Bmw Industries Ltd (NSE: BMW) Q3 2025 Earnings Call dated Feb. 03, 2025
Corporate Participants:
Sanjeev Sancheti — Investor Relations
Harsh Kumar Bansal — Managing Director
Unidentified Speaker
Analysts:
Balasubramanian A — Analyst
Bhavesh Bhatia — Analyst
Unidentified Participant
Madhur Rathi — Analyst
Dev Mehta — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to BNW Industries Limited Q3 FY ’25 Earnings Conference Call hosted by Arihant Capital. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr from Arihant Capital.Thank you, and over to you, Mr.
Balasubramanian A — Analyst
Thank you, Mr. Good afternoon, everyone, and welcome to the Q3 FY ’25 earnings conference call of BMW Industries. Today from the management side, we have Mr Pansal, the Managing Director; Mr Vitram, the CFO and Company Secretary; Mr Singh, VP, Finance and Accounts; and Mr, Investor Relations Advisors.
Without further ado, I will hand over the call to Mr. Thank you and over to you, sir.
Sanjeev Sancheti — Investor Relations
Thank you, Bala. Good afternoon to all the participants. Before I hand over the call to Mr Harsh Bansal for the opening remarks, I would like to draw your attention to the safe-harbor statement in the earnings presentation. I request each one of you to kindly go through the presentation either now or before the Q&A starts so that you are well aware of the same.
Over to you, Mr Bansal.
Harsh Kumar Bansal — Managing Director
Thank you, sir. Good afternoon and a very warm welcome to the company’s quarter three FY ’25 earnings call. Today, I will walk you through the key businesses, operational and financial performances for the last quarter. For those who are new to our company, a brief overview of our operations. The company focuses on adding value to semi-finished steel products, which enables us to maintain stable margins while shielding our businesses from the inherent volatility of steel cycles.
Through this, we ensure consistent margins, reliable cash flows and greater resilience to fluctuations in-market demand, pricing and other external risks. We take pride in our strong track-record reflected in customer relationships that span over 30 years. Our unique value proposition lies in offering a comprehensive suite of services that cover the entire value chain, supported by our strategic geographic proximity to customers.
Furthermore, our dedicated long-haul fleet enhances our ability to deliver seamless end-to-end solutions, giving us a significant competitive edge. As we move on to discussing the detailed financials, I would like to reflect on the past quarter. We are pleased to announce that our tubes manufacturing contract has been extended until the first-half of 2027 with an expected revenue of INR365 crores over the contract period.
The renewal aligns with our strategic growth plans. As has been highlighted in our previous discussions, the company remains steadfast in executing its growth initiatives. In the Pipes and tubes segment, we have successfully installed and commissioned additional capacity, bringing our total capacity to 534 metric tons as of quarter two FY ’25.
Looking ahead, we plan to further expand this capacity to 700,000 metric tons with a planned investment of about INR25 crores, which will be entirely funded through internal accruals. It is important to note that this is an update from our previous plan of 1 million metric tons.
We have made a deliberate decision to stagger the capacity addition, the additions given the longer-than-expected ramp-up time. This approach allows us to allocate your capital more judiciously. Additionally, the agreement for the conversion of GPGC sheets through the CRM complex has been extended until February 2025.
Negotiations for long-term contracts are in the final stages and we are confident of finalizing the agreement. The company plans to establish new facilities focusing on three sectors, infrastructure, solar and defense. These facilities will be designed to operate with a very efficient capital expenditure while enabling high-volume and value-added production.
More on this in subsequent calls. Before we begin the Q&A session, let me share a concise summary of our financial performance for the quarter. During this quarter, our company earned an operating revenue of INR147 crores, reflecting a modest 2.5% increase. For the Nine-Month FY ’25, operating income stood at INR471 crore, a similar 2.3% rise over the same-period last year. Operating EBITDA stood at INR36 crores with an operating margin of 24.5%.
On a nine-month basis, operating EBITDA was INR114 crores with a margin of 24.1%. We reported a quarterly profit-after-tax of INR17 crores. The quarterly PAT margin stood at 11.6%, while the Nine-Month PAT stood at INR57 crores and PAT margin stood at 12%. ROE and ROCE for the December ’24 period stood at 11.1% and 13.4% respectively, as compared to 10.1% and 12.5% in March ’24.
