Scoda Tubes Ltd Management Discussions

Global macroeconomic overview

In 2024 and 2025, global gross domestic product (GDP) growth is projected to continue to trend below the historical annual average of 3.8% logged between 2000 and 2019, reflecting ongoing challenges such as geopolitical tensions, high inflation and tightening monetary policies. Growth had contracted 2.7% in 2020 as the Covid-19 pandemic disrupted economic activity. However, the contraction was considerably lower than estimated by the International Monetary Fund (IMF), with a strong rebound in manufacturing, shift to new ways of working, and fiscal and policy support arresting a further slide. In 2021, global GDP growth rebounded to 6.5%, led by vaccine-powered normalization and continued fiscal support. However, in 2022 and 2023, it slowed to 3.5% and 3.3%, respectively, owing to challenges such as inflation driven by supply constraints, tightening financial conditions, long-term effects of the pandemic and geopolitical uncertainties.

Global consumer price inflation, after ranging 3-5% between 2019 and 2021, jumped to 8.7% in 2022 because of sharp increase in prices of oil, natural gas, fertilizers and other commodities in the wake of geopolitical conflicts early on in the year. Supply chain disruption exacerbated the situation. However, in FY23, global inflation slowed to 6.8% because of the resolution of supply-side issues in a few industries.

Real GDP (on- year growth)
	2020	2021	2022	2023	2024E	2025P	2026P	2029P
World	-2.70%	6.50%	3.50%	3.30%	3.20%	3.30%	3.30%	3.10%
Euro area*	-6.10%	5.90%	3.40%	0.40%	0.80%	1.00%	2.40%	1.20%
US	-2.20%	5.80%	1.90%	2.90%	2.80%	2.70%	2.10%	2.10%
China	2.20%	8.40%	3.00%	5.20%	4.80%	4.60%	4.50%	3.30%
UK	-10.40%	8.70%	4.30%	0.30%	0.90%	1.60%	1.50%	1.40%
Japan	-4.10%	2.60%	1.00%	1.50%	-0.20%	1.10%	0.80%	0.40%
India	-5.80%	9.70%	7.60%	9.20%	6.50%	6.50%	6.50%	6.50%

 

Consumer prices (on-year growth)	2019	2020	2021	2022	2023	2024P	2025P	2029P
World	3.50%	3.20%	4.70%	8.70%	6.80%	5.90%	4.50%	3.40%
US	1.80%	1.20%	4.70%	8.00%	4.10%	2.90%	2.00%	2.10%
Euro area	1.20%	0.30%	2.60%	8.40%	5.40%	2.40%	2.10%	1.90%
Japan	0.50%	0.00%	-0.20%	2.50%	3.30%	2.20%	2.10%	2.00%
UK	1.80%	0.90%	2.60%	9.10%	7.30%	2.50%	2.00%	2.00%
China	2.90%	2.50%	0.90%	2.00%	0.20%	1.00%	2.00%	2.00%
India	4.80%	6.20%	5.50%	6.70%	5.50%	4.50%	4.20%	4.00%

*The euro area consists of member states of the European Union that have adopted the euro as their currency

Indias macroeconomic overview

Indias GDP clocked a compound annual growth rate (CAGR) of 5.0% between FY18 and FY24 to INR 176.5 trillion, following the change in base year for calculation to FY12 from FY05 effected by the Ministry of Statistics and Programme Implementation in 2015. The pandemic-induced lockdowns led to a 5.8% decline in GDP in FY21, but the post-pandemic scenario has been positive, starting with a 9.7% on-year growth in FY22 led by the manufacturing and construction sectors. Indias real GDP have grown 9.2% on-year in

FY24 compared with 7.6% the previous fiscal. Although there will be support from the demand side on account of a normal monsoon and easing inflation, the growth is estimated to have slowed to 6.5% in FY25. Manufacturing is projected to experience the sharpest decline, with growth estimates dropping from 9.9% to 5.3%. Other major contributors to GDP, such as trade and hotels, and financial services and real estate, are also likely to grow slower.

Yearly demand-side real GDP growth

At constant 2011-2012 prices	FY19	FY20	FY21	FY22	FY23	FY24	FY25P
Private consumption	7.1%	5.2%	-5.3%	11.7%	6.8%	4.0%	7.3%
Government consumption	6.7%	3.9%	-0.8%	0.0%	9.0%	2.5%	4.1%
Gross fixed capital formation	11.2%	1.1%	-7.1%	17.5%	6.6%	9.0%	6.4%
Exports	11.9%	-3.4%	-7.0%	29.6%	13.4%	2.6%	5.9%
Imports	8.8%	-0.8%	-12.6%	22.1%	10.6%	10.9%	-1.3%

Global stainless-steel industry

Production

Global stainless-steel melt production increased to 58.4 million tonnes in 2023 from 52.2 million tonnes in 2019, logging a CAGR of approximately 3%. Production remained rangebound in 2020 and declined about 5% on-year in 2022. Stainless-steel production suffered in 2020 due to pandemic-led lockdowns in various parts of the world.Global stainless-steel melt production increased 13% on-year to 58.3 million tonnes in 2021 owing to a jump in production volume in key steel- producing countries such as India, Russia, and Brazil. The increase in production volume in these countries caused the share of China

in global production volume to decrease from 60% in 2020 to 56% in 2021. However, the production share of China increased to 58% in 2022 as global production normalized due to geopolitical uncertainties-led supply- chain bottlenecks.ln 2023, global stainless- steel production increased 6% on-year. Meanwhile, Chinas production surged 15% on-year, increasing the countrys share to 63% in global production volume, owing to the resolution of supply-chain issues and lifting of the countrys Covid-19 containment measures.

