Welspun Corp Ltd (WELCORP) Q3 FY23 Earnings Concall Transcript

Welspun Corp Ltd (NSE: WELCORP) Q3 FY23 Earnings Concall dated Feb. 03, 2023

Corporate Participants:

Salil Bawa — President – Group Investor Relations

Vipul Mathur — Managing Director and Chief  Executive Officer, Board Member

Percy Birdy — Chief Financial Officer

Analysts:

Abhineet Anand — Emkay Global Financial Services Ltd. — Analyst

Abhishek Jain — Arihant Capital Markets Ltd. — Analyst

Vikash Singh — Phillip Capital — Analyst

Yash Sarda — Sushil Finance — Analyst

Saket Kapoor — Kapoor Company — Analyst

Radha Agarwalla — Batlivala & Karani Securities — Analyst

Bhavin Chheda — ENAM Holdings — Analyst

Surabhi Saraogi — SMIFS Capital Markets Limited — Analyst

Ankush Mahajan — Axis Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, welcome to the Q3 FY ’23 Earnings Conference Call of Welspun Corp. hosted by Emkay Global Financial Services. [Operator Instructions] There will be an opportunity for you to ask questions at the end of today’s presentation. [Operator Instructions] Please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Abhineet Anand from Emkay Global. Thank you and over to you, sir.

Abhineet Anand — Emkay Global Financial Services Ltd. — Analyst

Thanks, Jordan. And a very warm welcome to everybody. Today, we have the post results conference call for Welspun Corp. I will hand over the call to Mr. Salil Bawa, Head, Group Investor Relations. Over to you, sir.

Salil Bawa — President – Group Investor Relations

Thank you. Thank you, Abhineet. Good morning to all of you. I welcome all of you to the Q3 FY ’23 earnings call of Welspun Corp. Present along with me today on this forum are Mr. Vipul Mathur, Managing Director and CEO; Mr. Percy Birdy, Chief Financial Officer of Welspun Corp. I also have with me my colleague, Gaurav Ajjan who leads Investor Relations for Welspun Corp.

You must have received the results and investor presentation of the company, which are also available on the BSE and NSE, as well as on the company’s website, which is www.welspuncorp.com. As usual we will start the forum with some opening remarks by our leadership team. We’ll then open the floor for your questions. During the discussion, we may be making references to the presentation, which has been uploaded. Please do take a moment to review the Safe Harbor statement in our presentation. Should you have any queries that remain unanswered after this earnings call, you can reach out to us anytime.

With that, let me hand over the floor over to Mr. Vipul Mathur, MD and CEO for Welspun Corp. Over to you, sir.

Vipul Mathur — Managing Director & CEO, Board Member

Thank you, Salil. Thank you very much and good morning, everyone. Welcome to our Q3 FY ’23 conference call. I sincerely appreciate for taking time to attend this call and I hope all of you are doing well.

Let me run through you the key highlights of our performance during this quarter ended 31st December, 2022. We commenced operations in our US facility and have also started dispatches. As you know, we have a strong outlook and order book in the US market. We have also ramping-up sales for our state-of-art Ductile Iron Pipe plant and TMT plant, which got commissioned in in this quarter. We have also received possession of the specified assets of ABG Shipyard. As we are committed to ESG, we have published our maiden Sustainability Report and Tax Transparency Report in this quarter. As regards order book, we still have, we have a very healthy order book of almost 928,000 tons and an active bid book of 1.7 million tons.

For the quarter, the production and sales volume in Line Pipes for our total operations including Saudi was at 330,000 tons and 281,000 tons, respectively. For India operations, the sales volume was at 126,000 tons, for US operations, the sales volume was around 38,000 tons and for our Saudi operations, the sales volume was around 118,000 tons. Let me give you some views on the outlook and a brief update as to where do we see the three geographies in which we are present for the next quarters to come.

Let me first talk about the Pipe vertical, in the Pipe vertical where we predominantly produce Line Pipes. The Line Pipe business has seen a robust performance with a global sales volume of 281,000 tons and an EBITDA of INR202 crores for the quarter. The production in the US has significantly ramped up and the dispatches against the projects have started in Q3. The full impact of this will be seen in Q4 FY ’23 onwards. It is expected that 2023 will be another strong year for the oil and gas industry as consumption is expected to increase.

According to IEA, global oil demand is set to rise by 1.9 million barrels per day in 2023 to a record high of 101.7 million barrels with nearly half the gain from China, following the lifted of COVID restrictions. In addition, the EU will need to buy a lot more gas to refill its storage and will continue using oil products that is no longer available from Russia. Global oil prices are forecasted to average around $80 per barrel, which is a fairly healthy level and should spur further investments in pipeline.

For India, the Ukraine crisis has reaffirmed the importance of energy security as governments around the world are trying to secure gas pipelines at affordable prices. The EU is pivoting away from Russia to other regions to secure the gas it needs. The current environment along with a reasonably high energy prices will lead to a robust capex cycle in the oil and gas infrastructure globally. We are seeing a strong revival in various pipeline projects and are in active discussion for several export orders across the world with a focus on Europe, Australia, South America, Southeast Asia and Middle East.

The Government of India has also set a target to raise the share of natural gas in the energy mix to 15% by 2030 from currently 6.2%. Various steps have been taken by the government in this direction, including expansion of National Gas Grid, expansion of City Gas Distribution network and setting up LNG terminals. PNGRB has authorized approximately 33,000 kilometers length of Natural Gas Pipeline Network across the country. Out of this, 21,000 kilometers length of natural gas pipelines are operational, including 6,600 kilometers of partially commissioned pipelines. In addition, there are 12,000 kilometers of natural gas pipelines, which are under construction.

We have seen a healthy demand from PSU oil and gas companies. The overall capex target for FY ’22-’23 is INR111,350 crores for which INR77,000 crores has been spent in April to December 2022. We expect a steady demand from these companies to continue for several years. There has been a revival in the water sector with a cooling off in the steel prices in the quarter compared to the previous year. We have seen increased demand across the state of Gujarat, Maharashtra, Tamil Nadu, Karnataka, Madhya Pradesh, Punjab and Rajasthan. There are several schemes planned by both the Central and the State government to ensure optimal sustainable development, maintenance of quality and efficient use of water resources to match the continuously growing demand across the country.

As regards US, Europe energy crisis is expected to keep the LNG market tight for the next few years supporting cash flow generation for the US LNG players. Rising global demand for natural gas is a growth opportunity for US LNG producers. But delivering on opportunity will depend on timely construction of natural gas pipeline infrastructure to support new US LNG supplies. In 2022, the EU imports of LNG hit 101 million tons, which was a 58% surge compared to 2021, as Russian gas exports to EU got shut down.

