Net Sales for the quarter ended June'11 stood at Rs 289.52 crore, which was 32% higher compared with corresponding quarter last year on improved performance in steel tubes & plates and wind mill sectors. Windmill sector has shown a notable growth in revenues due to rise in demand for wind power coupled with the availability of wind

Operating profit margin grew by 120bps to 18.1% pulling up the operating profit by robust 42% to Rs 52.52 crore.

Increase in Interest costs by whopping 104%, rise in depreciation cost by 7% and tax expenses by sharp 39% constrained the net profit growth to modest 37% to Rs 27.01 crore.

Key takeaways of the call:

Company is into production of High Frequency welded /Electric Resistance welded (HFW/ERW) pipes, Submerged arc welded (SAW) pipes and coating lines in Carbon steel segment and Seamless, welded and Electric fusion welded tubes and pipes in Stain less steel segment.

Company has demand from various sectors like oil & gas, Refineries & Petrochemicals, Thermal and Nuclear, Chemical Industries, Fertilizer, Aerospace, Pharmaceutical, Food and Dairy etc.

80% of company's production is on make-to-order basis and the remaining 20% on standard piping basis.

During the Q1FY12, the production of stainless steel pipes division increased by impressive 74% to 4569.93 MT while that of carbon steel stepped up by 11% to 32056.55 MT and coating segment zoomed by 112% to 175580 meter.

Income from Stainless steel segment rose by robust 67% to Rs 124.92 crore while that of carbon steel increased by 29% to Rs 141.96 crore and coating division income remained same at Rs 20.84 crore.

During the Q1FY12, Rs 290 crore of orders has been executed The order book stands at Rs 604 crore, out of which Rs 316 crore belongs to stain less steel pipes segment (SS)(domestic Rs 263 crore and exports Rs 53 crore) and Rs 288 crore to Carbon steel pipes segment (CS)(domestic Rs 263 crore and exports Rs 25 crore)

Company expects a huge requirement of water pipelines for power production near Gujarat and therefore expects good revenue growth during FY12.

Company expects revenues of Rs 1000 crore for the FY12.

Company is expecting more business from GAIL Pata due to its requirement of Stainless steel and carbon steel pipes and also from HPCL as it plans to set up a green –field refinery in Ratnagiri, Maharashtra

Company guided that its margins for Q2 FY 12 would remain in the level that of Q1FY12 as they are getting orders from IOCL Paradip.

Expansion of Electric Resistance welded pipes (ERW) capacity to produce steel pipes size in the range of 16 to 18 inches is likely to complete by October '11.Capex towards this is Rs 20 crore.

Company is bullish on all categories of steel pipes they produce except helical spiral pipes because of constraints like high competition, over capacity and less exports.

Expansion of stainless steel seamless tubes & pipes plant from current 4500 MT per annum capacity to 6000 MT per annum is in progress and will be completed in 15-18 months from now.

Expansion of stainless steel condenser tubes from the current 2000 tpa to 4000 tpa would be completed by Q3FY12.

The tubes & pipes that company manufacture have different sizes and wall thickness. Though small /low size tubes & pipes bring down the capacity utilization, they are higher in value addition. Thus it leads to better bottom line. Bigger diameter and high wall thickness types of tubes and pipes enable higher capacity utilization in MT but may not provide a healthy value addition.

Stain less steel pipes are exported to Korea, Japan, Europe and America etc.

Company expects more growth in future as more investments are flowing in Oil & gas and Power sectors of the country.

Company stated that the volatility in prices of steel pipes is more due to availability and prices of raw materials but it believes that prices of pipes would settle down depending on demand.

Company plans for Rs 165 crore of capex over a period of two years.

Currently, the Gross debt is Rs 265 crore of which Rs 190 crore is Working capital and Rs 75 crore is long-term debt. Working capital borrowings are more as company is importing raw materials. Majority of debt is in foreign currency than Indian rupee. Its average cost of interest is less than 10%.

Net current assets of the company are increasing due to rise in production and order dispatches.

Company expects ROC to remain at 20 - 22% for the coming fiscal years.