welspun specialty solutions ltd share price Management discussions

Global Economy

The global economy recovered in 2021 following the disruption caused by COVID-19, on the back of efficient fiscal and monetary policies coupled with vaccinations across the globe. The global economy is estimated to have grown by 6.1% in 2021, compared to a contraction of 3.1% in 2020, as stated by International Monetary Fund (IMF). The biggest contributors to the growth of developing economies were India and China estimated to have grown at 8.9% and 8.1% respectively.

World Economic Output (%)

Post COVID-19, the global economy was on a recovery phase. However, the ongoing Russia and Ukraine war coupled with the possibilities of another wave of COVID is expected to impact the global economic growth in 2022 and 2023. Russia is a key provider of oil, gas, and metals, as well as wheat and grain, which it shares with Ukraine. Due to diminishing availability, prices have seen a sharp rise. Global growth is projected to slow from an estimated 6.1 percent in 2021 to 3.6 percent in 2022 and 2023. This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January. Both Russia and Ukraine are expected to experience large GDP contractions in 2022.

The supply-chain disruptions across the globe have resulted in a higher-than-expected broad-based inflation. Further, with the ongoing Ukraine and Russia war, the inflation is expected to remain elevated for a longer timespan than previously forecasted by IMF. The inflation is projected at 5.7% for advanced economies and 8.7% for emerging and developing economies in 2022. Further, to reduce the impact of rising energy prices, many governments will need to diversify their energy sources and boost efficiency wherever possible in the near future.

Indian Economy

The Indian Economy contracted sharply by -7.3% in 2020 as it was hit hard by the pandemic and then rebounded by 8.9% in 2021. Despite having witnessed one of the steepest contractions in gross domestic product and being hit by three successive waves, the Second Advance Estimates of National Income released on February 28, 2022 indicate that the economy has surpassed its pre- COVID level in 2021-22, on the back of unprecedented policy support from monetary and fiscal authorities. India is expected to be the fastest growing major economy in the world. IMF projects a real GDP growth for India of 8.2% in 2022 and 6.9% in 2023



Stainless Steel Sector:

Global Stainless Steel melt shop production grew by 10.6% to 56.3 million metric tonnes in 2021 compared to 50.9 million metric tonnes in 2020.

China is estimated to have the largest share of production of 54%. With 3.5 Mn tonnes Stainless Steel output, Indias share in world Stainless Steel output is estimated to be at 6.2% in 2021.

India is one of the largest consumers of stainless steel in the world. However, its per capita stainless steel consumption is much lower at around 2.5kg compared to the world average of 6 kg per capita. The per capita consumption of stainless steel in India will reach 8-9 kg by 2040 and 11-12 kg by 2047 as per the "Stainless Steel Vision Document 2047" released by the Ministry of Steel.

It is estimated that manufacturing of durables and household utensils in India is the largest end use of stainless steel with a 44% share. Apart from this, the usage of stainless steel is 30% in capital goods, 13% in automobiles, railways and transport (ART), 12% of in construction and infrastructure and 1 % in others.

Stainless steel pipes and tubes are important products in the stainless steel industry. They are mainly used in oil and gas, petrochemical, refineries, thermal power and nuclear power, aerospace and defence and in instrumentation across a wide range of industries. Therefore, demand for steel pipes & tubes is linked to the prospects of the end-user industries.

India is planning to double its refining capacity to 450-500 million tonnes by 2030. Energy demand of India is anticipated to grow faster than energy demand of all major economies on the back of continuous robust economic growth. Indias energy demand is expected to double to 1,516 Mtoe by 2035 from 753.7 Mtoe in 2017. Moreover, the countrys share in global primary energy consumption is projected to increase to two-fold by 2035. Crude oil consumption is expected to grow at a CAGR of 4.66% to 500 MMTPA by 2040 from 201.26 million tonnes in 2021. Indias oil demand is projected to rise at the fastest pace in the world to reach 10 million barrels per day by 2030, from 4.9 million barrels per day in 2021. Natural Gas consumption is forecast to increase at a CAGR of 12.2% to 550 MCMPD by 2030 from 174 MCMPD in 2021. Diesel demand in India is expected to double to 163 MMTPA by 2029-30, with diesel and gasoline covering 58% of Indias oil demand by 2045.

India is the third-largest producer and second-largest consumer of electricity worldwide, with an installed power capacity of 395.07 GW, as of January 2022. Coal-based power installed capacity in India stood at 203.9 GW in January 2022 and is expected to reach 330-441 GW by 2040.

Indias defence manufacturing sector has been witnessing a CAGR of 3.9% between 2016 and 2020. The Indian government has set the defence production target at USD 25 billion by 2025 while production in 2020-21 was valued at USD 10.9 billion.

The Indian chemicals industry stood at USD 178 billion in 2019 and is expected to reach USD 304 billion by 2025 registering a CAGR of 9.3%. With global companies seeking to de-risk their supply chains, which are dependent on China, the chemical sector in India has the opportunity for a significant growth.


Source: IBEF

Company Business Update:

The company restarted its Steel Melting (SMS plant) operations during Q3FY22. This has helped mitigate challenges being faced in Raw Material procurement and hurdles in logistics. This is evidenced by a faster delivery cycle which has resulted in enhancing monthly output and improving market share.

