Maharashtra Seamless: Growth beneficiary

Maharashtra Seamless (MSL), India’s largest ERW and Seamless pipes and Tubes maker, is likely to benefit the most from the uptick in domestic demand, given the limited competition from the local peers, who continue to struggle from leveraged balance sheets.

Although, MSL recent earnings showing remain subdued but it is well positioned to yield better returns in the near future.

The company reported weak performance in 3QFY20, backed by lower volume from both the division – seamless and ERW.

It’s revenues revenue declined by 27.3%/27.9% YoY/QoQ to Rs 570 crore, due to lower volume. Seamless sales volume during the quarter stood at 65,000 tones, down 19% YoY, while ERW witnessed 11% YoY decline in volumes to 15,000 tones.

EBITDA during the quarter declined 26.3%/29.5% YoY/QoQ to Rs117 crore, with an EBITDA margin of 20.5%.

It is likely to strengthen its position in the domestic market supported by demand from downstream, mainly refineries due to switch over to Euro-VI norms.

Due to the growing pressure on sales promotions amid sluggish local demand, the company’s EBITDA/tonne is expected to moderate from the current levels of Rs15,500/tones to around Rs15,000/tonne for Seamless and Rs4,000/tonne for ERW.

After the execution in 3QFY20, order book at the end of the quarter stood at Rs 1,000 crore.

Meanwhile, the Supreme Court of India in January 2020, upheld the Order dated 21st January 2019 of the National Company law Tribunal, Hyderabad Bench approving the Company’s Resolution Plan for acquisition of United Seamless Tubulaar (USTPL). Appropriate Treatment will be made after receipt of possession.

The Rs 1600 crore investment plan of ONGC on drilling new oil and gas, Rajasthan refinery project in Barmer announced by HPCL will generate incremental demand of 50,000 tones pipes for the next three years and continuous demand for ERW from city gas distribution projects

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