Hi-tech Pipes Ltd

Ladies and gentlemen, good day and welcome to Hi-Tech Pipes Limited Q2 FY '25 Earnings Conference Call hosted by PhillipCapital (India) Private Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, you may pressing “*” then ‘1 on your touchtone phone to signal an operator. Pleas note that this conference is being recorded.

Inow hand the conference overto Mr. Vikash Singh from PhillipCapital (India) Private Limited. Thank you, and over to you, sir.

Thank you, Shefa. Good morning, everyone. I welcome you all on Q2 FY 25 Hi-Tech Pipes Earnings Conference Call.

From the management side, today we have with us Mr. Anish Bansal - Whole-Time Director; M. Arvind Bansal - the ED and group CFO; and Mr. Arun Sharma — Company Secretary and Compliance Officer.

Without taking any much time, T will hand it over to Mr. Anish Bansal for his “Opening Comments”. Over to you, sir.

Ladies and gentlemen, good morning, and thank you for joining us today for our Q2 and H1 FY '25 Investor Conference Call.

Tam joined on this call with Mr. Arvind Bansal -ED and Group CFO, and Mr. Arun Sharma — Company Secretary and Compliance Officer.

Tam pleased to report a solid performance this quarter marked by significant achicvements and strong financial growth underscoring the resilience of Hi-Tech Pipes despite the industry's dynamic landscape.

In Q2 FY '25, the company recorded a robust 22.5% increase in total sales volume to 1.23 lakh tons compared to 1 lakh ton in Q2 FY '24. This growth was driven primarily by rising demand for our steel tubes/structured steel products and value-added solutions.

Despite a5.3% decline in revenue from operations duc to lower steel prices, we have achicved remarkable profitability in this quarter. Our profit after tax increased by 72% to Rs. 18 crores and EBITDA rose by 57.6% to Rs. 42.2 crores with a notable 28% increase in EBITDA per ton.

Thaniks to our focus on value-added products and efficient cost management.

For the first half of FY '25, revenue increased by 13% to Rs. 1,572 crores, PAT surged by a remarkable 95% to Rs. 36 crores, while EBITDA saw a 77% increase reaching to Rs. 85 crores.

These results reflect our efforts in improving EBITDA per ton and operational efficiency. Page 2 of 13

‘We also made strides in key financial metrics, reducing net working capital days from 63 to 60 days and improving our debt equity atio from 0.7x to 0.49x alongside a strong current ratio of 1.63x and a notable improvement in ROCE from 11% to 15%.

A recent milestone was the successful closure of our QIP amounting to Rs. 500 crores. This issuance was met with overwhelming interest from Marquee qualified institutional buyers showeasing strong confidence in Hi-Tech Pipes' growth prospects. The proceeds from the QIP provide us with the capital to execute our strategic initiatives under Hi-Tech 2.0.

Now please let me provide a broad outline of our vision of Hi-Tech 2.0, The launch of Hi-Tech 2.0 marks a transformational phase of Hi-Tech Pipes. This initiative cncompasses several strategic actions that will drive our growth and solidify our position as a leader in the global steel pipes and tubes industry in the next three to four years.

Number one, doubling manufacturing capacity, we are sct to double our manufacturing capacity from 1 million tons to 2 million tons. This cxpansion aligns with our commitment to mect growing demand in sectors like infrastructure, building and construction, renewable energy among others.

Becoming the second largest manufacturer of ERW Steel Tubes and Pipes. By increasing capacity, we are on track to become the sccond largest ERW Stecl Tubes and Pipes manufacturer, further strengthening our critical applications worldwide.

Aiming for net debt-free status by FY 25 end. We are focused on strengthening our balance sheet with the goal of becoming net debt-free by FY 25 which will provide us with greater flexibility to reinvest in growth and enhance sharcholder value.

Fourth, strengthening brand presence in India and globally. We are cxpanding our market presence, aiming to cstablish Hi-Tech Pipes as a trusted brand worldwide through strategic ‘marketing and customer engagement initiatives.

Fifth, reducing ineremental working capital. Our commitment to reducing incremental working capital will streamline operations, enhancing our operational efficiency and supporting growth.

