India: Welspun Corp Q2FY23 highlights

Welspun Corp Ltd has recently announced its consolidated financial results for the second quarter ended 30 September 2022. The highlights are-

Line pipe production rises 36% q-o-q: The company produced 215,000 tonnes (t) of line pipes in Q2FY2023, rising by 36% against 158,000 t a quarter ago.

Sales increase 39% q-o-q: Sales volume of line pipes aggregated to 218,000 t in Q2FY2023, increasing by 39% q-o-q in comparison with 158,000 t in Q1FY2023. Moreover, sales of SS pipes grew by 46% q-o-q to 1,009 t in Q2 from 692 t in the previous quarter.

The profitability during the quarter was majorly impacted by the high cost inventory especially coke and lower realisations for pig iron due to the imposition of export duty. Notably, coking coal prices have fallen to INR 41,000/t from INR 54,000/t levels.

Company's global order book position: Welspun's current global order book position stands at 10,00,000 t valued at INR 13,750 crores. Active bid books are at 15,00,000 t in Q2FY2023.

The company majorly focuses on new energy including carbon capture and ammonia pipelines in the US. This order is for supply of 110,231 t of high frequency induction welding (HFIW) pipes, and would be used for transporting captured carbon dioxide. The pipes for this order will be produced in the Little Rock plant, USA and the same will be executed in FY2023-24.

Commencement of dispatches in TMT plant: The company's newly commissioned state-of-the-art TMT plant, with a capacity of 350,000 t, has received the BIS certification and is ready for commencement of dispatches. Demand from the markets of Gujarat is around 3 mnt per annum.

Acquisition of Sintex BAPL non-convertible debentures: The company has acquired the non-convertible debentures of Sintex BAPL Ltd with an outstanding amount of INR 1,223 crore at a consideration of INR 418 crore from its wholly-owned subsidiary Mahatva Plastic Products and Building Materials Private Limited.

Sale of land and civil structures at Dahej Plant: WCL has entered into a memorandum of agreement (MoA) on 30 September for sale of land and structural assets, excluding plant and machinery, at the Dahej plant in Gujarat. The unit constitutes an insignificant part of the company's operations and the management believes that the transaction will not affect its operations. The consideration for the sale of land is INR 130 crore.

Environmental, social and governance (ESG) initiatives: Welspun has launched ESG Compass - an integrated digital platform for measuring, monitoring, and reporting on ESG KPIs. It covers over 90 ESG indicators across all locations in India and presents data in a dashboard format which helps to automate manual data collection and streamline reporting processes.

Medium-term prospects over 3-5 years: The company is confident that it should be able to achieve a top line of over INR 15,000 crore and be able to generate a sustainable EBIDTA of INR 1,600-1,800 crore and ROCE could be 18%.