Net-debt stood at INR151 crores in December ’24 as compared to INR99 crores in March ’24. This was largely due to the capex incurred for our ongoing expansion. Additionally, our cash conversion cycle stood at 68 days in December ’24 as against 96 days in March 2024. With that, I will open the floor for Q&A and hand over the call to Mr Bala. Thank you.
Questions and Answers:
Balasubramanian A
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles.
The first question comes from the line ofPavesh, an individual investor. Please go-ahead.
Bhavesh Bhatia
Hi, sir. Good results from your side. My first question is with respect to your interim dividend. There is no declaration of interim dividend this quarter or the previous quarter. Is there any reason for not declaration?
Harsh Kumar Bansal
Okay. So no specific reason here, I’m sure depending on what is — I mean, we had shared the final dividend policy in the past and we will stick to it. It was 15% to 20% of our net profit. So I think in-line with the same. Maybe it will be just the final dividend. Correct. Correct.
Bhavesh Bhatia
Okay, understood. And sir, Tata Steel, that renewal contract or in the last quarter, you had said that it’s almost finalized and you’re going to sign the contract, but it’s been like another 1/4 and it’s still not signed. So any major reason for it?
Harsh Kumar Bansal
No, other than sometimes new question scheme coming up for clarification and all, other than that nothing major. So can we expect this contract to be signed in
Bhavesh Bhatia
The final quarter or it will get extended up to first-quarter of the next year?
Harsh Kumar Bansal
You know, in the interest of complete clarity, I expected it to be signed in the previous quarter. So as far as we are concerned, we are as close to completion as we would like, but we really don’t control any clarificatory questions that may come from other parties.
Bhavesh Bhatia
Okay. Sir, and my next question is with respect to the Tata Steels starting to manufacture hydrogen gaseous pipes. So are you aware about it? Or not —
Harsh Kumar Bansal
I don’t think I’m qualified to comment on that yet, because it’s not a part of my scheme of things.
Bhavesh Bhatia
So you won’t be a part of this, right, Manap, like they don’t give such contracts to you.
Harsh Kumar Bansal
I have absolutely — just to be fair, I don’t know the subject enough to comment on it.
Bhavesh Bhatia
Okay, fair enough. Sir, my last question is with respect to the capacity expansion. So when do you think the full capacity expansion would kick-in and you we can see a major growth in the revenue.
Harsh Kumar Bansal
So look based on our business model, we make the capacities available to the customer on their indications of demand, etc. Now after that, we constantly keep working to make sure that all the from our side are complete to expedite the ramp-up. I think there are various market conditions at play right now, which are slowing down the ramp-up from what we would have earlier anticipated.
And so I’m actually — I’m not sure what more I can say in terms of timing, but reflect what — exactly where we are. So we will continue to earn or the same margins going-forward or it will go on a higher side since you are manufacturing more of pipes and tubes right now and you’re going into higher-margin products.
Operator
So I think the margins and cash flows will remain on the indicated guidance that we’ve given in the past.
Harsh Kumar Bansal
We don’t expect to vary from that greatly.
Unidentified Speaker
Yeah. So we have indicated some expansion in the EBITDA margin going-forward a little bit probably as per the guidance, so we will be able to — we will be able to stick to the guidance as far as the margins are concerned.
Bhavesh Bhatia
Okay, sir. Thank you so much and all the best.
Harsh Kumar Bansal
Thank you.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Rohan Paranwal with Singhania Paribar Limited. Please go-ahead.
Unidentified Participant
Hello, sir. So my question is, given the fluctuations in steel prices, how is BMW Industry managing raw-material costs and pricing strategy to maintain margins?
Harsh Kumar Bansal
I’m sorry, you were not very clear. Can you repeat the question, please?
Unidentified Participant
Okay. So my question was given the fluctuation in steel prices, how is your company managing raw-material cost and pricing strategy, sir?
Harsh Kumar Bansal
Okay. So to maintain margins. Great question, but our business model doesn’t — doesn’t envisage the purchasing of such raw materials and therefore we are not really — we are isolated from the cyclicity and the fluctuations of the raw-material. The industry we are in, the raw-material is supplied as a free cost supply from our customer, which we do value addition to and supply back to them.
So this is you know, this is more a lookout from my customer than from me.
Unidentified Participant
Thank you, sir.
