Rajratan Global Wire Ltd

WE ARE AT AN INFLECTION POINT, SEEKING TO GRADUATE TO A WORLD- CLASS GLOBAL COMPANY.

Chairman Sunil Chordia

Takes a Long-term perspective of the Company's business health

Overview

At Rajratan, FY 24-25 was one of those years that comes once in a decade. The year was marked by new capacities by bead wire manufacturers becoming operational and exceeding demand. As a result, realisations were subdued; the focus shifted to maximising revenues and protecting profitability until market conditions improved.

The financial year under review was no different. Revenues were 5% higher than the previous year, while EBITDA declined by 0.55% and net profit was 18% lower when compared with the previous year. EBITDA margin, the measure by which our profitability is measured, declined 77 bps to 13.5%. Bead wire volumes grew 12% over the previous financial year; average per kg realisations were 4% lower and the Company's new Chennai plant went on stream.

These numbers could have been better but for increased competition, temporary demand sluggishness in some markets, increased global uncertainty related to trade barriers and softer raw material prices.

This aberration was reflected in the performance of the Company during the third and fourth quarters of the last financial year. The third quarter was the weakest of the year, marked by initial commissioning costs of the new Chennai facility and trial Losses; the second quarter was the year's strongest. The sharp improvement in the fourth quarter was on account of a demand revival and improved consumption sentiment following the announcement of an increased tax exemption in Union Budget 2025 that made it possibLe for individual salaried taxpayers to pay no direct taxup to an income of Rs.12 Lakhs for a financial year. Besides, when seen from a macro-perspective, interest rates remained stable that sustained the mortgage-financed purchase of vehicles. India's sustained economic growth in excess of 6% catalysed the offtake of LCVs and HCVs and there was a visible premiumisation in vehicle preferences (based on vehicle size and sophistication). Even as vehicle format demand varied, there was a sustained increase in automobile demand, strengthening the offtake of tyres (principal downstream customer for your company) and, in turn, bead wire [manufactured by your company).

The one feature of our operations during the last financial year that one seeks to draw the reader's attention is the performance rebound in the fourth quarter. Revenues increased 15% over the immediately preceding quarter, EBITDA increased 27% and EBITDA margin strengthened 124 bps to 13.26%. During this quarter, the capacity utilisation of the Pithampur plant increased to 91% and the capacity utilisation of the Chennai plant increased to 52%, We are optimistic that the rebound of the fourth quarter should extend into the current financial year, strengthening offtake and profitability.

Optimism

At Rajratan, I am often asked what drives my optimism.

I am optimistic of our sustainable prospects on account of overarching sectorial realities that are only expected to strengthen.

There is a growing demand for automobiles in global emerging markets like India, China, and Brazil driven by a growing middle-class and accelerating urbanisation in those geographies.

Virtually every single government across the world is advocating cleaner energy, leading to a rapid growth in the launches, production and sales of electric vehicles.

Technological advancements in Artificial Intelligence, autonomous driving, and connected vehicles are making vehicles safer,smarter and more efficient.

We are passing through an age of infrastructural rejuvenation, marked by expanded road networks, better public charging stations (for electric vehicles), and Smart City projects.

The overarching environment for the purchase of automobiles has never been better, marked by easier financing options.

A combination of government policies and incentives (subsidies, tax benefits, and stricter emission regulations) are incentivising new car purchases.

Shared mobility and subscription models have widened the automotive market.

The India story

India is the standout performer in the global automotive sector, thanks to long-term demand catalysts.

Scale: India is the third-largest automobile market in the world [after China and the US) with a widening and urbanising middle-class driving car ownership. The two-wheeler andpassenger vehicle segments continue to dominate sales.

Electricvehides: India aims for 30%

EV penetration by 2030, which could see a proliferation in government initiatives like the FAME-II scheme and Production Linked Incentives.

The possibility of one of the largest companies in the world manufacturing EVs in India could completely transform the visibility of the EV space in the country.

Government policies and incentives:

India's policy framework- including Make in India and Atmanirbhar Bharat - continues to support domestic manufacture and reduce import dependence. The implementation of BS-VI emission norms has led to stricter pollution controls; it has accelerated the shift towards cleaner and greener vehicles.

The Rs.25,938 Crore Production- Linked Incentive [PLI] scheme for the automobile and auto components sector is expected to strengthen domestic manufacturing and drive the demand for critical components like bead wire.

Exports: India is graduating into a global hub for automobile exports, especially in the small car and two-wheeler segments.

The result is that India's automotive sector is expected to grow at a CAGR of 5% until 2030.

Prepared

At Raj'ratan, we are positioned to capitalise on this directional clarity with strategic preparedness.

Our Chennai location: We commissioned our Chennai plant - our second in the country after Pithampur - in 2024. The plant was commissioned to not merely enhance manufacturing capacity; it was commissioned to create astrategic exports platform, reinforcing Rajratan's commitment to evolve from a national player into a global one.

Strategically located near a port and ten tyre manufacturing companies, the plant enjoys a geographical advantage. The manufacturing infrastructure is modern, marked by efficient processes that are not only cleaner or greener but also more competitive. Our immediate priority is to accelerate customer approvals- for the plant, its products and processes - enabling larger commercial supplies from this location from this financial year. As approvals are in place, the plant will market a substantial quantum of bead wire within proximate Locations, moderating logistic costs. The immediate objective of the Company is to achieve 80% of its installed manufacturing capacity in FY 25-26. When this is achieved, the Company will initiate the second module of its capital outlay, raising its overall manufacturing capacity to 5,000 Tonnes per month.

Geography mix: The Company is internationalising its sales mix. The Company is leveraging the power of its relationships with multi-national customers. Through the power of effective referencing, the Company is beginning to make inroads into the multiple international manufacturing locations of these multi-nationals. This is the power of compounding at work where our dependable engagement with one plant in India is servicing the globally dispersed plants of the same company. This inspires our optimism of growing our international shipments.

International offices: The Company established a US marketing office to strengthen its market visibility and customer confidence. This development is expected to widen products introduction in the US market.

The Company's US entry is unlikely to be impacted by new US policy changes.

Trade restrictions on competing countries are expected to improve the reLative competitiveness of Indian exports to US.

Value-addition: The Company is climbing up the value chain by integrating forwards from black wire production (manufactured by the Company) to the manufacture of wire ropes. Once commissioned, this wire ropes unit will represent a growing line of business at a time when the country is infrastructurally growing faster.

We are confident that these initiatives represent an inflection point in our existence, when Rajratan graduates from a national personality to a world- class global organisation.

Outlook

The Company intends to report improved performance going ahead. Consolidated sales by volume are expected to increase 15%; the sharper percentage increase will be derived from India where the Chennai plant is expected to play a larger role in the Company's performance growth as its manufacturing capacity possesses attractive headroom.

If there is one message that the management would like to leave for stakeholders, it would be this: the Company possesses more than three decades of experience in growing its business. It has always emerged Stronger, matured, bigger and better, outperforming its previous best. The location of the Chennai plant could prove to be a gamechanger in this regard. The production and revenues coming out of this plant could at worst be delayed but would eventually prove decisive. The gestation of this plant is likely to be shorter and maturing quicker; it represents a distinctive competitive positioning - a platform intended to evolve the Company from the national to the international.

In view of these realities, I see no change in the Company's long-term prospects. I see our business rationale increasingly validated and likely to enhance value for our stakeholders in a bigger and sustainabLe way.

We are optimistic that the reboum of the fourth quarter of FY 24- 25 should extend into the current financial year, strengthening offtake and profitability.