Electrosteel Castings Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from Electrosteel Castings Limited (ELECTCAST) Q3 FY23 Earnings Concall

Management Update:

• [00:03:20] ELECTCAST said the company achieved 100% capacity utilization in ductile iron pipes during 3Q23.

Q&A Highlights:

• [00:04:39] Saket Kapoor from Kapoor Company asked about the 4Q23 deliverables in terms of tonnage. Gaurav Somani, Joint GM of Finance replied that the company expects 4Q to be a good quarter and in 3Q23, ELECTCAST did 192,000 tons. 4Q23 is expected to be inline or better than 3Q23.

• [00:05:32] Saket Kapoor from Kapoor Company also asked about the RM basket shaping up. V. M. Sridharan, SGM of Finance replied that ELECTCAST’s two key RM are coking coal and iron-ore, which is imported and procured from nearby states. Prices of iron-ore have cooled off vs. previous quarters, but coking coal prices have been on an uptrend. This impacted profitability in terms of margins, however, in absolute terms, higher EBITDA was reported in 3Q23.

• [00:09:08] Saket Kapoor from Kapoor Company enquired about the status of capex for Srikalahasthi. Gaurav Somani, Joint GM of Finance answered that the capex for the Kalahasthi unit is progressing well and it is expected to be completed by the end of FY24. And as of now, ELECTCAST has spent around INR150 crores and balance of about INR400 crore would happen next year.

• [00:10:59] Saket Kapoor from Kapoor Company asked about the net debt as on Dec. 1. Gaurav Somani, Joint GM of Finance said net debt is around INR2,650 crores. Of this long-term is around INR1,050 crores and the balance short term.

• [00:14:25] Vipul Kumar Shah from Sumangal enquired about the company’s capacity.  Gaurav Somani, Joint GM of Finance replied that the current capacity for DI pipes is around 7 lakh tons, which will increase to 9 lakh tons post expansion.

• [00:24:28] Chetan Phalke from Alpha Invesco asked about the competitive intensity, with Welspun plant now operational. Gaurav Somani, Joint GM of Finance said that demand for tap water connections is high and Welspun’s presence in the market won’t be a concern as they are located in a separate region and ELECTCAST plants are spread throughout the country. Competition will improve the size of the market and price power.

• [00:26:32] Ankit Puri asked about the inventory levels. Gaurav Somani, Joint GM of Finance answered that the company needs to build up its inventory this year, requiring an increase in working capital. Coking coal and iron-ore inventories are 5.5 months and 3-4 months respectively. ELECTCAST have been regularly paying dividends at 80% and aim to maintain this subject to the Board’s decision.

• [00:28:32] Ankit Puri asked if there is any dividend policy the company has. Gaurav Somani, Joint GM of Finance replied that the company has been regularly paying dividends at 80% and aim to maintain this subject to the Board’s decision.

• [00:29:51] Saket Kapoor from Kapoor Company asked about the ICD due as on Dec. 31. Gaurav Somani, Joint GM of Finance said that the company has already received around INR25 crores of ICD and the full amount is expected to be received in 1-2 months, after which the ICD will become zero.

• [00:32:28] Vipul Kumar Shah from Sumangal Investment enquired about the company’s peak debt. Gaurav Somani, Joint GM of Finance replied that the current level of long-term debt is the peak level.

• [00:37:01] Vipul Kumar Shah from Sumangal Investment enquired if in power, the company is 100% captive or power needs to be bought. V. M. Sridharan, SGM of Finance said the company has to buy some power from the grid, which is immaterial. However, maximum is met through captive.

• [00:37:39] Chetan Phalke from Alpha Invesco asked if ELECTCAST has enough land in its current complex, Srikalahasthi or Bengal to expand beyond the current 9 lakh tons capacity. V. M. Sridharan, SGM of Finance replied that in the Southern unit, there is a marginal scope for expansion, but most of the land has already been used. Debottlenecking and improving existing plants are necessary in order to make room for larger expansions. Evaluations will take place at the right time when needed.

• [00:41:11] Saket Kapoor from Kapoor and Company asked about the EBITDA per ton for 3Q23 and 9 months. V. M. Sridharan, SGM of Finance clarified that a number cannot be given by was in line with last year and within the target range.