Electrosteel Castings Limited (ELECTCAST) Q3 FY23 Earnings Concall Transcript

Electrosteel Castings Limited (NSE: ELECTCAST) Q3 FY23 Earnings Concall dated Feb. 17, 2023

Corporate Participants:

V. M. Sridharan — Senior General Manager, Finance

Gaurav Somani — Joint General Manager, Finance

Analysts:

Anuj Sonpal — Valorem Advisors — Analyst

Saket Kapoor — Kapoor and Company — Analyst

Vipul Kumar Shah — Sumangal Investments — Analyst

Chetan Phalke — Alpha Invesco — Analyst

Ankit Puri — Individual Investor — Analyst

Presentation:

Anuj Sonpal — Valorem Advisors — Analyst

[Starts Abruptly] Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Electrosteel Castings Limited. On behalf of the company, I’d like to thank you all for participating in the company’s earnings call for the third quarter and nine months ended of financial year 2023. Before we begin, let me mention a short cautionary statement.

Some of the statements made in today’s earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs, as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions.

The purpose of today’s earnings call is purely to educate and bring awareness about the company’s fundamental business, and financial quarter under review. Let me now introduce you to the management participating with us in today’s earnings call and hand it over to them for opening remarks.

We have with us Mr. V. M. Sridharan, Senior General Manager of Finance, Mr. Neelesh Daga, General Manager, Accounts and Finance, and Mr. Gaurav Somani, Joint General Manager of Finance.

Without any further delay, I request Mr. Sridharan to start with his opening remarks. Thank you and over to you sir.

V. M. Sridharan — Senior General Manager, Finance

Thank you, Anuj. Good evening, everybody. I am Sridharan, I am the Senior Joint Manager Finance of Electrosteel Castings Limited. It’s a real pleasure to welcome you to the earning conference call for the third quarter of financial year 2023.

Let me first take you through the financial performance for the third quarter and then the nine months ended for the — of our company on a standalone basis. The total income for the quarter stood at INR1,751 crores, an increase of about 24.5% year-on-year. EBITDA reported was INR184 crores, a decrease of 7% year-on-year with the EBITDA margins at 10.50%.

Net profit after tax reported was 65 crores, a decrease of approximately 31% on a year-on-year basis, while PAT margins stood at 3.73%. The revenue in nine months financial year ’23 stood at INR5,227 crores, an increase of 49% year-on-year. EBITDA reported was INR586 crores, an increase of 21% year-on-year basis, while EBITDA margin stood at 11.21%.

Net profit after tax for nine months financial year ’23 stood at INR234 crores, which grew by 15% on year-on-year basis, PAT margins stood at 4.47%. On the operational front, we are happy to say that the company has achieved 100% of its capacity utilization in ductile iron pipes. In the third quarter ductile iron pipe sales volume has increased by approximately 18% to 192,000 year-on-year, while it grew 24% to 517,000 year-on-year in the nine months of 2023.

With this, we can now open the floor for question-and-answer session. Thanks a lot.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Saket Kapoor from Kapoor Company. Please go ahead.

Saket Kapoor — Kapoor and Company — Analyst

Yes. Namashkar sir and thank you for the opportunity. Sir, if you could give us some color, how the Q4 deliverables are lined up in terms of tonnage?

Gaurav Somani — Joint General Manager, Finance

Q4, Saketji we expected to be a good quarter. In Q3 we did around 192,000 tons. So broadly we expect Q4 to be in line with Q3 or better than Q3.

Saket Kapoor — Kapoor and Company — Analyst

Okay. So nine month was 517,000, and over and above 192,000, so we’d be closing — we will be higher of 7 lakh for the entire year, that should be the broad number?

Gaurav Somani — Joint General Manager, Finance

Yes, yes.

Saket Kapoor — Kapoor and Company — Analyst

Sir, and if you could give us some color on how the raw material basket is shaping up? If we take sir that, the reason for the dip in operative power, and if my understanding is correct, it is — is the impact of the higher raw material and I think so the fixed contract, which we have, wherein there is no pass on of the higher raw material prices. So currently how is the raw material basket shaping up?

And also give us some color on, order booking. And also the business environment and dynamics that are working for the DI pipe industry.

Gaurav Somani — Joint General Manager, Finance

So you have asked multiple questions. Number-one, raw material. So our two key raw materials are coking coal and iron-ore. We import coking coal and iron-ore we procure from nearby states. As far as iron-ore is concerned, the price is have cooled off compared to previous quarter. And as far as coking coal is concerned, the prices have been kind of on the up trend during the year.