Demand

Global demand for stainless steel increased from 44.3 million tonnes in 2019 to 47.4 million tonnes in 2023, clocking a CAGR of about 2%. The share of flat products in total stainless-steel demand was in the range of 82-84% during the period.

The global demand for stainless steel is expected to grow at a CAGR of 3-4% over the next five

years to 59-60 million tonne in 2028. This growth in global stainless-steel demand will be supported by growth in consumption from key end-use sectors such as consumer goods, energy and chemicals, building and construction, and automobile.

Trade

The majority of stainless-steel exports during the period between 2019 and 2023 were from Asia, especially China, India, Korea and Indonesia, as c result of which the share of Asian region in the overall global exports of stainless steel increased from 69% in 2019 to 76% in 2023. This growth in the share of Asia in the global stainless-steel exports is on the account of increased production capacities, capacity utilization rates, production of stainless steel at lower costs due to low labour and real estate related expenses

and resulting economies of scale in these regions. Share of Asia in global stainless-steel imports declined from 53% in 2019 to 48% in 2023 primarily due to higher domestic production capacity supported by higher focus on self- sufficiency in these countries. Further, the low- cost stainless steel being produced in Asian countries has resulted in their increased supply to the regions of Europe, Africa and NAFTA, wherein production volumes have decreased over time.

Global stainless-steel pipes and tubes industry

Demand

Global demand for stainless steel pipes and tubes increased from approximately 2.7 million tonnes per annum in 2019 to approximately 3.1 million tonnes per annum in 2023, clocking a CAGR of about 3%. The share of stainless-steel welded pipes and tubes in the overall global demand falls in 80-85% range with the stainless-steel seamless pipes and tubes accounting for the rest 15-20% share in the demand.

Between 2023 and 2028, the demand for stainless steel pipes and tubes is expected to increase at a CAGR of 3-4% to approximately 3.65-3.75 million tonnes in 2028.

Stainless steel pipes and tubes - global demand split by regions

China is the biggest consumer of stainless-steel pipes and tubes in the world, accounting for around 40% of its overall global demand. Such a high demand of these pipes in the country is on the account of high water, oil and gas transportation requirements to cater to a large population and high volume of manufacturing plants across industries. Further, Chinas government and local authorities have also been focussing on cutting water losses during pipeline transportation and reducing health related risks posed by poor quality of drinking water. Since stainless steel has high resistance to corrosion and are highly hygienic for health, the country has been resorting aggressively to using stainless steel pipes and tubes for water transportation to improve and expand the water supply network over the years. This has primarily led to a consistent increase in the usage of stainless-steel pipes and tubes, thus making China its single largest consumer in the world.

Trade

In 2023, the trade volume of stainless-steel pipes and tubes across countries amounted to approximately 1.19 million tonnes. During the year, most of the stainless-steel pipes and tubes were exported from China and Italy, which together accounted for -60% of total exports globally.

They were followed by Germany (5%), India (5%), and USA (3%) in the total volume exported in the year. On the import side, USA, Germany, Poland, India, Canada, and France cumulatively accounted for approximately one-third of the global imports in 2023.

Overall traded volume of stainless-steel welded pipes and tubes amounted to approximately 0.82 million tonnes in 2023. During the year, Italy was the top exporter accounting for a 32% share in the total global exported volume stainless- steel welded pipes and tubes. China was the second largest exporter in the segment, accounting for 27% share. On the import side, Germany and USA together accounted for around one-fifth of the imports of stainless-steel welded pipes and tubes (share of 10% and 9%, respectively). These were followed by Poland, India and Canada which imported 7%, 6% and 5% of the total globally traded volume of stainless- steel welded pipes and tubes, respectively.

Other Asian countries such as India, Indonesia, Malaysia and middle east countries are also top consumers of stainless-steel pipes and tubes. Most of the countries in the region are developing at a high rate and as a result, are experiencing rapid urbanization and industrial growth, leading to an increased demand for stainless steel pipes and tubes. The growth in the stainless-steel pipes and tubes demand is also getting robust support from growth in sectors like infrastructure development, water supply and sanitation, oil and gas, chemical, and food processing.

Europe is also a leading consumer for stainless steel pipes and tubes. Turkiye, a highly earthquake prone country, and Ukraine, which has been struggling for geopolitical stability require massive infrastructure related investments which also includes investments in stainless steel pipes and tubes installation for construction, water supply, oil and gas transport, etc.

Stainless steel seamless pipes and tubes

In the stainless seamless pipes and tubes segment, China was the top exporter accounting for 65% of the total traded volume in 2023. China was followed by India (8%) and Spain (8%). On the imports side, USA, China, Germany, Spain and Italy, together accounted for around 20-21% of the overall global imports of the stainless seamless pipes and tubes in 2023.

