Jindal Saw Ltd (JINDALSAW) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day and welcome to Jindal Saw Limited's Q2 FY '27 earnings conference call hosted by ICICI Securities Limited. Please note, this conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of the future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participants' 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 this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. Vikas Singh from ICICI Securities Limited. Thank you, and over to you, sir.
Vikas Singh (ICICI Securities Limited): Thank you, Relha. Good afternoon, everyone. A warm welcome on the Jindal Saw Q2 FY '27 conference call. On behalf of ICICI Securities, I would like to thank management for giving us the opportunity. From the management side, we have with us Mr. Narendra Mantri, Chief Operating and Financial Officer; Mr. Vinay Kumar Gupta, President and Head, Treasury; and Mr. Rajeev Goyal, Senior Vice President, Corporate Finance. Without taking any minutes, I'll hand over the call to the management for their opening remarks. Over to you.
Vinay Kumar Gupta (Jindal Saw Limited): Good afternoon, everyone. I am Vinay Gupta, representing Jindal Saw Limited on behalf of our management team, including Mr. Narendra Mantri, Mr. Rajeev Goyal. I'm delighted to welcome you to all to our Q2 2027 earnings conference call. Our sincerest thanks go to the team of ICICI Direct for facilitating this call also. Now, let me now take you through the operational and financial performance of Jindal Saw and its key major subsidiaries for the second quarter of FY '27, with the focus on the key developments that are shaping our business performance and future growth prospects. In today's presentation, we will cover three key areas. First, the financial performance, which board has approved on last Friday. This is for Q2 of FY '27 and H1 of FY '27. Second, the business scenario and outlook. And the third, update on the new project in MENA region. And, through this discussion, we aim to provide you with a clear perspective on our performance, business priorities, and growth opportunities going forward. Now, let us first, let me first present the high-level summary for the Q2 FY '27, comparing it with Q1 FY '27 and the corresponding quarter in the previous year. During Q2 FY '27, the company delivered improved top line with gross mar revenue hitting ₹3,870 crore, which is up by 3% on quarter-to-quarter basis and 14% year-on-year basis. However, operational headwinds compressed the EBITDA to ₹250 ₹254 crore, down from ₹341 crore in Q1 of FY '27 and ₹334 crores which was in Q2 of FY 2026.
Vinay Kumar Gupta (Jindal Saw Limited): Below the operating line, finance expenses rose to ₹92 crores which includes ₹15 crores negative forex impact. Normalized finance cost to that modest of ₹77 crores. And finally the profit after tax, PAT, came in at ₹63 crores compared to ₹110 crores in Q1 of FY'27 and ₹80 crores in Q2 of FY'26. This is net of a ₹30 crore tax credit received during the quarter. Financial performance on a standalone basis for H1 '27 and H1 of FY'26. The company delivered improved top line momentum in the first half of H0, FY'27, with gross revenues rising 13% year-on-year to ₹7,627 crores, up from ₹6,736 crores in H1 of the previous year, which is FY'26. However, operating profitability faced pressure as EBITDA contracted to ₹595 crores from ₹894 crores in the similar period last year. On a positive note, finance cost fell to ₹163 crores from ₹239 crores in H1 of FY'26, showcasing efficient capital management despite INR depreciation against the USD. Ultimately, higher tax expense and lower operating margin impacted the bottom-line performance of the company. PBT finished at ₹178 crores, down from ₹412 crores, while the PAT landed at ₹172 crores compared to ₹443 crores in H1 '26, a reflection of ₹6 crores tax expenses this half versus ₹31 crores tax credited last year. Overall, H1 '27 has delivered a increase in the revenue and lower finance cost, although profitability remained under pressure due to lower operating earnings and couple of other things. On consolidated basis, this is we'll now discuss Q2 versus Q1 of FY'27 with Q2 FY'26. On a consolidated basis, gross open income increased by by FY by Just a second. Okay, on a consolidated basis, our top-line expanded by 0.8% sequentially to ₹4,512 crores from ₹4,476 crores in Q1 FY'27, and rose 5.8% year-on-year basis from ₹4,264 crores in Q2 FY'26. The EBITDA slipped to ₹312 crores from ₹420 crores in H1 Q1 of FY'27 and ₹482 crores Q2 FY'26. Finance expenses rose 15.7% sequentially of ₹17 crores to ₹125 crores from ₹108 crores in Q1 FY'27, although remaining lower than although remained lower than ₹153 crores which were logged in Q2 FY'26. PBT dropped to ₹14 crores after the adjustments of the joint ventures and compared to ₹143 crores in the previous quarter and ₹183 crores year-on-year. Profit after tax is reported at ₹35 crores from ₹91 crores in Q1 FY'27 and ₹139 crores in Q2 FY'26. Notably, ₹24 crores tax credit caused PAT to surpass PBT by that amount. On consolidation basis, our top-line continued it a top line continued on a higher side with gross income expanding by 7.4% to ₹8,988 crores. However, severe operating margin pressures impacted overall profitability. EBITDA declined by 38.3%, leading to a 5.9% percentage point contraction in EBITDA margin to 8%, while 27.8% reduction in finance costs, down to ₹234 crores, offered some relief. Pre-tax savings
Vinay Kumar Gupta (Jindal Saw Limited): higher tax provision resulted in 7.8% 78.7% EBITDA in profit after tax. Now in terms of our loan profile, indebtedness, as of 30th September 26th, the company standalone net debt narrowed to rupees 2,245 crores versus 2,346 crore on 30th June 26th. This includes long-term debt of 522 crores, which is the NCD subscribed by LIC. And it is repayable in year '28, '29 and '30. The net institutional debt on consol basis has reduced to rupees 2,174 crore as compared to rupees 2,473 crore as at 30th June 2026. And the long-term as at 30th June 26th, the long-term debt was rupees 532 crore only, including Abu Dhabi, US and all. Further, in June 26, CARE Ratings has affirmed CARE A1+ for short-term debt facilities, including commercial papers, and CARE AA with outlook stable for long-term debt facilities. Now what is the prognosis for these results? Overall, while our revenue increased, profitability got impacted. And the major reasons for this weaker performance are as under: Ongoing geopolitical