Vardhman Special Steels Ltd

Thank you. We will move on to the next question. Our next question comes from the line of Nimesh Pandya, an investor. Please go ahead.

Thanks for giving me this opportunity. So, basically, I have two questions. My first question is, what portion of your H1 revenue was contributed by the exports? Which regions and product categories were the key drivers of this export growth?

Export is not a very large amount, I think it's about 6% to 7% or 8%. It does not change from quarter-to-quarter.

Right, sir. Okay. Sir, my second question is, you had earlier mentioned plans to raise debt for the upcoming plant. When do you expect to complete this debt raising?

Yes. So, there are no plans of raising debt for now, because we have enough equity aligned with us. So, when we need the cash, the cash flows are required. So, in all probability, the debt will get raised in the year 2027, partly 2026, and but mostly 2027. Got it, sir. Thanks a lot.

Page 13 of 17 So, as you can see, we plan to keep a conservative balance sheet with the new plant because we have seen many companies who go aggressive on their funding and go on high debt-to-equity and then land up into NCLT and so on. So, taking a lesson from that, and as a group, we have a long-term approach, conservative approach, so we will have a lower debt. We have already shared that we will never allow debt-to-equity to go beyond 1:1. Our comfortable figure is 0.75x as the upper end, and the target will be around 0.5x. So, even with this new plant, we expect to be only touching 0.75x for a brief period, if at all, and then coming down quickly to 0.5x.

Thank you. Our next question comes from the line of Prateek Duggar from Intelsense. Please go Okay. First of all, congratulations to the management for a great set of numbers. And I think a lot of initiative has been taken with the Aichi partnership to give us a good growth path for the company. I would just like to ask the management, like what are the sustainable margins that we see for our business? That's the first question.

As you said, from next year, we hope to have between Rs. 8,000 to Rs. 11,000 EBITDA per ton.

Okay, sir. And do we see like right now -- All going well. In the next two years after that, we hope to increase it further, but we cannot. But that is the hope. At Rs. 8,000 to Rs. 11,000 there is a reasonable confidence that we will be in that range from next year. Okay, sir. That's it. Thank you.

Thank you. Our next question comes from the line of Vinit Thakur from Plus91 Asset Management Company. Please go ahead.

Hi, sir. Good afternoon, sir. Thank you for the opportunity. I would just like to know the outlook of our industry as a whole. What do you think would be down next two years with the green steel demand going up or no? What do you think about that, sir?

Very difficult to predict in the next year or two, but over the next five-year period, we expect good demand because of all these factors. Year or two, very, very difficult to predict because these are trends which everybody is talking about. The first action we have seen is from Maruti for the circular economy initiative, which we started last month. This is the first initiative from any OE that we have seen. And secondly is the European OEs that are coming to us. That is happening because of green steel. But till the Government of India cracks the whip a little bit and gives some targets, very difficult for us to predict when the movement of these green will have an impact.

So, when I am saying that we will be improving our EBITDA per ton from Rs. 8,000 to Rs. 11,000 or a little beyond that, we are not taking any impact of these factors which are beyond our control. If green steel becomes a reality in India and becomes a requirement as it should, then there will be a massive boost in terms of demand and therefore ability to improve margins.

But that is not in our control. That may happen three years from now. That may happen five years from now. It may just remain talk. We do not know. As of now what we do here is that there is seriousness towards this.

Okay, sir. Thank you. Sir, I have one more question. So, since the government has given the target of 300 million tons by FY 2030, do you think how would that affect you positively or would it have any incremental impact on your revenue, on your cost margins?

These questions are more relevant to a JSW or Tata Steel or ArcelorMittal, which are at 40 million, 50 million, 60 million, bigger target. We are a small company, our target tends to reach up to 0.8 million tons. Okay, sir. Thank you so much.

Thank you. Our next question comes from the line of Aniket Ratkar, an investor. Please go Good afternoon, everyone, and thank you for the opportunity. So, sir, I just want to understand in terms of the strategic outlook, can you throw some light on the reheating furnace upgrade? Hello?

The reheating furnace, it is a part of the process. We already have a reheating furnace. So, basically, when you make steel, it comes out from the casting in the form of billets. Those billets then get cooled down. But you cannot roll cold billets, so they have to be heated again. That machine which does the reheating of billets is called the reheating furnace. So, we already had a reheating furnace. There were two issues with that. One was it had a smaller capacity, and that was the bottleneck, which would not allow us to increase production in our rolling mill.

