Investor
We have the following key business strategies to grow our business.
Complete our backward integration project to produce billets
We currently buy billets locally in Gujarat to produce our TMT Bars; however, to enhance our backward integration of our production and increase raw material security, we have initiated a project to manufacture billets from scrap. The production of billets will be for our own captive consumption to manufacture TMT Bars. We expect an inventory and supply cost reduction of ₹1,500-1,700 per ton of billets from our backward integration.
In this regard, we are installing a thirty-ton electric induction furnace with installed capacity of 216,000 MT per annum. The length of the billets can be customized as per the specification of TMT bars to be manufactured.
Key features of our billets unit include:
- Both our billets unit and TMT Bar unit will be operated and controlled through unified control panel at single location.
- Cast billets will directly go into rolling which is the first stage of TMT Bar production. This will eliminate the reheating of billets, thereby burning loss will be saved.
- Our consumption of coal will be substantially reduced and scrap melting will be done through the electric induction furnace to be installed. Accordingly, our current price fluctuation risk in coal sourcing will be eliminated.
The capital cost of this backward integration project is ₹ 90 lacs, which we are financing.
All necessary regulatory approvals are in place and installation of the induction furnace was completed. We expect that billet production will begin in October 2024.
Diversify into pipe production
In Fiscal 2025, we are diversifying our production to include pipe manufacturing from stainless steel sheets. We intend to produce pipe from 0.5” to 3” with a thickness of 1 mm to 2 mm.
We have entered a factory lease agreement, with Hans Industries Private Limited, dated June 4, 2024, under which we are leasing a facility in Bhavnagar, Gujarat with an approximate installed capacity of 5,500 MT of pipe per month. The term of the lease is five years and expires on June 30, 2029, with an option to renew the agreement after every 11 months and 29 days. The rent is ₹4.50 lacs per month (₹ 54 lacs per annum). We are looking to upgrade certain machinery and install additional equipment for further growth. We expect to begin producing pipe in July 2024.
We intend to purchase stainless steel sheets needed for pipe production after cutting to the required size to reduce the cost of wastage. We expect to purchase these pre-cut stainless steel sheets from suppliers in Gujarat on a purchase-order basis.
We intend to market under the name “Kamdhenu” under a license agreement with Kamdhenu Limited in 2024. We believe that there are important synergies between our TMT Bar market and the pipe market. We intend to leverage our current sales team and distribution network to sell pipe products to our existing customers as well as identify new customers.
Setting up a 15MW solar plant to reduce power expenses
For our production of TMT Bars and our production of billets from scrap, electric power is a key manufacturing expense. Our power requirements currently are sourced through the local state power grid. The table below sets forth our power and fuel expenses for the periods indicated:
For our production of TMT Bars and our production of billets from scrap, electric power is a key manufacturing expense. Our power requirements currently are sourced through the local state power grid. The table below sets forth our power and fuel expenses for the periods indicated:
Our power expenses have increased significantly in recent years due primarily to an increase in electricity prices, and further increases in power expenses may impact our margins if we are not able to pass these price increases to our customers. We expect our power requirements and power expenses to increase significantly due to the installation of our thirty-ton electric induction furnace as part of our backward integration project described above.
To reduce our electricity expenses, we are planning to setup a 15 MW solar power plant in Gujarat for our captive consumption. We estimate that the cost of this solar plant will be financed with internal accruals and the Issue proceeds.
We have entered into the lease for the land for the solar power plant and are in the process of obtaining the necessary governmental permits and approvals including environmental assessments and approvals. As of the date of this DRHP, we have secured.
We have finalized our assessment and feasibility study and project planning. Construction of the plant has commenced which includes clearing and grading the land, followed by the installation of mounting structures, solar panels, inverters, and electrical infrastructure. Our target completion date is September 2024.