IFGL Refractories Limited — Call Transcript 2021

Apr 8, 2021

� 'REFRACTORIES LIMITED [(J

Head & Corporate Office

3, Neta[j] i Subhas Road, Kolkato - 700 001, Indio Phone: +91 3340106100, Fax: +913322430886 E-mail : ifgl.ho[@] ifgl.in, Websites : www.ifglref.com

8[th ] April, 2021

National Stock Exchange of India Ltd 'Exchange Plaza', C-1, Block - G Bandra - Kurla Complex Bandra (E), Mumbai 400 051 Code: IFGLEXPOR

BSE Limited Phiroze Jeejeebhoy Towers Dalal Street Mumbai 400 00 I Code: 540774

Dear Sirs,

Re: Disclosure under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Reference decisions taken by the Board of Securities Exchange Board of India in their.meeting held on Thursday, 25[th ] March, 2021 and following principles of Good Corporate Governance practiced by the Company, please find attached Transcript of virtual discussion between Research Analyst, Mr Sahil Sanghvi of Monarch Netwo1th Capital Ltd, Mumbai and Director & CFO, Mr Kamal Sarda of the Company held on Friday, 2[nd ] April, 2021 afternoon, which is also being hosted on Company's Website www.ifglref.com.

Thanking you,

Yours faithfully, For IFGL Refractories Ltd.,

�� (R ,Argat Wal) Company Secretary

Encl: As above

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==> picture [34 x 36] intentionally omitted <==

Formerly known os IFGL EXPORTS LIMITED Registered Office & Kalunga Works : Sector 'B', Kolungo Industrial Estate P.O. Kolungo · 7 70 031, Dist. Sundergorh, Odisho, Indio Phone: +91 661 2660195, Fox: +91 661 2660173 E-mail : ifgl.works@ifgl.in, CIN : L51909OR2007PLC027954

TRANSCRIPT OF DISCUSSION BETWEEN RESEARCH ANALYST, MR SAHIL SANGHVI (SAHIL) OF MONARCH NETWORTH CAPITAL LTD, MUMBAI AND DIRECTOR & CFO, MR KAMAL SARDA (KAMAL) OF THE COMPANY HELD ON FRIDAY, 2[ND] APRIL, 2021 AFTERNOON

Sahil

Good afternoon. Hi, Sir.

Kamal

Good afternoon.

Sahil

You're doing good over there. The COVID cases, are they too much?

Kamal

Yeah, they're there. Getting a bit more scary.

Sahil

Right. It's very bad over here.

Kamal

You're in Mumbai. I mean, it's almost like 9000 cases here.

Sahil

Yes. You're right.

Okay, so shall we start? And I've kept it on recording mode. I have gone through the transcripts. So I won't be repeating those questions. These will be just the things that I want to understand and have understood. I've also gone through the presentation and reports, all of that.

Sahil

And I limit my questions strictly, Sir. First of all, and I understand there have been operational changes that have been from the business perspective that has been happening in the last one, two years. So, has there been a major change in the ratio of mini mill customers versus the integrated mills? Now as compared to two three years before?

Kamal

There is no major change as such.

Sahil

Okay.

Kamal

So it's I think it's a part of the usual business change. But I wouldn't say that it has been a very, very significant change. Yes in the mini mill segment we have made some inroads, but if you ask me a great percentage of this turnover has come from there, no, but yes that segment is now taking a good shape.

Sahil

Okay so would it be? How much percent of revenue? Would it be? Mini Mills, some ballpark number, if you can give.

Kamal

Possibly, Don't have the ready answer. Nothing, nothing more than I think. I wouldn't say that. But I don't I don't have the ready figures, so let me put up this.

Sahil

Okay. Okay But less than less than 20%, less than 30%

Kamal

No, No, could be less than 10% of the total.

Sahil

Sir, three years back, we were completely not present in the mini mills. Is it true?

Kamal

Very, very small.

It was not that we were not present at all, we were always present but not in a very big way.

Sahil

Okay, Okay. And so what is Sir, how have we ramped up on the mini Mills now? I mean, is it simply the marketing side of our team? Or, I mean, how are we trying to ramp up on these customers? Like, what's our strategy on that front?

