Rajratan Global Wire Ltd Q4 FY2022 Concall Summary

Key Takeaways

• Record profitability, built on structural cost advantages: Margin expansion came from the world's biggest bead wire line running at 90–95% utilization, lower conversion costs, better quality, and a shift toward premium customers. A Q4 dip was a temporary pass-through lag on volatile steel prices, not a reset.
• Volume growth ambition of 20,000–25,000 tonnes in FY23: Management targets 66,000 tonnes from India and 45,000 tonnes from Thailand, driven by debottlenecking, new Thailand capacity starting in July, and a tyre market growing at 7–8% CAGR. The confidence is backed by being sold out all year and customers now approaching Rajratan.
• Chennai greenfield breaks ground, first coil targeted before March 2023: The 60,000-tonne plant will ramp over three years, with more than ₹100 crore of the ₹300 crore total investment spent in FY23. It unlocks an export pivot to Southeast Asia, Europe, and the US, and positions Rajratan as the world's number two bead wire player by capacity.
• Thailand profitability converges with India, domestic shift adds resilience: Thailand utilization hit ~95% in H2, bringing it to par with India. The strategy to raise domestic market share to 35–40% reduces logistics costs and exchange-rate volatility, while export volumes are maintained at 12,000–15,000 tonnes with a shift toward higher-realization customers.
• What to watch next quarter: The pace of the Chennai construction and equipment ordering cycle, the start of production from Thailand's new capacity in July, and progress on the Michelin bulk trial, which is expected to take 6–8 months for full approval.

Margin Structure & Competitive Position

• Lowest cost producer claim: Management states Rajratan is the lowest cost producer of bead wire globally, achieved by running the world's biggest line at high utilization, which reduces both variable and fixed conversion costs.
• Pricing vs. imports: The company supplies bead wire to Indian customers at a price lower than what they can import from Vietnam or Malaysia, and to international customers at a price below Chinese suppliers.
• Q4 margin dip was a timing mismatch: Quarterly sales contracts prevented passing on raw material price increases from February and March; negotiations are underway and the differential is expected to be recovered in the current quarter.
• Customer mix upgrade: Over the last 3–4 years, larger volumes have shifted to premium customers like MRF in India and Yokohama in Thailand, improving realizations. Cycle tyre manufacturers received smaller quantities because their pricing is less attractive.
• Thailand pricing power: Customers such as Sumitomo and Yokohama pay a premium of THB 2,000–3,000 or more for service levels including local stock maintenance and immediate issue resolution, a benefit of being the only domestic bead wire producer in Thailand.
• Raw material security: The majority of wire rod requirements are tied up with JSW, which is expanding capacity and wants Rajratan as a customer; an agreement for large volume is already in place for next year, supplemented by two additional sources.

Sunil Chordia: "I can claim that we are the lowest cost producer of bead wire in the world today. I have in my 25, 30 years, I have seen, I have competed with Chinese suppliers. I have seen worst of the times. I have seen when we were supplying bead wire at a conversion of only \$200 or \$250 on a total spread..."

Volume Growth & Demand Visibility

• FY23 volume target: The business plan targets 66,000 tonnes from Pitampur (55,000 tonnes bead wire, 10,000–11,000 tonnes black wire) and 45,000 tonnes from Thailand, implying a 20,000–25,000 tonne volume increase year-on-year.
• Sold-out position underpins confidence: Throughout FY22, the company was short of capacity in both India and Thailand; customers approached Rajratan unsolicited, including 500–600 tonnes sold to the US without any outreach effort.
• Tyre market tailwind: Indian tyre capacities expanded 20% due to anti-dumping duties on Chinese tyres, and the market is expected to grow at a 7–8% CAGR, directly driving bead wire demand.
• 90% of order book under annual understanding: Volumes are largely committed through annual customer agreements, with only minor quarterly or monthly fluctuations, providing high visibility.
• Debottlenecking adds flexibility: A new furnace started in April, which will lift utilization from approximately 75% toward 90%, enabling growth in both bead wire and black wire depending on product mix.
• Bead wire demand longevity: A retired Good Year managing director told management the product will be sold for the next 50 years; no research is underway for an alternative to bead wire.

Sunil Chordia: "More of it is gut feeling. And the confidence we get from the discussion with customers. I have never seen customers coming to Rajratan to buy bead wire, whatever we sold in U.S. market, we didn't make any effort. Whatever we are selling in -- throughout the year we were short of capacity. Throughout the year in Thailand, we were short of capacity. So with this debottlenecking added capacity in Thailand, and of course we'll make efforts to sell now. So 20,000 tonnes or 25,000 tonnes additional volume is possible, not a difficult target."