COVID-19 Impact:

Financial results in FY21 and Q1 and Q2 FY22 were impacted due to the Covid-19 pandemic. There was no significant impact on operations in Q3FY22. The impact of the 3rd wave has been mild compared to the previous waves and operations in Q4FY22 were also not affected.

The company has adopted several additional measures, encompassing global best practices, across plant location and offices to keep the employees and service providers safe.

Key Business Updates:

• As on 31st March 2022, the total order book of the company for tubes and pipes stands at 1,692 MT amounting to Rs.96 crores and for Stainless Steel Bars stands at 1,117 MT amounting to Rs.29 crores.

• The Company restarted its Steel Melting (SMS plant) operations during Q3FY22. This has been ramped up quickly and also helped mitigate challenges being faced in Raw Material procurement and hurdles in logistics.

• In addition, WSSL continues to reap benefits out of countrys ‘Make in India indigenisation projects with several Private and pSu companies. Increasingly, customers are preferring to source locally which is favourable for the company.

• The Company has dispatched material for strategic sectors during the year with the help of its unique integrated steel manufacturing facilities and expects repeat orders in the near future.

• The Company has been continuously gaining new customer approvals. During the year, WSSL received approvals from customers in Oil & Gas, Fertilizers, Aerospace and Defence amongst others. It has also added new customers in the domestic market for critical equipment like power plant boilers and oil refinery heat exchangers. Notably, it also gained a prestigious approval from an international customer for one of the largest LNG project ever to be undertaken.

• The Company has entered into several niche market segments successfully this year. It executed its first lot of Heat Exchanger tubes in SS 317L grade. The company developed and booked its first order of square tubing for nuclear application, received an order for a critical application of high pressure feed water heater for U-bend tubes and delivered tubes for the countrys flagship defence project in aerospace. WSSL executed production of Super Duplex SS Mother Hollows for Heat Exchanger tube supply to domestic client and 6" Duplex Pipes for an export order.

• The company expects its performance to further improve on the back of a healthy order book and the several management initiatives undertaken to improve performance.


Product wise performance is given in Directors Report under the heading ‘Operations.


Companys performance as expressed or implied could differ materially due to economic conditions affecting demand/supply and price condition in the domestic & overseas markets, changes in the Government regulations, tax laws & other incidental factors.


Risk is integral to any business. The Company has evolved a proper governance to identify and access potential risks and also formulate appropriate mitigation plans as under -

• Rising input cost - Identifying alternative sources for procurement of key raw material in cost competitive manner dividing the exposure into various kinds of raw materials which are also interchangeable.

• Labour availability - In order to retain the labour company has taken initiative of providing training on skill development and also introduced performance linked incentive schemes.

• Competition - To minimize the threat of competition the Company is regularly identifying the niche/high value segment and working aggressively with the customer centric approach. Various new approvals have been obtained and more are underway.

• Trade barriers - Wherever the Company finds surging of cheaper imports in the country, the matter will be timely taken through business associations with appropriate authorities in the Government for suitable protection / remedial measures. The Company is a co-petitioner for anti-dumping duty investigation in relation to dumping of SS seamless pipes and tubes from China.


The internal control system encompasses the policies, processes, tasks, behaviors and other aspects of our company that taken together, facilitate effective and efficient operations.

The Company employs adequate and effective system for internal control that provide for:

i) Security of the asset

ii) Efficient management information system

iii) Compliance with all laws and regulations

iv) Compliance with all standard system and quality standards.


Our company is maintaining the good industrial relationship. Company recognizes that human capital is its most important asset and due care is taken by various HR initiatives at company level like employee development, talent pool program etc.


Operational performance vis a vis financial performance of the Company is discussed in details in Directors Report.


Ratio FY22 FY21 Remarks
Debtors Turnover 12.22 7.02 The turnover of the company has doubled from last year while the Debtors have grown only by 50%. The Debtors Turnover ratio has improved due to better realisation, increase in Export sales and regular supply with repeat orders.
Inventory Turnover 2.22 1.96 There has been significant increase in Raw Material and WIP due to increase in production capacity and for fulfilment of new sales order. This is like to stabilise with continuous production and sales going forward.
Interest Coverage Ratio (0.81) (2.86) The Interest has been in similar levels, except for an Ind As adjustment of Rs 553 lakhs, as compared to previous year though the sales and working capital requirement has doubled. With reduction in Operating losses the PBIT has improved resulting in improved ratio from previous year
Ratio FY22 FY21 Remarks
Current Ratio 1.80 1.58 Current Ratio improved in FY22 due to significant increase in current assets due to increase in Business operations compared to last year.
Debt Equity Ratio 38.85 4.62 Due to increase in loans availed for augmentation of working capital requirement to meet the enhanced business activity.
Operating Profit Margin (%) 0.45% (20.38%) Improvement in EBIT has led to a change in the ratio
Net Profit Margin (%) (18.85)% 99.76% In FY22 it is net loss as against net profit in FY21. FY 21 had exceptional income due to write back of Rs. 12726 Lakhs Preference Share Premium, else it would have been a loss. Excluding exceptional income ratio would have been (47.44%) & (18.85%) in FY21 & FY22 respectively.
Return on Net Worth (ROE) (51.41)% 111.72% In FY21, PAT was higher due to exceptional income (mainly write back of Rs 12726 Lakhs Pref Share Premium). Excluding exceptional income in both years, ratio would have been -53.24% & -51.41% in FY21 & FY22 respectively.