tensions in West Asia have worsened due to recent escalations in Saudi Arabia, a region where we hold significant export order exposure. The main challenge is not orders cancel order cancellation, but rather delay in shipping and revenue recognition. If these projects delays delay persist, dedicated production facilities will remain unutilized and continue to drive up fixed and operational costs. Then second, the ongoing global conflict has driven up international and domestic logistic costs. This directly impacts our operations, particularly because most of the sales contracts are structured on a delivered basis historically. Surging raw material costs, particularly for coking coal, have squeezed margins in the DI pipe business. This pressure was further compounded by lower capacity utilization due to lower execution of water pipe business as softness in domestic water business continues. This resulted in that impact on the profitability. The Abu Dhabi DI plant is facing a combination of cost overruns, underutilization, and delivery constraints, including difficulties serving customers who cannot be reached through truck-based transportation. This resulted in lower production, sales, and impact on profitability. In the seamless business, while the API license reinstated in June 26th for our eligibility for the key orders, though immediate financial impact remained limited in Q2. The seamless pipe business is currently bidding on new orders to rebuild its order book and is witnessing the improvement in the backlog. So now to summarize the performance for Q2, the weaker performance appears to be the result of combination of geopolitical disruption, continued weaker demand/offtake in domestic infra water infra segments, increased raw material prices, increased logistic cost, and other cost inflationary factors, and also supply chain constraints rather than a single adverse factor. The impact is particularly visible in the ductile pipes and in ductile pipes and seamless pipe businesses, where increased cost and suboptimal capacity utilization has impacted the profitability. Now to mitigate or minimize the impact of the above risks to the businesses, company is positioning ourselves, and we are taking couple of we are now highlighting couple of pointers that how we should be positioning ourselves for the Q3 or H2. The company has order book of confirmed order book of USD 1.135 billion, which approximately rupees 10,700 crores. And it further received letter of intent for approximately USD 575 million, which is mixed of export and domestic business. This this LOIs for USD 575 million, these orders are not from MENA region. And the export out of 575 constitutes $425 million approximately. And this is oil and gas sector. With this and on receipt of the order, our order book will be at approximately rupees 16,200 crores.
Vinay Kumar Gupta (Jindal Saw Limited): but the execution of these orders is likely to be from the month of February, March, because we would be receiving steel accordingly. Now, another good thing is that post the board meeting on Friday, we have received another LOI for approximately USD 50 million. This is for export to Southeast Asia. So if you add this 50 million further, so this will be the our total order book would be in the vicinity of 17,000 crore roughly. Now the existing job work order of approximately 6 lakh metric ton to Saudi has been delayed significantly, primarily because of the war in Middle East. While it has not blocked our working capital because it's a job work order, but it impacted the capacity utilization and revenue generation. Now parties, including the buyer, are engaged to work out an out-of-the-box solution for transportation or logistics services. If a solution works out, then you may see the positive impact on the capacity utilization, revenue generation in next few months' time. Now on the seamless, while the API license is reinstated in June 2026, the company is bidding for new API orders very aggressively. API business fetches better margin. We expect the impact of the same in next quarters. Ductile business may take some more time due to the micro and macroeconomic issues. However, we expect some export orders in DI business where we could be able to reduce concentration of business in the domestic market. Pellet business and profitability has been impacted and may remain impacted to some extent due to increase in the diesel prices, low Fe content in the iron ore coupled with higher shipping ratio. We have seen reduction of current assets in Q2, and we expect further reduction in the inventory and receivables amounts. This helps us to improve our liquidity position and thereby reduce bank borrowings. We are focusing on improved capacity utilization in all facilities, overhead absorption, cost control, and debottlenecking. We are also keeping our eyes open on the capital allocation for capex not only in India, but also in the MENA region. All these measures should start showing better results or demonstrate better volumes and thereby better margins. And we expect, as we have said last time also, we expect H2 to be better than H1. Now, let us discuss about the MENA region. The company initiated these projects when the region, when the MENA region was stable. Our pipe manufacturing investments in UAE, Saudi Arabia were designed from day one to serve as permanent foundation for the region's essential energy and water ecosystem. The economic fundamentals underpinning these projects remain entirely unchanged. Today, the project implementation is progressing well. By manufacturing locally, we are mitigating international logistics risks, improving local content integration, which is ICV in UAE and IKTVA in Saudi, and ensuring that critical utility infrastructure continues to build without disruption. Now, let's talk a bit about our progress of our seamless pipe plant in Abu Dhabi. Jindal Saw's proposed seamless pipe manufacturing project in KIZAD industrial area, Abu Dhabi, UAE, is progressing through the initial development and pre-construction phase. The project, with a proposed capacity of 300,000 tons per annum and an estimated investment of approximately USD 330 million, is intended to strengthen the company's presence in MENA east, Middle East oil and gas market. By securing a developed leasehold land with existing civil infrastructure, we have accelerated our construction timeline. Procurement of critical long-lead equipment is underway, supported by active LC letter of credits and initial cash advances.