Stainless steel welded pipes and tubes

Overall traded volume of stainless-steel welded pipes and tubes amounted to approximately 0.82 million tonnes in 2023. During the year, Italy was the top exporter accounting for a 32% share in the total global exported volume stainless-steel welded pipes and tubes. China was the second largest exporter in the segment, accounting for 27% share. On the import side, Germany and USA together accounted for around one-fifth of the imports of stainless-steel welded pipes and tubes (share of 10% and 9%, respectively). These were followed by Poland, India and Canada which imported 7%, 6% and 5% of the total globally traded volume of stainless-steel welded pipes and tubes, respectively.

Price trend of stainless steel

The following charts describe the movement of prices of hot rolled stainless steel of grade 304 over the last five fiscals. For drawing comparison between international and domestic prices of the commodity, the prices correspond to the average of monthly prices

between April and March of the respective fiscal in both scenarios. For instance, the price against FY20 in both the charts given below represents average of prices from April 2019 to March 2020 and so on.

Both international and domestic prices followed similar growth trend over the last five fiscals. The prices increased in FY21 and FY22 owing to pandemic led supply side issues leading to demand supply imbalance. In FY22, Indian steel industry recovered from the supply side issues and started production at near-optimum utilization levels, thereby cutting down the dependence on steel imports. Though the domestic stainless-steel prices increased on-

year in FY22 but its magnitude remained lower than the on-year price increase in the international prices in the fiscal as a result.

The prices, however, cooled down in the next two fiscals due to resolution of supply side issues, fall in demand in key countries of Europe and Americas, and fall in prices of key raw materials used in steel production.

Statutory Reports

Indian stainless-steel industry

Production and trade

Domestic stainless-steel production grew from 2.3 million tonnes in FY20 to 3.3 million tonnes in FY24, clocking a CAGR of about 10%. During this period, production of stainless- steel flat products logged a CAGR of about 7% and that of stainless-steel long products, a CAGR of about 18%. Indias stainless-steel production volume remained rangebound in FY21 owing to subdued domestic demand. However, in FY22, to cater to pent-up demand, production volume surged 24% on- year to 2.8 million tonnes. In FY23, though domestic demand increased, a sharp

increase in imports kept domestic production rangebound. Imports surged in FY23 primarily on account of high import volume of cheaper Chinese and Vietnamese stainless steel. On the other hand, exports from India decreased in FY23 due to tough competition from cheaper foreign-made steel in the export market. Domestic production volume increased 20% on-year in FY24 due to the governments strong emphasis on localized manufacturing and higher domestic demand for stainless steel.

Demand

Domestic stainless-steel demand grew at a CAGR of approximately 8% between FY22 and FY24. FY21, which was hit by pandemic, witnessed an on-year demand decline of around 12% owing to subdued consumption from key end use sectors like consumer goods and infrastructure. However, the demand for stainless steel increased robustly on-year by 27% in the following fiscal on the account of revival in consumer demand of white goods and durables and increase in government led capital expenditure towards infrastructure development. In FY23 and FY24, the demand increased on year by 13% and 8%, respectively, primarily led by

strong on-year demand growths of 19% and 25%, respectively in FY23 and FY24, in the long segment of stainless steel on the account of increased focus of government towards infrastructure development in the run-up to the 2024 general elections. This demand increase was also supported by the building and construction sector which grew owing to rapid urbanizations, government led initiatives like "Housing for All", improving consumer sentiments, and increasing industrialization on the back of governments push for local manufacturing.

Indian stainless-steel pipes and tubes industry

Demand

Domestic demand for stainless steel pipes and tubes increased from 0.23 million tonnes in FY20 to 0.32 million tonnes in FY24, clocking a CAGR of approximately 9% during the period. The share of stainless-steel welded pipes and tubes in the overall domestic demand has largely remained at around 65% with the stainless-steel seamless pipes and tubes accounting for the rest 35% share throughout the period.

Between FY24 and FY29, the domestic demand for stainless steel pipes and tubes is expected to increase at a CAGR of 6-8% to 0.45-0.47 million tonnes in FY29. This healthy growth in the demand will primarily be led by strong growths in major end use industries of stainless-steel pipes and tubes such as building and construction, automobile, oil and gas, chemical manufacturing, food and beverage, etc

End use sector growth outlook and application mapping with respect to type of stainless-steel pipes

End use industry	Expected growth CAGR (FY 2024-2029)	Type of stainless-steel pipe used
Process industry	6-8%	Electric resistance welded pipes and tubes for chemical and fluid transportation (Seamless pipes and tubes are also used but in rare cases)
Oil and gas	6%	Seamless for oil exploration, etc Submerged are welded for oil and gas transport
ART	8-10%	Seamless for suspension arms, steering rods, etc Electric resistance welded for exhaust systems, cooling systems, etc.
ABC	6-8%	Seamless for structural support Electric resistance welded for water, sanitation, and gas system

Source: CRISIL MI&A, industry

Stainless-steel pipes and tubes - domestic demand split by regions

Region	Key end use sectors
North	Food and beverage, automobile, chemical industries
West	Oil and gas, construction and infrastructure, automobile industries
South	Construction and infrastructure, automobile, oil and gas industries

Source: CRISIL MI&A, industry

Region wise domestic demand split for stainless-steel pipes and tubes

West region of India, having states like Gujarat and Maharashtra with high share of expenditures towards infrastructure development and high concentration of oil and gas industry, is the major consumption hub for stainless steel pipes and tubes in India. In particular, the region accounts for around 36-40% of the overall domestic stainless-steel pipes and tubes demand on the account of high consumption from key end-use sectors like oil, gas, chemical, automobile, and construction in western states. Southern states like Tamil Nadu and Andhra Pradesh are home to many oil refineries and oil

exploration sites, chemical industries, rapidly urbanizing cities of Chennai, Mysore, Hyderabad, and Amravati, automobile plants, and thus account for 25-28% of overall domestic demand of stainless-steel pipes and tubes in India. North region, which has multiple food, beverage, chemical and automobile manufacturing plants, accounts for 22-25% of the domestic demand for stainless steel pipes and tubes. Eastern zone of India accounts for the rest 12-14% of the domestic demand.

