Premier Explosives Limited (526247) Earnings Call Transcript
February 14, 2020
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to the Premier Explosives Limited Q3 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I'll now hand the conference over to Ms. Hina Agarwal. Thank you, and over to you, ma'am.
Thank you. Good morning, everyone. I, on behalf of Stellar Investor Relations, welcome you all to Premier Explosives Limited Q3 and 9M FY '20 Earnings Conference Call. We shall be sharing the key operating and the financial highlights for the quarter and 9 months ended December 31, 2019. We have with us today the senior management team of Premier Explosives Limited, Dr. A.N. Gupta, Chairman and Managing Director; Mr. C. Subba Rao, CFO; and Mr. Y. Durga Prasad, Director of Operation. Before we begin, I would like to state some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to the company's financial performance have already been e-mailed to you. Now I invite Dr. Gupta to share his initial remarks on the company's performance for this quarter. Over to you, sir.
Thank you for joining the call. The prevailing macroeconomic factors, the long rainfall and delayed defense orders led to the subdued performance during the quarter ended December '19. However, we are expecting pickup in pricing of detonators, volumes of exports and defense production, which should result in better performance of the company in the coming quarters. Government of India is contemplating the replacing of instantaneous detonators by shock tube detonators and ultimately with electronic detonators. This will act as a major disruption in the detonator market. PEL is ready with shock tube detonators. We have been marketing this for over a decade. And with electronic detonators, we can gain from positive trend...
Sorry to interrupt sir. Excuse me sir, this the operator. Sir, the audio from your line is sounding very soft. Can you speak a bit louder?
Okay. Is it okay now?
No, sir, it's still the same.
Now is it better?
Sir, a little better. Thank you.
You're welcome. Hello.
Yes, sir.
Is it better now?
Yes, sir, this is better. Please proceed. Thank you.
Should I repeat whatever I said earlier?
Yes, sir.
The prevailing macroeconomic factors, long rainfall and delayed defense orders led to subdued performance during the quarter ended December '19. However, we're expecting pickup in pricing of detonators, volume of exports and defense production, which should result in better performance of the company. Government of India is contemplating replacement of instantaneous detonators by shock tube detonators and ultimately with electronic detonators. This will act as a major disruption of the detonator market. PEL is ready with shock tube detonators we have been marketing over a decade, and electronic detonators, we can gain from the positive trend. The union budget and government's push for infrastructure development and revival of consumption in the economy will test overall scenario and affect the economic activities. Recent IMF projection of Indian GDP growth to 6% -- to 6.5% for 2021 indicates green shoots of pickup of economic activities during -- looking forward. Coming to defense explosives. During the quarter, the revenue saw a significant decline, mainly because the low order level compared to last year. As last year, we had order for Akash missile, which are completed. We have supplied more than 2,400 number of sustainer and booster range. But the government has released 4,000 worth of orders on BEL, but it has not translated into BEL to BDL and BDL to PEL. We are hoping that this will take place within this month. And we will be back into business of Akash missile. Having said that, the execution of orders in defense segment will pick up from next quarter and higher execution thereafter in the coming quarters. The major execution of chaff cartridges and flare cartridges order for -- order worth of more than INR 100 crores will commence from fourth quarter -- will commence from fourth quarter and will continue in next financial year. Recent order for RDX and HMX worth about USD 10.71 million, revised from earlier USD 9.63 million would be executed in 2021 from our coming up Katepally project. Defense being the strength of the country, the Government of India is proactive towards strengthening India defense sector. In the union budget 2020, Government of India increased allocation of defense sector by 4.63% to the tune of INR 3.18 lakh crores for 2019 and '20, which is 1.5% of India's GDP. The recent DefExpo 2020 is a step forward in the Prime Minister's target for $5 billion defense exports in the 5 years -- in the next 5 years. Regarding the sales, as mentioned in the last call, government has cleared the production of 6 squadrons of Akash air defense missile system worth about INR 5,000 crores. Bharat Electronics has signed the contract and it has not yet been transferred to BDL and BDL to PEL. In addition to this, the Astra and MRSAM missile, which are IP of Premier Explosives, are now in production stage, and we have already received the order for -- from BDL. Order for -- from ISRO for the strap-on motors is received and iron will be arriving, and production will start in probably next month. Update on Katepally project expansion, solid propellant plant has already been received and license from PESO for commercial production has been received. The trial production has already started and this will result into production for both ISRO as well as DRDL. RDX and HMX plants have also already received -- ready and we have received licenses from Excise Department of Government of Telangana and Pollution Control Board and awaiting license from Petroleum and Explosives Safety Organization. We will start the operation soon as the license are received, which are expected in a couple of days. Now I request CFO to share the financial performance.
