Interesting Players in Steel Pipes Space in India

Companies in the business of manufacturing steel pipes are set to become beneficiaries of India’s $10 billion push to expand its natural gas network to more of its urban masses and cut pollution. In Union Budget 2020, the government plans to expands its national gas grid to 27,000 kms from existing 16,200 kms.

In the article below, we look at some interesting players in steel pipe space including Welspun Corp., Maharashtra Seamless Ltd., Ratnamani Metals & Tubes Ltd., Jindal Saw, and Surya Roshni Ltd. which stand to benefit.

[1] Welspun Corp Limited

Welspun Corp Limited (“Welspun” or the “Company”) is one of world’s-leading welded line pipe manufacturer, and the flagship company of the Welspun Group. The Company is an end-to-end service provider, offering comprehensive pipe solutions for a wide range of applications – from oil and gas to water – for offshore and onshore projects.

Manufacturing – Global manufacturing presence with ~2.5 million MT capacity. The Company operates through its manufacturing plants in India, USA and the Kingdom of Saudi Arabia and has presence in over 50 countries across the globe.

Products

[1] HSAW Pipes – 18 – 140 inch diameter, 6mm to 25 mm. Used for Onshore oil, gas & water transmission

[2] LSAW Pipes – 16 – 60 inch diameter, 6 mm to 43 mm. Used for Onshore / Offshore oil & gas transmission

[3] ERW/HFIW Pipes – 1.5 – 20 inch diameter, 4 mm to 14 mm. Used for Onshore O&G transmission and Downstream O&G distribution.

Clientele

Financial Position

Particulars

FY15

FY16

FY17

FY18

FY19

Revenue (In Rs. Cr.)

8,450.49

7,235.51

5,898.71

6,363.29

8,675.34

Growth

-14.38%

-18.48%

7.88%

36.33%

EBITDA (In Rs. Cr.)

842.21

777.70

512.41

581.27

294.94

EBITDA Margin

9.97%

10.75%

8.69%

9.13%

3.40%

EBIT (In Rs. Cr.)

405.71

391.22

126.33

323.11

35.21

EBIT Margin

4.80%

5.41%

2.14%

5.08%

0.41%

PBT (In Rs. Cr.)

231.27

263.23

115.22

281.80

270.63

PAT (In Rs. Cr.)

69.04

151.81

26.43

175.67

59.85

PAT Margin

0.82%

2.10%

0.45%

2.76%

0.69%

EPS (In Rs.)

2.62

6.27

1.00

6.82

2.57


[2] Ratnamani Metals & Tubes Limited

Ratnamani Metals & Tubes Limited (“Ratnamani Metals” or the “Company”) manufactures Nickel Alloy / Stainless Steel Seamless and Welded Tubes/Pipes and Titanium Welded Tubes.

The Company is one of the  leading manufacturers of Carbon Steel Welded Pipes (ERW, L-SAW and H-SAW), Stainless Steel / Carbon Steel Pipes with 3 Layer PE / PP Coating in India

Ratnamani’s manufacturing facilities are located at Chhatral & Indrad (near Ahmedabad) and Bhimasar (near Gandhidham, Kutch), in the state of Gujarat, India.

PRODUCTS

  • Nickel Alloy / Stainless Steel Seamless Tubes
  • Stainless Steel Welded Tubes
  • Stainless Steel Seamless Pipes
  • Stainless Steel Welded Pipes
  • Titanium Welded Tubes
  • Carbon Steel Welded Pipes (ERW, L-SAW and H-SAW)
  • Stainless Steel / Carbon Steel Pipes with 3 Layer PE / PP Coating

Installed Capacity –  

  • Stainless Steel Tubes / Pipes – 28,000 TPA
  • Carbon Steel Pipes – 350,000 TPA

ERW pipes are used for city gas distribution (CGD). Currently CGD facility is operating at a capacity utilisation of 80%. The current ERW capacity is of 75,000 tonnes.  With healthy demand for ERW pipes for CGD, the Company plans to increase the capacity by 1.5x with a capex of Rs. 25-30 Cr.

Domestic Clientele

[1] PETROCHEMICAL & REFINERY – Reliance Industries Limited, HPCL, BPCL, IOCL, MRPL

[2] OIL & GAS – ONGC, GAIL, GSPL, EIL, Oil India, Cairns Energy, IOTL, HMEL

[3] POWER – Nuclear Power Corporation of India, BHEL, NTPC,  Siemens; Alstom Power, Coastal Gujarat, Reliance Energy, Adani Power, Lanco, MAHAGENCO, Bajaj Power

[4] FABRICATORS – L&T, Godrej & Boyce Manufacturing Co. Ltd, ISGEC

[5] FERTILISER – NFL, IFFCO, GSFC, GNFC, KRIBHCO, RCF

[6] DEFENSE – Brahmos Aerospace, DRDO, Ordnance Factory Board, Goa Shipyard, Hindustan Shipyard, Bharat Dynamics

International Clientele

Financial Position

Particulars

FY15

FY16

FY17

FY18

FY19

Revenue (In Rs. Cr.)

1,676.81

1,717.80

1,411.83

1,766.75

2,754.90

Growth

2.44%

-17.81%

25.14%

55.93%

EBITDA (In Rs. Cr.)

300.35

285.66

256.92

265.90

406.51

EBITDA Margin

17.91%

16.63%

18.20%

15.05%

14.76%

EBIT (In Rs. Cr.)

245.99

228.89

197.22

205.29

344.09

EBIT Margin

14.67%

13.32%

13.97%

11.62%

12.49%

PBT (In Rs. Cr.)