Meanwhile, China reduced their domestic demand in 2020, allowed Chinese importers to redirect their contracted LNG volumes to the higher priced European spot market and help Europe to avoid major shortages. A potential recovery in the Chinese market in 2023 will bring back the risk of natural gas supply in Europe. European demand may accelerate LNG capacity expansion in the US. This in-turn would spurt further capital allocation for constructing new pipeline capacity to connect the largest US gas producing regions like the Permian Basin to the new export infrastructure. Our HSAW plant in the US is fully booked till December 2023. The current business environment is extremely conducive. And we are in active discussions to book new orders beyond 2023 for our spiral plant.

Saudi Arabia. We have seen a very strong performance in our associate company, East Pipes, EPIC, with a 266% Y-o-Y jump in revenue and operational profit of SAR61 million during the quarter. The outlook for the oil and gas sector in Saudi Arabia is encouraging. The Master Gas System Phase 3 is being planned by Saudi Aramco for transfer of gas from east to west in Saudi Arabia. Saudi Arabia is also trying to speed up conversion of number of power plants from oil to natural gas. In that perspective, Saudi Aramco is extending the existing Master Gas System to Western Province in order to supply the power plants located there.

The planned new pipelines and distribution network to be operated by Saudi Aramco will add to the existing Saudi pipeline capacity. Apart from above, Saudi Aramco is also keenly focused in developing their offshore infrastructure and are rolling out a plan, a 10-year plan in terms of development of their offshore infrastructure. This will also mean a substantial increase in the pipeline capacity in times to come, the demand for the pipes to come.

SWCC is also investing in increasing its capacity to desalinate, transmit and store water to meet the increasing demand and further enhance water supply security. Today, Saudi Arabia can store 21 million cubic meters, which is equivalent to 2.2 days of current municipal water demand. Projects are ongoing to expand storage capacity by 14% and the expansion of to a further 225% is planned to reach seven days of strategic storage by 2030. On desalination, around 9 million cubic meters per day can be produced today. The market share of SWCC is around 66% of the total current production capacity and projects to increase desalination capacity by 60% are under construction.

Moreover, Saudi Arabia plans to increase desalination capacity by 17.4% by 2030. Given the vast geography of Saudi Arabia, transmission of desalinated water to its demand center is of key importance. Today, around 13.9 million cubic meters per day can be transported across the country. The capacity is currently being increased by additional 56% and a further expansion of 44% is planned by 2030. Thus, both Saudi Aramco and SWCC put together are showing a very robust sustainable demand for the next few years. Our associate company, EPIC recently announced signing contracts for the supply of steel pipes for water transmission with a total order value of around SAR570 million with NEOM and Petrojet Company. The huge thrust on oil and gas and water infrastructure will result in a strong demand for pipeline as we expect to win more orders in due time to come.

Let me now shift two another vertical, which is our Steel vertical. The Pig Iron and the DI Pipes. During the end of the quarter, we announced the commissioning of our Coke Oven in Anjar through Welspun Metallics Limited, a wholly-owned subsidiary of the company. The Coke Oven has a production capacity of approximately 210,000 tons per annum, which will primarily be used in the blast furnace for manufacturing of hot metal. This will help with continuous supply of high-quality coke at a very competitive cost to run the plant efficiently. This is a significant milestone in our quest to manufacture high-quality DI Pipes. The Coke Oven is built with the latest technology and adherence to the highest safety and environmental standards.

The EBITDA in this quarter for the Steel vertical showed a loss of INR34 crores as compared to the previous quarter, which was at a staggering INR293 crores. We are ramping-up production in a calibrated manner to ensure that we deliver pipes of the highest-quality to our customer. In the month of January 2023, our production has already touched close to 10,000 tons of DI Pipes. The removal of 15% export duty on Pig Iron has also given a boost to the selling of DI Pipes, Pig Iron in the market in both domestic and import-export market. We expect the financial performance of the business to significantly improve in the subsequent quarters.

As the Pig Iron sales will also get ramped-up as the prices for the Pig Iron also firming up and so as our capacity on the DI Pipes has also significantly ramped-up and we produced in January, 10,000 tons of pipe, which is sort of a milestone in a start-up DI company, if we see any historical data. To make provisions of portable tap water supplied to every rural household of the country by 2024, Government of India in partnership with the states is implementing the Jal Jeevan Mission, Har Ghar Jal, with an estimated outlay of INR3.6 lakh crores. As on 20th January, 2023, out of 19.36 crore rural households in the country, 10.96 crores households are reported to have tap water supply in their home. Overall, the demand environment is extremely robust and as on-date, we are already having a backlog of close to 88,000 tonnes of order valued at INR665 crores.

I now shift my focus to the Billets and TMT bars. Our newly commissioned state-of-the-art plant has started dispatches of TMT bars. The initial response has been extremely encouraging with a healthy traction both in the B2B and the B2C sector. We are creating a unique and industry-first digital platform for distributors, dealers, retailers and influencers. This will have a socio-economic impact and will also help to analyze early trends, buying patterns of the consumers in every region. This can help our production and make supply chain operations more effective while staying customer-centric.

Our key target for the TMT bar will be the state of Gujarat where we estimate an annual demand of 3 million metric ton per annum, driven by the spending on housing and construction. Of this approximately 2 million ton is manufactured within the state and while 1 million ton is procured from outside states. That opens up a huge opportunity for us to capture this market from our production facility.

I also draw your attention to our subsidiary, Welspun Specialty Solutions Limited. WSSL has recorded a turnaround in performance with a cash positive and they turned cash positive in this quarter. Going forward, the company expects its improved performance to sustain on the back of several new customer approvals, accreditations, development of new products and penetrating new markets. Pipe volume was higher by 45% for Q3 FY ’23 and 70% for nine months FY ’23, both compared to the corresponding period in the previous year. The total income was 175% higher for Q3 ’23 compared to the previous year. EBITDA quarter three stand at INR9.4 versus a loss of INR1.6 crore in Q3 of FY 2022. The total order book of WSSL for stainless steel bars stands at 2,134 tons, amounting to INR60 crores and for the tubes and pipes stand at the — the order book stands at 1,426 metric ton, amounting to approximately INR100-odd crores.

The Finance Ministry has approved a gazette notification for Anti-Dumping duty on stainless steel pipes and tubes Chapter 7340 imported from China. This is expected to significantly improve business prospects for our plants and for all the mills in India. The BIS standard for seamless pipes and tubes, which is BIS 17875 has also been introduced, which is favorable for integrated players like us. The company has received accreditation certificate by BIS for the wider range of product grades and sizes.

Let me also give you some other updates with respect to our acquisitions on ABG and Sintex. First, about ABG. The company has received the possession of the moveable asset properties from the liquidator of ABG. Further, the company’s wholly-owned subsidiary Nauyaan Shipyard Private Limited has received the possession. The partially built ship, equipment and metal scrap acquired under Nauyaan — under WCL is estimated to be over 150,000 tons. It is estimated that the metal and metal scrap not required for the business purpose will be disposed over next 12 to 15 months. We have already initiated the proceedings with respect to that and we expect to see significant cash flow coming in from this sale on a quarter-on-quarter — for the next couple of quarters. During this period, we will also evaluate new business areas like defense, greenfield, offshore wind, oil and gas structures to ensure optimal utilization of the asset.