Sahil

Do we aim to increase the mini mills clients? I mean, is there any such strategy that we have going forward?

Kamal

Yeah. So that's a business segment which we would we would keep on, you know, adding. New customers all along.

Sahil

Okay.

Kamal

So that that we will keep on adding the, this segment? There have been a lot of new customers, not that everything is new for us. So lot of customers have got added in this financial year.

Sahil

Okay.

Kamal

Obviously, we will keep on adding customers. We have created, we have created a network for that.

Sahil

Okay. And would you be able to give a number Sir are on the customer front, like last two years would know how much?

Kamal

I don't, honestly, I don't have number.

Sahil

Okay. Thank you. Okay. But on both fronts, we'll be trying to add customers Right Sir, integrated, also, we are equally focused on mini mills also.

Kamal

Right. Yes. Yes, absolutely.

Sahil

Okay. So, on the product front.

The new products that we have introduced in the last two, three years, there are a lot of new products that we have come in with or is that one of the reasons why we have ramped up

Kamal

I think, there is no major new products that has been added. It just in the in the existing product network only we have improved? The, the, I would say, competitiveness,

Sahil

Okay. Okay,

Kamal

which is, which is what?

Sahil

Yeah. Okay. And, and that's, that's by means of our sales team or by the quality of product or what would have gone behind that, Sir, if you can give me a bit more detail. If you don't measure.

Kamal

It will be it will be more the sales network, as well as the the product competence in terms of like, cost of the product to the selling price earlier, we thought that it's not a good idea for us. So we have worked on the cost front. And that's how that that market we are able to penetrate.

Sahil

Okay, okay. Okay. So would it be fair to say that some of the, I mean, the selling price of some of our products would be lower than our competitors.

Sahil

I mean, or is it a very difficult thing to say?

Kamal

Come again, please.

Sahil

Would it be fair to say that the I mean, the pricing of some of our products will be lower than our competitors. In that case, or it's very difficult, there are a lot of products.

Kamal

There are variety of products. It's not one product, it is a basket of refractory products.

Sahil

Yes, yes. Yes. Yes.

Kamal

So maybe kisi may jyada hoga kisi me kum hoga. Overall, you know, the market segment we are able to compete in in a good way.

Sahil

Okay. Okay.

Okay, got it. Sir. Sir, regarding the new plant that we're coming up with in Vizag, you know any kind of you know, business strategy that you have defined for that land because, you know, one it's closer to the port we didn't have any facilities in the south as such, so catering to customers in south and thirdly, from the product front also. So, can you, can you give some more detail on the strategy what do you aim to target from this facility at Vizag.

Kamal

So strategy in the sense we know the market

Sahil

okay.

Kamal

Our marketing network is very strong.

Sahil

Okay.

Kamal

But the because of the competition sometimes that becomes a challenge with that put up in Vizag near to port So, again the logistics cost to these range of products you know as a comparison to the cost is also high. If we are able to save the logistics cost that will give us a bigger advantage plus it's my it's a much more modern plant, Rourkela has been slightly I would say older plant so, the productivity overall So, which means overall cost of production also we need to work on that which is which is much better which should be ideally high productive plant in Vizag and from there we also have the options of exporting in case you want to export, some product line we would add into that particular plant.

Sahil

Okay,

Kamal

Where in the scope of exporting will also be very good, for that also, there also the logistics costs will play a significant role, very similar to the plant which we have in Kandla near the port.

Sahil

okay.

Kamal

So that that that that would be another advantage.

Sahil

Okay. Okay. Okay. So, the last thing that you said that you you plan to add some products you know, through which you can get the export advantage, which would that be, would that be some new ones.

Kamal

Yeah, We have plans to introduce some new products in that plant.

Sahil

Okay. Would you name, Would you kindly name some, you are looking at.

Kamal

You know, we have a lot of products in mind gradually we will put in there. So, some of the product line likes like we we have technology of Monocon in Lance’s. So, that we will we intend to make at Vizag even for the Indian customers also for some overseas customers, wherein Monocon is not competitive, bringing from UK is not competitive. So, there are options available for exporting the product from there. We will make a large precast shapes where again the cost of logistics plays a significant role, transporting them and as well as you know, there are scope of exporting the same products, we tend to introduce a product called Snorkel.

