Concall Notes – Nov 2024

Financial Performance:

Q2FY25 revenues reached ₹228.9 crores, a solid growth of 19.6% YoY.
H1FY25 revenues stand at ₹469.1 crores, marking impressive growth of 26.4%.
Robust volume growth of 30% YoY for H1FY25.
Achieved an all-time high order book of ₹340 crores.
Export revenue grew by 2.7X, now constituting one-third of total revenue.
Operational Highlights:

Seamless pipes sales increased by 21% YoY; welded pipes saw a slight dip of 2% in Q2FY25 but grew 13% in H1FY25.
Domestic market size expanded from 2.2 lakh metric tons to 3.2 lakh metric tons from FY20-24, with market share increasing from 3.7% to 6.2%.
Management expects to increase market share to low double digits in the coming years through foray into fittings and value-added products.
Team Expansion:

Appointed Mr. Neelanjan as Chief Strategy Officer and Mr. Mark Light as Business Development Officer (Energy).
Mr. Neelanjan brings over 20 years of experience across various industries, while Mr. Mark Light has over 30 years in international sales and business development.
Market Outlook:

Positive export outlook in Europe, with strong demand and quality on par with local manufacturers.
Anticipating growth in the US market post-election uncertainty; appointed local representatives to build connections.
Middle East demand remains strong in the oil and gas sector, with approvals from major players expected to boost orders.
Domestic demand remains solid, particularly in oil and gas, engineering, chemicals, and power sectors.
Challenges:

Some orders were delayed due to heavy rainfall, impacting domestic performance.
Fluctuations in raw material prices affected revenue expectations.
Increased ocean freight costs have softened margins despite strong export growth.
Future Growth Strategies:

Focus on expanding value-added product portfolio, including specialized tubes and fittings.
Anticipating strong second half of FY25 driven by sustained export growth and expansion into new geographies.
Capital investment for expansion is progressing, with the first phase set to launch in March 2025.
Capacity Utilization:

Current capacity utilization for seamless pipes is over 85%, while welded pipes are around 60%.
Targeting seamless utilization of 85-90% and welded at around 70% by year-end.
Market Dynamics:

Anti-dumping duty on welded stainless-steel pipes from Vietnam and Thailand may reduce imports and benefit domestic players.
Management sees a healthy demand for seamless pipes, with expectations of 6-8% market growth overall.
Investment and Capex:

Total CAPEX for FY25 expected to be around ₹150 crores, with ₹100 crores planned for the second half.
Projects are on track for completion by March 31, 2025, despite some delays due to weather conditions.

So your views might be biased. Let’s start with that @rupaniamit

Also I don’t know what it is about this company but people get offended fast.

1: Yes my assumption here was wrong as I did not have full information of buying price as pointed out by people analysis should be of facts not assumptions.

but if we add those 20 cr so company made profit of 56 cr and promoter made 53 cr in 2 quarters still, I don’t like what I see so I’ll skip you may stay invested your call your money.

2: So time frame is 18 months. If I am running a company and I see demand ramping up I would definitely get those warrants. Preferential warrants are a red flag from what I understand. Its like buying call option and having access to NSE servers. Plus 5 cr of capital infusion from promoter for a company doing topline of 70 cr makes no sense what so ever.
Also your tone signifies that you are not really in mood to understand my pov so maybe this might help.

3:5000 cr you say just read this and yes ofc ourse Opinions are dime a dozen
https://www.indigolearn.com/blogs/Top-5-Financial-Scams-in-India/b218399bd14e4473907fdaa165b20f94?categoryId=78f1aae4ea01437e87ef621ae9478d26&srsltid=AfmBOoq2gLGSYWkuhhH46Hp_wwiTbRh1zjWdbjnblqAoH-wAuIbhVFiA

If you could point me to link where it says I cannot post i would appreciate tried my best to follow the guidlines and asked the moderators so thats that. And with just 60 odd followers I do not reckon I am making anything go viral. So I will not be removing it. Also when you have been doing this yourself so I fail to see the difference here.

My language might have been a little strong I guess in my analysis as some got really offended and I will try to tone it down to not hurt people but I will not refrain from pointing out stuff which does not look right to me of course I can be wrong.

Dont like it ignore and move on.