So, because of this, our profitability, in terms of margins had lowered a bit. But otherwise, if you see in absolute terms, the quarter we did a very good EBITDA, we did around INR184 crores, compared to INR177 crores in Q2. So Q3 we were able to report a higher EBITDA. And going forward the coking coal that we have in inventory, the prices are of lower cost. But as of now the prevailing prices if you see of coking coal, it has again started rising, and as we speak, it is around $385.

So — but considering that the order book, that we are intaking that is happening, the intake which is happening is happening according to that current prices only. So, this is about the order book and raw material prices. Order book we have around seven months of order book right now. And business dynamics that you asked, see as of now the demand is very good. It’s mainly because of the Jal Jeevan Mission Scheme, which was launched by government in 2019, and the AMRUT 2.0 which is happening. So all this is leading to a lot of substantial demand is coming up. And we have been able to operate our plant at more than 100% capacity, and we have been able to execute the delivery also.

For Q3, it was our — it was — for us, it was a very remarkable quarter because we did the highest production and highest sales in the company’s history. So demand is very nice, demand is robust, and we are also prepared for it. We have our plants operating at more than 100%.

Saket Kapoor — Kapoor and Company — Analyst

So, sir, as per your reply, we can see improvement in margin going ahead, since the effect of the higher RM is already over and consumed and in the orders, order execution. So going ahead, sir, can we see improvement in the EBITDA margin?

Gaurav Somani — Joint General Manager, Finance

Absolutely, we expect the same and that the endeavor is to focus and get the margin, striving for improvement in margins.

Saket Kapoor — Kapoor and Company — Analyst

Okay, sir. Another small point is about the update on the capex part sir. So what are we in terms of capex for I think for Srikalahasthi? Where are we in midst of the capex that was announced?

Gaurav Somani — Joint General Manager, Finance

Okay, right. So in Kalahasthi unit, the capex was happening in two phases. First phase of 1 lakh ton was already completed in August 2021, and it has already been implemented. We are operating the plant at full capacity now. So 1 lakh is on stream. And another 1 lakh ton, another 1.5 lakh ton, which will take the plan to 5.5 lakh ton. The capex is progressing well. There was some delay because of China, China issues, China slowdown. But yeah, it is progressing well.

And we are hopeful that by the end of next financial year, the enhancement will be complete, and our capacity would increase by around 150,000 tons there, and by around 40,000 tons in Eastern unit. So altogether, we should be at around close to 9 lakh units by the end of next financial year.

Saket Kapoor — Kapoor and Company — Analyst

Okay. Sir, you have mentioned about China, so how — is it the equipment that we’re importing from China that got delayed?

Gaurav Somani — Joint General Manager, Finance

Correct, yes. So, all the equipments — mostly all the equipments are being imported from China. So there were some delay on that account.

Saket Kapoor — Kapoor and Company — Analyst

So how much have we spent, sir, what is the capital work in progress and what would be the capex for the next year?

Gaurav Somani — Joint General Manager, Finance

By next year the complete capex will be completed. And as of now, we have spent around INR150 crores. So balance would happen next year.

Saket Kapoor — Kapoor and Company — Analyst

Balance amount is?

Gaurav Somani — Joint General Manager, Finance

Balance amount would be around say INR400 crores approximately.

Saket Kapoor — Kapoor and Company — Analyst

INR400 crore. And what is the net debt number, sir, as on 31st December?

Gaurav Somani — Joint General Manager, Finance

31st December net debt is around INR2,650 crores.

Saket Kapoor — Kapoor and Company — Analyst

Breakup?

Gaurav Somani — Joint General Manager, Finance

Excluding the long-term debt and the short-term debt.

Saket Kapoor — Kapoor and Company — Analyst

[Foreign Speech]

Gaurav Somani — Joint General Manager, Finance

Long-term would be around INR1,050 crores.

Saket Kapoor — Kapoor and Company — Analyst

Balance is short-term and the cost of funds?

Gaurav Somani — Joint General Manager, Finance

Cost of funds will be close to 10%.

Saket Kapoor — Kapoor and Company — Analyst

Okay, sir. Again, the finance cost, so a key line item, that is lowering our PAT margins. So what steps are in the unveil to lower the impact of this line item, sir? And I think so, now with the interest rate on a rising trend, how are — what steps are we — or the mitigation steps we are taking to lower the impact of higher interest costs on the profitability or steps whether we can — we are introducing in terms of efficiency. So how are we going to take on this higher interest cost part sir? And last, so on the — this year maturity, sir, what is payable for FY ’23?

