Welspun Corp LTD Report 1

Equity Research Report
WELSPUN CORP LTD

NSE: WELCORP | BSE: 532144
Industry: Iron & Steel Products
Investment Summary
High / Low : ₹ 625 /₹ 178
➢ Dominant position in line pipes across geographies to benefit from Current Market Price : ₹ 558
strong sector tailwinds. Market Cap : INR 14,601 Cr
➢ Twin benefits of increasing operating leverage and declining Shares Outstanding : 26.2 Cr
financial leverage.
➢ Multiple re-ratings are likely as the company remains a key
beneficiary of key Govt. schemes. Stock Price performance
➢ Sintex / TMT in building materials segment to offer significant
growth optionality.
Company Overview
➢ Welspun Corp is a dominant player in the lines pipes segment
across India (Top 3)/US with 23% market share/ Saudi Arabia
(largest Player).
➢ WCL is one of the largest manufacturers of large-diameter pipes Source: Bloomberg
globally. The company also manufactures BIS-certified Steel Billets,
TMT (Thermo-Mechanically Treated).
➢ WLC has recently decided to increase its footprint across the B2C Company Snapshot
segment. In line with the company’s strategy, WLC forayed into the Founded: 1985
TMT bars business and set up a facility in Anjar (Gujarat). The
Headquarters: Mumbai, India.
company also acquired sintex’s iconic water tank business in
Chairman & MD: Mr. Balkrishan Goenka,
Mar’23 at a measly cost of INR4.1bn
• WLC also acquired the AGB shipyard for INR6.6bn which had a Mr. Vipul Mathur
scrap of 150,000 tons and a land of 165 acres with a seafront line of Website: https://www.welspuncorp.com
1,000 meters. Key Products: Steel & Plastic Pipes, Tubes, Bars.
Industry: Iron & Steel Products.
Financial Snapshot
Key Highlights
P/E Ratio : 13.56x
➢ Dominant position in Line pipes across geographies to benefit from Sector P/E Ratio : 18.68x
strong sector tailwinds Debt-to-Equity Ratio : 0.39x
➢ Indian businesses to benefit from GOI’s push for a well-established Return on Equity (ROE) : 16.03%
gas infrastructure. Return on Assets (ROA) : 1.34%
➢ US business in a sweet spot amidst increasing investments across the Current Ratio : 1.18x
Oil and gas Sector. Operating Profit Margin : 4.81%
➢ Saudi business to benefit from increasing capex intensity by Saudi Interest Coverage : 5.29x
Aramco.
➢ ‘Nal se Jal’ to offer multi-year opportunity for the DI pipe segment.
➢ Sintex acquisition strengthens foray into building materials.
➢ Market size growth and pan India reach make a turnaround case.
Consensus Rating
➢ Twin benefits of increasing operating leverage & and declining
financial leverage
Shareholding Pattern (As of 2023)
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Source: Company Reports
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1
WELSPUN CORP LTD
Business model Distribution Network:

Welspun Corp is transforming and creating value through multiple
business segments like Pipe solutions and building Materials. ➢ WCL has taken full control of assets at Sintex BAPL.
➢ Sintex continues to be a national brand with premium

positioning.
➢ It is the best-known brand for water storage tanks in

India.
➢ The Company has a very robust distribution network

of 900 distributors and 13,000 retailers.
➢ They stay intact and are going to act as a catalyst for

their growth.
Key Growth Drivers

Revenue Segmental Breakup:
➢ Govt. of India’s ‘Nal se Jal’ scheme to boost
DI pipe business.
➢ US business In a sweet spot amidst

increasing investments across the oil and
gas sector.
➢ Sintex / TMT in building materials segment

to offer significant growth optionality.
➢ Saudi Arabia VISION 2030

➢ TMT business to aid WLC B2C ambition.
Manufacturing:
➢ Overall industry growth of WST (Water
➢ WCL conducts various operations In various regions including
Storage Tanks) and Plastic Pipes.
India, the USA, and Saudi Arabia, and maintains multiple
manufacturing facilities for both SAW and ERW pipes.
➢ Ductile Iron pipes: Foray into India and the
Middle East.
➢ In India, the company possesses three manufacturing facilities
dedicated to SAW pipes and one for ERW pipes.
➢ Twin benefits of increasing operating
leverage and declining financial leverage.
➢ Additionally, WCL operates a single manufacturing facility in both
the United States and Saudi Arabia.
Manufacturing facilities in INDIA: STOCK PERFOMANCE

