00:00You know, we have Mr. TV Chaudhary, who's the MD of Premier Explosives with us to try and
00:06better understand what's happening because the stock has been up in a way.
00:10Firstly, good afternoon. Welcome to NDTV Profits, sir.
00:16Thank you.
00:19Sir, I just want to try and break this down. So 400 crore fundraisers, it's a fairly large
00:24fundraise for a company of your size. What does it mean and what's going to be the
00:30utilisation like for this fundraise?
00:34See, this funding is meant for utilisation at our new project, like we have announced about a
00:42possibility of starting the new Greenfield project in Odisha. So that is a major
00:49cap. Other than that, in the existing plants, capacity enhancement is there.
00:57So that is going to, first two years we'll be using it for capacity enhancement
01:03and adding the plants in the existing plants near Hyderabad. Then two years onwards, then we'll be
01:10going and expanding in the Odisha new land, which the Odisha government has approved.
01:16So this is planned for almost 10 years programme. The whole thing is scheduled
01:24for 10 years in three phases.
01:27Understood. So how much of this goes to the Odisha plant and how much of this goes towards
01:33the existing plant capex that you have allocated?
01:37Existing plant, it is about 35 crores for the expansion of the existing plant capacity.
01:46And we also want to add some additional products also. So that will take care of that. And
01:52the balance goes to Odisha in Odisha also in multiple phases.
01:56The first phase of Odisha will be around 100 crores.
02:01Got it. And how much of this will be debt and how much will be equity? Pretty much all of
02:08this amount will be upfronted in terms of the fundraise itself?
02:14Yeah, this all from the fundraise itself, we are thinking that we'll do. In addition to that,
02:18there'll be internal accruals. Because Odisha total project outlay is almost 800 crores,
02:26we are thinking. So in these three years, four years, we expect a good internal
02:32accruals together. That and this together should fund our entire requirement.
02:38Understood. And the 400 crores, some component will be equity. Is there a number to that?
02:46Yeah, that is not it. It is decided in the last board meeting that yes, we will go and
02:53raise some equity and how much and all those we have to come to.
02:57Understood, understood, sir. Okay. And with regard to the capital and the borrowing itself,
03:04of course, it'll raise your borrowing, but I want to try and focus in a little bit on your
03:09current liabilities as well. Those have spiked up a little bit. Do you expect this kind of a
03:14number to remain or do you expect that to come off? No, I don't think we have any large liability.
03:23It's more of working capital funds rather than any other debts. So it'll remain because as we
03:31are going to larger and larger, along with the capex needs, working capital needs also will be
03:37there. So we'll be maintaining at that level. Understood, understood. And with regard to
03:42deliveries to Israel, I'll switch focus from the funding side of things. With deliveries with
03:48regard to Israel and recovery from Israeli customers, has that started to pick up pace
03:54as Q4 has ended? Yeah, in the Q4 itself, we could dispatch a good quantity. So we are expecting
04:04this. It will continue in the first quarter of current year. Understood. And would that
04:09therefore lead to a cool off on the asset side, on the current assets, on the inventory side of
04:14things? Yes, that will help. And apart from that, some others from MoD, which could not be
04:24dispatched, they will also move out now. So together, the exports as well as the domestic
04:29MoD dispatches will definitely push us. Got it. And this new plant in Odisha,
04:35how much would that contribute to your overall revenue and from when will it start contributing
04:40to overall revenue? First, it was an allotment of land. You know, explosive industry needs large
04:48land. So when the Odisha government invited us to look at the possibility of putting up a facility,
04:55we asked, our first requirement is land, which they said that is not a problem. And we have
05:01visited the government and then multiple facilities which are available. And we have selected the
05:08area which is suitable for the plant. So after the elections are over, I think the activity
05:14will pick up and we hope that in two years time, first phase will complete.
05:19Okay, two years time, first phase will get completed and how much would, what would you
05:23manufacture there? I know it may not be absolutely accurate, but if at all, there is a plan to that.
05:29And second is how much or how will it contribute to revenue? What's the plan there like?
05:36See, the products which are going to be made there are mostly the explosive raw materials,
05:42that is RDX, HMX, TNT. RDX, HMX, we are already producing in near Hyderabad,
05:50but the capacity is not sufficient. So we will be going for larger capacity.
05:56And right now, TNT, we are dependent on other sources, outside sources.
06:01So we'll be producing ourselves. And there is a lot of big demand from Europe for these raw
06:08materials, that is RDX, HMX, and TNT. So mostly the capacity will be utilized for catering to
06:15the export market because our present capacity is good enough for our own internal consumption.
06:21So with these, all these things getting added, so we are expecting a good increase,
06:28something like another 300-400 crores should be added to the present turnover.
06:32Understood. That is in the first phase.