Trade

The import volume of stainless-steel tubes and pipes by India declined on-year by 33% to 0.066 million tonnes in FY21, owing to reduced demand from key end-use sectors in the wake of pandemic induced lockdowns in the fiscal. Between FY21 and FY24, the imported volume of stainless-steel pipes and tubes decreased at a CAGR of (-5%) to 0.056 million tonnes, primarily because of an antidumping duty imposed by India on stainless steel seamless pipes and tubes from China to guard the interests of local producers. As a result, the imported volume of stainless-steel seamless pipes and tubes, particularly, declined at a much higher negative CAGR of (-14%), during FY21-FY24 period. This has led to a significant reduction in import-export gap over the years, eventually making India a net exporter of stainless-steel pipes and tubes in FY22 and Fy24.

Imports to India (million tonnes)

On the other hand, the exports from India increased at a CAGR of around 35% between FY20-FY22 to 0.075 million tonnes in FY22, on the back of recovery of economy and pent-up demand in key export destinations from the pandemic induced slowdown in the previous fiscal. However, the exports of stainless-steel pipes and tubes further declined at a CAGR of (8%) between FY22 and FY24 to 0.064 million tonnes in FY24 primarily because of inflationary environment of key export markets and geopolitical conflicts in FY23 and FY24. Further, Indian steel produced faced high competition in the export market from the cheaper products made in other countries, resulting in decline in demand for India-made stainless-steel pipes and tubes in the export market.

Export from India (million tonnes)

Seamless pipes and tubes

China accounted for approximately 89% share in overall imported volume of stainless-steel seamless pipes and tubes to India in FY24, amounting to 8,692 metric tonnes. The high share of China made stainless-steel pipes and tubes in Indias overall imports is on the account

Split of import to India (100% = 0.010 million tonnes)

of preference of end consumers in India towards low-cost Chinese steel products. As far as exports are concerned, Italy, Canada, and Saudi Arabia cumulatively accounted for around one- third of Indias total exported volume of stainless-steel pipes and tubes in Fy24.

Split of export from India (100% = 0.010 million tonnes)

Welded pipes & tubes Seamless pipes & tubes Welded pipes & tubes Seamless pipes & tubes

Note: For stainless-steel welded pipes and tubes, products of HS codes 730611, 730621 & 730640 were considered, and for stainless-steel seamless pipes and tubes, products of HS codes 730441 were considered

UAE: United Arab Emirates, USA⁴: United States of America

Note: For seamless pipes and tubes, products of HS codes 730441 were considered; values in the pie correspond to volume in millions tonnes (whenever provided) and share in overall pie

Welded pipes and tubes

In FY24, India imported majority of stainless-steel welded pipes and tubes from Vietnam (share in total imports was ~41%), followed by Thailand (~30%) and Italy (~10%). The high import volume from Vietnam was on the account of its low cost and Indias free trade agreement with the country. On the exports front, USA accounted for ~45% of total stainless-steel welded pipes and

tubes export volume from India in FY24. It was followed by Brazil, which accounted for around 22% share in the overall exports from India. The high share of exports to USA and Brazil can be attributed to the rising demand for stainless steel pipes and tubes in various sectors such as construction, automotive, and oil & gas in both the US and Brazil.

Business Performance and Outlook

Increase our existing production capacity

Further, in light of Indias decision in 2022 to impose anti-dumping duty on stainless steel seamless tubes and pipes imports from China for five years would also present an opportunity to domestic stainless-steel tubes and pipes manufacturing industry. This policy has historically resulted in increase in the capacity utilization rates of domestic stainless-steel tubes and pipes manufacturers, is expected to continue to provide benefits to the domestic players in terms of operational efficiencies and margins.

Additionally, in September 2024, the government extended the anti-subsidy duty, initially imposed in 2019, on the imports of welded steel tubes and pipes from China and Vietnam to India. The government has imposed a 29.88% duty on goods falling under 7304 covering all tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel). -30% of import duty is expected to keep a check on the steel tubes and pipes that are imported at predatory prices and hence, will support the growth in domestic steel tubes and pipes industry.

