India: Jindal SAW sees robust growth in Q2FY24; Order book remains strong

Jindal SAW's total income (standalone) for Q2FY'24 stood at INR 46,113 million, higher by 37% y-o-y compared to INR 33,670 million in Q2FY'23, the company reported recently.

EBITDA (standalone) stood at INR 7,513 million in Q2, up by 150% y-o-y from INR 3,006 million in Q2FY'23.

Profit after tax (PAT) rose by whooping 470% y-o-y to INR 3,482 million in the second quarter of FY'24 against INR 611 million in second quarter of the previous financial year.

The company's sales and profitability increased in Q2FY'24 due to volume growth in nearly all product categories. Raw material prices stayed steady, which helped to keep the business running and profitable.

Highlights:

1. Order book position: The company's current orderbook stands at around $1.44 billion out of which iron and steel pipes orders are around $1,409 million and $31 million are pellet orders.

The company's order book includes nearly 30% of orders from global markets, which presents a significant opportunity for exports. These orders are scheduled to be completed in the next 12-15 months.

The company is primarily serving esteemed customers in the MENA region and despite the volatile geopolitical situation in the MENA and GCC regions, company anticipates that the business outlook will remain positive in the coming quarters.

2. UAE operations: Jindal Saw Gulf LLC's UAE subsidiary in Abu Dhabi has seen an improvement in order execution, resulting in higher sales of DI Pipes of nearly 59,000 metric tonnes (MT) in Q2FY'24 compared to nearly 43,000 MT in Q1FY'24.

The UAE subsidiary has an order book of 124,000 MT, which is scheduled to be executed over the next 9-12 months.

3. Sathavahana Ispat Limited: The National Company Law Tribunal (NCLT) in Hyderabad approved the company's resolution plan for Sathavahana Ispat Limited (SIL) on 31 March, 2023. All of the plan's prerequisites were met on 26 April, 2023, and as a result, SIL was merged with the company on that day. As of now, the manufacturing facilities are up and running at capacity utilisation of 60-70% and by next year it is expected to run at 80-90% capacity.

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 tonnes (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 December.

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. Commercial production of the JV has commenced in September 2023.

Outlook:

The order book position has been consistent in recent quarters, indicating that more inquiries are being converted into confirmed orders. This suggests that market conditions are favourable.

The company's current execution pace provides visibility into performance for the next 12-15 months, and additional order inquiries suggest that momentum will continue.

As for pipe segment, company is expecting demand to grow at healthy rate of 10-15% per annum.