As regards Sintex, Welspun growth strategy entails creating a diversified product portfolio, repurposing its business to add new target segments, expanding its offerings to add both B2B and B2C markets and making well considered strategic acquisition. In this regard, as you know, we have acquired Sintex. We are in the process of acquiring Sintex BAPL non-convertible debentures with an outstanding value of INR1,231 crores for a purchase consideration of INR421 crore. This is already accomplished. The process of — the whole process, as you know, it was under IBC is nearing completion and we are hopeful that it should be over in next couple of months, on or before quarter one of FY 2024.

ESG. Welspun published its maiden Sustainability Report for FY ’21-’22. The report is significant in helping WCL comprehensively with reporting its sustainability performance across the environmental, social and governance domain. The report also highlights the progress made by WCL over its sustainability goals and its alignment with the global framework like the GRI, UN SDGs, and SASB standards. In addition, we published our first-ever Tax Transparency Report. It is essential that we explain not only our compliance with tax laws and disclosure requirements and guidelines, but also our overall approach that sets the context for tax liability. The voluntary disclosures through the report demonstrates that we strive to uphold the highest standards of transparency and governance.

With this, I would like to conclude my opening remarks. I will be happy to take any questions. Now, the floor is open for you guys. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Neeraj from Arihant Capital. Please go ahead, sir.

Abhishek Jain — Arihant Capital Markets Ltd. — Analyst

Hello, sir. This is Abhishek Jain. Congratulations on good set of numbers. Sir, just a question on — two questions. One is, why is the debt increase and it is because of the capex which we are ongoing through and how much — when we are going to see the debt seeking out? Second question on the Sintex BAPL site, are we seeing any challenges? Because as per our initial commentary it was supposed to be completed maybe sometime in January and now we are talking about Q1. So, what is the reason for the delay and what is the current state of Sintex BAPL.

Vipul Mathur — Managing Director & CEO, Board Member

Thanks, Abhishek. As regards to your first question, you’re absolutely right. Debt has increased from, because of the capex cycle, we have wanted to. We have invested into our steel-making facility, our DI-making facility, our TMT, our acquisition of ABG and the acquisition of NCDs for the Sintex BAPL. So, these were — so these are the key factors for our debt increase at this point in time. And as these companies will start operating and as they’re ramping-up the production as you see, the DI Pipe company is ramping-up significantly, the steel plant is doing extremely good job, the TMT business is also in the process of stabilizing, ABG acquisition has also taken place and the scrap sales will start in next couple of days and once Sintex also comes onboard.

I think so debt will be — you will see the gradual reduction in the debt, which will start happening and as we have already said that it is our endeavor that we would like to again come back to debt-free level in the next three financial years. So, we are absolutely focused on that. We have committed — we are devised a clear road map for that and we will be continuously monitoring in working towards that.

As regard your second question with respect to Sintex BAPL, it is a process. It’s a regulatory process. We are expecting that it can get over even before 31st of March. But just to be a little bit on caution side, I’m saying that if it might slips by few weeks here and there, it is quite possible because you know we have no control on the regulatory process. But as regards the process, I think it is moving in absolutely in the right direction and we are very, very hopeful and we are — we feel convinced that this transaction will get closed ASAP.

Abhishek Jain — Arihant Capital Markets Ltd. — Analyst

And can you throw some light on the ABG? What was our thought process now once we acquire the — like the ABG and what we are going to — what is our plan of action going forward? And at any point of time do you see any kind of opportunity like maybe a technical tie-up with any global player at any point of time? Do you see this kind of opportunity for ABG also?

Vipul Mathur — Managing Director & CEO, Board Member

See ABG, as you know is a wonderful asset, right. Our first priority was to take the asset under control. That mission has been accomplished, number one. Number two, we’re on — then we have embarked on a journey of seeing what is lying there, what is of use to us and what is not use to us. So, we have also completed that exercise. Now, what is not use to us, we have created a separate team, which is completely focused on disposing of those things. So, we would like to bring in that cash flows into our play.

On the business side of it, we are already discussing with few reputed companies and consultants and what should be the best way ahead for us or the road map for which is value-accretive. We are exploring quite a few options. Option number one happens to be shipbuilding, ship repair. You know, we are also looking at offshore marine sub-structures. We’re also looking at in terms of can this facility be converted into — where we can have some green steel-making facilities. So, all these options are up on the table. And at this point in time, we are exploring each and every option absolutely in detail, so as to come out with a very clear cut road map for the next three to five years’ time, that what will be the best sustainable option and which will be value-accretive. So, this is a work-in-progress and as we will move forward, we will keep you apprised about the same.

Abhishek Jain — Arihant Capital Markets Ltd. — Analyst

Okay, sir. I have few more questions, but I’ll come in the queue, sir. Thank you, sir.

Vipul Mathur — Managing Director & CEO, Board Member

Thank you.

Operator

Thank you. The next question is from the line of Vikash from Phillip Capital. Please go ahead.

Vikash Singh — Phillip Capital — Analyst

Good morning, sir.

Vipul Mathur — Managing Director & CEO, Board Member

Good morning, Vikash.

Vikash Singh — Phillip Capital — Analyst

First of all, congratulation on some of these smaller business unit turnaround. We were waiting for this for a long time. Sir, I want to understand one thing. Sir, what we have seen in the last couple of quarters or prior to that, our India order book has not been growing in a significant way. While if I look at some of your competitors, they have added orders at a much faster rate than you. So, I just wanted to understand our strategy with respect to Indian business. Are we purposely keep this mills free or we are just looking for a higher-margin order? So, what is our strategy here?

Vipul Mathur — Managing Director & CEO, Board Member

Okay. Vikash, I think so thanks for the compliments on the turnaround and well our turnaround is both in the smaller and the larger companies, both. The field set-up is a large set-up and it is a great turnaround there as well. So, I take that compliment. As regards the Indian pipe business, we have, as you know, we have assets in Anjar, we have assets in Bhopal and Mandya, right. These are the three operating assets what we have in India. Primarily, our strategy is that, you know, from our India asset, we are trying to do majority of the water business and a significant portion of the oil and gas business and CGD business.

I think, so from a volume perspective, we are seeing a consistent volume across all. The oil and gas business, we are — if you see, we have a consistent order book. From the CGD business also, we have a consistent order book and even from the water business, we have a consistent order book. So, in our Indian assets, which are servicing the Indian market, there is a very consistent approach we have been following, number one. All — what we have been holding back is our longitudinal pipe business, which is predominantly our export business and that business is a high-margin business.

So, what we are always trying to blend the Indian Indian business and the export business together so that we are able to make a higher EBITDA margins. So, this is what our strategy has been. This is what our strategy is. And likewise, this is what our strategy going forward. So, at this point in time, I think so all the mills, which we have in our Indian assets are operating. None of them is idle, and I think so, looking at the business prospect and the volume, I think so they will continue to work on a quarter-on-quarter basis.