In light of the anticipated growth of the stainless-steel tubes and pipes industry in India, we intend to expand our production capacities through acquisition of land and procurement of additional machines. We have been working on expanding our production lines by purchasing and developing more land. Since 2016, our Company has grown consistently both in terms of acquisition of land and production capacity. In 2016, our production facility was situated on a plot of land measuring approximately 9,429 sq. mtrs. only. Since inception, over the years, we have purchased and leased land parcels totaling approximately 77,226 sq. mtrs. Currently, our manufacturing facility is situated on a plot of land measuring approximately 21,199 sq. mtrs., of which approximately71,061 sq. mtrs. of land is owned by us and 6,165 sq. mtrs. of land is leased to us. We have also purchased additional vacant land parcel located adjacent to our current manufacturing facility measuring approximately 10,669. sq. mtrs., reserved for future expansion of our manufacturing capacity for seamlessproducts (out of which approximately 7,746.13 sq. mtrs would be used for construction of manufacturing facility for seamless tubes and pipes). In addition, we have purchased vacant land parcel which is located approximately lOkms from our existing plant measuring approximately 30,064 sq. mtrs. that is reserved for future expansion of our manufacturing capacity for welded tubes and pipes (out of which approximately 5,250 sq. mtrs. would be used for manufacturing facility for welded tubes and pipes). Furthermore, we have an additional piece of vacant land of 6,939 sq. mtrs located approximately 7 kms from our existing plant. Our consistent acquisition of land has been key to our growth due to the nature of our Products and its intricate requirement for space for its production, handling, storage and logistics.

In addition to acquisition of land, we intend to procure additional machines to increase our production capacity. The following is a brief description of the major machineries and utilities that are proposed to be procured for the purposes of expanding production capacity of seamless and welded tubes and pipes.

Our manufacturing facility has an installed production capacity of 20,000 MTPA of mother hollows, 10,068 MTPA of seamless products and 1,020 MTPA of welded products. Through the above-mentioned acquisition of land and procurement of machines, we will add an additional nine (9) production lines for seamless products and five (5) additional production lines for welded products. The capacity for stainless steel seamless products will be increased by 10,000 MTPA to reach a total capacity of 20,068 MTPA, and the capacity for stainless steel welded products will be increased by approximately 12,130 MTPA to reach a total capacity of 13,150 MTPA. We believe this will help us increase our customer base and support our long-term growth.

Also, by adding further production capacities, we intend to leverage our strong execution capabilities in a capital efficient manner to maintain and improve our return ratios. We believe that the additional production capacities will place us in a competitiveposition to cater to the growing demands of our existing clients and attract new customers in the future.

The Company operates in single segment i.e. "Manufacturing of Pipes". Hence, does not have any additional disclosure to be made under AS- 17 segment reporting

Geographic expansion of our customer base

We have exported to 14 countries including Germany, the Netherlands, Spain, the United States of America and several others. In the United States market, we have one stockist authorized to exclusively sell our products in United States market, Further, we supply our Products through stockist in Italy, Germany, Austria and Eastern Europe markets. Our revenues from exports aggregated to 5129.1 cr, 583.22 cr, 594.12 cr and 559.21 cr for 2025, 2024, 2023 and 2022, respectively, and as a percentage of our revenue from operations, were 26.6%, 20.82%, 30.84%, and 30.52%, respectively. We have established our credentials in theinternational market as a quality brand for stainless-steel tubes and pipes. We intend to enhance our export focus on markets in the United States, Germany, Netherlands, Italy, Spain and France due to increased demand. We also intend to commence exports of our Products to the Middle East, primarily in Kuwait and United Arab Emirates. Through further diversification of our operations geographically, we hope to hedge against risks of operations in only specific areas and protection from fluctuations resulting from business concentration in limited geographical areas.

Strengthen our brand value

We market our Products under the brand name "Scoda Tubes Limited". We recognize the importance of developing market recognition of our brand and establishing image of quality products under the "Scoda" brand. To market our brand among market participants (such as stockists, engineering, EPC and industrial companies), we have consistently participated in trade expos and fairs. The major international trade expos that we have consistently participated include Stainless Steel World Maastricht (Netherland), Wire & Tube Dusseldorf (Germany), UK Metal Expo (United Kingdom) and Heat Exchanger World (Rotterdam & United States). Domestically, we have participated in

major shows such as Global Stainless-Steel Expo, Chemtech and Stainless-Steel Expo, etc.

Going forward, we intend to make consistent efforts at strengthening our brand and enhancing our brand visibility among targeted customers, including, maintaining and strengthening our quality customer services, consistently sponsoring or participating in domestic and international trade expos and fairs, undertake additional marketing initiatives such as digital marketing. We believe that such initiatives will improve our brand positioning, overall brand recall value and support us in our growth strategy.

Participation in key exhibitions and expos

Chemtech - Mumbai o GSSE - Mumbai

Stainless Steel World - Maastricht, Netherlands

Tube & Wire - Dusseldorf, Germany Heat Exchanger World - Rotterdam, Netherlands

Heat Exchanger World - Houston, Texas, USA

Stainless Show, Brno, Czech Republic

Trademarked "Scoda Tubes Limited" to build brand equity, increase market recognition, and protect IP o 20 personnel in quality check and customer servicing team to further improve brand positioning and brand recall value, supporting overall growth strategy

SWOT Analysis

Specialised production of Stainless-Steel tubes and pipes

The company specializes in the

manufacturing of seamless and welded tubes and pipes in a single metal category, i.e., stainless steel. This high emphasis on a single metal category for catering to the pipe requirements of both domestic and international customers has, over time, improved the expertise of the company in terms of manufacturing process, inventory management and sales of products

With the vast experience in the designated product segment, the company has achieved an ability to accurately assess and respond to customer preferences in this segment. This has helped the company to be able to offer various specialized stainless- steel tubes and pipes products in terms of length, bending, thickness and grades as required or preferred by our customers.

Thus, the specialized focus of the company on the stainless-steel segment of tubes and pipes has well positioned it in attracting and retaining customers to cater to their requirements of customized, specialized and high-quality stainless-steel tubes and pipes across the world.