Gaurav Somani — Joint General Manager, Finance

Right. So if you see, Mr. Saket, the overall debt, if you compare to the figure that was on 31st March, ’22. The overall debt has not increased much. Whereas the working capital requirement has gone up, which is on two accounts, you have to understand that. One, that the capacity has increased. Number two, the prices have moved, because of which the working capital requirement has gone up.

Considering that, still we have been able to keep our debt level at the same level what it was on 31st March, ’22. This is because we have used our own fund for our working capital requirement, after seeing that the cost has been rising. Now, the interest cost has gone up for everyone because the repo rates have increased. And during the year, it has increased by around I think 2.5%, so all the banks have passed on that cost and same has happened with us also. Still we have been trying and putting in all efforts to keep our cost under check.

Going-forward, we expect that the working capital cycle has peaked out, assuming that the raw material prices remain where it is. So we feel that now the debt should start coming down. Next year, we have a repayment of around INR350 crores till FY ’24 of long-term loan repayments. And — so and next year we will be generating our own cash as well. So all these ones will be used for — primarily for lowering debt, and for funding of capex.

Operator

Thank you. [Operator Instructions] The next question is from the line of Vipul Kumar Shah from Sumangal Investments.

Vipul Kumar Shah — Sumangal Investments — Analyst

Sir, what is our current capacity?

Gaurav Somani — Joint General Manager, Finance

Our current capacity for DI pipes which is our main product is around 7 lakh tons.

Vipul Kumar Shah — Sumangal Investments — Analyst

So that will increase to 9 lakh tons, post expansion, right?

Gaurav Somani — Joint General Manager, Finance

Right.

Vipul Kumar Shah — Sumangal Investments — Analyst

So, per ton of manufacturing DI pipe, how much iron-ore and how much coke you require, and have we any in-house manufacturing — in-house blocks for production of coking coal?

Gaurav Somani — Joint General Manager, Finance

So for — thumb-rule is that for 1 ton of liquid metal, you need around 1.6 tons to 1.7 tons of iron-ore and 1 ton of coking coal. We do not have coking coal mine or iron-ore mine. But otherwise, all our facilities are completely backward integrated. We have our coke oven batteries, we have a center plant. So we import coal and convert it to coke.

Vipul Kumar Shah — Sumangal Investments — Analyst

So we import coal and convert it to coke, right?

Gaurav Somani — Joint General Manager, Finance

Right.

Vipul Kumar Shah — Sumangal Investments — Analyst

So we import thermal coal?

Gaurav Somani — Joint General Manager, Finance

No first steel-making you need coking coal. So we import coking coal from Australia.

Vipul Kumar Shah — Sumangal Investments — Analyst

Okay. Coking coal. So that price is around 400, right, right now?

Gaurav Somani — Joint General Manager, Finance

Yes.

Vipul Kumar Shah — Sumangal Investments — Analyst

Okay. But on your slide number four, you have mentioned is 524,000 TPA, so that is your — capacity of your coke oven battery, right?

Gaurav Somani — Joint General Manager, Finance

Correct, yes.

Vipul Kumar Shah — Sumangal Investments — Analyst

Okay. So this is the first time I am attending the call. So there are lot of long notes on our investment in that coal block which was taken over by Supreme Court decree. So, cumulatively, how much money we have lost in that block?

Gaurav Somani — Joint General Manager, Finance

Sir, it would not be right to say that we have lost money. [Speech Overlap]

Vipul Kumar Shah — Sumangal Investments — Analyst

I mean to say so how much we have — means, right now, it is on non-productive asset, so for which how much money we have spent for development of that block. And, because we have got very minuscule amount from the government, I think.

Gaurav Somani — Joint General Manager, Finance

So allow me to give you a little background on that.

Vipul Kumar Shah — Sumangal Investments — Analyst

Yes, please.

Gaurav Somani — Joint General Manager, Finance

[Speech Overlap] coking coal mine, which was allocated to us somewhere in 2006, and we had started development of that coking coal mine. This is — this was primarily underground coking coal mine. And this got reallocated toward the end of 2014 and early 2015. It was operational underground coking coal mine, which is used for making steel. And cancellation book effect from April 2015.

