Welspun Specialty Solutions Ltd (NSE: WELSPLSOL) Q2 2025 Earnings Call dated Oct. 23, 2024
Corporate Participants:
Salil Bawa — Head, Investor Relations
Anuj Burakia — Chief Executive Officer and Whole Time Director
Analysts:
Ashutosh Somani — Analyst
Raaj Makwana — Analyst
Radha Agarwalla — Analyst
Miraj Shah — Analyst
Rahil Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Welspun Specialty Solutions Limited Q2 FY25 Earnings Conference Call, hosted by JM Financial. 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. Ashutosh Somani from JM Financial. Thank you, and over to you, sir.
Ashutosh Somani — Analyst
Yes. Thanks, operator, and welcome everyone to the call. I’ll first thank the management for giving JM Financial Institutional Securities Limited the opportunity to host today’s call. Without much ado, I’ll hand over the call to Mr. Salil Bawa, Head, Investor Relations, Welspun Group to introduce the management. Over to you, Salil.
Salil Bawa — Head, Investor Relations
Thank you very much, Ashutosh. Good morning to all of you and season’s greetings. On behalf of Welspun Specialty Solutions Limited, I welcome today all of you to the company’s Q2 and H1 FY25 results earnings call. Along with me, today we have Mr. Anuj Burakia, Chief Executive Officer and Whole Time Director. I also have Mr. Brijveer Singh, the Chief Financial Officer; and my colleague, Goutam Chakraborty, who heads Investor Relations for Welspun Corp. We hope you have had a chance to review the investor presentation that we filed with the exchanges yesterday. It is also available on the company’s website. During the discussion, we may be making references to this presentation. Please do take a moment to review the safe harbor statement in our presentation. As usual, we will start the forum with opening remarks by Mr. Anuj and then we’ll open the floor for your questions. Once the call gets over, should you have any further queries that remain unanswered post the earnings call, please feel free to reach out to any one of us. With that, I would now like to hand over the floor to Mr. Anuj Burakia, Chief Executive Officer. Over to you, Anuj.
Anuj Burakia — Chief Executive Officer and Whole Time Director
Thank you, Salil. Good morning, everyone. I want to extend a warm welcome to all of you for joining our quarter two and H1 financial year ’25 earnings call at Welspun Specialty Solutions Limited. Today, I’ll briefly share insights into the global macroeconomic environment, our industry scenario and the company’s performance before we dive into an interactive session. Let’s begin with macroeconomic outlook. According to the IMF, global GDP growth is projected to be 3.2% in 2024 and 3.3% in 2025. While we navigate ongoing geopolitical tensions, including the recent Middle East escalation, India’s growth story continue to remain strong with forecast upgraded to 7% for financial year ’25 and maintained at 6.5% for financial year ’26.
This is largely driven by robust domestic demand and a very stable governance framework. The RBI in its latest announcement has projected real GDP growth at 7.2% for financial year ’25. In quarter two financial year ’25, we faced a challenging rather muted demand environment, sluggishness in Europe, coupled with a cautious sentiment in USA ahead of elections has created a notable headwind. This has led to pressure on pricing and contributed to a decrease in our contribution margins. Furthermore, logistical issues, including container availability and fluctuating freight costs have added to these challenges.
Turning to our financials, we reported a revenue of INR341 crores for H1 financial year ’25 and EBITDA of INR25.11 crores for this period. SS Steel products sales volume during this period stood at approximate 8,700 tons, while pipes and tubes volumes stood at about 2,450 tonnes. Similarly, for quarter two financial year ’25, total income stood at INR173 crores with an EBITDA of INR8.3 crores. During quarter two, we made a PAT loss of approximately INR6 crores, primarily attributable to decrease in contribution margin during this period, as I explained before. On a positive note, our order book remains robust, standing at over 5,800 tons valued at about INR271 crores. Despite the situation, WSSL could maintain its top line revenue owing to our strong customer connect and relationship, we anticipate strong rebound in demand for steel bars starting quarter four, particularly in the EU and US markets. Recent rate cuts by various central banks is further expected to boost economic activity and demand for capital goods.
In Pipe business segment, WSSL is strongly positioned and expect to deliver strong performance in the upcoming quarters starting quarter three. I wish to highlight and draw your attention to the paradigm shift that’s happening in the Indian market economy. Government spend on infrastructure, energy, defense and other strategic sectors coupled with Make in India is creating clear demand trust in the country. The growth spend is expected to continue and increase further in times to come. In this scenario, an integrated special steels and seamless tube player like WSSL offering end-to-end product solution has incredible opportunities coming its way.
