Welspun Corp defies pandemic headwinds to post impressive results in Q3
- Pipe Sales Volume up 14.3% QoQ
- Total Income from Operations up 20.4% QoQ
- EBITDA at Rs. 252 cr up 5.1% QoQ
- Current Order Book stands at 612 KMT, active bid book of 1,496 KMT
Welspun Corp Ltd. (WCL), flagship Company of the Welspun Group, announced its consolidated financial results for the quarter and nine months ended December 31st, 2020.
The key takeaways are as follows:
1.Net debt position stands at INR 314 cr in Dec '20-The company's gross and net debt position stood at INR 314 cr in Q3 compared to INR 655 cr in Q2 FY '21. Free cash flow generation of INR 435 cr was reported for 9M FY '21.
2.Saudi business continues to contribute strongly towards profitability-Saudi pipe revenue stood at $106 in Q3. The company has also proposed the listing of their Saudi JV at the local Stock Exchange which involves divestment of 30% of stake, split proportionately between the JV partners. WCL currently holds 50.01% in the JV through its overseas subsidiary. This divestment would further improve liquidity at WCL. The process is on track and WCL targets to complete the listing by H1 FY '22.
3.Global order book position-The current global order book stands at 612 KMT valued at INR 5,500 cr to be executed from Saudi plant, comprising orders both in the Oil & Gas and Water segment. However, the company is not in a favorable position on a few large orders in the water segment. With a pickup in oil prices, WCL is optimistic about further opportunities to arise, both in the Oil & Gas and the Water segment.
4.Current status of Bhopal Project-The company's Bhopal project including expansion, stands successfully completed. It was inaugurated by the Hon'ble Chief Minister of Madhya Pradesh, Shri Shivraj Singh Chouhan on 20th December, 2020. The total capacity at Bhopal now stands at 305 KMT (HSAW) and this will cater to growing demand for Oil & Gas and Water infrastructure in Central and East India.
5.Foray into Ductile Iron Pipe Segment-Welspun is in the process of setting up a Greenfield facility at Anjar to enter the high growth Ductile Iron (DI) Pipe segment. This project is expected to be commissioned by April 2022.
6.Muted demand in water segment-The demand in the domestic water segment across states has been muted as resources have been diverted in the fight against the pandemic. A significant increase in steel prices has created an additional disruption as project costs have considerably escalated. However, WCL remains focused in water segment and expects momentum to pick up soon.
7.Prospects in the export market-The company's exports have significantly improved in a better global environment. WCL bagged a highly prestigious order in the last quarter (Q2 FY '21) from Australia and sees the potential to win a few more. Moreover, with increased traction from Middle East, East Africa and Latin America, WCL is in discussions with various customers to bag new large orders. A further flare up in steel prices may pose a risk as project costs would significantly increase automatically.
- Ken-Betwa , one of the 31 river interlinking projects planned in the country is the first that has reached an advanced level of planning.
- Provision of water to all households by 2024 under the Jal Jeevan Mission programme.
However, these projects would require huge investments in creating the necessary infrastructure, both in line pipes as well as for ductile iron pipes.
8.Oil PSUs to make a quantum jump in FY '21-The PMO has directed 13 petroleum-sector PSUs to double their capex to INR 2 lakh cr in FY '21 from the initial target of INR 1 lakh cr and scale it up further to INR 3 lakh cr in FY '22, thereby leading to several order wins. The Government's plan for City Gas expansion aims to raise the share of natural gas in the country's energy basket to 15% by 2030 from the current 6.3%. The 11th city gas distribution authorization round is being planned and is expected to be launched soon. Also, 50-100 districts will join the city gas network adding to the existing coverage of 406 districts.