Bharat Wire Ropes LtdQ1 FY23Industrial Products

Bharat Wire Ropes Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Order

Capex

Yes

1 of 5 growth signals are positive — mixed outlook.

Revenue guidance

Category 3

→Expected volume growth of 15% to 20% CAGR over the next 2 to 3 years.
→Target to achieve rated capacity of 72,000 tons per annum in the next 2 to 3 years with current growth rates.
→Revenue growth driven by volume increase, improved realizations due to changing product mix, and expansion in markets including US.
→Expansion supported by infrastructure developments in India, including a $15 billion road construction project.
→Export markets growing with increasing market share from competitors in Europe and Korea due to lower energy costs in India.
→Order book steady around ₹170-200 crores with continuous inflow supporting revenue visibility.
→Improvement in operational efficiencies and cost control expected to enhance margins alongside volume growth.
→Solar power implementation to save 30%-40% on energy costs, supporting future cost competitiveness.

Category 3

→Volume growth of 15% to 20% CAGR expected over the next 2 to 3 years, driven by capacity ramp-up to 72,000 tons (Pages 4, 5, 10, 14, 22).
→EBITDA per ton expected to be maintained around Rs. 36,000 with scope for improvement due to operational efficiencies, better product mix, and reduced production costs (Pages 17, 5, 24).
→Sustainable EBITDA margins around 23-28%, with confidence expressed in maintaining or improving these margins amidst steel price volatility (Pages 6, 17).
→Energy cost savings of Rs. 20-25 crores anticipated due to solar power initiatives and LNG consumption optimization, supporting margin expansion (Pages 4, 12).
→Revenue growth of 15% to 20% CAGR expected, contributed by volume and realization improvements, supported by infrastructure developments and market share gains globally and domestically (Pages 3, 19, 20, 22).
→Company confident of sustenance and growth in PAT, with net profit in FY23 up 354% YoY and expectations for continued profitability (Page 3).

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→There is no explicit mention of any current or immediate future fundraising through debt or equity in the excerpts.
→The company has issued Compulsorily Convertible Preference Shares (CCPS) worth ₹382 crores to bankers, which will convert into equity after 13.5 to 20 years; management is monitoring the situation and may consider buyback options after April 2023.
→Debt reduction is ongoing; a recent promoter infusion of ₹42 crores was used to repay Inter-Corporate Deposits (ICDs), reducing debt by the same amount.
→CAPEX plans are minimal and focused on balancing equipment to achieve rated capacity, funded from internal cash accruals, indicating no major external fundraising is planned in the next 2-3 years.
→Management seems focused on internal accruals and managing existing instruments rather than raising new funds.

→Current order book is around ₹170 to ₹200 crores for the next 3 months (Page 16, 20).
→Orders are received daily and it's a continuous process (Page 20).
→Around 13,000 to 14,000 tons volume pending in the order book (Page 20).
→Some order book reduction from ₹200 crores to ₹170 crores was due to seasonality and bunching of export orders; such fluctuations are normal (Page 16).
→Execution of current order book expected within approximately 3 months (Page 15).
→Orders fluctuate with tender timings and export market dynamics, making it difficult to quantify with certainty (Page 16).

Yes

→No major CAPEX expected in the next 2-3 years; planned CAPEX is small, around 1-2% of the gross block (~Rs. 10 crore per year) mainly to achieve related capacity.
→Investments mostly focused on balancing equipment to optimize capacity utilization rather than large scale expansions.
→Company plans to invest internally from cash accruals to increase capacity utilization from current ~60% to up to 90-95% over 3 years.
→Strategic investment includes switching to solar power for sustainability and cost saving, aiming to reduce energy costs by 30-40%.
→New product development investments planned offering Return on Capital (ROC) of at least 25-30%, with finalization expected in the next two quarters and implementation in two years.
→Issuance of Compulsorily Convertible Preference Shares (CCPS) to bankers to be converted over 13.5 to 20 years, monitored for early resolution without affecting existing shareholders.

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