Concall Notes – Nov 2024

Financial Performance:

Total revenue for Q2 FY25 reached ₹1,005 crores, an 84% increase YoY from ₹546 crores.
EBITDA for the quarter was ₹38 crores, a 74% increase from ₹22 crores in Q2 FY24.
Profit surged by 89% to ₹25 crores compared to ₹13 crores in the previous year.
Ratlam flagship store reported a 56% YoY growth with revenue of ₹486 crores in H1 FY25.
New Ajmer showroom launched in September generated ₹4 crores in revenue for its first month.
Market Dynamics:

Robust demand for gold and diamond jewellery driven by rising consumer purchasing power and preferences in Central Indian markets.
Government’s reduction of import duties significantly boosted demand, particularly in June and July.
Anticipation of strong sales during the festive season, with expectations of celebrating multiple Diwalis due to high consumer enthusiasm.
Expansion Strategy:

Plans to expand retail footprint from 8 stores in FY25 to 20 by FY28, targeting emerging markets in Madhya Pradesh, Rajasthan, Chhattisgarh, and Gujarat.
Current FY25 plan includes opening three more showrooms, following the successful launch in Ajmer.
Focus on enhancing product mix, aiming to increase revenue share from diamond-studded jewellery from 6% to 15%.
Operational Insights:

EBITDA margins are expected to stabilize between 5.5% to 7% and PAT margins between 3% to 5%.
The management acknowledged a stable EBITDA margin in Q2 despite revenue doubling, attributing it to increased inventory levels and strategic operational decisions.
Market share in Ratlam is approximately 25% to 30%, with plans to open another store by January FY25.
Challenges and Competitive Landscape:

Competition exists from both national players (e.g., Malabar, Tanishq) and local jewellers.
Management highlighted that lab-grown diamonds are perceived as less desirable compared to natural diamonds, with a 10% growth in the natural diamond segment.
The company is strategically focused on volume growth rather than margin maximization, with an emphasis on customer relationships and service.
Capital Raising and Funding:

Recently raised approximately ₹70 crores through the issuance of preferential shares and warrants to close associates.
Future expansion plans are expected to be funded through internal accruals, with an annual free cash flow of around ₹100 crores.
Management is cautious about leveraging debt, preferring equity financing to ensure store profitability within six months of opening.
Product Development:

Implementation of a shop-in-shop model for wedding customers to enhance customer experience and increase sales of high-margin diamond-studded jewellery.
Current sales composition includes approximately 92% gold jewellery, with plans to shift focus towards increasing the share of studded jewellery over the next three years.
Overall Outlook:

Management expresses strong confidence in the growth potential of the jewellery industry and the company’s strategic initiatives.
Ongoing assessment of market opportunities and customer preferences to adapt and thrive in a competitive landscape.
Disc Invested

The entire case is based on ability of IGL to increase gas prices. It could do this successfully in the past however the current circumstances need to be investigated to determine the probability of history repeating itself. Some things have changed as against the past this time. I see 2 problems-

1. Government is against price hikes. Please go through this article.
   https://www.business-standard.com/industry/news/cng-retailers-want-price-hike-government-wants-to-see-cost-breakup-124111700140_1.html

The officials in petroluem and gas ministry believe that these companies are already charging hefty margins and hence can easily absorb additional costs to get gas from new fields. They cite example of IGL making 11% as against companies like IOCL who make 4.5% . So they are asking for break up of final price In short , we will see resistance from government.

2.I am quoting some paras from the article whose link is provided below-

Earlier, on Oct. 25, the PNGRB had issued a notice to CGDs with a proposal to declare 73 networks as common carriers. The notice implies that entities other than CGDs can enter and provide CNG services.

Also read this –
Predicting that at one point of time, the allocation from Mumbai High could touch nil, Singh explained, “Initially, priority was given to power, fertiliser and all other sectors.” And now, those sectors don’t get it. Instead, city gas distributors were given priority. However, he said that “overall volume is declining. At one point, maybe in 2–3 years time, it will go down to nil.“

Then this–
He added that due to the entry of new firms into the gas distribution business, customers are likely to benefit from the increased competition vis-a-vis a reduction in prices.

The article states that production from Mumbai high will go to nil at some point in 2 to 3 years which means IGL gets nothing and has to buy from new wells just like any other company. Now this business will be a commodity business because you get gas at price just like any other company and you also have competition. How can there be a price hike in such a case?