Jindal Saw : Transcript for Q3 FY23 Results Call held on 30th January, 2023 – attached

"Jindal Saw Limited

Q3 FY '23 Earnings Conference Call"

January 30, 2023

MANAGEMENT: MR. NEERAJ KUMAR - GROUP CHIEF EXECUTIVE OFFICER AND WHOLE-TIMEDIRECTOR - JINDAL SAW LIMITED

MR. VINAY GUPTA - PRESIDENT AND HEAD TREASURY

• JINDAL SAW LIMITED

MR. NARENDRA MANTRI - PRESIDENT, HEAD

COMMERCIAL AND CHIEF FINANCIAL OFFICER -

JINDAL SAW LIMITED

MODERATOR: MR. VIKASH SINGH - PHILLIPCAPITAL INDIA PRIVATE LIMITED

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Jindal Saw Limited

January 30, 2023

Namingly, first is the variable price. If you look at the last few quarters, the performance has been largely suppressed, not because of the top line got suppressed, but because the raw material prices they're completely out of whack. We have succeeded in getting most of our clients, including government clients to accept now the real price model for the revenue there, one of the key or two of the key benchmark parameters in the raw material prices, where the raw material prices are correlated actually is the index based on which there is a variable price mechanism for the top line. That has begun to show results. Going forward, it would take its more impact.

The other very important thing, which has started showing results is, our effort and focus on moving up the value chain, moving towards premium products, moving towards value-added products and moving towards this segment, which hitherto has not been addressed by the domestic players.

So Atmanirbhar Bharat has helped us in that effort. Now we have been able to substitute a lot of products from import into domestic sector where we have been the predominant supplier. So, on the business side, these two are very significant development within the system, which is giving us a lot of comfort that going forward, we will continue to bear good results on the back of these two important factors.

If we now look at our consolidated results, again, just to broadly take the numbers, top line INR 5,202 as compared to INR 4,067, INR 3,509 EBITDA 539, here, we don't need to reduce that INR 113 because that's a contra entry, whilst we take the consolidated results. So, INR 539 as compared to INR 355 and INR 242.

Again, a similar result where you would see that not only Jindal Saw performance has improved, all other subsidiaries are now contributing in a positive manner in the EBITDA. At the EBITDA level, even down below, so all subsidiaries are beginning to do well, except for this quarter, the Abu Dhabi subsidiary, as compared to the comparable quarter last year, the performance has been a little lower, but that's again a temporary phenomenon. We have enough order book. Now the supply chain is there. And hopefully, towards the end of the fourth quarter, there should be some catching up that must happen.

But a good result overall that all our subsidiaries are now contributing to the business, and that is shown in the consolidated results. Another very important thing that -- on which we have always been keeping a very strong eye on and have been showing the trend is the debt profile of the company. Even though on top of our top line growth on top of a very good performance, we have actually been able to bring the net debt down either at a consolidated level or at a stand- alone level.

Everywhere across the board, the loan continues to come down, even though trade finance is very much a part and parcel of our operations. The long-term debt is now hovering around INR 1,200 crores for Jindal Saw on a net worth of over INR 6,000 crores. By any standards, we are

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Jindal Saw Limited

January 30, 2023

in a very, very healthy position when it comes to debt servicing, when it comes to the interest and repayment obligation.

So on our debt position, the balance sheet continues to remain strong, continue to build strong, and we intend to keep that trend. We intend to keep that tight control on our debt position going forward. So that broadly covers the high-level performance indicators that I have given. Some of the key drivers that we have said, namely the value-added product as well as the variable price that we have been able to achieve. So broadly, this is where.

Now let's look at the second important thing when you see a result like this in a quarter. I'm absolutely certain the first thing would -- all of you want to know is it is this sustainable, do we have a momentum? And is this more by oil by hard work or is this just by chance. I wish to give you comfort that this is a result of a diligent hard work that we have been doing and that all of you, even if you are seeing our results, there is a certain pattern that is emerging, there is a certain consistency that we have in our performance.

Obviously, we have faced extraordinary situations in terms of commodity price in terms of pandemic. But still on the core operations, there has been a certain amount of consistency. And that continues, that will be the backbone on which we are confident that the next few quarters, our performance would remain very strong. If you look at the order book -- very healthy order book on all segments and very balanced, both in terms of domestic as well as international exports.

The way the rupee is moving that also is giving us comfort that at least we do not have any major foreign exchange risk as it is the never use foreign exchange position for speculative purposes. We are usually hedging based on a conservative strategy, but that again gives us comfort that on that front, on our export businesses, we shall not be putting any of our revenues at risk.

So a healthy order book, good mix of export versus domestic, 35% roughly is our export order book, which is healthy, confirmed and this kind of an order book, which is about $1.3 billion, which if you recall, just a few quarters back was deliberately kept at lower than our sweet spot, which is around $1 billion.

So now since we are ready, we have got a lot of capacity available in the large dia. The large dia order book deliberately, we have swelled and we will continue to perform. There is no constraint on the capacity side. So large dia business is likely to be now a driver for the next quarter or so. We also have some significant export orders in the basket, very large orders where we would maintain the delivery we would maintain now the revenue stream, it will all be there.

So looking at the performance and the order book and our positioning in the market, we are confident that the momentum would continue and we should have a good next few quarters that is something that we are very, very confident about. As I said, one of the strength, would be the premium segment that we are entering, be it tellers, be it seamless, everywhere the premium

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Jindal Saw Limited

January 30, 2023

segment has continued - will continue to improve our EBITDA percentage will continue or improve our margins.

The important aspect is that now the JV, with Hunting. The machineries are under trial. We have already applied for the API license and as we say the soft launch is -- will happen anytime soon. definitely during this year and hopefully, early next year, that means by the mid of calendar year '23, we should have the grand opening of the JV between Jindal and Hunting. Everything is on track. All the machines have been delivered. The trials are going on. As I said, API license has been applied and will continue to help us once we have this moving.

Now the China is an important factor, has always been an important factor in our business. But I hope a combination of many factors, probably the impact of China on our business would become lesser as we continue because now there is some antidumping duty. There is some other protection which is available.

So that is going to reduce the impact on our business and that makes us feel confident that the China story, we would now continue to do our business more independently than what the impact of China or influence of China would be on our business.

One good thing that also we are seeing is there is a certain amount of stability in the raw material prices. The raw material prices have not gone back to the pre-COVID levels. But the volatility has largely reduced and slowly, we are seeing the trend where they are settling to a more reasonable level. So that being what we have at this point of time, with the order book, is again, is not a matter of concern for us.

Looking at the now domestic situation. One thing that I must emphasize that even though we have a healthy order book, but we continue to focus on the domestic market more. Going forward a few quarters, if I look forward again, our emphasis is on domestic market because we believe that the global recession would have a lesser impact on the domestic market because in India, the demand supply, especially in the kind of products that we are kind of balances itself.

So with Atmanirbhar Bharat in place kind of giving the domestic market that kind of a protection and with a demand supply kind of matching we continue to focus our attention on domestic market, and we believe that this would actually counter a global recession, assuming what now people are saying about US and Europe were to happen. Still, we believe that our businesses would not get impacted to that extent.

And therefore, we are basing our strategy on a strong India strategy, our strong support from -- under Atmanirbhar Bharat and therefore a limited impact on the global recession. Most of our order book that are there, we again believe are from countries which would continue with their projects because there has been a lot of pent-up demand in oil and gas sector post pandemic.

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