Chennai Greenfield: Timeline & Export Strategy

• Groundbreaking complete: Civil construction started on 15 April; orders placed for almost all critical plant and machinery, with the balance in the planning and negotiation stage.
• First coil target: Management aims to roll the first coil before the end of FY23, though it will not be a significant quantity; production can begin at 60–70% of CAPEX because machines are modular.
• Ramp-up profile: Capacity will grow from zero to 60,000 tonnes over three years, with full utilization expected in a maximum of three years. The investment of ₹300 crore is spread over FY23 and FY24, with more than ₹100 crore spent in FY23.
• Export pivot: At least 40–50% of Chennai's volume is targeted for export to Southeast Asia, Europe, and America. Customer relationships developed from Thailand will be leveraged to supply the same geographies from India.
• Global capacity rank: Post-Chennai, Rajratan's total capacity of 180,000 tonnes would represent approximately 19–20% of world bead wire requirement, making it the number two player behind Bekaert.
• Approval fungibility: Supplying an existing customer from Chennai requires a separate but shorter approval process of approximately two months, since the customer and requirements are already known.
• US and Europe pursuit deferred: The company has not yet reached out to US or European customers for approvals because it currently has no spare capacity to offer; aggressive mapping will begin once Chennai capacity becomes visible.

Thailand: Domestic Shift & Profitability

• Profitability convergence: Thailand's profitability reached par with India in H2 FY22 after utilization rose to approximately 95%.
• Domestic market focus: The goal is to raise domestic market share from approximately 20% to 35–40%. Customers are requesting more local volumes due to logistics issues and supply chain uncertainty around imports.
• Export volumes maintained, mix improved: Export tonnage will stay at 12,000–15,000 tonnes per year, but the company can now be more selective, choosing higher-value, higher-realization customers.
• Local sales structurally more profitable: Domestic Thai sales carry lower management and logistics costs, no exchange-rate volatility, and greater stability compared to exports.
• New capacity starts in July: The incremental 20,000 tonnes of Thailand capacity will begin production in July (Q2 FY23), not Q1, and is expected to be fully utilized within one to two years.
• Customer approvals progressing: Four new clients were approved for the Thailand plant: three Chinese companies with domestic Thai operations and one company in Finland. Approvals are also underway with two more Japanese companies and one European company.

Yashovardhan Chordia: "Moving forward export volumes will not go down, but it will remain the same. So year-on-year, we are doing about 12,000 to 15,000 tonnes of export volumes. So tonnage wise, they will remain the same. We might have an option where we are more selective of choosing the custom months in export. So it gives us another opportunity to choose high value or high realization customers for the export market."

Customer Approvals & New Business

• Michelin in bulk trial phase: Samples and small lots have been approved; the bulk trial involves 10 truckloads of 30 coils each, expected to take 6–8 months, with full approval hoped for by the end of FY23.
• Thailand approvals pipeline: Beyond the four clients already approved, two Japanese and one European company are in the approval process. The India plant has separately applied for approval from the four Thailand-approved customers, a shorter process-only approval of approximately two months.
• Patented wire opportunity: The company will sell some patented wire as raw material to an aluminium-cladded wire manufacturer using intermittent process capacity, though this is not a product line it intends to pursue actively.
• PLI registration: Rajratan has registered for PLI benefits for 60,000 tonnes of capacity with an investment plan of ₹300 crores.
• NCLT/Mittal Corp: Management has taken NCLT documents and visited the capacity but has no serious plans to pursue it; the intent is only to stay informed about developments in the area.

Balance Sheet & Capital Allocation

• Debt reduction underway: Debt came down year-on-year despite ongoing investments in Chennai and Pitampur.
• Sanctioned debt sufficient: ₹100 crore has been sanctioned from two banks, with only a very small amount availed so far. Management stated no need for additional debt beyond this, and is working on all possible methods to reduce overall debt on the company.

EV Impact & Industry Dynamics

• Stringent EV tyre requirements: EV tyres demand less noise, higher weight tolerance, higher tensile strength, and joint-less wire, which raises the quality bar for bead wire. [14–15]
• Incumbent advantage: The higher technology requirement makes it easier for existing suppliers to qualify compared to new entrants; Rajratan may already be producing to these specifications for Japanese customers.
• European supply consolidation: Many European bead wire suppliers are shutting down, including a former joint venture partner. Management will evaluate the feasibility of manufacturing in Europe later, but has not yet reached that level of business.
• No power disruption: There is no power shortage at the Madhya Pradesh plant; the Chennai situation will be assessed after one year; Thailand also has no shortage or disruption.

Yashovardhan Chordia: "I think, this eventually makes it easier for an existing bead wire supplier rather than somebody who's coming new and making a high technology bead wire."

Guidance & Commitments

Key Metrics