We are thrilled to note this belief further gets reinforced with WSSL’s significant win of approx 1,400 metric tons BHEL contract for Super 304 grade seamless tubes valued at about INR117 crores for prestigious NTPC Talcher super critical category power project. The tubes are being manufactured in an integrated manner right from the stage of melting the steel to delivering ultrasonically tested and short paint [Phonetic] final boiler tubes. This landmark project marks the first large-scale contract awarded to an Indian company for this specialized product traditionally imported. Successfully delivering this project will greatly enhance our reputation and establish our competence and credibility in the attractive power gen tubes segment.
Our commitment to innovation is unwavering. We are advancing our certifications, including AS9100B for aerospace and Norsok 650M for North Sea applications. Additionally, our new product offerings such as 13 chrome and nine chrome bars for oil and gas application and niche Welsonic 50 has been successfully developed, produced, delivered and commercialized. I’m very pleased to share that US Department of Commerce, after detailed assessment under new shipper review, recently determined nil anti-dumping duty on SS bars exported by WSSL to US during H1 of calendar year 2023.
This development enhances our confidence and business prospects for the company in the US market. We are intensifying our marketing efforts in USA and Canada, anticipating a revival in demand following the US elections. Our exploration of new markets, including Brazil, Mexico and South Africa reflects our strategic growth initiatives. Sustainability remains at core of our business at WSSL. I am proud to report a 10% reduction in overall energy intensity during H1 financial year ’25 as compared to financial year ’24. With renewable energy now comprising 38% of our total electricity consumption, we are dedicated to integrating sustainable practices into our operations.
In last, while the external environment may not be entirely conducive, we remain very optimistic about WSSL’s path forward. Our strong customer relationship and integrated solutions position us well to seize greater opportunities. Now I’d like to open the floor to the questions. Thank you.
Questions and Answers:
Operator
Thank you. We will now begin the question and answer session. [Operator Instructions]
Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Raaj from Arjav Partners. Please go ahead.
Anuj Burakia
Sorry, didn’t get the name. Can you please repeat?
Raaj Makwana
I’m Raaj from Arjav Partners.
Anuj Burakia
Hi Raaj.
Raaj Makwana
Yeah. Am I audible?
Anuj Burakia
Yeah, Raaj. Good morning.
Raaj Makwana
Anuj sir, I’ve been tracking this company for one or two quarters. I just wanted to know, once we get the approval for AS 9100 and Welsonic 50 and the other products. So how big is the opportunity size for us?
Anuj Burakia
So you see a lot of sectors require a lot of different accreditations and certifications to operate within that, okay. Now what happens is if we are selling, let’s say, our products to one customer in say for example in United States and this customer of ours is catering to various sectors, which includes oil and gas, which includes, let’s say, oil well services, which includes nuclear power, which includes aerospace, which includes chemicals and things like that. Now, obviously, the customer would want us to also have maximum certifications possible to be able to stock our products and can use it for any of these applications, okay. So as we progress and the certifications like AS9100 requires a lot of experience, maturity before you are — when company can really get accredited with this kind of a certificate, which is primarily for aerospace applications.
So more than how much market is there for aerospace, which is also by the way guided by many other factors. Important is to have that accreditation as one of the feature of the product, which can then be supplied to the market, wherein it is being used for multiple applications, not just one. The Norsok 650M is a specific certification which is required for North Sea application. This is a standard that is followed by Equinor in Norway, enabling any mill to supply the products for that particular application, which is considered as niche, especially the products that goes into that application are of a high value nature.
Now as far as Welsonic 50 is concerned, this is a particular grade which not many mills in India does and is widely used for multiple applications. This doesn’t require any certification as such, the quality of product and which we have been able to successfully develop and have already sold to many customers and look forward to doing more volumes in those.
Raaj Makwana
All right. And sir, how much is the price per ton of these category of steel?
Anuj Burakia
Well the certification is not for one particular steel. There would be multiple grades and things. So there is no one price, particularly for Welsonic 50, which is one product I can roughly say that it is something like $8,000 per ton.
Raaj Makwana
Right. And sir, I wanted to ask for a simple SS bar and SS 5 manufacturing company, how much time it takes to get all these accreditation?
