Vardhman Special Steels Limited (VSSL) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Q4 and FI26 conference call hosted by Werthamann Special Steals 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 guaranteed of future performance and involve 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 0 on your touchstone 4. Please note that this conference is being recorded. I now hand the conference over to Mr. Sachit Jain, Chairman and Managing Director. What a month special. Steel Limited. Thank you and over to you soon.

Ladies and gentlemen, very good morning to all of you. It's my first investor, annual investor call after taking over as chairman of the company also. So, it's a, and I am, we are, I am addressing all of you as we close the record year, record profits, 122 odd crores. Volume has been the highest, 225,000 tons, which was our budget. And also, we are poised for better times ahead. As in the last year, interesting things have happened. One, of course, in the last quarter with the Iran-Iraq war, Iran-U.S. war, raw material has shot up in prices as well as gas destruction was a concern. Luckily for us, there was no disruption of gas, though the cost of gas has gone up substantially. And I must say the government has handled the overall situation. Pretty well that whatever disruption in LPG, which was there for us, and for some other people, some other commodities, or disruptions were there, but they have not caused major chaos. As far as our CapEx, reheating furnace was commissioned in March. It will improve our rolling capacity to 270,000 tons of finished product. I hope as we close to 270,000 tons, we might find ways to tweak it further to increase it a bit further. New LED line is in progress. New peeling line is in progress. And we are trying to see if we can increase our overall melting production beyond 3 lakh tons to maybe 3,60,000 tons. So our team has come out with a plan to do that. So we will soon be applying for environmental approval, which is not sure that we will get, but if we get that environmental approval, we will increase the production in this plant. The solar plant was commissioned also in this quarter. We will be getting 9 crore units of powder per year. And a new section of 210 by 210 has also been introduced. Now, what does this new section mean? That with this new section, our productivity of our corncast goes up, which was a bottleneck, and which is why we are more confident of increasing production. And second, it improves the quality of our products. So our rework will come down. So first, rejection of some of the critical parts, especially the bigger dia products. We will come down, which will improve throughput as well as reduce some cost. Also, we have increased the heat size from 37 tons to 40 tons. These will also help in improving productivity as well as reduce costs due to the line. So overall, I think we are on track. In the next two years, I think we are getting more and more confident that we will be raising the guidance further. So this year, our guidance is now up from last year, which is 8,000 to 11,000 to see the ton EBITDA, and from two years from now, I think we are confident now that this range can be increased further to 9 to 12. So we are seeing better times ahead as move ahead. A couple of other interesting things. I think our new steel plant planning is going on full swing. We seem to be on track that we will start our plant in July 2029 as of now. And our forging plant also, a lot of equipment has been ordered. So we seem to be on track in starting, commissioning the plant in the third quarter of next year. And Jan, March of 28th. So, we hope to start the production from the forging line. We will also very soon start planning further expansion of the forging line. As well as strategically now, we are looking at a newer direction. With a new steel plant, we will have a capacity of... 5,000 to 600,000 tons. I think we had announced 500,000 tons, but gradually looking after talking to manufacturers, we are able to see maybe we'll be able to reach 600,000 tons. So with 600,000 tons there and 300,000 tons here, we will have almost 900,000 tons of steel. Now, this is the time for us to start diversifying our special steel portfolio into non-automotive steels also. So, we have taken a strategic view that over the next 10 years, we will be about 30% non-automotive steel, 70% will be automotive steel, and non-automotive steel has several categories, and we will do deep dive into them as we go along in this year and next year. So, there is railways, there is oil and gas, there is bearings, there is windmill shocks, ship shocks. And so on. And then there is also a newer area which is more sophisticated of advanced alloys and advanced materials where we will start looking at aerospace, defense, very special steel, nuclear, dyes, dye steel. So those are other areas which go into the more super specialized range. So these are all the next three to five years. You will see more planning and more trust in that area. Also, we are going to soon doing internal organization structure, moving into divisions. We'll be having a coaching division where one of the senior Japanese people is going to from Aichi will come in here. He will be posted here. So, the president of the forging division would be a Japanese gentleman from Aichi. We will have a, we are now looking for a president of the automotive steel division, and then we will create a, we will structure a separate non-automotive steel division. So all this in the next three to five years, and which will again enable the company to grow further, look for further alliances and joint venture partners, improve more specialized areas. So I think more and more of my time is now going to go into developing these strategies, these relationships, and making the company stronger and serving what the country needs today. To just give an example, tool and dice thieves, there's about a thousand crores which gets imported into the country every year. And as we talked to, and the customers are the same. Most of the dye steel customers, all are our forging companies who are our customers. And each one that we talked to says there's a big headache importing these steels from Europe or from Japan or from Korea. So there is a big opportunity in those areas also. So we have not decided on anyone, but I just think these are the areas of opportunities opening up for us as this plant is becoming saturated. So at the beginning, We're going to start with ingot casting in this plant. We'll start in a small way, and then we will be increasing our ingot casting. Now, ingot casting is a different method of steel making. Melting is the same as just casting. We have continuous casting, which really is mass market because of the automotive space. Ingot casting will be higher alloys and limited volume. That we will be moving into, and so the specialized products will require these injectors. There will be much bigger diameter products, which will, maybe you may just forge it, and it may be sold straight to forging companies, rather than the whole process of rolling after that. So, I am just sharing a broad outline with you today that we have reached a stage where we can think of all these newer areas. So, we are very clear we will remain only in the areas of special steels and automotive forgings. But more and more we want to see our vision now is to see ourselves as a supermarket of special steels. So this is a new term that we have started thinking about it in the last couple of months. And I think today, today's annual call is the first time I'm announcing this to our shareholder community that we will try to be a supermarket of, but we are very clear, we will remain only in the areas of specialist needs. And, of course, once we get into specialized alloys for... Defense and aerospace, then adjacencies come up where you can move into gradually in a slow process. Over the next five to ten years, move into other alloys also. So that all will be the job of the next generation of management after me. But we will lay the foundation, strong company, which can then grow into separate adjacencies with separate JV partners as we go along. And overall, seeing the confidence in the future, your board decided to recommend a dividend of three and a half rupees a share. Frankly, I had gone into the meeting with the mind of three rupees a share, but seeing the results and seeing our plans and discussions, the board decided no, that these kind of plans and the confidence the entire board has. In the management and the company, then we all decided that three and a half would be the share. One more thing, last year, the important part was Aichi increased their shareholding to 24.9, which is a statement of tremendous confidence from their side. Also, they are very happy partnership and they want to see a bigger play in India as we go along. Thank you. This has been my longest opening comments so far. The figures are already uploaded. So, we can open it to Q&A now.

