Rajratan Global Wire Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Volume-led quarter, margin steady: India bead wire volume grew 23% and Thailand H1 volume grew 32%, keeping the company on track for its 20% annual volume growth target while consolidated EBITDA margin held at 15–16%.
• Chennai ramp-up is live but costly: The new plant shipped 1,000 tons this quarter, yet 80% went to distant customers, erasing profit on those sales and inflating working capital. A major customer approval for 100% Chennai supply starts this month.
• BIS order is curbing Chinese imports, but realization stayed flat because Chennai’s ramp-up mix tilted toward lower-priced customers. The import drop from 3,000–3,500 tons/month is real; the pricing benefit is deferred.
• Thailand is a grind, not a recovery: Margins of 11–12% are the new normal as Chinese dumping and competitive pressure from Kiswire persist. The Bridgestone biggest-factory approval, with final audit in December, is the next catalyst.
• What to watch next quarter: Whether Chennai’s exit run-rate hits the promised 2,000 tons/month, the pace of working-capital correction, and any progress on Rajratan Thailand’s suspended BIS license.

Chennai Ramp-Up: Early Output, Delayed Profit

• 1,000 tons shipped, but geography hurt: Only 20% of Chennai’s Q2 sales went to nearby factories; the rest traveled long distances, incurring freight costs that wiped out profit on those volumes. Management expects this transition to continue next quarter.
• Customer approvals are the gating factor: Better-priced customers take longer to approve, so initial volumes went to lower-priced buyers. One major company has now approved Chennai for 100% supply starting this month, and management plans to add a new customer every 15–20 days.
• Fixed costs are already loading the P&L: Depreciation and finance costs hit the income statement after the commercial production declaration, while overheads were planned for a bigger volume that is still building. Management calls this anticipated.
• Exit target is 2,000 tons/month: The ramp-up plan aims for 12,000–14,000 tons this fiscal year, with a monthly run-rate stepping from 1,000 tons this month to 1,200–1,300 next month. The full-year aspiration for next year is 30,000 tons from Chennai.
• PLI incentive shapes the load-balancing: Chennai will be pushed to 14,000–15,000 tons to capture the PLI benefit, which means Indore utilization will be lower to that extent.

Sunil Chordia: "If Rajratan is taking so long, then competition will also take longer time."

Thailand: Volume Up, Margins Reset

• Volume growth is strong, but the margin ceiling is lower: Thailand H1 volume grew 32%, yet EBITDA margin sits at 11–12%. Management explicitly ruled out a return to the abnormally high 2022 levels, citing Chinese overcapacity and dumping in Southeast Asia as structural headwinds.
• Chinese competition is the core problem: China has huge bead wire capacity with domestic tyre plants running at only 60–70% utilization, pushing excess supply into Rajratan’s markets. Management is talking to the Thai government about relaxing import duties on wire rod rather than pursuing anti-dumping action, which it fears would irritate customers.
• Kiswire is fighting back selectively: Rajratan has entered accounts where Kiswire was the sole or prominent supplier, triggering price-dumping by Kiswire in specific quarters. Management’s counter is to target major MNCs that buy larger volumes at better prices.
• Bridgestone’s biggest factory is the next unlock: Rajratan was approved at Bridgestone’s smallest Thai plant, but that 50-year-old facility stopped operations, causing a three-month supply break. Approval for the biggest factory is secured, with a final audit in December; regular business is expected from Q4.

Sunil Chordia: "KIS Wire is selectively competitive. He goes to a customer, dumps the price because he wants to sell in that quarter and again goes back. And next quarter, he will evaporate from there."

India & BIS: Import Protection Without the Pricing Pop

• BIS is working on volumes: The government’s quality control order has cut Chinese bead wire imports from 3,000–3,500 tons per month to drastically lower levels. India bead wire volume grew 23% in the quarter, and India EBITDA margin approached 18%, helped by operating leverage and the import restriction.
• Realization stayed flat despite the import drop: Chennai’s ramp-up mix, weighted toward lower-priced customers, offset the pricing benefit that tighter supply would normally bring. Management said giving an exact calculation was not possible at this point.
• Market share is 42% and defended as a strategic asset: Management will not sacrifice market share for margin, arguing that when the tide turns, big volume will be valuable. Competition is increasing capacity: Tata Steel and at least one other company have announced major investments.
• Rajratan Thailand lost its BIS license and is still far from getting it renewed, a detail that limits the subsidiary’s ability to serve the Indian market directly.

Sunil Chordia: "At the cost of profitability, we can't lose the market share because in the long term, it is the market share which will be useful."

Export Pipeline: Early Green Shoots, Slow Bloom

• North America has started: Dispatches are running at a run-rate of roughly 120 tons per month to two customers. Sample approvals are in hand at most places in America and Europe; initial trial lots have begun shipping, and some customers are considering limited allocations for next year.
• Europe is growing but profitability was overstated: The last two quarters had good volume numbers for Europe, but actual profitability fell short of spreadsheet projections because ocean freight surcharges, driven by Red Sea crisis anticipation, eroded margins. Freight costs are now declining and are expected to trend downward for the next two quarters.
• One European customer is scaling: Sales of roughly 1,200 tons last year at one counter are projected to reach 2,000 tons next year by adding one more factory within that customer. Volume pickup is expected to be much faster in the second half of next year, reflecting the long approval cycle.
• A dedicated export team is now in place, working on connecting with customers and pitching the value proposition: green bead wire, reduced carbon footprint, better quality at a lower price.
• The long game is 30,000 tons of exports from India in three years, which would absorb full Chennai production and take overall sales to 180,000 tons. Thailand exports of 15,000–20,000 tons would remain similar, with plants potentially switching focus between Europe/America and Southeast Asia.

Yashovardhan Chordia: "Last two quarters, we had really good numbers for Europe, but profitability on Excel sheet was much higher and actual profitability turned out to be much lower."

Working Capital & Balance Sheet

• Operating cash flow weakened significantly in H1: Inventory and trade receivables rose sharply because of the Chennai startup. The credit cycle deteriorated as material was pushed to the new facility, and management expects to correct all working capital parameters within the next six months.
• Chennai capex is nearly done: Only 30% of the Chennai project remains to be capitalized, and that will happen as production ramps up on higher volume. Management says it is not a big burden.
• Debt repayment is on track: ₹15 crores more to repay this fiscal year, out of an annual ₹30 crores schedule, with half already completed.
• Freight savings are structural, not immediate: The long-term plan is to supply customers in the West and North from Pithampur and customers in the South from Chennai, cutting freight costs. That geographic rebalancing is underway but incomplete.

Guidance & Commitments

Key Metrics