BMW Industries — Q3 FY25 earnings call

Call held 3 Feb 2025

Management summary

BMW Industries reported modest revenue growth in Q3 FY25, with operating revenue reaching INR147 crores and PAT at INR17 crores. The company demonstrated improved profitability metrics like ROE and ROCE, alongside better cash conversion. Strategic capacity expansions are underway, funded by internal accruals, and a significant tubes manufacturing contract has been extended, providing future revenue visibility. However, the company revised its top-line growth guidance downwards due to slower-than-expected ramp-up and market conditions.

Highlights

  • Operating revenue for Q3 FY25 was INR147 crores, a 2.5% increase.

  • 9-month FY25 operating income stood at INR471 crores, a 2.3% rise YoY.

  • Quarterly Operating EBITDA was INR36 crores with a 24.5% margin.

  • Quarterly Profit After Tax (PAT) was INR17 crores, representing an 11.6% margin.

  • ROE and ROCE for December '24 improved to 11.1% and 13.4% respectively.

  • Net debt increased to INR151 crores in December '24, primarily due to capex.

  • Cash conversion cycle improved significantly to 68 days from 96 days in March 2024.

  • Tubes manufacturing contract extended until H1 2027, expected to generate INR365 crores revenue.

  • Pipes and tube capacity expanded to 534,000 metric tons, with further expansion to 700,000 metric tons planned with INR25 crores investment.

Key financials

2 periods

Headline

  • Operating Revenue
    ₹147 Cr
    YoY +2.5%
  • Operating EBITDA
    ₹36 Cr
  • EBITDA Margin
    24.5%
  • PAT
    ₹17 Cr
  • PAT Margin
    11.6%
  • ROE
    11.1%
  • ROCE
    13.4%
  • Net Debt
    ₹151 Cr
  • Cash Conversion Cycle
    68 days

9M FY25

  • Operating Income
    ₹471 Cr
    YoY +2.3%

What they filed

Q1 FY27: revenue up 12.2%, net profit up 26.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue150 147 157 148 145 −3%162 +10%209 +33%166 +12%
EBITDA35 36 34 32 37 +6%39 +8%58 +71%34 +6%
Net profit18 17 18 15 15 −17%18 +6%33 +83%19 +27%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

medium confidence

Composition

  • Tubes manufacturing contract extension (product) ₹365 Cr

Pipeline

other

Negotiations for a long-term contract for GPGC sheets conversion through CRM complex

The company has secured an extension for its tubes manufacturing contract and is in final stages of negotiating a long-term agreement for GPGC sheets conversion, providing future revenue visibility.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹25 Cr entirely funded through internal accruals
    • Capacity expansion for pipes and tubes to 700,000 metric tons ₹25 Cr
    Looking ahead, we plan to further expand this capacity to 700,000 metric tons with a planned investment of about INR25 crores which will be entirely funded through internal accruals.
  • Debt Net ₹151 Cr
    Net debt stood at INR151 crores in December '24 as compared to INR99 crores in March '24. This was largely due to the capex incurred for our ongoing expansion.

Guidance & targets

Capacity

  • Pipes and tube capacity expansion Capacity · future · High confidence 700,000 metric tons

    Previously 1 million metric tons → 700,000 metric tons

    Looking ahead, we plan to further expand this capacity to 700,000 metric tons with a planned investment of about INR25 crores which will be entirely funded through internal accruals. It is important to note that this is an update from our previous plan of 1 million metric tons.

    — Harsh Bansal

Capex

  • Investment for capacity expansion Capex · future · High confidence INR25 crores
    Looking ahead, we plan to further expand this capacity to 700,000 metric tons with a planned investment of about INR25 crores which will be entirely funded through internal accruals.

    — Harsh Bansal

Revenue

  • Tubes manufacturing contract revenue Revenue · until H1 2027 · High confidence INR365 crores
    We are pleased to announce that our tubes manufacturing contract has been extended until the first half of 2027 with an expected revenue of INR365 crores over the contract period.