Thank you so much, sir. Ladies and gentlemen, we will now begin with 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 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. Our first question comes from the line of Saket Kapoor from Kapoor and Company. Please go ahead.

Hello. Yes, Saqib, please go ahead.

Yeah, Namaskar, Jim, sir, and thank you for the opening remark, elaborating your plans ahead. So, sir, now what should we look forward in terms of our ramp up in volume of rolled products? I think so with the commissioning and the annealing of the new line. With, I think, so we closed this year at sub 230 levels. So, what can I do?

225 we closed this year, last year, and this will be about to cross 250, so maybe 255 we will target, but let us say for your calculations keep 15 in mind.

250 is a level number for us of the off-drone products.

Yes.

Your line is muffled. I'm so sorry, sir, but you have a... Hello.

250,000 tons for this year, you should please keep that figure in mind, though we will try to target to sell a bit more, but we will see as we go along.

Okay. Sir, then you have also spoken about our Cox Block commencement and then the efficiency and all kicking in. So, post factoring that also, we will keep our EBITDA per turn trajectory in that vicinity of 8,500 to 11,000 only, or should we look, that would be...

Our range earlier was 7 to 10. We have now, from this year, we are increasing the range to 8 to 11. And we said two years later, we would like to increase the range to 9 to 12.

Okay. It's a too small point.

We are trending upwards. That's what we are seeing, that we are gradually going to be trending upwards.

This year, we did average of 8,500 plus. Even with all the veggies of the market, we were able to...

Sir, can you come back in the queue? There will be other people. I will address your question later, this one. I will do that, sir.

But your line is still muffled, sir. That could be correct, sir.

Oh, I am so sorry. Let me... Am I more audible now?

Yes, sir. You are audible now. Thank you so much.

Okay. Okay. Sorry. My apologies for that.

No problem, sir. All right. So, we'll take the next question. Come from the line of Hassana, an individual investor. Please go ahead.