Sahil

Okay, okay,

Kamal

That also has a good potential in the Indian market. And there is a significant portion of imports involved into it. So there'll be a cost saving so there are few product range we have in mind. Maybe in the next few months, we really start working on the facilities of these.

Sahil

Right, so are we are we on track Sir? Q1 fy 22. The phase one to phase two.

Kamal

Yes.

Sahil

Okay, okay. So, as I understand Sir, I think monolithic and precast is what we aim to manufacture in the phase one Is it is it that is that correct? Understanding?

Kamal

Yes, yes.

Sahil

Okay and Phase 2 What what would we be targeting product wise, at Vizag.

Kamal

Phase 2, I think it should be end of quarter four or beginning of quarter one of the next financial year.

Sahil

Right. Sir, Right Sir

I was asking from the product side of the thing, I mean, what do you aim to manufacture over there would it be same monolithic same precast or something else. Sir product wise would you be manufacturing the same, monolithic and precast or

Kamal

Monolithic product would be very similar.

Kamal

But precast I as I mentioned, we may intend to make some larger products.

Sahil

Okay, So phase two phase two product portfolio will be somewhat similar to phase one.

Kamal

Yeah.

Sahil

Okay. Okay. And we would target both exports and domestic, right Sir or more of exports.

Kamal

No, only it will be more of a domestic market.

Sahil

Okay. Okay.

Sahil

Okay, got it Sir would you would you would we be so now that we come into South? Is there some, I mean, we are catering to a lot of players across India. But do we stand a chance to pick up on some South steel players? Now that we have a plant over there before we didn't have So, any kind of that advantage we can have.

Kamal

There will be some advantage having a plant in South like Vizag Steel Plant is there.

Sahil

Correct

Kamal

Based on doing Bellalry, these are the two large Steel Mills.

Sahil

Correct? Correct.

Sahil

Hello, can you hear me Sir?

Kamal

Yes.

Sahil

Okay. Okay. Sorry, your last statement.

Kamal

I said that there will be definitely a big advantage in terms of cost.

Sahil

Okay.

Kamal

You know, for for supplies to Vizag plant and JSW.

Sahil

Right? Right. Got it. Got it. Okay, okay.

Sahil

Sir,.

Okay, you have already told that you are looking to add new customers Okay. Okay. Sorry about that.

Sahil

So, any kind of main focus you have on the strategy front? I mean, how do you aim to ramp up next two, three years, would it be more customer acquisition would it be more introduction of products or mix of both or

Kamal

It will be more tilted towards adding new products? See Keep adding customer and all are regular things. Introducing new product will be our major focus.

Sahil

Okay, Got it Sir.

Sir, shaped versus unshaped? Would one of that have higher margin? I mean, which one would have higher margin or nothing like that?

Kamal

I don't think there is anything which is like that. Dekho, aisa margin apne calculate nahi karte hein. So honestly speaking, if you ask me that higher margin kaha hoga, we do not calculate like that.

Sahil

Okay.

Now, Sir, regarding the capex that you've already announced. So, you are doing a 10 crore spending on debottlenecking at Kalunga, Odisha that would be Sir, what exactly do you aim to achieve. Over there I mean, which product or I understand what debottlenecking is, but I'm just trying to understand.

Kamal

It's in the light. Like, we are now almost working on at a very good capacity level there.

Sahil

Okay. Okay.

Kamal

So, we need to you know, increase the capacities there so that to take care of any kind of additional business and the business volume looks very good. It's the market looks very good. Okay, so that's where we are creating additional volumes.

Sahil

Okay.

Kamal

Isostatic product, Slide Gate product which is exclusively made in Kalunga only. So we would like to increase the capacities there. So that's that that will be our major product line where we will spend money.

Sahil

Okay, okay. Okay. And the current utilization at Kalunga would be around 75 80% Sir or more more than that.

Kamal

You can say so on an average Yes.

Sahil

Okay. Okay.

Kamal

So in some product line it could be slightly more.

Sahil

Okay. Okay. Average could be 75-80%.

Sahil

Okay. Sir. Out of the approximately 500 crores or something like that I think we make from the standalone business, the split between Kalunga and Kandla, is it roughly around 400:100 or 350:150 sort of number.

