Vibhor Steel Tubes Ltd Q1 FY2024-25 Earnings Conference Call

Summary

In the VRO Steel Tubes Limited Q1 FY25 conference call, Mr. Vijay Kik, the Managing Director, addressed the company's performance and future plans. Despite a 40% stock price drop, attributed to market surveillance, the company remains optimistic, citing ongoing projects like a new plant in Jhura and a galvite plant in Hyderabad. The IPO funds were primarily utilized for working capital, with a focus on raw material procurement, and the company aims to manage debt levels and reduce finance costs. The management expressed confidence in meeting the promised developments and maintaining investor trust.

Takeaways

• 🏭 Vro Steel Tubes Limited is a manufacturer and exporter of mild steel carbon steel ERW black and galvanized pipes, oval steel pipes, cold rolled steel strips, and crash barriers.
• 📈 Incorporated in 2003, the company has seen significant growth under the leadership of Mr. Vijay Kik, who joined in 2006 and expanded the company's capacity by 90 times.
• 👥 The company is supported by a highly skilled and experienced team of over 600 people.
• 📍 VST has two manufacturing units in Telangana and Maharashtra, with a total installed capacity of 221,000 metric tons per annum.
• 📈 The company's product profile is diverse, including electric resistance welded pipes, high dip galvanized pipes, hollow section tubes, and crash barriers, which are used across multiple sectors such as agriculture, oil and gas, automobile, and telecommunications.
• 💼 In February 2014, VST made a successful debut on BSE and NSE, raising ₹72.7 crores from the IPO.
• 📉 The company's stock has experienced volatility and a significant drop of approximately 40% since the IPO, attributed to market surveillance and initial high demand followed by a correction to the grey market price.
• 🔑 Mr. Vijay Kik reassures investors that the company is following through on its IPO roadmap, including the establishment of a new plant in Jhura with an installed capacity similar to their western region plant.
• 🛠️ The company has installed an additional galvanizing line in Hyderabad to meet the demand for their new Highway guard rail product, achieving a dispatch target of 12,200 tons.
• 💼 The proceeds from the IPO have been utilized mainly for working capital and procurement of raw materials, with a portion placed in fixed deposits due to the unutilized funds.
• 💡 The company aims to manage its debt levels and finance costs effectively, with the IPO funds helping to reduce interest payments and positively impact profits.
• 🌟 Vro Steel Tubes Limited is committed to maintaining investor confidence through transparent communication and executing promised developments within the given timelines.

Q & A

What is the purpose of the conference call with Vbro Steel Tubes Limited?

The purpose of the conference call is to discuss the company's Q1, F25 financial performance and to address any questions from investors and analysts.

What is the primary business of Vbro Steel Tubes Limited?

Vbro Steel Tubes Limited is a manufacturer and exporter of mild steel carbon steel ERW black and galvanized pipes, oval steel pipes, cold rolled steel strips, and crash barriers, which are widely used in medians, shoulders, and high embankments.

How long has Mr. Vijay Kik been associated with the company?

Mr. Vijay Kik joined the company in 2006 and has been leading it since then, expanding its capacity significantly under his leadership.

What is the total installed capacity of Vbro Steel Tubes Limited's manufacturing units?

The total installed capacity of Vbro Steel Tubes Limited's manufacturing units, located in Telangana and Maharashtra, is 221,000 metric tons per annum.

What was the purpose of Vbro Steel Tubes Limited's IPO in February 2024?

The IPO was conducted to raise funds, which were intended to be used for working capital and the procurement of raw materials.

How has the stock price of Vbro Steel Tubes Limited performed since the IPO?

The stock price opened at a high level but has since fallen by approximately 40% due to market phenomena and regulatory surveillance.

What is the current status of the new plant promised during the IPO?

The new plant is underway in Jhura, with land purchased and construction in progress. The company aims to start its trial run or production by the second quarter.

What developments have taken place in Hyderabad related to the company's operations?

