Jindal Saw : Transcript for Q4 FY23 Results Call held on 18th May, 2023

"Jindal SAW Limited Q4 FY23 Earnings Conference

Call"

May 18, 2023

MANAGEMENT: MR. NEERAJ KUMAR - GROUP CEO & WHOLE-TIME

DIRECTOR

MR. VINAY GUPTA - PRESIDENT & HEAD (TREASURY)

MR. NARENDRA MANTRI - PRESIDENT & HEAD

(COMMERCIAL) AND CFO

MR. RAJEEV GOYAL - VICE PRESIDENT-GROUP CORP.

FINANCE & TREASURY)

MODERATOR: MR. VIKASH SINGH, PHILLIPCAPITAL (INDIA) PRIVATE LIMITED

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	Jindal SAW Limited
	May 18, 2023
Moderator:	Ladies and gentlemen, good day and welcome to the Jindal SAW Q4 FY23 Earnings Conference
	Call hosted by PhillipCapital (India) Private Limited.
	As a reminder, all participants' lines will be in the listen-only mode. There will be an opportunity
	for you to ask questions after the presentation concludes. Should you need assistance during the
	conference, please signal an operator by pressing "*" then "0" on your touch-tone phone. Please
	note that this conference is being recorded.
	I now hand the conference over to Mr. Vikash Singh from PhillipCapital (India) Private Limited.
	Thank you and over to you, sir.
Vikash Singh:	Good evening everyone. A very warm welcome for the Jindal SAW Q4 FY23 Earnings Call.
	From the Management side, today we have with us Mr. Neeraj Kumar - Group CEO and Whole-
	time Director; Mr. Vinay Gupta - President & Head (Treasury); Mr. Narendra Mantri - President
	& Head (Commercial) and CFO; and Mr. Rajeev Goyal - VP-Group Corp. Finance & Treasury
	Without taking much time, I will hand over the call to Mr. Neeraj Kumar for the opening
	remarks. Over to you, sir.
Neeraj Kumar:	Good afternoon friends. I welcome all my stakeholders on this call. I need to thank all of you
	for your patience, perseverance, and continued interest in us. Yesterday, we had our Board
	meeting which followed the audit committee meeting. The results have been announced and I
	am sure all of you are in receipt of details of the results, performance, and guidelines for the
	future.
	We are delighted that all our hard work on many fronts is beginning to now show some results.
	This process was temporarily kind of disrupted, halted, first by the pandemic, then by the
	extremely volatile commodity prices, but we stayed course and now I am happy to tell you that
	the results are beginning to show. This year ended 31st March '23 appears to be a watershed
	year. There is a clear demarcation. If you see the first 2 quarters' performance and then you see
	the 3rd quarter performance, clearly it shows a breakaway.
	The 4th Quarter performance actually is the first very strong data point towards a trend and
	coupled with other fundamentals which are shared with you - the corporate structure, the order
	book position - there is enough confidence that we would be able to sustain this momentum that
	has been created. We have always been saying Jindal SAW business model is very well thought
	out, it is unique, it is robust, and it is sustainable. We have chosen as a constant management,
	you can say strategy, policy, or goal to give up the short-term flashes in the pan and we have
	chosen for a very sustained long-term movement where the momentum carries on. That held us
	very well during pandemic where our suffering was largely reduced. It was kept within a
	manageable level. Immediately over the pandemic effect the moment the business environment
	turned in our favor, there was a tailwind from the government on infrastructure spent. Some of

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Jindal SAW Limited

May 18, 2023

their major initiatives gathered more momentum. We were absolutely ready and we are beginning to see the results. The results are in front of all of us.