Good morning, sir, and thank you for the opportunity. Yes, sir. Go ahead. So, what is our current capacity usage and how much can we see improvement in the next year?

Our current capacity we actually sold full because our rolling mill capacity was close to 180,000 tons. And we have done a lot of outsource rolling and therefore we managed to sell 225,000 tons. In the year 26-27, our rolling capacity is 270,000 tons. And we hope to sell about 250 to 200. Hope is 255. But for your calculations, keep 250,000 times.

250. Okay, sir. And sir, one more question I have. Are we expecting any changes in our product mix going forward?

Not this year, but this year we will see the beginning, just the tiny beginning, tiny shoots. As I said, we will start ingot casting in a small way. And so that's the change we will see, and we will just be selling ingot products. Then gradually as we learn and as we improve on this, we'll be improving the product mix. So from next year, you'll see small changes, but really the impact that you will see will not be enough. Impact will take about five years for the outside world to see the impact. And by then the volume of the new plant would have come in. So again, you will not see an impact in terms of proportions.

Okay, sir. All right.

So for the foreseeable future, please assume the same product, similar product mix of automotive skills.

Okay, so we can consider it a similar one for the next five years, and after five years, we can see a good number.

You will start seeing changing, yes. There will be, again, initially when the new plant commissions, there will be a small dip in the kind of product we are making because we will be ramping up volume in the new plant. And therefore, we will be shifting to some commodity products to build up volume. So the product mix will be a bit changed. And then again, so it will remain similar, then deteriorate a bit, and then again start improving from five years from now. And seven years from now, you should start seeing a change. I know it's a little longer perspective than most investors on this call, but to see changes in the stuff that I was talking about. The futuristic businesses, it will take five to seven years, we'll start making some impact, and for a change from investors, you'll see, maybe seven years onwards.

Okay, sir. Thank you so much, and all the very best.

Yeah, thank you.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on their touchstone telephone. Our next question comes from the line of Nishita from Crown Capital. Please go ahead.

Yes, hello. Good morning. So, I just had a clarification question on the previous participant's question. I just wanted to understand, when you mentioned that the new capacity that will commission, are you referring to the 500,000 tonne capacity of bullet production?

Correct.

Okay, so I just want to understand, when are we expecting that to commission?

We are expecting that to commission by July 29.

Okay. And what is the growth trajectory that you can see going forward?

I'm sorry, can you speak a little louder? I couldn't hear that.

Yes, what is the growth trajectory that we see going forward, like with the IG increasing their stake, and now with all the KPEGs that we are doing, if you can give us a growth target, that would be very helpful.

The first target is to reach the full 270,000 to 280,000 tons that we can make in this plant, because our license is 300,000 tons of steel making. If we get a government license to increase the capacity, which is a 50-50 chance we get it, then there is a scope to grow further. So, but as of now, please target, keep in mind, 270,000 tons for the next three years, and then after that, there will be a sudden jump in the new plant commissions.

Okay, so, like, for this license, have you already applied for the license, and, like, by when can we expect to get some results on this?

So, we will be applying in two months' time. We have some pending environmental work to be done before that, which will be done maybe in May itself, and June we will apply, and we should know before March of next year.

Okay, got it, got it. Thank you so much.

Thank you. The next question comes from the line of Shlok Bhartia from Sven Investments.

Sorry, may I just say one more comment that normally if a 20% increase in capacity is applied for, you don't need a public hearing. So, environmental approval, normally people say, what I hear from consultants or other people is normally not that difficult to get. So, we are reasonably confident that we will get it. Why I am still saying 50-50 is because Ludhiana still is in the critically polluted zone. So, separately from our CSR activity, I am talking to think tanks to see how to work on getting Ludhiana out of the critically polluted zone. That's a separate topic, but that's just by the side, as an aside.

She left the question. Thank you so much for your remark. Our next question comes from the line of Shlok Bhartia from Sven Investments. Please go ahead.

Good morning, sir. First thing, on the basing of the solar power, which you indicate that we'll be generating almost 9 crores of unit in financial 28, and with the installation of dating funnel, what sorts of savings one can see in FI 28?