In Hyderabad, an additional galvanizing plant has been installed to cater to the increased demand for a new product, the Highway guard rail, which has seen significant growth in production and sales.

How has the company managed its debt levels and finance costs post-IPO?

The company has managed its debt levels effectively, with the IPO funds being used for working capital and reducing reliance on bank loans for machinery, which in turn has helped control finance costs.

What are the future plans for product diversification as mentioned during the IPO?

The company plans to introduce other products such as octagon poles and high mast poles, with orders for the necessary machinery already placed and expected to be installed in the Jhura location.

How does the company intend to maintain and grow investor trust?

The company intends to maintain and grow investor trust by executing the developments promised during the IPO within the given timeline, showcasing continuous growth and commitment to investor expectations.

Outlines

00:00

📞 Conference Call Introduction

The script begins with an introduction to a conference call for VST (Vibro Steel Tubes Limited) Q1, F25, hosted by Mr. Vijay Kik, the company's managing director. Participants are informed that they are in listen-only mode and can ask questions after the presentation. The company's background is provided, including its establishment in 2003, its product range, and its expansion under Mr. Kik's leadership. The call is managed to ensure participants can ask questions by pressing specific numbers on their phones.

05:02

📉 Stock Performance and Future Expectations

In this paragraph, the discussion focuses on the erratic stock performance of VST since its IPO, with a significant drop of about 40%. Mr. Kik addresses the issue by explaining that the stock was under surveillance, which affected its price. He also outlines the company's roadmap, including the construction of a new plant in Jhura and the installation of additional tube mills, which are part of the promises made during the IPO. The aim is to reassure investors about the company's commitment to its growth strategy.

10:03

🛠️ Expansion and Product Development

The speaker discusses the company's expansion efforts, including the installation of a new galvanizing plant in Hyderabad to meet the growing demand for a newly introduced product, the Highway guard rail, also known as crash barriers. The company has seen a significant increase in the production and sales of this product, leading to the installation of an additional galvanizing line. The speaker also mentions future plans to introduce other products like octagon poles and high mast poles, with machinery orders already placed.

15:03

📉 Profit Decline and Market Correction

The conversation shifts to the decline in profits, which the speaker attributes to a correction in steel prices after the COVID-19 pandemic. The company expected this correction and managed it well. The speaker emphasizes that the quantity of sales has not decreased, and the slight decrease in profit is due to the stabilization of steel prices. The company's focus is on maintaining the trust of its investors and continuing its growth trajectory.

20:06

💼 Utilization of IPO Funds and Debt Management

The speaker clarifies the use of IPO funds, stating that they have been used primarily for working capital and procurement of raw materials. The company has not used the funds for long-term asset procurement, which has been financed through internal approval and bank loans. The successful IPO has helped manage the company's debt levels and finance costs, with the aim of reducing interest payments and positively impacting profits.

25:12

🏗️ Plant Installation Updates and Investor Confidence

The final paragraph provides updates on the installation of new plants and machinery. The speaker mentions delays due to heavy rains but assures that production is expected to start by September or October. The company is also sending representatives to China to finalize machinery orders. The speaker emphasizes the company's commitment to maintaining investor confidence and transparency in its operations.

🔚 Conference Conclusion and Closing Remarks

The script concludes with a formal end to the conference call, thanking participants for joining and inviting them to disconnect or continue their lines. The management expresses gratitude and reiterates the company's commitment to its growth and investor relations.

Keywords

💡VRO Steel Tubes Limited

VRO Steel Tubes Limited is the company hosting the conference call in the video script. The company is a manufacturer and exporter of various steel products, including mid steel, carbon steel, ERW pipes, and crash barriers. The company is led by Mr. Vijay Kik, and the conference discusses the company’s financial performance, IPO proceeds, and future plans.

