Vardhman Special Steels Limited (NSE: VSSL) Q3 2025 Earnings Call dated Jan. 30, 2025
Corporate Participants:
Sachit Jain — Vice Chairman and Managing Director
Sanjeev Singla — Chief Financial Officer
Analysts:
Sailesh Raja — Analyst
Unidentified Participant
Anil Kumar Sharma — Analyst
Kirtan Mehta — Analyst
Angad Katdare — Analyst
Aniket Redkar — Analyst
Saket Kapoor — Analyst
Sai Ganesh — Analyst
Presentation:
Operator
SA Foreign. Ladies and gentlemen, good day and welcome to Vardaman Special Steels Limited Q3 FY25 Post Result Earnings conference call hosted by Batliwala and Karani securities India Private Limited. 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. Shailesh Raja from Batliwala and Karani securities India Private Limited. Thank you and over to you.
Sailesh Raja — Analyst
Yeah. Good afternoon and thanks to everyone who have logged in to Vadimon Specialties Limited 3Q FY25 earnings conference call. Now let me introduce you the management participating with us in today’s earnings call. We have with us Mr. Sachit Jain, Vice Chairman and Managing Director, Mr. Sanjeev Singla, CFO, Mr. Rajendra Kumar, Executive Director and Ms. Sonam, Company Secretary. I would now like to turn the call to Mr. Sachit Jain for the opening remarks followed by Q and A. Over to you, sir.
Sachit Jain — Vice Chairman and Managing Director
Thank you. Thank you so much. Ladies and gentlemen, good afternoon and thank you so much for attending our call. We’ve had an interesting quarter and interesting nine months so far as we’ve shared with you that we have big two projects coming up. There have been shutdowns for that and inventory buildup for the forthcoming shutdown in March, second half and part of April. So the two projects that we are talking about are Cox Block that we are putting up which is a sizing block meant for giving precise sizes for customers as well as the new reheating furnace which both of these together will help enhancing our capacity of our rolling to 300,000 tons input as well as improving the quality and reducing some costs. So combination of all three would happen. The questions that were coming in earlier for us was where is the Runway for growth? Because we had a capacity limitation and we were testing our melting capacity continuously. And I’m happy to report that in the month of December we have tested making 25,000 tonnes for the whole month. Which means that now we have tested albrecht only for one month, but a run rate of 300,000 tonnes for the full year. So which means for next three to four years the growth path is clear. We will be able to declare a capacity of 3 lakh tonnes of melting and 270,000 tons of rolling by the end of the next financial year. So we have a Runway for growth up to 270,000 tonnes. And then of course we will have possibility of some outsourcing and so on. Apart from that, the market conditions have been pretty tough and there is pricing pressure and all of us are facing that pressure. There are two reasons for that pressure. One is on the demand side, after the very good growth last year, this year growth in cars have been also much lower. Commercial vehicles and tractors. Nothing is very exciting and the mood is not great in the markets overall. That puts more pressure on the bigger companies to try to undercut and sell more. The second reason is imports from China of not for our products too much, but HRCs and commodity products. But that reduces the steel prices and spoils the sentiments in the market, which gives a leverage to the OES to drive a harder bargain than what is warranted. And therefore the price reductions which happened in our belief, have happened a bit more than what were warranted, which has led to lower margins and lower profits than what we were anticipating. However, the profits that we have are still within our stated range. So we are still within the range of seven to ten thousand rupees Ebitda per ton, but. But definitely lower than what we were anticipating. Part of the lower margins have been offset by improvement in our operating parameters. And as we test at a higher level of production, other costs also, some of the semi variable costs also go down. Fixed cost gets absorbed better. So all that leads us to a confidence that the times to times coming ahead. We are standing on a good picket. Couple of other things before I ask Mr. Singla to talk about the results of this quarter. The solar plant is coming up well. In all probabilities it should be ready by March end or latest in April. So more or less next year we should get almost the full benefit of this plant. The second thing is there is an inventory buildup in the company. That is for the shutdown coming in March end. So after that shutdown the inventory should. The finished goods inventory should come down to a reasonable level. And of course after the Cox block installation our attempt will be to bring down the inventory levels even further. The other interesting thing is there was a news in the market which came out from the Chief Minister of Punjab’s office about our new plant. We are not yet ready to announce the new plant. But yes plans are being made for the new plant. In all probability the major planning on the gross level will be done by April. And we should get ready to announce the contours of this plan. And hopefully the board approves. In the April board meeting we should be able to announce we are looking for land in Punjab. So the new plant is going to come up in Punjab. Hopefully in Ludhiana district itself. In the last stages of negotiations for some land. The third thing I wanted to bring to your notice is plans for forging. Also more talks have started happening. I have a strong feeling that within the next year or two these plans will get concretized and we should start taking some concrete steps on the forging journey. The other issue which we said and people have asked us questions they passed is what about capital equity infusion and stakes and so on. So again talks are going on. Have been going on with IQI for some time and it is part of the plan. At some stage they will increase their stake. And my feeling is with the announcement of the new project in the next year or two even that possibility of their increasing the stake is looking brighter than. I mean it was always on the cards but timing looks to be now, maybe the next year or two this may happen. Once this happens in all probabilities, the promoters also would then put in more money in the company to see that the stake doesn’t get diluted too much. It will get diluted of course whenever if IG increases the stake. But there probably would be an equity infusion from the promoter side also. So this will all go towards the capex for the new plant. So first the new plant has to be announced, the contours have to be announced and then later all these other things will follow after that. That’s all for the opening remarks. I’ll ask Mr. Singla to quickly take you through some numbers and then we are open for Q and A.