We have not shared those figures, but by the very fact that we are saying Aripida range, which has been stuck at 7 to 10 for some time, will go up to 8 to 11 this year, and then two years from now, 9 to 12. Maybe next year itself, we will feel more confident if the oil price is correct, if the economy, see, we are also facing a possible recession in the economy, global economy. So, a lot depends on what you see, friends, but we are now, again, for the first time, we are saying that two years from now, we should be getting 9 to 12. Earlier, these figures were just aspirational figures. Now, we are saying that we are now quite confident that we should be able to up the range. So, yes, those cost savings, volume increase, all those things are being taken into account.

So, from 8 to 11 to 9 to 12, right, now it's more looks like the reality rather than aspiration. So, is it going to come with more of a cost efficiency or it will be driven by the change in the product mix?

As I answered in the earlier question, the product mix, I don't see much of a change just now. So it is volume, cost cutting, process improvement. Even this year, though we have had record profits, there are areas we saw that we could have improved further. So there is clearly, you see, the duty, some of you may read my annual, know that I'm a trekker. When I go trekking and you cross a mountain which seems at a height, as you cross, reach that top, then you suddenly see newer vistas which were not visible earlier.

True.

So you keep, as you improve to reach a particular level, then you find newer areas which you didn't see earlier. Then you say, you kick yourself and say, why, how come we didn't see it earlier? Then I have a famous saying for the last 30 years, jab jage tab savera. So I don't ask people a question, why they didn't see it? Why didn't you think of it earlier? If you think of it today, great, implement it now.

Agreed, agreed, agreed. So, one question on your forging plan, now which is expected to commission on third quarter of financial 28, what sorts of capex have we spent and how much it is left, and secondly, what sorts of ROC one can assume only on the forging unit?

So, as of now, not much has been spent. We have, of course, bought the land. So, as some initial LCs have started getting opened. So, really not much has been spent on that. Maybe about 50 crores? 80 crores have been spent.

And how much will you be spending in the next nine months?

So, total project cost was 475 crores plus our entity line is also in that same premise. So, overall, the budgeted investment is more than 500 crores. The NDT part was already part of the earlier approved VSS steel expansion of 350 crore. So, let us not double count that. But for the forging project, 475 crore was a budgeted expenditure. And the way we are going ahead, it looks like we may not be spending that much. We will be spending less than that. We will have a better estimate in six months time of what will be the actual but looks like we will be clearly less than 475 which we had budgeted.

And the plant is expected to commission on third quarter of FY28.

Let's say it will be commissioned. So fourth quarter, finally, we'll start seeing some performance. So really, 28-29 is the first year of performance that you will get, realistically.

And in terms of the payback or the IRR, I mean, is there any...

Both things, we don't disclose project by project. And one line, as you can make out, will not be sufficient. So we will soon be adding a second line and a third line. So we have plans to add at least three lines of forging. So that's when it will be completed. So, we'll see by when we complete this entire, this, this forging project. But the first line will start operations in the fourth quarter of 27-28.

And incremental cap tax for the new line, assuming the same capacity will be lower.

Will be clearly lower.

It will be at the same capacity, right, which we are taking into part one, phase one.

Okay, those things we will evolve as we go along. As we are entering a new business, those things will take shape as we go along.

That's quite helpful, Mr. Jain. Thank you and all the best.

Thank you.

Thank you. Our next question comes from the line of Ritwik Seth from OneUp Financial Council. Please go ahead.

Hi, good morning, sir. Sir, congratulations on a great set of numbers. Sir, I have a few questions. So, firstly, has the land acquisition been completed for the new Greenfield plant?

We are the last stages. It should happen the next, within May, we should be closing it. Okay.

Okay. So, my second question is related to the capex for FI 27 and 28 with the forging plant and also with the new greenfield plant and potentially expanding capacity of the melt shop at the existing site. What can be the capex for FI 27 and 28?

Tingla? 2728. Graphics, huh?

2728 for that steel plant and forging plant, we will be incurring maximum capital expenditure in that year. So, a ballpark figure, so we don't have a calculation, but a ballpark figure will be more than 700 or 800 crores. Okay, the current year? No, 2728, you are saying?

No, so in the current year, it

will be very less expenditure only on a procurement of land and some development work. But the major capex will happen in 97-28 only.

And we are also having replacement items as our old peeling line needs the replacement, we are adding to our testing line and so on. So roughly about 100 odd crores of normal capex and replacement and quality upladation and so on. Those will be done in the next two years for normal work for this plant.