Thank you. Good morning, everyone. The result presentation for the quarter has been uploaded on the stock exchanges' and on the company's website. I believe you all may have gone through the same. During the quarter ended December 31, 2019, the total revenue is INR 29.14 crores and PBT is negative INR 8.94 crore. On a 9-month basis, top line is INR 123.57 crores and a negative profit of INR 7.08 crores. Order book update. As of today, we have total orders worth INR 478 crores, out of which explosives business comprises of INR 82 crore, defense products INR 232 crores and services INR 164 crores. With this, we now open the floor for questions and answers. Thank you.
[Operator Instructions] The first question is from the line of N K Arora, an individual investor.
Sir, we had received a big order from Turkey. So when are the exports likely to begin exactly?
The order from Turkey will be executed as soon as RDX and HMX permission for our Katepally Plant is received in next 2, 3 days or 1 week maximum. After that, we will apply for permission for export, that is, it will go through the process for import export code, and we can start the production -- and we can start the export.
Secondly, sir, is there any effect of epidemic in China on our company?
Sorry?
China epidemic, is it affecting our company?
Coronavirus, coronavirus.
No, that will not affect the dispatch of RDX and HMX because the coronavirus in China has got nothing to do with this. And I don't think they export much of explosives of this nature.
In the Small Satellite Launch Vehicle, we have received the order for solid propellant. So in the Small Satellite Launch Vehicle, do you have liquid propellant also?
Small satellite vehicle. ISRO small satellite vehicle project.
Small satellite project, I don't think ISRO has been able to finalize that because we are very much in line with in -- to start the SSLV. In fact, we had a number of meetings with ISRO people on this, and we are waiting for them to finalize.
Okay, sir. And in the Akash missiles, we are getting order for propellant, but can we...
Sorry to interrupt, Mr. Arora. Sir, your voice is breaking up.
Okay. I'll just come back in the queue again.
The next question is from the line of [ Monica Arora from Man Finance ].
Sir, I wanted to ask that if we see your results during the quarter, your top line has registered a huge decline in revenue, whereas the operating profit has also declined. So sir, what is the reason for the same? And when do you see the things to normalize?
See, there has been 2 reasons, particularly one which is very, very prominent is -- that we completed the order for Akash missile. And the new orders were cleared by the government, and it has been placed on Bharat Electronics, that is still to be finalized on BDL and BDL has to then give it to Premier Explosives. Second reason has been because the monsoon, which normally is ending by September, it continued up to October and November, particularly in this area, that is, Rajasthan, Gujarat and Telangana, particularly. And that has affected the sale of detonators.
Okay. So sir, what is the scope for margin expansion once all these things normalize?
See, as I have told earlier, there is a change in the government policy that instantaneous detonators are being replaced with shock tube detonators. In fact, yesterday, there was a meeting in Delhi and earlier, there had been some meetings in various places in country. And they have decided that 25% reduction would be started with this year, 25% reduction in the next year and 50% thereafter. And ultimately, they want instantaneous detonators, which are used by the terrorists for blowing up caravans of CRPF or Army and other things. That will be completely replaced and would be with electronic detonators, [ it's a different thing ]. So what will happen is that the possibility of terrorists using that detonator for this particular purpose would be stopped.
Okay. So sir, then if I...
This will act as a total disruption of -- instantaneous detonator. This will be replaced by shock tube detonator. We make that for more than 10 years, and electronic detonator for which we are prepared.
