Scoda Tubes Limited is a manufacturer of Stainless-steel products such as tubes, pipes etc. with over 14 years experience. The company is dedicated to the supply of seamless and welded products in the stainless-steel category.
Its end customers span across various industries such as oil and gas, chemicals, fertilizers, power, railways, automobiles, the pharmaceutical, and the food and beverage sector.
It operates a plant situated in Mehsana, Gujarat with an installed capacity of 20,000 MTPA of mother hollow, 10,068 MTPA of seamless tubes, pipes, “U” tubes and instrumentation tubes and 1,020 MTPA of welded products/”U” Tubes.
Its products are sold to a variety of EPC and Industrial customers. It is also vertically integrated in the sense that it operates a hot piercing mill for the production of mother hollows which are used as a raw material for seamless pipe products. Scoda Tubes Limited also has a strong export presence, with a network spanning 11 countries. Europe is among the largest export markets as the company has a stockist network in Austria, Germany, Italy, Poland, and Eastern European markets.
The IPO offer is for a fresh issue shares aggregating to a total amount of up to INR 2,200 m. There is no offer for sale. A pre-IPO placement to the value of INR 550 m has already been completed at a price of INR 125 per share. As a result, the original size of the IPO has been reduces from INR 2,750 m.
Price Band
The price range for the IPO has been set at INR 130 to INR 140 per Equity Share.
BRLMs and Other Details
The BRLMs to the issue are Monarch Networth Capital Limited and MUFG Intime India Private Limited (formerly Link Intime India Private Limited)
The proceeds of the IPO are proposed to be utilized for the following purposes.
Capital Expenditure
Working Capital Needs
History and Origins
The origins of the stainless-steel industry can be traced back to early 1900s. An English metallurgist named Harry Brearley accidentally discovered a corrosion-resistant steel alloy in 1913. This led to the invention of stainless steel, first used in cutlery, but later applied to applications diverse as construction, automotive, and aerospace.
Evolution
The stainless-steel sector has progressively evolved over time, largely due to technological developments, evolving market demands and dynamic market trends. The industry has grown to be a producer of several grades and types of stainless steel, including austenitic, ferritic, and duplex.
Customers and Market Segments
The stainless-steel sector meets active demands from a variety of different customer and market segments, including:
Construction: Builders, architects and engineers choose stainless steel for its ability to resist corrosion and attractiveness.
Automobile: Automobile industries utilize stainless steel for the exhaust system, fuel tanks and some other parts.
Aerospace: Aircraft and spacecraft are constructed from stainless steel because of its high tensile strength, superior fracture and- temperature resistance, and radiative properties.
Household Goods: Stainless steel is also the material of choice for various cooking implements, kitchen utensils, and dining treats.
Process industries: These products are resistant to corrosion and used in chemical plants, oil refineries as well as power plants.
Increasing demand for corrosion-resistant products: The increase in demand for products that are corrosion-resistant, sturdy, and last a long time is expected to drive the market for stainless steel.
Technological advances: Enhanced manufacturing processes coupled with product innovations are increasing the industry’s product portfolio and applications.
Environmental sustainability and concerns: The industry is making a move towards sustainability and environmentally friendly practices (e.g. recycling, reducing waste etc.).
Market Size and Growth
The market for stainless steel pipes and tubes has been witnessing robust growth in the past couple of decades. The demand for stainless steel pipes and tubes is expected to increase by 3-4% YoY to reach around 3.65-3.75 MTPA in 2028. The market size of stainless-steel seamless pipes & tubes is about 15-20 per cent of the total demand. Welded stainless steel pipes and tubes have a substantial share of 80-85 per cent of the market.
The demand for stainless steel pipes and tubes continues to rise due to various factors:
Increasing Demand From End Use Industries: Several end use industries such as oil and gas, building and construction, automotive and chemical processing are growing and drive greater demand.
Government Policies & regulations: Imposition of anti-dumping duty on import of stainless-steel pipes and tubes are aiding the growth of the domestic industry.
Growth in infrastructure: Rising number of infrastructure development activities, including transportation, water plumbing system and power projects, is expected to propel demand for stainless pipes and tubes.
Shifting Focus on Quality and Safety: The shift in focus toward quality and safety in a diverse range of industries is promoting the need for high-quality stainless-steel pipes and tubes.