Okay, so 100 crores this year, and 700 to 800 crores next year.

For the expansions, and for the existing plant, about 100 crores more. And if we get the environmental approval, then we will take maybe another 80 to 100 crores.

Okay, got it.

But those are all figures are up in, these are very, very ballpark rough figures. So once those things come up and then we will take a clear decision and then we'll be announced actually.

Sure, got it. And so just one question on the brownfield expansion, the melting shop, which we are planning to take from 300 to 360 kTPA. Once we get the approval from environment, from UC, what would be the timeline for this expansion to get completed?

If things work out well, our target will be, again, these are very rough ideas, because every of some of these equipment is a long delivery, but we would expect sometime in later part of calendar year 27. Okay.

Okay. And EC, you mentioned in 6 to 9 months, you can get the EC clearance.

Yeah. So, yes. So, we are discussing with the suppliers how to shorten the time. Otherwise, these equipment take a year and a half for delivery. We are talking to the suppliers and we have good relations and we figure out how we can get it earlier.

Sure. Sure. Thank you, sir. I have a few questions. I will join back in the queue.

Thank you.

Thank you.

Anyone who wishes to ask a question, may press star and one on their touchstone telephone in order to join the queue. Thank you. Our next question comes from the line of Manok Gokia from YesSecuritiesLimtd. Please go ahead.

Yeah, hi. Very good morning, and thank you so much for the opportunity. Most of my questions are more or less answered. I just have a couple of follow-ups. So, first one being, you know, so you just guide it for the bit of a ton to be around 8,000 to 11,000, and, you know, further going ahead towards 9,000 to 12,000 on a certain basis. My question comes, I mean, what sort of realization assumptions are we building out over here? Is it the current spot prices or the average for FY26?

No, no. So we always look at, it's consistently true whatever you take. If you take the average of last year, even that is fine. You take the current, even that is fine. Because in auto industry, we don't work as a commodity pricing. So pricing will change based on scrap going up. Spreads are more or less protected. A little bit here and there it changes, which is why we keep a range in our EBITDA. So, which is why when the commodity steels have gone up substantially, alloy steel prices will not rise up to that extent. And when commodity steel prices fall, then alloy steel prices don't fall. That dramatically either. So, which is why, as I said, in my earlier remarks, opening remarks, that the scrap prices have gone up. And therefore, we are asking for a price increase from Q1. And we are likely to get those price increases in Q1. Those discussions are ongoing.

Got it, got it. So basically, in a nutshell, it's, you know, much more cost-driven growth that we're coming out with apart, you know, along with some operating leverage also kicking it.

Which is why we always talk about spreads. We don't talk of actual selling price. I mean, for example, the average selling price for steel was lower in the previous year in 25, 26 and 24, 25. So despite a higher volume, our sales are actually lower on a higher profit. So if it margin looks much better than normal, net profit margin looks much better than normal. That's why I don't look at those figures. I always urge our investors, please look at EBITDA per term and volumes.

Yes. Oh, that is, that is quite helpful. So, for the greenfield, I mean, for the run rate that you have given for the CAPEX over the course of the next couple of years. So, just to check it again, we have sort of a 100 to 150 crores of maintenance CAPEX and then incremental 400, 500 crores of growth CAPEX.

What we will do is, I think these questions are coming up, we will have exact better calculations after next three months when we negotiate all the machines, we will have a much better idea. And once we have that, we will update our presentation and post it on the company website. Yeah, sure.

That would be quite helpful.

Just one last question out over here. For the greenfield plant that we are targeting for July of 2029, what sort of ramp up do we, period, do we expect, you know, to reach the peak capacity utilizations over there?

Very difficult to say that today because you are talking of six, seven, eight years into the future. Who knows what the market is going to be there. But now if I can hazard a guess and please, please take this as a very, very, with a very, very, very big pinch of salt. Attempt will be within three years to reach full capacity. It could take five years. So, in fact, for all our budgeting, we have taken five to six years to reach full capacity utilization.

Got it. So, that does actually help us.