Harsh Kumar Bansal
Thank you.
Unidentified Participant
Thank you. I’ll join in again the queue if there’s question from.
Harsh Kumar Bansal
Sure, of course.
Operator
Thank you. Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Vignesh Ayer with Sequent Investments. Please go-ahead.
Unidentified Participant
Thank you for the opportunity, sir. Sir, wanted to understand on the guidance part of it, from what I remember from the last call, we were still confident of achieving the 18% growth, 15% or 18% growth for the full-year, but the numbers now in this quarter has been a bit lower than what it was expected.
So are we still sticking to the guidance of achieving that 15% to 18% growth?
Harsh Kumar Bansal
No, I don’t think we’ll be meeting that. And an updated guidance will be shared in the March quarter call. But as things stand now, I do not think that we will be meeting the 18% top-line growth target.
Unidentified Participant
Okay. Okay. And my second question is, any reason for the — I mean, lower utilization on the CRM complex side in this quarter.
Harsh Kumar Bansal
So I think it’s just a market-related issue here. Okay. There is no specific reason.
Unidentified Participant
Okay, got it. Got it. Yeah, that’s all from my side, sir. All the best.
Harsh Kumar Bansal
Thank you, sir.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. Our next question comes from the line of Madhur Rathi with Countercyclical Investment. Please go-ahead
Madhur Rathi
Thank you for the opportunity. Sir, as we are a converter or we are little outer, we are not
Sanjeev Sancheti
Able to get you, not able to hear you, sir.
Madhur Rathi
Is my audio better right now?
Sanjeev Sancheti
Not too. Not really. Not resiliently.
Madhur Rathi
Hello.
Sanjeev Sancheti
We are much better. Thank you.
Madhur Rathi
Limit Sir, so I wanted to understand as we are a — as we process the semi-finish steel or we are a converter of the steel, sir, what kind of cost-reduction in this processing can we expect over the next two to three years because our ROCE and ROE can it move from just 13% 14% range to 15% 16% range over the next two to three years?
Sanjeev Sancheti
So yeah, so I think yeah. So this is. So let me let me say that we have already guided earlier that definitely as our volume increases, as our top-line increases, our margins will expand and so will the return ratios improve. We are working on the guidance and either — either along with the March ’25 results or earlier, we will come out with a specific guidance, which this time we will move now to 27 and we are working on that.
But definitely with the current expansion, ongoing expansion, the return ratios are going to improve from where they are today.
Unidentified Participant
Okay. So what I understood was we create a capacity for maybe Tata Steel and we give it to them and they expect us to
Madhur Rathi
Either utilize it fully or they can expect us to use only 15% 30%, but we’ll get the certain amount. So in a certain level,
Sanjeev Sancheti
15% 20%.
Madhur Rathi
Just an example, just an example. So in a situation where they are not utilizing whatever we have created for them, do we earn lesser margins than what we would have earned in a scenario where they are increasing every — they are utilizing the whole capacity or it’s like a take or pay kind of a contract that we have?
Harsh Kumar Bansal
No, I’ll just clarify this that we do not have a take or pay arrangement in these contracts. And naturally, because of that high utilizations lead to higher margins and better cash flows. But as with any manufacturing facility, I would assume that there is a lag between setting up a facility and fully ramping-up our production and sales because there are a bunch of things that need to come together.
What we are experiencing right now is just a slow — slower-than-expected ramp-up of capacity utilization. There are no structural issues per se, more on the market side.
Madhur Rathi
Okay, got it. Sir, just a final few questions on these tube investments. We have highlighted that the new capacities will cater to infra, solar and defense segment and we are quite a lot increasing the capacity to 700,000 tons. So will this come at an incrementally better margins than what we are doing currently?
Harsh Kumar Bansal
Yeah. So there are actually two separate parts of your question. One is the increased capacity of tubes. The other is the new businesses with respect to solar infra and defense. I think you have assumed that, that is for pipes and. They are not essentially for the conversion for that similar kind of business.
But needless to say, that business is expected to have better margins than the existing business.
Madhur Rathi
Okay. And sir, and on the pipe segment, so this capacity — so I’m not trying to understand we are having a 710,000 capacity and we are guiding a production of 300,000 rid. So what is this incremental
Unidentified Participant
The 400,000 tons that is not being utilized? It is — is this capacity being further used for some additional value addition or something else?