After the calculation, our claim amount was INR1,500 crores, this amount was calculated. This is the act of the government. And the new successful bidder is supposed to pay the compensation to the old mine numbers. But somehow the calculation was misinterpreted and this led to litigation. In — sometime in 2017, Delhi High Court had passed the order on the compensation matter and which was in our favor. Post that the nominated authority under the Ministry of Coal, they had appointed a valuer, and the valuation exercise has progressed.

Now as part of the valuation exercise, nominated authority has further appointed an agency to verify the bills and the vouchers, which are related to the coal mine capex. And so just to add, in case of other coal mine allocations, for the purpose of land valuation, circle rate on the date of vesting has been considered. So going by the same principle, our claim amount becomes justified.

Now the mines have been put under auction under the 16th turns of auction under Coal Mines Act. And JSW Steel and Vedanta they have shown interest and they have bid for the mine in January 2023. This mine is — has a very perfect location, this is located around 10 kilometers from the steel plant of Vedanta, which is in Jharkhand, 30 kilometers from Bokaro steel plant.

So once the new bidder comes in, we will receive the final compensation amount from the new successful bidder. So what I’m trying to say is that all-in-all, lot of positive movements are happening, as I mentioned, and we are regularly following up and we are also hopeful of receiving the compensation, although timelines cannot be given. But this is a substantial amount.

So once this INR1,500 crores comes in whenever it comes in, our long-term debt is only INR1,000 crores. So you can fairly assume where we will stand.

Vipul Kumar Shah — Sumangal Investments — Analyst

So as and when this matter will come to its logical conclusion, you’re very hopeful that you will receive almost entire amount of INR1,500 crores, sir. And you said Delhi High Court had passed the order in 2017, so what was the amount in that particular order?

Gaurav Somani — Joint General Manager, Finance

Mr. Shah, we’re extremely hopeful that we will receive the compensation. The order that was passed by the Delhi High Court, it on the principle, it was on the matter that the compensation should be given to the prior allottee. It did not mention any amount. The amount was to be calculated by the Ministry of Coal, the nominated authority. So, which they have started the exercise, they have already done it. And now the things are progressing, so that’s why I’m saying that we are now hopeful that, we will receive the compensation. But again as I said, timelines cannot be given.

Vipul Kumar Shah — Sumangal Investments — Analyst

Okay. So plead me for my ignorance. But compensation will be given by new allottee or it will be given by Ministry of Coal?

Gaurav Somani — Joint General Manager, Finance

Compensation will be given by the new allottee.

Operator

Thank you. [Operator Instructions] We’ll move to the next question from the line of Chetan Phalke from Alpha Invesco. Please go ahead.

Chetan Phalke — Alpha Invesco — Analyst

Yeah, good afternoon, and thank you for the opportunity. So, sir, my question is just a follow-up to the last participant’s question that, I was just going through the list of the 15 ground of bidders, and JSW and Vedanta has bid for it. So sir, if at all it happens, what will be the flow of this transaction, as in the winner of the bid will give you the money directly or will it go to some central agency then it will be routed to us? I mean how — what is the exact process around this particular thing, just trying to understand that.

Gaurav Somani — Joint General Manager, Finance

Mr. Chetan, the important part to focus is that the money will eventually come to the prior allottee. We should — we will avoid getting into the process in this call, it is not important for us, to discuss that. But the most important part is that the things are progressing well. And we are quite hopeful because we have been waiting for some time now. This happened, this started in 2015. So now we are quite hopeful that things are moving and is progressing, and the money will come in. It will come in from the new allottee. How it will come, what will be the process, we would not prefer going into that detail in this call.

Chetan Phalke — Alpha Invesco — Analyst

Okay, okay. No, sir, usually such things take a lot of time, let’s say even if the bid happens. I mean, just trying to get some sense on the timeline, whether it happens immediately or it is — again, it is a lengthy process of two, three years or… [Speech Overlap]

Gaurav Somani — Joint General Manager, Finance

No, no, no. Here, I would like to disagree. It won’t be a lengthy process, because once these tenders is out for the bidding of mine, it will happen very quickly because, when the new allottee comes in, he will takeover the mine, they will takeover the mine and handovers the money. So I don’t think so that there will be any delay once the process is complete.

Chetan Phalke — Alpha Invesco — Analyst

Okay, okay. And sir, just in a hypothetical scenario, let’s say the bid is at let’s INR500 crores, I’m just putting a ballpark number to it. So if it happens, way below than the claim that we have, then what will be our stance will we contest the bid in the courts or what are you planning into in that scenario?