Sanjeev Singla — Chief Financial Officer
Thank you sir. Good afternoon everyone. On financial numbers this quarter we have been able to achieve 52,000 ton, 52,600 tons of rolled sales which is higher by 7 and a half percent over the last year. In terms of value it is 426 crores of total revenue it is higher by 7.39%. Mainly because as Satishar has already explained that we have to give higher price decrease than what was warranted. So total revenue in terms of rupees it is higher by 7 and a half percent. Whereas in terms of volume it is 13.5%. A beta per ton is 8000 rupees per ton in this quarter. And for the nine months our total volume is 152,000 tons which is higher by 13.5%. And in terms of value it is higher by 9 and a half percent. EBITDA per ton for the nine month as a whole is 8500 rupees. Well within our stated range. And as a result our pack for the nine months is 73 crores as against 58 crores of nine months in the last year, higher by 25%. So that’s all from on the financial. Now I request further question answers.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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 will wait for a moment while the question queue assembles. We’ll take our first question from the line of Gargi from Value investment. Please go ahead.
Unidentified Participant
Hello sir. Thank you for the opportunity. So my first question was, you mentioned that in this quarter there was a mutual demand scenario with distribute as well as in your opening remarks. So if you can highlight what is the user industry mix for us in 9 months FY25 and how is this as compared to last year?
Sachit Jain
Can you repeat the last part? I didn’t understand after the muted demand you said nine months. You asked the question, I couldn’t hear you clearly. Can you repeat that?
Unidentified Participant
Yes, sure. So what is the user industry mix in 9 months FY25 as compared to the same period?
Sachit Jain
We don’t share. It’s marginally different. The tractor and commercial vehicle segment would be a bit higher than marginally higher. And some non automotive sales also would be a bit higher.
Unidentified Participant
Okay, secondly,
Sachit Jain
But these are all marginal differences. It’s not something very major. And that kind of shift can easily happen year to year, quarter to quarter. Some order matures here and there because we have strategic customers and we have certain volume always of non strategic customers. So there the volumes will fluctuate a bit here and there.
Unidentified Participant
The second question is, you know, previous year you had guided for 215 to 220, say logic terms of volumes for FY25. So given the volumes that we have done, the balance for 4Q comes to 48,000 tons, considering that we have almost one month of shutdown next quarter. So are we still in line with the guidance or.
Sachit Jain
We are. When we made the guidance, we knew there was a shutdown coming and we have planned inventories with us. So which is why if you see we analyze the balance sheet, you’ll see working capital significantly higher than our norms. So we believe that yes, around that figure, exact figure is difficult to predict, but around that figure is where we should end up.
Unidentified Participant
All right. And the third question was on the power and fuel cost. So that has gone up by around 1.2 rupees per kg. This is despite shifting fuel. Shifting sourcing needs from gale and also solar power. So what let me know.
Sachit Jain
Per ton figures haven’t. Per ton figures haven’t gone up. They’ve gone down actually the per ton figures. So maybe separately offline you can quit. Send an email and we’ll answer your concern. But the cost of power and fuel has gone down per ton.
Unidentified Participant
Okay. Okay. Out of the 47 crores power and fuel that is reported
Sachit Jain
The sales are higher. Our production is higher than our sales. So the consumption is more on the production, not on the sales. If you will consider the increase in inventory of 53 crores in the revenue. Because in this quarter production was higher but the sales were lower. So the inventory has gone into stock. So percentage to the total sales and stocks our power and fuel cost has come down.
Unidentified Participant
Okay, understood. Out of. Generally out of this 47 crores power and power and fuel it mentioned. So how much would be power and how much would be fully on a general basis. If you can give a breakup, sir,
Sanjeev Singla
Out of this about 38 crore. Is the power.