Vikash Singh — Phillip Capital — Analyst

Understood, sir. Sir, in terms of our bid book basically, which geography has a higher percentage in this bid book, if you could just give us some insights into it?

Vipul Mathur — Managing Director & CEO, Board Member

So. Right now, right now, if you, if you see from a bid book, we have sort of an active bid book of almost close to 1.7 million tons and today, of course Middle East seems to be leading the pack. I think so we are seeing a significant business potential, which might be emerging from Middle East. We are also seeing the business — a significant business coming up from Europe and we are also seeing a substantial business coming from Southeast Asia and Australasia. So, these are our three areas, which we are completely focused on and if you see our track-record, we have been extremely active and extremely successful in these three areas. And fortunately, these three regions are showing a very, very strong demand over the next couple of years. Coming to and that is getting reflected in this bid book.

Vikash Singh — Phillip Capital — Analyst

Sir, just a small further clarification here, given we have mainly in Saudi also where we just — Indian shareholder would have only 35% of the weighted. So, this bid book, are these larger part is booked from — bid from the Indian mills or a larger portion would still go to Saudi and Indian mills would have to wait? So, just wanted to understand. Because I believe this 1.7 million ton bid book is for the entire group and not — including Saudi as well.

Vipul Mathur — Managing Director & CEO, Board Member

So, this — what we are not talking Saudi here. We are not talking Saudi here. This is purely what we are talking — 1.7 million tons, we have purely talking, which could be a potential bid book addressable out of our Indian asset. Saudi is over and above this. Saudi is a very localized domestic market and with our presence out there, you know that we we are doing extremely well out there and the prospects looks even better in the years to come. But this 1.7 million bid book refers to the addressable market which we are looking to sell out of India and of course, US.

Vikash Singh — Phillip Capital — Analyst

Understood, sir. Sir, my third question with respect to your capital allocation policy. So, since we have already now got that debt of roughly about INR1,800 crore. Are we just looking to stop right here, or there any further plans, which are on the pipeline and what kind of the debt peak out we would witness as per your internal assumption by when?

Vipul Mathur — Managing Director & CEO, Board Member

See this INR1,800 crore of net debt what you are looking at this point in time is because of all the greenfield projects or the acquisitions what we have done and all these acquisitions we have discussed and deliberated in details in our past meetings that they were all thought through acquisitions and we will — once we have made these acquisitions, over a period of time this will start yielding benefit and it will lead to an incremental growth into the earnings of Welspun Corp. So, that was the whole genesis behind it.

Answering your question that are we at this point in time, we are pretty much done with our capex cycle. This is all what we would have — we have clearly set our platform together. We now have a fully operational Pipe vertical. We now have a fully operational Steel vertical. We have acquired ABG. And we have Sintex. So, these are the four verticals in which we were determined to get into. We have got into that we have put our skin in the game. And beyond that at this point in time, we are not thinking anything other than that, only operationalizing them and ramping-up their operations and making money out of that.

Vikash Singh — Phillip Capital — Analyst

Understood, sir. Just one last question if I may, sir, could you just give us US-specific performance details? What kind of EBITDA, EBITDA per ton they have done this quarter?

Vipul Mathur — Managing Director & CEO, Board Member

So, in this quarter, US produced close to — they produced and rather dispatched close to 38,000 tons if I’m not — 38,000 tons of sales. And because they only started production sometime in September. So, while the production started, the production ramp-up happened and then we have made dispatches of almost 38,000 tons and the bulk of the order, we will start now seeing that dispatches happening from Q4 onwards, going up to the Q3 of the next financial year. So the next four quarters, you will see the order book getting completely executed. In terms of earning, I think so, they made a modest EBITDA turnover of almost close to $7 million, INR155-odd [Phonetic] crore, in this particular quarter by the sale of almost close to 38,000 tons.

Vikash Singh — Phillip Capital — Analyst

Thank you, sir. That’s all from my side and congratulation again on turnaround of some of the entities and hoping for the better future.

Vipul Mathur — Managing Director & CEO, Board Member

Thank you, Vikash.

Operator

Thank you. The next question is from the line of Yash from Sushil Finance. Please go ahead.

Yash Sarda — Sushil Finance — Analyst

Good morning, sir. I have a couple of questions. Firstly, congratulations on gross margins, which have improved significantly since the previous quarter and the previous years. My first question is, could you throw some light on other income? There has been a substantial fluctuation happening quarter-on-quarter. And secondly, there’s a line-item, other expenses, which has increased from approximately INR140-odd crores to INR358 crores year-on-year. So, if you could throw some light on the bifurcation of other expense? Which is the major two components or major two heads, which are having those expenses aggregated.

Vipul Mathur — Managing Director & CEO, Board Member

So, if you see our other income in the two sequential quarter, I think in the quarter before that, in quarter two, we had other income. We did, we had the sale of asset at Dahej. And you know it was — and it was close to INR104-odd crore, which came from the sale of our Dahej land. Also, there was a mark-to-market earning in the other income, which was close to INR43-odd crore. So, all put together, this was like close to INR160 crore, INR170-odd crore of other income. That is why you saw that other income higher in the second quarter in comparison to quarter three.

As regards other expense, Percy will you take.

Percy Birdy — Chief Financial Officer

Sure. Other expenses includes of course lot of expenses which are apart from the materials and the manpower cost. And as you know, we have lot of businesses, which are ramping-up. So WML, WDI, ATMT, all these are new businesses and all the production expenses, everything is ramping-up. So, going-forward, quarter-on-quarter number will be very difficult to compare for all of you, because of the newer businesses, which will be ramping-up. But on the whole, I think these are all the numbers which are on the predictable lines and we add these new business — we expect these new businesses to start contributing to the bottom line in the next few quarters.

Yash Sarda — Sushil Finance — Analyst

Okay. And a follow-up question on the gross margin side, not the EBITDA levels, EBITDA gross margins, do we see the same level maintaining going forward and have you absorbed the increase in raw material prices completely or do we see something happening in this quarter, coming quarter as well, some effect?

Vipul Mathur — Managing Director & CEO, Board Member

I think you know the — whatever hit we had on the raw material side, right, you know, which was predominantly on the coal and, which everyone knows the — across the industry that hit came. So, we also had that hit in the quarter two. I think, so that was almost fully absorbed in quarter two. A residual impact of that was — is seen in quarter three. But with that, I think, so this history of any raw material impact coming into play I think it’s all completely addressed. So, moving forward, the gross margins across the businesses are likely to go up only and as the businesses are ramping-up, as the performance is happening, as the dispatches, sales is happening and the market looks very promising. I am very confident that the gross margin over next subsequent quarter is going to be better than what we have seen this quarter.

Yash Sarda — Sushil Finance — Analyst

Okay. And just last one question, sorry. The government contracts and other contracts, which we have, so do we have a price escalation clause in those contracts going forward or like some of your competitors are — and requested the government for a price escalation cost. So, are we also opting for the same or how is it? Or was it already in place?