06:34Yeah, right. And that's just in the first phase, right. And what about the margins on some of
06:39these products? What can one expect, 20% plus? Yeah, it will be in between 20% to 25%
06:47of these defence products. Understood. So not margin dilutive either,
06:51just for viewer reference, margins are roughly in the 20% to 25% range. Defence margins are
06:56slightly higher, north of 26%. And so the other products are in the 18% to 20% range,
07:04if I'm not wrong, just for viewer reference. Anyway, so I understand your point of view.
07:09So you've guided for roughly 500 crores of top line in FY25. I won't talk about FY24 because,
07:17of course, your numbers are not yet out. I don't want to push you on that. But with regard to FY25,
07:23500 crores of top line, 300 crores will roughly be the flares and the shafts which you will be
07:32selling to Ministry of Defence is our understanding. And therefore, this 300 crores will be
07:38added from FY27 onwards, if I understand correctly. So what does your 500 crores do in FY26
07:48and FY27? What kind of top line should one expect in the interim period for you to increase by?
07:56It will be maintained at the 500 plus level, the coming 2006 and 2007 also.
08:03See, it's a bouquet of products. We have multiple products. Now we have started
08:09different products. So they will keep on changing. Today, the main thrust is on
08:14shafts and flares countermeasures. And that also further orders will continue.
08:20What we are executing is an emergency order. But that's not the end of it.
08:26Other orders are in RFPs and RFIs. So they will also materialize. Other than that, now we entered
08:34mines, landmines. The first consignment is expected to move out now before this month end.
08:42So the landmines is another area which is going to be full import substitution for MOV.
08:47Then we are now into warhead manufacturing. And we are now producing large volumes of
08:57rocket motors, which earlier we have developed and then designed and developed. Now they are
09:02in production phase. Those dispatches have started and we are getting many more queries.
09:08You know, FY25, maybe 5-600 crore. FY26, what's the kind of growth trajectory that one can expect
09:15you to take? These new projects, what we are planning, like I said, 300 crores will come
09:24from Orissa plant. That's what is the plan. So with all the new products that you are building
09:34up on top of the 600 in FY26, how much will some of these new products contribute? Because 300
09:41crore will be flares, 300 crore will be existing business is how I'm looking at it. The existing
09:46order pipeline of roughly 600 crore. The new products that you are venturing into,
09:50how much will that contribute to top line in FY26?
09:53FY26, see that in these products, there is a long gestation period, product acceptance and all
10:05those. So whatever new facilities we are going to install, those will, the 26 will not be a year
10:13where we'll be getting a large revenue from those. But yes, it will start and then I think another
10:19100 crores we can expect. Understood. And with regard to your space part of the business,
10:26you're expecting that to grow in a big fashion in the next five years.
10:30So what will the contribution be like to revenue, maybe in the next two or three years?
10:36Right now, it is unpredictable, the space, how it is going to grow and all those. See,
10:42space scenario is totally changing. Up till now, the customer is ISRO for the space industry,
10:50main customer is ISRO. But it's going to shift to now the private industry,
10:55which are private satellite launchers. Satellite launching companies will become our customers.
11:00So how the business is going to change is a little bit unpredictable.
11:04I think we need some more time to come to some predictions.
11:09Understood, understood. But you're confident that five years from now,
11:12it will contribute 500 crores to top line because that was part of your Q3 guidance?
11:17Yes. Understood, understood. Got it, sir. And with regard to overall margins,
11:23what's the kind of number one can expect you to be at? Because margins have been
11:28on the lower side of 20 for a very long period of time. They spiked up and in Q3 again, we saw
11:34bit of tepidness on margins because, of course, defense execution hadn't happened. So where can
11:40one see overall margins in the broader scheme of things, between maybe 23-25%?
11:46I think we'll be at 20% level, 20% level. Definitely between 18-20%. It changes with
11:56the product mix. The margins, you know that industrial explosives is lower,
12:01but we'll not be quitting that business. We'll be continuing in that business. So overall,
12:07if you go by the turnover, it's a volumes business, so turnover also will be good from that.
12:13So average margins, if you look at, will be at 20% level.
12:18Yeah. So with regard to the fundraisers as well as with regard to all the cash that you're pulling
12:23back into the business because you're making cash profit this year, what's the kind of return
12:28ratios that one can expect from Premier Explosives? Yeah, return on capital definitely
12:35between 25-35%. Understood, understood. That's sharp. Thank you so much, sir. It's been a
12:41pleasure interacting with you. And of course, we look forward to continue to interact with you
12:47going forward as well. And many, many congratulations on this new development and
12:53hopefully good luck on a good fundraise. Thank you. Thank you very much for the
12:58interest shown in our company and thanks for all the good words. Thank you.
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