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BMW industries is a 40+ year old company with manageable debt engaged in manufacturing, processing and selling of steel products consisting of engineering and other products and services related to the same.

BMW Industries

Current market price of the date of publishing this report-: 28 Rs

Introduction

Incorporated in 1981 as Bansal Mechanical Works Pvt. Ltd, company changed its name to BMW industries. Later it emerged as a prominent industrial group in eastern India. The Company is primarily engaged in manufacturing of tubular poles and structures, transmission line towers, rebars and providing steel servicing centre and infrastructural services.

BMW joined the proprietary business (the production and sale of items under its own brand) in 2016. The proprietary business sells structural, TMT, pipelines, towers, and HR coils. This group provides items to both the B2B and B2C markets. Going forward, the company hopes to capitalise on its well-known brand and achieve rapid expansion.

The company’s adventure began in Kolkata with the creation of its first tube factory. It then expanded into the production of lighting poles. As the company’s activities developed, it extended the capacity of its Steel Service Centre and created a Joint Venture with SAIL (Steel Authority of India Limited).

The company then expanded into infrastructure and road development. Significant milestones were reached between 2001 and 2010, including the commissioning of an automated structural rolling mill with a capacity of 0.12 million TPA and the installation of a TMT (Thermo-Mechanically Treated) rolling mill with a capacity of 0.30 million TPA. Furthermore, the company forged a strategic agreement with TATA to build a Continuous Galvanising Line.

In February 2018, the company erected a new TMT Mill with a capacity of 120,000 MT (Metric Tonnes) and began manufacturing of its self-branded Bansal Super TMT.

BMW Industries Limited has been involved in the processing of continuous galvanised lines on behalf of Tata Steel Limited (TSL) for over three decades. The company specialises in converting Tata Steel’s Hot Rolled (HR) materials into Galvanised Corrugated (GC) sheets, which are marketed under the well-known name ‘TATA Shaktee’. BMW Industries, the leading TSL conversion agency, offers galvanised sheets on a massive scale.

In addition, the company manufactures mild steel, as well as long and flat items such as tubular poles and buildings. It runs five manufacturing plants, two in West Bengal and three in Jamshedpur, Jharkhand. The West Bengal operations are dedicated to the manufacturing of mild steel, long, and flat goods, whilst the Jamshedpur units are dedicated to TSL conversion activities.

Today BMWIL is a secondary steel producer possessing more than 60 years of experience.

Business products

BMWIL is one of the few companies in India’s secondary steel sector that manufactures both longs (towers, structures, and TMT) and flats (pipes, galvanised plain, and galvanised corrugated). BMWIL also produces tubular poles/structures, gearbox line towers and rebars. It is also engaged in manufacturing & Processing of HRPO Coils, CR Coils, GP Coils, GC Sheets, MS and GI pipes, TMT rebars, etc; for marquee steel players in India.

Long Products includes: towers, structures, and TMT. The company works with Slitting, Shearing, Seconds Recovery Processing, MS Pipes and GI Pipes, Pickling, GP coils, GC Coils, and Sheets in the long product, TMT conversion, and Flat Products and operates the country’s biggest independent cold rolling and galvanising facilities

Flat Products includes: pipes, galvanized plain, and galvanized corrugated. It is also engaged in tube galvanization and the manufacture of tubular poles/structures, transmission line towers, and rebars.

In 1992, BMWIL agreed to convert raw steel into a variety of secondary steel products for a cross-section of the giant’s downstream clients. This partnership has increased in volume, income, responsibility, and product complexity throughout the years.

Company’s business has been classified in two parts mainly

Tolling business

In this business segment, BMWIL has longstanding partnerships where the raw materials provided by the principal are processed and customized to meet market demands. This collaboration is a source of pride for BMWIL due to a few key reasons. Firstly, the enduring relationship of over 25 years demonstrates the institutionalization of their value proposition. Secondly, BMWIL has seamlessly integrated its manufacturing facilities with those of the principal, ensuring no differences between them. Lastly, BMWIL’s values, processes, and practices align perfectly with those of the principal. As a result, customers not only receive a high-quality product but also the assurance of exceptional service whenever needed.

Company’s tolling’ business provides a range of products used in diverse industries

Proprietary business

BMWIL’s proprietary business consists of producing, branding, and selling items under its own name and account, as opposed to tolling services supplied on behalf of third-party principals.

BMWIL entered the proprietary product market in 2016, with direct sales to both commercial and retail clients.

• BMWIL’s private business is distinguished by many strengths:
• It is separated into B2B and B2C categories to allow for more client involvement.
• The company’s primary goal is to increase B2C market penetration in a specific region, Bengal, with the goal of reaching every district, even the most distant villages. BMWIL has strengthened its ‘Bansal’ brand, focusing on product reliability and durability.

Agreement with Tata Steel

Over three decades, the company has worked with Tata Steel Limited (TSL) to convert Galvanised Corrugated (GC) sheets using a continuous galvanising line. To prevent rusting, a protective zinc coating is applied to steel or iron. TSL’s roofing segment is represented only by the company itself. In 2014, the company engaged into a take-or-pay arrangement with TSL that was effective until FY21 for the conversion of hot-rolled coil into Galvanised Plain or Corrugated (GP/GC) sheets in exchange for a certain price. In addition, in Q4FY21, the business extended its volume and pricing agreement with TSL to acquire 80 percent of the unit’s entire capacity of 200,000 MTPA through FY24, without the take-or-pay arrangement.