Yeah, because again, we are not in commodity steels that you just put up a plant and they start producing and selling. But the advantage in the new plant will be that our costs are going to be much lower than the existing plant. And therefore, some of the commodity, within the alloy steel, the commodity end of the business, like tractors and trucks, which we normally stay out of, because of lower cost of steel making in the new plant, we may be able to access those markets. And therefore, we will be... We will try to wrap up earlier. Got it. Got it.

So, thank you so much, and all the good news, sir. Thank you.

Thank you. Our next question comes from the line of Abdudjushi from 3Vantage Capital. Please go ahead. A little louder, please. A little louder, please.

Go ahead. We can barely hear you, but we can.

Okay. So, my question was on the exports.

If you look at our exports,

it has remained in a single digit, but earlier when our guidance was to reach up to 20% of the export by the end of FY27. So, with the new capacity coming in, I would like to know how we are thinking about the exports going forward.

So, you are right that we had a guidance at that point in time. Exports are going to be a much lower proportion of our business. But we are seeing exports in the form of components increasing from India. So, more and more our attention is towards serving OEs from component exports from India. Including from our new forging line, we'll be targeting through some more vendors in India, some global companies coming in, who will use our forged products and machine them and export them. So we'll be looking at that possibility. We are talking to a couple of other global forging majors to expand capacity in India, that we will supply steel to them. We are talking to some global OEs who are wanting to source big quantities from India, but they will all be sourcing more and more of components from India. So Europe, as you know, is having a much higher cost of operation because of the gas cost, energy cost being high, wage cost also becoming higher, unavailability of young people to work in the night shifts and in hardcore manufacturing. And with an FTA, which has been signed with EU, they are expecting much bigger imports of components from India. And in CBAM, which is there for steel imports into Europe, we stand very well, very well placed in CBAM calculations. And within a year or two, I think even components are going to come under CBAM. Once components, some components already come in, some will come in in the next coming few years. So because of green steel, our abilities in green steel, we will be able to take more and more advantage of this. So exports will be more and more indirect exports rather than direct exports.

Okay. Do we see a realization or the EBITDA better into this kind of exports?

It depends customer to customer and part to part. Clearly, for a customer, like if you're in the luxury end, if you're able to serve a customer like BMW or Mercedes-Benz, the prices are normally a bit better. So, in some cases, yes, prices are better.

Understood. And secondly, on the posing part, when we are building the capacity which will come on stream by the beginning of January 28th, but on the other side, the customer approvals or how long that will take for us to get starting the ramping.

So, we are... I think it's a very valid point to be a strategizing because our partners, Aichi, are amongst the world leaders in the kind of forging they're going to enter into. So we are talking to customers if they can start supplying from Japan initially to get those approvals. And since Aichi is the partner here and Aichi people are going to be heading the forging. So, attempt will be to reduce the approval process and approval time.

So, on the wall part, what's our product validation or process validation period for products like polling for us?

Very difficult to say. It will vary from customer to customer. Okay. So, some customers that we are talking to, see, all these are just not talks because everyone says we haven't seen the product, we haven't seen the factory just now. So, these are all talks, but hopefully for a couple of customers we have talked to, we should be validated before our plant starts production.

So, we are integrating the two things, you know.

Through our partners, because of our partners, otherwise it will be very difficult. Because of our partners, Aichi, we will be, we should get better approval for some customers. For some customers, like Maruti, they very clearly said we will first see the factory in operation here, then start the validation process.

I understand. So, is it fair to say that the forging ramp-up will happen in FY28 or by the fag end of FY28?

No, no, no, no. 28-29. We have very clearly said if we go to start operations in Jan to March of 28, ramp-up will be 28-29.

I understand. I understand. That's it from us.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question will press star and want on their question. The next question comes from the line of Sakit Kapoor from Kapoor and Kam. Please, correct.

Hello.

Yes, Rathir, welcome back.

Thank you, sir. Just to take the chronology of events, for this financial year, we are modeling in or factoring in a 10% volume growth with a higher EBITDA range by Rs. 1000. And then, when are we expecting the, how will the forging and the new steel plant commensurate to each other, means, if you could just explain the chronological event, and this 10% volume will be flattened out for the coming two years. That means, we will be reaching the peak for this year and even for the next financial year. Is this understanding correct?