Unidentified Participant
Okay. And in power, sir, so I think you mentioned in an opening remark.
Sachit Jain
Can you allow another question to come in and then we can come back and these are very, very detailed questions on numbers. You can send an email to the company and we can answer that separately. Okay.
Unidentified Participant
Okay, thanks.
Operator
Thank you.
Sachit Jain
Line items we don’t normally address in a call that can be sent separate to the company.
Operator
Thank you. Ladies and gentlemen, to ask a question please press star and one on your phone. Now the next question is from the line of Anil Kumar Sharma, an individual investor. Please go ahead.
Anil Kumar Sharma
Good afternoon, sir. Thanks for the good numbers about it. So my question is. We have earlier discussed that we will announce the. You have. That we have clarified. But return on capital employed the target we have taking 20, 25%. Is that still there?
Sachit Jain
So first of all, thank you for calling these numbers. Good. We internally are not very happy with the numbers. But thank you. And yes, we stick with the. With the return on capitalized capital.
Employed figures of EBITDA of on capital employed of 20% and the target of 25%. We stand by, I mean, I mean this year end maybe marginally a bit lower or I don’t, I don’t look at the numbers on an exact number because at the end level what is this inventory? Because we have, the inventory that we have, as I said, is high and a lot of inventory is made in anticipation. So making inventory four months, five months in advance, there could be a little bit off chance of some items become becoming little extra which will get sold in the next quarter. But so this quarter that may be an issue. But from next year end onwards we will be back on track from 20% to 25%. Even this year we should be around that, around 20%.
Anil Kumar Sharma
My second question is regarding after this installation of the solar project, how much our power cost in percentage or in VA can be reduced? What is the economy for us?
Sachit Jain
We have not shared those numbers just now. So and roughly power would be around 40 to 45% of our power will become solar, roughly 40 to 45. All right, so we haven’t shared any details just now.
Anil Kumar Sharma
All right, thank you.
Sachit Jain
But suffice it to say there will be a cost reduction. So next year we have two items which will be helping to improve our margins. One is power costs are going to come down because of the solar power and two, you would have seen notice an item of job work. So a lot of outside rolling is going on because of a shutdown and so on. So with the shutdowns over and second, with the increased capacity there’ll be no need for, there will not be any need for such major outsourced rolling. So those figures will come down in the second half of next year. So solar project will get the full impact the full year itself and the outsourced job work part will come down substantially in the second half. So these are the two positives which will happen next year.
Anil Kumar Sharma
All right, sir, thank you. Thanks a lot.
Operator
Thank you. Before we take the next question
Sachit Jain
And those positives, as I said, sorry, may I just add to the. These two positives are in addition to the positives of quality improvement and better servicing to customers and the capacity increasing and therefore some costs coming down which has to be seen.
Operator
Thank you, sir. Before we take the next question, would like to remind participants to press star N1 to ask a question. Next question is from the line of Kirtan Mehta from Baroda BNP Paribas Mutual fund. Please go ahead.
Kirtan Mehta
Thank you sir for this opportunity.
Operator
Kirtan, can you use your handset mode? Your line is not very clear.
Kirtan Mehta
Is this better now?
Operator
Yes, please go ahead.
Kirtan Mehta
Yes. After we are completing a sort of capacity expansion to 270kg rolling capacity, how do we expect the volume growth to come through? And how much years of growth Runway that this capacity expansion provide us?
Sachit Jain
We are still making those forecasts. But assuming 215,000 tons, we do this year, next three, four years growth is visible to us. So basically we should be able to hit 70,000 tons in three to four years from now.
Kirtan Mehta
Understood, sir. And in terms of what is the present cost of your power in unit cost terms? Is it close to seven rupees or so?
Sanjeev Singla
Yes, it’s around seven. But that is including fixed and variable. The variable cost is lower. So the fixed cost will remain what it is, the variable cost. Only that part will be saved with the solar plant coming in. So you should look at a cost of 5 rupees 65 paisa as a variable cost and compare any saving from solar will be on that 5 rupees 65 paisa not on the 7 rupees.
Kirtan Mehta
And this would be entirely on our books, the solar plant.
Sachit Jain
I’m sorry. No, no, no. The power plant is putting up in an SPV only our share of the equity. 26% of the equity, which is roughly 18 crores. Sorry. I’m sorry. My CFO has corrected me. 19 crores. So about 19 crores would be on our books. Everything else, including debt obligation, everything else is on the books of the operator.
Kirtan Mehta
And what would be the. Then this group captive plant would charge us in terms of the solar power cost.
Sachit Jain
We haven’t shared those figures.
Kirtan Mehta
Would it be in the lines of the industry where the cost is typically under 2 rupees 50 paisa or so?
