Pipes and Tubes Sector

Pipes and Tubes
R R Sector Analysis
PIPES INDUSTRY
Indian Pipes Industries
June 2007
R R Investors
www.rrfinance.com
RR Information & Research 1 Industry Research

Pipes and Tubes
Pipe Industry
“Connect the future through pipes”
Contents
Industry Snapshot ............................................................................................................................ 3
Overview .......................................................................................................................................... 4
Industry structure ............................................................................................................................ 5
Key Demand Drivers of the Industry................................................................................................. 7
Demand and supply Mismatch........................................................................................ 7
Demand Estimation:........................................................................................................ 7
Sources of Demand ......................................................................................................... 8
Major Customers and Their Requirements ..................................................................... 8
Key Demand Drivers ...................................................................................................... 9
Strategic Analysis .......................................................................................................................... 12
Industry Attractiveness ................................................................................................. 12
Industry Competitiveness.............................................................................................. 13
Global Demand-Supply Scenario ............................................................................. 13
Export advantage ...................................................................................................... 14
Import advantage ...................................................................................................... 15
SWOT ........................................................................................................................... 15
Major Players of the Industry ......................................................................................................... 16
1 .Jindal SAW Limited ................................................................................................. 16
2. PSL Limited .............................................................................................................. 16
3. Welspun Gujarat Stahl Rohern Limited (welspun Gujarat)...................................... 16
4. Maharashtra Seamless Ltd (MSL) ............................................................................ 16
5. Ratnamani Metals & Tubes Ltd., (RMTL) ............................................................... 17
Financial summary of 2006-2007 ............................................................................. 17
Conclusion ..................................................................................................................................... 19

Pipes and Tubes
INDUSTRY SNAPSHOT
May - 2007
OUTLOOK KEY INDICATORS

The Indian natural gas sector is expected to witness PE 14.13 NPM % 8.38%
robust growth in medium to long term. The supply CAGR % 34% Key Inputs Steel
dynamics of the industry has changed with recent No. of Critical Energy
gas discoveries along the eastern coast and LNG 10
cos. Factors Demand
terminal. Thus to supplement the increased
availability, it is imperative that gas pipeline INDUSTRY SCORE CARD
infrastructure be put in place. Pipelines infrastructure
is made up of many components and out of theses Growth Potential
components, pipes make up for about 75 percent of
the total. Industry
attractiveness
So growth in natural gas will drive the growth pf pipes

and tubes industry, which will have an investment to Current economic
environment
the tune of Rs 325 billion expected in the next 3-4
years. 0 Low
1 Medium
2 High3
SWOT
STRENGTHS WEAKNESSES
• Indian manufacturers are competitive in the domestic • The demand of pips and tubes sector is derived form
market growth of oil and gas in country if there is any delay in
• Globally cost competitive with conversion costs of ~ exploration and production it will impact the growth of
US$ 55/MT as against US$ 100/MT which will provide this sector.
great advantage in export market as well.
OPPORTUNITIES THREATS
• The total global pipeline demand for transportation of oil • Threat of cheap import from other countries.
and gas over next 5-7 years is estimated at approx.
200,000 kms which will open up new opportunities.
• As production does not match the required demand of
28,000 kms it will provide immense opportunity for this
sector.
INDUSTRY ATTRACTIVENESS PEER GROUP

Sales (Cr)
CAGR-%
Bargaining Pow er Of suppliers

OPM-%
NPM-%
ROE-%
Bargaining Pow er of Buyers Company PE
Entry barriers
Threat of subsitutes JSW Steel 9337 39 30 14 26 9

Mah. seamless 1077 94 21 13 32 14
Rivalry among the firms
PSL 1539 73 11 3 15 18
Low Medium High Ratnamani Metals 350 161 18 10 39 8
Welspun Guj. Stah 1870 110 10 3 15 19