💡IPO

An Initial Public Offering (IPO) is the process through which a private company offers its shares to the public for the first time. In the context of the video, VRO Steel Tubes Limited conducted an IPO in February 2024, raising approximately ₹72.7 crores. The script discusses the use of these proceeds and the impact on the company's stock price.

💡ERW Pipes

ERW (Electric Resistance Welded) pipes are a type of steel pipe that is manufactured by cold forming a flat steel strip into a cylindrical shape, which is then welded along its length. VRO Steel Tubes Limited produces these pipes, which are a significant part of their product profile and are used in various sectors like agriculture, oil and gas, and telecommunications.

💡Crash Barriers

Crash barriers are safety devices installed on roads to prevent vehicles from leaving the roadway. VRO Steel Tubes Limited manufactures these barriers, which are used on highways and high embankments. The company has expanded its production capacity for crash barriers due to increased demand, as discussed in the conference call.

💡Stock Price Volatility

Stock price volatility refers to the rapid and significant fluctuation in the price of a company's shares. In the video, the stock price of VRO Steel Tubes Limited has been described as 'extremely erratic,' with a notable decrease of around 40% since the IPO. The discussion focuses on possible reasons for this volatility, including market phenomena and the company's financial performance.

💡Working Capital

Working capital is the capital a company uses in its day-to-day operations, primarily for managing inventory, accounts receivable, and accounts payable. The conference call mentions that the proceeds from VRO Steel Tubes Limited's IPO were primarily used to boost their working capital, particularly for the procurement of raw materials.

💡Debt Management

Debt management involves strategies and practices to handle a company’s debt levels and finance costs effectively. In the video, VRO Steel Tubes Limited discusses their debt levels, which are described as manageable. The company has been using its IPO proceeds and internal accruals to control its debt and reduce interest costs.

💡Manufacturing Expansion

Manufacturing expansion refers to the company's efforts to increase its production capacity by setting up new facilities or enhancing existing ones. VRO Steel Tubes Limited is expanding its manufacturing units, particularly with new plants in Telangana and Maharashtra, which is expected to increase their production capacity and introduce new products.

💡Steel Price Correction

Steel price correction refers to the reduction in steel prices that occurred after a significant rise during the COVID-19 pandemic. In the script, this correction is cited as one reason for the decline in VRO Steel Tubes Limited’s profits, as the prices returned to pre-pandemic levels, affecting the company's revenue and profit margins.

💡Future Prospects

Future prospects refer to the anticipated growth and development of VRO Steel Tubes Limited based on their current strategies and market conditions. The video discusses the company's plans for new product introductions, plant expansions, and maintaining investor trust, all of which are expected to contribute to a positive outlook for the company's future performance.

Highlights

Welcome to the VRO Steel Tubes Limited Q1, F25 conference call with Mr. Vijay Kik, the Managing Director.

VRO Steel Tubes Limited, incorporated in 2003, is a manufacturer and exporter of mild steel carbon steel ERW black and galvanized pipes.

The company also produces crash barriers widely used on medians, shoulders, and high embankments.

Vijay Kik, a first-generation entrepreneur with over four decades of experience, joined the company in 2006 and expanded its capacity significantly.

VST's promoters are supported by a highly skilled and experienced team of over 600 people.

The company has two manufacturing units in Telangana and Maharashtra with a total installed capacity of 221,000 metric tons per annum.

VST's product profile includes electric resistance welded pipes, high dip galvanized pipes, hollow section tubes, and crash barriers.

Products are used across multiple sectors including agriculture, oil and gas, automobile, and telecommunications.

In February 2014, VST made a successful debut on BSE and NSE, raising 72.7 crores from the IPO.

The stock price has been erratic since the IPO, with a significant drop of approximately 40%.

The company is undertaking new developments such as a new plant in Jhura and a galvanizing plant in Hyderabad.

The Jhura plant is expected to have an installed capacity similar to Maharashtra's western region, around 10,000 tons.

A new galvanizing line has been installed in Hyderabad to meet the demand for the Highway guard rail product.

