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.