Venus Pipes & Tubes Ltd (VENUSPIPES) Q1 FY23 Earnings Concall Transcript

Venus Pipes & Tubes Ltd (NSE: VENUSPIPES) Q1 FY23 Earnings Concall dated Aug. 10, 2022

Corporate Participants:

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

Dhruv Mahendrakumar Patel — Whole Time Director

Kunal Bubna — President, Finance and Accounts

Analysts:

Pallav Agarwal — Antique Stock Broking — Analyst

Abhishek Agarwal — Prithvi Finmart — Analyst

Nirav Shah — GeeCee Investments — Analyst

Sneha Talreja — Edelweiss Securities — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Kamlesh Bagmar — Prabhudas Lilladher Pvt. Ltd. — Analyst

Asha Jain — Jain Capital — Analyst

Anjana Shah — Shah Investments — Analyst

Dhiral Shah — Phillip Capital — Analyst

Presentation:

Operator

Good day, ladies and gentleman, and welcome to Venus Pipes Q1 FY FY ’23 Earnings Conference Call hosted by Antique Stock Broking. This conference call may contain forward-looking statements about the Company which are based on the belief, opinions, and expectations of the Company as on date of this call. These statements do not guarantee the future performance of the Company and it may involve risks and uncertainties that are difficult to predict.

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. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Pallav Agarwal. Thank you and over to you, sir.

Pallav Agarwal — Antique Stock Broking — Analyst

Yeah. Thank you, Michelle, and good afternoon, everyone. And welcome to the 1Q FY ’23 Venus Pipes results conference call. We have the senior management represented by Mr. Arun Kothari, MD and CFO; Mr. Dhruv Patel, the Whole Time Director; and Mr. Kunal Bubna, President, Finance and Accounts on the call with us today.

So I would now like to hand over the call to Mr. Kothari for his opening remarks. Over to you, sir.

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

Good morning. Welcome to everyone on the first earning call for Venus Pipes & Tubes Limited. First and foremost, I hope that you and your family members are safe during this difficult times of COVID. Along with me, I have Mr. Dhruv Patel, our Whole Time Director; and Mr. Kunal Bubna, President, Finance and Accounts; and SGA our Investor Relations advisor.

To begin with, I would like to thank and congratulate all the stakeholder, investor, bankers, and business partner for helping us achieve a milestone of getting listed on the Indian Stock Exchange. We were delighted to see such a strong response for our IPO. Since this is our first earnings call, allow me sometime to take you through Venus Pipes & Tubes Limited, it’s a journey so far, broad industry update and strategy going forward. Followed by this, will be operational and financial highlights for the quarter and we can open the floor for question and answer.

We have also uploaded our latest investor presentation on the stock exchange, and I hope everybody had a chance to go through the same. We are the manufacture and exporter of stainless pipes and tubes in India, based out of Kutch, Gujarat. We make versatile products while having usage in several industry, like power, food processing, aerospace, fertilizer, paper, pharmaceutical and chemical. Yet the facility is located in Dhaneti, near to Kandla and Mundra port, which is one of the major port of North India, it gives us a logical advantage. Today, we export over 20-plus countries, and out of total clients we serve 58 are Fortune 500 companies.

Our products contain seamless, welded, and heat exchanger and hydraulic tubes and pipes. I am proud to tell you that we are compliant with the international standard and have been certified by ISO, IBR, and TUVS200. Our quality check is extremely stringent, which is the reason why we could take prestigious client such as Adani, Asia Paints, Amul, BHEL, Cipla, Godrej, SP, ISRO, L&T, Tata, Voltas and many more. Going forward there is much more growth to look at India as the second largest steel producer in the world. Not only demand comes from a diversified set of sectors, but also from primary users like chemical, oil and gas and pharmaceutical, all three which have a huge potential due to government initiative and scheme announced.

In such scenario, our growth strategy is to occupy more market share by expanding our capacity from a total of 12,000 MTA to 25,600 MTA. Especially, we would like to mention that our increased capacity will increase our project basket in welded segment up to 48-inch dia pipe and in seamless segment up to 18 dia pipe. We are manufacturing welded type segment up to 18 dia pipe and in seamless segment up to four-inch dia pipe. In addition, we will also make 9,600 MTA of seamless over pipe by fitting a piercing line. This backward integration will benefit not only the cost structure but will eliminate the risk associated with raw material imports. This capex will be built on 45,690 square meter of surplus land on our existing facility.