The company has achieved a dispatch target of 12,200 tons of galvanized product, a significant increase from the previous 500 tons.

VST plans to continue pipe manufacturing and introduce other products like octagon pole and high mast pole.

The company has utilized the IPO funds for working capital and raw material procurement as intended.

VST has managed its debt levels effectively, reducing interest costs and enhancing profitability.

The company is committed to maintaining investor confidence and meeting the targets set during the IPO.

The conference concludes with a reminder of the company's dedication to its investors and future growth prospects.

Transcripts

ladies and gentlemen good day and

welcome to vro Steel tubes limited q1

f25 conference call we have with us

today Mr vbro Kik managing director vro

steel tubes

limited as a reminder all participant

lines will be in the listen only mode

and there will be an opportunity for you

to ask questions after the presentation

concludes should you need assistance

during the conference call please signal

an operator by pressing star then zero

on attach to

phone Incorporated in 2003 vibro steel

tubes limited is a manufacturer and

exporter of mid steel carbon steel erw

black and Calvin pipes olivo steel pipes

cold R steel strips cools the company

also manufactures crash Bears which are

widely used on medians

shoulders wids and high embankments VST

is promot Ed by Mr Vijay Kik a first

generation entrepreneur with a rich

experience of more than four decades in

the manufacturing sector Mr V Vio Kik

joined the company in 2006 and under his

leadership the company has expanded its

capacity by 90 19

folds vst's promoters are ay supported

by highly skilled and experienced team

of 600 plus peoples

vsl has two manufacturing units each in

telengana and Maharashtra with a total

installed capacity of 221,000 metric ton

perom vsl has a wide product profile

comprising electric resistance widly

pipes hard dip calvon pipes Holo section

tubes and crash beers amongst

others products find applic across

multiple sector including agricultures

oil and gas automobile Telecom Etc in

February

20124 vsl made a steer depute on BC and

nsse raising rupes

72.7 cres from the IPO thank you I now

end the conference over to Mr weo Kik

from the vro steel tubes limited thank

you and over to you sir hello

yes sir please go ahead sir hello yes

sir

hello hello sir please go ahead

sir e

yes sir yes we sir please go ahead

sir okay

yes hello sir please go ahead sir you

can hear me right yes sir yes sir yes

sir

Mr vij kosek is also

online V sir yes sir

both please go ahead

sir go ahead with what are there any

investors there there questions yes sir

I have transferred to the main call

Sir anybody body wants to talk to us if

he has some inquiry he can talk to

us okay sir should I open up for the

question and answer uh okay okay fine

sir thank you very much we will now

begin the question and answer session

anyone who wish to ask a question may

press star and one on the touchone

telephone if you wish to remove yourself

from the question Q you may press star

and two participants are requested to

use handsets while asking a question

ladies and gentlemen we will wait for a

moment while the question que

assembles ladies and gentlemen a

reminder to all participants please

press star and one to ask

questions our first question is from the

line of vanika Gandhi from Kara

Securities please go

ahead hi so I was looking at the stock

crisis since the IPO came out and it

seems like the stock of the company has

been extremely erratic with the value

either falling or Rising a lot and

overall it seems to have fallen by a

drastic amount approximately 40% since

20th fed

today um could you give any reasons

could you give um an explanation

explanation as to why it has fallen that

much divor this is

uh I couldn't understand whats

to her question is her question is the

stock market when it opened up opened up

at a certain

level and then it has come down to a

lower level what is the reason for this

change in the stock price what is

driving it that is our

question it is a a market

phenomena because of Sur they have put

this share in

surveillance s put the share in that's

why

it's that is that is happening at the

moment but uh when the stock when the

stock opened up it opened up to a great

response the the share price opening was

150 it went all the way up to around 440

445 that was

because uh there was a lot of demand of

for the stock and slowly and steadily it

came back to the original gray Market

indicator of around 250 and for the past

all these months it has been floating

around the same

number

so expectations for it to rise

again hello hello

sir

yes uh do you have any expectations of

it to rise again because um yes I agree

usually um stock prices do fall after an

