Rajratan Global Wire expects 15-18% volume growth, sees stable margins

Rajratan Global Wire expects to deliver 15-18% volume growth while maintaining 13-14% operating margins, supported by capacity expansion in India and Thailand, Chairman and Managing Director Sunil Chordia said.

The Indore-headquartered bead wire manufacturer is increasing capacity at its Thailand plant by 50%, ramping up its Chennai facility and commissioning a new steel cord project at Pithampur over the coming quarters.

Chordia said the company has recovered from the raw material cost spike seen in the previous quarter. While he expects margins to remain in the 13-14% range over the long term, he said quarterly projections remain difficult because of competitive market conditions.

Chordia said demand from the automobile and tyre industries remains strong, with the company operating at full capacity and exports from India expected to double to 20,000 tonne this year.

Rajratan Global Wire has a market capitalisation of ₹2,487.78 crore.

This is an edited transcript of the interview.Q: I want to start with two numbers. One is in terms of margins. You've seen an improvement versus last quarter and versus last year as well. Margins are back to that 13% mark. Apart from that, volumes are still seeing double-digit growth of 16%, but they are below your guidance. First, in terms of margins, given that you have already taken price hikes and now input costs are coming down, what is the outlook for margins, and what is the outlook for volumes as well?

A: As I said in Q4, our margins were low because there was a sudden price increase in raw materials, which we could pass on in Q1 of this year, and we are back to the margins we normally operate with.

Coming back to your question on the outlook going forward, we are growing at all three locations. Our Thailand plant is also taking up a project to increase capacity by another 50%. So, Thailand's capacity will become 90,000 tonne from 60,000 tonne after one year. Our Chennai capacity has to ramp up from 30,000 tonne to 60,000 tonne in the current year, and we are investing in a steel cord project at our main location at Pithampur, which will start production in the next quarter. Trials will start next quarter. So, I am bullish. I am positive that we will keep growing at 15% to 18% in volume terms.

Q: Just a word in terms of margins. Already, like I've mentioned, and like you mentioned as well, right? Price hikes have been taken now. Input costs are also coming down. So, my point is, does it mean that margins will improve further from here on? What is the peak margin that we can expect in FY27?A: Margins may improve, but I would not like to say it here because we are in a competitive market. Generally, making quarter-on-quarter projections is very difficult. But over the longer term, 13-14% margins we can continue to work with.

Q: Revenue was up around 29%. While you're talking about the numbers, I just wanted to understand the demand scenario that you're working with at this point in time. What were the key drivers of growth this quarter, considering the geopolitical uncertainty? Did that in any way impact your business?A: It has impacted our business. The input cost has gone up, starting with the cost of liquified natural gas (LNG) and extending to a lot of other petroleum-based inputs. They have all gone up, and that is why the margin could not improve. Of course, we passed on the price increase to our customers, but going forward, I see that the demand is very good. In India, the automobile industry is doing well, the tyre industry is running at full capacity, and our order book position is also good. We are running at full capacity.

Q: The last time we had spoken, you did indicate that exports are also an important market for you, and it's something that you have discussed at length earlier. Give us a sense of how demand in export markets is currently, and do you plan to expand there? Would margins or realisations be better in export markets? And if that is the case, will this increased capacity cater more to export demand or domestic demand?A: We will grow our exports. Getting approval from global customers takes a long time, but it is happening, and it will continue to grow. Our exports to the US are growing. Our exports to Europe are growing, and we have been traditionally exporting to the South Asian market. Exports from India are something new that we have started over the last one year, and they will double this year from the current level of 10,000 tonne. Our exports will increase to 20,000 tonnes from India.

Q: I just want to understand the bead wire segment, which is your key business. Now we have Bansal Wire talking about entering the space. They've spoken about it. They've said that they are gaining market share. Are they undercutting in terms of pricing? So, is there some pricing pressure there? You have a large chunk of business coming from the auto segment. So, what is the current on-ground situation? Are they taking market share from you? What is the situation?A: I would prefer not to comment on our competitor, but yes, they are also trying to get into this market. As I mentioned, we are in a competitive market. But in our case, we are a very old company. We have been in this business for the last 30 years. We have very strong relationships and very strong approvals with all the customers, which works in our favour.

Q: So, you are not seeing significant pricing pressure, sir, in this segment?A: We are seeing pricing pressure, but it is not necessary that we have to follow their pricing policy. We operate at our own price, and customers are happy to give us their business.

Q: You are maintaining your market share here, right?A: Yes. Rather, we have increased our market share.

For the full interview, watch the accompanying videoCatch all the latest updates from the stock market here