No, so $250,000, $255,000 if we reach now. We will, the next year will be 270 or 275. We will get to see the exact numbers and then we will try to see, we will try to target some outsourcing and so on. We will keep seeing that we are trying to grow, that we will not stop growth. But to figure that out two years later, what kind of model we will have is difficult to say just now. So for your calculations, please assume static at 270 or 275. And then if we get this government approval, environmental approval, then yes, then this phase will increase. So it's very difficult to commit today. So, as far as this plant, existing plant is concerned, 270 is the figure you should take where we remain static at. And then in 28-29, we will start seeing results of the forging business, but we have very small volumes, really not see any impact. And the new steel plant will get commissioned in 28-29 also. July 29 is the target. And then you will see volumes coming in towards the second half of 28-29. So 29-30, we will start seeing a better impact of the new plant.

Okay, and the government clearance is for the existing melting shop of 3 lakhs, and we are contemplating a 20% increase on the sale.

No, no, currently we are producing less than 3 lakh times. So we will, our first attempt is to quickly go to 3 lakh times, which will happen next year.

And the government clearance is for?

3 lakh times, so we will be at full government capacity level.

Sir, when we look at our plant and property closing balance for the financial year 26, it is closer to 585 euros. And that is a significant increase from the last year closing balance. So, if you could just give us understanding of the breakup of how the capex has been.

I think they sent a specific email to the CFO, this will be answered, but largely we have had capex going on, the box block was commissioned, the reheating furnace was commissioned, some warehouses were built, currently being built. And land has been bought. So those are the things which are there. So as you know that we bought some land initially where we started buying the land for the steel plant. We are stuck at 50 crores. So that's one area we have for some possible expansion. And then we bought land and with a constructed shed for our new forging line. So this is all lastly for the new capex for the new plants. As well as the box lock and the reheating furnace.

Okay, two more questions. Firstly, on the incentive part, for the current financial year, what should be factoring for a quarterly run rate in terms of the government subsidies, whether it is electricity or the other tax subsidies, if any, for the full year, if you could share the number. And also, for the new steel plant, does it fall under any government incentive or PLI benefits that we are going to accrue going ahead?

The new plant will not be under any PLI. However, it will be under the Punjab government subsidy scheme. So, again, we will have a similar set of subsidies of electricity duty as well as GST refunds and some capital subsidies, some on workers. So, there will be subsidies in the new plant also. Singla, this year, what is the subsidy being? Question.

Currently, we are getting two types of subsidies from the Punjab government. One is electricity duty exemption and the second is the GST refund. So electricity duty exemption will continue until August 29. And GST refund incentive was for seven years and will end on August 26.

Okay. So, for next financial year, Singla ji, what should be the number, uh, uh, uh, add

So, for next financial year, it will be close to 12 to 13 crores for both the incentives, because electricity duty exemption will also come down because of the solar power commissioning. So, the total incentive will be close to 13 crores. In this financial year? In this current financial year, yes.

26-27. And how much have you secured for financial year 26?

It is 24 crores.

So it will be halved for the next financial.

Yes.

Right. And one more understanding, Jain Saab, when I joined the queue, in terms of the forging unit, the forging unit will serve the products from the current facility and the new steel facility both? Or will it just cater to the 5 lakh ton new plant that we are contemplating?

No, it will start from here.

I'm sorry sir, but your voice is muffled.

Your voice is muffled, sir. We can't hear you. New steel plant, but initially it will come from this plant, because that's what we have today.

Sir, will you repeat the same, sir? We could not hear you, sir.

I said most of the volume will come from the existing steel plant to start with. Once the new steel plant gets established and the quality gets in, then more and more of the volume for the current products that we are putting in will come from the new steel plant.

Okay. Thank you.

I am sorry to interrupt you, Mr. Kapoor, but you may please rejoin the queue for more questions. Thank you. Our next question comes from the line of Riyankar Sarkar from Square 64 Capital Advisor. Please go ahead.

Good afternoon. Good morning, sir. Sir, a couple of questions on the balance sheet, Frank. What are the plans of funding in terms of debt, equity, and internal accrual? That's one. And also, do we have any figure in mind that we don't want to cross a certain debt-equity ratio that we won't be comfortable crossing?