Sachit Jain
I think your figures are way off. 2 rupees 50 paisa maybe for government norms for supply. And so there is a cost of supplying to the grid. And then on top of that there are wheeling charges, there are transmission and distribution losses, there are banking costs. So there are other costs also. But 2 rupees 50 paisa kind of a thing is for a government kind of bidding then super large projects where land is very often provided by the government. So please don’t compare with those kind of things. This will be in the range of the power input to the grid will be in the range of three to four rupees. In that range.
Kirtan Mehta
Great. Sir, thanks for sharing these details.
Operator
Thank you. Ladies and gentlemen. To ask a question please press star n1 on your phone. Next question is from the line of Angad Kaddare from Samiksha Capital. Please go ahead.
Angad Katdare
Thank you for the opportunity. So my first question. Am I audible now?
Operator
Yes, thank you.
Angad Katdare
Sir. My first question is on the. You know government I think has announced another PLI scheme for specialty steel. How do you see the benefits? You know and can you just throw some light on the same?
Sachit Jain
Yeah, we haven’t examined that scheme. So. So I can’t answer that question.
Angad Katdare
Are we planning? Are we interested in it or like not planning?
Sachit Jain
No, we are not. We are Approved in the PLA1 scheme.
Angad Katdare
Yeah. Okay. So my second question is on
Sachit Jain
The new project when it comes up. So first you have to have a detailed project plan before you apply. So we will Hope that a PLI3 scheme will come in and if it comes in we will apply for it.
Angad Katdare
Noted. Sir. My second question is on green steel. So government has come up with the definition of 2.2 CO2 per ton. We are already at 0.73 and you know, further planning to go down to 0.4. I just want to understand the unit economics, how we will be benefited from green steel. Like let’s say if we manufacture 2 lakh tons of. If we produce 2 lakh tonnes how will we get benefited from this green steel definition and even the carbon credit.
Sachit Jain
So all those things are getting clarified as we speak. So the financial benefit will come once carbon trading begins in the country. And the government is serious about carbon trading. And people like us with 0.45 or 0.48 is where we should end up. Maybe within May we’ll be at 0.45 or so. So we’ll be way lower than the norms. And therefore whenever carbon precision. Trading begins, we will be beneficiaries. So but very difficult to find out what is the financial impact of that. Suffice it to say it will be a positive impact and all our competitors will be significantly above 2.2. So the relative advantage we will have over our competitors would be positive for us. The second thing is in terms of share of business. So clearly we are getting signals from OES that they want to move to lower carbon credit companies, which means that chances of increasing our share with the target customers is going to increase. And at some stage there will be a shortage in the country of low carbon footprint companies. And which case if the government mandates come in in terms of so much everybody has to use from low carbon credit companies, then there will be a premium for our steel. But all this is speculation and conjecture at this point in time. Suffice it to say that the tailwinds are in our favor. We are facing tailwinds favoring us, not headwinds ahead of us. So this, all this thing is moving in our favor and we are getting ready with a new plant also. Hopefully by the time all these things can concretize, we’ll have a new plant also we will have sufficient capacity to take full advantage of it. The European customers that are talking to us are coming to us primarily because of this. So that is a very clear thing we are getting from Europe.
Angad Katdare
Got it, sir. One small.
Sachit Jain
Sorry for being very vague, but I’m sorry for being so vague but as of now it’s all talk. But the seriousness of those talks that I’m seeing in some of the OES is very, very heartening. So to answer your question, is there some specific benefit we have seen so far? I guess only the European large oe, the inquiry that came to us and whose samples we have sent and I am going to meet them later this year. That inquiry came only because of low carbon credit. They were very clear. That’s the only reason they approached us. And they have never sourced from India and they are huge. If that happens and if other large European OEs follow suit, then we are sitting pretty.
Angad Katdare
Suffice to say the 25% export target is on track.
Sachit Jain
Difficult to say because some of it could be export of steel, some of it they may say no. We will take the forgings from India, so they may ask us to supply the steel to forging companies. These are global supply chains, so very difficult to say with the steel. Will be exported or they will increase their sourcing of forgings from India.
Angad Katdare
Got it. Sir, one small clarification. We are planning to do a shutdown. A planned shutdown of 25 days in the. In this quarter. So we have sufficient inventory build up.
Sachit Jain
So first of all one one, it’ll be partly March and partly April. So it’ll be partly this quarter, partly next quarter. Second, we have chosen a time where anyway demands are low because everybody is trying to reduce their inventory. So March end is not a time where customers are looking for large amounts of material. So we have chosen that kind of time. And third, we built up sufficient stocks.
Angad Katdare
Got it. And other small clarification.
