Rajratan Global Wire Ltd Q4 FY2024 Concall Summary

Key Takeaways

• A year of two halves: Thailand volumes surged 43% but global Chinese dumping crushed margins, dragging consolidated EBITDA down 21% and PAT down 28%.
• India defended by regulation: The quality control order choked cheap Chinese imports late in Q4, reversing two quarters of share loss; management is optimistic imports will not return next year.
• Chennai is the growth bet: The new plant begins commercial production this quarter, targeting 15,000 tons in FY25 with a PLI benefit of 8% of sales, though first-year profitability will be thin.
• Global ambitions are now physical: A US marketing subsidiary and a European rep office are open; Bridgestone registered the company for its European factories, and 400-500 tons/month already flow to Europe.
• What to watch next quarter: Whether Chennai's ramp-up stays on the 15,000-ton trajectory, whether Thailand's EBITDA margin recovers as higher-priced approved customers take share, and whether Chinese imports stay out of India.

The China Shock & India's Regulatory Shield

• The problem: China's weak domestic economy forced its steel wire producers to export aggressively, dumping material into India and Thailand at prices below cost. In India, this cut Rajratan's sales for two quarters because the company could not match Chinese pricing.
• The fix: The Indian government's quality control order acted as a non-tariff barrier, drastically reducing imports in the last month of the quarter. Management is optimistic the order will hold and cheap imports will not return in FY25.
• The residual risk: China's behavior is unpredictable; they supply without margin or at a loss, and management acknowledges this is not a competition the company can fight without government support.
• Market share impact: Market share came down from earlier levels due to increased Tata Steel capacity and the import influx, though management says Tata's price cuts did not translate into sustained volume gains.

Chordia: "Very difficult to predict what China will do. We will have to look at government support to whom fight with China because they supply without margin, they supply at a loss also. So, that is not a competition we can talk about."

Thailand: Volume Engine, Margin Drag

• Volume story is strong: Thailand volumes grew 43% in FY24, and the plan is to exceed 50,000 tons next year with utilization rising from ~75% to 85%.
• Margin story is weak: The Thai business is exposed to global competition, and Chinese tyre companies who are key customers have very low profitability. The board directed management to run the plant at full capacity even if the contribution per ton is small, to avoid ceding market space.
• The recovery path: Some newly approved customers offer much better pricing; as volume shifts toward those customers in the coming year, EBITDA percentage should improve.
• Cost position claim: Management asserts Rajratan is the lowest-cost producer globally barring the Chinese, whose scale advantages are structural. Against Kiswire, Hyosung, Bekaert and Tata Steel, the company believes it holds a cost edge when raw material prices are equalized.

Chordia: "Our board decided to, gave us a direction that you should run the plant to full capacity. If there is a small contribution also, you should not leave that customer."

Chennai: The Four-Year Bet

• The asset is live: Machines are started, trial runs are underway, and commercial production will be announced this quarter with capitalization in Q1 FY25.
• Year-one math: Management projects 14,000-15,000 tons of volume (25% of eventual 60,000-ton capacity) and INR 125-130 crores of topline. The plant carries an 8% PLI benefit on sales. First-year profitability is not expected to be meaningful; the plant will take time to stabilize.
• The four-year ramp: The plan is to reach full 60,000-ton capacity over four years, driven by tyre company growth projections and competitor growth in the region. Sales are tied entirely to tyre production because the product is only sold for tyre applications.
• Location logic: Chennai sits within overnight distance of at least 10 tyre companies, including MRF and Apollo who have major capacity investments there. The port location also enables the strategic goal of at least 50% exports from this facility.
• Early customer mix: Some initial sales will go to lower-priced customers the company previously avoided; with added capacity, this becomes necessary. The company is also targeting global market customers where the approval process is shorter.

Chordia: "Our focus will remain on making our Chennai investment successful in next 3 years, 4 years where we want to be doing at least 50% export. It is a port based location and we want to become a strategic supplier to two, three companies, mainly MRF, Apollo who have major investment in tyre capacity in that location."

Global Customer Approvals: Slow but Moving

• Europe is converting: New approvals are happening; the company sold an average of 400-500 tons per month to the European market in the last quarter. Bridgestone has registered Rajratan as a vendor for its European factories.
• Korean OEMs approved, volumes lagging: All Korean tyre companies have approved Rajratan's product, but this has not yet translated into much bigger volumes across all locations. Approvals are in place for their facilities in Indonesia and other Southeast Asian regions.
• US presence established: A marketing subsidiary has been set up in the US, and discussions are ongoing with Michigan. The subsidiary will sell from all factories: existing Thailand volumes to America and Europe, plus new Chennai business.
• Approval timelines are long: It took two to two-and-a-half quarters to get approval from one European customer. For European and American plants, trial lots will ship in the near term, but actual commercial volumes are expected to start only after a year.

India Core: Defending the Base

• Pithampur steady state: The existing 60,000-ton India capacity will continue at similar utilization, though some bead wire volumes may shift to Chennai. The offset is selling more black wire, conductor wire, and spring wire from Pithampur.
• Domestic growth target: Management expects 20% growth in domestic sales, driven by the import reduction and a broader product mix.
• EBITDA per ton context: The INR 15,000 per ton figure cited for India was historical FY24 performance excluding Chennai. Recent months have seen EBITDA increase, but management is cautious about projecting the full-year run-rate.
• Competitive positioning: Tata Steel tried to gain share by reducing price, but management says price cuts do not reliably deliver volume in this industry; the impact was limited to one or two months.

Financial Position & Capital Allocation

• Capex cycle winding down: The heavy investment phase is over. Chennai's remaining capex is modest, and Thailand and Pithampur expansions are complete. Cash flows will now be directed partly toward debt reduction.
• Subsidy stream: A third installment of INR 3.27 crores was received from the state government for the Pithampur expansion; similar amounts are expected for the next five years from a total sanctioned pool of INR 22-odd crores over eight years.
• Chennai PLI: The 8% of sales PLI benefit is a one-time advantage attached to the Chennai plant.
• Margin trajectory: Last month and last quarter EBITDA has increased, but management says it is difficult to project how this will pan out for the full year given the volatility in Thailand and the Chennai ramp.

Chordia: "I will not call it pain point. These are business issues. We have to deal. We have to find a solution. But overall, it is a good business."

Guidance & Commitments

Key Metrics