Kamal

Kandla would be close to close to 20 to 25% of the total turnover.

Sahil

Okay, okay. Okay. Got it. So 100 crores.

Kamal

Something around that. You know that the final figure is still not with me.

Sahil

Right, right, right.

No, so my question was that Sir, supposing if we assume, you know, say approximately 300/350 what you're doing from Kalunga right now, full scale production can ramp up to 500/550 crores.

Kamal

Where.

Sahil

Kalunga

Kamal

Yeah, yeah. Any where, may be even more.

Sahil

Okay. Okay. Okay. And similarly at Kandla. Sir we can go up till 200 crores.

Sahil

Full scale.

Kamal

More.

Sahil

Okay. Okay. Okay.

Kamal

More, more.

Sahil

Okay. Kandla will also be around 75% Sir because phase two I think should be low right. Phase two utilization. Kandla.

Kamal

Yeah, yeah, so Kandla the existing plant of ISOstatic we are running at 90% plus.

Sahil

Okay, Wow, okay. Kamal 90%, as of today.

Sahil

Right. Right. Right.

Kamal

May not be on the full year basis. Last year could be you can take it somewhere around 75 to 80%. Last three, four months, we are running at almost 85/90%

Sahil

Right, Sir. Phase 2 of monolithic plant. I think that should be.

Kamal

25% or so. 30%

Sahil

There's a great room over there to upgrade.

Kamal

That's just we've just made the plant. Just before Corona we started manufacturing.

Sahil

Okay, okay. Okay.

Okay, I get that Sir this magnesia bricks is something I was reading some material on the IRMA website, also. There's a great imports happening of magnesia bricks. Do we do we manufacture that right now?

Kamal

No, we don't. Sahil

Okay, okay. So any plans on that front? I mean, to replace

Kamal

We, we, we have a plan to start but not finalized when?

Sahil

Okay. Okay. So, nothing to be expected in FY 22 at least may be next fiscal. May be FY 23.

Kamal

Possibly Yes.

Sahil

Okay. Okay. But Sir import substitution is possible I mean, the pricing wise we are cheaper than the imports.

Kamal

Which one

Sahil

Maybe magnesia bricks or

Kamal

We have not started manufacturing as yet.

Sahil

I understand it but I was just comparing the imports versus the domestic production, I mean, substitution is definitely possible pricing wise. Some of the imports.

Kamal

See there is there are two parts of the, one is pricing, second is the push by the Government of India on make in India

Sahil

Right. Right.

Kamal

So like, all the public sector undertakings and some private sector players also have started under that Atmanirbhar Bharat Scheme.

Sahil

Right.

Kamal

PSU’s have been , you know, there's a guideline that, below 200 crore tenders, they will procure from Indian sources.

Sahil

Right

Kamal

So, it's a need of the day that you know that your production is made in India.

Sahil

Got it Sir. Got it Sir over there 200 crore thing that you said, Sir that is that is just for the PSU right Sir. And I mean, I just tried to understand the I think SAIL is one of our customers but then I mean, I'm sure you have other customers but PSU customer as positive of our whole customer market. Right Sir or is it a good chunk?

Kamal

No, it’s a good chunk. It is about 20/30%

Sahil

Okay, okay.

Kamal

Will be if I am not wrong, it will be close to 25% of our domestic sales.

Sahil

Okay, Wow, okay, then we definitely stand to benefit. Okay, Right. Just that I'm noting things down so just I'll just go quickly.

Kamal

Absolutely. Yeah, yeah.

Sahil

And, Sir, these facilities that we have in Tianjin, Brazil and Czech Republic. I think all of these are under the Monocon subsidiary.

Kamal

Yes.

Sahil

Okay. Are all of these manufacturing facilities are or they are simply trading also.

Kamal

No, no, manufacturing

Sahil

All of them all of them. Right Sir. All the three of them

Kamal

We don't have any trading wings as such.

Sahil

Okay,

Kamal

We don't have a trading company as such.

Sahil

Yes. Got it. Got it. Right.

Sir coming to raw material. Now I've I I've read all the transcripts. So I know I won't be asking those questions. But could you simply tell me. I think probably clay, magnesia, alumina, resins, zirconia, these are the raw materials probably the ones that we import

Sahil

Yes. Which one do we

Kamal

Resins we don't import?