IPO comes out however

40% this is also a market this is also a

market driven

phenomena it is uh forward looking it is

uh not permissible to say when it is

going to rise however uh there are

indication that we can give about our

company the promises that we made at the

launch of the IPO and we are following

the same

pathway the same road map that was laid

out to the investor at the time of the

IPO such as uh a new plant is underway

which is coming up in

Jura even at the time of the IU launch

we had mentioned that uh we had

purchased the land at the

moment after the land being purchased

the plant is uh under process we have Ed

uh two tube Mills there three tube Mills

we are uh installing in that area with

the with a slitting line and giz unit

the installed capacity of Jura plant is

similar to what we have in the western

region of India in Maharashtra which is

10,000 tons so these are the

developments I can I can talk about the

development that we promised during IPO

that it is underway and uh we had given

a timeline of uh somewhere second

quarter end of second quarter for the

plant uh to to start uh its trial run or

its production and uh we are uh well on

our way to achieve that

Target so I believe uh investors will

see that uh the development as promised

is taking

place second development that has taken

place is in Hyderabad we have installed

one more galvite plant because of a new

product that we

introduced almost around an year ago but

now it has taken a uh a Leap Forward in

terms of it production and its sale

which is a Highway guard rail Pro

product before we were using only one

ganizing line in Hyderabad to cater to

the demand of pipe industry and also to

cater to the demand of of Highway guard

rail which is the crash badges that you

see on the highway on both side of the

highway you must have seen a corrugated

sheet this this is for the protection of

uh the vehicle in case uh a vehicle kids

to the left or to the right it does not

go off the road these are the protection

barriers so we have started the

production in uh quite a good uh

quantity one giz line was not sufficient

to cater to the demand of the of the

client so we have put another giz line

just last uh month we achieved a target

of 12200 tons of dispatch of ganized

product called trash barrier or Highway

guard rail which used to be before that

it used to be only 500

tons okay that's good you know so these

are these are the velopment we made now

all these development shall reflect in

terms of

turnover in coming up quarters and

coming up years this is only the start

of it in jasu also we wish to continue

with pipe manufacturing and we wish to

continue with Highway guard rails as

well and during IPO we had promised that

once we establish ourselves in Crash

barriers we will go ahead and introduce

other products as well such as octagon

pole High mask pole and we are in the in

way of achieving that that the

machineries for those products are also

being placed ordered orders of those

machines have been placed and they shall

also be getting installed in Jura

location in its due time so these are

the development which uh which we promis

to the investors most of it uh all of it

I believe shall be

executed uh within the timeline that was

given in February so based on that there

shall be the trust which we have

developed in the TR in the investors we

shall continue to uh have that trust and

grow that trust so once the investors

have this have the growth and it's it's

a continuous uh it's a continuous trust

so I believe the the future Prospect for

the steel as a company is uh very

promising okay so I just had this

answers your question

gandi uh yes sir thank you very much but

I was also wondering that you have

increased your assets by a lot it seems

like it is that the reason why there is

approximately 15% decline in your

profess

because it seems like this deine of this

decline of the of

the profit is a cycle of Steel which was

expected after the rise of steel prices

due to covid the ripple effect of covid

takes his has taken its own due time due

course to settle up now the prices that

has risen to a very new height during

covid has come down to almost its

original price which used to be before

covid so all the price colle con uh

correction that has taken place we

believe it is more or less a uh come

back to normal or come back to being

stable so the the uh uh Although our

turnover hasn't or our volume hasn't

changed uh drastically in the first

quarter neither have our profit but uh a

little bit uh less

profitability is in the account of steel

price correction which we expected even

last year that it will happen in the

first quarter of this year so it wasn't

a certain surprise we expected it and we

managed it very well we believe okay so

you Gandhi g there's one more thing to

