Rajratan Global Wire Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Volume-led 20% revenue jump, highest-ever quarterly tonnage: Revenue grew 20% as combined India and Thailand volumes crossed 32,000 tons, with EBITDA near Rs.40 crores. The Chennai plant turned monthly-profitable and is now feeding bulk trial lots to global customers.
• Export pivot is working, but the clock is long: Trials have converted to bulk supplies in Europe and America, and management targets 35,000-40,000 tons of exports in FY27, up from ~20,000 this year. The catch is that multinational approvals take 2-5 years, so the ramp is paced by decisions already made.
• Margins are stable, not expanding yet: Gross margin is sustainable at current soft raw-material prices, but management will not commit to a specific percentage band, calling analyst data wrong. EBITDA margin is guided to 13-15%, with cost improvement from higher Chennai tonnage partly passed to customers.
• Competitive moat is real but underappreciated: Customer approvals create a viable-capacity bottleneck that keeps smaller players loss-making at 15% utilization. Rajratan's 60,000-ton Chennai location and Indore export capability give it a cost structure that competes with Chinese suppliers even inside Chinese tyre companies.
• What to watch next quarter: Whether Chennai's other manufacturing cost falls as promised when volume picks up, any movement on the long-pending BIS license for Thailand, and whether the 15% volume growth plan stays on track.

The Volume Engine: Chennai Ramp & Indore Shift

• Chennai turned the corner: The plant is now profitable on a monthly basis and is expected to improve further as volumes rise. Other manufacturing cost will come down drastically because current fixed-cost absorption is low relative to Indore's Rs.8,000 per ton.
• Freight savings exist but are not a margin windfall: Management estimates 1.5% to 2.5% of revenue in combined inward and outward freight savings at full Chennai capacity, but warns that competitive pressure means part of this will be passed to customers rather than dropping to the bottom line.
• Indore volumes are being rebalanced, not lost: As Chennai-proximate customers are fed from the new plant, Indore capacity is freed for West and North India markets that were previously uneconomical to serve. Indore volume is not expected to decline because export orders and previously unserved domestic customers will fill the gap.
• Phase-II already in motion: A further Rs.20-25 crores is being invested in modular machines to take Chennai to 60,000 tons capacity, with equipment arriving by Q1 FY27 and completion by Q2. The low-cost expansion design means the plant can double capacity if the market absorbs it, though management does not see that happening for at least three years.

Sunil Chordia: "you have seen improved performance I think which is beginning of a U-turn and the road ahead looks very promising to us"

Export Transformation: From Korea to the West

• The Korean bet did not pay off: Two years of effort to serve Korean customers ran into overcompetition from two Korean MNCs and low Chinese logistics costs. Approvals and scaling were too slow, so management consciously shifted focus to Europe and America, where contrary growth emerged.
• Headroom at Western MNCs is substantial: One Japanese MNC approved in Europe buys 3,000-4,000 tons per month, and Rajratan is supplying only 5-8% of that requirement. The export ramp is gated by approvals already obtained, not by demand discovery.
• Export volumes are on a steep trajectory: This year's export expectation is ~20,000 tons; next year's plan is 35,000-40,000 tons. The jump depends on bulk trial lots converting to regular orders at accounts where approvals are already in hand.
• Working capital stretched by geography, not by credit quality: The working capital cycle has moved from 70 to 90 days purely because shipping to the US takes 45-60 days transit and customers pay 60 days after that, stretching the real cycle to 120-150 days. Local Thailand and India credit terms are unchanged.

Yashovardhan Chordia: "One Japanese MNC, who we are approved with now in Europe, probably buys about 3,000 tons to 4,000 tons a month. And there we have started supplying probably 5% to 8% of the requirement. So, the headroom at these counters is quite a lot."