➢ Anjar (Gujarat), Bhopal (MP), Mandya (Karnataka) and Jhagadia
(Gujarat)
Manufacturing facilities in overseas:

➢ Little Rock, Arkansas, USA.
➢ Total capacity: 2.2 mn Metric Tonnes.
2
WELSPUN CORP LTD
Industry Overview
➢ India’s WST (Water Storage Tank) market size as of FY22 falls between INR (45- 50) billion.
➢ The industry will continue to grow up to a market size of INR (90 – 100) billion at 19% CAGR in FY26.
➢ The Plastic Pipe Industry’s market size as of FY13 is INR 190 billion and it continued to grow at a CAGR between (10-18%) in
FY21.
➢ As of FY21 the market size is INR 400 billion and it will continue to grow at a CAGR of (10%-12%) in FY25 to INR 600 billion.
➢ Government efforts on JJM, PMAY, etc as well as structural economic drivers to boos the spending on the building materials
segment.
Indian WST (Water Storage Tank) and Plastic Pipe Market Growth
1.4
1.3
1
0.9
0.8
0.7
0.6
Source: Statista
ORDER BOOK:
➢ As of 9MFFY24, Order Book for line pipes in India and US stands at 575 KMT valued at Rs. 7200 crs.
➢ The Saudi Arabia associate company; EPIC has a confirmed order book exceeding 2 years.
➢ Execution of Aramco order of 1.8 billion started.
➢ Saudi JV, East Pipes integrated Company for Industry (EPIC), listed on the Saudi Exchange’s Main Market
(‘Tadawul’), with a current stake at 35%.
➢ The company has signed new contracts including a significant SAR a billion (Rs 2,200 crore) contract awarded
recently by SWCC. With this the cumulative orders received by EPIC stood at INR 4000 crs.
3
WELSPUN CORP LTD
Key Growth Drivers

❑ Dominant position in Line pipes across geographies
➢ Indian businesses to benefit from GOI’s push for a well-established gas infrastructure.
➢ GOI’s target is to increase natural gas pipeline coverage by 54% to 34.5 km by 2024-25.
➢ To connect all the states with the trunk natural gas pipeline by 2027.
➢ Increased opportunity in the water sector with the government using SAW pipes for water transportation (Nal se Jal)
scheme.
➢ Upcoming hydrogen hubs and carbon capture projects are likely to drive the future for pipelines.
❑ US business in a sweet spot amidst increasing investments across the Oil and Gas sector:
➢ Since the outbreak of the Russia-Ukraine conflict, Europe has been finding alternative destinations to replace the Russian
gas.
➢ Rising global demand for natural gas is a growth opportunity for US LNG producers this will require timely construction of
a natural gas pipeline infra aiding WLC business.
➢ Plans for two major oil pipelines and at least four major gas pipelines from the Permian Basin are currently under
discussion offering demand opportunity.
➢ The WLC HSAW plant in the US is currently fully booked till 1QFY25 with a very strong demand outlook over the next 5-7
years.
➢ WLC leadership position in the US (23%) remains confident of capitalizing on the opportunity.
❑ Saudi Arabia VISION 2030:
➢ Saudi Arabia remains healthy given increasing investments in oil and gas and sea revenue water desalination projects.
➢ Saudi Aramco has raised its upstream spending to increase its crude oil capacity to 13mn bpd also plans to increase gas
production by +50% till 2030.
➢ Increased investment towards water desalination by 56% from 14mn cubic meters per day to 22mn cubic meters per day
and a further expansion of 44% to 35mn cubic meters is planned by 2030.
➢ The government will likely spend USD 15 billion over the next 7-8 years offering a multi-year revenue visibility
➢ EPIC has recently signed a contract with Saudi Aramco for supplying large-diameter steel pipes valued at USD 1.8 billion.
❑ 'Nal se Jal’ offers a good opportunity for the DI pipe segment:
➢ GOI has already committed ted more than INR 700 billion in their union budget of 2023 towards JJM.
➢ DI pipes are likely to account for ¼ of the pipe market share of India and WLC intends to become a key player in the
domestic DI pipe market.
➢ The total consumption in India is 1.5mn tons against a total demand of 2.6mn tons. Given the strong demand for DI pipes.
➢ The Co. boasts an order book of 15KT across DI pipes valued offering visibility for the next 3 quarters.
❑ Sintex acquisition strengthens foray into building materials:
➢ Sintex is a national brand with a peak market share of 23 – 25%.