Harsh Kumar Bansal
No, I didn’t understand your question, please. Can you just repeat that please?
Unidentified Participant
Yes. Yes, sir. So I sir, this capacity as we have increased to 534,000 metric tons and a production of 175,000 metric tons. So there is a quite a few — there’s a quite a lot of delta between the capacity as well as the actual production. So is this delta being used for further value addition to some different products or why is this low or if not, then why is this low?
Harsh Kumar Bansal
So number-one, if it was, you know, I just want to clarify that this is the total production. Even if this was being used for other value addition, it would have been reflected over here or in one of the other matrices of the production. Secondly is, if you look at the same chart which you’re referring to, over FY ’23, ’24 and ’25, we’ve consistently increased from 73,000 to 115,000 to 175,000.
The increase was expected to be a little sharper in ’25 and as I mentioned, this has been slower. Because of that, we have tempered our guidance or rather we have our expectation even for FY ’26, which was if you look at the earlier presentations, it was much higher. We have tempered it down to 300,000.
Keeping in mind the slower pace of ramp-up. The expansion also like I mentioned earlier was earlier supposed to be about 1 million tonnes by FY ’26, which we have scaled back to 700,000 tonnes, keeping in mind the slower-than-expected sales ramp-up. So this helps us to conserve a little bit of your capital beyond what was earlier estimated and use it a little more judiciously.
But I think coming back to your question once again, this is the production. There is no further value addition in the product — in the capacity which is not being utilized elsewhere. We are working with the customer to escalate this capacity utilization to a more sustainable level.
Unidentified Participant
Okay, got it. So just a final question from my side. Sir, considering our whole capacity, sir, what would be the optimum revenue — revenue potential at marginal utilization?
Harsh Kumar Bansal
Yeah. So you know, I mean, we’ll be coming out with a guidance closer to the March quarter call. But in terms of capacity — capacity utilization, I think 60% to 70% is a fair sustainable capacity utilization number.
Unidentified Participant
Okay, sir. Thank you so much.
Harsh Kumar Bansal
Thank you. Thank you.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of with Capital Markets Limited. Please go-ahead.
Unidentified Participant
Thank you for the opportunity, sir. Am I audible?
Harsh Kumar Bansal
Yes, please. Please go-ahead.
Unidentified Participant
Sir, there are few questions from my side. First, could you provide an update on company sustainability initiative, particularly with respect to reducing carbon emission or improving energy efficiency in our production facilities?
Harsh Kumar Bansal
Carbon emission. So you are — the rooftop solar for the Calcutta unit is already up and running. That’s commissioned. I think this was updated in the last call as well. The project for the Jam one is underway and we will be updating on that you know incrementally as we go-forward. In terms of energy efficiency and all, that’s an ongoing project.
As we increase production, as we go with fewer technologies, what’s available in the market, that’s something we continue to do here and that gets reflected in our — various reports that we will be releasing along with our the balance sheet and the annual report in after March ’25.
Sanjeev Sancheti
Yeah. So the focus remains on energy conversion — conservation and that’s the endeavor.
Unidentified Participant
Okay, sir, got it. Sir, next question is, are there any new technology upgrades or innovation being implemented at our manufacturing facilities that could enhance product quality or improve production efficiency.
Harsh Kumar Bansal
Not anything beyond the ordinary and not something worth talking over here about. And these are — some of these are all continuous processes that keep happening because it’s — some of the technologies are actually hardware that needs to be installed, but a lot of them is also to do with continuous manpower trading and debottlenecking of the systems.
So that’s something which is ongoing.
Unidentified Participant
So next question is the expansion in pipe and Cube and agreement for GP, GC Schmidt and TMC indicate strong revenue visibility. Are there any new business line or acquisition under consideration to accelerate growth?
Harsh Kumar Bansal
I mean, we’ll need to come back on that because as has been indicated about the solar defense and infra business, more details on that will follow in the subsequent calls. As and when we are ready to talk about it okay.
Unidentified Participant
Thank you.
Operator
Thank you. A reminder to all the participants that you may press star and 1 to ask a question thank you. Once again, a reminder to all the participants that you might be star and one to ask a question. Next question comes from the line of Rohan Paranwal of Singhania Pariwal Limited. Please go-ahead.