Thailand: Utilization, Mix & the BIS Bottleneck

• Running hot, with a little more to give: Thailand is at ~90% utilization, and a de-bottlenecking investment will add another 10% capacity. No further expansion is possible at the current site due to space constraints.
• Realization improvement is structural, not just raw-material luck: Higher realizations in Thailand come from an increased proportion of sales to premium multinational customers, not simply from raw material cost trends. Annual negotiations for 2026 are described as encouraging, with volumes expected to increase and sustain.
• BIS license remains elusive: Rajratan Thai Wire has completed its inspection but has not yet received the BIS license. Getting BIS approval for bead wire "still seems to be a struggle," which constrains the Thailand entity's ability to sell into India.
• Chinese competition is a fact of life, not a threat: Chinese suppliers have not stopped dumping and remain as competitive as before. Rajratan's cost structure allows it to supply Chinese tyre companies at a small profit while keeping its plant full, and the Chinese export rebate on bead wire has been stopped.

Competitive Moat: Approvals as the Real Capacity Cap

• Viable capacity, not installed capacity, is the constraint: The Indian market is ~160,000-170,000 tons per annum, but installed capacity is far higher on paper. The bottleneck is customer approvals: bigger capacities are unsellable without them, and smaller capacities are unviable because production cost becomes too high.
• Competitors are likely loss-making at current utilization: At current price levels, a player needs 60-65% utilization just to break even. Some competitors are running at only 15% capacity and are assumed to be absorbing losses, though their staying power depends on how long they can sustain that.
• Approval timelines are a natural barrier: Multinational companies take 2-5 years to approve a new supplier; even large local players like MRF take 1-3 years. One year is the absolute minimum for any good customer, which means any competitor who starts investing in quality today is years away from taking share.
• China risk is manageable even in a worst case: If quality control orders were removed and Chinese wire rod entered India freely, Rajratan would simply buy Chinese wire rod and its conversion cost would be as competitive as any Chinese player, especially with 60,000-ton scale at a single location.

Sunil Chordia: "I keep saying that smaller capacities are not viable because your cost of production goes very high and bigger capacities are not sellable because there is no customer without approval"

Costs, Margins & the Path to Improvement

• Other expenses are elevated but temporary: The jump in other expenses reflects Chennai costs moving from capex to P&L now that the plant is fully commercial, plus Rs.11 crores in export freight and Rs.9 crores in higher power and fuel. These manufacturing costs will come down drastically as Chennai volume picks up, because the cost base is not proportionate to production at low utilization.
• Employee cost per ton has a clear lever: Employee numbers have stabilized, so per-ton cost will fall substantially as production tonnage increases and the denominator expands.
• EBITDA margin is guided to 13-15%: Management is confident of sustaining current margins or seeing some improvement from cost reduction on higher tonnage. Anything beyond 15% requires a raw-material or demand tailwind that cannot be predicted.
• Gross margin sustainability is a sensitive topic: When an analyst asked whether 42% or 38-40% is the sustainable gross margin run rate, management disputed the data ("38-40% we never did. Something wrong in your data") and declined to pin a number, advising analysts to assume the same EBITDA level and do their own calculation.

Sunil Chordia: "Chinese have not stopped dumping. They are as competitive as they were. But fortunately, our cost structure is also very competitive and we are able to compete with Chinese suppliers in Chinese tyre companies."

New Ventures: Wire Rope & the Tyre Cord Question

• Wire rope is a pilot, not a pivot: A new building is under construction at Pithampur with machines already on site, targeting production start in Q1 FY27 and total capex of Rs.70 crores. The target margin is 17-18% when the plant is running at full production, with approval cycles that are much shorter than bead wire because it is an engineering product, not an automotive one.
• But it is a learning exercise with a long fuse: If the pilot succeeds, bigger capacity investment may follow in two to three years, though Indore may not be the right location for global markets. Decisions on scale and location are roughly two years away.
• Tyre cord is firmly off the table: Management's back-of-envelope math does not show a 20% margin, the business requires very high investment, and the approval cycle is much longer than bead wire. Rajratan will not enter without a very strong partner who takes responsibility for product and approvals, and nothing is happening on this front.

Sunil Chordia: "we will not dare to enter that business without a very, very strong partner, who takes the responsibility of making the right product and making and getting the approvals quickly." [7-8]

Guidance & Commitments

Key Metrics