Our other plans are to increase our geographical presence by leveraging our existing relationship with traders, distributors and market representatives globally. Not only this, we are also planning to install an acid regeneration plant for lower consumption of acid in the manufacturing process. This has both ecological and economical advantages for us. To set up Venus as a stronger brand, both domestically and globally, we have planned various brand-building activity.

Now I am handing over the call to Mr. Dhurv Patel, our technical director, who will brief about the technical details and for the existing and expansion project of the Company.

Dhruv Mahendrakumar Patel — Whole Time Director

Good afternoon, everyone. I will be briefing about the capacities and the present project status of Venus. So Venus started in December 2015 with initial capacity of 200 metric tonnes per month only for the welded pipes. And over a period of time, the capacity had been increasing each year. At present, our total capacity is around 1,000 metric tonnes per month where welded pipes contribute to 700 metric tonnes and seamless pipe contribute around 300 metric tonnes per month.

I’d like to brief you all about the present project status. So the orders have already been placed for major machineries like slitting lines, piercing [Indecipherable] and further we propose to start new seamless division and the slitting line by the fourth quarter of financial year ’23 and the balance plant will be commissioned in the first quarter of financial ’24.

I would also like to brief you about the expanded capacity. Currently, as I told you that we have 700 metric tonnes capacity for welded per month and for seamless we have 300 metric tonnes per month, so it is totaling around 1,000 metric tonnes per month. Post expansion, we will be having the seamless capacity of around 800 metric tonnes per month and 1,300 metric tonnes per month will be for welded and further 900 metric tonnes per month for seamless with the backward integration which will be self-consumed.

In this year, we participated in many exhibitions, like Globus Stainless Steel Expo and Camtech in Mumbai, and we also participated in international fair in Germany which was in Dusseldorf, the wire and tube expo, and further we will be participating in Stainless Steel World in Maastricht, Netherlands in September.

And now I am handing over the call to Mr. Kunal Bubna, who is our President, Finance and Accounts for operational and financial highlights for the quarter.

Kunal Bubna — President, Finance and Accounts

Good afternoon, everyone, and a very warm welcome to our earnings conference call. We have uploaded our latest investor presentation on stock exchange for Q1 FY ’23 results. I hope everybody had an opportunity to go through the same.

On the revenue front, revenue from operation from Q1 FY ’23 stood at INR113.6 crores as compared to INR81.1 crores in Q1 FY ’22, a growth of 40% on year-on-year basis. Revenue bifurcation for the quarter was INR60.3 crores for welded, INR24.8 crores for seamless and INR8.5 crores from others. Our exports was at 12.4% for this quarter versus 5.9% of Q1 FY ’22. The dependency on stock has gone down from 43.77% to 32.2% as we compare with FY ’22 with Q1 FY ’23. Domestically, Gujarat has been our top contributor, but revenue from other states had also gone up giving us better access across regions.

EBITDA stood at INR14.5 crores as against INR9.3 crores in Q1 FY ’22, a year-on-year growth of 55%. EBITDA margin is up by 120 basis points. PAT for the quarter is INR9.1 crores as compared to INR6.8 crores in Q1 FY ’22, a growth of 34%.

On the banking side in FY ’21 end, we have changed our banker. We introduced SBI as our banker and baring the working capital with earlier bank was INR30 crores fund based and INR22 crores non-fund based apart from the term loan. This INR52 crores was internal change with SBI. The limit with SBI was fund-based INR45 crores and non-fund based INR52 crores. So basically INR52 crores earlier was INR32 crores from our working capital is INR22 crores in the non-fund base, which was changed to INR45 crores with fund based, and non-fund based by INR7 crores with SBI. Our bet — balance sheet as on March ’22 will be increased because of conversion of non-fund to fund based facility.

Apart from that a brief on the working capital cycle is basically — it is around 90 days for stock with raw material around 60 days to 55 days for debtors and near to 30 days for creditors. So it is a net working capital cycle of around 120 days which is again lower than our peers.

Just to update, we have further added two news in this quarter, which is basically in July ’22 which will result in increased capacity for welded pipe 100 MT per month starting July ’22 onwards. Just to brief you on the utilization from IPO, we have utilized INR57.71 crores so far till June 30, 2022, and the major part of the money was spent on financing of capex, meeting working capital requirement and also IPO expenses.

Our capex funds are on track and same [Indecipherable] would be operational by January ’23 and some part by first quarter FY ’24. The demand scenario going forward with robust and we are optimistic for a growth trajectory. We have profitability in the wake of synergy aided by our capacity expansion plan.

With this, I would like to open for Q&A round.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Abhishek Agarwal from Prithvi Finmart. Please go ahead.