Anuj Burakia
Well, Raaj, I think first of all, SS is a very wide subject. I don’t know how much we have been able to really study and research about it. There would be numerous number of grades and categories and products that can be produced in stainless steel. Our philosophy at Welspun Specialty as the name suggests is only to be in high value add specialty segment. Having said that, of course, our lowest grade that we produce is, let’s say, standard of genetic [Phonetic] 300 series. But to say that it is a simple production and simple to do, I think it takes time to really mature and get to a level where a company can achieve certifications like AS 9100, which requires a huge maturity in QMS systems and documentations and the level of knowledge that’s required.
The audits are really stringent and they are conducted by the field experts and it is always advisable to go for it once the level of maturity has been achieved.
Raaj Makwana
Okay. And sir, who are your peers in this category?
Anuj Burakia
I’m sorry, come again.
Raaj Makwana
Hello. Who are your peers in this category.
Anuj Burakia
Okay, it will be difficult to say that there is one peer which I — which we can compare because this is a unique proposition where we are producing right from steel to final tubes and that to in particular category using hot extrusion route. There are a lot of players, some and they may not be directly comparable, maybe partially comparable. So it’s really difficult for me to say that who is the direct peer here. But there are global companies like Sandvik, like Tubacex, like Mannesmann, Sumitomo who are into this field in a similar segment. Then of course there are some large Chinese companies as well.
Raaj Makwana
Understood. So sir, once we get all these approvals.
Operator
Raaj, please rejoin the queue for further questions.
Raaj Makwana
All right. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Radha from B&K Securities. Please go ahead.
Radha Agarwalla
Hi, sir. Thank you for the opportunity.
Anuj Burakia
Yeah, good morning, Radha.
Radha Agarwalla
Sir my first question. Good morning, sir. Sir, my first question was that can you please talk a bit about the total requirement of SS bars in India? And out of the total requirements currently, how much capacities are there in India? And are there any imports? So a bit about the industry scenario on SS bar in India?
Anuj Burakia
Okay, so there are two aspects. One is how much is being produced in India and how much is being really consumed in India. So I will only talk of flat steel and of course, there is some overlap between, sorry, long steel and there is some overlap in products which are considered long but are made of flat like for example, welded pipes. So if we talk of purely long products play, the overall capacity in India with let’s say the prime players is approximately 1.5 million to 2 million tons of total capacity in India. Of course, flat steel capacity is more about I think 2.5 million, 2.8 million tons. Overall SS production in India is anywhere between 4 million to 4.5 million.
Now out of this, about 50% to 60% is something which gets exported eventually in various forms may not be just a steel bar, it could be then further forged [Phonetic] into various components. It can be extruded into various parts, machined into components and parts in various forms. It is not like normal carbon steel, which is used in bulk in infrastructure. Stainless steel mostly is used for special applications in very high corrosive or very high-temperature requirements. So overall, you can say these are the numbers around which we are playing.
The global market in stainless steel, inclusive of all forms and all everything is about 55 million tons and out of which 60%, 65% of the production out of that is coming from China alone.
Radha Agarwalla
Okay, sir. Domestic industry size, what did you mention?
Anuj Burakia
Overall production about in between 4 million to 5 million tons including domestic flats.
Radha Agarwalla
Okay, sir. And secondly, sir, so in — we are targeting a lot of exports in both SS bars and SS pipes. So particularly for the SS bars, I wanted to understand which are the key regions that we are targeting and what is our USP or competitive intensity in these SS bars products.
Anuj Burakia
Well, I think, I spoke about two, three points. One is on the bars, of course, you see, we have to sell where there is consumption, okay. Now the bars and the category of bars that we produce in bigger sizes is mostly for engineering applications into various sectors. Now the consumption is highest in these segments if we talk of non-China world is majority into West, Europe being the largest consumer then followed by, of course US, Turkiye and they are kind of similar or for us as a next immediate next priority markets. So these are the markets that obviously we are eyeing and we have attained a lot of, I would say, comfort and maturity in the European market, which was our first market to go to. And now we have intensified our activities in United States and overall Americas, I would say. So these are the market that we are definitely targeting.
Now on the — on the competitive side, competitiveness side, I can tell you that probably India is one of the most competitive producer and so are we. So I don’t see a challenge on that front, except that sometimes the markets are not good and your margins overall are little squeezed. So that’s a different story.
Radha Agarwalla
All right, sir. Sir, lastly, what is the overall business opportunity in nuclear power business in India?
