India: Surya Roshni sees robust performance in Q1FY'22

Surya Roshni Ltd, the largest exporter of ERW pipes and ERW galvanised steel pipes (GI) from India, is optimistic of maintaining its EBITDA/tonne (t) above 4,000/t on account of export orders and value-added products in a year's time.

Surya's steel pipes and strips business performance demonstrated a strong growth despite the twin challenges in terms of higher raw material prices and second wave of Covid-19-led restrictions resulting in low demand.

The company foresees better performance supported by the commissioning of the 72,000-mtpa capacity large diameter section pipes (up to 300*300 mm) facility with direct forming technology (DFT).

Furthermore, government policies like Make in India, Vocal for Local and the recently-announced PLI Scheme will provide room for an increase in domestic consumption.

The company feels the regional lockdowns imposed to curb the spread of Covid-19 are being relaxed and will spur growth in the coming quarters.

Factors to impact pipes segment

1.Improved working capital: With resumption of economic activity as the second wave of Covid-19 recedes, Surya Roshni witnessed sharp improvement in working capital days driven by strong fundamentals across its product portfolio. It saw the same improving from 101 days as on 30 Jun'20 to 66 days as on 30 Jun'21.

2.Robust order book of steel pipes: The company's order book stands INR 847 crore (in hand) for API coated pipes as on 30 Jun'21 with order inflow aggregating to INR 614 crore during Q1.

The second line 3LPE coating manufacturing facility and commercial production which had commenced from 31 Mar'21 (900,000 square metres) at Anjar has resulted in substantial growth of the company. Enhanced coating capacity resulted in cost efficiencies and improved margins through utilisation of existing offline spiral pipe capacities.

3.Reports highest-ever EBITDA: The company achieved its highest-ever EBITDA in Q1FY'22 at INR 5,033/t. In Q4FY'21, EBITDA stood at around INR 4,251/t.

Key factors behind the same-:

• Timely commissioning of 3LPE coated facility.
  
  
• Higher realisations in overseas market against the domestic market pushed export volumes higher.
  
  
• Higher contribution from API coated pipes and GI pipes.
  
  

4.Seeks market opportunities: There has been demand and investments in water, oil and gas and city gas distribution (CGD) segments. Surya has thus tapped into various government schemes like Har Ghar Nal se Jal, the National Gas Pipeline network and the Natural Gas Regulatory Board (PNGRB) for CGD bidding.

The company's managing director, Raju Bista, said, "Even in such a difficult and challenging environment due to the second wave of the Covid-19 pandemic, we have been able to improve our operations and achieve growth in revenue as well as profitability. Our revenue for Q1FY'22 grew by 64% to INR 1,453 crore, EBIDTA grew by 112% to INR 93 crore and cash profit registered a growth of 221% to INR 76 crore on a yearly basis."