➢ The acquisition is in line with the company’s strategy to build a building material portfolio and enhance its B2C footprints.
➢ Sintex’s product portfolio comprises water storage tanks, and UPVC-based interior products.
➢ Huge distribution network of 900 distributors, 13,000 retailers.
❑ Industry Growth :
• WST (Water Storage Tank) market to grow at 19% CAGR over FY22-26
• Plastic Pipe offer a significant increase in market size.
• Plastic Pipe market to grow 10-12% CAGR over FY21-25.
4
WELSUN CORP LTD
Key Growth Drivers

❑ TMT Business to aid WLCO’S B2C ambition:
➢ Welspun Corp’s foray into TMT bars in FY23 strengthens the company’s plan to transform from being a large-scale B2B
business to a B2C business.
➢ TMT bars segment to focus on the Gujarat market which has a consistent annual demand of 3mn tons per annum, of which
only 2mn tons is produced in the state.
➢ Welspun has identified this gap and this strategy is to focus on the local market and gradually expand its presence across
India.
➢ PM Gati Shakthi National Master Plan: an expected outlay of INR 100 lakh crores.
➢ Pradhan Mantri Awas Yojna-Urban’s Housing for all mission.
❑ Twin benefit of increasing operating leverage and declining financial leverage:
➢ Operating leverage: Co. is expected to post a significant improvement in financial operations during FY23-26 with
revenue/EBITDA/PAT CAGR at 27%/65%/93% compared to the previous decade Revenue/EBITDA/ PAT CAGR of 0.7%/-
4%/3.9% aided by sector tailwinds.
➢ Financial Leverage: The Co. has reduced its net debt position from INR 11bn to INR 8bn at the end of 1QFY24 and with no
major capex pending.
➢ This is a good position for the company as the company is increasing its operating leverage and decreasing its financial
leverage resulting in a share price rerating.
❑ Ductile Iron Pipe: Forays into the Indian and Middle East:
➢ Huge focus on creating drinking water supply infrastructure in India

➢ The Immediate Focus Market is West, Central and North India.
➢ Strong order backlog of 264KMT valued at INR 2,185 crores.
➢ Board approves setting up of 150 KMTPA capacity in the Middle East
➢ Strong GDP growth and economic outlook to back demand
➢ Leveraging WCL’s leadership position in the Line pipes business in the Middle East region.
5
WELSPUN CORP LTD
OVERALL SALES VOLUMES
➢ Line Pipes have grown to 291 KMT 78% YoY.

➢ DI pipes have grown to 62 KMT 429% YoY.
➢ SS Pipes have dropped to 1,183 MT -7% YoY.
➢ SS bars have grown to 3,921 MT 171% YoY.
➢ Water Storage Tanks have grown to 3,411 MTN 10% YoY.
➢ TMT bars have grown to 30 KMT 1704% YoY.
6
WELSPUN CORP LTD
PROJECTIONS OF PIPE LINES
➢ The line pipes segment will reach 1250 KMT in FY26 at 8% CAGR between FY23 and FY26.
➢ DI pipe segment will reach a staggering 450 KMT in FY26 at a 122% CAGR between FY23 and FY26.
➢ SS pipes will continue to grow at a CAGR of 25% between FY23 and FY26 to 8,000 MT.
➢ SS bars will continue to grow at a CAGR of 112% between FY23 and FY26 to 65,000MT.
Guidance for FY24
➢ The management is confident of exceeding their guidance for FY24.

