Business Metric: Industry Specific (Industrials & Materials)

Overview

Sector-specific spreads and unit economics for metals, refining, chemicals and engineering - conversion charges, refining margins and pass-through terms.

Order-book visibility

The value of confirmed but unexecuted orders, usually expressed as a multiple of annual revenue, showing how much future revenue is already contracted
It is the standard disclosure for project-linked businesses - pipes, EPC, capital goods, defence - where revenue is booked on execution rather than on sale

Working capital - customer advances

Steel pipe and project equipment makers negotiate customer advances alongside price, so the buyer funds raw material purchase and manufacture. It is standard in made-to-order pipe and project supply, and unavailable in commodity sales
It is typically negotiated alongside price, and its availability differs sharply between government, private and export customers

PII (petrochemical intensity of a refinery)

The share of a refinery's output converted into petrochemical feedstock and derivatives rather than sold as transport fuel. Higher intensity means more of each barrel goes into polymers, aromatics and olefins
It is the central strategic response to peak transport-fuel demand: petrochemical consumption is expected to keep growing when petrol and diesel demand plateaus

Marketing margin / price freeze

State-owned oil marketing companies earn a marketing margin on retail fuel separately from refining. Retail petrol and diesel prices are nominally deregulated but were held unchanged for an extended stretch from March 2024
The freeze works both ways - margins compress when crude rises and expand when it falls, since the pump price follows neither

LPG under-recovery

The gap between the cost of imported LPG and the subsidised price at which domestic cooking gas cylinders are sold, borne in the first instance by the oil marketing companies
Unlike petrol and diesel, LPG remains effectively administered for household consumers, so under-recoveries accumulate until the government compensates - which has been irregular and is a standing budget request from the sector

New vs replacement - capital equipment spares

Capital equipment makers earn from spare parts, consumables and service on machines already in the field. For material handling, machine tools and engines the installed base generates revenue for a decade or more after the original sale
Aftermarket margins typically run well above original equipment margins

Formula pricing lag (Q-1/M-1)

Carbon black is sold to tyre makers on formulas that reset quarterly or monthly using the previous period's feedstock price. The lag means today's selling price reflects last quarter's input cost
It protects the spread over a full cycle but not within it

Spread - metal conversion charge (tolling)

Copper and aluminium extruders earn a fabrication margin per tonne for turning cathode or rod into extrusions, strips, tubes and wire. Metal is passed through at LME-linked prices on both sides, so this conversion charge is the entire economic return
It makes revenue a poor indicator of performance - a converter's turnover moves with the copper price while its actual earnings depend only on tonnage and charge per tonne

Spread - refining (gross refining margin)

The difference between the value of products a refinery makes and the cost of the crude it processes, expressed in dollars per barrel. It is the core profitability measure in refining and moves with product cracks, crude differentials and refinery configuration
Indian OMC GRMs fell from $10-12/bbl in FY24 to about $4-6 in FY25 on cycle normalisation, then held up in FY26 largely on discounted Russian crude

Spread - sponge iron to billet

The margin between the cost of sponge iron and the realisation on billets, which is the core economics of a secondary steel mill. Sponge iron is direct-reduced iron made from ore using coal or gas; billets are the semi-finished cast product re-rolled into bars
The spread compresses when ore and coal rise faster than finished steel, and widens when the reverse happens

Spread - HRC to CRC (cold rolling)

The margin between hot-rolled coil, the input, and cold-rolled coil, the output. Cold rolling reduces thickness at room temperature, improving surface finish, dimensional tolerance and strength
A standalone cold roller buys HRC at market and sells CRC at market, so the spread is the entire economics of the business

Spread - manganese alloys

Silico-manganese and ferro-manganese are the deoxidising and alloying additions used in virtually all steelmaking. The spread is the gap between manganese ore plus power and coke costs, and the alloy price
Unlike ferrochrome, manganese alloys serve all steel rather than only stainless

Spread - cable conductor (copper vs aluminium)

Cable conductors are copper or aluminium, and the choice is economic as well as technical. Aluminium has lower conductivity so needs a larger cross-section, but is far cheaper per unit of current carried
Both are LME-priced and passed through, so the cable maker earns a conversion margin rather than a metal position

Spread - carbon black (CBFS feedstock)

Carbon black feedstock oil is a heavy residual stream from refineries and crackers, and is the dominant input cost in carbon black manufacture. The spread between CBFS cost and carbon black realisation is the industry's margin
CBFS is crude-linked, so the input follows oil markets