Okay. So sir, when can we expect the company to generate free cash flows?
The company next -- only 1 month or so, we will be exporting the first consignment of the propellants to Israel and we'll be sending our first counter-measures to the Government of India, MoD. Because counter-measures -- this orders are received in bulk and we have -- you have to completely make that, put into 1 consignment, which is tested and approved by the government and by the MoD people and then we can dispatch it. So that could be about INR 11 crores itself.
Okay.
Yes. The date has been given as the middle of March.
[Operator Instructions] The next question is from the line of Kirthi Jain from Sundaram Mutual Fund.
First, I want to understand that when you will start this our Katepally facility, sir?
We are waiting for the license or clearance from the chief controller of explosives, that is in charge of PESO, that is Petroleum and Safety Organization, which is expected any time now. Anytime means it can come in today, it can come tomorrow, because there, all the questions have been answered and all that and we are waiting for it.
Okay, okay. Sir, just given that the prior year, you had highlighted the pricing erosion had happened in the Coal India explosives, sir, like what is the risk mitigation we are doing or the -- any other -- like, do we look -- envisage that through our trade channel route, we will be able to sell more and make up for it, sir?
See, what we have done in Coal India. When the prices are falling, that we have withdrawn our quotation for supply to Coal India Limited. And that is being replaced by order from private customers; that is, other customers in the same area at much higher prices. So we hope that the turnover may be lower. But the profitability will be better. Where the prices of Coal India had gone to INR 22,000 per tonne, we have got an order for INR 38,000 per tonne, but low volume. But overall, there would be a profitability which is -- which will be more than INR 4 crores.
Okay. Like sir -- like what revenues do you expect, sir, in the current year, full year or next year from both the segments? Any rough idea you can give, sir?
Yes. This year, we should be doing around INR 170 crores. Say, INR 122 crores is there till December. Another INR 50 crores, we're expecting in the fourth quarter. So 2021, yes, let us actually calculate based on the order on hand and then the expected date of commencement, certainly, it will be better than this year. Only the point would be, subject to Coal India, like our MD was saying, top line may be falling down, but we'll hope the profitability will be better.
Okay. Sir, like at least FY '19 numbers, we should reach in FY '21. Sir, like INR 240 crores business we had done in FY '19. We would be able to reach at least that much in FY '21 given that our defense order is healthy -- order backlog is healthy?
Yes. We are expecting that in '21, we would be exceeding what we did in last year.
Okay. With better margin, sir?
Certainly.
Because defense mix will be higher and also like the orders -- order taken have been selective?
Yes. Defense plus service and all that would be better than the previous -- previous year. And we would achieve better results. But every year, the disadvantage of the tough quarter, whatever we said now is to be taken with a pinch of salt.
Sir, how big are these like -- say this private order opportunity, sir, like as compared to, suppose say, if Coal India opportunities ex, private would be like 1/3 of it or 1/4 of this which we had highlighted, private would be how big, sir, [ suppose ] in compensating...
It's about 1/3, but that is very confidential, and we would not like to give the details of that.
Okay. No, no, I don't want the detail, but like in terms of the revenues, like we are doing -- we are having a loss of business, sir, but -- so will we be able to make up in revenue, the defense revenue next year -- I mean, sorry, in the explosives revenue next year?
Yes, certainly. This disruption, nothing can be said about it. It has just started yesterday. So this disruption in instantaneous detonators is going to totally change over the complete industry. And what will happen, only next quarter figures will tell me.
Okay.
We were expecting this for almost like 1 or 2 months, but you can't be sure until the government takes a decision. The decision was certainly expected in this line and we were fully prepared to, say, take the change.
Okay. Sir, then any other new product which will come, which can add significant business, sir, in the next 1 or 2 years?
Well, we have developed what's called spectral flares. So the counter-measures department would be further sort of reinforced. We'll have flares, chaffs and spectral flares. But the inquiry for spectral flares is around -- that again has come in last 2 days and all that. And that requires what is called airworthiness certificate, which will take about 12 to 8 months. But the inquiry which has come, that is asking for dispatch of material after 1 year. And we are the only people who are making the higher flares as well as spectral flares, and we hope that this would be a good business.
