Conference Call with Tube Investments Management and Analysts on Q4FY20 and Full Year Earnings Performance and Outlook. Listen to the full earnings transcript.

Call Participants: Mr. S. Vellayan - Managing Director, Mr. Mahendra Kumar K. - Chief Financial Officer, Mukesh Ahuja- Head of Tube Business, Mr. Paul - Head of Cycle Business

Introductory Remarks from S. Vellayan

Good morning everybody! Basically, I just want to give you a quick run through Q4 and the year performance. We have declared an interim dividend of Rs 3.50 per share in February 2020 and that was paid to the shareholders in March 2020. Consequent to the outbreak of the COVID-19 pandemic and the lockdown introduced by the Central and State Governments, the operations in the company’s manufacturing plants situated across various locations of the country had to be shut down or were disrupted from 23rd March 2020 onwards and continued through the month of April 2020.

With the easing in the lockdown/curfew and the Governments permitting operations to be resumed with necessary permission from the local authorities, the company from May 2020 onwards has resumed operations, in a partial manner across pretty much all locations with the exception of 2. Highlights for the fourth quarter and for the year:

• Revenue of Rs 935 crore in the quarter compared with Rs 1224 crore in Q4 of last year. Revenue for the year Rs 4276 crore was lower by 19% over last year, mainly due to de-growth in the Auto industry.

• PBT (before exceptional items) of Rs 108 crore, a growth of 26% over Q4 of last year. PBT (before exceptional items) of Rs 421 crore with a growth of 13% over last year.

• ROCE at 23% for the year ended 31st March 2020 compared with 21% in the previous year.

• Cumulative Free cash flow of Rs 320 crore for the year ended 31st March 2020, which is 97% of PAT. This has resulted in net debt reduction by Rs 342 crore, from Rs 491 crore to Rs 149 crore. I definitely can say that the free cash flow has kind of strengthened our balance sheet and was a timely move for us as what we are facing in the current environment. 

• The company implemented a voluntary retirement scheme and that cost us Rs 22 crore and the same amount is considered as an exceptional item in PBT. 

• For engineering, revenue for the quarter was at Rs 545 crore compared with Rs.659 crore in the corresponding quarter of the previous year. Profit before interest and tax for the quarter was Rs 75 crore as against Rs 65 crore in the corresponding quarter of the previous year, registering a growth of 16%. 

• The revenue for the full year for engineering was at Rs 2,258 crore compared with Rs 2,896 crore in the previous year. Profit before interest and tax for the year was at Rs 264 crore as against Rs 254 crore in the previous year, registering a growth of 4%. For the year ended March 2020, ROCE of this division improved to 41% as against 37% in the previous year. So, Mukesh is here who had that division and I would definitely say congratulations to him and his team for pulling off an incredible performance in terms of efficiency, working capital improvement and profit enhancement in a very tough market. 

• The second business is cycle and accessories. The division registered revenue of Rs 129 crore during the quarter compared with Rs 250 crore in the corresponding quarter of the previous year. There is a huge drop and the drop is predominantly because of our axit from institutional sales, a part of the business wage we have chosen not to participate in this financial year that just got done. Profit before interest and tax for the quarter was Rs 6 crore, compared with a loss before interest and tax of Rs 7 crore in the corresponding quarter of the previous year. 

• Revenue for the full year for cycle and accessories was Rs 781 crore compared with Rs 1,238 crore in the previous year, mainly because of exit from institutional sales in the current year. Profit before interest and tax for the year improved to Rs 26 crore as against Rs 11 crore in the previous year. For the year ended March 2020, ROCE of this division improved to 17% compared to 6% in the previous year. Improvement is PBIT, I will fully attribute to the strong work that Kalyan and his team has done in terms of significantly turning around cycles business.

• I would say in a full turn around increases in operational efficiency, significant work on the ground in terms of improving the sales infrastructure by proving our relationships with the distribution channels modifying kind of the structure of solution we use in itself and also either looking at significant cost reductions were necessary especially in the areas of sourcing and logistics and the warehouse infrastructure. If it were not for Covid-19, we were fairly convinced that we would deliver a much stronger year this year than last year. But we are still continuing on all of the activities that will strengthen the cycle business as well. 

• In terms of metal formed products, revenue for the quarter was at Rs 301 crore compared with Rs 358 crore in the corresponding quarter of the previous year. Profit before interest and tax for the quarter was Rs 16 crore as against Rs 31 crore in the corresponding quarter of the previous year. 

• Revenue for the full year for metal formed products was at Rs 1,399 crore compared with Rs 1,360 crore in the previous year, registering a growth of 3%. Profit before interest and tax for the year remained flat at Rs 123 crore. For the year ended March 2020, ROCE of this division was at 26%, marginally lower than 27% in the previous year.