    — Harsh Bansal

Strategic Focus

  • New facilities focus Strategic Focus · future · Medium confidence infrastructure, solar and defence sectors
    The company plans to establish new facilities focusing on three sectors: infrastructure, solar and defence.

    — Harsh Bansal

Profitability

  • EBITDA margin expansion Profitability · going forward · Medium confidence a little bit
    Yes. So, we have indicated some expansion in the EBITDA margin going forward a little bit, probably as per the guidance. So, we will be able to stick to the guidance as far as margins are concerned.

    — Harsh Bansal

Revenue Growth

  • Top line growth target Revenue Growth · full year · High confidence not meeting 18%

    Previously 18% → not meeting 18%

    No, I don't think we'll be meeting that, and updated guidance will be shared in the March quarter call. But as things stand now, I do not think that we will be meeting the 18% top line growth target.

    — Harsh Bansal

Capacity Utilization

  • Sustainable capacity utilization Capacity Utilization · future · Medium confidence 60% to 70%
    But in terms of capacity utilization, I think 60% to 70% is a fair sustainable capacity utilization number.

    — Harsh Bansal

What to watch in Q4 FY25

Updated top-line growth guidance for FY25/FY26

March quarter call
Current Not meeting 18% target
Target New guidance for top-line growth

Why it matters

New guidance will provide clarity on the company's growth outlook after revising down the previous target.

No, I don't think we'll be meeting that, and updated guidance will be shared in the March quarter call. But as things stand now, I do not think that we will be meeting the 18% top line growth target.

Risks & concerns

  • Slower-than-expected ramp-up of capacity utilization

    medium

    Market conditions are slowing down the ramp-up of new capacity, impacting revenue growth.

    Management acknowledged

  • Not meeting full-year top-line growth target

    medium

    The company will not achieve its previously guided 18% top-line growth for FY25.

    Management acknowledged

  • Delay in finalizing long-term GPGC sheets contract

    low

    Negotiations for a long-term contract are in final stages, but external clarifications have caused delays.

    Management acknowledged

Q&A highlights

5 direct
Interim dividend declaration Direct
No specific reason here, I'm sure depending on what is I mean, we had shared the final dividend policy in the past and we will stick to it. It was 15% to 20% of our net profit. So, I think in line with the same. Maybe it will be just the final dividend.

Clarifies that no interim dividend was declared, and the company plans to stick to its final dividend policy of 15-20% of net profit.

Asked by Bhavesh, Individual Investor

Tata Steel contract renewal delay Partial
No, other than -- sometimes new question scheme coming up for clarification and all. Other than that, nothing major.

Indicates that the delay in signing the Tata Steel contract is due to external clarification requirements, not internal issues.

Asked by Bhavesh, Individual Investor

Full capacity expansion kick-in and revenue growth Partial
So based on our business model, we made the capacities available to the customer on their indications of demand, etcetera. Now after that we constantly keep working to make sure that all the loopholes from our side are complete to expedite the ramp-up. I think there are various market conditions that play right now, which are slowing down the ramp-up from what we would have earlier anticipated.

Explains that the ramp-up of capacity and corresponding revenue growth is slower than anticipated due to market conditions, not internal issues.

Asked by Bhavesh, Individual Investor

Not meeting 15-18% top-line growth guidance Direct
No, I don't think we'll be meeting that, and updated guidance will be shared in the March quarter call. But as things stand now, I do not think that we will be meeting the 18% top line growth target.

Management explicitly states they will not meet the previously guided 15-18% top-line growth target for the full year, with updated guidance expected next quarter.

Asked by Vignesh Iyer, Sequent Investments

Raw material cost and pricing strategy to maintain margins Direct
But our business model doesn't envisage the purchasing of such raw materials. And therefore, we are not really we are isolated from the cyclicity and the fluctuations of the raw material. The industry we are in, the raw material is supplied as a free cost supply from our customers which we do value addition to and supply back to them. So, this is more a look out from my customer than from me.

Clarifies that the company's business model as a converter shields it from raw material price volatility, as customers supply the raw materials.