Sir, in terms of service orders, which you have, any other new service order we are looking to take or any opportunity coming our way in the services business?
See, the main 2 parts, ISRO as well as DRDL. So we have ISRO order for next 10 years. And DRDL is sort of send inquiry to us, we hope that we'll be qualified for that. As well as ISRO Trivandrum, they're also looking for services, but until and unless the order is placed on us, we can't say. That will make it to your inquiry.
Okay. So ISRO Trivandrum is under inquiry pipeline, that is the thing, right sir?
Exactly.
Okay. Sir, defense exports, like government is giving emphasis and all, sir, any movement we are seeing, sir, in terms of defense explosives being taken by foreign countries or to match their -- the local sourcing requirement, sir, are the defense -- are they buying into this industry, sir?
Certainly, and as I have already told you, that we have got the order for propellant from one of the European countries and also for RDX and HMX from Turkey. These are all exports only, no?
Correct, sir. But because of this, sir, with regard to -- like under the contract, they have to buy, sir, like offset...
You're saying offset?
Offset class, sir. I missed it, I was -- under offset class, are they buying, sir, like for S-400 missiles or RAFAEL? Are they -- say the -- anything they are buying products -- for those products, sir?
See, RAFAEL is, still the ink is green. It is still not very dry and as 24 -- again has same thing, the imports have not yet started. So we are certainly looking for offset requirement under both the orders.
Okay. Sir, in terms of order flow next year, what is the target we have in our mind, given the various opportunities you would have envisaged, like without any specific, what would be our target, sir, in terms of order flow? Like what would be for explosives, what would be for the defense, sir, in terms of order flow for FY '20?
Yes. From the perspective of 2021 financial year, like we have already discussed, the order for chaff on hand, about INR 100 crores. And the INR 76 crores is the RDX and HMX. These are the 2 major orders that we will be supplying. What would be in the pipeline are Akash, Astra and MRSAM. Astra and MRSAM is, okay, already received small quantities, but we are expecting them to be big, similarly Akash.
Okay. Akash you are mentioning is the add Akash right?
Yes, yes, yes.
Okay, okay. Sir, like cumulatively, these 3 names you told us, Akash, Astra, and MRSAM, put together, what would be the order flow, sir, next year, we are expecting?
It is difficult to say now because it will all depend upon the -- how fast they induct and all that. We can give you the -- give the figures, but it would be off the head.
Okay, okay, okay. Sir, like in the next -- and a little longer term, sir, like over next 2 years, like, sir, what is the revenue target we have, sir, at the company level? Anything we have planned, sir, broadly, sir, what is...
Let us not put any number for the time being because of whatever the -- this quarterly thing. Like our MD has always told, it will be taken with some pinch of salt. It is better to keep silent on that thing and let us come back to normal level and then talk about it.
The next question is from the line of Dhruvin Upadhyay from Sushil Finance.
Sir, first question of mine is, what is our strategy to stop our erratic sales growth? Because we can see that in some quarters our sales grew by around 30%. And this quarter, we have degrown by 30%. So how do you solve this problem? Or how are you planning to solve this problem, sir?
Yes. Whatever we have already explained, what is going to happen in the fourth quarter or the next financial year, these are all based on the orders on hand. We [ plan on ], say, irregular kind of number. In the commercial, it is based on the monsoons and other economic developments like mining and infra, that is one. Yes, that maybe relatively, it should be some kind of a smooth graph, but what has disrupted the Coal India order, which was -- we didn't want to take the order because if we have supplied in October to December, our loss would have been much more than what we have seen today. So that is where we were affected by the -- in the commercial line. In the defense, I mean we have to all agree that it is based on the order execution, it is like a project. Say, Akash we got -- we have supplied 2,400 over a period of 3 years kind of time. So there will be a gap in between before receiving another order. So this is very difficult to say why it is down and why it is more in 1 quarter because this is a natural phenomenon of the -- of our business, and there will be a U or V kind of graph will be there.
