The objective of this report is to convey the Managements
perspective on the external environment as well as strategy and financial performance
during FY 2022-23. This should be read in conjunction with the Companys financial
statements, the schedules and notes thereto and other information included elsewhere in
the Annual Report. The Companys financial statements have been prepared in
accordance with Indian Accounting Standards (‘Ind AS) complying with
requirements of the Companies Act, 2013, as amended and regulations issued by the
Securities and Exchange Board of India (‘SEBI) from time to time.
Global Economy
The global economy witnessed a recovery in 2022 following two years of
a pandemic-in icted environment. The International Monetary Fund (IMF) in their report of
April 2023 estimated growth in global Real Gross Domestic Product (GDP) for 2022 to
increase by 3.4% on the back of a 6.3% increase in 2021. A higher-than-usual growth in
2021 was due to a low-base effect of 2020 as a result of the global pandemic during which
GDP contracted by 2.8%.
IMF forecasts global growth for 2023 to decelerate to 2.8% from 3.4% in
2022 before rising to 3.0% in 2024. This forecast is lower than expected growth rates a
year ago. The economic slowdown in 2023 is concentrated in advanced economies especially
the Euro Area and UK where growth is expected to fall to 0.8% and -0.3% in 2023. A lower
growth in 2023 is attributable to prevailing tight monetary and financial conditions,
recent signs of stress in the banking system, rising debt levels in certain countries
including lower and middle-income countries, stickier than expected in ation and no signs
of truce in theRussia-Ukraine war. In contrast, emerging and developing economies are
showing stronger economic prospects than advanced economies. In the medium-term, the IMF
forecasts global in ation to fall to 7.0% in 2023 and to 4.9% in 2024 on the back of
gradual softening of interest rates, unwinding supply chain disruptions and a fully
reopened Chinese economy putting the global economy back on the growth track.
Indian Economy
India is now the fastest growing, major economy in the world. The First
Advance Estimates of National Income released by the National Statistical Office (NSO) of
the Government of India in January 2023 estimates Indias GDP to have grown by 7.0%
in FY 2022-23 following a growth of 8.7% in FY 2021-22. Total Consumption grew by 7.0% in
FY 2022-23 mainly due to private consumption. Growth in exports for FY 2022-23 seems to
have plateaued at 12.5% while Imports grew by 20.9% in FY 2022-23. By sectors, agriculture
grew by 3.5% during FY 2022-23 after a growth of 3.0% in FY 2021-22. Mining grew by 2.4%,
manufacturing by 1.6% and construction by 9.1% while electricity, gas water supply and
other utilities services grew by 9.0% in FY 2022-23. Indias foreign currency
reserves stood at USD 578.45 billion as on 31 March 2023 covering approximately 9 months
of imports due to timely interventions of the Reserve Bank of India (RBI). The outlook for
FY 2023-24 is optimistic. Retail in ation reduced to 5.6% in March 2023 from a peak of
7.79% in April 2022 and is expected to moderate to 5.2%. Core in ation which remained
above 6% for the year eased to 5.8% in March 2023. Among the high frequency indicators,
direct and indirect tax collection has shown strong momentum, bank balance sheets are
strong, adequately capitalised and credit o take during the year was highest since FY
2011-12. The Indian Rupee is stable, the Current Account De cit is expected to remain
moderate and consumer sentiment is high.
E ective implementation of various policies such as Amtanirbhar Bharat,
Gati Shakti for improved connectivity and the National Monetization Pipeline (NMP) to
nance infrastructure creation, will determine the pace of Indias growth story. It
will have a multiplier effect on private investments and help India to move closer to its
target of reaching USD 5 trillion GDP goal by 2024.
Pipes Industry Outlook
North America has traditionally been a significant producer of oil and
gas, and their oil reserves have risen to more than 76 billion barrels and natural gas
reserves to 521 trillion cubic feet. Steel pipe demand in the United States has benefited
from robust economic development, which has been fuelled by government-led scal stimulus,
resulting in high corporate con dence. This led in an increase in oil and gas output as
well as increased industry activity in the region.
United States is expected to have the largest share in the global steel
pipe and tubes market during the identified period of 2022-2027. In United States, the oil
and gas sector has ourished exponentially. Further, the same product is used in upstream
and downstream of crude oil processing.
Asia-Paci c is expected to the fastest during 2022-2027. This is
attributed to rising consumption volume. The majority of steel pipe providers want to
expand in equipments market and hence manufacturers supply chain management,
increased transportation and trade has boosted market share in Asia-Paci c. This region
has become significant production centres due to strong development potential and their
capacity to manufacture steel pipes and tubes. The replacement of ageing pipelines in
Europe is likely to rise rapidly in the next years which will further boost demand of
pipes from this region.
The global market for seamless pipes and tubes estimated at USD 175
billion in the year 2022 is projected to reach a revised size of USD 218 billion by 2026,
growing at a CAGR of 5.50%. Hot finished pipes are projected to grow at a 6.40% CAGR to
reach USD
132 billion.
Honourable Prime Minister Narendra Modi announced that Government of
India (GOI) plans to invest around Rs. 7.5 trillion in oil and gas infrastructure over the
next ve years. GOI would add 100 more districts to the City Gas Distribution Network in
next few years. GOI is also working on Har Ghar Jal mission to provide tap water supply to
every rural household by 2024. Acknowledging the importance of oil and gas segment as a
vital sector directly contributing to energy security of the country, GOI remains
committed towards strengthening the oil and gas industry. It has gradually moved towards
investor friendly liberalized policies and reforms in the sector. GOIs initiative to
boost demand in domestic E&P sectors includes increased FDI in E&P Projects, NELP
& CBM Policies and Freight SubsidyScheme.