Pipes and Tubes
Overview
A well-developed transportation network is essential for efficient and economical use of available
natural resources including energy (oil and gas) and water sectors. Pipes and tubes are used in
various industries and applications, including oil and natural gas related products, oil refineries,
petro-chemical plants, Oil Country Tubular Goods (OCTG) application and in mechanical,
structural, chemical, automobile, water and sewage transportation and general engineering
industries. So far, in India, transportation of petroleum products through pipelines has been lower
than via roadways and railways.
This is in contrast with the international trend, where pipelines are the most preferred medium for
transporting petroleum products over long distances. However, of late, the emphasis on pipelines
is gaining significance in India as it offers a more eco-friendly and cost effective mode of
transportation. Further given the pace of development of Indian economy and its increasing
requirement of energy, the demand for energy is expected to increase significantly. This along
with the changing energy map towards increasing gas usage is likely to give an impetus to the
demand for pipeline network expansion.
Moreover high oil prices leads to increased cash flow for oil and gas companies, which are
deployed into drilling activities to curtail demand-supply gap. The demand for seamless tubes is
expected to grow at a CAGR of 20% and above for next couple of years due to increased E&P
activities around the world.
Demand Drivers
E&P Activities
Migration from
traditional
modes of Demand Drivers Drilling
transportation, Activities
The total global pipeline demand for transportation of oil and gas over next 5-7 years is estimated
at approx. 200,000 kms. This gives an average global demand in excess of 28,000 kms per
annum (assuming 7 years). The production however does not match the required demand of
28,000 kms thus there is a huge demand and supply mismatch expected over the next couple of
years.

Pipes and Tubes
Industry structure
Pipes and tubes are used in various industries and applications, including in water, oil and natural
gas and related products and sewage transportation as well as in oil refineries, petrochemical
plants, Oil Country Tubular Goods (OCTG) applications and in mechanical, structural, chemical,
automobile and general engineering industries.
Pipes and tubes may be classified on the basis of their manufacturing process Seamless Pipes;
SAW (HSAW, LSAW and ERW) and Spun pipes (DI/CI).
Different Types of Pipes and Tubes

Types of Size Major raw Domestic player Main Application
pipes material
SEAMLESS 1/2”-14” Billets MSL,ISMT,BHEL,REMY High Pressure
Application Metals
Gujarat, JSL Oil & Gas
Drilling,
H SAW 18” –100” HR Coils WGSRL, MIL, PSL, JSL Cross Country, Line
Pipes, Transport, Low
Pressure Application
L SAW 16” – 50” Steel Plates WGSRL, MIL, JSL Cross Country, Line
Pipes, and Water, for
Oil & Gas Transport
ERW Pipes 1/2 ” –21” Steel Sheets MSL, WGSRL, JPL, Cross Country
Surya Roshni
- DI / CI 3” –39” Iron Ore + Electrosteel Castings, Water & Sewage and
Pipes Coke to Lanco, Kalahasti, Transport for Oil & Gas
produce Pig Kesoram, Kapilansh, Transport.
Iron Dhatu, Kalinga, Tubes,
JSL
1. Seamless Tubes
Seamless pipes and tubes are used both in oil and non-oil sectors. Energy sector is the biggest
consumer of seamless tubes. Demand for oil is expected to grow at 1.6% CAGR over FY 2005-
25 (Estimated) and that of gas at 2.3% over the same period. Following rising demand for oil and
gas, the drilling activity is likely to grow at a much faster pace. Moreover high oil prices leads to
increased cash flow for oil and gas companies, which are deployed into drilling activities to curtail
demand-supply gap. The demand for seamless tubes is expected to grow at a CAGR of 20% and
above for next couple of years due to increased E&P activities around the world.
2. SAW Pipes (L SAW Pipes and Spiral Pipes)

The demand for Large Diameter Submerged Arc wielded Pipes(LSAW) and Spiral Pipes is driven
by oil and natural gas exploration and transportation activity in petroleum exporting countries and
in key consumer countries. The total pipeline infrastructure in India for oil and gas is around
18,000 kms. Currently, the crude pipelines in India covers approximately 8,000 kms and the
majority of these are located in Western and North Eastern regions.
The total global pipeline demand for transportation of oil and gas over next 5-7 years is estimated
at approx. 200,000 kms. This gives an average global demand in excess of 28,000 kms per
annum (assuming 7 years). The production however does not match the required demand of