Plants strategic location and integrated operations

The companys current manufacturing facility is strategically located in the state of Gujarat to enable easy and seamless access to key ports and junctions for efficient flow of products.

For instance, the plant is in close proximity, approximately 360 kilometres, from the Mundra port, a key port for exports, and 23 kilometres from an Inland Container Depot, that ensures sound access and connectivity to the company.

The strategic location of the manufacturing plant, hence, helps the company in reducing its logistics costs and improving its margins.

Currently, the company possesses 20 production lines for its products (18 production lines of seamless tubes and pipes, 2 production lines of welded tubes and pipes). As of FY25, the company owns land area of 77,226 square meter, out of which the plant facility is built upon 21,199 square meter area. The extra land gives the company an opportunity to expand its manufacturing capacity in the near or long term.

The companys plant is fully integrated with sizeable production facilities. For example, the company has stainless steel seamless tubes and pipes

manufacturing capacity of 10,068 metric tonnes per annum. The company also possesses a 1,020 metric tonnes per annum manufacturing capacity of stainless steel welded tubes and pipes.

As a result of the high capacity, the company garners benefits such as the economies of scale and produces its final products at competitive prices. The company is fully committed to continue to invest in its production facilities to increase the quantum of edge over its competitors in the long term.

In FY23, the company completed the setup of a brand-new piercing mill for the production of mother hollow (annual capacity of 20,000 metric tonnes per annum), which is the principal raw material for its products. This new facility of the company makes its overall pipes manufacturing operations a highly backward integrated one. Apart from getting benefits such as lower raw material related costs and reduced supply side risks owing to low reliance on the raw materials suppliers, the company also gets the flexibility to easily accommodate changes in its product portfolio as per the market dynamics to cater to requirements of its wide spectrum of customers. h

Customer and geography diversification

The company sells its products to diversified end-user markets, both domestically and internationally. In the domestic market, it sells products to end-users, fabricators, EPC contractors as well as stockists.

In the United States market, the company supplies its products through one exclusive distributor, while in the Italy, Germany, Austria and Easter Europe markets, it supplies its products through its hired sales/marketing representatives to end-users, fabricators and EPC contractors.

The company, thus, has a solid end-user base in a wide range of industrial sectors, such as oil & gas, petroleum, fertilisers, chemicals, defence & aerospace, pharmaceutical, power, automobile industry, etc. Some of the key customers of the company are described below:

The company has received approvals from various esteemed organizations such as Laxmi Organic Industries Limited, Gujarat Narmada Valley Fertilizers & Chemicals Limited (GNFC), Krishak Bharati Cooperative Limited (KRIBHCO), Triveni Turbine, Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Heavy Electricals Limited (BHEL), etc.

Further, the company has supplied its products to major domestic public sector clients such as Western, Central, Eastern and Northeastern Railway, Modern Coach Factory (MCF), Rail Coach Factory (RCF), Department of Atomic Energy, etc.

The company exported its products to over 14 countries in FY25, the share of exports in the companys overall revenues have remained over 20% for the last three years.

This diversification with respect to industries and the market regions helps the company garner revenue diversification and sustainable operations in the medium and long term. This also helps the company to hedge its business operations from concentration risks and other sector- or geography- specific risks.

Valuable experience, qualifications, and industry relations of the promotors

The promoters of the company, namely, Jagrutkumar Patel, Ravi Patel, Samarth Patel, Saurabh Patel, Vipulkumar Patel have experience of over 10 years in the pipe industry, which gives the company a strong and healthy relationship with suppliers and customers.

The promoters have high expertise in marketing, procurement, finance, accounting and customer relationship management.

The companys senior management team comprises of professionally qualified members with experience and knowledge in the pipe industry and regulatory environment. Their experience and their

understanding of the industry has enabled and will continue to enable the company to take advantage of both current and future opportunities. Since a large number of senior management personnel have worked with the company for a significant period of time, it will result in effective operational coordination and continuity of business strategies.

This extensive experience and understanding of the business has played a huge in customer satisfaction, which brings repeat- business and new-client referrals for the company.

Extensive and Effective Quality Control

All the products manufactured by the company adhere to national and international standards and go through extensive quality control procedures by trained and experienced personnel.	The companys quality team is responsible for different aspects of the manufacturing process, such as monitoring the parameters of equipment, checking the strength of materials, reporting any irregularities in the manufacturing process and making adjustments accordingly.
The company has a dedicated quality control team which takes care of quality standards during all the manufacturing stages including raw material processing, cold rolling, pipe manufacturing and dispatching, etc. Some of the quality testing and inspection facilities in the company include include Positive material identification (PMl) test, Hydrostatic test, Chemical test, Tensile test, Mechanical test, Micro test, Hardness test, Eddy current test, Ultrasonic test, Intergranular Corrosion (iGC), practice "A" "C" and "E" tests, air under water test, dye penetrant test, impact test, and Boroscopic examination.	The company has a low production rejection rate. On an average annual basis, approximately 3% and 2% of the companys products are rejected by its quality control systems and its customers, respectively.
	The high focus of the company towards maintaining quality standards helps it cater to large sections of the end-use industry, both domestically and internationally, while keeping its brand image intact.

