Based on publicly available data and our understanding the details are as below:

Current Seamless Tube Capacity in India: Around 15 lac tpa.

Production (Excl. Captive consumption): 5.50 lac tpa.

Exports including Deemed Exports: 2.00 lac tpa.

Imports: 4.5 lac tpa.

Major Seamless Tube Consuming Industries are as below:

Oil & gas Exploration

Power (Boiler & Heat Exchangers)

Automotive & General Engineering

Bearings

Construction Equipment

Others (Projects & trade).

There is no established data to support our market share industry-wise. However our share as % to total Seamless Tube production in India is about 30%. (For Oil & Gas Exploration around 5%-10%, while in others around 35%-45%).

BHEL is the largest player in the Indian seamless steel tube sector. But for modernization and expansion of its capacity, BHEL has already closed this unit, and may re-open the same only after one year. BHEL is also the largest consumer of seamless steel tubes in India. With the significant domestic capacity of BHEL going out of market, do you expect strong growth in demand and realizations of seamless steel tubes in India, atleast until BHEL resumes operations of expanded capacity?

The targeted capacity additions of over 85 GW in the domestic power sector over FY 11-16 would generate sufficient demand for the seamless tubes market in India.

With the country increasingly moving towards super critical power projects, how your company is placed in catering to the seamless steel tube demand of super critical boilers?

Super Critical Power projects in turn use high alloy seamless tubes whereby the realizations and margins are almost 2.5 times. ISMT is well poised to take advantage of the same with its in-house capability to produce high alloy content seamless tubes with varied diameter ranging from 38 mm to 273 mm and thickness as low as 3.2 mm.

Do you expect the share of power sector in the Indian seamless steel tube demand to increase over the next few years, considering massive expansions planned in Indian power sector?

Yes, the same is expected to grow at a CAGR of over 10-15% for next 5 years.

What is the total power requirement of the company, and what % of the same will be met from 40 MW captive power plant commissioned in the quarter ended December 2011. At what rate, and to whom, will the surplus power be sold. Whether the company has applied for / received coal linkage for this power plant from Coal India. What % of the coal requirements of this plant will come from domestic coal linkage, and from when?

Total Power requirement of the company is expected to reach around 320 MU per annum and the 40 MW Captive Power plant would cater to 80% of Company's total Power requirement. Hence there would be no surplus power for sale.

Company has applied for Coal linkage, which is under consideration. However, the increasing Power tariff by State utility, would still ensure the same envisaged savings of about Rs. 30 – 40 crore p.a. from the 40 MW CPP even without Coal linkage.

Kindly share the annual revenues due to Mega Project Incentive scheme under the Package Scheme of Incentives 2007. How long will this benefit accrue to the company, and whether it is linked to production?

The Mega Project Incentive Scheme entitles company for refund of VAT, Electricity duty on goods manufactured and sold through its new PQF seamless tube plant at Baramati for 7 years amounting to maximum of about Rs. 200 cores. The benefit is estimated at round Rs. 15 crore for FY 11-12.

What factors were responsible for mere 35.95% capacity utilization of the company's seamless hollows & tubes unit in FY 2010-11? What was the capacity utilization in the current fiscal, and whether do you expect significant improvement in the capacity utilization, going forward?

Company in May 2010 announced commencement of Commercial production of its 3 times increase in Seamless tube capacity from 158,000 tpa to 465,000 tpa. The expansion was a Brownfield project at a significantly lower capital cost, through installation of latest technology PQF mill and the capacity was chosen to best suit the existing set up and balance the upstream and downstream processing facilities. The company aims to progressively step up the production to reach 80% utilization within next 3-4 years.

The Capacity utilization for FY 11-12 is estimated between 40%-42%.

What is the share of value added products made from tubes in the company's turnover in FY 2010-11, in the nine months ended December 2011, and for the corresponding previous period. What kind of increase in share of value added products do you visualize over the next few years.

Value added sales accounts for around 5% of company's Seamless Tube sales and is targeted to increase to about 10% in next 3-4 years.

What is the steel capacity of the company, and what % of the same is utilized captively to produce seamless hollows and tubes? What are the niche areas in which the company's steel business (outside sales) is present, and what kind of traction do you visualize for value added steel segments like bearing quality steel, specialized high quality steel for auto, forging, textile machinery, fasteners etc.

Steel capacity stands at 350,000 tpa.

Over 55-60% capacity is utilized for Captive purpose.

Company sells value added Bearing and alloy steel to Forging, Bearing and Auto customers. The Steel business is estimated to grow by about 10% p.a.

Kindly share the details of various subsidiaries of the company and their operational and financial performance for the nine months ended December 2011, and for the corresponding previous period. Also, kindly share the future plans for each of these subsidiaries.

Company has a operating Subsidiary by name of 'Structo Hydraulics AB' in Sweden. It is into manufacturing of finished Hydraulics cylinder tubes and components, which are supplied into European market to companies like Caterpillar, Volvo, Hydrauto and others. Company is in the process of shifting the labour intensive Cold drawing machinery to India and continue with the high-end value added manufacturing at Structo. The same is expected to result into lower sales at Structo for FY 2011-12 and would pick up from Q1 FY 12-13.

