Detailed narrative
Strong Q2 & H1 FY25 Financial Performance
Bansal Wire Industries Limited reported robust financial results for Q2 FY25, with revenue growing 36.8% YoY to ₹825.45 crores. EBITDA saw an even stronger increase of 78.9% YoY to ₹68.1 crores, leading to a 192 basis points expansion in EBITDA margin. Net Profit after Tax surged by 120.8% YoY to ₹40.06 crores, with PAT margin expanding by 183 basis points. The first half of FY25 also demonstrated significant growth, with revenue up 42.7% to ₹1,642.36 crores and net profit jumping 101.9% to ₹71.57 crores.
Strategic Capacity Expansion at Dadri Facility
The company is actively ramping up its Dadri facility, which contributed 2,000 tons in Q1 and 6,000-7,000 tons in Q2. This facility was already operating at close to 20% capacity utilization by the end of Q2 FY25. Management aims to fully operationalize the entire 3.5 lakh tons capacity within this financial year, bringing the total company capacity from 2.5 lakh tons at the start of the year to 6 lakh tons by year-end.
Consolidation of Group Entities Progress
Bansal Wire has completed the 100% acquisition of Bansal Steel and Power and almost 100% consolidation of Bansal High Carbon and Balaji by the end of Q2 FY25. Management expects almost all volumes and revenue from Balaji and Bansal High Carbon to be integrated into Bansal Wire in Q3 FY25, with their standalone sales becoming almost zero by the end of Q3. This consolidation is projected to significantly contribute to absolute EBITDA, with Bansal Steel and Power alone contributing approximately ₹60 crores in EBITDA last year.
Launch of High-Margin Specialty Wire Vertical
The company is on track to launch its fourth vertical, Specialty Wire, starting in Q3 FY25. One line of lead wire is expected to be fully commissioned in November 2024, followed by the steel cord line in December 2024. While steel cord approvals will take 1-1.5 years, production and sales of the hose wire by-product are anticipated to begin in Q4 FY25, with a 30,000 tons annual bead wire capacity becoming operational in November 2024. Specialty Wire products like steel cord and lead wire are highlighted as 'much higher margin businesses' compared to existing segments.
Product Mix and Raw Material Dynamics
Q2 FY25 volumes totaled 80,000 tons, comprising 30,000 tons of high carbon, 27,000 tons of mild steel, and 21,000-22,000 tons of stainless steel. The 10% increase in high carbon volume from the previous quarter was cited as a key driver for improved EBITDA margins. Management noted that a decrease in steel prices during the quarter helped maintain EBITDA despite some stock losses, emphasizing their natural hedge business model where orders are booked simultaneously with raw material purchases at fixed prices.
Export Performance and Domestic Focus
Exports accounted for approximately 10% of the company's sales in the last quarter. While export growth has been subdued in the past two years due to geopolitical situations, management noted improving momentum. The business model primarily focuses on the domestic market, though exports historically grew at around 100% annually before the recent slowdown, and the company anticipates good traction going forward⏳.
Backward Integration in Stainless-Steel Rods
Bansal Wire has formed a new subsidiary, Bansal BWI Steels, for backward integration into stainless-steel rods. The company is actively seeking land parcels in Rajasthan and Ahmedabad, aiming to finalize a location between November and December. Discussions are also underway with vendors for long lead items, such as rolling mills, which typically require 12-15 months for delivery, as the company prioritizes speeding up the entire process.