Sachit Jain
The. Sorry, let me repeat. May I. May I just complete this? The outsourced rolling mills that we are doing, we’re getting some work done on outsourcing that will continue. So. So there will be. It’s not that will be in a complete shutdown. It will be partial shutdown of capacity.
Angad Katdare
Got it. Sir, another small clarification on the upcoming forging and the. The action plan. Both we are going ahead with Aishi or is another entity or are we going standalone?
Sachit Jain
One thing about Vardaman is when we partner with somebody then we go the whole hog with them. And Aichi is the world’s third largest forging company and one of the best in quality. So when you have such a partner, your partner has all that. Why would you go outside?
Angad Katdare
Thank you.
Sachit Jain
They have forging plants all over the world. They are. Their mother plant is in Japan. They have a forging company in Indonesia. They have a forging company in Taiwan island in Philippines and the U.S. india is the missing part in their plan. And India when it comes up will be meant for Indian market, will be meant for Africa in the future and will meant to export to Europe in the future.
Angad Katdare
Got it, sir. Thank you. I’ll get back in the queue.
Operator
Thank you.
Sachit Jain
And sorry, they are also in China. I forgot to add. They are also in China.
Operator
Thank you, sir. Ladies and gentlemen, to ask a question Please press star N1 on your phone. Now next question is from the line of Aniket Redkar, an individual investor. Please go ahead.
Aniket Redkar
Good afternoon everyone and thank you for the opportunity. Hello, Am I audible?
Sachit Jain
Yeah, yeah, go ahead.
Aniket Redkar
Yes, yeah. Just wanted to understand, are we looking for any export opportunity and in terms of, I mean from the long term perspective or the short term perspective?
Sachit Jain
Of course.
Aniket Redkar
Hello.
Sachit Jain
Yes, we are. Yeah, of course we are. If you want to be a world class company, you can’t be a domestic company alone. You have to be exporting. So yes, we’re looking for export opportunity.
Aniket Redkar
So, so answer related to this ig, are we supplying products directly to Toyota or through it?
Sachit Jain
No, Toyota is a car company. They don’t buy steel. They buy some. In some cases they buy forged components, a forged and machined component and some they will buy assemblies. So steel company would appear two or a tier three supplier. But we are approved by Toyota. So only then can you supply to Toyota. So the audits are done by Toyota and they apply approve our plant for certain grades of steel, for certain products we send to certain customers.
Aniket Redkar
Okay, okay.
Sachit Jain
They specify all that.
Aniket Redkar
So sir, can you.
Sachit Jain
Sorry, it supplies roughly 70% of Toyota’s requirements of steel globally.
Aniket Redkar
Okay, okay.
Sachit Jain
And therefore, with the announcement of Toyota’s new plant and expansion in India, this will open up an opportunity for us to supply more volume in India also to Toyota.
Aniket Redkar
Okay, okay. And sir, can you give me the guidance in terms of revenue and bottom line for FY25 and 26?
Sachit Jain
FY25, we’ve already said 3 months, 9 months are out, so 1/4 is left. We will remain in the range of 7 to 10,000 rupees EBITDA per ton in the fourth quarter also. And 25, 26, we had said we will be 8 to 11. We will try to raise the range. We said that remains to be seen as we close the year because the market conditions have turned adverse. So whether we will be able to hit that figure next year or the year after that. So 26, 27, we are now reasonably confident we will be able to hit the figure of 8 to 11. But for next year, for now the I would like to retain the forecast of 7 to 10.
Aniket Redkar
Okay, okay, got it, Got. And sir, one last question. Are we looking for any CapEx for the upcoming fiscal year?
Sachit Jain
Yes, this is already part of the announced capex. The rolling mill part will get completed only next year by September. So it will get commissioned both the Cox block as well as the reheating furnace and some additions in the cooling bed and other things. So roughly 160 crore to 170 crores worth of capex will be capitalized next year. In addition, we’ll be starting work on the entity line, the second non destructive testing line. So that work will start next year and will get commissioned in the year after that.
Aniket Redkar
Okay? Okay, got it sir. Thank you so much sir.
Sachit Jain
We will attempt to see if it gets commissioned within the next year. But after this, after the entity line is done and some more pending work in the furnace and some environmental investments. So really speaking, 25, 26 will signal the end of the CAPEX plan as far as this plant is concerned.
Aniket Redkar
Okay, okay.
Sachit Jain
Largely then the normal CAPEX kind of a thing will continue. But this plant will be then almost done I would say.
Aniket Redkar
Okay. Okay. Got it sir. Got it.
Operator
Thank you. We’ll take our next question from the line of Saket Kapoor from Kapoor Company. Please go ahead. Mr. Saket Kapoor, please check if your line is on mute. Yes, there is.