Very quickly, let me just walk you through some of the numbers, and I won't go into too much of nitty-gritty's and details because it's important to understand on at what juncture we are at and from here what do we see for our future. So, let me first start with the annual numbers. Standalone, Rs. 15,703 crores of top line which is the first time ever we crossed Rs. 15,000 crores. EBITDA of Rs. 1,827 crores. Out of those if you have read the notes, Rs. 197 crores is just accounting entry. Removing that, the EBITDA is Rs. 1,630 crores as opposed to Rs. 1,385 crores last year. So, a turnover of Rs. 15,703 crores and EBITDA of Rs. 1,630 crores as opposed to a turnover of Rs. 11,243 crores and EBITDA of Rs. 1,385 crores last year. If you look at the financial charges, Rs. 369 crores versus Rs. 529 crores, there is a Rs. 50 crores forex impact which is just change in rupee. So, for a like-to-like comparison, this Rs. 50 crores needs to be removed from the financial expenses of Rs. 529 crores and then if you see the increased business performance, you would see that the financial charges are on track.

PBT of Rs. 924 crores which, again, removing the impact of Rs. 197 crores, a PBT of Rs. 727 crores as opposed to Rs. 637 crores. This gives you a happy picture. But as I have already said in my opening remarks, let's look at the 4th Quarter because that appears to be the trendsetter. A turnover of Rs. 4,676 crores as opposed to Rs. 4,641 crores and EBITDA of Rs. 590 crores and a PBT of Rs. 356 crores as opposed to Rs. 440 crores which is appearing there.

If we take all of these into account, that would give you a sense of what the quarterly performance has been. A turnover of more than Rs. 4,500 crores and EBITDA of close to Rs. 600 crores or Rs. 590 crores and a PBT of close to Rs. 350 crores at the last quarter. Now, if you look at our order book and the way we have created the capacity and the operations, we are very hopeful that we should be able to sustain this and we should be able to carry this momentum forward.

A very quick comment on the consolidated numbers. Top line is Rs. 18,000 crores. Rs. 1,844 crores is your EBITDA. Here we don't need to make that impact of Rs. 197 crores because that gets collapsed on consolidation; this is the real EBITDA, a PBT of Rs. 736 crores. As we have been saying, the subsidiaries have also started contributing. Although this year Abu Dhabi has been profitable, but in terms of its relative to its last year's performance, it is on a lower side primarily because of the commodity prices. For the current year, we expect to do far better, even may exceed the year before' s performance for Abu Dhabi. Similar is the case for the US. These subsidiaries are no longer a drain, financial support is not being given anywhere, and they are contributing. This year, in the current year, we expect their contribution to improve from what they did last year. It is very important; order book position $1.4 billion which is a shade better than our sweet spot and we hope that this momentum will continue. There is enough demand. The water segment is doing very well in India. Oil & gas prices are sustaining because of the macroeconomic factors and the demand in oil & gas is also looking good. We have had some very prestigious export contracts. So, if you really see this year's performance and if you

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distribute it over export versus import, various segments, and various industries, it's a very balanced growth. The order book also gives us a lot of confidence that there are no spikes. It is a very balanced and a robust growth all around. More importantly, all of you keep a watch - our treasury team keeps a very sharp watch - the debt has reduced. The term loan is now Rs. 1,000 crores which is if you really make any comparison with anything, it is far superior than any benchmark in the peer group. So, the debt position is very good. The bankers' position is very good. They are very well disposed towards us and we are hopeful that the bankers' support will continue for our this year's increased performance, improved performance.

Let me now touch upon some of the other highlights which I am sure would be of interest to you:

During the year, we saw the pellet's price having some correction primarily because the commodity prices corrected. Most importantly the commodity prices thereby the raw material prices have corrected and we expect that now for a few years going forward, this would indeed remain the case, and therefore, the next year's performance we are very hopeful that we would be able to continue this momentum throughout the year. In fact, from the place where we are looking at, we think and we have a lot of confidence with a high level of probability that we can see about 15 to 18 months of very good performance.