Anuj Burakia
That’s a very, very wide question, I think the nuclear power opportunity is running into billions. But that’s something which is very closely guarded with the policy and the releases of budgets and so what I broadly know is that about 10 reactors are being envisaged and all of them are in different stages of maturity. Some are already on the ground, some are about to start, some are in the budget clearance stages, things like that. And a nuclear reactor would consume like plethora of products. Out of that even the tubes of various kinds and — so I think it’s really difficult to put it in terms of an amount or a number. But what I can tell you is that with Make in India any reactors that are coming in the country, the first preference is definitely to the Indian companies.
And as Welspun Specialty, I can tell you that we have played a very important role and have really supplied the most critical steam generator tubing, which is the heart of the nuclear reactor, in partnership with Nuclear Fuel Complex. So we have the required experience and as this business grows in India, I mean, we are ready to grab that opportunity.
Radha Agarwalla
Okay, sir. I’ll come back in the queue.
Anuj Burakia
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Miraj from Ariant Capital. Please go ahead.
Miraj Shah
Good morning, sir. Thanks a lot for the opportunity. I had a couple of questions to understand the demand part, you did speak about it in the start of the call, but just wanted to clarify this part. You said that the demand was muted and a lot of the impact also came from the container traffic freight issues because the freights have spiked. So can you just let me know that how has the domestic demand trend been in the past quarter versus as you already mentioned that the import — export part is being affected because of the container freight. So how was the domestic demand? Is that also muted or was that decent?
Anuj Burakia
So let me try to explain this Mirage. So first of all, there are two products that we are talking about and both are very different in nature. So one is the stainless steel bars and the other is the seamless pipes and tubes. Okay. Now if we talk of stainless steel bars, major consumption, as I was explaining earlier also that India is not a big consumption center at this point in time. Even to the customers that we are selling in India, okay, I would assume that at least 50%, 60% of those bars further gets processed and eventually end up getting exported in various forms. So which means if the external market out of India or the export market is not doing well or if it is muted for a mill like us, the direct sales in exports as well as our customers in India who are again dependent on exports, the effect come on all of this. And it’s an open situation at this point in time that how Europe is performing for last one year and especially in the last six months and how US, I mean the two major consumption centers, how they are operating at this point in time. And that is what is also showing into the demand which is there for the steel bars and the pricing pressures that are there.
However, I mean we are very clear and very confident that quarter four onwards this demand will start to come back. So that is on the bar side of it. Now coming to the pipes and tubes, our volume remains constant or it has rather improved a bit, which is more towards the domestic Indian side. So as I mentioned in my commentary also that we are very bullish on the seamless pipe side of it especially when we look at the Indian domestic consumption. This recent few years the activity that has happened in the public spending, especially in last two years to three years, if you see, a lot of strategic projects which were earlier being talked about are now already on the floor.
The tenders are coming out and the demand has got really created in the market. So on the pipe side, I think it is more domestic looking than outside. Of course, having said that, not that our focus is not there on exports, but to simply put, three years back when we were doing 30% domestic sales in pipe and 70% exports. At this point in time it is, you know, you can say it’s reversed. Now we are selling 70% in domestic and 30% exports.
Miraj Shah
Understood. So that is for seamless pipes that we have reversed. The domestic sales are more. Sir, on the bar side, SS bar side. Could you let me know how much are we selling in domestic and how much are we exporting directly?
Anuj Burakia
Bars is, let’s say about, I mean depending quarter-on-quarter, 60% to 70% is exports and about 30% is domestic.
Miraj Shah
Understood. And just for knowledge purposes, if I wanted to understand that since we are having issues on the freight part, is there any region that is being benefited because of this? Is there some other geographical region who’s gaining advantage because of other countries having issues in exporting?
Anuj Burakia
See what led to this freight crisis during H1. There are two factors, okay? First factor is this discontinuation of Red Sea route. But it is not discontinued. But let’s say none of the shipping lines want to take that risk of coming under attack. A lot of ships got attacked in the past. So most of the lines, let’s say from India to Europe, the actual route or the reasonable route or a viable route is going through the Suez Canal which passes through that Red Sea.
Instead of that, all the vessels are now going through under the South African region, which is the Cape of Good Hope and which has increased the voyage time, average voyage time, which used to be 25 days to Europe to now 45, 50 days now, which is significant. It’s not just two, three, four days addition. It is like double the time it is taking and therefore the costs have escalated and availability because the same turnaround that was probably happening in 50, 60 days is now happening in 100 days. Right. So the container equipment is remaining more on water than being really used. So that is one factor. The second factor was during H1 there were some heavy traffic that was flowing between China to US and we understand that most of it was for EVs. The good news is that now we are seeing towards the end of let’s say September and beginning of October that the freights have started to soften a bit.