Pipes and Tubes
28,000 kms thus there is a huge demand and supply mismatch expected over the next couple of
years.
Originally, this type of pipe was produced using electric resistance heating to make the
longitudinal weld (ERW),but most pipe mills now use high frequency induction heating (HFI) for
better control and consistency. However, the product is still often referred to as ERW pipe, even if
the weld has been produced by using the HFI process. Considered to have the lowest strength,
these pipes are generally suitable for small-diameter sub-trunk and branch lines in oil & gas
transportation. The pipes are also used for water and sewage transport.
3. Spun Pipes (DI/CI)

DI Pipes are used in transportation of water and sewage. Fast growing population and rising
population level in country has resulted an increase in demand for safe water. This in turn has
increased the demand for transporting good quality water from potential sources to distant cities
without contaminating it. Given the increasing demand and low penetration of water distribution
and sewage infrastructure in the country, the growth prospect for the sector is favorable. India
has 16% of the world’s population but is estimated to have just 4-5% of the world’s water
resources.
This is because of slow implementation of water supply project in India due to some issues on
funding of such projects. However, with the multilateral finance Institutions like ADB and World
Bank, recognizing the need for pipeline network for transmission of water in recent times, coupled
with increasing focus of the Central Government, State Government and local bodies the path
has been cleared for the development of the infrastructure. The demand for DI Pipes is expected
to grow at a CAGR of (app.) 15% for next couple of years.

Pipes and Tubes
Key Demand Drivers of the Industry

Demand and supply Mismatch
• Submerged Arc Welded (SAW)
The total installed capacity of the major players in the SAW pipe segment would be around 9000
kms based on the corresponding tonnage capacities announced by industry players. The average
utilization level is around 60% of this capacity implying a production of 5400 kms per annum, out
of this around 60% is exported i.e. 3240 kms are exported. The domestic supply is limited to
around 2160 kms per annum.
The average domestic requirement is expected to be around 4000 kms for next five years, even if
the companies were to decrease the share of exports as a percentage of revenues, the pipe
demand would be huge and the domestic capacity available would still not be enough to cater to
the sort of expansion being envisaged.
• Seamless Segment
We expect sustained demand for seamless tubes as various oil companies undertake exploratory
drilling of areas totaling 1 mn sq ft in aggregate. In addition, development drilling is likely to
proceed in the blocks where oil and gas have been found.
In addition to this, huge investment is expected to be made in power, bearing and automotive and
engineering industry where seamless tubes (for boilers) have major applications. The growth in
this sector is expected to be around 20% per year for next 5 years.
Demand Estimation:
Type Total Average Total Key assumption
requirement realization per demand
for next tonnes (USD) over next
year(million five
tonnes) years(USD
bn)
SAW 4.0 1000 4 15,500 km of pipeline and
300 tonne per km.
Seamless 3.0 1100 3 900,000 meters of drilling in
India every year. Seamless
requirement 0.5 tonne per
meter
ERW 1.4 800 1 36,000 km of pipes
requirement with 38 tonnes/
km
DI/CI 1.5 700 1 300,000 tonnes of demand
per annum
Total demand in India 9
Less demand met to be 2 We estimate demand for

met through imports (25% 4,000 km of Reliance's
of total demand) Kakinada- through exports
Hazira pipeline

Pipes and Tubes
Sources of Demand
Demand from the domestic market is expected to surge exponentially in the wake of
a) An upswing in E&P activity in India,
(b) A urgent need to create cross-country infrastructure for energy transportation, and
(c) Increased focus on water transportation/ city gas distribution infrastructure.
Demand for Transportations in next five years
Existing (kms) Expected additions (kms)

Crude 7,810 1,500
Products 8,864 5,000
Gas 9,988 9,000
Total 26,662 15,500
Sources: CRIC Inrfa
Major Customers and Their Requirements
The major customer of this sector includes GAIL, IOC, GSPCL and GGCL.
Gas Authority of India Ltd (GAIL) is the country’s largest gas transmission and marketing
company. It currently owns and operates around 58 per cent of the onshore gas pipeline
network, with over 5,390 km of pipeline concentrated mainly in northwestern India, but
spread over all the regions of the country.
IOC laid the first crude pipeline from the Digboi oil fields to the Digboi refinery. Subsequently,
a number of product and crude pipelines were laid in the 1960s, 1970s and 1980s, including
sub-sea crude oil pipelines. The crude pipelines transport waxy indigenous crude as well as
low-sulphur and high-sulphur imported crude.
Existing players in Pipeline Network
(km) Onshore Offshore Total