262.12

240.39

205.22

227.86

370.55

PAT (In Rs. Cr.)

173.45

165.29

144.06

151.77

252.92

PAT Margin

10.34%

9.62%

10.20%

8.59%

9.18%

EPS (In Rs.)

37.12

35.37

30.83

32.48

54.13

[3] Maharashtra Seamless Limited

Maharashtra Seamless Limited (“Maharashtra Seamless” or the “Company”) is a leading manufacturer of seamless and ERW carbon & alloy steel pipes and tubes in India.

Products – ERW Pipes, Seamless Pipes and Coated Pipes.

Financial Position

Particulars

FY15

FY16

FY17

FY18

FY19

Revenue (In Rs. Cr.)

1,354.67

1,018.68

1,434.22

2,150.21

3,072.71

Growth

-24.80%

40.79%

49.92%

42.90%

EBITDA (In Rs. Cr.)

105.48

38.45

224.90

311.04

668.61

EBITDA Margin

7.79%

3.77%

15.68%

14.47%

21.76%

EBIT (In Rs. Cr.)

74.76

-32.66

153.94

234.81

588.99

EBIT Margin

5.52%

-3.21%

10.73%

10.92%

19.17%

PBT (In Rs. Cr.)

128.97

30.85

196.34

258.13

618.95

PAT (In Rs. Cr.)

117.72

-24.31

123.36

210.73

234.20

PAT Margin

8.69%

-2.39%

8.60%

9.80%

8%

EPS (In Rs.)

17.57

-3.63

18.41

31.45

34.96

[4] Jindal Saw Limited

Jindal Saw Limited (“Jindal” or the “Company”) manufactures

  • SAW Pipes (Submerged Arc Welded Pipes) and spiral pipes for the energy transportation sector;
  • Carbon, alloy and seamless pipes and tubes for industrial applications; and
  • Ductile Iron (DI) pipes & Fittings for water and wastewater transportation.

Customers include world’s leading oil and gas companies, water bodies as well as engineering companies engaged in constructing oil and gas gathering, transportation, power generation and other industrial applications.

Installed Capacity

  • SAW Pipes – The total installed capacity stands at approximately 2 million MTPA.
  • Ductile Iron Pipes (DI Pipes) – 0.8 MTPA
  • Seamless Pipes – 0.4 MTPA

Financial Position

Particulars

FY15

FY16

FY17

FY18

FY19

Revenue (In Rs. Cr.)

8,207.83

7,702.58

7,070.12

8,478.23

12,117.00

Growth

-6.16%

-8.21%

19.92%

42.92%

EBITDA (In Rs. Cr.)

878.64

772.17

813.95

1,016.44

1,475.05

EBITDA Margin

10.70%

10.02%

11.51%

11.99%

12.17%

EBIT (In Rs. Cr.)

543.16

444.23

476.54

652.96

1,078.77

EBIT Margin

6.62%

5.77%

6.74%

7.70%

8.90%

PBT (In Rs. Cr.)

73.16

-63.27

105.76

229.94

609.71

PAT (In Rs. Cr.)

-14.47

-40.16

113.77

178.50

850.16

PAT Margin

-0.18%

-0.52%

1.61%

2.11%

7.02%

EPS (In Rs.)

-0.45

-1.26

3.56

5.58

26.59

[5] Surya Roshni Limited

Surya Roshni Limited (“Surya” or the “Company”) is a leading manufacturer in India for Fans, LED Lights, Steel Pipes, Home Appliances and many more.

The Company is the largest exporter of ERW Pipes and largest manufacturer of ERW GI pipes in India under Brand “PRAKASH SURYA”

Products – ERW Steel pipes (GI, Black, Hollow section), Spiral, API, 3LPE coated & CR sheets

Exports – More than 50 countries (UAE, Australia, Egypt, EU, Canada, US etc.)

Marketing Network – Over 250 Dealers and 21,000 Retailers (B2C – 70%)

Installed Capacity

  • ERW Pipes – 900,000 MT
  • Spiral – 200,000 MT
  • CR Sheets – 115,000 MT
  • 3 LPE Coating – External; 1,850,000 sq mtr, Internal; 1,100,000 sq. mts

Financial Position

Particulars

FY15

FY16

FY17

FY18

FY19

Revenue (In Rs. Cr.)

2,857.10

2,964.16

3,883.53

4,931.16

5,977.04

Growth

3.75%

31.02%

26.98%

21.21%

EBITDA (In Rs. Cr.)

223.09

242.38

313.02

345.93

372.05

EBITDA Margin

7.81%

8.18%

8.06%

7.02%

6.22%

EBIT (In Rs. Cr.)

167.05

181.37

229.41

258.62

283.54

EBIT Margin

5.85%

6.12%

5.91%

5.24%

4.74%

PBT (In Rs. Cr.)

61.78

86.79

117.57

156.12

172.48

PAT (In Rs. Cr.)

54.09

63.10

86.28

108.04

120.88

PAT Margin

1.89%

2.13%

2.22%

2.19%

2.02%

EPS (In Rs.)

12.34

14.40

19.68

19.86

22.22

View – Of all the players in the steel pipe space, we like Ratnamani Metals and Tubes Limited. What I like most about the Company is that it operates with zero debt which is unique for the sector. For this reasons Ratnamani’s margins (despite falling EPS because of its expansion activities) look much healthier than the top players in the segment. Despite lower sales turnover, Ratnamani Metals reports a similar net profit number to the largest player in the industry.