➢ Top line of INR 15,000 crore (growth of 50%).
➢ EBITDA of INR 1,500 crore (growth of 90%).
➢ ROCE of 16% + (from 7% in FY23).
➢ Strong focus on the growth of Sintex, DI Pipes, and WSSL.
➢ Increase in DJSI ESG rating to 60+.
7
WELSPUN CORP LTD
Financial Analysis
Revenue Mix
Product Wise Break-Up -India
➢ The company derives 97% of its

revenue from its steel products.
➢ 3% of revenue is derived from
others
➢ 75% of the revenue from steel
products is derived from HSAW
pipes.
➢ 15.9% of its revenue is derived from
LSAW pipes.
Location Wise Break-Up
Geographical split:
➢ The company derives more than

half of its revenue from India(54.4%)
➢ The rest of the revenue is derived

from various countries across the
world (45.7%).
Cash flow Analysis
● The cash from operating activities has declined 117% YoY from 218 crores to -185.13 crores.
● The cash from investing activities has declined 54% YoY from -200 crores to -347 crores.
● Cash from financing activities has increased 50% YoY from 452 crores to 908 crores.
● The overall new change in cash remains positive but a decline from 470 crores to 376 crores.
● The capex level of the company has increased 22% YoY from 979 crores to 1,194 crores.
● The overall free cash flow of the company remains negative FY22 -760 crores to FY23 -1,379 crores.
8
WELSPUN CORP LTD
SWOT Analysis
❑ STRENGTHS
• Dominant player in the line pipe segment across India(Top3), US 23% market share, Saudi Arabia (largest player)
• Increasing demand for SAW pipes from oil and gas and water transmission projects has improved the business
prospects for the WCL’s line pipe segment.
• Diversification into SS pipes and DI pipes has improved the pipe product portfolio and opened new avenues for quality
growth.
• Acquisition of Sintex and entry into TMT bars business improve the company’s B2C presence. The turnaround of Sintex
will add significant value.
❑ WEAKNESS
• Competition from other well-established players (both domestic and global).

• Volatile key raw materials prices (HR sheets and sinters) and other inputs cost along with supply chain disruptors.
• Metal industries are required to maintain environmental regulations due to their usage of coal in blast furnaces.
❑ OPPORTUNITY
• The river linking project to link 30 river basins of Himalayan and Peninsular geographies is expected to create
substantial demand for SAW pipes.
• WCL is the part of global metal pipe group, which is developing new-age metal pipes to transmit green H2. It will open
new avenues for growth in the coming decades.
• WCL is expanding the product profile of Sintex and planning to enter into other polymer plastic-based products, which
could enhance the revenue profile.
❑ THREATS
• Huge competition from companies like JSW Steel, APL Apollo tubes, Jindal Saw, and Maharastra seamless.
Peer Comparison – Moderate durability
9
WELSPUN CORP LTD
Corporate Governance
Company Board of Directors
Name Designation
Mr. Vipul Mathur Managing Director and CEO
Mr. Balkrishan Goenka Chairman, Non-Executive
Mr. Rajesh R. Mandawewala Director
Ms. Dipali Goenka Director
Mr. Arun Todarwal Lead Independent Director
Ms. Revathy Ashok Independent Director
Ms. Amita Misra Independent Director
Mr. Manish Chokhani Independent Director
Mr. Anjani Agarwal Independent Director
Mr. Aneesh Misra Director
Shareholding Summary
Total Promoter Holding Foreign Institutions Holding
10
WELSPUN CORP LTD
Key Investment Risks
➢ Global slowdown may impact demand conditions.
➢ Increase in competition.
➢ Foreign exchange risk.
➢ Low oil prices may impact order inflow from the key oil and gas sector.
➢ Sharp surge in steel prices could impact margin/earnings.
➢ Lower than expected ramp-up of new business segments
➢ Insufficient use of Capital declining ROE is falling faster than historical averages.
➢ Declining Net Profit Margin falling faster than historical averages.
➢ Declining Interest Coverage Ratio falling faster than historical averages.
➢ Basic annual EPS is falling faster than historical averages.
Forensic Analysis
11
WELSPUN CORP LTD
Financial Statements
Consolidated Balance Sheet (in INR Cr)
● The total current assets have increased 123% YoY FY22-FY23.