Of course, the Red Sea crisis still continues. That is not the factor where we’ve got a relief. But this traffic between China and US seems to have gone down significantly now. So we see this situation improving in times to come.
Miraj Shah
Understood. And sir, just a thought over here that geographically if I see wouldn’t China be the best to supply demand in US because that region would be closer?
Anuj Burakia
Well see, just because they are — I mean distance wise and actually they are not because if you look at East Coast of US, I mean, it’s still a haul. More important is the other trade policies, the other trade barriers and which applies everywhere. Like we have restrictions to supply beyond the capacity in Europe or in US, similarly China has also got restrictions. So logistics wise one origin can have some advantage over the other. But it is not so significant that China can take over all the business. So we have especially in the value added grades, I mean, and which is what is our whole business idea. We have a huge opportunity in the US market but as I explained earlier also it’s a special product. It takes some time to really get approvals and trials and then finally become a commercialized product and which we are on the path, I mean.
Miraj Shah
Understood. So is that the same thing that you mentioned in the presentation that we’re expecting better outlook on them in Q3 and Q4, is it for the same high value pipes that you mentioned right now?
Anuj Burakia
The high value is part of the overall sales that we do. What I mentioned about Q3, Q4 is simple two things that on the pipe side of it we are doing very well and I am very confident of continued or even much superior business performance during Q3, Q4 when it comes to pipe. On the steel bars, since the external environment still continues to remain a challenge, little unpredictability looks to be there. However, in all fairness, we definitely expect the demand to bounce back starting quarter four for the steel bars. And since you see, we keep engaging with customers, policy makers, analysts. So basis that this confidence is coming from all our analysis that after a muted performance on steel bars in the market for almost three quarters now, quarter four and by the time the US elections will be over. So US market is also expected to bounce back which is also muted at this point in time.
So we strongly believe that quarter four onwards the bar business or bar demand will bounce back.
Miraj Shah
Perfect. Understood. So just one last question before I get back in the queue. In the presentation, you mentioned that the U.S. Department of Commerce has assessed nil anti-dumpling duty. It was mentioned as H1 CY23. Till when is this applicable?
Anuj Burakia
So Miraj, what happens is the US has a typical system where they assess the duty for one year at a time. Okay. Since we first started the business in 2023 is the first result that they have now released. So it goes with a lag. So what might — the significance of this is an untested territory wherein, of course, we went in with all the calculation and with the right strategy. This is in a way our strategy getting proven whereby if, let’s say we would have got an anti-dumping which can go to any extent, it could have completely dented our plans of doing business into US.
So let’s take this as a clear indication that our strategy is right, we are playing the game by the rules and we could get anti-dumping on for that period at zero. So if we continue our strategy in that manner, I mean, it gives us a lot of confidence that we will not get entangled with the anti-dumping in US.
Miraj Shah
Okay. So this was the retrospective action. Is that the right way to look at it?
Anuj Burakia
Yeah, yeah, yeah.
Miraj Shah
And the next assessment would come with same-period next year.
Anuj Burakia
Every year it will come for a period which is…
Miraj Shah
One year.
Anuj Burakia
Yeah.
Miraj Shah
Understood. Okay. I have a few more questions, sir. I’ll get back in the queue. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Rahil Shah from Crown Capital. Please go ahead.
Rahil Shah
Hello. Can you hear me, sir?
Anuj Burakia
Yeah. Morning, Rahil?
Rahil Shah
So sir you mentioned SS bars is looking weak. Demand is to be — to revive from Q4 onwards. But pipes and tubes is looking promising. So what does that mean for our guidance which you had given earlier, so now you had 20%, 30%, you will be delivered in FY25 and also contribution margins now going ahead, will they improve or will we see — still see losses at the PAT level. Thank you.
Anuj Burakia
You see Rahil, first of all in a kind of volatility that is existing, it is difficult to give guidance on Q3, Q4. So when we spoke first it was a relatively stable external environment. The escalation of war like situation and the things which are happening around, I think it will be prudent to stay a little — little paused and really observe and take the actions which are really prudent for the business. The guidance that I gave 20% to 30% still stays the way we are poised. Right. So as far as our internal preparation, our customer connect, our product development, our strategy is concerned, we are definitely on the path.
