Electrosteel Castings Limited

Electrosteel Castings reported a consolidated total income of INR 7,443 crores for FY25, with an EBITDA of INR 1,159 crores and an EBITDA margin of 15.6%. Consolidated PAT for FY25 stood at INR 710 crores, including a one-time^📎 deferred tax adjustment of INR 81 crores. For Q4 FY25, consolidated total income was INR 1,739 crores, impacted by plant shutdowns, resulting in an EBITDA of INR 198 crores and an EBITDA margin of 11.4%. The company recommended a dividend of Rs. 1.40 per equity share, maintaining the previous year's payout.

The Jal Jeevan Mission (JJM) experienced a slowdown in H2 FY25 due to a budget revision from Rs. 70,000 crores to Rs. 22,000 crores for FY24-25. However, the government has allocated a significantly higher budget of Rs. 67,000 crores for FY25-26 and extended the mission until December 2028. Management believes that while official penetration claims are 80%, the ground reality is closer to 40-50%, indicating substantial remaining work for over 4 crore households. The impact on ground-level activity is expected to pick up from Q2 FY26.

The company's phase-wise expansion to increase capacity from 6.8 lakh tons to 1 million tons is on schedule, with installed capacity reaching 9 lakh tons by year-end FY25. A total CAPEX of Rs. 500 crores has been incurred up to FY25 out of a planned Rs. 700 crores, with the balance Rs. 200 crores to be spent later. DI sales volume for FY25 was 7.17 lakh tons, with Q4 volume at 1.71 lakh tons. Production for FY26 is targeted at 8.3-8.5 lakh tons, aiming to cross 9 lakh tons in FY27, with capacity utilization expected to reach 90-95% within the next year.

Coking coal prices remained relatively steady in the last three months, varying by about $20, while iron ore saw a small upward trend of Rs. 200-300 per ton. The softening in realizations, currently Rs. 58-60 per kg for new orders, is partly attributed to lower input material costs. Despite Q4's 11.4% EBITDA margin being a 'rock bottom' due to shutdowns, management maintains a mid-to-long term EBITDA margin target of 15-18% and aims for a Return on Capital of 12-13%.

Electrosteel Castings is strategically moving towards becoming a comprehensive manufacturer and supplier for the entire water infrastructure space. This includes expanding product offerings beyond DI pipes and fittings, with a new production line for gaskets already set up. Through the Singardo acquisition, the company has successfully entered the Vietnam market, initially with small orders, and is now pursuing larger contracts. This diversification aims to reduce reliance on core products and tap into broader market opportunities.

The company has incurred approximately Rs. 500 crores in CAPEX up to FY25 for capacity expansion, with a balance of Rs. 200 crores planned. For FY26, the total CAPEX is projected at Rs. 200 crores, comprising Rs. 35 crores for maintenance and Rs. 165 crores for regular CAPEX. Working capital debt has been reduced from Rs. 1,800 crores to Rs. 1,400 crores. Management aims to maintain and slightly reduce total net debt, targeting a comfortable level of Rs. 1,500-2,000 crores for a 1 million ton plus production capacity.

Management addressed concerns regarding OPVC pipes, stating they do not pose a significant threat to DI pipes due to distinct use cases and limited overlap, particularly for larger diameters (above 200 dia). The company is focusing on innovation by adding new products for the water infrastructure space, beyond just fittings and pipes, to maintain competitiveness. The demand for DI pipes is expected to remain 10-12% ahead of supply for the next two years, with the demand-supply cycle projected to meet in FY28-29.