Gaurav Somani — Joint General Manager, Finance

So, Mr. Chetan, I would like to avoid commenting on hypothetical questions. You should leave this to the management. We have our team working on it. We also have legal support. So I would request you to wait when we have already waited for so much of time, wait for some more time, and let the clarity emerge.

Chetan Phalke — Alpha Invesco — Analyst

Sure, sure. Thank you, sir. And just one last question on the competitive intensity, sir. The Welspun plant is now operational. So how do you see this scenario panning out with other players are also announcing their intention to come with the DI pipes plant, what is your outlook on the supply side per se? And how do we plan to cope up with the increasing competitive intensity?

Gaurav Somani — Joint General Manager, Finance

See, first of all, demand is robust, we have to understand that. And why it is robust because of the population. There are huge, there are many households still not having proper connection of drinking water. And that is why the government’s focus is on providing each and every household with at least a tap prediction, under which — this is happening under Jal Jeevan Mission Scheme and AMRUT. So demand is robust and it has been growing. And there are still many households to be connected.

What I understand on the latest data is around 58% of the rural households have the connectivity now, and still 42% is yet to be connected. So for everyone, for every manufacturer there is enough on the people. Welspun coming in is not a concern. And in fact, it is good for all the players, it shows that there is lot of demand there.

Further, see Welspun is in the western part of the country, whereas our plants are in eastern part and the southern part of the country. So, geographically, we are present in the eastern, northern market, southern market and central market. Whereas we are also into exports. So competition will only improve the market size, and the pricing power. So we are not at all concerned about the competition.

Operator

Thank you. We’ll move to the next question from the line of Ankit Puri [Phonetic] individual investor. Please go ahead.

Ankit Puri — Individual Investor — Analyst

Hi, good evening, gentlemen. My question is regarding the inventory level, can you throw some light on that? And secondly, if you can throw some light on — if you — is there any dividend policy of Electrosteel Castings as such?

Gaurav Somani — Joint General Manager, Finance

Hello, Mr. Puri. So, in terms of inventory, we have to build up our inventory this year, that is why our working capital requirement has gone up, as I mentioned in my earlier query also. Our coking coal inventory is of around 5.5 months, and iron-ore inventory we have of around three to four months.

Ankit Puri — Individual Investor — Analyst

Okay.

Gaurav Somani — Joint General Manager, Finance

And, as far as dividend policy is concerned, we have been regularly paying dividend. Last time it was 80%. Aim would be to maintain this. Subject to Board’s decision.

Ankit Puri — Individual Investor — Analyst

All right. Thanks so much for that. And lastly, I’d like to also — if you can throw some light on the debt numbers going forward as well, if you can — do we plan to reduce debt, if yes, by how much? And how do we see the next year panning out with regard to the debt component?

Gaurav Somani — Joint General Manager, Finance

See, in terms of debt, next up to FY ’24 we have around INR350 crores of long-term repayments lined up, FY ’24. And FY ’25 again, we have repayment of around INR250 crores to INR260 crores.

Operator

Thank you.

Gaurav Somani — Joint General Manager, Finance

So gradually the debt would come down.

Operator

Thank you sir. [Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead.

Saket Kapoor — Kapoor and Company — Analyst

Yes, sir. Sir, I have the question firstly on the Kalahasthi and Electrocast merger itself. The rationale for that was to create a single entity, bring in the synergy, create value. So what we have seen that operationally things have really worked well, and we have been able to put forward the enhanced capacity of Kalahasthi, selling the same into the system and the market supporting this. But on the point of value creation for investors, we find two years also down the line, things are not working in favor of your investors, I’m talking about the minority, as well as the majority shareholders.

So what’s the thought process of the management that in-spite of getting all the support from the investors, in terms of the merger, and in-spite of doing all the right things, somehow market is unable to give the right valuation. And that was the reason sir, we were looking for — somebody from the promoter entity to address sir or to answer the queries of investors. So that was the focus.

I know the operational people won’t be in a position to comment anything. But again, we would be waiting for the management comment on the same sir. And next, point is about the ICD, sir. What are the inter corporate deposit due as on 31st December? What was the opening and what’s the closing balance?