If you notice our — we have been given the situation which is really adverse outside. We still have been able to maintain our top line and are — we remain prepared for as soon as there is better environment outside, we will also bounce back. So maybe our increase over — are past by 20%, 30% has got a bit delayed. But it stays, it still remains and we will get there. It’s a matter of maybe one or two quarters that it has got delayed.
Rahil Shah
Okay. [Technical Issues]
Operator
Sorry to interrupt, Mr. Rahil. Could you come a bit close to your handset?
Rahil Shah
Hello. Hi. Can you hear me?
Operator
Yes, it’s better now.
Rahil Shah
So what you mean to say is obviously you’re an observation period but when you say the 20%, 30% guidance stays, is it for the near future? Is it for this year?
Anuj Burakia
Sorry, I couldn’t get the last one. Is it for —
Rahil Shah
Is it for the near-future like or maybe next year or is it for this year? You still think you can achieve it?
Anuj Burakia
Well, I think, well as I — I said that on the pipe we are maintaining our very, very robust position and there is no delay on the pipe side of it. On the bars, owing to the situation quarter four onwards, we see the demand returning back. So maybe we should be able to see some better scenario starting from quarter one.
Rahil Shah
Okay, you’re saying that pipe is more than enough [Technical Issues].
Anuj Burakia
[Technical Issues]. Very, very strong.
Rahil Shah
Okay, okay. And margins you can’t say because it’s a bit — it’s really volatile at the moment.
Anuj Burakia
Margins are intact. I mean, see, it’s a — pipe is altogether different business. It’s a super speciality you can say. Bar is a mix of specialty, super speciality, and also some standard products.
Rahil Shah
Okay. Okay. Yes, thank you and all the best.
Anuj Burakia
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Raaj from Arjav Partners. Please go ahead.
Raaj Makwana
Hello, am I audible?
Anuj Burakia
Yeah, yeah. Mr. Raaj, you are audible.
Raaj Makwana
And sir, once we get the approvals of AS category and about 650M and others, are we expecting a drastic improvement in the order book?
Anuj Burakia
So, Mr. Raaj, we already got a lot of approvals. These are the decorated ones. So it is not — it will not be prudent to say that just by getting two certifications will be a drastic. So it has to be built brick by brick. These two accreditations represents two high-value add segments within the overall scheme of things. Okay. So if you would notice in last few quarters, every quarter we have done some or the other addition on accreditations and which is like building the capability wherein we will be able to do better volumes and better margins by having these accreditations under our belt. So very, very difficult to say that just, I mean, an accreditation can really pull in a big volume or a business. But yeah, I mean, if these are not there, our sales are definitely going to suffer. Wherein the customers would prefer to buy from the mills who have multiple accreditation, so one stock can serve multiple purpose — purposes.
Raaj Makwana
Understood.
Anuj Burakia
So I — did I explain it better?
Raaj Makwana
Understood, understood. And sir, regarding the execution, like, sir, sorry, I wanted to ask how much is our current outstanding pipeline?
Anuj Burakia
Do mean the order book?
Raaj Makwana
Not the order book. I’m talking about the leads.
Anuj Burakia
Leads yeah. Well there are a lot of projects that we have bid especially on the pipes and they include both domestic as well as exports. Here the case is a little different from very large project pipelines that we talk about. But broadly, I can say that I think our balance bid book would be anything between INR120 crores to INR140 crores on the pipe side of it. As far as the bars are concerned, you see bar is not a business which is bid like a project. It is normally like an inquiry based and if the transaction has to happen it normally — I mean for the most of the business it just happens in a week, 10 days, 15 days time. So maybe at this point in time we may have INR20 crores, INR30 crores, INR40 crores of bids which are — which may be under discussion. But there are no long lead offer in case of bars.
Raaj Makwana
All right, sir. And regarding the execution, so we are expecting FY25 to be a flattish year right? And growth is expected from FY26 onwards. So on the earlier calls you had said 20% to 30% growth. So that stands for FY26 now. Am I right?
Anuj Burakia
Well at least for ’25 you can. Since two quarters have already gone and we have seen what’s happening around. So you are right in saying that ’25 could be a flattish year. ’26, whether it is going to be 20% or it is going to bounce back more sharply and it could be 40% also, I think, let’s go a little nearer and then we will be able to make a better prediction even in that case.
