00:00 Hi, thanks so much for joining in.
00:02 You're watching BQ Prime and this is a conversation that will help you understand a significant
00:07 development for one of the companies that we track and that is Salazar Technoengineering.
00:13 The company has just commissioned a galvanization plant and some of you are probably wondering
00:18 what that's all about.
00:19 I will let the management explain that to you.
00:21 We're joined by the managing director Shashank Agarwal.
00:24 Shashank, thanks so much for taking the time and for speaking to BQ Prime.
00:28 Let me start with that basic question because I think a lot of your investors, a lot of
00:33 potential investors will be wondering what this plant is all about and why it's so significant.
00:38 Okay.
00:39 So Alex, thanks for the call.
00:43 And just to, you know, for the common man, we are into structures manufacturing which
00:49 are primarily galvanized.
00:50 These structures are used for power transmission lines, telecom towers, railways and various
00:56 other fields where the structures are open to sky, open to atmosphere.
01:01 So we already have three galvanizing plants running in all our three units and we are
01:07 primarily doing telecom towers, transmission line towers as I said and structure.
01:11 The new galvanizing plant is a state of the art which has been imported from Italy and
01:15 France, Italy and Germany, sorry.
01:19 And this galvanizing plant happens to be the largest in India for structural galvanizing
01:25 and not only in India, largest in Asia and among one of the largest in the world.
01:29 And primarily we'll be doing transmission line monopoles in this apart from other structures
01:34 for solar, telecom and railways.
01:39 This gives us an edge over our competitors in terms of the size of the structures that
01:45 we can do, being one of the largest among, you know, among one of the largest in the
01:49 world.
01:50 And this will of course give us an additional, not only capacity but additional revenues
01:57 over the year when it is, you know, running to its full capacity.
02:02 Okay.
02:03 So give us a sense of how this will impact orders going forward because you mentioned
02:07 monopoles and when I look at your order book, the total order book stands at about or stood
02:13 at about 1435 crores of which monopoles is only about 64 crores, Shashank.
02:19 So are you saying that going forward, there will be a much larger share of this business?
02:25 So of course the share of businesses will increase but that 1400 crores order book,
02:31 what you've seen includes a lot of things that include EPC jobs as well.
02:36 Wherein partly we use structures for transmission line towers and monopoles.
02:42 So 64 crores order book of monopoles is primarily for the supply purpose only.
02:47 But going forward, there will be a lot of orders coming in for poles which we'll be
02:51 utilizing our capacity for.
02:53 And also for the, see transmission line monopoles is sort of a little niche market at the moment
03:00 wherein there are very limited number of players which are doing this.
03:04 And as I said, it's, the plant is not going to cater only to the transmission line monopoles
03:09 but to various structures of all the kinds what we make.
03:12 So it is about optimizing our capacity, going with a better technology, increasing the efficiency
03:19 of manufacturing in terms of our not only capacity utilization but in terms of our utilization
03:27 of the zinc and the efficiency of operations.
03:33 So you operate in a majority of segments but you are primarily operating that transmission
03:39 business as I understand it.
03:40 And you export to several markets.
03:43 I'm just trying to understand the implications of the commissioning of a new plant which
03:49 apparently is the largest galvanizing plant in Asia.
03:53 And you say that this is not something that is very heavily populated in India.
03:58 So that seems to suggest that you will add significantly to your revenue base and to
04:03 your orders.
04:05 What is the implication of this?
04:06 Will this significantly increase the order book?
04:10 So what we are looking for is that with the additional capacity that we have seen this
04:14 plant on its own can do about, is having a capacity of almost 96,000 tons per annum.
04:20 That's about 8,000 tons per month.
04:22 But what we are going to do is we are going to put one of our existing galvanizing plants
04:28 on a shutdown.
04:29 And it will be on a standby basis.
04:33 You know, it can be utilized in case of any emergency or in case of any extra capacity
04:38 which is required at any point in time.
04:42 So we are basically closing down a plant of 30,000 ton capacity.
04:47 And we will be starting a new plant of 96,000 tons capacity, which would give us an additional
04:53 capacity of almost 65 to 70,000 tons per annum.
04:56 I mean, this, if capacity is fully utilized, would give us a revenue of almost 600 crores
05:03 to 700 crores at some point in time, when it is utilized to its full capacity.