Vipul Mathur — Managing Director & CEO, Board Member

See, the quantum of government contracts in our Indian business is only restricted to the business what we do with the PSU, in the oil and gas sector, right. And that business is a fixed-price contract and where we always do sort of bidding on a back-to-back basis. So, I think so they are fully secured contracts for which even the raw material is completely taken care of. So, I don’t think so that there is any impact on that, number one.

Number two, when it is — for the DI Pipes, the DI Pipes also has some component of direct contracts with the government and most of the contract now have been modified on a price escalation basis. So, they are index-based pricing now, which is available. And so to that extent, we are completely insulated on the DI side of it. Earlier it was because only on the Pipe side of it. Now on the DI side of it, whatever is the government contract, they are index-based. So, from a raw material perspective, I think so — on both the front, steel front and the vertical — Pipe vertical front, we are completely insulated.

Yash Sarda — Sushil Finance — Analyst

Okay. Thank you. Thank you for answering.

Vipul Mathur — Managing Director & CEO, Board Member

Thanks, Yash.

Operator

Thank you. Question from the line of Saket Kapoor from Kapoor Company. Please go ahead.

Saket Kapoor — Kapoor Company — Analyst

Thank you for the elaborate answer. I joined a bit late, sir, so sorry for any repeated question, but Percy sir, if you could give me the debt number sir, as on December on a constant basis.

Vipul Mathur — Managing Director & CEO, Board Member

Good morning, Mr. Kapoor.

Percy Birdy — Chief Financial Officer

Sure. So Mr. Kapoor, our debt number at the end of December on a consolidated basis, net debt stood at about INR1,800 crores. So, this is up from September quarter, which was bout INR1,600 crores, so we are up by about INR200 crores, largely driven by the project capex and we are approaching now the fag end of completing all the project capexes. So, by this March, we will be completing most of the capitalization as well. So, you may virtually say that this is the peak level that we are witnessing right now and going forward we will see improvement as our working capital will also get released more and more and the project capexes are also coming to an end.

Saket Kapoor — Kapoor Company — Analyst

And what is our capital work-in-progress as on 31st December and what is going to be likely for 31st March?

Percy Birdy — Chief Financial Officer

The capital work-in-progress is basically entry which it will get capitalized and go to fixed asset. But I think your question maybe more towards the capex cash flow. So, I think as we stand today, maybe another INR100 crores-odd figure could be there pending for payouts towards the projected capex.

Saket Kapoor — Kapoor Company — Analyst

Sir, how much we are going to capitalize as on 31st March? What is the working — CWIP as on December 31st?

Percy Birdy — Chief Financial Officer

So, by December, see we had capitalized things like, the Coke Oven was capitalized, Sintex is capitalized. So, the bulk capitalizations are done. On the DI side also, some of the mills are already being capitalized. Some capitalization will happen in Q4 as well. But this is by and large, just a balance sheet entry between CWIP to fixed assets and by 31th March we’ll complete all the capitalization, majority of it.

Saket Kapoor — Kapoor Company — Analyst

And when we look at now the new businesses and the profile of the company, it’s totally different than what we were only subjected to a Line Pipe company. So, sir going ahead as things get aligned, how will the revenue profile look like? If you could give a ballpark percentage? How — what would be the contribution from the various segments going ahead, sir?

Vipul Mathur — Managing Director & CEO, Board Member

See, for — as we say that we have — now we have two verticals, the Steel vertical and the Pipe vertical. Pipe vertical will continue to be our mainstay, number one. And as you know that it is showing a — we are seeing a very super tailwind on the businesses both in the domestic and the global market. So, Pipe business will continue to be our mainstay and our new businesses, which are embedded into the Steel vertical, I think as they’re ramping-up, they will also start contributing to that.

If I have to say, I think so the rate — if in terms of, back of the palm number, if I have to throw, I think so the ratios will still be close to 60% of our earnings and revenues would still be coming and our margins will still be coming from the Pipe business and the balance would be coming from the — for the next two years will be coming from the Steel businesses and other businesses. I am not — I am currently discounting in this the Sintex part of it, because it will be improper to comment on that at this point in time, because we will like to make a very judicious call and judgement and give a clear guidance when we are in absolute control of things. So, all what I am saying about this 60/40 ratio is more on the current businesses on which we have full control of.

Saket Kapoor — Kapoor Company — Analyst

And sir, what has been our investment to the Sintex part and the other vertical, how much have we invested and what is the outlook going ahead? How will this investment will start accruing to the P&L going ahead? What’s the timeline for it?

Vipul Mathur — Managing Director & CEO, Board Member

Sintex is close to INR420-odd crores. That’s the amount we have currently invested into that at this point in time. And as Mr. Percy said, that now we are done with and as I also said that we are now done with our capex cycle. So, all the capex which was supposed to happen has now happened both in the Steel vertical, the DI Pipe, the TMT mill, the ABG Shipyard, the Sintex. So, I think we are pretty less than capex cycle. And this is what the numbers what we have disclosed broadly will remain the same now.

Saket Kapoor — Kapoor Company — Analyst

Sir, in particular to the investment in Sintex and ABG Shipyard, how are these two assets aligned to our business model? And the total investment, INR429 crores you mentioned for Sintex. For ABG, how much investment have gone through and what is lined-up and how are these two assets going to gel with our total business?

Vipul Mathur — Managing Director & CEO, Board Member

See, as Welspun Corp. aims to diversify its portfolio, see we have been a large B2B player and we wanted to have — we wanted to create a platform and wanted to have a large B2C presence and that was the — that is the rationale of bringing Sintex into play. And we don’t have to talk about this particular brand. I think so there is nothing and anyone would like and everyone knows about what sort of a brand pull it currently enjoys. So, Sintex continues to be our — will be leading our B2C play. So energetically, from a pipe company no synergy, but as Welspun Corp. becomes is trying to become a conglomerate. So, on one side, we will manage the pipe business. On the other side, we will try and — we will manage the steel business. On the third side, there will be a shipyard and the fourth side, we will have the Sintex.

Coming back to the shipyard business, we see a huge synergy into that business, because that’s also a sort of fabrication job. Ship building, ship repair and anything which you do on the offshore asset and offshore platform is more than — is more or less like a fabrication business and it is very phenomenous and very close to the business what we do on our pipe side of it, in our Pipe vertical and it seems to be a very high growth area at this point in time. And on top of it, the acquisition was fairly reasonable. So all put together, that made a very interesting proposition for the ABG Shipyard. And we are very hopeful that over three to five years’ time, we will make a complete turnaround of that. And in-between that, whatever is our acquisition cost, we will like to mitigate it through the non-surplus items which are there and by virtue of liquidating that. So, it makes a great synergy for our business.

Saket Kapoor — Kapoor Company — Analyst

Sir, two small points. Our investment in ABG is total, what amount have we spent as of now?