GAS
GAIL 5390 0 5390
ONGC 1079 671 1750
OIL India 213 0 213
GSPL 433 0 433
GGCL 1600 0 1600
Asam Gas 600 0 600
Others 2 0 2
Sub Total 9317 671 9988
Oil
ONGC 2232 821 3053
Oil India 1538 0 1538
IOC 2791 22 2813
HPCL 11 0 11
Pvt/JVC 187 208 395
Sub Total 6759 1051 7810
Total 16076 1722 17798

Pipes and Tubes
Key Demand Drivers

The demand of pipes may be classified into the following major segments:
Usage of Pipes and tubes in various categories
Pipe Sector
Energy
Water & sewage Transport
E&P in Oil Transportation of Natural Gas

and Gas
Seamless HSAW LSAW ERW DI/CI HSA ERW

W
Source: (Annual Report)
ENERGY SECTOR
Growing energy demands of developed and developing countries have largely dictated the health
of the oil & gas pipe industry. Transnational lines that traverse thousands of kilometers, like the
North European Gas Line from a remote corner of Russia to stable markets like Germany/France,
Myanmar-India, Iran –India notwithstanding political compulsions have generated demand for
premium quality large diameter pipes like never before. Hectic drilling activity in offshore fields
perhaps due to the fact that the crude is around $ 70 /per barrel and still going up, has resulted in
huge casings/tubings and other pipe requirements. The offshore lines linking these
fields/marginal fields to main hubs have resulted in huge demand of such pipes.
1 .OIL & GAS

As the world witnesses record high prices for oil, there is mounting pressure on all major oil
producing and consuming nations to secure long-term supply contracts. The Indian Oil & Gas
industry are preparing themselves to secure sustainable energy sources for long-term and
medium term. Keeping this in mind the Government of India has announced the National
Exploration Licensing Policy (NELP) for stimulating exploration activities both in offshore shelf’s
and within the country. More oil discoveries in the country and worldwide will require oil products
to be disbursed quickly and efficiently thereby increasing the demand for the steel pipes.
Recently Oil & Gas pipelines have been awarded the infrastructure status and with this
recognition we estimate a huge jump in the Oil and Gas pipeline requirements .It is estimated that
the expected demand from the oil and gas sector in India would be about 25,000 km of pipelines
over the next 10 yrs and the global demand for SAW pipes is expected to grow to 100,000-
120,000 Kms with a annual domestic demand is expected to grow to 2500-3000 Kms for the
same period over the next 5-7 years. Even if 50 per cent of the projects fructify in the given
timeframe, the domestic pipe companies will witness a quantum jump in business opportunity.
Domestic manufacturers are expected to capture almost 100% of these domestic opportunities,
as imports of such pipes may not be cost effective due to current import tariff and logistics.

Pipes and Tubes
A look at the statistics below would show that as on date transportation of oil and natural gas
through dedicated pipelines currently constitute only approximately 32% of the total oils and
natural gas transportation in India, significantly lower than the penetration in many developed
countries.
Share of Pipes and tubes in total oil Transportation
India 32% USA 59% Global75%
2. Natural Gas
India produces about 90 million standard cubic meters of natural gas per day as against its daily
demand of 120 million standard cubic meters that is likely to go further in the coming years. The
projected demand of natural gas in India by 2020 stands at a staggering 400 million standard
cubic meters a day. Though some of this demand will be met domestically, a large gap would
remain. Based on plans announced by major Oil & Gas majors and in line with the Petroleum
Ministry’s Hydrocarbon Vision statement 2025, the domestic demand for SAW pipes is expected
to grow exponentially in the next 5 -10 Years.
India currently has about 15,000 km of pipelines transporting crude oil, refined products and gas
in the country. Domestic investment in the pipeline infrastructure has been quite low, particularly
in gas pipelines, due to lack of gas supply. However, due to recent gas finds such as the Reliance
and Gujarat State Petroleum Corporation Ltd. (GSPCL) gas finds in the Krishna Godavari Basin,
India will require increased investments in pipelines as gas will need to be transported to areas of
consumption.
Area covered under Pipeline in various countries
15000Km India
170,000Km France
329,600 Km US
Increased availability of natural gas in northern and western India should spur improved
infrastructure for gas transportation. In view of these developments, players such as Gas
Authority of India Ltd (GAIL), GSPCL, ONGC, Cairn and Reliance have proposed investing in an
additional 20,300 km in pipeline infrastructure over the next five years. The proposed pipeline
required for meeting the demand is given below in map