Sixth, focus on valuc-added products. We arc placing a strong emphasis on value-added products, catering to specialized industries like renewable encrgy and infrastructure, which not only diversifies our portfolio but also captures higher margins.

Lastly, exploring new markets, applications and geographics. By exploring new product markets and new regions, we aim to drive sustainable growth and expand our footprint across the nation.

I want to highlight the positive momentum created by the government's capital expenditure on infiastructure, which is expectedto drive demand for steel products and specially steel pipes and tubes. Hi-Tech is well positioned to capitalize on this growing demand with an enhanced Page 3 of 13

capacity and strong strategic roadmap in place. Thank you. We can now have questions and answers.

Thank you so much, sir. We will now begin the question-and-answer session. We have first question from the line of Muskaan Rastogi from B&K Sccuritics. Please go ahead. Sir, T have a few questions. The inventory level has gone up in the first half as compared to FY 24, Ts this because we have installed some inventory on account of lower steel prices?

So, Muskaan, this inventory increase is in line with our new expanded capacitics. We have installed our new facility in Gujarat in Sanand Unit 2. So, with the incremental sales volume, the inventory is also rising. But the incremental volume risc is lesser than the overall volumes.

Sir, I wanted to know how much of the sales mix is coming from dealers and OEMs? And also can you please tell us how many manufacturing lines do we have currently?

So, currently, 62% to 63% is coming from our trade and distribution network. And balance 37%, 38% is coming from OEMS' projects and some big corporates like Reliance and Adani.

And how many manufacturing lines do we currently have?

So, currently we have six mamufacturing locations and one new Greenficld unit is in pipcline.

So, by the end of this financial year, we will have seven manufacturing facilities across India.

And sir, within hollow section, we are planning to have the high dia pipes. So, does this high dia pipe like 500 by 500 have better margins than 200 by 200 millimeter?

Yes, Muskaan, so, big sizes would definitely fetch a higher EBITDA per ton, and currently we are doing up to 250 by 250, but then there are strong plans of increasing this up to 500 by 500 very shortly. So, how much better the margin would be?

So, in higher sizes, which go like beyond 300 by 300, so there is a EBITDA per ton in the range of Rs. 6,000 to Rs. 7,000 per ton.

And sir, one last question. The presentation that you have mentioned has 500 plus dealers and distributors. So, further roughly how many fabricators are we connected within India?

So, with the 500 dealers and distributors, there are approximately 20,000 fabricators that arc attached to with these dealers and going forward, as we increase our production and as we increase our geographiss, so this number will go up quite significantly.

Thank you. The next question is from the line of Sncha Talrcja from Nuvama. Please go ahead. Page 4 of 13

Tust couple of questions from my end relates to EBITDA per ton. Now your PPT states that you have done EBITDA per ton of 3,429 and in the interview, if Tam not wrong, we heard it out that you have mentioned that there was an inventory loss of about 600 to 700 per ton. So, just wanted to understand that despite inventory losses, have you actually scen improvement in your EBITDA per ton? If that's the case, what are the reasons for same?

Good morning, Sneha. So, firstly, as we recall in Q2, the company procured big orders from the rencwable energy side, and we predicted the steel price volatility because of the China stress.

And in that, in the month of July, so we gathered a lot of fixed price orders that helped us in mitigating this Rs. 600, Rs. 700 inventory loss. And additionally, we did not resort to additional discounts to our dealers and distributors. So, that was the main reason that our EBITDA per ton didnot go down significantly. Additionally, you know, there were like lot of imports being done by the industry, but then we resisted from the imports. And we had a very limited stecl price reduction risk.

So, ideally speaking, if I understand, in fact, imports came in at a slightly cheaper prices. So, without resorting for that, your EBITDA per ton came higher. And also one of the reasons that you mentioned in your interview is that you got some rebates from the producers out there of HRC. Just failing to understand that why s it so differentiated when the leader actually reports a much higher significant EBITDA loss and we gt those rebates and so somewhere unable to align it?

Yeah, so firstly imports. So, at the time of ordering the imports, the prices were cheaper, but then when the imports actually landed in the country, they were higher by Rs. 2,000 to Rs. 3,000 per ton. So, there was a big inventory hit, import hit in that when the imports landed in the country. So, this was one big impact. So, when we were ordering the imports, they were Iucrative. But then finally, when the material landed at the ports, it was quite expensive.