Okay. Sir, correct me if I'm wrong. Our commercial explosives business has always been kind of a bread and butter business, whereas the defense business has always been the alpha-generating segment for us. So is there any strategy that we have over the next 2, 3 years, where since you have mentioned, we'll be focusing on private players more, is there any target or strategy or an idea where you would like to normalize the segment first? Because I believe in the previous quarter, you had mentioned you have lesser focus in the commercial explosive business and more importance is being given to the defense business.
See, the commercial business is becoming very competitive and the prices are not stable. And you can see that Coal India, while we had to withdraw from the bidding, the other people have continued to do that. And now they are in trouble because the prices are lower than the raw material prices, and they're trying to put water into it -- into the explosive. So the letter which was issued by Coal India that this particular vessel which we're supposed to carry on and at this stage is carrying water, this vessel which is supposed to carry some lubricant is carrying water and all that. And a big inquiry is going on. We hope that this will not -- this will be taken very seriously and already WCL has coal, they're not taking enough explosive, because the prices are very low. One of our representatives has gone to Nagpur to say that, "Okay, if you give us the prices which are -- the earlier prices, then we are ready to supply you 40 tonnes per day." Like that, one after another, all the subsidiaries are going to come back. And say, "That's okay, fine, we'll take it, take the orders on risk purchase." That means, they will pay us whatever we want, but that will be deducted from the people who accepted the lower prices and are not supplying. So we hope that next 2, 3 months are going to be a little difficult. But soon, we are not going to sort of lose the business. We will get the business at our price.
Okay. And sir, there have been mentions by the government, they will be privatizing a couple of coal blocks and -- a number of coal blocks since Coal India is not able to meet its annual targets. What kind of opportunity do we see over here?
There is a lot of opportunity, but let there be some clarity, and then we can tell you. We are very upbeat about the privatization of coal mines and also people who want quality rather than the price. You see, we have got an order from Singrauli where the prices are INR 22,000 and INR 38,000. That itself says volumes about that there are some customers who want quality, they want to have a good blast rather than having a bad blast and then spending money to clear it up.
Right, right. And sir, relating to the fire that occurred in the Pedakonduru facility. Is there any loss or additional costs that we'll be incurring this quarter?
This quarter, next quarter is expected to be a good quarter. Normally, the fourth quarter is usually the best quarter. Apart from that, we are expecting good export as well as the defense supply.
Relating to the fire at the facility. Is there any additional cost or expense that will be incurring?
You're asking detail for the accident?
Yes, yes, about the accident.
That will not affect the -- our turnover anyway. It is the loss or whatever you are asking, we have already put the claim for the insurance. So when they process it and all that, we hope there will not be any major hit on that.
See, we are in explosive business and such things are expected quite often. But fortunately in the last 40 years, we have had only 2 major accidents so far, and we have been -- because of our consciousness about safety and all that. And we provide for insurance and other things and all that and all are remote. There is no loss of life, and everything is fine. We have 10 curing cabinets and 1 of them only blew up. So the production is not lost because of that. The other 9 curing cabinets are working perfectly okay in the old plant. In the new plant, again, we have some more curing cabinets which are being commissioned now.
Okay. Sir, relating to the Katepally plant, after expansion and after the -- all the approvals are in place, what kind of revenue potential would we look at from this plant?
See, because of the bad performance in the present quarter, I don't want to venture into the figures because, as I said earlier, the plant we've taken very seriously. But we certainly have very good plans for the new. Apart from that -- apart from the RDX and HMX, we also have plan for making ammunition that is 40 mm and above and below. And we are very seriously working on that.
Okay. And sir, relating to our order book, what kind of an execution time line do we have for the explosives and the defense business?
Yes, explosives, whatever the orders, it would be an 18 months kind of period maximum, because there is very small [ reference ]. Because after Coal India is not there, the order book has really come down. In the defense on the -- that chaff order will take longer time, in the sense it will be over a period of 18 to 20 months because it just started just during this quarter. So we will get a full year of '20-'21 and part of '21-'22, about that chaff order. And the recent order of RDX that is like within 1 year, that should be covered. Other things which are there from Israel and those things also, we are expecting to complete in the next financial year. Going down, this is a long period, you know.
