Yes you are correct, we are just exploring possible verticals for future. We can stop this discussion if you want as it doesn’t add value to this forum as of now.
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We know that S Gupta Family Investments Private Limited holds 4% share in Krishca Strapping Solutions as a strategic partner.
In S Gupta Family Investments, Neera Gupta and Megha Gupta are the directors.
Neera Gupta is wife of Sanjay Gupta and Megha Gupta is daughter-in-law of Sanjay Gupta.
Neera Gupta also holds 11.39% share in SG Mart.
After analysing this information, it seems that strategic partnership between APL Apollo and Krishca is happened considering the requirements of SG Mart. As SG Mart is going to open 100 service centers and warehouse throughout India by 2030, where the strapping & packaging is going to be a crucial element. (For details anyone can go through the thread of SG Mart).
Along with getting strapping and packaging contract from SG Mart, krishca can also use the reach of SG Mart to sell their hardened & tempered speciality steel products from its new plant, commissioned in May 2024.
Krishca is also in the process of setting up a Cold rolled steel strips mill and a MIG welding wire plant. As per management 35% of Cold Rolled steel strips will be use for captive consumption and remaining will be sold in market. For selling these products in future, again SG Mart can play the role of an intermediary.
So, this strategic partnership is a win-win situation for both parties.
Few more things on hardened & tempered/Cold rolled steel strips:
Hardened and tempered /Cold Rolled steel strips are used in a variety of industries, including: Automotive, Electrical, Medical, Hand tools, and Agricultural. There isn’t much information about the size of the hardening and tempered steel strips and Cold Rolled Steel Strips industry in India, but here are some companies that manufacture and supply these strips:
Stelco Limited is one of the leading Manufacturers of Hardened & Tempered Steel Strips with a production capacity of about 22000 MT/annum and Cold Rolled Steel Strips with a production capacity of 35000 MT/annum. https://stelcolimited.com/
KND Steel Syndicate was established in 1981, India’s leading manufacturer & exporter of Low, Medium & High Carbon annealed steel strips and Hardened & Tempered steel strips. https://www.kndsteel.com/
Steel Corporation India is a leading manufacturer of hardened and tempered steel strips and Cold Rolled Steel Strips in India. https://www.steelcorp.in/
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I had gone through this transcript, What I believe is margin% should not fall but declining or rising steel prices can lead to a change in absolute revenue and profit number.
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I have a few questions:
Proceeds from issue of Equity Shares 6,578.60—Why have they raised this money?
Also Increase/(Decrease) in Long-Term Borrowings 207.53—Why raise debt as well?
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Summary of the earnings concall of Krishca Strapping Solutions Limited for H1 FY25:-
Krishca achieved a 40% volume growth in steel strapping production during H1 FY25 compared to H1 FY24. This contributed to a 30% growth in revenue, reaching ₹63.84 crore, despite a 10% decline in steel prices.The company expects to achieve a 25% year-over-year revenue growth for FY25.
Export growth has been flat in H1 FY25, reaching ₹8 crore compared to ₹15 crore of FY24. This stagnation is attributed to the impact of declining international steel prices, particularly due to Chinese competition.
To address this challenge, Krishca is focusing on diversifying its product portfolio to include more primary packaging materials. These materials, such as fabrics and lashing, are in high demand for export packaging due to their corrosion prevention properties.
Krishca is investing in a new speciality steel production plant in Chennai to expand production capacity and product range. This plant will produce high-quality steel products .This backward integration initiative is expected to enhance operational efficiency, expand production capacity and product range, and reduce reliance on external suppliers. 40% of the production will be used for captive consumption and balance will be sold in market.
To fund this investment,Krishca raised ₹68 crore through a preferential issue of equity shares and convertible warrants. ₹49.40 crore was raised from issuing 2,120,000 equity shares at ₹233 per share to non-promoter shareholders. An additional ₹18.63 crore was raised from issuing 800,000 warrants at ₹233 each to promoters and non-promoter groups.
Regarding the decline in EBITDA margin compared to the previous year, the Management attributed this to several factors, including the decrease in steel prices, increased shipping costs, and a rise in employee costs due to strategic hiring.
About the increase in receivables, the company explained that it was due to several factors, including last-minute dispatches in September, a focus on packaging contracts with longer receivable cycles, and a general slowdown in the steel industry.
Regarding the utilization of the new strapping line, Management stated that they expected to reach 40% utilization by the end of this financial year and were gradually shifting orders from the old plant to the new one.
The impact of the proposed solar power plant on margins was discussed. Management estimated annual cost savings of around ₹1 crore.
Krishca has order pipeline of ₹962 crore in packaging contracts. These contracts typically span 3-5 years. Management expects a 30% conversion rate on this pipeline. This projection is based on the company’s success rate in securing nine contracts over the past year. To enhance its expertise in this area, Krishca has been strategically hiring experienced personnel, which has contributed to increased employee costs.
The company expects to finalize the entire pipeline within the next six months. This suggests potential order wins of ₹250-300 crore in value. However, it’s important to note that this value represents the total contract worth over their 3-5 year duration, not the annual revenue generated.The largest potential single order size Krishca can currently handle is in the range of ₹50-100 crore per year.
On MIG welding wire plant and Middle-East plant, the company has decided to put these plans on hold for the time being.The rationale behind postponing the Middle East expansion is the company’s current focus on capital expenditure in India. The potential for higher returns and top-line growth from the Indian investments outweighs the Middle East project’s expected contribution.
The new strapping line is a continuous running line, it can’t be switch on and switch off in intervals, compared to the old line. So, the management is diverting some order book to keep the new plant running continuously. The current utilization is around 40% to 50% of the overall capacity of the plant when we consider both plants. This should improve from this point onwards.
Regarding the construction of the new factory, a Cold Rolling Mill, Krishca is ordering all the machineries by next month.That will be mainly in the specialty steel segment, the high carbon alloy steel, also into stainless steel. This plant should be up and running by December 2025 and the plant capacity will be of minimum 5,000 to 6,000 tons per month.This can bring additional top line of around 250 to 350 crore apart from captive use.
Krishca is also investing INR 8 crores for production of various kind of products like Tarpaulins, the HDPE, LDPE rolls, the drainage bags and VCI-based corrosion protection products for use in packaging contracts as well as to sell in the open market. Various machinery they are purchasing for that, and put together, this can achieve a top line of INR 100 crore with 20% operating margin.
Regarding big packaging contract, management told that earlier they are not very confident of taking very big orders. Now with the set up of SOP to monitor and audit the process alongwith the kind of team and expertise they have in place with the new employees joining, they are very confident of taking a much bigger contract without any issue.
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