Pipe, tube scrips beat Sensex

Exploration, production and large gas finds by the Reliance Group, ONGC, GSPC and Cairn Energy have pushed pipe and tube industry stocks, including Welspun Gujarat, Man Industries, Maharashtra Seamless, Ratnamani metals and tubes and others, up the charts.

Pipe and tube scrips have gained up to 32 per cent in the last one month alone. Welspun Gujarat and Punj Lloyd have gained up to 33 per cent beating the Bombay Stock Exchange benchmark index, Sensex, by a wide margin. The 30-stock index grew by nearly 19 per cent in the same period.

"The submerged arc welded (SAW) pipes category is capital intensive and the companies operating within this segment have established their reputation. They have received overseas orders as well. It is difficult for a new player to enter this segment," said an analyst with a local brokerage.

Moreover, pipe and tube companies import steel that constitutes 30 to 80 per cent of the export sales of different companies and have also availed of funding through the foreign currency convertible bonds and forex loans, which give them a hedge against currency risk, according to a report on the industry by Asian Securities. Low margins stemming from high metal prices remain a cause for concern to the industry.

Several companies, including PSL and Jindal Saw, have set up manufacturing plants overseas. Analysts maintain that Reliance Natural Resource's (RNRL) application to the ministry of petroleum and natural gas for setting up city gas distribution projects in Mumbai, Delhi and NCR could impact these companies positively.

According to an ICICI direct report, out of the total order book position of Rs 17,170 crore, Welspun Gujarat accounts for Rs 5,160 crore, Jindal Saw Rs 2,900 crore, Maharashtra Seamless Rs 1,000 crore, PSL Rs 2,200 crore and Man Industries at Rs 2,400 crore. About 70 per cent of the order book is for exports.