Pipes and Tubes
Proposed Pipelines Network in India

Note: No of Pipelines indicate Volume (mmscmd) of gas to be transmitted/transported
Source: Crisil

Pipes and Tubes
Strategic Analysis
Industry attractiveness
Bargaining power of Buyers: -
Low
Bargaining power of
A consolidated Global pipe
Suppliers: - Medium to High
industry leaves limited
The raw material of this sector bargaining power with
includes Steel and copper in customers.
which very few manufacturer
exist .So it will create
reasonable pressure to the
manufacture of this industry.
Rivalry Among the

Firms: - Low
Expected robust demand
has left negligible possibility
of rivalry. As its expected
that annual domestic
demand is expected to grow
to 2500-3000 Kms for the
same period over the next 5-
7 years
Threat of Substitute: - Low Barriers to entry: - High

Threat of substitute is low as Insistence track record of global
Rail and Road as mode of majors & rigorous quality
transport for oil and gas is approvals restricts new
costlier by 125%. entrants.

Pipes and Tubes
Industry Competitiveness
Global Demand-Supply Scenario
The total pipeline demand is estimated at 1,94,883 km over next 5-7 years for oil and gas
transportation (SAW pipes), which gives an average global demand in excess of 27,000 kms p.a
(assuming 7 years). The production however does not match the required demand of 27000 kms
(India’s contribution over 35%), so there is a huge demand-supply mismatch expected over next
couple of years. After this we expect new capacities to be added to fulfill the requisite gap.
Also the share of demand from Middle East countries to overall demand is as high as 40%, which
is the major market for domestic players as more than 70% of their exports go to these countries.
Global Demand Scenario
Region No. of Projects Total Average Length

Length
No . % km miles % km miles
North America 174 46 52,101 32,383 27 299 186
Latin America 31 8 27,142 16,868 14 876 544
Europe 47 12 20,341 12,646 10 433 269
Africa 16 4 9,223 5,734 5 576 358
Middle East and Asia 96 25 71,173 44,235 37 741 461
Australia 17 4 14,853 9,230 8 874 543
Total 381 1,94,833 1,21,096 511 318
Source: Simdex
According to IEA, the effects of the relatively high oil prices are likely to continue. Oil prices have
fluctuated over the past several months primarily due to the disruption caused by hurricanes in
the Atlantic Ocean and a continued desire by refiners and major consumers to either build stocks
of diesel or buy paper forwards against potential peak winter demands of diesel. Fluctuating
freight costs have also contributed to fluctuations in crude oil prices. The price of crude for May
2007 deliveries has touched the level of US$64/bbl.
Energy sector is the biggest consumer of seamless tubes. Demand for oil is expected to grow at
1.6% CAGR over FY2004-25E and that of gas at 2.3% over the same period. Following rising
demand for oil and gas, the drilling activity is likely to grow at a much faster pace. Moreover high
oil prices leads to increased cash flows for oil and gas companies, which are deployed into drilling
activities to curtail demand-supply gap.
World Oil Demand(mn barrel per day) World natural Gas Primary Demand(bcm)
140 6000
121.3
120 106.7 4900
5000
100 90.4 4104
77 4000
80 3225
3000 2622
60
40 2000
20 1000
0 0
2002 2010 2020 2030 2002 2010 2020 2030
Source: World energy Outlook 2004

Pipes and Tubes
Capex Survey (Bn $)
2005 2006 Change

USA 49 62 26.5%
Canada 22 25 13.6%
Rest of the world 139 166 19.4%
Total 210 253 20.5%
Source: Tenaris
Demand for the seamless tubes is directly related to increase in oil and gas demand as they find
application in oil and gas drilling as casing and drilling tubes. Recent global trend shows that
usage of seamless tubes in OCTG applications have increased significantly in 2003-2005.
Rising Global Demand for OCTG
2003 (%) 2004 (%) 2005 (%) CAGR