Secondly, yes, there has been support from the steel mills. They have scen the market conditions, and they have given support to many players.

Lastly, if I may ask, what is the percentage of your revenucs that you are getting from the solar projects absolutely?

So, currently, it is 10%. And I think going forward, we will take this up, surely, with our new capacities.

Onelast one, ifatall I can squeeze in. What would be the region mix? Can you share the mumbers of North, West, South, East? So, Sncha, can you repeat that?

Can you please share your regional revenue mix with us? Page 5 of 13

Oh, so it is around 40% is coming from the North, and 35% from the West and Central India, and 25% is coming from the Southern North.

Thank you very much. We have next question from the line of Pallav Agarwal from Antique Stock Broking. Please go ahead.

So, this question on your volume guidance, because our first half volumes have been very good.

So, what sort of volume and EBITDA guidance do we have for FY '25?

Good morming, Pallav. So, basically, in the first half, we have done approximately 2.5 lakh tons of sale volume, 2.45 to be precise. And we are sticking to our guidance of 500,000 tons, 0.5 million tons for this financial year. And with the new capacitis that are coming at the end of this quatter, end of this financial year, so we will have a jump in FY '26. So, with the current capacity in hand of 0.75 million tons, we will be doing 500,000 tons of sales volume for this financial year comfortably.

And what about the, our EBITDA per ton has been gradually improving. So, with the highet value-added proportion being targeted, so I think first half, our average EBITDA per ton is probably around Rs. 3,000, close to Rs. 3,500 per ton. So, what sort of trajectory can we look at going ahcad?

You know that our focus is towards value-added products, and we have developed various new products in the rencwable cnergy side, in milways, in the telccom scotor. And that process is going on continuously. And our internal target is to take this, graph share from 36%, 37% currently to 50% in next 1.5 to 2 years. And the new capacities that are coming up are focused towards value-added products. And I think this EBITDA per ton will be growing significantly.

There will be a gradual improvement every year, and in the next 1.5 to 2 years, it will be reaching a good, there will be a good growth in that dircetion.

Just on this acquisition, if you could just xplain this acquisition in terms of what was actually cash consideration paid for this and what is broadly the mtionale for this acquisition? Sotry, can you repeat that?

Ijust wanted to, you know, on the acquisition of I think Hi-Tech, the mention in the press relcase. So, I just want to understand what was the actual cash consideration? So, it is just the paid-up share capital or there was some premium paid for acquiring this Hi-Tech Pipes Global Stecl Private Limited?

So, this company we have acquired this company, if's a 100% subsidiary, and the new projects, new plants, it is for the new plants that will be taken care. There is no premium at all.

Yes, sir. So, what was the cash consideration?

There is no premium, but it's on the paid-up capital only. Page 6 of 13

So, this is Rs. 1 lakh? Yeah.

We have next question from the line of Radha from B&K Securities. You may proceed, please.

Sir, in this quarter, ifI see the purchase of stock in trade mumbers, last quarter that was 99 crores and this quarter it is 7 crores. So, please help me understand what is this purchase of stock in trade? I this the trading in HR coils that we are doing every quartet?

So, these are the tubes and pipes that we had sourced from the market when the capacity was less, but now with our new capacitics and we not need to o that. So, I think that is over with.

Sir, your anmual report mentions that it is completely HR coil. So, thats why I was wondering.

So, this is some rejection or some odd sizes that come in. So, it is pertaining to that only.

Sir, if [ remove this purchase of stock in trade and see the gross profit cx of this purchase of stock in trade, which you said that this quarter you have not done, so the gross profit per ton, so your realizations are down 20% on a Q-0-Q basis and your raw material cost ex of stock in trade purchaseis down 10%. So, ideally, what [understand is the inventory loss could have been much higher for this quarter, but I am unable to understand the numbers, Please help me with this.