Gaurav Somani — Joint General Manager, Finance

Saket, so in earlier calls, the feedback was given by the shareholders by you also regarding ICD, we had placed that feedback to the management. And so now the reversal has started happening. We have already received around INR25 crores of ICD. And in another maybe one, two months the full amount is expected to be coming into the company. So ICD will come in, ICD will become zero.

Operator

Sorry Saket, we were not able to hear you. Can you repeat the question?

Saket Kapoor — Kapoor and Company — Analyst

Sir, I was telling that, going ahead we’ll not participate in these ICD transactions, can that also be confirmed from management or we will continue with this process of disbursing fund under ICD?

Gaurav Somani — Joint General Manager, Finance

See, so as I said, we have already conveyed this to the management, and post that only the decision has been taken to recall the ICD.

Saket Kapoor — Kapoor and Company — Analyst

Okay. So what is the closing balance, sir, as on 31st December? How much is the money due as on 31st..

Gaurav Somani — Joint General Manager, Finance

[Speech Overlap] INR200 crores.

Saket Kapoor — Kapoor and Company — Analyst

INR200 crores and this will be… [Speech Overlap] This is expected, yeah.

Gaurav Somani — Joint General Manager, Finance

Another one, two months, it will come back.

Saket Kapoor — Kapoor and Company — Analyst

And on the value creation aspect, sir, I think the trust and branding aspects are lacking being the largest player in the sector, the kind of enterprise value Electrocast currently is commanding does not suffice the reason why is that happening. So management needs to create that trust and brand and needs to speak to investors. So that was the point. I am reiterating on the same. That should be conveyed to them and a message from the promoters to the investing community should be given on either this platform or in any other medium whichever is correct on the part. And that’s all from my side, sir. Thank you.

Operator

Thank you.

Gaurav Somani — Joint General Manager, Finance

Thank you sir.

Operator

The next question is from the line of Vipul Kumar Shah from Sumangal Investment. Please go ahead.

Vipul Kumar Shah — Sumangal Investments — Analyst

Hi, sir. So what will be your peak debt, if I heard you correctly, your next year capex is INR400 crores right, sir?

Gaurav Somani — Joint General Manager, Finance

Sir, your voice is not very clear, Mr. Shah. Can you just repeat your question again?

Vipul Kumar Shah — Sumangal Investments — Analyst

So if I heard you correctly, your next year capex is INR400 crores, so for that you will have to raise further debt. So what will be our peak date?

Gaurav Somani — Joint General Manager, Finance

So debt is already tied up. And we have — as I mentioned we have repayments also lined up, term loan repayments. So you can fairly assume that as of now the long-term debt, what the levels that we are at, the moment is the peak level.

Vipul Kumar Shah — Sumangal Investments — Analyst

Okay. In-spite of capex there will not be any material increase in long-term debt?

Gaurav Somani — Joint General Manager, Finance

No sir, no.

Vipul Kumar Shah — Sumangal Investments — Analyst

And, sir, on your Slide 4 your various business mix and capacities have been given. So if you don’t mind, can you explain in brief the manufacturing process, means, how filtering, means in filtering what is done? We require Ferro Silicon also. So, if you don’t mind, can you briefly explain your manufacturing process for DI pipes, sir?

Gaurav Somani — Joint General Manager, Finance

Surely. I’ll give you overview about it. So, first of all, our plants are fully backward integrated. There are two main raw materials, which is required for DI pipe making. So till the manufacturing of liquid metal the process is similar to a steel company. We need iron-ore and we need coking coal. From coking coal we convert it to coke. We have our own coke oven batteries. The capacity which is given in the presentation for the coke oven battery.

So from coke oven battery we make coke, and also waste heat gases are generate. These waste heat gases help in production of power. We have our own captive power plants. So the power that has been generated is not from the thermal coal, but from the waste heat gases, and hence the cost of power generation is also very minimal. Now this coke which is generated is transported to the blast furnace. In blast furnace, we use coke and iron-ore. The iron-ore is converted to liquid metal, which is eventually sent to the manufacturing process of DI pipes, where the pipes are casted.

And later on — sorry, I missed out one thing. We also buy iron-ore, the iron-ore comes in two nature, one is lumps and one is fines. So we have our sinter plant, where we buy iron-ore fines and convert into sinter. So hence iron-ore fines are actually cheaper than iron-ore lumps. So we get the advantage there. And, along with this, we have also our own Ferro Silicon plant. Ferro Silicon is also required manufacturing process. So part of it is captively consumed and the surplus is sold in the market.

