It hopes to complete the project by August. Suppliers of pipes to the oil and gas sector are cashing in on the strong demand from the upstream oil and exploratory activity. While Welspun Gujarat Stahl Rohren's new plate mill of 1.5 million tonnes capacity commenced trial production in September 2007 and is expected to start commercial production by April, PSL is in the process of setting up 300,000 tonne of HSAW (highly submerged arc welded pipes) capacity in the US, scheduled to be commissioned by September 2008 and plans to fund the expansion with an issue of $125 million. This expanded capacity is expected to meet the demands of upstream oil players like GAIL, RIL and GSPL, who plan to spend about Rs 40,000 crore over 3-4 years on pipeline networks across the country and for transporting oil from oil blocks to consumption centres. While suppliers of pipes could be hit if there are project delays, the impact should be limited as global oil majors too are expanding pipeline networks. The potential market could be about $59 billion in pipe contracts over the next five years, say analysts. |
| However, the ability of suppliers to manage raw material costs like steel will also be crucial. |
| PSL, saw its operating profit margin fall 40 basis points y-o-y to 8.2 per cent in Q3 FY 08, as it failed to combat higher input costs like those for steel. |
| In the December 2007 quarter, Welspun's net sales rose 39.1 per cent to Rs 1036.4 crore. |
| The operating profit margin improved 400 basis points y-o-y to 16.8 per cent, as a result of which the operating profit grew an impressive 82.7 per cent y-o-y to Rs 174.1 crore. |
| Stronger sales were the result of the highest ever realisations of $1,656 per tonne achieved, compared with $1,166 per tonne in Q3 FY07. At Rs 447, Welspun trades at over 14 times estimated FY09 earnings of Rs 31, while PSL, at Rs 384 is cheaper at 10 times estimated FY 09 earnings of Rs 42. |
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