Raaj Makwana
Understood, sir. And sir, when I look at the — hello, am I audible?
Anuj Burakia
Yeah. Go ahead.
Raaj Makwana
When I look at the shareholding of the company, so there is an individual named Dilip Kumar [Phonetic]. He has 23% stake in the company. So what exactly role does he play?
Anuj Burakia
There is no — I mean on the role side I can simply say that if somebody is holding 2% or 0.2% or 2 shares is the same role that Mr. Lucky [Phonetic] is also playing with 23% stake. So he into the business of the company and stands invested in a big way. And that’s about it.
Raaj Makwana
All right, so he…
Anuj Burakia
[Speech Overlap] Participation in the management.
Raaj Makwana
Understood. So he is an investor sitting in the company with 23% stake. Right.
Anuj Burakia
And it’s been long time, invested in the company.
Raaj Makwana
All right. Okay. Thank you. Have a good day.
Operator
Thank you. The next question is from the line of Radha from B&K Securities. Please go ahead.
Radha Agarwalla
Sir, thanks again. Sir, I wanted to understand that with current capacities and utilizations, is it correct to assume that we can sell externally 75,000 to 80,000 tons of SS bars and 8,000 tons of SS pipes.
Anuj Burakia
Theoretically, yes, rather but to get to 80,000 tons, 85,000 tons of external sales there is progression which is involved. Right. I mean to understand it easier, currently we are utilizing less than 50% in fact rather about 40% of our capacity of salable steel, which also includes the steel which goes for our captive consumption for pipes and tubes. This of course, our focus is to ramp it up to a level of 70%, 75% first and then eventually to 85%, 90%. But there is of course, gestation involved in that. So we are not looking at big capital investments. We are not looking at adding more streams to the production lines. So the whole focus is also to increase our capacity utilization.
This I have said before also and that focus stays. Similarly on the pipe, the usable capacity is approximately 8,000 tons to 9,000 tons. Currently, we are, I would say at a run rate of about 70%, 75% of that. And on pipe, I am very confident that over the next few quarters we should start hitting the 90%, 95% utilization.
Radha Agarwalla
Okay sir. Secondly, with the trial runs and pending [Phonetic] approvals then new markets that we are planning to enter with new products. So is it fair to assume that it could take around three to four years to reach our full potential of sales in SS bars and SS pipes?
Anuj Burakia
If we talk from the let’s say installed capacity standpoint, I think on the pipe side we should get to that run rate in about one to one and a half years. And on the bar side anything between one and a half to two years.
Radha Agarwalla
So both within [Technical Issues]
Operator
Sorry to interrupt Ms. Radha. Could you speak into your handset. There is a lot of disturbance from your end.
Radha Agarwalla
Sorry, two years. Hello.
Anuj Burakia
Yes, you are clear now.
Radha Agarwalla
Yes, sir. So both SS bars and SS pipes, you are expecting the utilization — at full utilizations within two years?
Anuj Burakia
Yeah, yeah, that’s right.
Radha Agarwalla
Okay, sir. Great. So just wanted to understand that players like — peers like Venus and Skoda, so they are targeting aggressive growth and also growing at double digits and some players like Ratnamani, they are growing at single digits, whereas this year in first half, as of now, our pipe vertical has not grown. So there seems to be a mismatch with the peers. So can you please help us understand how to figure out these numbers?
Anuj Burakia
So Radha, first of all the one company that you spoke about is not Apple to Apple comparison because they have got different basket of products that we have got compared to what we have got. They are into welded pipes, they are into fittings, they are into lot of different products. So I am not — and plus the proportion of seamless pipe for the sectors that we are selling in their overall scheme, we are not aware of that. I mean we don’t have such analysis with us. And they are not available in the public domain. So I think the analysis needs to be done in that sense that the other sectors, other products that they are doing how they are — how those sectors are performing.
Similarly on the large player, let’s say Ratnamani we speak about again, that comprises of large diameter carbon steel pipe, large diameter stainless steel welded pipes, then welding lines and then also seamless. So again very difficult to compare as to which product is growing, how much or doing how much. But I can tell you in general that we are also no different than any other player when it comes to the overall demand with respect to the seamless pipes and stainless steel. So with experience and with whatever knowledge I have, I can tell you that everybody is sailing the same boat. On the bar side, none of these players are into bars. So anyway, there is no comparison possible.