Percy Birdy — Chief Financial Officer

So, we have put in about INR700 crores plus GST so far and majority of it is of course for the scrap that we have got, more than 150,000 tons, including the partially completed ships. And we will try and monetize these assets as quickly as possible. So, this is of course limit our investment exposure. And as far as the business plan is concerned, we will take our time, we will do our due diligence and then we will come up with a complete proposal as to what do we do with these assets and how do we use them for our business growth.

Saket Kapoor — Kapoor Company — Analyst

Sir, one more question and then one for pipes. For Sintex and ABG, these two stories had been the leverage stories of the two promoters wherein they could not manage their business for one or other reasons, and both whether for ABG, it was a capital-intensive part and for — not to quote what was wrong being done by promoters whether or not and for Sintex also it was exposure towards the government project and there’s several issues. So, what are the two learning stories and compelling reason for which other than getting things at a discount, what would have made you people believe that these could — these two are the potential to put the management bandwidth since that we have a large pie in the Pipe segment and we are also expanding. We have already expanded in the DIP, which is itself offering a lot of business opportunity. So, trending towards these two unrelated segments, how — what confidence and how is the management bandwidth there in these two verticals at the time and energy that we spent would generate the same ROE and ROC that the Pipe segment in totality is what garners to?

Vipul Mathur — Managing Director & CEO, Board Member

I think so you are asking a couple of questions, Mr. Kapoor. Number one, what — how — why were they not managed nicely by the erstwhile promoters. I don’t think so I intend to comment on that. There could have been various factors and so be it. As regards Welspun, number one, it is not that they were available to us at attractive — or they were an attractive proposition. They were completely thought through stories, thought through acquisitions and which clearly will be the next engine for fuel for our growth. We are, you know Sintex is, Sintex is our play coming to the B2C, is our play for B2C segment and we’re completely focused to turn it around. We have a clear strategy around that and we know that what type of brand it is, what can leverage this from this particular brand, what is the penetration it has. It has more than 800 distributors, 13,000 retailers.

To create a platform and to have a platform like that into a B2C play is commendable. I think so this is — so, one is the brand and other is the network and then it could be leverage into so many other things. So, that was that was — that was our whole contention of getting into Sintex And we are very confident that it will be a clear turnaround street. ABG is, ABG why did it not operated well. I think so, it has — also it has to do with the timing part of it. Probably that point in time, the government businesses, what was happening was the government or the PSU business were not very encouraging. Today, if you see, this government’s focus on Make in India, Atmanirbhar Bharat India and all that shipping, you know, all the defense shipbuilding has to happen in India. I think there is a huge potential of shipbuilding, which is going to be there in the defense sector itself.

If you see that all the government shipyards have an order book of more than seven to eight years. Now if — but if the demand and the appetite of the government in terms of putting more ships into the water from a defense perspective is so high that there is a lot of business, which is expected to come back to the private sector. And this is one of the genesis of which for us to look at the — for the ABG Shipyard. Not only this is a genesis, but if you see the freight corridor across India, the water transportation in India and the corridor, the economic corridor for the freight for the shipping lines across in India has significantly gone up. It has almost tripled over a period of time. So, that necessitates a huge need for a timely ship repair.

So this asset has — this asset could be a potential, a global asset in terms of ship repairs as well. Thirdly, this asset is the only asset where offshore structures and offshore drilling rigs were — it was compatible to make. The way things are panning out at this point in time, the way the offshore story, the oil and gas story in offshore, the offshore — structure story in offshore, the drilling rig business in — globally. I think so this is, this is one particular asset, which has the competency and the capability to do that. So all put together, when we are seeing, we are seeing a great potential into that and that is the reason we ventured into that withstanding that the acquisition cost was fairly reasonable. So, just to tell you, Mr. Kapoor, that it was — it is no knee-jerk reaction, it is absolutely thought through with a proper diligence and with a clear road map that we have put our hands into this game.

Saket Kapoor — Kapoor Company — Analyst

Yeah. And it is really heartening — yes, sir. I’ll come in the queue, sir. Yeah, yeah.

Operator

Yes, please. Thank you.

Saket Kapoor — Kapoor Company — Analyst

Thank you for the opportunity.

Vipul Mathur — Managing Director & CEO, Board Member

Thank you.

Operator

[Operator Instructions] We have the next question from the line of Radha from B&K Securities. Please go ahead.

Radha Agarwalla — Batlivala & Karani Securities — Analyst

Hi, sir, good morning. Thank you for the opportunity. Sir, first question, in the Line Pipe business, could you give us a breakup of that 2,18,000 tons of sales for this quarter? India, US and Saudi.

Vipul Mathur — Managing Director & CEO, Board Member

Good morning, Radha. I think, so from a — for you know, for our India, the sales was 126,000 tons. For our US operation, it was as I said, it was 38,000 tons and for the Saudi operation, it was 118,000 tons. So, that was the sales for this particular quarter, Q3.

Radha Agarwalla — Batlivala & Karani Securities — Analyst

And also the break-up for the order book, sir, 928,000 tons break-up?

Vipul Mathur — Managing Director & CEO, Board Member

I think the break-up is very evenly split. We have almost close to — in excess of 300,000 tons of business in India, close to, more than 400,000 tons of business in US and close to 200,000 tons of business in Saudi. So, that’s the broad break-up, almost we have, that brings us to close to 950,000 tons to almost 1 million tons of business at this point in time.

Radha Agarwalla — Batlivala & Karani Securities — Analyst

Sorry, I could not get you. How much you said in US and Saudi?

Vipul Mathur — Managing Director & CEO, Board Member

US is more than 400,000 tons and Saudi happens to be more than, it’s close to 200,000 tons.

Radha Agarwalla — Batlivala & Karani Securities — Analyst

Okay, sir. So, this India business, EBITDA per ton has jumped significantly in this quarter. So, could you give us the reason for that?

Vipul Mathur — Managing Director & CEO, Board Member

As I have always said EBITDA per ton is a factor of a product mix. In this particular quarter, we have a very favorable product mix, number one. We have very profitable orders, which got executed and that is the reason you are seeing a high EBITDA per metric tonne for our Indian business. I think so moving forward, even for the subsequent quarter, the way the product mix looks to us looks pretty decent at this point in time and I hope that we should be able to maintain the same EBITDA per ton in the subsequent quarters, if not improve upon further.

Radha Agarwalla — Batlivala & Karani Securities — Analyst

Okay, sir. And in the Saudi business, you said you have 2 lakh tons of order book now. So, out of that is the entire order book pertaining to the Water segment?

Vipul Mathur — Managing Director & CEO, Board Member

Yes. Currently, yes. Currently, 200,000 tons or perhaps 200,000 tons of the water business is purely with our Water segment. Yes, you’re right.

Radha Agarwalla — Batlivala & Karani Securities — Analyst

Okay. And, sir, last two months there is a sharp correction in gas prices, so is this expected to impact the order book position or new tenders in the US business?