● The total assets of the company have grown 66% YoY FY22-FY23.
● The total liabilities of the company have grown 145% YoY FY22-FY23.
● Total equity of the company has declined -1.4% YoY FY22-FY23.
● Total common shares outstanding shares have grown 0.22% YoY FY22-FY23.
12
WELSPUN CORP LTD
Financial Statements
Consolidated Income Statement (in INR Cr)
Consolidated Cash flow Statement (in INR Cr)
13
WELSPUN CORP LTD
Company History
14
WELSPUN CORP LTD
Technical Analysis
STOCK PERFOMANCE EMA & SMA
Delivery & Volume
Bulk Block Deals
15
WELSPUN CORP LTD
Key Results Announcement Dates
Ex-Date Key Results Dates

06 Feb 2024 Quarterly Results
08 Nov 2023 Quarterly Results
04 Aug 2023 Quarterly Results
30 May 2023 Audited Results & Final Dividend
03 Nov 2022 Quarterly Results
04 Aug 2022 Quarterly Results
27 May 2022 Audited & Quarterly Results
28 Oct 2021 Quarterly Results
TTM Stock Price Performance Chart
16
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Equity Research Report

WELSPUN CORP LTD

Shareholding Pattern (As of 2023)

Source: Company Reports

Business model Distribution Network:

➢ Sintex continues to be a national brand with premium

➢ It is the best-known brand for water storage tanks in

➢ The Company has a very robust distribution network

➢ They stay intact and are going to act as a catalyst for

Key Growth Drivers

➢ US business In a sweet spot amidst

➢ Sintex / TMT in building materials segment

➢ Saudi Arabia VISION 2030

Manufacturing facilities in INDIA: STOCK PERFOMANCE

Manufacturing facilities in overseas:

➢ Total capacity: 2.2 mn Metric Tonnes.

Source: Company Reports

➢ Execution of Aramco order of 1.8 billion started.

Key Growth Drivers

❑ Saudi Arabia VISION 2030:

❑ 'Nal se Jal’ offers a good opportunity for the DI pipe segment:

❑ Sintex acquisition strengthens foray into building materials:

➢ Sintex is a national brand with a peak market share of 23 – 25%.

Key Growth Drivers

❑ Twin benefit of increasing operating leverage and declining financial leverage:

➢ Huge focus on creating drinking water supply infrastructure in India

OVERALL SALES VOLUMES

➢ Line Pipes have grown to 291 KMT 78% YoY.

PROJECTIONS OF PIPE LINES

Guidance for FY24

➢ The management is confident of exceeding their guidance for FY24.

➢ The company derives 97% of its

Location Wise Break-Up

➢ The company derives more than

➢ The rest of the revenue is derived

Cash flow Analysis

• Competition from other well-established players (both domestic and global).

Peer Comparison – Moderate durability

Company Board of Directors

Mr. Vipul Mathur Managing Director and CEO

Mr. Balkrishan Goenka Chairman, Non-Executive

Mr. Rajesh R. Mandawewala Director

Ms. Dipali Goenka Director

Mr. Arun Todarwal Lead Independent Director

Ms. Revathy Ashok Independent Director

Ms. Amita Misra Independent Director

Mr. Manish Chokhani Independent Director

Mr. Anjani Agarwal Independent Director

Mr. Aneesh Misra Director

Total Promoter Holding Foreign Institutions Holding

Key Investment Risks

➢ Global slowdown may impact demand conditions.

➢ Foreign exchange risk.

➢ Sharp surge in steel prices could impact margin/earnings.

➢ Lower than expected ramp-up of new business segments

➢ Declining Net Profit Margin falling faster than historical averages.

➢ Declining Interest Coverage Ratio falling faster than historical averages.

➢ Basic annual EPS is falling faster than historical averages.

Consolidated Balance Sheet (in INR Cr)

● The total current assets have increased 123% YoY FY22-FY23.

Consolidated Income Statement (in INR Cr)

Consolidated Cash flow Statement (in INR Cr)