[Operator Instructions] The next question is from the line of Nitin Gandhi from KIFS Trade Capital.
The CWIP, which is of approximately INR 50 crore, when do we see it likely to be getting commissioned? And what is the overall plan for that, if you can share something on that?
Like that project, like our MD has already told, consists of mainly 3 parts. One is solid propellant, the second is RDX and HMX. The third is ammunition. So all the licenses -- major licenses have come only for the RDX. HMX, we need to get the PESO, that is chief controller of explosives. That is expected at any moment now. But of course, these are about the licenses. About the capitalization or actual commencement of production, the trial runs will be started even before receiving every piece of paper. They are already receiving the raw materials for the solid propellant plant and doing the -- trial runs is going on. RDX also, we'll commence soon that water trial, it is like a [Foreign Language], we call it as a water trial. Those things are going on. So financially, if you ask, it is maybe by 31st March, we will be capitalizing that.
Okay. So corresponding interest and depreciation will kick in next quarter itself, right?
And that is 1 part in terms of finance, but only 1 point is, there is no interest as such because entire money of over INR 50 crores or INR 55 crores, which we have raised from [ QLP ], I can say, more or less, it has gone to this project alone.
Okay. So that means there is no increase in interest burden, but only depreciation...
Yes, for working capital, yes, you have to correct for that.
Working capital is anyway linked to the revenue. So, there is no -- anyways unlike this.
Yes, yes.
And other thing which I wanted to know, how are these margins in each of these segment?
This would be better. We cannot give quantification. We can only tell you qualitative, yes.
The next question is from the line of Keshav Garg from Counter Cyclical Investments.
Sir, I wanted to understand whether in this fourth quarter, we will break even at operating level?
We hope so, because going by the orders we are going to include in the fourth quarter, it should be certainly better than third quarter, no doubt. But how much better and all that, it is advisable not to say anything now.
Sir, and also, sir, in the present -- in the third quarter, our defense revenues also fell drastically year-on-year from INR 27 crores to less than INR 8 crore. Sir, even though we have a huge defense order book and, sir, our order book is at an all-time high, sir, so then why aren't we able to book revenues?
Yes. This is all the orders like we just now discussed, to be executed from -- 1 order is from fourth quarter. The other, that is Turkey order, export of RDX will commence in the new -- coming financial year.
Okay. And sir, since the major fall has been in our explosive revenue, and sir, since explosive any which way was a low-margin business for us, sir, so I mean, are we -- sir, and our order book, sir, explosives make only 17% of our order book. So, sir, what I want to understand is that, sir, is explosive segment critical for us as for breaking even? Or sir, we can do well on the back of defense segment only?
See what happens is, the commercial explosives order is essential to keep the company going. While the defense orders are sort of like cream on the top of the cake. So if you don't have the commercial, we don't get the big [ end ].
Yes. Sir, and so for the next financial year, sir, so what kind of -- sir, so this total order book, sir, so till when is it executable, around INR 480 crores order book?
See, about INR 50 crores, we are expecting in the next quarter. And the next year, we will come back to -- back to normal, like we sort of expect about INR 400 crores. And then next year, INR 500 crores and so on. Apart from that, the -- our joint venture, which is from the -- with a company in France, that is also getting active. And we are going to sign the agreement on the first week of March.
Sir, so basically, it's the highest revenue that we did till now was in FY '18, sir, around INR 266 crores. Sir, so how confident are you that in next financial year, FY '21, you will be able to do around INR 400 crores?
It will come because we have got a number of orders from defense, which are executable from the first week of March onwards.
Okay, sir. And sir, what kind of margin, sir, will we be able to do, sir? I mean -- sir, I mean, any range since our -- with operating leverage, our margin should also improve?
Yes, certainly. When the turnover goes up, the operating leverage will be helpful, but let us not go into always so much detail of some percentage, some number and all that, that is difficult to say, especially after this quarter result. We don't want to indulge in that discussion.
The next question is from the line of Kirthi Jain from Sundaram Mutual Fund.