Saket Kapoor
Hello.
Sachit Jain
Yeah, go ahead.
Saket Kapoor
Yeah. Yes sir. Firstly as you are. You are alluding to the previous participant about the capex for the existing plant to be over by the financial year 2125, 26. So already we have. Our melting capacity has risen to 3 lakh per ton. How much have we spent? How much have we spent on this part of the story and what part of the CAPEX is left to be spent in absolute amount terms if you could quantify.
Sachit Jain
So on the melting side we have not spent much money. The more process improvements that have gone in and a new transformer was put in, there’s some pending environmental work which is again not. To major less than 10 crores kind of thing which is pending. So there’s not much investment done in the melting. For the rolling side we have said about 180 crores or something which is largely two items. 160 crores. And then smaller items here and there would be another maybe 20 crores. 15, 20 crores. And then the entity line, okay. That is required for testing for high quality customers like Toyota and Maruti. For the import substitution for so for the other. For the. For the more sophisticated customers and sophisticated products. You require that kind of continuous testing for quality Reliance quality assurance.
Saket Kapoor
Okay. Sir, you mentioned LDD lines. Can you just provide the full form
Sachit Jain
Non destructive testing.
Saket Kapoor
Okay. NDT line. Sir,
Sachit Jain
These are continuous lines. These are continuous lines for quality checking and any defects are immediately pointed out. If you can rectify the defect you can send the goods. If you can’t rectify the goods then the goods are. Each bar is rejected or approved. Right. And sir with this method is manual checking. The earlier method is manual checking. This is automatic check checking by machines.
Saket Kapoor
Correct sir. Thank. Thank you for elaborate answer sir. So the quarterly challenges going ahead with the. With the additional rolling capacity would be to the tune of 70,000 plus for the first quarter. Going ahead.
Sachit Jain
Can you repeat the question please? I’m sorry, I didn’t get that.
Saket Kapoor
With the new addition
Sachit Jain
Will be less. Less because one we having a shutdown in extending into April. Plus the. The first investment coming up is the Cox block which will get commissioned in April. That will increase our capacity by about 15,000 tons of input. Then the next investment coming in is the reheating furnace which will get commissioned by September or October. That will have a bigger chunk of impact on the capacity.
Saket Kapoor
Okay so the second half what should be the quarterly run rate?
Sachit Jain
Sorry, sorry, sorry. Let me just elaborate a bit. Plus after the cops block gets commissioned there’ll be a few months of stabilization. Getting approvals from customers that they are okay in using this but. It’s a major change. So the customers have to get satisfied and so on. That whole process begins again. Much shorter process than a fresh approval but still that takes time. So which is why next year we are not looking at a major increase in capacity or so on till December or so when customers get fully confident. And then maybe the last quarter we’ll get a benefit of capacity. Okay. That’s why I said next year is a year of more stabilization and consolidation, project implementation and consolidation. And then the year 2627 we are ready full blast. Okay. And that is again earlier this whole process got delayed by a year, a little over a year because of the delays in some capex, some capital deliveries and so on. So the whole process got delayed by a year.
Saket Kapoor
Yes sir, I. I got your point that the project implementation got delayed by an ES time and we have spent around 160 to 180 crore in. In these all activities. This is what their total capex will be.
Sachit Jain
Some spend, some invested, some will. Will be invested but the capitalization will be too to that kind of a. That kind of amount and it’ll. The entire capitalization will happen in next year.
Saket Kapoor
Okay. And then, and then from 2627 the run rate would be a. What? Sir? On a quarterly basis how will the tonnage go up?
Sachit Jain
That depends on the sales position, market forecast and so on. But this year we’ve done 215,000 tons. Next year we’ll try to do 225 to 230 around that. We have not finalized the figures. The year after that we should try to do 245 to 250. And the year after that we should try to do 270. Okay. Growth of 7 to 8%. We target a growth of about 7 to 8% which is the rate at which the economy is growing. If there is a scope things are better. We’ll be happy to take that growth. But all that will be discussed in the year 2627. Once capacity problems are behind us. Correct. Then you can put a foot on the accelerator. No, otherwise if you have capacity shutdowns and so on, you have to be careful. So you can’t put the foot on the accelerator.
Saket Kapoor
For the raw material mixture you were mentioning about. Once this green aspect comes into full throttle there will be scarcity part on the. On the same. So what is the currently our raw material sourcing strategy and how much of the scrap goes also in the raw material?Mix.
