.

Thank you. We take this as a last question. I now hand the conference over to the management for closing comments.

We thank you very much to all the participants on this call as well as to ISIS Direct for hosting this call. And we hope that the issues what we discussed gets overcome ASAP so that we have a good call next time. Thank you very much.

On behalf of ICICI security, thank you for joining us. You may now disconnect your lines.