Ratnamani Metals & Tubes Limited — Q4 FY24 earnings call

Call held 17 May 2024

Management summary

Ratnamani Metals delivered its third consecutive year of record-breaking performance, crossing the ₹5,100 crore revenue milestone. While domestic oil and gas demand remains muted due to election cycles and structural shifts, the company is seeing robust traction in water line pipes and international exports to the MENA region. Management is aggressively targeting ₹6,000 crores in revenue for FY25, supported by capacity expansions and a shift toward higher-value specialized products.

Highlights

  • Achieved record consolidated revenue of over ₹5,100 crores in FY24.

  • Reported historic high profitability with PAT of approximately ₹600 crores.

  • Order book stood at approximately ₹2,400 crores as of May 1, 2024.

  • Management guided for FY25 consolidated revenue of approximately ₹6,000 crores.

  • Volume growth for FY25 is projected between 10% and 15%.

  • EBITDA margin guidance maintained at 16% to 18% for the long term.

  • Stainless Steel (SS) segment saw a sharp increase in export demand, particularly from the Middle East.

  • Subsidiary Ravi Technoforge reported revenue of ₹258 crores with 11% EBITDA margin.

Key financials

  1. Consolidated Revenue ₹5,100 Cr
  2. PAT ₹600 Cr
  3. Order Book ₹2,400 Cr +4.3%YoY
  4. EBITDA Margin Guidance 17%

What they filed

Q1 FY27: revenue down 30.2%, net profit down 62.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue898 1,294 1,575 1,062 940 +5%794 −39%893 −43%741 −30%
EBITDA149 214 292 192 140 −6%136 −36%122 −58%80 −58%
Net profit102 146 225 145 108 +6%88 −40%93 −59%54 −63%
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.

Segment breakdown

SegmentOrder Book ShareUtilization
Carbon Steel70%50%
Stainless Steel30%65%
Ravi Technoforge (Subsidiary)——

Guidance & targets

Revenue

  • Consolidated Revenue Revenue · FY25 · High confidence ₹6,000 crores
    As informed in my earlier remarks, we are expecting consolidated revenue of close to Rs. 6,000 crores.

    — Manoj Sanghvi, Business Head

  • Ravi Technoforge Sales Target Revenue · FY25 · High confidence ₹310-330 crores
    And going forward for this year, we have a sales target of roughly between Rs. 310 and Rs. 330 crores.

    — Manoj Sanghvi, Business Head

Volume

  • Volume Growth Volume · FY25 · Medium confidence 10-15%
    Between 10% and 15% growth.

    — Manoj Sanghvi, Business Head

Margin

  • EBITDA Margin Band Margin · FY25 · Medium confidence 16-18%
    Our guidance still remains same, which is between 16% to 18% because in longer run where the demand for oil and gas pipes in the carbon steel is muted, so more and more order booking will happen in water segment where margins are quite competitive.

    — Manoj Sanghvi, Business Head

Capex

  • Maintenance & Debottlenecking Capex Capex · Annual · High confidence ₹100-125 crores
    So, debottlenecking and normal CAPEX of roughly Rs. 100-Rs. 125 Cr will continue.

    — Vimal Katta, CFO

  • Orissa Plant Capex Capex · FY25 · High confidence ₹170 crores
    Yes, it will come this year by, but at the back end of this year.

    — Manoj Sanghvi, Business Head

Risks & concerns

  • Muted Domestic Oil & Gas Demand

    medium

    Domestic oil and gas transmission and city gas distribution business is currently muted and yet to show signs of pick up.

    Management acknowledged

  • Geopolitical Disturbances in Europe

    medium

    Disturbances in Europe impacted export shares for subsidiary Ravi Technoforge, though domestic share increased to compensate.

    Management acknowledged

  • Election Cycle Impact

    low

    Elections cited as a reason for slower order booking in the carbon steel segment, though expected to recover in 6-8 months.

    Both acknowledged

Areas of evasion (2)

  • Geographical revenue breakup (explicitly stated they don't share it).
  • Specific margin differences between hot finish and cold finish products.

Q&A highlights

2 direct
Volume vs Value Guidance Partial
Dhananjai, basically our product portfolio is such where volumes only in terms of tonnage may not be the right thing to monitor... so usually we prefer giving guidance in terms of amount in crores instead of volume only.

Highlights the shift towards value-added, specialized products where tonnage is a secondary metric to revenue and value addition.

Asked by Dhananjai Bagrodia

Margin Sustainability with Product Mix Shift Direct
Our guidance still remains same, which is between 16% to 18% because... more and more order booking will happen in water segment where margins are quite competitive... that may get offsetted with better utilization of capacities in process pipes.

Explains how the company manages margin pressure from the competitive water segment by leveraging high-margin process pipes and better utilization.

Asked by Vikash Singh

Market Share and Anti-Dumping Duty (ADD) Direct
Welded pipes what we manufacture is not for the structural or architectural purpose, so if I remove that market, we would be close to 20% of the demand in India.

Clarifies the company's dominant market position in specialized industrial welded pipes and corrects misconceptions regarding the scope of ADD investigations.

Asked by Nitesh Dutt

2 min read 5 chapters

Detailed narrative

Record Financial Performance and Growth Trajectory

Ratnamani Metals achieved its best-ever performance in FY24, with consolidated revenues crossing ₹5,100 crores and profits reaching approximately ₹600 crores. This marks the third consecutive year of historic highs for the company. Management has set an ambitious target of ₹6,000 crores for FY25, representing a nearly 18% growth target, supported by a volume growth guidance of 10-15%.

Robust Order Book and Sectoral Dynamics

The order book remains healthy at ₹2,400 crores as of May 2024, with a 70:30 split between Carbon Steel (CS) and Stainless Steel (SS). Within the CS segment, the water segment accounts for 20-25% of orders. While domestic oil and gas demand is currently cyclic and muted, the company expects a resurgence in 6-8 months as new projects move from planning to execution.

Middle East Expansion Driving SS Exports

The Stainless Steel segment is benefiting significantly from a resurgence in CAPEX in the MENA region. Major players like Saudi Aramco, SABIC, and ADNOC are in expansion mode, driving demand for oil and gas applications. SS order bookings have increased to over ₹150 crores per month, with direct physical exports now accounting for more than 50% of SS turnover.

Subsidiary Turnaround and Value-Added Strategy

Subsidiary Ravi Technoforge is undergoing reorganization and automation to improve margins, with a target of 13-14% EBITDA in FY25 up from 11%. Additionally, the company is expanding its 'spooling' and cooling business, targeting ₹100 crores in revenue with high margins of 18-20%. These initiatives reflect a broader strategy to move away from commodity products toward specialized, high-margin applications.

Strategic Capex and Capacity Enhancements

Ratnamani is at the final stages of commissioning a new expansion for higher diameter pipes (up to 150mm thickness and 18m length). A new plant in Orissa with a ₹170 crore investment is expected to come online by the end of FY25. Maintenance and debottlenecking capex will continue at a steady rate of ₹100-125 crores annually to maintain the company's competitive edge.

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