Abhishek Agarwal — Prithvi Finmart — Analyst

Hello, sir. Sir, my question is related to our capex plan. So can you reiterate our capex plan? What is your total capex and breakup on our welded pipes and seamless pipe and backward integration? And what is — is it a phased manner and what is the time of completion of this project? When the project will start? So this is my first question.

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

For welded pipes, the current capacity is 700 tonne a month and we are expanding it by another 600 tonne for a month. So the total capacity post expansion will be 1,300 tonne a month. Plus to mention here, currently we are manufacturing eight-inch dia welded pipe with expansion we would be manufacturing up to 48-inch dia pipe. So it would be increase of 600 tonne a month for welded pipe for normal capacity, and it will also increase basket for the Company going ahead.

For seamless, we currently manufacture 300 dia — 300 metric tonne a month. And in the expansion, we would be increasing by 500 tonne a month. So the total capacity post expansion would be 800 tonne a month. Plus to brief you on the manufacture for seamless, it is currently four-inch dia, post expansion we would be manufacturing up to six-inch dia pipe. So if you look the total capacity currently is 1,000 tonne a month taking both welded and seamless in blended basis, which will increase to 2,100 per month with the expansion capacity in place.

And to mention here, we are also putting a backward integration for manufacturing of hollow pipe and that capacity would be 900 tonne a month, which will add value additions at margins to the bottom line. And in regards to starting of this project for piercing and silver mill, we target the fourth quarter of FY ’23 and for that welded A358 welded line project we are targeting first quarter of FY ’24.

Abhishek Agarwal — Prithvi Finmart — Analyst

First quarter FY?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

’24.

Abhishek Agarwal — Prithvi Finmart — Analyst

’24, okay. So seamless will come in ’23 and this ’24, correct, welded?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

Yes, sir.

Abhishek Agarwal — Prithvi Finmart — Analyst

And backward integration will come?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

In the fourth quarter of FY ’23 only.

Abhishek Agarwal — Prithvi Finmart — Analyst

Sir, can you give the breakup of this capacity? How much it will cost?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

It is basically INR108 crores we have targeted for this expansion. So basically, welded, and seamless and piercing has a major component for it. And apart from there, there are some quality and machine wherein — we are a high quality machine, apart from that there are some acid regeneration plant where in our current facility we use in the pickling process we use some acid that would be regenerated and used. So it will be more economic friendly and saving on account of chemical would be there. And apart from that, there will be few ancillary machines to support this entire expansion.

Abhishek Agarwal — Prithvi Finmart — Analyst

Okay. And just, sir, how confident we are that whatever capacity expansion we are doing that will get absorbed quickly and we can have the full utilization by FY ’25?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

See, we cater to varied number of sectors if you see. So, we cater to chemical, we cater to engineering, we cater to fertilizer, we cater to paper, power, food processing, oil and gas. So there are multiple number of sectors we cater. And the uses of our pipe are threefold basically, it is basically used for the new projects, other is for replacement, and third is for repair and maintenance. So there is basically a threefold demand number of sector — varied number of sectors we cater. So it gives us — and type of business for the year.

And apart from that, we are adding — going on adding sectors. If you can see paper was very nominal percentage, but in the last April to — April ’23 first quarter, paper factor was increased to 4%. So we are adding sector. Our export sales which was earlier on a lower side, it was around 12% for the first quarter of FY ’23. So we are also increasing on front of export to keeping varied number of sector, giving the export market also export they are very basic.

Export has increased from 5.94% from first quarter of FY ’22 to 12.4% for first quarter of FY ’23. So keeping all this thing, we very much believe and we are much of course those demands are there. We will be — we are qualified for so many of the project. We supply to ample industry.

Abhishek Agarwal — Prithvi Finmart — Analyst

Sir, if I can ask a further question like, for export market, as we are planning to increase the…

Operator

Sorry to interrupt, sir. Sir, I would request you to please rejoin the queue. There are many other participants waiting for their turn.

Abhishek Agarwal — Prithvi Finmart — Analyst

Okay. No problem.

Operator

Thank you. The next question is from the line of Nirav Shah from GeeCee Investments. Please go ahead.

Nirav Shah — GeeCee Investments — Analyst

Yeah. Good afternoon, sir. And congrats on steady set of numbers. Sir, couple of questions. Firstly, sir, are we sharing the total volumes for the quarter and corresponding quarter of previous, sir?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

See, basically — on the volume front, it was basically flattish for the — for this quarter as compared to the last quarter.