Similarly, for coke also, maximum portion is captively consumed and small portion, the surplus is sold in the market. So coming back to the DI pipes, when the DI pipes are made, it is internally coated with cement. So we have our own cement plant in the southern unit. Again, the cement is used for captive purpose and again surplus is sold in the market.

We also have a paint plant. So, we manufacture paints, these paints are used for outside coating of DI pipes to give it more strength, because these pipes are eventually made below the ground, and are subject to corrosion. So we make our own paint also. So this is about the manufacturing process consumable.

Vipul Kumar Shah — Sumangal Investments — Analyst

Sir, lastly, you — so power, we are 100% captive or we have to buy certain power from the grid?

Gaurav Somani — Joint General Manager, Finance

We have to buy certain power from the grid. But that amount is not much. Maximum amount is met through captive only.

Operator

Thank you. The next question is from the line of Chetan Phalke from Alpha Invesco. [Operator Instruction] Chetan Phalke, your line has been unmuted. Please proceed with your question.

Chetan Phalke — Alpha Invesco — Analyst

Yeah. Thank you for the opportunity again. Sir, as and when our current round of capex is done from 7 lakh tons to 9 lakh tons, do we have enough land to do capex in our current complex, or — either at Srikalahasthi or Bengal or are we looking at some other locations going-forward. I mean, just trying to understand what are our plans beyond the current 9 lakh tons capacity plant.

Gaurav Somani — Joint General Manager, Finance

In southern unit, yes, there would be a marginal scope. But most of the expansions, most of the land has been used for this expansion. So there would be a marginal scope. But always — see we also do debottlenecking and try to improve our capacities in the existing plant itself. And for further expansions, for larger expansions, of course, we will need plant, so we’ll have to evaluate those at the right time.

Chetan Phalke — Alpha Invesco — Analyst

Tentatively, what kind of incremental capacity can happen in our existing complexes? I mean just — not asking for any particular number, but just ballpark 5%, 10%.

Gaurav Somani — Joint General Manager, Finance

So, as of now, we are already increasing it to 9 lakh tons, beyond that, it will — we will need some time to work on that.

Chetan Phalke — Alpha Invesco — Analyst

Okay, okay. So, tentatively can we go to 1 million tons, or difficult in the existing capacity — existing land bank?

Gaurav Somani — Joint General Manager, Finance

Yes, yes, of course.

Chetan Phalke — Alpha Invesco — Analyst

Okay. That’s it from my side. Thank you. Thank you very much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.

Saket Kapoor — Kapoor and Company — Analyst

Gauravji, when we look at the raw material to sales percentage, last year nine month average was 49%. Correct me there, whether the calculation part is correct or not. And this year it is 56%. So going ahead and the type of now order booking at — type of business, which we are seeing in the raw material scenario, what should be an ideal number. I think the last year, the 6%, 7% jump is what has eaten our EBITDA margins.

So can you give us some understanding, what should be the ideal number, and how are we aligning our sales in the business process that this RM to sales percentage would hover around which level?

Gaurav Somani — Joint General Manager, Finance

So, Saketji, there are couple of facts. See, in terms of nine month numbers for this financial year, compared to nine month numbers of previous financial year, we have been able to maintain our EBITDA per ton. Even though you see that margins have come down, but more importantly, we have been able to maintain the absolute EBITDA which is more important. Addressing the raw-material percentage that you are talking about, see coking coal cost, in last year was substantially lower compared to what it is now. So obviously, the percentage has gone up because of that, the raw-material cost. And, now it will not be easy for us to comment on the future numbers because lot will depend on the price movements of coking coal.

What we can say is that the endeavor would be to maintain the EBITDA, and try to improve that.

Saket Kapoor — Kapoor and Company — Analyst

Thanks. Sir, what is the EBITDA per ton for the quarter and nine months?

Gaurav Somani — Joint General Manager, Finance

I would like to mention any number, but it was in line with what it was last year. So — and it is within the range that we are targeting.

Saket Kapoor — Kapoor and Company — Analyst

Correct, sir. And for the Elavur Land and what is our line of action going ahead? I think so the same notes is copy paste for every quarter. So any development or how are we going to get hold of our land or what is the future lying ahead for? I think so that the land is valued around INR300 crores at Elavur.