Sahil

Okay, that's domestic.

Kamal

It has very short, small shelf life. So it's only procured in India. Clay we don't import we don't use Clay much. That's all whatever else we use is, is in India.

And, and Magnesia Yes, we import

Sahil

Alumina, Zirconia

Kamal

There's some Alumina we import some Alumina we procure locally. Zirconia is fully imported.

Sahil

Okay, Okay, Right Sir So, Sir, I mean, are these prices have risen again

Kamal

Major impact has been due to the ocean freight increase.

Sahil

Oh Yes, yes.

Kamal

Ocean freight has gone up so much, major portion of the increase is due to that.

Sahil

Okay, okay. Sir but I what I was trying to understand is that if in case I want to track these raw materials, like which one is the biggest in our RM cost? You know, if I want to really understand which one would impact.

Kamal

Different product will have a different

Sahil

Okay.Okay, okay. Okay.

Kamal

So, like some product will have Zirconia only as a major, some will have Magnesia as major.

Sahil

Okay. Okay. And clay is it like used everywhere or even clays?

Kamal

No, we don't we don't have too much of it.

Sahil

Okay, got it. Got it. So, I think Magnesia and Zirconia is something that I should be watchful of.

Kamal

Yes.

Sahil

Okay. Okay. Got it. Got it and China prices right Sir.

Kamal

Yes

Sahil

Okay, Right.

Sir, you have been addressing in the Q2 Fy 21 concall when when we had some margin expansions that there has been some cost optimization measures that the company has took up. So, would you be able to give some details on that like, what have you done internally.

Kamal

See those details, difficult to share? So I think there is something which is seen as a regular work, which we keep on doing to keep the competition afloat, but difficult to share some of these details. Hope you appreciate that.

Sahil

Okay, but these are sustainable, right. I mean.

Kamal

Yeah.

Sahil

Okay. Okay. Okay. Sir, speaking about Hofmann now you have also on the concall said enough about that. I mean, I'm pointing towards the the performance of subsidiary. Now, is the product acceptance one of the reasons why, you know, we've been taking time to ramp up on that subsidiary, I mean,

Kamal

Where

Sahil

It's not the routine basket of refractories right, I think it has a niche product portfolio.

Kamal

Yeah. So, so, the two three issues why that is getting delayed, one the overall market conditions are not I would say, favorable. Second, the competition scenario also because the market condition has got intense. And third Yeah there is a technological challenge to make the product acceptable. In the refractories industry it takes longer time, so maybe in this case, it is taking a bit more time.

Sahil

Right.

But anything anything like we can do more over there, or I'm sure we are doing our best, but is it just that we will wait for the market to improve? Or like we are? You know, we are we have some action plan over there.

Kamal

Yeah, it's the product is getting, I think more and more acceptable. In the last couple of/last three months, the product sales have increased. So I think now only, now there is a bright chance of Hofmann should come back to black and improve from there. Last two month sales have been better.

Sahil

Okay. Okay.

Kamal

So, we see a sign of improvement there. But since the market segment is so insignificant, honestly, sitting here, my knowledge about that market is very limited.

Sahil

Got it. Okay, okay. Go on. Go on Sir please.

Kamal

So that's what I'm saying. Nothing more, but things are improving there oflate.

Sahil

Okay. Okay. Sir, I mean, both UK and USA, there are still the COVID cases are still there. It's not that they have just come out of all of those. But the demand side, you're seeing that improving I mean in Q4 and Q3

Kamal

Yeah, yeah, demand has been good.

Sahil

Okay. Okay

Kamal

Demand has been good. And demand unless you know, there are like you have you know, lockdown kind of conditions in Germany, you have lockdown conditions in France, UK is easing out . But some of the some of the European countries are still not out of, you know Covid situation.

So that grey grey area will always remain, you know, today we cannot source say that there will be no lock down and our business will remain intact. But yeah, assuming the COVID conditions would be under control, the market seems to be very good.

Sahil

Okay. Okay. Got it. Got it.

Right. So on the product front Sir, like you said, the things that you want to do in Vizag those are the products that you will be targeting now, Right Sir, those are the products that you wish to introduce in the market? And that's and on the customer side also we are targeting some new mini mills or integrated plants, is it or is it more.