Oilfield (OCTG) 44 46 53 9.8%
Pipelines (risers, flowlines etc) 10 8 9 -5.1%
Process and Power plant 25 27 20 -10.6%
Industrial & Automotive 21 19 18 -7.4%
Sales Volume (mn tons) 22.7 26.46 28.7 12.4%
The demand for seamless tubes is expected to grow at a CAGR of 20% and above for next
couple of years due to increased E&P activities around the world on the back of rise in global oil
prices
Export advantage
Majority of the global capacity is concentrated in Europe and Japan, which primarily caters to
their regional demand. Domestic Manufacturers have started making inroads international
contracts, as Indian quality is getting widely accepted. Indian manufacturers basically cater to the
pipe requirement of the Middle East Countries mainly due to following competitiveness vis-à-vis
other global manufacturers.
• Middle East is a high demand area, with no significant local manufacturing
• Indian suppliers with proximity to Middle East stand to benefit
–Lower production cost
–Lower freight rates
–Flexibility in supply schedules and order sizes
–In-house coating plants permit higher value addition
Export Advantage of Indian Manufacturers
US$/ton Indian Mfr Foreign Mfr

Plate 750 750
Freight on Plate 40 20
Import Duty 0 0
Production Cost 55 100
Freight on Pipe 40 80
Total 885 950
Source: MAN Inds

Pipes and Tubes
Import advantage
Indian manufacturers are competitive in the domestic market even without any import duty mainly
on the following grounds. Globally cost competitive with conversion costs of ~ US$ 55/MT as
against US$ 100/MT.
MT for international players

–Lower labour costs, and costs of consumables a key differentiator
• Higher freight on pipes (as compared to sheets) adds to the advantage
• Indian manufacturers able to compete on flexible delivery schedules – can deliver pipes at sites
in India as per laying program.
Import Advantage
US$/ton Indian Mfr Foreign Mfr

Plate 750 750
Freight on Plate 40 20
Import Duty (@ 5%) 35 0
Production Cost 55 100
Freight on Pipe 0 70
FOB Cost 880 940
Import Duty (@ 10%) 0 95
Landed Cost of Pipe 880 1035
Source: MAN Inds
SWOT
STRENGTHS WEAKNESSES
• Indian manufacturers are competitive in the • The demand of pips and tubes sector is derived
domestic market form growth of oil and gas in country if there is any
• Globally cost competitive with conversion costs of delay in exploration and production it will impact
US$ 55/MT as against US$ 100/MT which will the growth of this sector.
provide great advantage in export market as well.
OPPORTUNITIES THREATS
• The total global pipeline demand for transportation • Threat of cheap import from other countries.
of oil and gas over next 5-7 years is estimated at
approx. 200,000 kms which will open up new
opportunities.
• As production does not match the required
demand of 28,000 kms it will provide immense
opportunity for this sector.

Pipes and Tubes
Major Players of the Industry

1 Jindal SAW Limited
Present operation-The company has 4 business unit- Large diameter submerged arc welded
pipes (SAW), Seamless tubes, ductile Iron(DI) pipes and US operations to handle marketing of
the product in the US markets. A diversified global presence, coupled with strong client
relationships, has resulted in an order book of US $1.2bn (1.1x FY07E sales) for JSL. The
company also has the distinction of being the only Indian pipe manufacturer to be present across
the seamless, SAW and DI pipes segment. It is also the only Indian pipe manufacturer having
facilities in the US markets.
Future Plans-De-bottlenecking of DI pipes facility to increase pipe production, installation of PQF

mill in seamless plant to improve it’s from 100,000 million tones per annum (mtpa) to
approximately 250,000 mtpa and also to increase its efficiency.
2. PSL Limited
Present operation-PSL’s main strength is spiral helical SAW pipes .The Company has 10
conventional HSAW mills with a capacity of 75,000.PSL has added a state-of –the-art, high
speed, two step SAW pipes mills of 350,000 MT/annum.
Future plans-company does not have any immediate planned expansion.
3. Welspun Gujarat Stahl Rohern Limited (welspun Gujarat)

