Electrosteel Castings Limited — Q3 FY25 earnings call

Call held 31 Jan 2025

Management summary

Electrosteel Castings reported a mixed Q3 FY25, with revenue impacted by a blast furnace shutdown, though 9M FY25 performance showed modest growth in income and PAT. The company maintains a healthy order book and is progressing on its brownfield expansion, aiming for 9 lakh tons capacity by March 2025. Management expressed optimism for a rebound in government infrastructure spending and stable EBITDA margins, while addressing challenges in the US export market and delays in asset valuation.

Highlights

  • Consolidated 9M FY25 total income grew 2.9% YoY to ₹5,701 crores, with EBITDA increasing 2.7% YoY to ₹961 crores and PAT growing 5.5% YoY to ₹541 crores.

  • The company's long-term credit rating has been upgraded by CRISIL from AA- to AA, reflecting improved financial health.

  • A robust order book of 6 lakh tons provides 8.5 months of revenue visibility, supported by strong demand drivers like River Linking and Jal Jeevan Mission.

  • An anti-subsidy refund of ₹23 crores from the European Commission contributed to a significant increase in other income this quarter.

  • Management is optimistic about a restart in government infrastructure spending from April 2025, following the Union Budget.

Concerns

  • Q3 FY25 total income was down 4% YoY to ₹1,816 crores, primarily due to a 14-day shutdown of the Mini Blast Furnace (MBF) in December 2024 and January 2025.

  • The MBF shutdown resulted in an estimated revenue loss of approximately ₹105 crores and incurred expenses of ₹7.5 crores.

  • A momentary slowdown in government expenditure, particularly for the Jal Jeevan Mission, has impacted demand and led to the order book being at the lower end of its historical range.

  • The US export business has been negatively affected by an overall market slowdown and 'Made in America' policies, leading to a reduction in export contribution from 5% to 1%.

Key financials

2 periods

Q3 FY25

  • Consolidated Total Income
    ₹1,816 Cr
    YoY -4%
  • Consolidated EBITDA
    ₹294 Cr
  • Consolidated EBITDA Margin
    16.2%
  • Consolidated PAT
    ₹160 Cr
  • Consolidated PAT Margin
    8.8%

9M FY25

  • Consolidated Total Income
    ₹5,701 Cr
    YoY +2.9%
  • Consolidated EBITDA
    ₹961 Cr
    YoY +2.7%
  • Consolidated EBITDA Margin
    16.9%
  • Consolidated PAT
    ₹541 Cr
    YoY +5.5%
  • Consolidated PAT Margin
    9.5%

What they filed

Q1 FY27: revenue down 22.2%, net profit down 93.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,692 1,659 1,563 1,402 1,192 −30%1,242 −25%1,197 −23%1,091 −22%
EBITDA249 264 175 162 83 −67%34 −87%25 −86%43 −73%
Net profit152 157 191 86 76 −50%-20 −113%-11 −106%6 −93%
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

high confidence

Total value

6,00,000 tons

as of 2025-01-31 quantified

Execution

8-1/2 months of order book

Composition

  • Export (geography) 14%
  • Jal Jeevan Mission (client type) 50%
The order book is currently at the lower end of the historical 8-10 month range due to a momentary slowdown in government spending, but the bidding pipeline remains strong.

Source: Q&A

Capital allocation

medium confidence
  • Capex ₹700 Cr
    • Brownfield expansion to reach 1 million tons of DI pipes capacity
    On the ongoing brownfield expansion to reach capacities of 1 million tons of DI pipes, out of our planned CAPEX of Rs. 700 crores for Phase-2, we have already spent Rs. 480 crores till 31st of December.
  • Liquidity Liquidity disclosed The company has a claim of Rs. 1200 crores related to the JSW coal block, and management is optimistic that the majority of this will be realized, providing cash flow.
    Our claim is of Rs. 1200 crores so the way it is going on we are optimistic that the majority of this will be realized.

Guidance & targets

Capacity

  • DI Pipe Installed Capacity Capacity · March 2025 · High confidence 9 lakh tons
    We are also happy to inform you all that our long-term credit rating has been upgraded by CRISIL from AA- to AA. ... We are hopeful to reach installed capacity of 9 lakh tons by the end of March 2025.

    — Madhav Kejriwal

  • DI Pipe Manufacturing Capacity Capacity · March 2026 · High confidence 1 million ton
    We target to enhance our DI pipe manufacturing capacity to 1 million ton by 2026 March.

    — Madhav Kejriwal

  • Installed Capacity Capacity · during FY25 · Medium confidence 9.5 to 1 million tons
    In FY25, we will have an installed capacity of approximately 9 lakh tons, 8.5-9 lakh tons and then during the course of the Financial Year, we will put in more capital to take our capacity up to between 9.5 to 1 million tons.

    — Madhav Kejriwal

Production

  • FY25 Production Production · FY25 · Medium confidence North of 7.5 lakh tons
    Sir, we are hoping that we will end that somewhere north of 7.5 lakh tons both on production and on sales.