Nirav Shah — GeeCee Investments — Analyst

Okay. Fair point. And sir, we are more than doubling our capacity from the current number to 25,000-plus tonnes per annum. So in terms of ramp up, how do you see that capacity utilization going up over the next two or three years? I mean how quickly are we targeting that? And another question related to this is continuing from the previous participant’s question. In terms of exports, how do you see the mix changing when we are using our capacities on optimal basis? At those levels, say in FY ’25 or ’26, what could be the share of exports and the stockiest/ traders? What is the kind of switch that we are seeing over there?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

See, sir, from the capacity ramp up, as I said, if — we would be coming up with our piercing — freezer plant and piercing plant in the first — in Jan to March ’23. So, definitely that usage would be very low as we would be starting on that quarter only. But if you look at FY ’24, we could pre-dominantly believe around 40% to 50% would be the capacity utilization from the new capacity, and FY ’25 would be the year where this capacity would be utilizing to a maximum extent, which can go up to 70% to 75% for FY ’25.

And from the perspective of — as you said, what would be the contribution going ahead because from export and other, I would like to say we are seeing a good traction in export and — so we believe it should be — going ahead it should be around 20% to 25% for export, traders and stockiest is around 32% in this quarter, but we believe it should be around 20% and the rest would be — balance would be for that.

Nirav Shah — GeeCee Investments — Analyst

Okay. So can we say these numbers FY ’25, the ratio 20% to 25%…

Kunal Bubna — President, Finance and Accounts

Nirav, [Indecipherable] we are increasing our product basket basically. So our number of existing clients require the bigger size of different type of pipe [Technical Issues]. So once our capacity will increase, we will able to market to our existing client also. So we ca go — for new capacity utilization, we can go faster basis since we already have existing client in different sizes.

Nirav Shah — GeeCee Investments — Analyst

Absolutely. Got it, sir. And just lately, I mean, for — this is more question related to the industry. I mean what is the import scenario that we are seeing? Has it reduced materially over the last two years which can aid our faster ramp up?

Kunal Bubna — President, Finance and Accounts

Yes. It is right. There are good increase in import and this will definitely help us to cater our increased capacity and with — as we said for welded we would be adding 48 inch dia pipe where in the country it will be very few number of manufacture for this. So those imports of higher sizes would be catered by us. So import will definitely help us in increasing our share in the Indian market.

Nirav Shah — GeeCee Investments — Analyst

Great. Great, sir. Thanks for answering my questions and best wishes, sir. Thank you.

Kunal Bubna — President, Finance and Accounts

Thank you, sir.

Operator

Thank you. The next question is from the line of Sneha Talreja from Edelweiss Securities. Please go ahead.

Sneha Talreja — Edelweiss Securities — Analyst

Good afternoon, sir, and thanks a lot for the opportunity. Just couple of questions from my end, which could be basic. Is there any seasonality in your business that we see generally on quarter-on-quarter basis? Is there any strong quarter that you generally have with respect to your business?

Kunal Bubna — President, Finance and Accounts

See, it is, basically, no seasonality is there in our business. As I said, we see full demand for our product. First is basically for the new project, second is for the replacement because in the sector where we cater, like sugar, chemical, the nature of the industry, they need to replace their pipe over some period of years. And the third would be end users for repair and maintenance. And so, any type of business where the order flow throughout the year. So in our product and our line of business, and as we said we cater to 10, 12 number of factors like chemical, fertilizer, pharma, food processing, paper, oil and gas, aerospace, so as such there is no seasonality in our business.

Sneha Talreja — Edelweiss Securities — Analyst

Understood, sir. And is there any order book that you have maintained given that you also said that you are coming out with higher diameter where the limited number of players already existing? Is there any order book that is already created or in general do you have any order book which is there from time to time, let us say, to repairs and maintenance or replacement parts which is more of a certain demand?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

See, its very tough to identify those buckets basically, but it is internal assessment what we gather from the clients for replacement. But to be right, repair and maintenance are very nominal, it is more of projects and replacement based on cater to our order book. And see, we maintain — try to maintain an order book of around three months horizons. And as you said for the higher sizes, we are currently also getting purchase validated and supplying to our customer. Suppose we get an order of two eight-inch and we also get an order along with that for some higher size of welded pipe, so we currently also supply so that we can build up our clientele for those categories and we are doing this.