That is what we have at this point of time. Definitely, 15 to 18 months we think we can definitely have visibility, we have enough visibility. On the debt side, no major acquisition is now planned up beyond Sathavahana. On Sathavahana, I must say a very good effort by Narendra Mantri who led the structuring and the other acquisition everything and very ably Vinay would arrange all the financing on time. The NCLT order that we have received is a classic order - takeover, merger, all in one stroke. As we speak, Sathavahana is a division of Jindal SAW Limited, the South India DI division, which DI capacity has now been enhanced to over 7.5 lakh tonnes. The DI segment is seeing a lot of traction because of the water segment, the push of Jal Jeevan Mission, this being an election year. So, it looks like the timing of this acquisition is very opportune and we would be able to make a good start. During this intervening period, it was made sure that the plant is in working condition. All the equipment's have been refurbished, and today, the plant is in a running condition and we expect a full year performance of Sathavahana to come into Jindal SAW as well. That's one good acquisition which is going to be a stepped function with the full year performance of Sathavahana into Jindal SAW as a division.

I already said, Abu Dhabi, the demand is very good. This year's performance would definitely return to the previous year - means not the last year but the year before - a very good likelihood it can exceed that as well. The US also, the same. Others also, if you have been following our news very carefully, a few other subsidiaries in related field like stainless large diameter which were created have been incubated and now are getting merged. Now, Jindal SAW in India would be one mammoth entity. It would have an American subsidiary and it would have an Abu Dhabi subsidiary all focused on pipes, absolutely clean corporate structure that is where, and we wish to continue with this kind of a business model because all the other subsidiaries, all the other

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associates, all the other companies in the PR Jindal Group, the good news is that now each one of them is standalone, viable, and they are all rising to their own potential so that there is absolutely no pressure within the group on any capital call on any of our businesses. All the businesses have now come out of age and are doing well rising up to their potential. We are also seeing that the supply chain, the important components of ocean freight, etc., are kind of stabilizing and are likely to move within a corridor.

At the end, I must say thank you to all for being with us, for your patience, and for your perseverance. It looks like the early results of all the tough decisions, the difficult path that we had chosen for ourselves, the business model, and the corporate structuring, all the efforts are now beginning to bear fruit and we have all confidence that it would sustain. With that, let me just stop. I would definitely be able to take some questions; we have some time. Thank you all once again for being with us.

Moderator:We will now begin the question & answer session. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

The first question is from the line of Dhananjay Mishra from Sunidhi Securities & Finance. Please go ahead.

Dhananjay Mishra: Congratulations for a very excellent performance and also a very strong commentary; especially for the last quarters, we have done very well and also you have done remarkably well in terms of balance sheet debt reduction. So, my question is with regard to, if domestic opportunity which we have mentioned in the press release as well, Jal Shakti Mission and then 15,500 km gas pipeline will be added over the next 3-4 years, what is the kind of opportunity from the industry perspective we will have in terms of steel pipe in both the segments like water segment as well as the gas pipeline segment? In terms of you can give some value or whatever for the next 2-3 years for the industry.

Neeraj Kumar:The commentary that probably you are referring to, it reflects the vision of the current government, and again, if you look at the current political scenario in the country, it would be safe to say that there is a more than 50% chance that there would be a continuity in the government. Then, all of these must fructify. Also, many times that we have a confidence that the kind of position that now this government has taken the policies or initiatives for the economy, directionally to make a huge change may not be possible. Some tweaking of priority emphasis might happen. Having said that, a) With a more than 50% probably of the current government to continue, we believe all this will translate into real demand. b) Even assuming the other way, there would be some tinkering in the priority but the direction is not going to change. So, both the oil & gas and water segment will remain very strong. Very important now we should not miss the track on. The industrial sector and the defense sector are going to become very strong, and that is a big market for our seamless stainless segment. We have made inroads into nuclear, defense, and space technology. We are getting into instrumentation tubes and higher-gradevalue-added products. That is again something that we are very encouraged and

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