    — Madhav Kejriwal

  • FY25 Production Production · FY25 · Medium confidence 8.5-9 lakh tons
    Production for the year, Sir, because this is going to get installed and then it takes a little bit of time to start ramping up to that level. As I mentioned, our production will be somewhere between 8.5-9 lakh tons.

    — Madhav Kejriwal

  • Production Production · March 2027 · Medium confidence 9.5-1 million tons
    Yes, please. And similarly, we would have put up an install capacity of approximately 1 million tons by March 2026, our production will be somewhere in the range of 9.5-1 million in March 2027.

    — Madhav Kejriwal

Profitability

  • EBITDA Margin Profitability · foreseeable future · High confidence 16%-18%
    I think historically, if you see these, we have always hit a margin of 15%-18%. At the moment, we are at 16.7%. I think these are pretty stable numbers which we should be able to carry on for the foreseeable future.

    — Madhav Kejriwal

Volume

  • Sales Volume Volume · FY26 · Medium confidence 8.5 lakh tons to 9 lakh tons
    On the volume front, we are hoping to hit a figure of somewhere between 8.5 lakh tons to 9 lakh tons.

    — Madhav Kejriwal

Revenue

  • Turnover Revenue · FY27 · Medium confidence ₹9,000 crores
    You can consider at Rs. 9000 crores.

    — Ashutosh Agarwal

  • Turnover Revenue · March 2027 · Medium confidence ₹9,000-9,500 crores
    Somewhere between that, a little more towards, I would say between Rs. 9,000-9,500 crores.

    — Madhav Kejriwal

  • Fittings Production Turnover Increase Revenue · future · Low confidence ₹300-500 crores
    Sir, around Rs. 300-Rs. 500 crores.

    — Madhav Kejriwal

What to watch in Q4 FY25

Government Infrastructure Spending Restart

Next quarter (starting April 2025)
Current Momentary slowdown
Target Spending restart from April 2025

Why it matters

Crucial for demand recovery and order inflow, especially for projects like Jal Jeevan Mission.

Well, there has been a momentary slowdown from the government side on the expenditure towards Jal Jeevan Mission... we are very optimistic that spending will restart and starting April, I think things would be back to the way they were earlier in regard to the demand pull.

Risks & concerns

  • Mini Blast Furnace (MBF) shutdown impact

    medium

    A 14-day shutdown of the MBF in Q3 FY25 led to a 4% YoY decline in total income and an estimated revenue loss of ₹105 crores, impacting quarterly performance.

    Management acknowledged

  • Slowdown in government infrastructure spending

    medium

    Momentary slowdown in government expenditure, particularly for Jal Jeevan Mission, has reduced demand and kept the order book at the lower end of its typical range.

    Management acknowledged

  • US export market headwinds

    medium

    The US market is experiencing a slowdown, and 'Made in America' policies are making customers apprehensive about non-American products, impacting export volumes.

    Management acknowledged

  • Uncertainty in coal block asset valuation and realization timeline

    medium

    The valuation and realization of the ₹1200 crore claim related to the JSW coal block are ongoing, with management unable to provide a specific timeline due to past inaccuracies.

    Analyst partial

  • Delays in brownfield expansion project

    low

    A minor delay of 2-3 months in the ₹700 crore Phase-2 CAPEX is expected due to manpower shortages and equipment supply issues, pushing the 9 lakh tons capacity target to March 2025.

    Management acknowledged

Q&A highlights

7 direct
Impact of Mini Blast Furnace (MBF) shutdown on Q3 financials Direct
So with the total loss that was given by Madhav ji was for the total 12-13 days and in December what we have lost is around Rs. 45 crores of revenue. ... So, the total expense for the shutdown is around Rs. 7.5 crores.

Clarified the direct financial impact of the operational disruption on revenue and expenses for the quarter.

Asked by Rajesh Agarwal

Outlook on order book and government spending post-elections Direct
Well, there has been a momentary slowdown from the government side on the expenditure towards Jal Jeevan Mission... we are very optimistic that spending will restart and starting April, I think things would be back to the way they were earlier in regard to the demand pull.

Provided management's perspective on the current demand slowdown and their expectation for a recovery driven by government initiatives post-budget.

Asked by Rajesh Agarwal

Raw material price fluctuations and their impact on margins Direct
Actually, in the raw material front, on the coke front, and coking coals and all that, there has been a downward trend... but at the same time, as far as iron ore is concerned, there has been a upward trend, so practically on raw material front, they have neutralized each other, more or less.

Explained the offsetting effects of raw material price movements, clarifying why margin stability was maintained despite volatility.

Asked by Rajesh Agarwal

Challenges and strategy for the US export market Direct
So, there is an overall slowdown in the US market for our product as a whole. And secondly, because of the impending possibilities of tariffs that to come and Made in America programs that are there. The customers are a little apprehensive in buying non-American products right now. ... We are looking at increasing our market share in other geographies so that we don't lose out on our overall export percentages.

Highlighted specific headwinds in a key export market and outlined the company's strategy to mitigate this by diversifying into other geographies.