With a capital expenditure of roughly Rs.400 crore, the Gamharia, Jamshedpur factory was strategically built up to satisfy TSL’s demand for GP/GC sheets. The proximity of BMW’s facility to TSL’s production location guarantees that the latter has cheaper logistical expenses. As a result, this TSL’s strategic relevance might continue to benefit BMW in the long run, ensuring enough revenue visibility and the sustainability of their solid business risk profile.

Further company Signed a deal with Tata Steel for the conversion of MS pipes at NH6, Howrah; the contract is for 40,000 tonnes and has the potential to earn Rs. 15 crores throughout the contract period of nine months to November 2023, with a renewal clause thereafter.

For the fiscal year ending September 23, the company successfully transported the first batch of TMT rebars from NINL Billet for TATA Steel.

Key Processes carried out by the company

• Continuous Galvanized Line (CGL) -: Company has a galvanising line capacity of 2,00,000 TPA and Currently, the entire line is committed to TATA Steel for manufacturing of ‘TATA Shaktee’.
• Slitting of HR Coils – : Roll slitting is a shearing operation that cuts a large roll of material into narrower rolls . In this process company has total capacity of around 5,72,000 tonnes per annum with Major customer for the process as TATA Steel.
• Tube manufacturing and Galvanizing services -: Company has operational capacity of 1,48,000 TPA where MS Pipes are manufactured from the slitted coil and are used for agriculture and irrigation purposes as well as Galvanised Pipes are manufactured from MS Pipe are used for plumbing works.
• TMT bars manufacturing Services -: TMT processing facility of 3,30,000 MT tonnes per annum and company has managed to secure long term orders of 3,00,000 MT per annum from TATA steel.

Financials

For the year ended March 23

• Net Sales stood at Rs 562 crore in March 2023 up 26% from Rs. 447 crore in March 2022.
• Quarterly Net Profit stood at Rs. 54 crore in March 2023 up 54% from Rs. 35 crore in March 2022.
• EBITDA stood at Rs. 130 crore in March 2023 up 23.9% from Rs. 105 crore in March 2022.
• EPS stood at Rs. 2.42 in March 2023 up 58.16% from Rs. 1.53 in March 2022.
• Total debt stood at Rs. 238 in March 2023 down 7% from Rs. 256 in March 2022.

For the Quarter ended Q4 FY 23

• Net Sales stood at Rs 135.24 crore in March 2023 up 15.56% from Rs. 117.02 crore in March 2022.
• Quarterly Net Profit stood at Rs. 16.29 crore in March 2023 up 218.3% from Rs. 5.12 crore in March 2022.
• EBITDA stood at Rs. 32.33 crore in March 2023 up 20.19% from Rs. 26.90 crore in March 2022.

Management’s comments

• Revenue is dropping mostly as the corporation reduces its share of low-margin items and focuses on high-margin categories.
• Management plans to reduce the debt to considerable low levels in the coming period.
• Over a 6-year period, the company successfully repaid about Rs. 300 crores in debt. As of FY15, the debt was at Rs. 538 crores. There are currently no big CAPEX (Capital Expenditure) initiatives in the works, and the emphasis is on using existing capital expenditure. The company spent Rs. 400 crores in 2014 on the Continuous Galvanised Line, which currently costs roughly Rs. 1000 crores.
• Currently, about 50% of cashflow generated is devoted towards debt reduction, with the objective of eliminating all debt by FY24. As a result, it is expected that the company will be debt-free in the near future.

Going forward

• BMWIL is dedicated to increasing its own business in tandem with India’s growing infrastructure developments and rising disposable incomes, which will result in higher steel consumption.
• The company successfully dispatched its first batch of TMT rebars for Tata Steel (NINL) during the quarter against the long-term contract entered in the first half of the current financial year.
• BMWIL is constantly improving operational efficiencies through the implementation of various measures, as a result of which our Manifit unit, which began operations in April’22, has successfully crossed a landmark production of 1,00,000 MT. The above business line will contribute an incremental revenue of Rs. 100 crores per year with healthy margins.
• Furthermore, the company has secured long-term orders, which will assists in creating a robust order book while providing us with strong revenue visibility in the future.
• The arrangement for the continuous galvanising line conversion of GP/GC sheets has been extended until 2024. This renewal is estimated to generate Rs. 2,000 crores in income throughout the whole 5-year contract duration. The contractual duration is currently three years long.
• Until 2025, the company has an agreement to produce about 3,00,000 MTPA (Metric Tonnes Per Annum) of TMT Rebars. This arrangement is estimated to earn Rs. 250 crores in income during the three-year contract duration, with PV (Purchase Value) on Key Consumables.

Conclusion

BMW Industries, originally known as Bansal Mechanical Works Pvt. Ltd, has established itself as a major industrial conglomerate in eastern India. The company specialises in the production of tubular poles, transmission line towers, and rebars, as well as the provision of steel maintenance centres and infrastructure services. Over the previous 6+ years, it has effectively returned over Rs. 300 crores in debt, greatly lowering its financial load. Because there are no big capital spending plans, the emphasis is on maximising current investments. The firm intends to become debt-free by FY24 by devoting about 50% of cashflow towards debt reduction and emphasising high-margin areas. This strategic strategy promotes financial discipline as well as increased revenue profitability. This makes BMW Industries worth exploring for long term.