Unidentified Participant
Sir, can you share your revenue breakdown in margins on your products? So the revenue breakdown
Harsh Kumar Bansal
Has been shared in the presentation. Slide number nine — in Slide number nine and the margin breakup we don’t share as a policy yet.
Sanjeev Sancheti
That’s because of customer sensitivity.
Unidentified Participant
And sir, if I have missed it out, can you share some information regarding the contract extension for H1 ’27, which was expected to generate like the revenue. And can you share more details on the margin profile of that context?
Harsh Kumar Bansal
You want the margin profile of that contract.
Unidentified Participant
Yeah, like what kind of margin you would be able to generate
Harsh Kumar Bansal
From as I just mentioned sectorally, we don’t share margin guideline because this is sensitive information.
Unidentified Participant
Okay, sir. Okay. Thank you. That’s all from my side.
Harsh Kumar Bansal
Thank you.
Operator
Thank you. A reminder to all the participants that you may bestar no one to ask a question. Next question comes from the line of Madhur Rathi with Counter Cyclical Investments. Please go-ahead.
Madhur Rathi
Sir, thank you for the opportunity once again. Sir, I wanted to understand what would be the cost-savings from those solar projects coming online?
Harsh Kumar Bansal
So again, the cost-savings is not material, it’s more from a green angle. But as you know, as we — as we proceed, any thermal and fossil fuel source will continue to increase in pricing and as you go along the solar and renewable sources will continue to get cheaper. So it’s less of a short-term benefit, more of a long-term benefit. It’s more of a carbon neutralization, a green plate, but not material cost-saving that one can talk about.
Madhur Rathi
Okay. And just generally — cost-savings, it’s not an immediate thing here, but over a period of time, of course, the savings accrued. Got it. And just generally — so whatever internal efficiency or internal cost-savings that we do, sir, generally, how much do we need to pass-on to our end-customers or we can keep entire cost-savings to ourselves?
Harsh Kumar Bansal
No, I mean, why would we pass it on to the customer the customer relationship is based on the contract and any further efficiencies and ongoing improvements that we do, they are a part of my — or the company’s savings.
Madhur Rathi
Okay, got it. Sir, thank you so much and I’ll come in Q4 to understand how we are planning our business going-forward. Thank you all-the-time.
Harsh Kumar Bansal
Thanks a lot.
Operator
Thank you. A reminder to all the participants at you may bestar and one to ask a question. The next question comes from theline of Dev Mehta, an individual investor. Please go-ahead.
Dev Mehta
Good afternoon, sir. So if you can just throw some light with respect to your D2C brand, Bansal Super TMT. Where are we on that project right now?
Harsh Kumar Bansal
Yeah. So this is a — this was a part of the strategic initiative to actually build a market-facing scenario. As we’ve been mentioning, this is not somewhere where we are putting a lot of focus in terms of a cash burn, but we slowly and steadily continue to create a dealer, distributor sales-based network.
This will also come in handy for us in case we decide to venture into some of these other businesses in the future. But from a point-of-view Of current status, it remains the same as earlier. We continue to sell material, device new methodologies on the sales side, create new dealers, distributors and supply-chain and keep testing that. However, all this is done with a very, very careful focus on positive cash-flow. So it’s more to do with learning and slow and steady growth as opposed to something of big bank cash burn initiative.
Dev Mehta
Got it, sir. Thank you. So this Bansal Super TMT product, the major penetration is in the Eastern states only, right, as of now?
Harsh Kumar Bansal
Yes. Yes, primarily in Bengal.
Dev Mehta
Okay, sir. Got it. Thanks a lot.
Harsh Kumar Bansal
Thank you.
Operator
Thank. A reminder to all the participants that you may press star and 1 to ask a question. Once again, a reminder to all the participants that you may press star and one to ask a question. We have no questions at this point of time. Shall I hand over we have no questions at this point of time.
Balasubramanian A
Yeah, thank you, sir. Thank you everyone and the management for the quarter time in sharing the insights on the performance as well. I will just like to hand it over back to sir for any closing remarks.
Harsh Kumar Bansal
Thank you, Bala. As always, a pleasure to be hosted by you and talk about the results. Thank you once again.
Operator
Thank you. On behalf of Arihant Capital, that concludes this conference. Thank you for joining us. You may now disconnect your lines