Indias existing pipeline infrastructure falls short of what is
required to cater to the upcoming boom in demand from the oil and gas and water segments.
These actions bode well for the seamless and ERW pipes industry in India, as the demand
visibility is clear.
Financial Performance
(Rs in Crores except EPS)
| Particulars |
FY 2022-23 |
FY 2021-22 |
Change |
| Revenue from Operations |
5707 |
3975 |
44% |
| Other Income |
83 |
90 |
8% |
| EBIDTA |
1038 |
603 |
72% |
| Depreciation |
136 |
121 |
>12% |
| Finance Cost |
36 |
41 |
12% |
| Profit after tax |
793 |
711 |
12% |
| Earnings per share (Rs.) |
59 |
53 |
11% |
| Type of Ratio |
FY 2022-23 |
FY 2021-22 |
Change |
| Trade Receivable Turnover |
9.46 |
7.77 |
+ 22% |
| Trade Payable Turnover |
9.89 |
5.13 |
+ 93%1 |
| Inventory Turnover |
2.54 |
2.36 |
+ 8% |
| Debt Service Coverage Ratio |
10.39 |
4.67 |
+ 122%2 |
| Current Ratio |
5.89 |
3.74 |
+ 57%3 |
| Debt Equity Ratio |
0.05 |
0.16 |
- 68%4 |
| Operating Profit Margin (%) |
18% |
15% |
+ 20% |
| Net Profit Margin (%) |
14% |
18% |
- 22% |
| Return on Capital Employed (%) |
19.03% |
12.62% |
+ 51%5 |
| Return on Investment (%) |
13.71% |
13.50% |
+ 2% |
Explanation of percentage change in ratios greater than 25%
1. Trade Payable Turnover - Due to better negotiated terms and better
utilisation of internal accruals.
2. Debt Service Coverage Ratio - Due to prepayment of debt leading to
lower interest and higher earnings.
3. Current Ratio - Due to increase in inventory on account of higher
order book.
4. Debt Equity Ratio - Due to prepayment of debt.
5. Return on capital employed - Due to better sales realisation &
amalgamation of subsidiary leading to economies of scale.
Human Resources
The Company has a rm belief that human capital is core to development
of Company and the Companys philosophy of wider inclusion and participation from
employees has resulted in the transformative growth to enable the Company to reach where
it is currently. The pandemic resulted in focus on employee safety which was achieved
through an agile workforce and development of world class occupational health and safety
protocols. As on 31st March 2023, the Company had a total count of 1677 employees.
Risk and Mitigation
As per the Securities and Exchange Board of India (Listing Obligations
and Disclosure Requirements) Regulations, 2015 and Companies Act, 2013, the Company has a
Risk Management Framework in place. Risk management in the Company covers the ve
components of the Internal Control - Control Environment, Risk Assessment, Control
Activities, Information & Communication (ICT) and Monitoring. Accordingly, the
operations are structured and it functions with business and process owners acting as
first line of defence and management acting as the second line of defence. In addition
there is a third party internal audit rm which conducts periodic audit of the various
functions as per the Internal Audit plan. Statutory audits are also conducted on periodic
basis.
As the Companys products are primarily used in oil and gas
sector, demand - supply factors, pricing, economics and sovereign policy on oil and gas
affect demand and cost of our products. The Company continuously monitors foreign exchange
rates movement and our foreign exchange policies safeguard price escalation risk. The
Company hedges foreign currency exposure as and when required.
Internal Financial Control Systems
The Company has a framework in place for the Internal Controls over
Financial Reporting which complements the size, scale and complexity of business
operations and covers all major processes to ensure an effective operating environment.
The framework has been designed to provide a robust recording and reporting environment,
effectively implement the change management process and with the annual review of the
operations and business processes and compliance with statutory, legal, corporate laws and
policies it stays relevant. This system is supplemented by internal audit review by
management and documented policies, guidelines and procedures.
The Company has a well-de ned organisation structure, authority levels,
internal rules and guidelines for conducting business transactions. A third party audit rm
carries out the internal audit of company operations and reports its nding to the Audit
Committee. The Company strives to undertake sustainable measures as necessary in line with
its intent to adhere to procedures, guidelines and regulations in a transparent manner.
Internal Audit is carried out as per a risk based internal audit plan which is reviewed by
the Audit Committee of the Company. The Committee periodically reviews the findings and
suggestions for the improvement and is apprised on the implementation status in respect to
the actionable items. The controls, based on the prevailing business conditions and
processes have been tested during the year and no reportable material weakness in the
design or effectiveness was observed. These have been reviewed by the internal and
external auditors. The Company uses various IT platforms to keep the Internal Financial
Control framework robust and our Information Management Policy governs these IT platforms.
The systems, standard operating procedures, and controls are implemented by the executive
leadership team and are reviewed by the internal audit team whose findings and
recommendations are placed before the Audit committee.
Company Outlook
The strategy of the Company has been realigned to increase focus on
pipes and renewable energy segments and reduce exposure to other segments. Internal
accruals are currently being utilised for working capital, capital expenditure
requirements and growth opportunities.
The Company is focussing on developing value addition pipe products and
improving e ciencies both in production process and in production mix. The Companys
in-house product development team has successfully developed various import substitution
products such as subsea pipes, cylinder pipes, drill pipes, cold-drawn pipes and premium
connections. These products are high margin opportunities both for domestic as well as
export markets. High priority has also been given to the addition of new customers in
export markets.
|
For and on behalf of the Board |
|
D.P. JINDAL |
| Place : New Delhi |
Chairman |
| Dated : 1st August, 2023 |
DIN: 00405579 |
+91-9892691696