Vipul Mathur — Managing Director & CEO, Board Member

It should rather improve. It should rather improve. We see that they have gone to an abnormally high-level and that is where the consumers have started feeling the pinch and things were slightly — we were seeing a little slowdown especially on the CGD side of it. I think so with the sharp correction which is happening, I think so the projects which were slightly — on which some rethinking was happening, probably that will be over and we would see fresh business opportunities coming up on the table. So, I see that as a positive rather than negative.

Radha Agarwalla — Batlivala & Karani Securities — Analyst

Okay, sir. And in DI, sir could you tell us how much the coking coal inventory we have in terms of months?

Vipul Mathur — Managing Director & CEO, Board Member

I’m sorry?

Radha Agarwalla — Batlivala & Karani Securities — Analyst

Sir, in the DI business, how much coking coal inventory we have currently?

Vipul Mathur — Managing Director & CEO, Board Member

In DI business, we don’t have a coking coal inventory, it is in our steel business, we have a coking coal. And we have defined the product — we have defined that the bulk raw material has to be always covered up to a particular limit. We have set internal goals, that what will be our goals, you know that we need to carry for iron ore, what we need to carry for coal, what we need to — so we have set internal target and we are well within that. On the DI business, it is purely, purely a DI pipe.

Radha Agarwalla — Batlivala & Karani Securities — Analyst

Sir, from the consol basis, how much EBITDA per ton are you expecting for the next one year or so?

Vipul Mathur — Managing Director & CEO, Board Member

As I said, EBITDA per ton is a factor of product mix and the product mix keeps on changing on a quarter-on-quarter basis. It’s very, very difficult to predict at this point in time, that what is going to be the product mix for the next quarter. All what we would have a visibility for the next quarter. Let’s say we will have a visibility for quarter four. But when we are talking about — while we have a booking till quarter three of the next financial year, but there will be some new orders, which will come, at what margins, they will come, what profitability, they will have, so that will keep on changing. But the way things look like at this point in time, I think so the market seems to be extremely buoyant. I think, so this EBITDA per ton, whatever we are showing in this particular quarter, I think the cycle should sustain.

Radha Agarwalla — Batlivala & Karani Securities — Analyst

Okay. Thank you, sir. That’s it from my side.

Vipul Mathur — Managing Director & CEO, Board Member

Thank you, Radha.

Operator

Thank you. [Operator Instructions] The next question is from the line of Bhavin Chheda from ENAM Holdings. Please go ahead.

Bhavin Chheda — ENAM Holdings — Analyst

Yeah, good morning, sir. Overall, congrats on good recovery in this quarter and strong order book across US and Saudi. So, two, three questions. First on the leverage level, so how much capex would be pending and can we assume this gross debt and net debt levels are at peak level or the same would peak out by March ’23? If Percy is there on the call, yeah.

Vipul Mathur — Managing Director & CEO, Board Member

Yes, so good morning, Bhavin. I think, Percy is there, Percy said, I know that we have — we are — we have only a residual capex, projected capex which is left out which could be in the vicinity of INR100 crore to INR150-odd crore. That’s the residual projected capex, which is left out and it will all be done on or before 31st of March. So, we will be done with our capex cycle. So, there is nothing here.

Bhavin Chheda — ENAM Holdings — Analyst

Residual capex, INR150 crore, obviously you are generating strong EBITDA, which means that leverage will come down or we will lead incremental working capital for US order book and all that?

Vipul Mathur — Managing Director & CEO, Board Member

Our leverage will come down Bhavin for sure. And as regards the US part of it, the working capital, I think so that is fully secured, fully in-place. I don’t think there is any need for any incremental working capital for our US operations. We have adequately covered ourselves there.

Bhavin Chheda — ENAM Holdings — Analyst

Sure. And in terms of the order pipeline also, I think you mentioned somewhere bid book of 1.7-odd million. So the — is ther esome kind of a geographical break-up in that bid book, how much would be US, Middle East and India, just in percentage terms would also be fine?

Vipul Mathur — Managing Director & CEO, Board Member

Yeah, so as I said, Middle East seems to be having a significant, which is almost one-third of the businesses seems to be coming from Middle East, then US and then Southeast Asia and Australasia. So, it is in that particular three regions that we are seeing…

Bhavin Chheda — ENAM Holdings — Analyst

That’s the current order book, sir. I’m saying bid book of 1.7 million. The active book of 1.7 million that would be also similar break-up in-line with the order book break-up?

Vipul Mathur — Managing Director & CEO, Board Member

If you see, it’s pretty much close to that. You see in the US side of it, it’s pretty much close to that, you may say that.

Bhavin Chheda — ENAM Holdings — Analyst

Okay, okay. And, sir DI Pipe breakeven should be there by quarter one?

Vipul Mathur — Managing Director & CEO, Board Member

The DI Pipe has ramped-up significantly. I think so in the quarter three what — they were — they had just started and they were ramping-up their performance. But just to give you some reference point that whatever they produce in totality in the month — in the whole quarter in Q3, they produce almost close to that they produce in first month itself. So, you can assume that, what type of a ramp-up it is happening, almost close to 10% to 12% [Phonetic] ramp-up.

Bhavin Chheda — ENAM Holdings — Analyst

Excellent ramp-up. Yeah. So, what I’m saying is quarter four — so, Pig Iron prices are also going up, DI Pipe prices going up after the export duty have been scrapped. So, on the EBITDA breakeven part, we should be there by quarter one FY ’24 based on the order book and current pricing scenario? Obviously, the same can change.

Vipul Mathur — Managing Director & CEO, Board Member

Absolutely fair to assume that. Absolutely fair to assume that.

Bhavin Chheda — ENAM Holdings — Analyst

Okay, okay, okay. Thank you and best of luck, sir. Yeah.

Vipul Mathur — Managing Director & CEO, Board Member

Thank you. Thank you.

Operator

Thank you. We have the next question from the line of Surabhi Saraogi from SMIFS Capital Markets Limited. Please go ahead.

Surabhi Saraogi — SMIFS Capital Markets Limited — Analyst

Hello. Am I audible?

Vipul Mathur — Managing Director & CEO, Board Member

Yes, Surabhi. Good morning you are.

Operator

We request you to please speak a little louder, ma’am.

Surabhi Saraogi — SMIFS Capital Markets Limited — Analyst

Okay. Is this better now? Hello? Is is better now?

Vipul Mathur — Managing Director & CEO, Board Member

Yeah, yeah, better, better. Please go ahead.

Surabhi Saraogi — SMIFS Capital Markets Limited — Analyst

Just one question, sir. Can you give some outlook or guidance regarding the revenue and profit for the next quarter and the next financial year?

Vipul Mathur — Managing Director & CEO, Board Member

Surabhi, generally as a policy, we don’t give any guidance. I think — but all what we are trying to help you to understand I think so we have a robust order book at this point in time, a confirmed order book and across all the three geographies; India, the US, as well as the Saudi. All of these are extremely profitable order at this point in time, so. And on top of it we are also seeing a huge tailwind across all the three geographies in terms of US, in terms of India, in terms of Saudi.