And second, it had a walking hearth furnace, which leads to some quality issues. So, we are moving to a bigger furnace and a walking beam furnace, which means the quality will improve, which means our rejections and rework costs will come down, and our rejections should also come down. That is one part. And our capacity will go up.

The third, we will be increasing our billet size from 4.2 meters to 5.2 meters. And both sides of a billet are cut as scrap. So, on 4.2 meters, we were cutting out scrap. We will be cutting out scrap at 5.2 meters, which will reduce the total amount of scrap that we generate internally, and therefore our yield will go up, which will all lead to cost savings. There is production improvement, quality improvement, and cost reduction, all three aspects.

Page 15 of 17 Okay. So, sir, you were saying the capacity is fully utilized in terms of the reheating furnace and grid. So, is there any plan to expand the capacity in this?

Yes. That is what I am saying, with this new reheating furnace, then from 2,00,000 tons, which is our current capacity, we will be able to go up to 2,70,000 tons.

Okay. And sir, in terms of our revenue and our margin -- Our rolling mill will go up and therefore, revenue will also improve because we will be able to produce more material. And two, our margin will go up because our cost will come down with the new reheating furnace.

Okay. Got it, sir. And sir, one last question. In terms of revenue and margin mix, how do you envision that revenue and margin mix evolved by FY '28 across our rolling mills and bright bars?

FY '28, we expect to hit 2,70,000 tons, which is our capacity. And EBITDA per ton, Rs. 8,000 to Rs. 11,000 we are quite confident and then we hope by then we will be able to increase this range from Rs. 8,000 to Rs. 11,000, maybe Rs. 8,000 to Rs. 12,000 or Rs. 9,000 to Rs. 12,000.

So, we expect to see a bigger margin, but very difficult to predict so far in advance. So, the confidence level that we have is Rs. 8,000 to Rs. 11,000.

Got it, sir. Thank you, sir. Thank you so much from my side.

So, if you see the lower end of that, that means 2,70,000 tons if we are able to achieve that figure.

So, Rs. 216 crores at the lower end is what the EBITDA should be. On 2,70,000 tons, it will go up to about Rs. 300 crores. But I think but I think by then we will be able to give a better forecast and we get closer to that figure.

Got it, sir. Thank you, sir. This is from my side.

Thank you. Our next follow-up question comes from the line of Radha from B&K Securities. Please go ahead.

Sir, what is the incremental cost per ton of the extra processes that happens in bright bars over black bars? We do not share those numbers.

Sir, generally for the industry, how much -- I have not looked at industry numbers, so I do not know. And roughly, our bright bar is between 20% to 25%, and black bar is about 75% to 80%, roughly.

Page 16 of 17 Sir, last question. In your previous calls, you had indicated that you will start supplying to auto OEs directly. So, sir, actually the product -- Yes, we already discussed that -- that. I am sorry? So, OEs usually buy this. For gears. For gears?

Yes. And this is what we discussed a little bit earlier in the call of import substitution. So, where the OE was directly importing steel from Japan, that steel is likely to come to us. So, that approval process has been done. Now the question is, we have to make a decision when will they do the switching over.

Understood, sir. Thanks and all the best to you.

And this will be the first case where we supply directly to these Tier 2 and OEs. Otherwise, normally we supply to Tier 1 or sometimes Tier 2s.

Yes, sir. Thank you and all the best to you. Thank you.

Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Ladies and gentlemen, thank you so much for having interest in our company. One thing which is very interesting for us is that since I came to this business in 2010, we have been continuously investing in this plant. Now thanks to those continuous investments, we have reached from 50,000 tons of production, we hope to reach 2,70,000 tons of capacity by next year and filling up the capacity in two to three years. After this, we should hopefully end our CAPEX cycle as far as this plant is concerned.

There is one idea which we are working on, which is if we can go even beyond this capacity level. But that idea, once we are able to test it out, then we will share that we require further CAPEX. But that is only if this idea works out, otherwise, as far as we are concerned, this plant is now largely done. The future CAPEX will largely go into the new plant and the forging business, the announcement of the forging business will happen by Jan.

And as of now, the target commissioning of the forging line is also before July’29. So, both these things which will happen simultaneously, forging line as well as the new plant should happen simultaneously. But we will have more details when we have our January conference. Thank

Page 17 of 17 you very much and we look forward to you all remaining with us as we continue on this journey. Thank you.

Thank you. On behalf of Adfactors PR, that concludes this conference. Thank you all for joining us. And you may now disconnect.