Spread - cotton to yarn

The margin between raw cotton cost and yarn realisation, which is the entire economics of a spinning mill. Cotton is typically 60-70% of yarn cost, so the spread is thin and volatile
It widens when cotton falls faster than yarn prices and compresses when the reverse happens

Spread - cement (realisation less variable cost)

The cement spread - realisation less variable cost per tonne - was around Rs 2,704 in Q4 FY26, down over Rs 50 sequentially. Power, fuel and freight are the dominant costs, with petcoke and coal driving the fuel line
EBITDA per tonne diverges sharply between leaders and laggards

Spread - iron ore to sponge and pellet

Sponge iron is direct-reduced iron made from ore using coal, and pellets are agglomerated beneficiated fines. The spread between ore cost and sponge or pellet realisation is the merchant producer's entire margin
Induction and electric furnace steelmaking is the demand base, and freight radius to steel clusters limits how far product travels

Spread - poultry (broiler realisation less feed)

Poultry economics turn on the gap between broiler or egg realisation and feed cost, where maize and soybean meal are the dominant inputs. Both the output price and the feed price move independently, so the spread swings violently
Ethanol diversion has structurally raised maize costs

Spread - POY to textured yarn

Drawn textured yarn is made by texturising partially oriented yarn; twisting, covering and dyeing add further steps. Each stage earns a conversion spread over the input polymer or fibre
The base is a fragmented cluster industry, and power is a major cost

Working capital - steel wire conversion

Steel wire and wire rod converters tie up capital across a long operating cycle - rod bought and processed before a customer with negotiated credit terms pays. The cycle is structurally long because inventory sits at several stages of drawing and stranding
In steel conversion it is structurally high, because raw material must be bought and processed before a customer with negotiated credit terms pays

Working capital - electronics manufacturing

The gap between paying for components and being paid for finished goods. Electronics manufacturing is unusually exposed because components are imported with upfront payment or letters of credit while customers take extended credit
Rapid growth widens the gap in absolute terms even when the cycle in days holds steady

Working capital - state agency receivables

Payment delays from state governments, municipal bodies and utilities that buy through scheme-funded tenders. Approval chains, fund release from central schemes and local budget positions all sit between delivery and payment
The supplier funds the gap

Working capital - shipbuilding advances

Customer advances and milestone payments received before the corresponding revenue is earned, held as a liability until delivery. Warship and commercial vessel contracts carry large stage payments across multi-year builds
They fund working capital and often leave defence shipyards in a net cash position

Wire-rod pass-through

Steel wire rod is the primary input for fasteners, typically the largest single cost. Contracts with OEMs usually carry a price-variation clause that passes steel movements through with a lag of a quarter or so
The lag is the whole issue - the supplier absorbs the gap between input cost changing and selling price adjusting

Nickel & ferrochrome surcharge

Stainless steel is priced as a base price plus an alloy surcharge that passes through nickel and ferrochrome costs, which move on LME and global contract benchmarks. The 300 series contains substantial nickel; 400 series contains almost none
The surcharge mechanism exists because alloy inputs are too volatile to absorb within a fixed price

Zinc (LME) coating cost

Zinc for galvanising is priced off the London Metal Exchange, so a coater's second-largest input after steel moves with a global benchmark it cannot influence
Coating weight per square metre is specified by the customer, which fixes zinc consumption per tonne of output

Total cost of ownership - compressors (energy)

Compressed air is among the largest electricity consumers in a factory, and energy typically dominates a compressor's lifetime cost - the purchase price is a small fraction of what the machine costs to run over a decade
Selling on efficiency means selling on the customer's electricity bill rather than on equipment price

Capacity utilisation - crane rental fleet

Cranes and heavy equipment hired by the day or month rather than purchased, with the rental company owning, maintaining and often operating the machine. Utilisation - the share of days a machine earns - determines returns
It lets contractors access equipment without capital commitment

Naval order book-to-revenue

Defence shipyards carry order books running to several times annual revenue, because warship programmes take years to build and are awarded in large blocks
It is the standard disclosure for defence shipbuilding visibility

Cane arrears

Unpaid dues to farmers for cane already delivered, accumulating when mills cannot fund the mandated price from sugar realisation. Arrears have historically run into thousands of crores concentrated in Uttar Pradesh and Maharashtra
The draft 2026 control order proposes 15% annual interest on dues unpaid beyond 14 days, recoverable as land revenue

Capacity utilisation - cement (pricing threshold)

Cement pricing power depends on capacity utilisation crossing roughly 80-85%; below that, producers compete for volume and prices stay flat. Industry utilisation has run around 70-72% against capacity near 655 mtpa
Regional imbalances matter more than the national average because freight limits how far cement travels

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