So, I think so, a, order book is good, order book is profitable and the demand projections what are looking — are looking extremely encouraging, but they need to be converted into businesses and opportunity and that will determine that what is the — that is what will be the revenue, earnings and all that stuff. So, we fall — we are always fall short of giving a guidance, but I think so if you do a sort of a metrics around these three data points, it should be able to give you a satisfactory answer that the company is definitely poised to grow from here on.

Surabhi Saraogi — SMIFS Capital Markets Limited — Analyst

Okay. And, sir one more question. Last quarter you mentioned about an order regarding carbon capture pipeline in the US. So, any update on that front?

Vipul Mathur — Managing Director & CEO, Board Member

Yes. So, we have this carbon capture order from the US. This order is at this point in time, of course, the production of that order was supposed to start sometimes in May of next year — May of this year. Looks like they are having a little bit of a regulatory hurdle at this point in time and they have a — they are in discussion with us that can we potentially delay the start of that particular order. And there are provisions into the contract, it looks like they are very hopeful to resolve that particular matter. So, we are engaged with them but they do have a provision to request as to delay the start of this particular order.

But in terms of carbon capture project, I think, so they are gaining a lot of traction in the US at this point in time, not only about this particular project, which is slightly into a regulatory hurdle for land acquisition and all that, which is very common, which happens across all over the world. But the demand and the number of projects, what is being discussed in carbon capture, are — number of projects are being discussed in US at this point of time. And one happens to be the Navigator, which seems to be one of the largest project coming up immediately after this existing project what we have.

So, to your question that what is the potential and what is the outlook for carbon capture. I think so, it it is looking extremely promising. Of course, as it is in US, and there are always certain regulatory hurdles around any businesses, which is not very uncommon. So, there is little bit of hurdle this order is also facing at this point in time, but it’s just a matter of time that they will all get resolved and we will do that. And in any case, we were not supposed to start before May. So we will see that, how that it pans out from here on.

Surabhi Saraogi — SMIFS Capital Markets Limited — Analyst

Okay, sir. That’s it.

Operator

Thank you. We have the next question from the line of Ankush Mahajan from Axis Securities. Please go ahead.

Ankush Mahajan — Axis Securities — Analyst

Thanks for the opportunity, sir. Sir, this quarter, employee cost is quite high and despite good gross margins, other expenses are also on the higher side. So, would you throw some light, sir? What is the reason behind it and how is the outlook for upcoming quarters?

Vipul Mathur — Managing Director & CEO, Board Member

See, other expenses, I think so in the earlier part of this call, Mr. Percy did explain why the other expenses are going up because all the new businesses expenses are — all the new businesses have started production, they are getting ramped-up. So, that is where the expenses are getting — they are going in comparison to the last quarter when all these businesses were not there. So, you will — it may not be a direct correlation. And so is the case with the employee cost. I think so with the new businesses coming in, the new — all the new vertical getting created, new employees also joining in, the headcount significantly going up, that is what is getting clearly reflected in our employee costs. But they are absolutely on the projected lines, they are absolutely within our budgeted parameters and they are absolutely in our closest radar in terms of evaluation at any point in time.

Ankush Mahajan — Axis Securities — Analyst

So sir, any outlook on EBITDA margins, consol EBITDA margins in the upcoming quarters?

Vipul Mathur — Managing Director & CEO, Board Member

As I was just telling Surabhi just before you, I think we do not give any guidance around that. Our — we are very clear that, a, first almost, Ankush, our order book is there, confirmed order book is there, almost close to 1 million ton of an order book is in play, which is to get executed over next four quarters’ time, number one. Number two, all of these order book is very profitable order book. So, that’s the second point. And the third, as we have been talking, the demand, the demand pipeline is looking also very strong. As we speak, we are contemplating orders in the US, we are contemplating new orders in Saudi, we are contemplating some very high-margin orders in India.

So, all three of them, that the new order book which is likely to come is going to be very profitable. The existing order book, which is already profitable and already the order book for next three to four quarters, I think so these three factors should give you a clear sense that we are absolutely into sort of a good space at this point in time and which we will only — which will only improve from here, please.

Ankush Mahajan — Axis Securities — Analyst

Yeah, we agree with you that despite there is a good order backlog and even the execution is strong that we are looking in the numbers. So, just in terms of the profitability that somehow we are lacking, so just want to understand that.

Vipul Mathur — Managing Director & CEO, Board Member

Profitability, if you see EBITDA per ton has been improving, and this quarter three also, it has been significantly higher than in comparison to the other quarters and it was also — it was a factor of product mix and I think so in the subsequent quarters also when very profitable orders will be performed or executed, you will see that quarter-on-quarter basis, the margins are only going to be similar, if not better.

Ankush Mahajan — Axis Securities — Analyst

I get it. Thank you, sir.

Vipul Mathur — Managing Director & CEO, Board Member

Thanks, Ankush. Thank you. The next question is from the line of Abhishek Jain from Arihant Capital. Please go ahead.

Abhishek Jain — Arihant Capital Markets Ltd. — Analyst

Yeah, thank you for taking up my follow-up questions. So, two questions. First is, is there any inventory loss in this quarter? If yes, then what would be the quantum? And secondly, the second question would be a bit skeptical, but do we have any exposure to any of the companies from Adani Group in terms of business? Just a skeptical question. That’s it. Thank you.

Vipul Mathur — Managing Director & CEO, Board Member

To the inventory loss, I don’t think so, do we have any anything called inventory loss in this particular quarter, number one and number two, answering your question with Adani, I think so the — I mean we have limited exposure with them in terms of orders, which we do keep on getting from them for supply of some ARW pipes or water pipes with them and that’s the business exposure what we have. Nothing, nothing more than that. It’s a business transaction as usual and in any case, at this point in time is not, it’s very insignificant, very, very insignificant.

Abhishek Jain — Arihant Capital Markets Ltd. — Analyst

Okay. Thank you.

Vipul Mathur — Managing Director & CEO, Board Member

Thanks.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.

Vipul Mathur — Managing Director & CEO, Board Member

Thank you, gentlemen. Thank you very much for taking time out today morning to hear us out and to see — to hear the growth story of Welspun Corp. I greatly appreciate all the insight — in-depth questions what you asked and I am sure that me and my team would have given to your satisfaction. But just in case if you have any follow-up questions or you need further more clarity you can definitely reach out to Mr. Percy, the CFO and Gaurav Ajjan, our Investor Relations guy.

And I would like to thank the trust and the confidence you have always shown into Welspun Corp and as Welspun Corp now moves from a stand-alone pipe company to become a conglomerate, I think so, your trust and your patience and your support in this journey will be very, very appreciated. That support you have always extended to us the past. And thank you very much and we will continue to communicate with each other and keeping you abreast about what all developments are happening at our place.

Thank you very much and have a good day, please.

Operator

[Operator Closing Remarks]