Asked by Saket Kapoor

Status and timeline for the JSW coal block asset valuation and realization Partial
Our claim is of Rs. 1200 crores so the way it is going on we are optimistic that the majority of this will be realized. ... I am saying this for the last two quarters that I have gone wrong on this timeline so if I comment on this then it would be wrong again I would rather just say that things are optimistic because we know that it is in the right stages.

Revealed the significant financial claim related to the coal block and management's cautious optimism, but also acknowledged past delays in providing timelines.

Asked by Saket Kapoor

Confidence in demand growth for DI pipes despite Jal Jeevan Mission nearing completion Direct
Jal Jeevan today is around 79%-80% on the website. But if you see the actual impact on the ground, there are many places where the tap connections are there, but there is a dearth in drinking water available. ... India is very strongly and aggressively moving towards pipes irrigation... Another very ambitious project which seems to have finally picked up pace is River Linking.

Provided a detailed rationale for continued robust demand, emphasizing ongoing work for existing projects and new government initiatives beyond initial targets.

Asked by Deepak Lalwani

Request for inclusion of tonnage data in future presentations Direct
Sir, I can commit to you from now itself that this will be done. ... We generally remained slightly shy organization on that front, but I do completely agree with you and this will be done.

Management committed to improving transparency by including key operational metrics like tonnage data in future investor presentations, addressing an analyst and shareholder request.

Asked by Kaushal Bhagnani

Strategy to regain investor confidence given recent share performance and mutual fund exits Direct
Sir, I think consistent performance. We would like consistent performances. I think work and actions speak much louder than words, so to be able to perform consistently to the commitments that we make and adequate transparency in time communication to our shareholders. That is the best way.

Addressed a critical investor concern about stock performance and outlined management's strategy focusing on consistent execution and transparent communication.

Asked by Vikash Jain

3 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Impacted by Blast Furnace Shutdown

Electrosteel Castings reported a consolidated total income of ₹1,816 crores for Q3 FY25, a 4% decrease compared to the previous year. This decline was primarily attributed to a 14-day shutdown of the Mini Blast Furnace (MBF) at its South unit, which occurred for 6 days in December 2024 and 8 days in January 2025. The shutdown resulted in an estimated revenue loss of approximately ₹105 crores and incurred expenses of ₹7.5 crores, impacting the quarter's profitability. Despite this, the company achieved a consolidated EBITDA of ₹294 crores with a margin of 16.2% and a PAT of ₹160 crores with an 8.8% margin.

9M FY25 Shows Modest Growth and Margin Stability

For the nine months ending December 31, 2024 (9M FY25), Electrosteel Castings demonstrated resilience with a consolidated total income of ₹5,701 crores, marking a 2.9% year-on-year growth. Consolidated EBITDA for the period stood at ₹961 crores, an increase of 2.7% YoY, maintaining a healthy margin of 16.9%. PAT grew by 5.5% YoY to ₹541 crores, with a PAT margin of 9.5%. The company's management expressed confidence in maintaining EBITDA margins within the 16%-18% range for the foreseeable future, citing offsetting movements in raw material prices (downward trend in coke/coking coal, upward trend in iron ore).

Brownfield Expansion Progress and Capacity Targets

The company is actively pursuing a brownfield expansion project with a planned CAPEX of ₹700 crores for Phase-2, aimed at increasing DI pipe manufacturing capacity to 1 million tons. As of December 31, 2024, ₹480 crores of this CAPEX has been spent. While there's a minor delay of 2-3 months due to manpower and equipment supply issues, the company expects to reach an installed capacity of 9 lakh tons by March 2025. The ultimate target is to achieve 1 million tons capacity by March 2026, with production reaching 9.5-1 million tons by March 2027.

Robust Demand Outlook Despite Short-Term Slowdown

Management highlighted a robust long-term demand scenario for DI pipes, driven by government initiatives such as River Linking, Viksit Bharat Vision, Jal Jeevan Mission, and AMRUT 2.0. Although there has been a momentary slowdown in government expenditure, particularly for the Jal Jeevan Mission (which accounts for about 50% of the order book), the company is optimistic that spending will restart from April 2025 following the Union Budget. The current order book stands at 6 lakh tons, providing 8.5 months of visibility, which is at the lower end of the typical 8-10 month range.

Strategic Focus on Product Innovation and Market Diversification

Electrosteel Castings is enhancing its product portfolio and R&D efforts, particularly in fittings, to offer comprehensive water solutions. The company has seen a significant increase in fittings volumes, up by approximately 3000 tons in 9M FY25 due to new product lines, with a target to reach 25,000 tons. Geographically, while the US export market faces headwinds due to slowdown and 'Made in America' policies (reducing its share from 5% to 1%), the company is exploring new markets in Southeast Asia and Africa and seeing optimism in the Middle East, particularly Saudi Arabia.

Credit Rating Upgrade and JSW Coal Block Claim

A significant positive development is the upgrade of the company's long-term credit rating by CRISIL from AA- to AA. This reflects improved financial stability and outlook. Additionally, the company has a claim of ₹1200 crores related to the JSW coal block. Management is optimistic that the majority of this amount will be realized, which would provide a substantial cash flow to Electrosteel Castings, although a specific timeline for this realization could not be provided due to past delays in the valuation process.

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