05:08 That would of course mean a lot of orders coming in, a lot of projects being handled
05:12 by us.
05:13 Okay.
05:14 When do you anticipate that it will be fully utilized and over what period will the shutdown
05:19 take place?
05:20 Will it be done in this quarter itself?
05:22 Yes, the existing plant of 30,000 tons at unit 3 would be shut down maybe in a month's
05:30 time or maybe about 45 days till the time this plant gets fully operational in the sense
05:37 that it comes to its full capacity.
05:42 And we are hoping that from November onwards, this plant should be operating at 70 to 80
05:48 percent capacity and going forward within a year's time, the plant should be running
05:52 at a full capacity level.
05:55 So you had three plants, correct me if I'm wrong, before the commissioning of this one.
06:00 And effectively, you will have three plants going forward as well.
06:04 It's just that your total capacity is increased by a net of 65 odd thousand tons per annum.
06:11 Absolutely.
06:12 So if you say that 80 percent capacity utilization, 70, 80 percent capacity utilization in this
06:19 financial year, is that what you're anticipating?
06:21 Oh, well, this financial year, we are expecting to reach at least 60 percent to 70 percent
06:28 level, yes.
06:29 Okay.
06:30 So that would entail what you said, 600 crore, right, for the full year.
06:33 So that would entail one third or two third of that.
06:36 So over 400 crores of revenue from that plant?
06:39 Well, see, by the time this plant is stabilized, it will be a month over.
06:44 So by the end of October or probably 15th of October, that plant is stabilized, right,
06:50 running at a decent capacity.
06:53 And suppose we are operating in the last quarter at 60, 70 percent of capacity, yes, we can
06:58 look at at least 200 crores of additional revenue coming in from there.
07:03 This year itself.
07:04 So that's significant.
07:05 The point that you made at the start to explain what you do and what this plant is all about,
07:11 you said this is state of the art.
07:12 One would assume that the operational metrics are superior to your existing facilities.
07:18 And therefore, what kind of implications does that have, Shashank, for the EBITDA margins
07:22 to be anticipated, an improvement in the margins going forward in this financial year itself?
07:28 Of course, you know, when you see right now what we've been using are the traditional
07:33 gelman plant which were manufactured in India.
07:37 This plant being a very high tech kind of a plant would definitely give us better operational
07:44 efficiencies.
07:45 And we are hoping that we are hoping, in fact expecting that the zinc consumption would
07:52 go down.
07:53 Which would, of course, give us better margins at a better level.
07:59 So just to put all of this together, Shashank, to wrap this up, give us a sense, you're already
08:06 growing at a very comfortable close to 25 percent revenue growth in the first quarter.
08:12 Margins have improved, in fact, stood at 9 percent.
08:15 And one would assume that they would go to double digits.
08:17 Correct me if I'm wrong.
08:19 What kind of range to be anticipated?
08:23 And you're talking about what, 200-300 crore of revenue from the new plant in this financial
08:28 year itself.
08:29 Of course, some part of that will be moving away from the third plant which are shutting
08:34 down.
08:35 But on a net basis, I think that's still quite a significant improvement in the operations.
08:39 Right, right, right.
08:40 Of course, yes, you're absolutely right.
08:44 Of course, going forward, see, I mean, at the year ending 31st March 2023, we did a
08:52 revenue of more than 1,000, slightly over 1,000 crores.
08:57 And of course, we would like to close this year at least 25 to 30 percent above that.
09:06 Okay.
09:07 And margins, you didn't say, so double digits is comfortable to achieve, would you say?
09:11 That's possible.
09:12 That's possible.
09:13 That's possible.
09:14 Okay.
09:15 All right.
09:16 So we'll touch base soon enough, but I think significant development.
09:20 And thank you so much for joining in and clarifying all those things.
09:24 Thank you.
09:25 Thank you, Alex.
09:26 Thank you.
09:27 Appreciate it.
09:28 All right, viewers, there you have it.
09:29 The management of Salazar Techno Engineering.
09:31 We'll touch base with them soon enough to get an understanding of how the plant is improving
09:37 operations.
09:38 Do stay tuned.
09:39 Lots more coming up over the course of the day.
09:41 This is BQ Plan.
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