Yes, at the peak debt-equity, we will keep it below 0.75 total debt-equity. And we are comfortable at 0.5. So, there will be an equity infusion. There will be a further equity infusion sometime later part of next year. And at that point in time, we'll see how we'll fund that equity. So, clearly our partners, Aichi, are able to invest more. Vardaman Group has committed 300 to 400 crore rupees. So, we will have that also. And at some stage, we might do a QIP or something for outside investors. So, roughly, we see about a 1,200 crore of equity infusion out of which 385 has already come in. So, about 800 crores or so roughly equity and about a 1,200 crore of debt which will be raised. Right, sir.

Okay.

Thank you very much. I wish you all the best. Thank you.

Thank you. Our next question comes from the line of Anil Kumar Sharma, an individual investor. Please go ahead.

Good morning, sir. First of all, congratulations, the wonderful job you are doing for us, for all of us. Sir, my question has already been answered up to some extent. I want some clarification. As you recently said that our capex equity will be 1,200 floor and that will be 1,200 floor. So, what are the total expenditure capex you are thinking about? It means, just now it was 6700 crores. So, but how much capex you are planning up to 30?

So, the total capex that we have planned for the new steel plant is about 2000 crores. For the forging project is about 475 crores, which is being announced. We feel that CAPEX would be a little lower than that. Then there is some internal CAPEX. Plus, we will also start some replacement CAPEX and normal CAPEX. And then, as I said, we are going to start a process of ingot casting and then moving into specialized alloys. So as those plans get formulated, there will be investments in electroslag refining, vacuum arc refining, vacuum induction melting. So all those areas we have to study. But I think that the directional area, we will be investing in those. So, those have not been discussed fully, announced, so planned fully. So, in the next one year, we will be finalizing those and announcing our plans in that area. So, five days, it will be a smaller investment to start with. We are a risk-averse group. When we enter into a newer area, we will start with a smaller area, smaller investment, and then gradually build up. So, but as of now, the committed investment is about. 2,600 crores.

Okay, right, sir. Only second question is, sir, how much after this all the established capacity plant as plant is already there, is committed, then what are your ROC you are keeping in mind? Actually, you are always talk of some sort of target of ROC. What can we get some figure after 30?

So, after the plants are established and running towards full capacity utilization, EBITDA on capital employed, we hope to continue to be above 20%.

Okay. Thank you, sir.

This is a very, very futuristic figure because we are looking into the future. So, but yes, below 20%, then it doesn't make sense for us to continue investing.

So, that's my pleasure, sir. And thanks once again for your wonderful efforts you are doing. Thank you. Thank you, NLG.

Thank you. Thank you. The next question comes from the line of Sriram, an individual investor. Please go ahead.

Thank you for the opportunity. So, what will be the components that will be made in the forging plant and what will be the capacity? Like if you can also give in terms of asset terms of the forging plant, it will be helpful.

We are entering a new business, so it's very difficult to give all those numbers. We are entering into the area of ring gears. So that's the area we are entering into. Each car uses one ring gear, so that's the potential volume for car manufacturing in India and exports. It's a superior method of making ring gear, so it's not a new product. It will be replacing an existing product with which customers are already using with a far more efficient process. All customers we have talked to are very excited with the announcement of the project that we are bringing into the country. Now, Aichi is one of the world leaders in this method of gear making, and that same know-how is going to come into India to VSS. As of now, as per their study, there really is no viable competition for this process of gear making. As per Aichi's knowledge, we are still new in the area of forging. So we are relying more and more on their knowledge and their confidence in this process. They have nine lines of this product. We are putting in only one line just now.

Fine, sir. Understood. Thank you. Thank you.

Thank you so much. Ladies and gentlemen, that was the last question for today. I would like to hand the conference over to Mr. Chen for the closing remarks. Thank you. And over to you, sir.

So, ladies and gentlemen, thank you so much for the interest that you've shown in our company today. So, today I did lay out some futuristic thinking. So, again, now, as management, our job is to look 5, 7, 10 years in the future, which will be longer than the horizon for some of you. But I also see some of you on this call are HNIs and individual investors who may have a longer-term perspective also. So, our job is to show the direction in which we are going while maintaining existing performance. So, if the existing performance... To be maintained is very, very important, and continue to enhance and make the company stronger as we go ahead. So, thank you so much for your interest, and we look forward to your continued support. All the best.

Thank you. Thank you so much, sir. Ladies and gentlemen, on behalf of Werdamal Specials Tools Limited, that concludes this conference. Thank you for joining us, and you may not understand the lines.