Welspun Corp (WCL), flagship of the Welspun Group, has proposed to acquire the steel business of the demerged company Welspun Steel Limited (WSL). At a meeting held on 28 Jun ’21, the board of directors decided to propose the scheme of arrangement between Welspun Steel and Welspun Corp to NCLT for transfer of WSL’s steel division to WCL, subject to regulatory approvals.
WCL is also foraying into the manufacture of steel long products. Working towards this end, the company is setting up a greenfield TMT bar manufacturing facility, with a capacity of 350,000 tonnes (t) per annum through the proposed demerger of WSL from WCL, the company said while announcing its consolidated financial results for the quarter and full year ended 31 March ’21. The expected investment is INR 175 crore (plus soft cost) and the project is expected to be completed by Sept ’22.
The company is enhancing the capacity of its pig iron and ductile iron pipes from 250,000 t to 400,000 t, in what is to become one of the largest standalone single-location DI manufacturing facilities in India. The company forayed into the pig iron and DI pipes business by setting up a greenfield facility in Anjar. The expansion is to be funded through a combination of internal accruals and debt. The project is to be commissioned by Mar ’22. The project cost has also enhanced from the earlier INR 1,250 crore to INR 1,550 crore (plus soft cost), it is learnt.
The long products and pig iron and DI pipes businesses would be synergistic in terms of raw material sourcing, common infrastructure, technical manpower, management bandwidth, etc.
Net profit high, revenues low: The profit after tax (PAT) in Q4FY ’21 was higher by 15.3% q-o-q at INR 225 crore compared to INR 195 crore in Q3 on lower input costs and deferred tax credits.
Consolidated revenues were down 34.06% in Q4 at INR 1,819.31 crore. The company managed to cut operating and material costs sharply to maintain its operating margins. The big boost came from INR 121 crore of deferred tax credits in the quarter which resulted in the profit growth. On a sequential basis, net sales revenues were up 30.56% compared to total revenues in Q3 at INR 1,393.48 crore.
Pipe sales: In total operations, the company achieved more than 1,000 KTM of pipe sales during the pandemic. Sales volumes in Q4 were at INR 247 crore against INR 285 crore in Q3, down 13.5% q-o-q.
Order book status: The company’s current global order book is at 528 KMT, valued at INR 4,800 crore ($663 million).
Focus on water segment: The company witnessed a recovery in the water segment post the first wave of the pandemic. However, the second wave and all-time high commodity prices have slowed down activity in the water pipeline sector. Welspun is confident of seeing a bounce-back in demand for line pipes and ductile iron pipes in H2 FY ’22.
Continued focus on exports: WCL continues to stay focused in the exports market. The recent award of the Barossa order from the Australian market and a few other international projects clearly reflects revival in pipeline demand in the exports market. The company is in discussion with several customers across geographies and is optimistic of bagging new orders in the near future.
Outlook
The company feels strong demand and higher oil prices would likely spur demand for pipelines globally. Gas dominates the global mix, accounting for 82.7% of pipelines in pre-construction and construction stages.
With the emphasis on infrastructure, the new TMT facility may significantly contribute to growth.
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