International Accreditations and product approvals

The company follows international standard manufacturing practices, and its manufacturing facility benefits from the quality benchmarking certifications, including ISO 9001:2015,14001:2015 and 45001:2018. Further, the company is certified with TUV SUD South Asia Private Limited and Pressure equipment directive (PED), Norsok M650, and DNV.	Norsok (Norway), ASTM (US) & ASME (US), EN (Europe), Lloyds Marine (UK). Additionally, the Company has applied for certification from Bureau Veritas Marine (France) and Rina Marine (Italy) and further the Company has applied for renewal of its BIS licence for stainless steel seamless pipes and tubes for general service.
The products sold to the European market are certified under PED 2014/68/EU and ADW/AD 2000 - Merkblatt - W0 from TUV Nord.	The domestic and international accreditations have enabled the company to supply its products across sectors including oil & gas, petroleum, fertilisers, chemicals, defence & aerospace, pharmaceutical, power & atomic, automobile industry, etc. These certifications, along with the industrial expertise that the company possesses, favourably position it to service client requirements across all segments of the stainless-steel seamless and welded tubes and pipes market.
The company also holds accreditation from the Indian Boiler Regulation for manufacturing and supply of stainless steel seamless and welded pipes, tubes and U- tubes, DNV-CP-0252 certification for steel pipes and steel pipe fitting and DNV marine certificate for application in ship building and marine industry.
The companys products also comply with relevant standards stipulated by Engineers India Limited in the domestic scenario. In the international context, the companys products comply as per DNV(Germany),

Financial position of the company

The companys financials have been showing consistent improvement for the last 3 years. For example, its operating revenues increased on- year by 57%, 31%, and 21% in FY23, FY24, and FY25, respectively, indicating a strong sales performance of the company. Further, its operating margins and net margins grew from 11.4% and 3.4%, respectively, in FY23 to 14.7% and 4.6%, respectively in FY24 and further to 16.1% and 6.5%, respectively, in FY25. These sharp growths in

6.5%, respectively, in FY25. These sharp growths in the margins happened on the account of companys cost related benefits from the economies of scale and the backward integration developed between FY22-FY24. As a result, the return on equity and the return on capital employed increased from 4.7% and 5.8%, respectively, in FY22 to 21.1% and 16.6%, respectively in FY25.

Opportunities

1) Governments supportive policies

The governments policies to boost local production and increase the competitiveness of Indian industries through "Make in India" and "Aatma Nirbhar Bharat" initiatives would pave a way of opportunity for the stainless-steel pipe manufacturing sector. Further, governments policies, announcements, high budgetary allocations towards railways, roads, civil aviation, gas pipelines for affordable housing are expected to drive demand for steel products including stainless steel tubes and pipes. Additionally, the policies such as Production Linked Incentive (PLl), Jal Jeevan Mission, PM Jivan Yojana targeting development in various sectors like infrastructure and housing development pose a unique opportunity for stainless steel tubes and pipes sector.

Further, in light of Indias decision in 2022 to impose anti-dumping duty on stainless steel seamless tubes and pipes imports from China for five years would also present an opportunity

2) Infrastructure development

Private and public sectors are increasingly focussing on infrastructure development in the areas of transportation, water supply, energy, chemical and manufacturing industries, and the residential and commercial real estate.

to domestic stainless-steel tubes and pipes manufacturing industry. This policy has historically resulted in increase in the capacity utilization rates of domestic stainless-steel tubes and pipes manufacturers, is expected to continue to provide benefits to the domestic players in terms of operational efficiencies and margins.

Additionally, in September 2024, the government extended the anti-subsidy duty, initially imposed in 2019, on the imports of welded steel tubes and pipes from China and Vietnam to India. The government has imposed a 29.88% duty on goods falling under 7304 covering all tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel). -30% of import duty is expected to keep a check on the steel tubes and pipes that are imported at predatory prices and hence, will support the growth in domestic steel tubes and pipes industry.

Additionally, big infrastructure development projects like the Baltic Pipe Project and the discovery of new natural gas sources are expanding the global market for natural gas, and in turn will increase demand for pipeline network growth.

3) Growth in oil and gas industry

Increasing offshore exploration and production and digital transformation of the oil and gas industry are expected to boost the oil and gas sector, supporting the demand growth for stainless steel welded and seamless tubes and pipes. Further, on the global front, the demand for natural gas is rising owing to its eco-friendly nature, its consumption in a variety of sectors like transportation and power generation, and its growing need for energy security in places like the Middle East, Africa, and Asia-Pacific. As a result, the infrastructure for gas pipelines is set to grow. Additionally, the demand for the natural gas pipeline network is anticipated to rise on the

back of an anticipated growth in the worldwide liquified natural gas (LNG) trade.

The incorporation of cutting-edge security technologies in the pipeline distribution network to make the global operations secure, cost- effective, and productive would also support the oil and gas infrastructure industry. Governments push towards increasing the usage of compressed natural gas (CNG) and LNG as substitute fuels for petrol and diesel to minimise carbon footprints and greenhouse gas emissions, will also support the natural gas infrastructure industry.

Threats & Weaknesses

l) Governments supportive policies

Fluctuations in prices of raw materials such as stainless-steel round bars are likely to present a threat to companys margins. However, with the help of the vast experience of its promoters, the company can manage raw material inventory levels optimally and reduce the raw material volatility risk factor. For instance, the company has been booking the purchase of raw material on a back-to-back basis which reduces the chances of raw material inventory pile-up and significantly reduces the impact of raw material price fluctuations on companys profitability.

