India: Maharashtra Seamless Ltd's production falls by 24% q-o-q in Q1FY'24

Maharashtra Seamless Ltd's production volumes dropped q-o-q in April-June, 2023 (Q1FY'24) owing to planned shutdown of their Telangana plant.

The company's planned capex for FY'24 to FY'26 is INR 852 crore. The company plans to spend the same on upgradation of plant and not on capacity expansion. The company also stated that no external debt will be required and the capex will be funded from internal accruals.

The company is planning to expand and upgrade its United Seamless Tubulaar Pvt. Ltd. (USTPL), Narketpally plant facilities with heat treatment, finishing facilities and EMI for capacity enhancement along with a solar plant (captive).

They also plan to expand and upgrade its Maharashtra Seamless Ltd. (MSL), Mangaon plant facilities with a complete line for cold drawn pipes including pilger and drawbench along with Oil Country Tubular Goods (OCTG) line and billet pre-heating surfaces.

At the MSL, Nagothane facilities their plan is to upgrade hot mill to Premium Quality Finishing (PQF) mill, an EMI machine, 3 roll sizing mil, flying saw and ultrasonic testing machine, mill upgrade with annealer, hydro, ultrasonic testing (ERW) and electronic upgrade of EMI and ultrasonic testing machine (OCTG).

Other highlights:

Production falls q-o-q: The company's production fell 24% q-o-q to 115 kmt in Q1FY'24 compared with 151 kmt in the last quarter. Y-o-y production declined 7% as against 124 kmt in Q1FY'23. Production fell due to shutdown undertaken in the Telangana plant.

Sales down q-o-q: Sales volumes fell by 23% q-o-q to 111 kmt in Q1 from 145 kmt in the previous quarter. Sales registered a 10% decline y-o-y as against 124 kmt in Q1FY'23. The share of seamless pipes in export was around 10-12%.

EBITDA falls q-o-q: The company's EBITDA registered a fall of 24% q-o-q to INR 215 crore in Q1 compared to INR 283 crore in the preceding quarter. EBIDTA fell by 4% y-o-y against INR 224 crore in Q1FY'23.

The company expects the profit margins to remain stable, as the current trend of seamless pipe prices is favourable. Also, because they have secured a steady supply of raw materials, which has locked in their margins and protects them from the volatility of raw material prices.

Capacity utilisation: The company utilised 91% of its capacity of 5,50,000 t. They plan to increase their capacity to 6,50,000 t in next two years.

Orderbook of INR 1,725 crores: As of 25 July 2023, the company had an order book of INR 1,725 crores of which 51% (INR 883 crores) is from ONGC and oil while 49% (INR 842 crores) is from exports and others.

Financial highlights
a) They have a net zero debt as loans taken for Telangana plant acquisition and rig acquisition were prepaid in full in October 2022 and June 2023 respectively.
b) They have a cash reserve of INR 1,018 crores.