So, basically, the inventory loss that came in, of course, like the stecl purchase got down. So, we bad inventory loss, but then overall blended, of course, this scenario was very cvident in the month of July, when the international steel prices were going down. So, in that situation, we purposcly and strategically, we took a lot of fixed price orders, especially from the rencwable cnergy side. You must have seen our announcement carlicr, the company secured its, you know, the biggest ever order from the solar side and that helped us in sailing through this period. And we knew whatever prices, fixed price orders we will have in the month of July, soit will help us in sailing through this period.

No, sir, considering all the solar, so on a blended basis only, so that includes the solar type mumber. So, blended basis realizations, I can sce that it has fallen by Rs. 13 per Kg on a Q-0-Q basis. And like you mentioned that this quarter, there was no stock in trade. So, if we remore the stock in trade, so I can see the gross profit per metric ton is fallen by Rs. 7 per Kg. So, that should include a higher inventory loss?

Actually, we need to calculate this gross profit considering this raw material cost, change in inventory and purchase of stock in trade. I we consider all this and if we compare on quarter- to-quarter basis or year-on-year basis, our actual inventory loss is in the range of Rs. 600 to Rs. 700 only. And that has been mitigated by various factors, which has been mentioned by Anish Bansalji. T think you are not considering this change in inventory in your calculation. I might be so. Page 7 of 13

Yes, cx of, no, I am just excluding the purchase of stockin trade, which as per anmual report was mentioned that it is a HR coil trading that is being done. So, if we remove this, so on the basis of the products wherein we are doing the value addition, ex of the traded material, so there I can see a higher drop in gross profit per ton. So, just wanted to understand these numbers, sir.

No, actually, this trading as Anish Bansalij has mentioned, this is only a temporary phenomenon on account of the known availability of capacity at that time. Now we have already added the capacity. Now capacity is available. Now we are not focusing on the trading volume. We arc just focusing on the mamufacturing volume to increase our capacity utilization. To explain you the number, we can correct with you scparately also.

Sccondly, from the industry perspective, today the market size in India is 9 to 10 million tons, and Hi-Tech is having a produet portfolio of all four products, that is MS Pipes, Hollow Scction, Glas well as GP Pipes to cater to this market. So, please help me understand how is the market divided in terms of these products, like roughly what percentage of total market would be MS versus Hollow versus GI and GP?

Out of this total capacity of 8 to 9 million ton, around 50% to 60% market is for the Hollow Sections, and around 20% market is for the GP Pipes, around 20% market is for the Galvanized Pipes, and the rest s for, say, your Cold Rolled Pipes, HR Pipes and all that.

Sir, you mentioned to the previous participant, you gave your sales mix region wise. So, from the industry perspective, if you can give that how is the industry divided between North, East, West and South India? And going forward, where are the supply gaps that you can see and where do you want to focus more?

Yeah, currently, our sense is, 80% of the demand is coming from the North, West and the Southern market, and 20% is coming from the Eastern side. And going forward, we sce a strong potential in the North, West and South states. So, we will be growing organically in this through our Brownfield route.

The third question is that, again to a previous participant, you mentioned that in terms of pipe dia, if we increase the pipe dia beyond 200 mm to 300 mm, so there is an EBITDA per ton of 6,000 to 7,000. So, wanted to know the same number for below 300 into 300?

So, that is ranging from like product to product, size to size. So, you can take it ballpark between Rs. 3,000 to Rs. 5,000 per ton depending on a specific size.

That gives a huge delta between if you increase the pipe dia. So, sir, when do we plan to launch this 300 into 300 or 500 into 500 mm?

So, we are working there. So, a year-and-a-half we should be there. Page 8 of 13

Last question, to a previous participant, if | heard correetly, you mentioned something about the telecom sector demand. Sir, please could you claborate this point?

So, as you know, there s a lot of 5G deployment that is going on in the country and after Vodafone-Idea, they becoming active now. So, their the CAPEX was missing from last two to three years, but now they arc also in CAPEX mode and lot of new tower deployment is going to happen innext 1.5 years. So, our focus is there and I think this sector will be a big demand driver for the sector.

I suppose the line from Ms. Radha has been disconnccted. We will procced with the next question from the line of Amit Vohra from Ginar Consultants. Please go ahead.

Just wanted to understand how are we spreading our brand spends over the next two years? What are we doing and working on this?