Vinay Kumar Gupta (Jindal Saw Limited): is strategically aimed at capitalizing on the Middle East long-term investments in energy security, hydrocarbon development, and water infrastructure, while strengthening customer proximity, enhancing regional market access, and creating a diversified platform for sustainable growth across the energy and water sectors. Regarding our pipe saw pipe plants in Saudi Arabia, we communicated earlier also that we have established a strategic joint venture in Saudi Arabia where Jindal Saw will hold 51% equity stake and Buhur of Kingdom of Saudi Arabia will hold 49%. The joint venture envisages setting up two advanced pipe manufacturing facility helical pipe and longitudinal pipe, with a capacity of 300,000 metric ton each, catering to the region's growing water infrastructure and energy requirement. The project is progressing well. Land has been secured, LCs for long lead items have been established. We remain focused on accelerating project execution with interim financial closure expected on over the next few months. We recognize that prevailing geopolitical environment and highlighted regional security concerns may create some near-term uncertainties around project execution, logistics, and investment timing. Nevertheless, our approach remains guided by the long-term fundamentals of Saudi Arabia's energy and water infrastructure requirements. Beyond serving domestic demand, the facilities are strategically positioned to capitalize on emerging regional opportunities, including the potential for alternative energy transportation and export routes that reduce dependence on the Strait of Hormuz. We remain committed to a disciplined approach to project implementation while closely monitoring the evolving situation in MENA region. Now, Jindal Saw Middle East strategy leverages a dual-platform approach to target critical investment in energy security, hydrocarbon development, and water infrastructure. The company's Abu Dhabi hub serve as a controlled, high-end base for seamless pipe and ductile iron pipe, optimizing customer access. Meanwhile, its Saudi Arabia joint venture focuses on localized longitudinal and helical pipes, creating a balanced, diversified corridor positioned for the sustainable regional growth. Now, let's talk very quickly about our ductile iron pipe operations in Abu Dhabi. You know like regional conflicts in MENA has have disrupted operations at our Abu Dhabi facility. The facility remains highly impacted due to the war. Due to these circumstances and with employee safety as our top priority, operations have been reduced to meet essential demand. The sales from Abu Dhabi plant are restricted to customers in the countries which are working which are within the trucking range. In this backdrop, Q2 of FY '27 for Abu Dhabi, they we delivered 29,000 metric ton pipes as compared to 34,000 metric ton pipes in Q1 of FY '27 for the DI pipes. As of September '26, the subsidiary holds order book valued approximately at USD 195 million for corresponding to 177,000 ton pipes, ensuring operational visibility for next 9 to 12 months. This backlog is independent of Jindal Saw India's standalone order book of close to 17,000 including orders plus LOIs. Now about Jindal Hunting, a joint venture with Hunting Energy Services Private Limited Singapore in which Jindal Saw holds controlling interest of 51%, it generated revenue of 9.70 crores and a loss of 1.5 crore in Q2 of FY '27. This dismal performance is a result of suspension of API license, which is likely to improve in coming quarters with API license as as sorry, as the API license has been reinstated. Now the last about the litigation in Jindal ITF versus NTPC. This a legal conflict In this legal conflict, a division bench of Delhi High Court delivered a split verdict. Consequently, Chief Justice has referred the matter to a third judge, who has now been appointed. The next hearing is scheduled for January 2027. So, this is from the presentation for today, and we now leave the floor open for to take certain questions. Mr. Narendra Mantri and Mr. Rajiv Goyal are with me to address any of the questions. Thank you very much, and let's start the question-and-answer session.
Moderator: Thank you very much. We will now begin with the question-and-answer
Moderator: Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, 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 queue assembles. The first question is from the line of Shaurya Shah from Equirus Securities Private Limited. Please go ahead.
Shaurya Shah (Equirus Securities Private Limited): Yeah. Thank you for taking up my question. So, the first question I have is regarding the new LOIs, right? So, Just wanted to know how firm are these LOIs and when an approximate date as to when are they expected to translate into some dis- dispatches? And the other thing is that can these orders kind of to an extent replace the affected MENA volumes at a comparable margin?
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