Jai Balaji Inds.

Despite industry-wide challenges and a slowdown in government orders during FY25, Jai Balaji Industries delivered a resilient performance. The company reported a 14% EBITDA margin and 26% return on equity for FY25. On a quarterly basis, Q4 FY25 saw revenues increase sequentially, though EBITDA and PAT decreased. Realizations across most products experienced a slight decline, and the company noted Q4 margins were impacted by inventory losses, coming in at 8-9%.

Jai Balaji is actively executing its capacity expansion plans. In Q4 FY25, an additional 2.04 lakh tons of Ductile Iron Pipe capacity was commissioned, increasing the total to 5.04 lakh tons, with a further 96,000 tons expected by FY26. Ferro Alloys capacity is set to rise from 1.66 lakh tons to 1.9 lakh tons by Q1 FY27, despite a delay due to critical equipment from China. TMT Bar capacity also increased from 2.6 lakh tons to 3 lakh tons through debottlenecking.

The company has made significant progress in its debt reduction strategy, bringing down net term debt from INR 871 crores in FY23 to INR 221 crores in FY25. This resulted in a net debt-to-EBITDA ratio of 0.25 for FY25, significantly outperforming the earlier guidance of 0.6. The remaining capital expenditure of INR 175 crores for FY26 will be funded through internal accruals, reflecting strong financial discipline.

The Board has approved diversification into other pipes and tube segments, including OPVC pipes. Management clarified that OPVC is a new alternate material, primarily targeting replacement of HDPE and plastic pipes, and is not expected to significantly impact DI Pipe demand. The initial investment for OPVC is small, less than $2 million, with a total capex not exceeding INR 100 crores over several years, positioning it as a trial product to explore new growth avenues.

Management expressed optimism for FY26, anticipating a rebound in government ordering activity. The company is targeting revenue growth of 25-30% and EBITDA margins in the range of 16-17%. DI Pipe production is projected to surpass 4 lakh tons in FY26, up from 2.82 lakh tons in FY25. The company believes product realizations, which saw a slight decrease in FY25, are at their lowest point and are expected to improve with market demand recovery.

A slowdown in government orders and spending was observed in FY25, particularly in the second half, attributed to pre-election dynamics and diversion of funds. This also led to an increase in working capital in Q4 FY25 due to delayed payments from government bodies to infrastructure contractors. However, with the new budget, management expects funds to be released, leading to a normalization of working capital by the end of Q1 FY26 and a robust order book going forward^⏳.

The company started FY25 with INR 1,000 crores in carry-forward tax losses. Approximately INR 750-800 crores of these losses have been consumed, leaving INR 250 crores for the current financial year. Management expects to return to normal taxation after the profitability of INR 250 crores is utilized.