My questions have been answered.
The next question is from the line of [ Raghav Rathi ], an individual investor.
I just wanted some balance sheet numbers around receivables, inventory, what is the current debt position? And what are the cash level?
Yes, basically, current debt fees is something like INR 6.5 crores. Working capital, cash credit is something like INR 30 crores. Those are the debt levels. And of course, corresponding, the inventories and all that are there.
So would it be fair to say the inventory and receivables levels are the same as previous quarter, Q2 end?
It would be around those levels, yes.
Okay. And second question is around the bimodular charge system that we are in talks of and you touched briefly in the previous question -- in the response to previous question. Sir, we had heard in the news that NEXTER was -- the contract between Pelgel and NEXTER would be signed only on receipt of orders. So are we seeing some traction from the government's end on this, where they're placing orders or they're placing some trials -- orders for trial?
See, BMCS particularly -- the order for BMCS has to come from the government, but they are extending the last date for the quotation and I think the validity will be over on the 4th of October -- 4th of April. So after that, we're going to revise prices and do it. But nothing is in our hand, until the order is placed by the government.
Okay. But there is traction from the government's end to push this forward in the current budget?
The 7 RFIs which are -- RFEs which are sort of issued, none of them has come to fruition. Every time they're getting extended.
Okay. So just -- okay, got that, sir. Just an extension of the same. Are the -- so when we talk about the BMCS with NEXTER as NATO grade. So what is the applicable across the new artillery systems that the government is procuring in terms of Dhanush, Sarang, et cetera?
NEXTER is already supplying -- or in the process of supplying the same ammunition BMCS for the 155 mm guns.
The next question is from the line of Kamlesh Joshi from Essar Power. As there is no response from the current participant, we will move on to the next, that is from the line of Kirthi Jain from Sundaram Mutual Fund.
Sir, you were highlighting that we are manufacturing explosives of differentiated quality and sir, can you, just for the benefit of everybody, sir what is the differentiated quality and how uniquely our product is positioned as compared to peers? And you had highlighted that the bad blast and all those things, can you explain that concept, sir, for the benefit of us?
See, we are making explosives of the standard quality. Those who have accepted the pricing of INR 22,000 or INR 22,500, they are sort of diluting the explosive. There is only that much of differentiation. We don't want to do -- put water into our explosives and dilute it. So we have withdrawn from that. As the prices are not sort of doable, we have withdrawn from the bidding. We are not saying that our explosives are better than others, but we will not dilute them for the sake of getting the order.
Okay. Dilution, in the sense, what happens, sir? Like, can you -- I mean...
Diluting is putting water into it.
Ultimately, we are branding it as 100 grams, but the [ biscuit ] supply maybe 80 grams.
80 grams. So 20 grams of water you're putting.
Okay, okay. So -- no, sir, because I don't know because chemically what happens?
No, no. We are sort of in the lighter vein, diluting means you just don't give the proper material to the customer. It will weigh like 100 grams, but it will contain only 80 grams of water -- of explosives. So ultimately, the customer is going to get the performance of 80 grams only. So after sometime, after 1 or 2 blasts and all that, they will come back to us saying, okay, [ Foreign Language ] but give us standard explosives.
Okay. Sir, but doesn't those consignment will get rejected once on the trial testing or once they go on to field, after like, 1 or 2 months, sir?
[ Foreign Language ] All -- everything is done, but it's a government customer and you are L1. So what will you do? The customer still goes on buying that till he gets a failure. When he gets a failure, then in that case, he is ready to pay at a risk purchase price. The risk purchase price, they have to justify paying a higher price and debiting it to the customer who has got L1 price. Are you clearer or not?
I'm clear, sir. I'm clear, sir. Just out of knowledge, I asked, sir, for knowledge sake.
Yes. So it is like in the cement, instead of mixing cement, you will mix the sand, it will be coming to required quantity, but what about the quality. That is only the...
After some time, the building or the bridge you are building is going to collapse. If you add cement, you add sand and cement. That's only an example.
The next question is from the line of Kamlesh Joshi from Essar Power.