Kamal

It is a continuous process. You know, I cannot identify that this is the customer. Yeah, there are a lot of customers still there. We can do business, See, in the world market, we are a very small player. It's not that we have a 20% market share in the world and you know, we cannot look at any other growth. So we possibly in the ISO market in the world, we will not even be 2, 3, 4 percent.

Sahil

Correct. Correct.

Kamal

So there is a huge scope of growth there.

Sahil

Yeah. Okay. Okay and Sir Dolvi is coming up with the new plant. So would we get a chance over there?

Kamal

We are already in.

Sahil

Okay. Yeah. Okay. So that might give some incremental demand from that plant. We might see that coming.

Kamal

Yes, we have have been there

Sahil

Okay very good, very good Sir. Now, coming to some modeling questions, because you know we have to maintain a financial model also. So, I just go quickly on that Debt is pretty lesser, but just on the cost of borrowing, we have some term loans and we also have some working capital. So, average cost of borrowing What should I assume Sir some figure that you can give

Kamal

Average cost of borrowing our average cost see we normally borrow the working capital

Sahil

okay okay.

Kamal

Other than that, our borrowing is very limited okay. So, our average cost of borrowing will be what we normally draw that foreign currency packing credit only

Sahil

Yes you have that about 27 crores is what you have

Kamal

Yeah, major portion is packing credit in foreign currency, packing credit is not even more than 3% of sales

Sahil

Okay, okay. Okay. Right. And I think some working capital loan 7.4 crores sort of so that should be around six 7%.

Kamal

I don't think we have any working capital loans.

Sahil

I think these are consol based.

Kamal

Yeah, Consol, maybe see, but they are treating as loan. I do not have ready answer to what is the nomenclature? They would be at this this level of percentages only. Not, not, not not more than 3% or so. Because they are all again, you know LIBOR based things.

Sahil

Got it. Got it. So floating, not so really hot. Got it? Good.

Kamal

Yeah. A Yeah.

Sahil

Okay. So nothing more than three 4%? Not nothing more than three 4%. Okay. Okay.

Sir, on the tax rate front, so I believe standalone we have moved to the new regime. 25% effective tax rate. Am I correct?

Kamal

Yes.

Sahil

Okay. Okay. And consol basis? I mean, what should be the effective tax rate that I should assume for the forward years? Would there be some number or would you be able to guide me on that?

Kamal

Consol tax rates?

Sahil

Yes. I mean or should I just look at the historical trend and assume, would you have,

Kamal

I think best is to assume a historical trend.

Sahil

Okay. Okay. Because a lot of geographies are involved. So I mean, so

Kamal

Best is to assume historical trend only.

Sahil

Okay. Okay. Okay. Okay. On the cash front, I mean, we get this from the investors also. So, what's your thinking on the utilization of cash Sir? Are we going to do some increased payout in terms of dividend or we thinking some other route? Or are we are we because we don't have huge capex as such? So what's, what's your take on that, Sir?

Kamal

So we will, we are on lookout of of inorganic growth opportunities. So as and when we have the opportunities. And now we have a cash, Kitty, which is a bit more comfortable. So we can look at a slightly bigger company also in case we get, So. So that's, that's the idea that, you know, to look for an opportunity to use this cash.

Sahil

Okay. Okay.

Kamal

On the other things on the other things on dividend policy and buyback, I don't have I'm not entitled to talk on that subject.

Sahil

Okay. Okay. Okay. But if in case you don't go ahead with some inorganic expansion, I mean, if probably the valuation doesn't suit you, if asset doesn't suit you, would there be a mindset to you know, go ahead with higher returns to the investors in terms of dividend.

Kamal

As I said I am not authorised to talk on this subject.

Sahil

Okay. Okay. And, Sir, on the inorganic front, I mean, it would be into the refractory space, right. I mean, you're not looking anything outside of that, right?

Kamal

No, it would be in refractory/space. Again I will, I do not know exactly mindset of promoters and top management but we have only acquired in the field of refractory or allied fields in the past. Going by the trend our interest would be to remain in that bracket.

Sahil

Okay, okay.

Sahil

Okay. Okay.

