Welspun Corp (WCL), which had proposed to acquire the steel business of the demerged Welspun Steel (WSL), is awaiting approval under SEBI’s Listing Obligations and Disclosure Requirements, 2015, before filing the scheme with the National Company Law Tribunal (NCLT), the company said.
It may be recalled the board had decided to propose the scheme of arrangement between WSL and WCL to NCLT for transfer of the former’s steel division to the latter, subject to regulatory approvals.
The company also expects topline of INR 1,500-1,800 crore upon commissioning of the new Anjar facility and aims to reach optimum level of utilisation in the next financial year, the company said while announcing its Q1 FY’22 results.
Highlights of Q1 FY’22
Net profit and revenues low: The profit after tax (PAT) in Q1 FY’22 was lower by 57% q-o-q at INR 97 crore compared to INR 225 crore in Q4 FY’21. Meanwhile, consolidated revenues were down 37% in Q1 at INR 1,299 crore compared to INR 2,069 crore in the previous year owing to delay in projects.
Pipe sales: In total operations, the company achieved 175 KTM of pipe sales in Q1 against INR 247 KTM in Q4, down 29% q-o-q. On a yearly basis, sales volume declined by 21% compared to 222 KTM in Q1 FY’21.
Order book status: The current global order book stands at 487 KMT valued at INR 4,500 crore (US $606 million).
Challenges in the water segment: The all-time high commodity prices and delayed payments from the government had slowed down activity in the water pipeline sector. However, Welspun is optimistic of seeing a bounce-back in demand for line pipes and ductile iron pipes in H2 FY’22 as allocated funds have started coming in from the government.
Continued focus on exports: Due to higher oil prices and low interest rates globally, Welspun is in discussions for several export orders. These opportunities are mainly for gas and slurry pipelines and are spread across Australia, Malaysia, Middle East, East Africa and Chile. WCL is well placed to win a large chunk of these orders in due course, the company said.
High steel prices: The surge in raw material prices impacted the costs of major projects, despite the optimistic demand scenario. As a result, delays in project implementation in the water segment and project costs had to be revised upwards. Sewage treatment capacities are expected to boost the demand for DI and HSAW pipes.
Update on US business: Currently, Welspun does not have much visibility for new orders at its US facility in Little Rock and has undertaken cost rationalisation measures as midstream companies are cautious about regulatory issues and environmental opposition. The company is anticipating a revival in the medium term due to the current high oil prices and improving economic conditions.
Update on Saudi business: The Saudi business was impacted by a sharp increase in steel prices. However, as of now, all orders in hand are secure for WCL.
Commenting on the results, B. K. Goenka, Chairman, Welspun Group, said, “Demand is expected to recover supported by the government’s thrust on creating water supply and gas pipeline infrastructure. We have built a solid foundation with our strong cash reserves, ESG initiatives and business diversification plans, and are confident about our future growth prospects.”
Outlook
Welspun Corp sees good demand in the export markets for LSAW pipes in oil and gas, primarily from Latin America and Australia. In the US, the company will be executing the pending orders by the next quarter. Meanwhile, the Saudi market is buoyant and more traction is expected in Q2 and Q3 FY’22.
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