Sir, just wanted to know, I'm -- I have put in my hard earned money to the stock around INR 200. So when I will be able to free from this because I wanted money now?
I wish I can help you.
Sir, any guess or idea, because...
Obviously, we are here working only to see that your money is not only safe, but it also grows. So when it grows, you only get advantage, we don't get advantage.
Yes. That's correct, sir.
If the things were in our hands, so far for 40 years, we have been sort of having, but we never had a bad quarter like this and we were very, very sorry about this quarter and let's face it. We are very much sorry about this fiasco, and we hope that it will not happen again. Because these are things which are beyond our control, otherwise why should it happen.
No, no, I'm with you, sir. And then, we should not compromise on quality with customers because that is the trust which we are building with the customers.
Absolutely. That is the reason why we had to take a beating and face this sort of a question from you rather than facing a mad customer.
The next question is from the line of [ Raghav Rathi ], an individual investor.
Sir, just wanted to check if we have exhibited this time at the Defense Expo? And if, yes, what has the response been?
Sorry, can you repeat the question? You were breaking actually.
Can you hear me better now, sir?
Yes.
I just wanted to check if we have exhibited at the Defense Expo in Lucknow this time? And what has the response been like?
We don't sort of exhibit any of the DefExpo because those who are going to buy our product, they know all about our product. And we don't sort of -- we just visit DefExpo to see if there is any foreign company, which is -- which -- who can help us in new products. So we have not exported in the -- we have not exhibited in the DefExpo. We had also not exhibited in the previous DefExpos.
Okay. Got that, sir. Sir, any other defense -- any other marketing channels that we are exploring in terms of defense exports? For example, there -- do we use the defense attaches in other countries, Indian Defense Attaches? And how is the relationship with them?
See, our relationship is good. We also attend the Eurosatory and all that. The exhibition, which is held by Europe and all that, European companies where almost everybody from the globe comes to exhibit, that and all. We visit them and we are executing basically, mainly the orders which are coming to us. Our reputation is known to customers in the country and abroad.
The next question is from the line of NK Arora, an individual investor.
Sir, my question is that ISRO is opening up very fast. They want to privatize PSLV itself. So are we looking at any new products like strap-on motors, we are already supplying. Are we looking for anything new to supply to the ISRO?
We are a regular supplier to ISRO, and we are in touch with them. We're in touch with the top as well as all bottom people and all that in ISRO. And we are always in -- we are setting up a unit which is very close to ISRO and we hope that whatever the business opportunities come from ISRO, we are part of that.
Sir, any update on land allotment [ near SHAR ], which we are supposed to get?
We got 1 or 2 inquiries and all that. But this -- the DefExpo which was held in Lucknow, we have made a contract with the people from Andhra Pradesh, and we have been given choice of 3. We'll visit them and then select 1 of them and then we'll take up.
L&T has set up a big facility for inert missiles at Coimbatore. So is it possible to supply any propellants or warheads to them also?
L&T.
Yes. L&T is an integrator, they are not the user. The user is MoD, Ministry of Defense. L&T or Adani or other people, they're like integrators and L&T is not in the picture. L&T and Premier, we have got very good relationship, and if we get the order, we go to them and they get the order, we get to them.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments.
Yes. Thank you all. Like our MD has told you, it is not a good quarter at all, but we are trying our best to improve that. So we hope this quarter we'll be in a good position. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Premier Explosives, that concludes today's conference. Thanks for joining us and you may now disconnect your lines. Thank you.
Read the full transcript via the API
You're viewing the first half of this call. Get the complete Premier Explosives Limited transcript - plus 251,000+ transcripts from 12,000+ companies, speaker segments and full-text search - through the EarningsAPI REST API or hosted MCP server.
Get an API key View API docs →For developers and AI pipelines
Programmatic access to Premier Explosives Limited earnings transcripts and 251,000+ others is available through the
EarningsAPI REST API and the hosted MCP server.
Quarterly plans from $105 - full transcripts, speaker segments, full-text search,
and the /api/v1/transcripts/recent polling endpoint for ETL pipelines.