Radha Agarwalla
Okay, sir. Sir at — when in two years we are expecting to reach full utilization. So assuming the current realizations and the product mix, could we assume INR200 crores potential EBITDA at full utilizations for the company?
Anuj Burakia
Well Radha, I think it will not be prudent to say anything like that because what a business can control in its quality, utilization, customer connect and things like that. But there is a big role of market demand, supply and pricing of raw material that has to also come into play. So I mean, I would not like to give any vague numbers around it. So most important for us is to focus on increasing our capacity utilization and obviously in a better utilization the efficiencies are better and the margins and potential of making margins is much higher. That is where our focus remains.
Radha Agarwalla
Okay, sir. The last question with our current plans in the next two years, so there could be a lot of cash generation. So what would be your capital allocation policy? Do we have debt reduction plans on card?
Anuj Burakia
So we are not looking at any major Capex, Radha, it’s very, very clear. Given the situation and strategy that we are very clear about for the last more than one year, we are only focused on increasing our capacity utilization and will be only looking at the sustenance and the upgradation Capex wherever it is required and that we are doing also. So I would not assume it to be more than INR10 crores, INR15 crores a year. If there is anything specific that’s required in the real nature of Capex would also be not away from enabling the existing utilization. Right. So no new line, no new products. I mean it’s only focused on existing utilization.
So that’s how we are very clear on our capital allocation.
Radha Agarwalla
Okay, sir. Thanks very much for explaining in detail. All the best to you and team.
Anuj Burakia
Thank you so much. Thanks.
Operator
Thank you. [Operator Instructions] The next question is from the line of Miraj from Arihant Capital. Please go ahead.
Miraj Shah
Thank you for the follow-up opportunity. Sir, I think most of my questions are answered. I just had one question regarding pipes, part seamless pipes. These are made from billets, right?
Anuj Burakia
So Miraj, I don’t know what you call [Foreign Speech] Use a lot of words in common parlance, but there is something called cast product. Then it is rolled into black bar, then it is made into bright bar. So bright bar is the input for producing seamless pipes.
Miraj Shah
Okay bright. Okay, understood. And sir, I believe we are doing some more towards critical equipment and probably higher value. So these wouldn’t be used in the oil and gas segment, right, or are these also used there?
Anuj Burakia
See the segment and application are mutually exclusive Miraj. Within oil and gas there are, I’m just giving you example like 20 different uses of 20 different kinds of seamless pipes and stainless steel. Okay. So within oil and gas, we have seen very, very high value add 625 nickel alloy tubing going into offshore platforms and in the refineries. Whereas for the simple transportation of some chemical in an offshore platform or a refinery could be a simple 304 grade pipe. Right. So what we are focused on is value add in terms of the application. Our focus is, or our intention always is to be into the critical applications game and not in the standard transportation pipes which can also be supplied from piercing route. Right. So the piercing route of producing stainless steel, seamless pipe is suitable for low cost, low value applications. Whereas when we talk of critical applications at most of the time, we find that the hot exclusion only is the suitable route and which we employ.
Miraj Shah
Understood. Understood. Okay. Yeah, I think that’s it from my side. And just want to reiterate the guidance part you said for two years is 20% to 30%, right?
Anuj Burakia
No, I said 20% to 30% guidance stays. It has got delayed by two quarters. And we are very sure that next year we are going to definitely achieve the same.
Miraj Shah
Understood. Okay. Yeah, that’s it from my side, sir. All the best. Thank you.
Anuj Burakia
Thanks.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of our Q&A session. I would now like to hand the conference over to the management for closing comments.
Salil Bawa
Thank you. Okay as we wrap up today’s call, I wish to acknowledge the external challenges that we face many of which are beyond our control. However, our focus remains steadfast on our core competencies. We are dedicated to developing and delivering high quality grades for critical applications which continuously — while continuously expanding our market presence. We believe that our company’s performance will not only sustain but also improve through an unwavering commitment to one, exploring new markets, enhance customer acquisition and expand into new territories. Innovative product offerings that meet critical market needs, building strategic partnerships, securing approval and accreditations to enhance our capabilities, embracing technology and fostering innovation and digitization will be crucial to streamline our processes and drive growth. I hope we have addressed your questions effectively today. If you have any further queries, please don’t hesitate to reach out to our Investor Relations team. Thank you once again for joining us and I look forward to reconnecting with you — all of you soon.
Operator
Thank you. On behalf of JM Financial, that concludes this conference. Thanks for joining us. You may now disconnect your lines.