Sneha Talreja — Edelweiss Securities — Analyst

Understood, sir. And one last if I may just squeeze in. A lot of catering so many segments which is the area where you are seeing very high demand. Is it — example chemicals or is it engineering where do you see the next two to three years or which are the segments which are going to be major growth drivers for you?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

See, the sector where we see is chemical, its engineering, its paper industry, its sugar and ethanol, these are the predominant sector we see and fertilizer where there are good number of demand. And from engineering prospective, just to give you the key points, engineering will be a — it was one of the leading EPC consultant for oil and gas. And oil and gas could be again the sector. [Indecipherable] one of the leading large scale EPC contract. We added Technic India Limited, this is again a leading engineering and technology company.

[Indecipherable] a German client, wherein acid and tubes are required. In chemical, we added Asia Paints. We added Tamil Nadu Paper Limited for the last FY ’22. For sugar, we added Rana Group. In engineering, we added Tata Projects. There are varied number of sectors [Technical Issues].

Sneha Talreja — Edelweiss Securities — Analyst

Understood, sir. Thanks. Thanks a lot and all the very best.

Operator

Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.

Pritesh Chheda — Lucky Investment Managers — Analyst

Sir, I have few questions. One, what is the current capacity utilization that we are running at? My second question is how much time will it take for you once the new capacity comes, which you are mentioning as quarter four and quarter one, how much time does it take for you to stabilize and run this capacity?

Kunal Bubna — President, Finance and Accounts

The current capacity utilization is around 90% for both welded and seamless pipes. And in relation to the upcoming capacity, we have said we are trying to cater to number of sectors and we are supplying also higher sizes of welded pipes and all. So we are building up a market for that…

Pritesh Chheda — Lucky Investment Managers — Analyst

That [Speech Overlap]

Kunal Bubna — President, Finance and Accounts

But those capacity will be in coming FY ’24. Those capacities would be not to ramp up entirely, but it will be utilized to around 50% and going ahead with FY ’25 it will be predominantly used to a good extent.

Pritesh Chheda — Lucky Investment Managers — Analyst

So the incremental capacity you are saying will be utilized 50% in FY ’24 and 75% in FY ’25, right?

Kunal Bubna — President, Finance and Accounts

Yes, sir.

Pritesh Chheda — Lucky Investment Managers — Analyst

These capacities are plug and play? Does it take any time to stabilize? But in the seamless side at least it takes some time to stabilize and all, or it is a plug and play?

Kunal Bubna — President, Finance and Accounts

See, sir, that’s why I said for seamless as you said you are right, we started in January and we are targeting Jan ’23 to March ’23 where it will be definitely a slightly buffering period, but it is not that much as critical in capacity and solution. One to two months is basically the period which will lead to a new development, but apart from that we can easily ramp it up from there.

Pritesh Chheda — Lucky Investment Managers — Analyst

My other question is, sir, on the margin side with the backward integration, which is obviously the piercing line for the hollow pipe, and in the acid generation plant, what kind of margin addition is possible from this backward integration?

Kunal Bubna — President, Finance and Accounts

Sir, for seamless side, as you said with backward integration, with some higher sizes, so those definitely would be around — going ahead, it will be around 400 basis points to 500 basis points.

Pritesh Chheda — Lucky Investment Managers — Analyst

Which is at the Company level, right?

Kunal Bubna — President, Finance and Accounts

Yeah, the company level…

Pritesh Chheda — Lucky Investment Managers — Analyst

Or at the seamless level? Or is it at the seamless level or company level?

Kunal Bubna — President, Finance and Accounts

This is basically at the seamless level. And for welded it would be around 250 basis point to 350 basis point or 400 basis points.

Pritesh Chheda — Lucky Investment Managers — Analyst

So company level is also 400 basis points?

Kunal Bubna — President, Finance and Accounts

Yeah.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. Sir, the other question is, what will be your peak debt and with backward integration can be — was this — I mean, backward integration, can there any changes in working capital cycle?

Kunal Bubna — President, Finance and Accounts

See, sir, as I said, we are currently having a net working capital cycle of around 120 days. And the peak debt is around INR58 crores to INR70 crores currently. But this piercing line and with — going a project there, there would be definitely some — there can be some requirement of working capital. It would be not substantially high, but it would be there. And then our cycle would be, basically, can increase up to 30 days and other. As you compare to our peers, they are also running at 150 days to 170 days so it would be definitely increased to 20 days to 40 days.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. So working capital cycle increases basically?

Kunal Bubna — President, Finance and Accounts

Slightly it would be increasing.

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

We are going in the backward integration. So we have to return — increase the inventory level also, which will give the effect in EBITDA level. So since overall capacity is also going to increase, present capacity is 12,000 metric tonnes per annum, which will go up to three fold with the backward integration.