Scoda Tubes Limited is a private limited company, incorporated in 2008 in Gujarat, India. From its humble beginning, the company had grown to become one of the leading manufacturers of stainless-steel pipes and tubes.
Customer & Segments:
Manufacture of stainless-steel pipes and tubes is the key business. Its products comprise a diverse range of seamless and welded stainless steel pipes and tubes. Its customers span several industries like oil and gas, petrochemicals, fertilizers, pharmaceuticals and others.
Production Capacity
It has a manufacturing capacity of 10,068 MTPA of stainless-steel seamless pipes and tubes and 1,020 MTPA of stainless-steel welded pipes and tubes. Also, the company has a mother hollow capacity of 20,000 MTPA.
Products and Services
Its products include stainless steel seamless pipes, stainless steel seamless tubes, stainless steel seamless “U” tubes, stainless steel hydraulic / instrumentation tubes, and stainless-steel welded tubes and “U” tubes. Apart from production, it also offers cutting, bending and tube and pipe fabrication services.
Diversified product portfolio is the key differentiator for Scoda tubes. In addition, it has a strong presence in export markets.
The company considers its strong focus on quality a key differentiator. This has helped it maintain a loyal customer base, which has been a significant source of competitive strength.
It has a strong distribution presence. However, it is still lower than some of its large competitors. It is also not the largest player in the market. In this business, economies of scale and high utilization are a competitive advantage.
Competitive Landscapes
The firm competes in a competitive industry with a handful of key players competing for market share. The key competitors include:
Revenue Growth: The company’s revenue has surged, with a 57.80% rise from INR 1,950.53 million in Fiscal 2022 to INR 3,077.85 million in Fiscal 2023. This continued in Fiscal 2024, where revenue further grew by 30.77%. Expansion of its manufacturing capacity and increase in exports were a key reason behind this growth.
Profit Growth: The company’s profits have also experienced significant growth. They have grown by 531.78% from INR 16.36 million in FY 2022 to INR 103.36 million in FY 2023. For Fiscal 2024, the profit surged 77.05% to INR 183.00 million.
Financial performance: The company’s return metrics have also shown a strong improvement. Notably, its ROCE has increased to 15.9%. Also, its EBITDA margin has increased to 14.7% in FY’24.
Figure: Summary of Revenue and PAT
| Metric | Period Ending March 31, 2022 | Period Ending March 31, 2023 | Period Ending March 31, 2024 |
| Revenue from Operations | 1,940 | 3,051 | 3,999 |
| Profit Before Tax and after Exceptional Items | 23 | 144 | 259 |
| Profit After Tax (PAT) | 16 | 103 | 183 |
Source: RHP
Figure: KPI Comparison (FY24)
| Revenue Growth (%) | EBITDA Margin (%) | EBIT Margin (%) | RoE (%) | ROCE (%) | |
| Scoda Tubes Limited | 31.05 | 14.7 | 10.6 | 28.77 | 15.92 |
| Ratnamani Metals & Tubes Limited | 13.07 | 17.73 | 15.8 | 19.9 | 24.36 |
| Venus Pipes & Tubes Limited | 45.22 | 18.24 | 16.77 | 21.17 | 24.22 |
| Welspun Specialty Solutions Limited | 66.74 | 8.01 | 5.79 | 67.11 | 11.44 |
| Suraj Limited | -9.81 | 11.94 | 9.1 | 17.57 | 19.27 |
Source: RHP
Table 2: Comparison of Financials and Valuation (FY24)
| Peer | Market Price | Face Value | Revenue from Operations (INR million) | Basic EPS | Diluted EPS | P/E Ratio |
| Scoda Tubes Limited | – | 10 | 3,999 | 4.6 | 4.6 | – |
| Ratnamani Metals & Tubes Limited | 2,847 | 2 | 50,591 | 89.2 | 89.2 | 31.9 |
| Venus Pipes & Tubes Limited | 1,304 | 10 | 8,022 | 42.4 | 42.4 | 30.8 |
| Welspun Specialty Solutions Limited | 32 | 6 | 6,967 | 1.2 | 1.2 | 27.2 |
| Suraj Limited | 408 | 10 | 3,307 | 11.7 | 11.7 | 34.8 |
Source: RHP
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