Large order book masked by execution delays, margin collapse, geopolitical risk

Revenue flat QoQ at +0.4%, only +5.6% YoY despite large order book

Order book dominated by delayed job work (6 lakh tons delayed, low margins). Execution from Feb-Mar onwards. Capacity utilization only 67% vs 80% target.

Q2 PAT crashed 74.5% YoY, EBITDA fell 22% QoQ to ₹265 Cr. No concrete evidence of near-term improvement; dependent on delayed order execution and geopolitical stability.

Abu Dhabi plant: 300k tons p.a., USD330M capex, FY28-29 target. Saudi JV: Still acquiring land, no orders secured yet. 12+ months away; not near-term driver.

API license reinstated June 2026. Company bidding on API orders. Margin impact deferred to 'next quarters.' No Q2 evidence.

Prior call (Q1) expected H2 improvement. Q2 delivered PAT −74.5%, NPM 0.8% (vs implied >1.5%). EBITDA margin 5.8% (vs prior ~8%). No concrete near-term recovery evidence. Mgmt reaffirming H2 target, but credibility diminished.

Largest job work order (6 lakh tons, ~₹1,135 Cr) delayed from Q2 due to MENA war. Initially expected Q2-Q3 execution. Now Feb-Mar onwards. Delays persisting.

Prior call (Q1) acknowledged 'geopolitical challenges in MENA.' Q2 shows material impact: war delays large job order, shipping/logistics costs spiked. Region (~30% order exposure) now higher-risk than previously guided.

Abu Dhabi facility now operating at ~50% utilization (down from higher levels prior year). Despite large order book, supply chain and buyer logistics constraints limiting ramp. Target 80% utilization not achieved.

API license reinstated June 2026 (was suspended). Company now bidding aggressively on API orders. Higher margins expected. Margin tailwind in coming quarters, per mgmt.

LOIs total USD575M (USD430M export CIS + USD480M CIS + USD50M SE Asia). Most outside MENA. Conversion typically takes 2–3 weeks after LOI (legal, buyer approvals). Production Feb–Mar onwards. Raw material booked for Feb–Jan dispatch. Job work nature means buyer supplies raw material; margins lower than full conversion.

Of 2.5M ton order book, 0.5M is LOI, 55% is export, 45% domestic. Majority from oil & gas and exports. Q3–Q4 onwards, expect margins to move toward double-digit range and eventually return toward ₹25 (sic — mgmt said 'endeavor of the company management'). New order mix will improve product mix; exports more profitable.

In general, export orders more profitable than domestic for oil & gas. But in water pipes, export margins not better than domestic. Currently, sales mix weighted to water (low margin). As new orders (oil & gas, exports) execute, mix improves.

Utilization at 67% effective (2.3M tons out of 3.5M design). Reaching 80% depends on execution of multiple orders. Volumes in FY27 expected higher than FY26. Q3–Q4 with better oil & gas volumes, margins should improve. But can't commit to exact numbers or timeline; things are volatile.

Funds are releasing gradually; not like cleaning of existing payables (slower). Orders coming but now through State governments. EPC execution is slow (funds lag in some states). Execution is the key constraint; full order book availability but delivery spread over 6–12 months.

Saudi facility initially not fully utilized; decided to hold pending inspection approvals. Once approval received, can participate in orders. Targeting FY28–FY29 commercial operation. Land acquired; development underway. Won't receive orders before approval; due diligence being done.

H1 FY27 delivered ₹7,637 Cr (+13% YoY). H2 outlook dependent on MENA order execution (Feb–Mar onwards), API order ramp-up, and geopolitical stability. No specific revenue target for H2 or FY27 full-year disclosed.

Current GP/kg at ~₹41. New order mix (oil & gas, exports) expected to improve margins Q3–Q4 onwards. API orders and reduced job-work concentration will drive improvement. But no specific timeline or EBITDA target (e.g., 'return to 8%' or 'by FY28').

Abu Dhabi: 300k tons/yr, USD330M, FY28–29 commissioning (financial closure coming months). Saudi JV: 300k tons/yr each facility, progressing, FY28–29 target. Land acquired, development underway. Procurement of long-lead items underway (LOC-backed).

Saudi Arabia war escalations disrupted large 6 lakh ton job work order, delaying execution to Feb–Mar 2027. Shipping routes, logistics costs spiked. ~30% of order book exposed to MENA region. Further escalations could cascade delays.

₹17k Cr order book includes ₹4,750 Cr in LOIs (not firm). Conversion process involves buyer legal approvals, 2–3 week lag post-LOI. Supply chain bottlenecks limiting ramp. Abu Dhabi facility at ~50% utilization despite orders in backlog.

Majority of order book is job work (raw material supplied by buyer; only conversion margin retained). Gross profit per kg fell from ₹51 to ₹41. EBITDA margin at 5.8% (vs prior 8%+). Raw material prices, coal inflation, logistics cost surges hitting DI pipe margins. No pricing power in fixed-price job contracts.

Effective capacity utilization at 67% (2.3M tons out of 3.5M design) despite ₹17k Cr order book. Abu Dhabi facility at ~50% due to MENA logistics delays. Supply chain and buyer logistics bottlenecks constraining ramp. Higher fixed costs per unit if utilization doesn't improve.

Delhi High Court case pending between Jindal ITF and NTPC over contract dispute. Chief Justice referred matter to third judge; next hearing scheduled Jan 2027. Outcome not quantified but has created past uncertainty.