Sachit Jain
Scrap is roughly 80% in our raw material mix. And we have tested that. We can go up to almost 100% of scrap also. So that has also been tested. And some customers have liked the idea very much that we can do 100% scrap. As a country there is a shortage of scrap. However in the north we do not face that shortage of scrap. So that is why our second plant also we are looking to locate that plant in Punjab itself. In our opinion, Punjab is the best state to put up a secondary steel which is our kind of steel plant. So. And there’s concept of circular economy which is coming in. And already with some OEs we have here advanced levels of talks of circular economy which means crap generated from the OE will come to the steel company. The steel company will make the steel, send it to vendors of the automobile company and go back to the auto company also. End of life scrap will also come from the OE and come to the steel company. So for example, Maruti has a joint venture with Toyota Susho for scrapping cars. Hundred percent of that scrap comes to us and goes back to Maruti.
Saket Kapoor
Correct. Correction. And this entire sourcing
Sachit Jain
That is still a very small quantity just now. But those concepts are being tested and so on that as government. Because government regulations are clearly coming in this area. So all companies, the OEs are getting ready for this kind of a thing. That once this thing happens, we are the best placed company for implementing the circular economy concept.
Saket Kapoor
Correct. And currently all the stuff is the source.
Sachit Jain
Sorry, go ahead.
Saket Kapoor
No sir, you answered. Sir, I am there to listen. Please.
Sachit Jain
So the two concepts of green steel and circular economy, these two are the positive steps which are going in our favor. Green steel will be implement, will be have an advantage in India and overseas. Whether for steel or for forged components. Circular economy is a local concept. It’ll benefit us with the north Indian companies. So whether it’s Maruti, whether it’s Hero, whether it’s the other plant. In the northern region. So. So we have. Honda is present. So Bajaj has a plant in the north. And then depending on how seriously the government implements this Even the companies in other parts of the country may want this material from us.
Saket Kapoor
Correct. Correct. And sir, there is also another steel company that has started in a small way. I think the Tata Steel has also commissioned their crab based ea fruit plant in the state of Punjab. Only that is complementing to the story.
Sachit Jain
No. So first of all it is not yet commissioned. And two, it is not for automotive steel. To our understanding. Okay. Our understanding is it is meant for construction steel.
Saket Kapoor
Correct. So thank you for correcting me. And lastly sir, when you. When we are talking to the state government in terms
Sachit Jain
This is our understanding is I’m saying it is not right for me to comment on another company.
Saket Kapoor
Absolutely right, sir. Lastly sir, when we are. Look when we have an understanding with the government of Punjab going ahead with the another greenfield facility. So the type of incentives which we are accruing right now in terms of the benefit in the tax refund and the. The electricity duty and all. So that should. That will again be the very likelihood that will be a part of the project going ahead. That. That will. That. That incentives should be a part going ahead.
Sachit Jain
That’s a. That’s a reasonable assumption. But till things are finalized I don’t want to comment on that. But that’s a reasonable assumption.
Saket Kapoor
Okay, sir. And as of now sir, we have accrued I think so for the nine months. 22 crores. So what is the total time, time limit for accruing the benefit? When will this come to end?
Sachit Jain
I’ll let Mr. Singlar answer that question. I don’t have the knowledge to answer that question.
Sanjeev Singla
So there are two components. One is a GST refund. And GST refund is available to us up to September 26th. And electricity duty exemption is available up to September 29th. Yes, it will continue in the same proportion. So overall under both the hats it is 24, 25. Crores per annum. So equally distributed under both our heads. Other expenses category at 67 crore. Many variable cost. It is.
Sachit Jain
There’s no one off. There’s no one off. Big, big, big ticket item
Saket Kapoor
Presentation or your press release. So kindly look to upload the same on the same basis.
Sanjeev Singla
Yes, this time we got late and it is uploaded today morning. So normally we do upload on the same day itself. So next time we will take this point.
Saket Kapoor
Please continue to be to lead the call going ahead. Thank you.
Operator
Next question from the line of Sai Ganesh from Square 64 Capital Advisors LLP. Please go ahead.
Sai Ganesh
Thank you for the opportunity. I just wanted to know the opportunity size from coming from IG to our company.
Sachit Jain
I’m sorry, can you. Can you repeat the opportunity
Sai Ganesh
Size coming from ig?
Sachit Jain
Opportunity size in terms of volume business? Y
Sai Ganesh
Es, in volume? Yes. Yes.
Sachit Jain
It is still small. We are below our target of 30,000 tons of exports. That was planned primarily because Toyota sales in Thailand are not taking off as per their expectation. And the yen depreciated significantly over the last five years. And we believe in a strong rupee. So relatively Indian costs have become higher than even Japanese costs. So now with the rupee depreciating finally I think things should change a bit, turn a little bit more in our favor.