Pritesh Chheda — Lucky Investment Managers — Analyst

I understood, sir. I just wanted to know with the process change because you must be using hollow pipe, now you start using billet, so will be there increase in working capital? You said it will increase from 120 bps to 150 bps. And this 400 bps of margin expansion do we start seeing at 50% capacity utilization level or we see it at 75% capacity utilization?

Kunal Bubna — President, Finance and Accounts

See, it will not be entirely at 50% utilization. It will be entirely at — 70% to 75% utilization.

Pritesh Chheda — Lucky Investment Managers — Analyst

So initially, there will — so FY ’24 there will not be expansion in margin…

Kunal Bubna — President, Finance and Accounts

No, it would be there, but it will not be 400 basis points. I meant to say that.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. So it is basically 400 basis points split up in ’24 and ’25.

Kunal Bubna — President, Finance and Accounts

Yeah.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. Thank you very much, sir, and have a great day.

Kunal Bubna — President, Finance and Accounts

Thank you.

Operator

Thank you. The next question is from the line of Ramesh Bagmar from Prabhudas Lilladher — I am so sorry, Kamlesh Bagmar from Prabhudas Lilladher Pvt. Ltd. Please go ahead.

Kamlesh Bagmar — Prabhudas Lilladher Pvt. Ltd. — Analyst

Yeah. Thanks for the opportunity, sir. Sir, one question on the part of like EBITDA per tonne. So, are we operating at like say upwards of INR53,000 odd or INR54,000-odd EBITDA per tonne in this quarter assuming like say 90%-odd utilization?

Kunal Bubna — President, Finance and Accounts

See, again, — see, sir, basically it’s more like EBITDA per tonne, right? But because ours is to make two order a scenario, it’s very difficult to give standard figure for EBITDA per tonne. That is the reason we talk about EBITDA in percentage term only. So theoretically speaking, in case of raw material prices coming down, EBITDA in percentage should be going up, but it has never happened basically. Prices are low then demand is low, so somebody needs to adjust your margin also. So it continues in case of high price scenario.

Theoretically speaking, shrinkage should be there that also never happened, because demand is good and [Technical Issues] contribution top line may be higher. So it’s what we see in EBITDA is around 12.7% to 12.92% for this quarter basically.

Kamlesh Bagmar — Prabhudas Lilladher Pvt. Ltd. — Analyst

And sir, going forward, like, as our capacity comes up and we have the backward integration in place, which all new segments or new industries we are going to cover up or get diversified?

Kunal Bubna — President, Finance and Accounts

See, sir, we cater to number of industry currently, but oil and gas will be there, paper industry would be added. We started adding those sectors also. And chemical engineering will also be a sector where we cater a good number as compared to other sector. And so pharma, oil and gas, and paper and fertilizer would be another sector which we will do.

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

Further [Foreign Speech]. So we are catching the market of unorganized player alsom so that will — since Venus will be in organized market or Venus can cater in better way, so we will take advantage of that also of the unorganized market of the pipes and tubes.

Kamlesh Bagmar — Prabhudas Lilladher Pvt. Ltd. — Analyst

Okay. But, sir, lot of capacities are also coming up in the unorganized and organized sector. So do you see a significant increase in the competition?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

Since there is a very good demand, number of industry is improving [Foreign Speech] that was very low. Most of our industry use the other pipe category. But slowly, slowly [Foreign Speech] So definitely demand is going up. Still there is a very good demand. [Foreign Speech] There is number of lot of entry barriers. [Foreign Speech], they can increase the capacity. [Foreign Speech],

They will not come for the — buy for the pipe, they will do some quality check, test, certificate, all this process takes at least four to five years. So there is a entry barrier. Nobody can come in one year time or six month time in this segment. This is a very typical segment, where number of approach is required or number of certification. Even a single industry cannot give the order in one instance. They first take the small order, then big order, then test order, then they increase the size of the order because pipes [Foreign Speech] is critical operation only.

We are in critical operation because there is lot of cost difference between SS pipe and MS pipe. So it is a critical operation, so all industry users a very conscious about the quality of the pipe.

Kamlesh Bagmar — Prabhudas Lilladher Pvt. Ltd. — Analyst

And lastly, who would be your nearest competitor? And in the same range, whom do you follow the most or you see that particular competitor on a close watch?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

In India, there is very limited player in SS pipe market. Ratnamani is the market leader, then Jindal is also in the SS pipe segment or some other players who also are in the seamless segment, some are there in welded segment. In all the three segments, very limited players in India, which is one of the Ratnamani, another is Jindal Saw, third is the [Foreign Speech]. They are either in the welded segment or seamless segment. We have the competition between five to seven company, just Ratnamani, Jindal Saw, [Indecipherable], these are the top seven, eight players in the market.