Kamal

I cannot say that, you know, that's the only thing we will look at

Sahil

On that front Sir I mean, we have the Vizag capacity, which we will be, which will be coming up and even Kandla is yet to ramp up. So you believe that it will have that strong demand that probably another inorganic expansion would you would be required? Or is it? I mean, I mean,

Kamal

That's that's the that's the that's the market intelligence we have our own network of business and customers wherein we have more confidence that yes, if we have facility if we can sell at a cost competitive we can that that demand will be there.

Sahil

Okay, okay. Okay.

Right, Sir. Got it. Sir. Now, on the the pricing side, so are you have mentioned in the con calls that there are these contracts that you have for pricing? And you've said six to 12 months? Is that correct, Sir?

Kamal

Yes.

Sahil

Okay. Okay. So, is it June and December that you get the revision or there is no such fix?

Kamal

There is No, no, fixed date.

Sahil

Okay. Okay. And like, do we have pricing for like, are we able to pass on the the all the raw material cost inflation? Or how does it usually work out? So these negotiations, I'm just trying to understand the realization front.

Kamal

It's a market driven. But yes, the prices are higher, you know, input costs. So there is an opportunity to, I would say can be passed on. But then again, the market conditions are more important here. So, it can only be done in the next, you know, ordering cycle.

Sahil

Okay. Okay. Sir, I mean, just for my assumptions, like, the next cycle would be after a couple of months, or like, I mean, I'm just trying to understand, should I assume some kind of change

Kamal

You know, there is no fixed date some order can finish today and we can start negotiating tomorrow, but some order could be next month, some order could be next to next month. There's no fix cycle. I mean, it is not like a financial April to March.

Sahil

Okay. Okay. But we are able to pass on the cost inflation. It's there. I mean, we can negotiate for that.

Kamal

Some bit of it yes.

Sahil

Okay, Okay It's the function of both you are saying, the market dynamics also and market place

Kamal

Yes. It’s function of both.

Sahil

Okay. And currently, as you were saying, You were saying that the rather there is a I mean, the raw material costs are lower, you're saying probably, we might have to. I mean, on that front, you saying there might be some dip in the realization that's what you're trying to refer when you say the realizations are higher than raw materials.

Kamal

Sea freight and all others have so significantly risen in the last four or five months. . Talking to the customer for passing on, has its own cycle.

Sahil

Okay. Okay.

Kamal

There will be an immediate impact.

Sahil

Okay. Okay. Got it. And so, on the sales front, we have credit sales, Right? I mean, there are no cash basis, right? There are credit sales. So it's usually what a 45 period 45 days kind of a period payable for it

Kamal

Ranges. It ranges from 30 days to 180 days.

Sahil

Okay? That that big Okay. Okay. But 180 days is too high. Right, Sir? I mean, why do we have to give that higher credit period? I mean,

Kamal

That's the demand of the customer.

Sahil

Okay. Okay.

Kamal

The other players, other players? Give that kind of.

Sahil

Okay. So that's the industry thing. Yes.

Kamal

Yes

Sahil

Okay. Okay. And secondly, when we have to source our raw material, so that is also again, I mean, over there, it's like how is the credit period, Sir, over there. When we are paying for our raw materials Sir? On the payable front?

Kamal

So there are there are again, they're varied customers various suppliers will have various it could be ranging from CAD Round credit, some will have 15 days credit or 30 days credit or 60 days credit for example.

Sahil

Okay, okay. Okay. Okay. Okay. And these raw material costs Sir they usually reflect in our? So they takes about some shipping time right Sir, reflecting in the financials, is it with a lag or something like that? Because usually in steel companies, we find that so anything sort of that Over here, while it is shipped from China.

Kamal

I didn't get what you want to ask.

Sahil

So I'm trying to understand like, you know, when the steel companies ship, coking coal from China, there's usually a three month lag, like the coking coal prices, they apply they come in the financials with a three month lag. So similarly, for the raw materials, we're importing from China, there's is there a lag something like that the shipping time and all of that, usually a month or so?

Kamal

Yeah, there will be a lag. By the time you order and by the time it will come it will be anywhere between 30 to 60 days.

Sahil

Okay. Okay right.