Sai Ganesh
Okay, sir, do we have any internally target for like volume in volume terms from IG going forward three to five years?
Sachit Jain
No, we don’t work like that. There’s a direction towards which we move towards and which is why even Aichi is cognizant of the fact that we are below those figures of 30,000 tonnes. So this forging business and all these things are kind of things are being thought of to see how. Offtake of steel from Vardaman Steel can be made good.
Sai Ganesh
Can you share the.
Sachit Jain
I’m sorry.
Sai Ganesh
Can you. Could you share the EBITDA pattern of IC light? Is it possible?
Sachit Jain
No, we don’t share separately. Customer by customer. We talk about overall ebitda.
Sai Ganesh
Okay. Okay. Thank you, sir.
Operator
Thank you. We’ll take our next question from the line of Gargi from Value Investment. Please go ahead.
Unidentified Participant
Hi, sir. Thank you. So my question was that many of our peers are unlisted. Is there any capacity addition happening in the next one or two years? Also, could you talk about the dynamics and. Yes, sir.
Sachit Jain
So from what we have heard Kalyani Group has already come out in public that they’re putting up a green steel plant. They’ve taken over a steel plant in the South Kamineni Steel. So that is one that we’ve heard of. SLR is probably thinking of Baki. It’s very difficult to comment on other companies. But maybe they are thinking of expanding. But nobody shares their plans with us. No.
Unidentified Participant
Yes, sir. Also, could you talk about the dynamics and the reason for the pricing pressure which you mentioned in your opening remarks. Wanted to understand whether your opinion. Whether. I’m sorry. Continue.
Sachit Jain
So currently the pressure is. As I said, there are two reasons primarily. One is imports from China which have depressed the commodity steel prices which reduces. Which spoils the steel sentiment. And the bigger guys like jsw, Tata Steel results are out in the public, I believe. JSW profits I heard are down by 70%. And Tata Steel profits are also down by 36%. Please. This is a figure I heard. So I’m not standing by these figures. But the fact is the profits are down. Sajjan Jinderji has already come out in public. There was an interview in Times of India talking about this. So steel industry is under pressure. Very clearly. If steel industry is under pressure then the probability that the government will step in at some stage. I think there’s pressure from the industry to the government to put in some safeguard duties. Anti dumping duties. All those discussions are going on now. When these things will take shape, when will it happen? Very difficult for me to say the second thing which is favoring our company not directly. But by reducing our competitive disadvantage compared to our competitors. I believe on this coking Coke, there has been some action by the government in terms of dumped coking coke coming to the country and therefore cooking coke prices. The country are expected to rise with those prices rising. Which means our competitors will be forced at some stage to start raising prices. So once that pressure comes in, the relative disadvantage will come up. We are much smaller company. So the bigger companies, their pressure determines the market sentiment. So once JSW and Tata Steel start doing well, there will be tailwinds supporting us to do better than what we are doing today.
Unidentified Participant
Okay, so one last question is that in the last quarter you mentioned that there is an order win with one large Indian only for which vssl, for which our company will be the tier one supplier. So that is on account of only replacing the Japanese steel imports. So when do we expect to start supply to these OEMs? And also
Sachit Jain
Within a year. Within a year the supplies will start.
Unidentified Participant
Okay. Any progress on similar negotiations with other oe?
Sachit Jain
Yes, there is. There is. So because the government is very clear that everywhere where steel is getting imported, to see that steel gets localized, the certain things have already happened where we are tier two suppliers. So some. Some orders which were going from which which imports were coming in from Korea have already shifted to us and some more. But largely steel had already been localized except for this oe. And this opportunity is a big opportunity for us provided we are able to make success out of this. Now please understand, they’ll be comparing this OE will compare our steel with Japanese steel. A tier one comparing Japanese steel and an OE comparing Japanese steel is a big difference. So it’s a challenge and an opportunity for us.
Unidentified Participant
Understood, sir. Thank you. And all the best to you.
Sachit Jain
Thank you.
Operator
Thank you. Ladies and gentlemen, since we are at time, we will take that as the last question for today. I now hand the conference over to management for closing comments. Over to you, sir.
Sachit Jain
Ladies and gentlemen, thank you so much. Some of your comments have been encouraging. As I said earlier, we are not very happy with this performance and we hope one. Once this plant or the expansion gets stabilized, we’ll be able to focus on more improvements and very soon reach our figure of 8 to 11,000 guidance. And we’re able to show you a clearer path of growth. April meeting, as I said, will hopefully announce our new project. Also. The timelines for the new project also will be announced. So a lot of things will become clearer in the next three to six months. Thank you so much. And we look forward for your continued interest in our company.
Operator
Thank you, sir. On behalf of Bartleywala and Karani securities India Private Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.