Bansal Wire Industries Limited — Q1 FY25 earnings call

Call held 2 Aug 2024

Management summary

Bansal Wire Industries Limited reported a strong Q1 FY25, with significant growth in revenue, net profit, and EBITDA, driven by increased volumes and margin expansion. The company is actively commissioning its new Dadri facility, which is expected to be a major growth driver, and is progressing with its specialty wire expansion, including steel cord and hose wire, aiming for substantial capacity and revenue increases in the coming years. Management expressed confidence in achieving higher growth and profitability, supported by a cost-plus model and strategic acquisitions.

Highlights

  • Net profit jumped 82% to Rs. 31 crores in Q1 FY25.

  • Revenue increased 49% to Rs. 817 crores in Q1 FY25.

  • EBITDA grew 127% to Rs. 62 crores in Q1 FY25.

  • EBITDA margin expanded by 260 basis points to 7.6%.

  • PAT margin grew by 70 basis points to 3.9%.

  • Total volume increased 140% year-over-year to 76,000 tonnes.

  • Dadri facility contributed 6,000 tonnes and achieved 13% utilization by quarter-end.

  • ROCE improved to 23.85% in Q1 FY25 from 18.46% last year.

Key financials

  1. Revenue ₹817 Cr +49%YoY
  2. Net Profit ₹31 Cr +82%YoY
  3. EBITDA ₹62 Cr +127%YoY
  4. EBITDA Margin 7.6%
  5. PAT Margin 3.9%
  6. Total Volume 76,000 tonnes +140%YoY
  7. ROCE 23.9%

What they filed

Q1 FY27: revenue up 24.4%, net profit down 48.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue825 925 940 939 1,055 +28%1,029 +11%1,136 +21%1,168 +24%
EBITDA64 72 70 72 77 +20%85 +18%76 +9%56 −22%
Net profit40 42 33 39 38 −5%43 +2%40 +21%20 −49%
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.

Segment breakdown

  • Q1 FY25 Volume Mix
    27,000 tonnes High Carbon Volume28,000 tonnes Mild Steel Volume21,000 tonnes Stainless Steel Volume

Guidance & targets

Capacity

  • Total Installed Capacity Capacity · by end of this year (FY25) · High confidence 6 lakh tonnes

    From 2.5 lakh tonnes today

    As far as capacity goes, the whole company will now have about 6 lakh tonnes of installed capacity by the end of this year, from the 2.5 lakh tonnes that we had last year. So, about 2.5x capacity jump will be there by the end of the year.

    — Pranav Bansal, MD

Production

  • Specialty Wires Production Start Production · Q3 FY25 · High confidence Q3 this year
    But otherwise, within the third quarter of this year we would start our production in specialty also.

    — Pranav Bansal, MD

EBITDA Growth

  • Overall EBITDA Growth EBITDA Growth · This year (FY25) · High confidence >80%
    In fact, we are looking at about more than 80% growth in our EBITDA as compared to last year. At last year we were at about Rs. 150 crores of EBITDA, we are looking at least 80% growth in that within this year...

    — Pranav Bansal, MD

  • Absolute EBITDA Jump EBITDA Growth · Whole year (FY25) · High confidence 70-80%
    But in absolute EBITDA it does not change because we follow a cost-plus model. Therefore, we are looking at least 70%, 80% jump for the whole year.

    — Pranav Bansal, MD

Revenue

  • Steel Cord Revenue Revenue · next 5-6 years · Medium confidence Rs. 2,000 crores
    Looking at the current market, the current margin profile of this product, we are looking at a Rs. 2,000 crores kind of revenue from steel cord in the coming future, maybe five to six years down the line, in which the EBITDA percentage is also about 20%, 25%.

    — Pranav Bansal, MD

EBITDA

  • Steel Cord EBITDA (2 lakh tonnes facility) EBITDA · null · High confidence Rs. 700-800 crores
    If and when we make 2 lakh tonnes, the EBITDA alone of 2 lakh tonnes would be about Rs. 700 crores to Rs. 800 crores, looking at the current prices.

    — Pranav Bansal, MD

ROCE

  • ROCE Level ROCE · Every year · High confidence 20-25%
    Our focus is to maintain at least 20%-25% kind of a ROCE level.

    — Pranav Bansal, MD

Working Capital

  • Working Capital Cycle Working Capital · by end of this year · High confidence Decrease
    So, our overall working capital cycle will decrease as and when we scale up. So, all of this combined, we will see a good impact, I would say, by the end of this year, we will see a very good impact on cash flow as well as ROCE.

    — Pranav Bansal, MD

Steel Cord Approval

  • Approval Process Duration Steel Cord Approval · null · High confidence 1-1.5 years

    Previously 3 years → 1-1.5 years

    Which is the reason why they have reduced our approval process from three years to about one, one and a half year.

    — Pranav Bansal, MD

Capex

  • Total CAPEX for 2 lakh tonnes Steel Cord Facility Capex · 5 years · High confidence Rs. 2,500 crores
    Sir, only for steel cord, for the 200,000 tonnes facility we will have to invest Rs. 2,500 crores.

    — Pranav Bansal, MD

Financial Performance

  • Boost to Financial Performance Financial Performance · FY26 · Medium confidence —
    And our expansion plan will provide a boost to our financial performance in financial year '26 as we work towards improvement in value creation to the shareholder.

    — Ghanshyam Das Gujrati, CFO

Risks & concerns

  • Project execution delays for specialty wires (steel cord)

    medium

    Initial delay of ~1 month for specialty wire production due to container availability from China, but equipment is now arriving and installation is underway.

    Management acknowledged

  • Long approval process for steel cord

    medium

    Steel cord requires a 1-1.5 year approval process from customers, which could delay full ramp-up, though management plans to produce hose wire in the interim.