be mentioned

that uh the quantity is not

decreased quantity is the same last last

quarter in days chis the the quantity

was

38,1 129 and in

2425 it is 36 747 so quantity wise it

will not decrease because of the prices

goes down that's why sale is affected in

the of

amount y it's it's a very important

thing to

know okay thank

you thank

you ladies and gentlemen a reminder to

all participants you may press star and

one to ask

questions ladies and gentlemen a

reminder to all participants you may

press star and one to ask

questions ladies and gentlemen a

reminder to all participants you may

press star and one to ask

questions ladies and gentlemen a

reminder to all participants you may

press R and one to ask

questions a reminder to all participants

please Place start n

one4 ladies and gentlemen a reminder to

all participants you may press R and one

to ask questions

our next question is from the my next

question is from the line of vanika

Gandhi from Kata Securities please go

ahead yeah sorry I had a few more

questions and it seems like right now no

one El ready so um okay I was one to

that now that you have your IP proceeds

um could you tell me how they've been

utilized so far and like what amount of

remaining how you plan to allocate the

proceeds that You' received through your

IPO um to maximize shareholder

value I believe the question is since

IPO is raised how has been our fund

utilization from the IPO correct uh this

is your question

yes we you utilize the in the for the

working capital

know uh for the working capital as in

your um land your machinery and

everything no no no no no no no no we

have taken loan on the

Machinery we have not utiliz this money

we have utilized this money work capital

is yes working capital is only utilized

in our procurement of raw material which

was the reason why we raised IPO it was

mentioned as well and that's exactly

where the fund has been utilized most of

the fund is utilized there I think we

have very less which we which is in the

form of

FD I'm not sure about the exact number

should be around 3 should be in the not

used we have made a FD also which not

utiliz 3 3 CR something we have made an

FD also because we were not utilizing

that fund so we made the

FD so you're planning on continuing to

use this um amount for working capital

and not for any procurement of any

long-term

assets no no not not not for the

long-term asset it has been done through

our internal approval and also the term

loan that we have uh taking from the

bank

okay and also um I thought the debt

levels of the company are also um pretty

good so does the company plan on

managing its debt levels and finance

costs moving forward or is it more

reliant on financing through

debt I believe uh with the IPO being

successful the money has been raised for

working capital so now we have been able

to manage our that significantly

effectively so that has been taken care

and

uh so

our bank interest for the working

capital which is a cc or OD limit that

has been under control which was our

Target interest interest amount will be

reduced heavily so it will add in the

profit because interest

decreased quite a lot so it will affect

the

profit okay thank you so

much thank

you as there are no further questions

from the participants I now the I now

end the conference over to the

management for closing

comments hello

investors are there other investors

online yes sir yes

sir we are uh very generously we are

doing our best to maintain that

confidence or

confidence uh say I don't think

GI plant we have installed in Hyderabad

and the investment which we have

promised in

jaru we have taken possession of the

land in the month of January and month

of January six month within six months

we will install

pip Mills we made five sheds we are

making GI plant and GI plant is

approximately 50% is

complete because of heavy rain

we because of heavy and we are suffering

a lot uh in installing the plant so 8

Mina delay I feel we are going to be in

production in the month of September it

may go up to October but not beyond that

so in 9 months if a man put a factory

from the scratch or

catch my flight for Jura I'm on the way

to Delhi airport I am sitting in the car

my son is also in the China because we

have to take delivery of some

machineries so he has gone there to see

the machinery and uh then the Machinery

monopo that will be finalized and they

will that machine will come in the month

of August or September I think so

so you can watch very

easily profit so I

think we will maintain the confid

of the

inv I think it's very proper to tell you

all the

things to the place so most

welcome thank you very

much thank

you on behalf of Vio Ste cubes limited

that concludes this conference thank you

for joining us and you zoom in or

disconnect your lines