Gaurav Somani — Joint General Manager, Finance

You’re right. So the matter is pending in the court. And it has — whenever the hearing happens, then only it will get concluded. So that is why the note that you are seeing is appearing as it is. So. The value of the lend is INR300 crores, and Elavur contributes around 2% to 3% of our total turnover. So it is a very minuscule number, and it contributes around INR8 crores to INR10 crores of EBITDA. But the plant is operational. It is profit-making. Though it is not a significant amount. But as far as the case is concerned, we are very confident, that the merits of the case is in our favor. And whenever it gets concluded, it will get concluded in our favor.

Saket Kapoor — Kapoor and Company — Analyst

Sir, this is a vacant piece of land or the land where the plant is situated, already occupied?

Gaurav Somani — Joint General Manager, Finance

We have plant on this land.

Saket Kapoor — Kapoor and Company — Analyst

We have plant on this land, so this is not a vacant space?

Ankit Puri — Individual Investor — Analyst

Yeah, it’s not completely vacant, part of it is vacant, part of it has plant.

Saket Kapoor — Kapoor and Company — Analyst

Okay. And lastly sir, on the consolidation part, sir, how should the investors read into your consolidated number? I asked last time also, but you told me to look at the standalone. But as investors, we have to monitor the consolidated number. Last quarter and this quarter again, we find that there is an increase in the profitability, but these costs that are involved in selling are significantly higher.

So, I think that will be only on account of the trading part that the logistic and the freight cost that are eating away the margins, I mean, how should one read into, and what exactly contributes to this profit in the consolidated number, if you could explain, Gauravji. And you have been very candid and very explanative today in the call. Kudos to you sir, for explaining everything in good details. And I hope for a detailed answer for this also.

Gaurav Somani — Joint General Manager, Finance

Thank you. Saketji, I’ve explained earlier also. So you can look at both the standalone numbers and the consolidated numbers. In terms of profitability, you will find that the numbers are as far as standalone and consolidated are concerned, it is more or less at the similar level. You have to understand the business model.

In case of consolidation we have our subsidiaries in many countries, which are more of marketing arms, which help us in sales of our export products. So if you see the EBITDA, it is more in line — it is more or less in line with what we have done in standalone. And we have done INR593 crores in nine months at consolidated level, and the INR586 crores at standalone level. So in consolidation, we have around INR5 crores or INR6 crores more. Otherwise, if you see the numbers are more or less similar.

So you can look at any of the number, you will find it more or less in line — there will not be much of deviation.

Operator

Thank you. Next question is from the line of Vipul Kumar Shah from Sumangal Investments. Please go ahead.

Vipul Kumar Shah — Sumangal Investments — Analyst

Sir, I just wanted to know whether, legally we can bid for the same block or not, means…

Gaurav Somani — Joint General Manager, Finance

Sir, as of now, see the coking coal mine block that we had has big reserves, so we are — as of now, the management is not interested for bidding, for that mine again. Already JSW Steel and Vedanta have expressed their interest, and have submitted the bid. Now the things are progressing well, and we look forward for the compensation amount.

Vipul Kumar Shah — Sumangal Investments — Analyst

And sir lastly these DI pipes, so major consumer must be government agencies. So how is the working capital cycle for these pipes?

Gaurav Somani — Joint General Manager, Finance

You are correct. The major customer is government only, ultimately it’s government only, but it’s through EPC contractors. Most of our sales happens to EPC contractors, big names like L&T, Nagarjuna, Megha Engineering. The payment cycle is on time. In case of domestic, the domestic aging is not very high, it’s around say 60 to 90 days. But in case of exports, it’s slightly higher because of the transportation time. And the stocking that happens at the subsidiary level.

All-in-all, our net working capital days would be around five months, 5 to 5.5 months. It has gone up slightly, because as I mentioned that we had increased our inventory position of coking coal, considering the prices were moving up. So that was a conscious decision taken by the management to increase the inventory, when the prices were lower.

So but, considering manufacturing business, I think we are at a comfortable working capital cycle.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management from Electrosteel Castings Limited for closing comments.

Gaurav Somani — Joint General Manager, Finance

Sridharanji, would you like to say something?

V. M. Sridharan — Senior General Manager, Finance

You tell, you tell, please. Go ahead, Gaurav.

Gaurav Somani — Joint General Manager, Finance

Thank you, everyone. It was really pleasure interacting with you all, and answering the valuable questions, and also taking your advises. We look forward to meeting you all again in the next quarter. Thank you so much.

Operator

Thank you very much.

V. M. Sridharan — Senior General Manager, Finance

Thank you.

Operator

[Operator Closing Remarks]