Kamlesh Bagmar — Prabhudas Lilladher Pvt. Ltd. — Analyst

Great, sir. Thanks a lot, and wish you…

Kunal Bubna — President, Finance and Accounts

We request the persons who are not asking to keep themselves on mute, because there is some echo in the voice.

Operator

Sorry to interrupt. I would request all the speakers also to self-mute themselves when they are not speaking. Thank you. The next question is from the line of Asha Jain from Jain Capital. Please go ahead.

Asha Jain — Jain Capital — Analyst

Yeah. Hi, sir. So I have couple of questions. Sir, how are we penetrating into export market? And what are the strategy to expand our export skills? And also what would be the contribution for export sales in FY ’23 and ’24?

Dhruv Mahendrakumar Patel — Whole Time Director

Sir, so, for export market, we are planning — like we have already appointed representative of Venus who is very senior person in stainless pipe in the Europe market. So Europe market, like this we are planning to go ahead. And time by time, we are also exporting to other countries apart from Europe. In Europe also, we are participating in many exhibitions. This year only we have already participated in one expo to show our market presence and in September also we are going to participate in expo. There are leading publications in Europe where we have started getting some coverage.

Asha Jain — Jain Capital — Analyst

Okay. And sir, what would be the estimated contribution for export sales in fiscal…

Kunal Bubna — President, Finance and Accounts

In this fiscal, we believe should be around 12% to 15%.

Asha Jain — Jain Capital — Analyst

Okay. Sir, secondly, is there any margin differential between domestic and export sales?

Kunal Bubna — President, Finance and Accounts

See, the margin basically — the direct supply what we make and the export sale we made, the margin is basically in parallel. Apart from that, for export, definitely we get 1.4% of drawback, so that is from additional discounts when we do exports.

Asha Jain — Jain Capital — Analyst

Okay, understood. That’s all from my side. Thank you.

Kunal Bubna — President, Finance and Accounts

Okay. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Anjana Shah from Shah Investments. Please go ahead.

Anjana Shah — Shah Investments — Analyst

Hello?

Operator

Yes, Ms. Shah, you’re audible. Please proceed…

Anjana Shah — Shah Investments — Analyst

Thank you. Thank you for this opportunity, sir. Sir, couple of questions from my end. First, if you could tell us what is the volume growth and the price growth attributable to our revenue growth for Q1 FY ’23?

Kunal Bubna — President, Finance and Accounts

Yeah. See, for FY ’23 as compared to the first quarter of FY ’22, the quantity has been on a flattish — basically more or less same as it was only 1% to 2% growth and the increase in rate for the finished goods. But definitely there has been mixed change as compared to what welded and seamless we do, seamless had increased to good percentage by — in quantity term, it has increased by 68% and welded was slightly down.

Operator

We have lost the line of Ms. Shah. We will move on to the next question which is from the line of Dhiral Shah from Phillip Capital. Please go ahead.

Dhiral Shah — Phillip Capital — Analyst

Good afternoon, sir. Thanks for the opportunity. Sir, what is the reason for the flattish growth in the quarter?

Kunal Bubna — President, Finance and Accounts

Sir, see, as I said, we currently also had an order book of around INR100 crores. So it is not as sluggish, it was flattish basically. And further — and the capacity was basically fully exhausted, if you see, as I said, it was around 90% utilization. So it basically exhausted from our side. But going ahead and with an order, it will definitely increase going ahead.

Dhiral Shah — Phillip Capital — Analyst

So next two quarters also, sir, we can see a flattish growth as we are running at full capacity?

Kunal Bubna — President, Finance and Accounts

No, the — as I said, in July 2022, we added 100 tonne capacity for welded pipe, so that could be also be there. And as I said, for higher sizes of welded pipe, we currently also do purchase and sell it so that our markets are build up. So those things would also be there. So it will not be flattish, it will be slightly on the upper side only.

Dhiral Shah — Phillip Capital — Analyst

Okay. Thank you so much, sir.

Kunal Bubna — President, Finance and Accounts

Thank you.

Operator

The next question is from the line of Abhishek Agarwal from Prithvi Finmart. Please go ahead.