Further, company can take advantage of its backward integration facilities to reduce the impact of raw material price fluctuations.

High cost of gas pipeline, and fluctuations in oil prices have a negative effect on government and consumer spending.

When the oil prices are high, there is an increase in inflation, current account deficit, and FY deficit in major oil importing nations like India and China. On the other hand, a decline in oil prices has a negative impact

on government spending in nations like Saudi Arabia, Nigeria, and the UAE (United Arab Emirates), which are heavily dependent on revenues from crude oil export.

In the international context, geopolitical conflicts, trade barriers, taxes, other trade restrictions, and reduced international investments and joint ventures can present a threat to business by limiting the companys ability to acquire raw materials, export completed goods, access new markets and find growth prospects.

Less expensive imports of stainless-steel tubes and pipes may pose a challenge to the companys sales volume and margins. However, the company may also take steps to counter the effects of less expensive imports, including raising the quality of their goods, streamlining their supply chain, and growing their clientele.

Volatility of raw material prices and changing government policies, custom duties, and regulations can pose threat to the stainless- steel tubes and pipes business.

Declined to 5.1x in FY25 from 5.7x last year, reflecting flexible credit terms even as revenue increased.

Units = Times

Broadly stable at 2.6x in FY25 compared to 2.5x last year, showing effective inventory management despite increased scale of operations.

Units = Times

Improved to 2.9x in FY25 from 2.4x last year, operational performance and profitability have increased the companys ability to cover interest expenses.

Units = Times

Improved to 1.3x in FY25 from l.lx last year reflecting the impact of the Pre-IPO equity infusion.

Units = Times

Significantly reduced to 1.4x in FY25 from 3.2x last year due to equity infusion from Pre-IPO, improving capital structure stability.

Units = Times

Improved to 16.1% in FY25 verses 14.7% last year, as operational leverage from higher revenues led to better cost absorption.

Units = %

Improved to 6.6% in FY25 compared to 4.6% last year, reflecting strong operating performance.

Units = %

Slightly lower to 21.1% in FY25 verses 28.8% last year, due to equality infusion from Pre-IPO.

Units = %

Internal Control Systems and Their Adequacy

Scoda Tubes Limited has established a robust system of internal controls designed to safeguard assets, ensure accuracy in financial reporting, and maintain accountability across the organization. These controls are supported by documented policies, divisional guidelines, and Standard Operating Procedures (sOPs) that are regularly reviewed and updated to reflect evolving business requirements.

The Company leverages its Enterprise Resource Planning (ERP) platform to streamline operations and embed transactional checks, including segregation

of duties, tiered approval mechanisms, and mandatory supporting documentation. These processes ensure that all transactions are properly authorized, recorded, and reported with integrity.

Our internal control environment is further reinforced by comprehensive internal audits, periodic management reviews, and continuous monitoring of risk areas. Together, these measures provide reasonable assurance on the reliability of financial statements and operational efficiency while protecting the Companys assets against unauthorized use or loss.

Risk Management

Scoda Tubes has instituted a comprehensive approach to identify and manage risks that may impact its operations, financial stability, and growth plans. The key risks and corresponding mitigation measures are as follows:

1. Industry and Market Risk:

Global economic cycles, competitive pressures, and volatility in raw material prices may adversely affect performance.

Mitigation: The Company maintains a broad product range and adopts booking strategies to manage price fluctuations and ensure raw material availability.

2. Operational Continuity Risk:

Rising energy costs, supply chain disruptions, or breakdowns in critical systems and equipment could impact business continuity.

Mitigation: Backward integration reduces external dependencies, while preventive maintenance and system safeguards enhance resilience.

3. Business Execution Risk:

Delays in execution or underutilisation of new capacities may limit growth potential.

Mitigation: The Company addresses this risk by diversifying end-use applications and steadily ramping up production capacities.

4. Financial and Currency Risk:

Volatility in exchange rates can influence the cost of imports and export realisations.

Mitigation: A structured hedging mechanism, combined with natural offsets from balanced imports and exports, helps manage currency exposure.

5. Technology and Innovation Risk:

Evolving technologies may affect the relevance of existing products.

Mitigation: Regular investments in R&D and a focus on product improvement keep the Company competitive.

6. People and Workforce Risk:

Retention of key personnel and labour disruptions may affect operations.

Mitigation: Employee development programmes, structured engagement activities, and talent retention measures are in place.

7. Compliance and Regulatory Risk:

Changes in laws and regulations may create operational or financial challenges. Mitigation: The Company ensures compliance through internal oversight and external expert reviews.

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8. Demand Cyclicality Risk:

Fluctuations in demand linked to overall economic activity may affect business volumes.

Mitigation: The Company operates in multiple geographies and serves a wide range of industries, reducing reliance on any single market.

9. Competitive Positioning Risk:

Strong competition may put pressure on margins and market share.

Mitigation: The Company focuses on quality, product differentiation, and customer service to maintain its position.

10. Environmental and Sustainability Risk:

Growing expectations around sustainable practices may affect cost structures and operations.

Mitigation: The Company invests in renewable energy and resource-efficient practices across its facilities.

11. Liquidity and Capital Risk:

Limited access to funding may constrain growth or expansion plans.

Mitigation: A conservative approach to leverage and prudent cash flow management ensures availability of resources for future requirements.