Structo Hydraulics posted a sales of about Rs 85 crore for the nine months period ended December 2011.

The exports zoomed from Rs 175.58 crore in FY 2009-10 to Rs 328.46 crore in FY 2010-11, and they have further surged by 61% to Rs 385.91 crore in the nine months ended December 2011. Do you expect the growth momentum to continue, and as a result, what will be the share of exports in the total turnover in FY 2011-12, FY 2012-13 and subsequent years.

- For the 9 months ended December 2011, Exports accounts for 37% of company's seamless tube sales, which increased from 30% for corresponding period last year. Exports is targeted to contribute about 40% of Company's Seamless tube Sales in FY 12- 13.

What was the DEPB benefit on seamless steel tubes till September 2011, and duty draw back (revised) thereafter. Do you expect duty draw back rates to be revised upwards from June 2012, factoring in the higher incidence of excise and service tax, after they were hiked in Union Budget 2012-13?

Export benefit for 9 months ended December 2011 stood at Rs. 15 crores.

It would be logical to expect duty draw back rates to be revised upwards.

What factors were responsible for fall in EBITDA margins in the second and third quarter of the current fiscal? What are the company's initiatives to restore margins and improve turnover and profits?

- Raw material accounts for over 50% of Company's Sales. The Company is able to pass on any increase or decrease in Raw material prices with a lag of over 3-4 months. With continuous up trend in RM prices in the current financial year along with higher Power and fuel rates led to temporary dip in margins. The margins would be regained once RM prices stabilize and Company start benefiting from lower cost Captive Power beginning Q1 FY 13.

Whether the Indian seamless steel tube producers have petitioned the government to levy anti dumping duty on dumping by China. What is the current status of this petition? What are the various governments that have levied anti dumping levies on import from China, and at what %?

ISMT along with other major Indian Seamless tube producers have applied for levying 'Safeguard duty' against dumping by China.

US, European Union, Canada and Russia have already levied anti dumping duty on Chinese Seamless tubes.

What is the total debts of the company, and what % of the same are denominated in (a) Indian rupee (b) Euro (c) US dollar (d) other currencies.

Total debt of the Company is about Rs 1100 crore of which about 75% is in Foreign currency denomination.

What are the various projects that are eligible for carbon credit / Certified Emission Receipts under the clean development mechanism of Kyoto Protocol. What is the current status of each of these projects, and what is the (a) accumulated CERs (b) annual accrual of CERs.

Company has one project registered under UNFCCC eligible for CER's. Accordingly 7348 CER's have been granted Upto March 2008.

The average power cost of the company was Rs 5.85 per unit in FY 2010-11. What will be the total interest and depreciation cost per annum of the captive power plant, and what will be its variable cost of power generation. What will be the annual revenues from sale of surplus power.

The variable cost of Power generation from 40 MW CPP is estimated at about Rs. 4.50/ unit. The interest and depreciation for the first year is estimated at bout Rs. 11 crores each.

The plant would generate about 250 Million Usable units at the plant.

What are the various cost optimization initiatives, considering huge dumping by China needs to be faced head on. What are the segments in which China is highly competitive, and what are the other segments wherein their presence is muted, in terms of geography as well as products

The newly installed PQF mill would not only enable elimination of some of the upstream and downstream processing costs but would also enable company to produce wider range and longer length tubes with better yields. This would in turn result into reduced costs and facilitate entry into newer segments. Further, the anticipated savings from company's 40 MW Captive Power Plant would help company to withstand any Dumping threat from China.

China has created Seamless tube manufacturing capacity of over 20 Million tpa, which is the largest in the world and accounts for almost 60% of the total world capacity. With slowdown witnessed in some of the key markets accompanied by anti-dumping duty imposed by US & Europe, they are left with no choice but to dump their production in the fast developing countries like India.

What is the capex planned and incurred for FY 2011-12, and planned for FY 2012-13 and FY 2013-14. How will these capex be funded?

Apart from the 40 MW CPP, company has no other major capex plans. Accordingly company would continue to incur about Rs. 25-30 crores as Normal Capex.

For FY 2011-12 Capex towards 40 MW is estimated at about Rs. 40 crore.

The company's profits were tumbling down from Rs 18.56 crore in the quarter ended June 2011 to Rs 10.49 crore in the quarter ended September 2011, which further crashed to mere Rs 1.77 crore in the quarter ended December 2011. Do you feel that the worst is over, and the company is poised to significantly scale up its revenues, margins and profits, factoring in low capacity utilization, coming on stream of power capacity, and the plans to enrich product mix and efforts to control costs?

The dip in Profitability is largely attributable to reasons, which are temporary in nature. Company's Cash profits for 9 months declined by about 12%, which is largely attributable to:

Lag in passing on Raw material price increase. (Once RM prices stabilize the margins would come back to normal)

Increase in energy cost (Power at lower cost from CPP would ensure improvement in margins)

FX volatility (Over 20% depreciation of rupee in 9 months FY 12.

With stabilization of RM prices and own Captive Power plant company the company is poised for a significant improvement in margins going forward.

Kindly share your guidance on turnover and profits.

Company is targeting a growth in top line of over 20% p.a. for next 3-4 years.