Abhishek Agarwal — Prithvi Finmart — Analyst

Thanks for the follow-up, sir. Sir, my question is regarding our direct sale as currently it is less than 50% and more than 50% is coming from channel networks. So what is the mix you are seeing that it will change from now onwards? And how you see that will help to increase the margin? And secondly, that will help to reduce the working capital requirement?

Kunal Bubna — President, Finance and Accounts

It’s more than 50%. For this quarter, our direct sales was around 55%. And in the last FY ’22, it was around 46% and export was 12%. So if you see, around 68% odd percent from this quarter was from direct sales and export. The stockiest and trader contribution for this current quarter was around 32%. So it’s a fair amount of direct sales of 70%, export 68%. And definitely the margins are always on higher side when you do direct sale and export, as compared to trader and stockiest. And that why we — as I said, there would be margin expansion going ahead wherein traders and stockiest we will try to tone it down to 15% to 20% going ahead.

So definitely those margins, as I said, for both welded and seamless with capacity expansion with higher sizes with backward integration, we are adding more export countries in our trajectory and higher sizes of welded and seamless with backward will add to our margin going ahead.

Abhishek Agarwal — Prithvi Finmart — Analyst

Sir, just can you give a ballpark figure like how the mix will look like in — around FY ’25?

Kunal Bubna — President, Finance and Accounts

Sir, see, it’s 60% for welded and 40% for seamless, more or less.

Abhishek Agarwal — Prithvi Finmart — Analyst

Sir, I am asking about the sales mix, direct order through channel partner.

Kunal Bubna — President, Finance and Accounts

Sorry. It would be taking export and direct sale, it would be — we target around 75% to 80%, and the balance would be for stockiest and trader.

Abhishek Agarwal — Prithvi Finmart — Analyst

And, sir, that will have to reduce the working capital?

Kunal Bubna — President, Finance and Accounts

What — sir, see, it is more — likely, working capital will always require if you are made to an order, so it will not reduce the working capital.

Abhishek Agarwal — Prithvi Finmart — Analyst

Okay. And sir, last thing that can you breakup of EBITDA margin of welded and seamless pipe?

Kunal Bubna — President, Finance and Accounts

[Speech Overlap] The quarter was around 14% to 15% for seamless pipe and it was around 12% to 13% for welded.

Abhishek Agarwal — Prithvi Finmart — Analyst

Okay, sir. Okay. Thanks a lot. That’s from my end.

Kunal Bubna — President, Finance and Accounts

Thank you, sir.

Operator

Thank you. The next question is from the line of Pallav Agarwal from Antique Stock Broking. Please go ahead.

Pallav Agarwal — Antique Stock Broking — Analyst

Yes, sir. Sir, I had a couple of questions on the demand outlook with this concerns of recession leading to some slowdown in demand, so what is our strategy to counter that and are we confident that we will be able to increase our export proportion despite these concerns?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

Pallav-ji, [Foreign Speech] about the estimates in pipe industry. [Foreign Speech] Further due to China plus one policy, some of the other country are not expecting the Chinese material or Chinese raw material. So, they are expecting originally from other places. [Foreign Speech]

Pallav Agarwal — Antique Stock Broking — Analyst

Sure. Also just, given the concerns about higher energy and gas cost in Europe, so have you seen any pipe manufacturers over there or some of the competitors shutting down, it can actually give us an advantage in terms of volumes, etc.?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

Sorry, will you repeat the question, Pallav-ji?

Pallav Agarwal — Antique Stock Broking — Analyst

Arun-ji, what I am saying is given that energy cost are very high due to the Russia-Ukraine conflict, we have seen lot of shut down happening in smelters or aluminum smelting capacity. So do we have any competitors of ours who are manufacturing stainless steel pipes in Europe, have you seen any of them say going out of business or any shutdown happening in this segment?

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

Pallav-ji, [Foreign Speech] So due to this energy cost, there is no shutdown in the SS industry. So even our raw material supplier also. Everybody is working with the good capacity.

Pallav Agarwal — Antique Stock Broking — Analyst

Okay, sir. Are there any more questions the queue, Michelle? Or I can hand over to the management?

Operator

No, Mr. Agarwal. We do not have any questions in the queue.

Pallav Agarwal — Antique Stock Broking — Analyst

Okay. So, Arun-ji, I would like to hand over to you for any closing comments from your end.

Arun Axaykumar Kothari — Managing Director and Chief Financial Officer

Thanks for everyone for joining the call. We will keep updating the investor on regular basis for incremental update on our Company. I hope we have been able to address all our queries. For any further information, kindly get in touch with me or our investor relation, Mr. [Indecipherable]. Thanks to all.

Operator

[Operator Closing Remarks]