India: Jindal SAW posts total income growth of 27% y-o-y in Q1FY24

Jindal SAW's total income (standalone) for Q1FY'24 stood at INR 38,312 million, higher by 27% compared to INR 30,190 million in Q1FY'23, the company reported recently.

EBITDA (standalone) stood at INR 6,148 million in Q1, up by 141% y-o-y from INR 2,548 million in Q1FY'23.

Profit after tax (PAT) rose by whooping 885% y-o-y to INR 2,768 million in the first quarter of FY'24 against INR 281 million in first quarter of the previous financial year.

In the first quarter of fiscal year 2024, the company logged an increase in sales and profit margins compared to the same period last year. This was due to an increase in sales volume and a favourable business mix.

Additionally, raw material prices have become steadier, and the company's ability to complete projects has improved. It has have a constant stream of orders worth more than $1.4 billion, which indicates a higher success rate in converting potential orders into confirmed ones.

Highlights:

1. Order book position: The company's current orderbook stands at around $1.4 billion out of iron and steel pipes orders are around $1,391 million and $7 million are pellet orders.

The order book consists of approximately 34% of orders from global markets, indicating a positive change in market conditions worldwide, especially in the Gulf region where there is a significant emphasis on investing in smart cities infrastructure. These orders are expected to be completed within the next 12-18 months.

2. UAE operations: Jindal Saw's subsidiary in Abu Dhabi, UAE experienced some challenges in operations and profitability in the fiscal year 2023. However, the first quarter of fiscal year 2024 has seen an improvement in overall market demand.

In this quarter, the company sold approximately 43,000 t of ductile iron (DI) pipes compared to 40,000 t in the previous quarter and 150,000 t in the entire fiscal year 2023.

3. Sathavahana Ispat Limited: Sathavahana Ispat Limited (SIL) was purchased by JSAW through the NCLT process. The conditions outlined in the Resolution Plan were met on 26 April resulting in the merger of Sathavahana Ispat Limited with the company. As of now, the manufacturing facilities are up and running.

SIL which is strategically located to cater to the south Indian market is engaged in the manufacturing and selling of DI pipes, metallurgical coke and pig iron and generation and sale of power. The company has a capacity of 250,000 t mini blast furnace and 210,000 t DI pipe with 400,000 t of coke facilities.

4. Update on Jindal ITF Ltd v/s NTPC case: Jindal ITF Limited, a subsidiary of Jindal SAW Limited, won a final arbitration award in a dispute with NTPC Limited regarding contractual terms.

The award granted various claims worth INR 1,891 crore, plus interest and taxes. Currently, both parties have filed petitions with the High Court of Delhi, and the case proceedings have been postponed several times. The next hearing is set for the end of August.

5. Joint venture with Hunting Energy Pte Ltd: The company has entered into a collaboration with Hunting Energy Pte Ltd Singapore to set up precision machine shop for premium connections which is expected to start production in the next financial year.

Outlook: The pipe industry is expected to be in a good state due to various factors both in India and internationally. India, being one of the few large economies that is predicted to grow steadily, is attracting extensive investments in infrastructure development across different sectors.

The global oil and gas investment cycle is moderate, with more focus on maintenance rather than expanding capacities, although there are some opportunities for growth. Middle Eastern countries are also investing in projects that aim to improve the quality of life for their citizens and bring about economic transformation.