    Management acknowledged

  • Raw material price volatility

    low

    Management states they operate on a cost-plus model, transferring raw material price changes to customers on the same day, and target 80-85% inventory with confirmed orders to mitigate commodity risk.

    Management acknowledged

Q&A highlights

3 direct
Discrepancy in Steel Cord EBITDA projections Direct
From 20,000 tonnes facility, revenue about Rs. 300 crores. From 200,000 tonnes facility, the revenue will go up to Rs. 3,000 crores. But again, this will be done in a phased manner. So, we will start with maybe 40,000 tonnes and then every four months, every six months, we will keep on adding 20,000 tonnes, 40,000 tonnes to scale up to 200,000 tonnes. At 2 lakh tonnes we will be able to do about Rs. 700 crores to Rs. 800 crores EBITDA.

Clarified the phased ramp-up and corrected the analyst's calculation, providing a more realistic EBITDA target for the full 2 lakh tonnes steel cord capacity.

Asked by Anant Mundra, Mytemple Capital

Source of extra capacity utilization beyond existing capacity Direct
Sir, this has come from Bansal High Carbon and Balaji Wires. So, these are the two other group companies which we have to take on lease within this year. But we do not want to wait for that. Therefore, whatever working capital we had, we at least started a job-work arrangement with these two companies, so that at least the numbers are consolidated as soon as possible.

Revealed the strategy of using job-work arrangements with group companies to immediately consolidate volumes and revenues, explaining how the company is exceeding its stated existing capacity.

Asked by Anant Mundra, Mytemple Capital

Strategy for utilizing Dadri facility during steel cord approval process Direct
So, sir, as far as 20,000 tonnes goes, this is all steel cord. But because it will take us about one to one and a half year to get the approval and ramp up our capacity, for that one, one and a half year, we will not sit idle. In that same infrastructure we will make hose wire, which is a product in which, as compared to steel cord where we see 20%, 25% EBITDA, here we see about 15%, 20% EBITDA. So, it is more like a bi-product of steel cord, which we will start producing because it does not need any approval process, because of which we will be able to reach a capacity utilization even in this infrastructure.

Highlighted a pragmatic approach to capacity utilization by producing a related, lower-margin product (hose wire) that doesn't require lengthy approvals, ensuring immediate revenue generation from the new facility.

Asked by Anant Mundra, Mytemple Capital

3 min read 7 chapters

Detailed narrative

Strong Q1 FY25 Performance Driven by Volume and Margin Expansion

Bansal Wire Industries reported a robust Q1 FY25, with net profit surging 82% to Rs. 31 crores and revenue increasing 49% to Rs. 817 crores. This growth was underpinned by a 140% year-over-year increase in total volumes, reaching 76,000 tonnes. The company also saw significant margin improvement, with EBITDA growing 127% to Rs. 62 crores, leading to an EBITDA margin of 7.6% (up 260 basis points) and a PAT margin of 3.9% (up 70 basis points).

Dadri Facility Commissioning and Capacity Expansion

The new Dadri manufacturing facility, the single largest in Asia, has commenced operations, contributing 6,000 tonnes to Q1 volumes and achieving 13% utilization by quarter-end. Management expects to surpass initial estimates for Dadri's ramp-up. The company projects its total installed capacity to increase from 2.5 lakh tonnes last year to 6 lakh tonnes by the end of FY25, representing a 2.5x capacity jump, which is anticipated to drive significant growth over the next 2-3 years.

Strategic Focus on High-Margin Specialty Wires

Bansal Wire is aggressively expanding into specialty wires, particularly steel cord, which is currently largely imported or serviced by a single foreign player in India. The company aims to establish a 2 lakh tonnes steel cord facility in a phased manner, with a pilot project of 20,000 tonnes already underway. This segment is projected to generate Rs. 2,000 crores in revenue over the next 5-6 years with a high EBITDA percentage of 20-25%, and Rs. 700-800 crores EBITDA from the full 2 lakh tonnes capacity.

Interim Strategy for New Capacity Utilization

Recognizing the 1-1.5 year approval process for steel cord, Bansal Wire plans to utilize the new Dadri infrastructure by producing hose wire in the interim. Hose wire, a related product, does not require lengthy approvals and can be ramped up quickly, ensuring immediate capacity utilization and revenue generation, albeit at a slightly lower EBITDA margin of 15-20% compared to steel cord's 20-25%. The company also plans to introduce IHT and OHT wires for electric vehicles by next year.

Improved ROCE and Working Capital Management

The company has made a conscious effort to improve its Return on Capital Employed (ROCE), reporting a jump to 23.85% in Q1 FY25 from 18.46% last year, with a target to maintain ROCE at 20-25%. Management is also focusing on optimizing working capital, aiming for a decline in trade receivables and inventory, which is expected to reduce the overall working capital cycle from the current 70 days (30 inventory, 43 receivables, 12 payables) by the end of the year.

Consolidation of Group Companies and Diversified Business Model

To streamline operations and consolidate financials, Bansal Wire is integrating sales from group companies, Bansal High Carbon and Balaji Wires, through job-work arrangements and planned leasing by Q3 FY25. These companies contributed approximately Rs. 40 crores EBITDA last year. The company maintains a highly diversified customer base with no single client accounting for more than 5% of sales, and operates on a cost-plus model to mitigate raw material price volatility, ensuring stable EBITDA margins.

Future CAPEX and Funding Strategy

The total CAPEX for the Dadri project is Rs. 500 crores, with Rs. 250 crores already spent and the balance to be invested this year. The larger 2 lakh tonnes steel cord facility will require a substantial investment of Rs. 2,500 crores over approximately five years. Management expressed confidence in funding these ambitious CAPEX plans through internal accruals, indicating no immediate need to raise further capital.

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