Asked by Rohan Baranwal, Singhania Pariwar Limited

Cost reduction from processing semi-finished steel Direct
No. I'll just clarify this, that we do not have a take-or-pay arrangement in these contracts. And naturally because of that high utilizations lead to higher margins and better cash flows. But as with any manufacturing facility, I would assume that there is a lag between setting up a facility and fully ramping up production and sales because there are a bunch of things that need to come together.

Explains that while higher utilization leads to better margins, there's a lag in fully ramping up production, and the company does not have take-or-pay contracts.

Asked by Madhur Rathi, Counter Cyclical Investments

Optimum revenue potential at maximum utilization Partial
So, I think we'll be coming out with the guidance closer to the March quarter call. But in terms of capacity utilization, I think 60% to 70% is a fair sustainable capacity utilization number.

Management indicates that 60-70% capacity utilization is sustainable, with more specific revenue potential guidance expected in the next quarter.

Asked by Madhur Rathi, Counter Cyclical Investments

Status of D2C brand "Bansal Super TMT" Direct
So, this was a part of the strategic initiative to actually build a market-facing scenario. As we've been mentioning, this is not somewhere where we are putting a lot of focus in terms of a cash burn, but we slowly and steadily continued to create a dealer, distributor, sales-based network which will also come in handy for us in case we decide to venture into some of these other businesses in the future. ... However, all this is done with a very, very careful focus on positive cash flow. So, it's more to do with learning and slow and steady growth as opposed to something of a big bang cash burn initiative.

Highlights the company's cautious, cash-flow positive approach to building its D2C brand, focusing on slow and steady network expansion rather than aggressive cash burn.

Asked by Dev Mehta, Individual Investor

2 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Overview

BMW Industries reported a modest operating revenue of INR147 crores in Q3 FY25, marking a 2.5% year-on-year increase. For the nine months ended December 2024, operating income rose 2.3% to INR471 crores. The company maintained strong profitability with a quarterly Operating EBITDA of INR36 crores, achieving a 24.5% margin, and a PAT of INR17 crores, or an 11.6% margin.

Capacity Expansion and Strategic Growth

The company successfully installed and commissioned additional capacity in its pipes and tube segment, bringing total capacity to 534,000 metric tons as of Q2 FY25. Further expansion to 700,000 metric tons is planned with an investment of INR25 crores, entirely funded through internal accruals. This revised plan is a reduction from a previous target of 1 million metric tons, reflecting a more judicious capital allocation given slower ramp-up times.

Contract Extensions and Future Outlook

BMW Industries secured an extension for its tubes manufacturing contract until H1 2027, expected to generate INR365 crores in revenue over the period. Additionally, the agreement for GPGC sheets conversion through the CRM complex has been extended until February 2025, with negotiations for a long-term contract in final stages. The company also plans to establish new facilities focused on infrastructure, solar, and defence sectors.

Financial Health and Efficiency

The company demonstrated improved financial efficiency, with ROE and ROCE for December '24 increasing to 11.1% and 13.4% respectively, compared to March '24. The cash conversion cycle significantly improved to 68 days in December '24 from 96 days in March 2024. Net debt, however, increased to INR151 crores from INR99 crores in March '24, primarily due to ongoing capex.

Guidance Revisions and Market Conditions

Management announced that the company will not meet its previously guided 15-18% top-line growth target for the full year, attributing this to slower-than-expected capacity ramp-up driven by market conditions. Updated guidance is expected during the March quarter call. Despite this, the company expects EBITDA margins to expand slightly going forward and aims for a sustainable capacity utilization of 60-70%.

Sustainability and D2C Initiatives

The rooftop solar project for the Calcutta unit is commissioned, and the Jamshedpur project is underway, contributing to energy efficiency and carbon neutrality. The company continues its cautious, cash-flow positive approach to building its D2C brand, "Bansal Super TMT," focusing on slow and steady network expansion primarily in Eastern states like Bengal, rather than aggressive cash burn.

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