Good morning, Amit. So, yes, we arc strongly focusing on brand creation for Hi-Tech Pipes, and Lot of work is in progress in the same direction. And very shortly, I think we will have good news for the matkets for our Tubes and Pipes scgment, The company will come out with a big branding and marketing initiative.

Any ballpark number on what is the amount that you are going to spend over the next couple of years on that?

So, it s still work in progress. I think in a couple of months, we will have a clear indication of what our total advertisement and branding spend will be.

One last question. Do we change any of our guidance? Sorry, I have missed that in case you have mentioned this. After the Q2 mumbers and the first half numbers, are we revising our guidance?

So, currently, we are maintaining our guidance. I think we should reach there comfortably without because if we have done like, we have sailed through H1, despite of the challenges from the election, monsoon and the China stress, but H2 looks certainly promising.

Thank you very much. We have a question from the line of Vikash Singh from PhillipCapital. Please go ahead.

Thave a few questions regarding the overall market size. Basically, if you look at the along with you and the top four, five peers arc adding closr to 5 million tons of the capacity in the next three year. So, how we should look at the demand side and which are the pockets you expected to outperform in the segments?

So, sir, currently, the market size is 10 million tons, and we sce this market growing by like 15% per annum. And with the new applications like solar and in the building construction, there are Page 9 of 13

new kind of tubes and pipes requirement that has come. So, all in all, I think this segment, this market will be growing by at least 15% over in a year.

So, that should take care of the additional capacity.

Absolutely, absolutely. So, we are adding capacity from a perspective of 6 to 7 year vision, and once it is done, we are thoroughly confident of utilizing the same.

Sir, India is basically adding a huge HRC capacity and considering that pipe scgment as a whole of the stecl demand being 10%, they are the kind of a low length tools. So, have they expect or from the company side to already get some rebates or we are signing MoUs which arc on a more favorable temms in terms of working capital, if you could give us some insight into it?

Yes, sir. HRC is definitely, the capacity of HRC is rising now and going forward, if the availability is higher, I think, if the availability of HRC is higher than the consumption can also be higher. And if consumption s higher, then definitely we will have room for new applications, new substitutions. So, we are fairly confident that with new supplics, sonew product inovation will be taking place where we can cerainly have the edge.

Interms of procurement, you said that you are already getting some rebates. Can we expect with the supply increasing rebates to go up further or we have already achieved our desired restlt?

So, basically, like, Steel Authority of India being the leader in this space right now, so they are working, all these mills, they do not want to encourage imports, and they have aligned their prices with the global markets So, imports, they want to discourage the imports and to discourage imports, they arc balancing their price level. So, they take a call depending on the market situation, Q2 was a bit abnommal. So, they are proactive and they are taking decision accordingly.

Sir, just lastly on the fixed price percentage of our total sales. So, what it would be currently in terms of order book positions then?

Sir, approximately out of our monthly sales volume, so all our OEMs, projects, so these are on fixed prices. And that would be broadly 20%, 25%? 35%. 35%.

Thank you very much. We have next question from the line of Ronald Siyoni. We are taking the question from the line of Ronald Siyoni from Sharekhan Limited. Please go ahead.

Sir, I have a question with respect to your upcoming CAPEX. Have you decided the mix of Brownficld and Greenfield CAPEX for the next 1 million ton? Page 10 of 13

Good momning, Ronald. So, yeah, that is a work in progress. So, Central India is one where we are missing right now and the Eastern part where we are still not there. There is no manufacturing facility over there. We will be certainly covering these termitorics and also strengthening our current Northern, Western and Southern markets. So, it will be more of a broad based? Yes, absolutely.

And about this fixed price contract. So, you continue to undertake fixed price contracts because it can also hurt margins going ahcad if you know the trend reverses. So, is it a regular phenomenon or it was just one off phenomenon during Q2 which had shiclded your margins?

Yes, when it comes to fixed price contract, so we factored in some degree of steel price volatility. ‘We factored that in befor taking the orders. So, for the Q3, I think, we are more or less, we have covered whatever steel price hike that may be there.