Right, right. Okay. Okay, got it. Okay, and last couple of questions. So we have seen, there has been an increase in the inventory and accounts receivable in first half of fy 21, the balance sheet that we've rolled out for September. So is this something due to the lockdowns? And was that the reason or is there something else that's going on over there?

Kamal

What inventory

Sahil

Yes, inventory and the account receivable that's on standalone basis it I've seen kind of a jump. So any sort of reasoning over there or is it simply because first quarter is awesome? locked down related issues. Should I give you the numbers if you want or?

Kamal

Yes, yes.

Sahil

Okay, just one second. Okay, I'm just I'm just going to open that up Till that time, I just ask one more question. So on the capex potential fy 22 guidance so I think 10 crore Kalunga debottlenecking all will be spent in 22 Right.

Kamal

Yes,

Sahil

Okay. Kandla also 10 crore in 22, fy 22

Kamal

Yes almost Yes.

Sahil

Okay Okay. And Vizag Phase 2 20 crore that will be again spent in fy 22 right.

Kamal Major part of it.

Sahil

Major part of it. Okay. Okay. We have already spent all of the 30 crores of phase one Is it correct? For Vizag

Kamal

Some No no, no some will be spent.

Sahil

Okay, okay. So, okay. So, this is already around 40 crores the expansion capex if I may, so, say so, and on the maintenance front Sir, maintenance capex What should I assume like annually.

Kamal

Five crores

Sahil

Five crores. Okay. Okay. So, like about 45 to 50 crores Should I assume for FY 22? Capex front? a ballpark figure I wouldn't need?

Kamal

Yes. Something like that, 40 to 50 crores

Sahil

Okay, okay. And 23 would be lower right. So because we don't have major expansions lined up right.

Kamal

We have so far not visited 23 as yet

Sahil

Okay, okay. Sure. Sure. No worries. And Sir the other expenses. We have this line item called site contractor expenses, which is which is about 15% of the other expenses. So can you give me some more What is what exactly is that site contractor expenses

Kamal

That's see we have a lot of contracts where we also apply the refractories you know, we manage the shop floor of the customer. So we have our own people or we employ contractor to run that particular equipment. So this is majorly that only.

Sahil

Okay. Okay, and what I mean then what what kind of I mean on our standalone revenue? Probably it's it's hardly 5% the services that we give. Is it a huge chunk or it's very small?

Kamal

It will be a good chunk. It will be so you yourself are saying 15 crore

Sahil

15% and I'm saying the expenses is 15% of the total other expenses, the site contractor expenses.

Kamal

So 15% of total expenses is also significant.

Sahil

Okay. Okay. Yeah. Okay

Kamal

In all management contracts manpower is that of the Company

Sahil

Right? Right.

Kamal

This is that manpower cost?

Sahil

Okay, okay. And just give me one second I have the financial result open. I'll give you the numbers. Just give me one second. All right, so I'm looking at the the consol balance sheets, September basis. And inventories have gone to 163 crores from 140 crores. I understand it's 20 crores but and the account receivable is gone. Just one second. Okay, then there is a dip in account receivable. Okay. Sorry. That's, that's not that's not much. That's not much. Sorry, Sir. So on the inventory side, anything, there's nothing particular happening over there. Right.

Kamal

No No Nothing in particular, Nothing to worry about

Sahil

Okay. Okay. Sure. Sure. Okay, I think that's that's all from my question side point of view. Anything on the directions or on the business direction on or probably, I mean, you've already answered my questions, but like,

Kamal

Business is going to be okay. Yeah, the business looks good. I think in the immediate short to medium term, the things looks I would say more progressive.

Sahil

Okay. Okay.

Kamal

I don't think anything more than that is there. We have our future plan, more or less in place.

Sahil

Right. Okay.

Domestic demand, Sir. Seems to be good for at least next two years. I mean, fy 22, we are sure that it would be really good. But we won't see demand really falling Right Sir. I mean, like, Next two years really looks good with all the capex spend and the public spends and all of that.

Kamal

I don't see any

Sahil

Right. Right Sorry, Sir. You were saying something?

Kamal

I said demand would be there.

Sahil

Right, right. Right. Right. Right. Got it, Sir. That's all from my side, Sir. Thank you for your time, Sir.