So, post Q2, how has been with the trend in terms of demand and also the spreads? Are they still at around Rs. 2 to Rs. 3 per Kg or has there been movement in the spreads? Also about the HRC prices. So, these three things if you can highlight post Q2, how has been the situation?

So, Ithink, the steel prices should move in a tight band from here. So, like in Q2, there were like alot of imports. Al the mills have taken that into cognizance and they belicve the imports should not come in India and a lot of restriction the trade have resorted to that, and I think the prices should move in a tight band, steel prices.

About the spreads, how are they currently? Spreads in terms of? Between primary and secondary? So, there is a gap of around Rs. 2,000 to Rs. 3,000 per ton between primary and secondary currently.

Ttis stillthere. It is not increased, right?

Yeah, it is stable there and I think the secondary steel prices will definitely be like Rs. 2 to Rs. 3 cheaper. Otherwise, there is no incentive for anybody to buy. So, this is it and I think it should be like this going forward. But this is a sustainable differential between primary and secondary. Thank you very much. We have a question from the line of Muskaan Rastogi from B&K Securities. Please go ahead. Page 11 of 13

So, from the channel checks, we found that these one, two-day small functions like managers' conferences, mostly secondary steel is used because of the cost difference. So, let's say primary ‘market is 100 and secondary is 100. With the same spread of Rs. 5 to 7 per Kg, how do you see the conversion happening from this 100 is sceondary in the future and how will it narrow down?

So, Muskaan, earlier there was a price gap of Rs. 12 to Rs. 14 per Kg, if we go back like 6 to 7 months previously, and that spread has come down to Rs. 2 to Rs. 3 Kg right now. I think within this gap, definitely primary players will definitely have an cdge over the secondary players, and this, we are seeing a strong momentum coming from this side, from the trade and distribution side, and it is only accelerating the shift from secondary to primary.

How much conversion will happen, if you can give the number?

You know, it is very hard to quantify in terms of, but then overall we arc seeing a lot of shift that is happening from sccondary to primary in lot of markets.

Sir, this, the rebate that we arc getting that you mentioned, is it a policy that the supplier gives or is it because of the sharp decline like a one-offrebate that we got from the supplicrs case? So, lets say, like, if there is stcep decline in the steel prices like 2K or 3,000 per month, we are sccing a lot of correction has been happening, so will we continue to get the rebate or how is it?

So HRC, Steel Authority of India Limited, the prices are governed by them for the entire nation and these like Steel Authority, they have taken the imports into cognizance, and they have corrected their prices in line with international prices. So, Whatever imports that has happencd, the people have not made any money imports. While they were cheaper at the time of ordering, but then when the deal actually hit the port, there was no gain there. So, the mills are working with the international prices in mind and they are taking the decisions, like depending on the market dynamics.

Sir, in telecom sector that you mentioned to the previous participant, what pipes are we using there and what is the opportunity size there, if you could give the estimate?

So, these are high tensile stecl tubes, and different grades of stecl are being used and different sizes arc there. There has been a shift from angular steel telecom towers to tubular steel tube towers in last five, six years. And this is acoelerating now, the shift. And we sce a strong demand coming from 5G deployment. What would be the opportunity size, sit?

So, in India, we are poised, we are adding approximately 50,000 tons, 50,000 towers every year.

So, this means approximately, like 500,000 tons of steel tubes and pipes. Ok, all right. Page 12 of 13

Ladies and gentlemen, that was the last question for the day. I now hand the conference over to Mr. Vikash Singh for closing comments.

On behalf of PhillipCapital, I would like to thank Hi-Tech Management for giving us the opportunity to host the Con Call. Now I hand over to Anish sir for his closing remarks.

Our focus on innovation and efficient operations and market diversification positions us as a forward-thinking leader. We remain adaptive to market trends, scizing opportunities to mect the cvolving needs of our customers with advanced deal solutions. As we move forward, we arc confident that our strategic initiatives will drive sustainable growth, value creation, and reinforce our leadership in the steel manufacturing industry. Thank you for your continued trust and support in Hi-Tech Pipes. We look forward to delivering consistent and sustainable growth for our stakeholders. Thank you. On behalf of PhillipCapital (India) Private Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines. Page 13 of 13