Present operation-Presently, the company has facilities for manufacturing electric resistant
welded pipes (250,000 tones per annum- tpa), spiral(HSAW-300,000 tonnes per annum-tpa) and
coating pipes(900,000 tonnes),LSAW pipes (850,000 tpa) as well as plate cum coil mills. In
addition to a well-timed capacity expansion coinciding with growth in demand, WGSR will benefit
significantly from backward integration. WGSR’s plate capacity, expected to go on stream in
December 2007, will give it a significant edge over peers in terms of control over raw material
availability and costs, and would provide a sharp improvement in EBITDA margin.
Future plans-The company is setting up a 1 milion tonnes plate-cum-oil mill to meet the captive
requirement of high grade plates for spiral and LSAW pipes . The plate mills are expected to
fully operational by December 2007.
4. Maharashtra Seamless Ltd (MSL)

Present operation- The Company is one of the leading steel pipe manufacturers in India, focused
on seamless pipe and ERW pipe segments. MSL is a dominant player in the seamless pipe
segment with a market share of about 37% to40%. In addition, it is currently the only producer in
India to manufacture seamless pipes withan outer diameter greater than 10 3/4'' (up to 14'') and
ERW pipes with an outer diameter greater than 16'' (up to 21''). Seamless pipes division
constitutes 71% of turnover of the company and ERW division constitutes around 27% while the
rest is from power sales.
Future Plans- With the commissioning of higher diameter seamless plant, the company is well
positioned to garner substantial orders with better margins. Given the benefits and rising demand

Pipes and Tubes
for higher diameter (7" to 14" Ø) seamless pipes the company now further plans to triple its
installed capacity of higher diameter seamless pipes from 100,000 MTPA to 300,000 MTPA in a
phased manner with minimal of capex of Rs 600 mn. In addition to the above, MSL is also
expanding its installed capacity for seamless pipes of up to 7" diameter from the present 125,000
MTPA to 200,000 MTPA. The company is expected to invest Rs 250 mn over the next two years.
5. Ratnamani Metals & Tubes Ltd., (RMTL)

Present operation -The Company has also undertaken job – of drawing pipes. The company is a
multi - product, multi – location providing the complete piping solutions to the diverse range of
Industries. Sector Steel – Large RMTL, mainly present in two segments i.e Carbon Steel (CS),
Stainless Steel (SS). The company caters to niche markets of almost all the emerging sectors like
Oil & Gas, Refineries, Petrochemicals, Power Plants and Water Distribution systems.
Future Plans- The Company is planning another 60000MT of ERW capacity expansion. The
details of the project have not yet been finalized. 200.0. The burgeoning demand from the user
industries of SS pipes and CS pipes is likely to sustain the growth momentum of the company.
Financial summary of 2006-2007
Company Sales(Rs in Sales in Operating Debt CMP AS P/BV P/E Order

crores) (CAGR for Profit Equity on ratio ratio book in
FY03-FY Margin ratio(in 04/06/07 (Latest
06) (%) times) (In Rs.) Approx
in Rs.
mn
Jindal Saw 3772.91 81.7852 10.26 1.3 576 1.71 9.43 48564
Mah. Seamless 966.18 36.0363 19.66 0.83 598.90 4.71 14.33 8500
PSL 1433.25 57.6912 8.82 3.09 238 3.13 17.46 1500
Ratnamani Metals 319.12 55.5928 16.26 1.18 889.95 3.42 8.42 1800
Welspun Guj.Stah 1787.99 67.3199 7.67 1.51 177.20 2.37 19.28 25091
Unaudited financial results of major Player of Pipe and Tubes Manufacturer
Jindal Saw limited

2nd Qtr % of 2nd Qtr % of VAR Full Full VAR
200703(Rs Net 200603 Net [%] Year Year [%]
in cr) Sales Sales
200609 200509
Net Sales 1269.1 100.00 953.19 100.00 33.1 3855.67 2313.62 66.7
Total Expenditure 1123.1 88.50 845.22 88.67 32.9 3445.74 2046.46 68.4
PBIDT 149.17 11.75 109.82 11.52 35.8 441.4 281.6 56.7
Interest 29.05 2.29 25.93 2.72 12 126.16 94.7 33.2
PBDT 120.12 9.46 83.89 8.80 43.2 315.24 186.9 68.7
Depreciation 13.87 11.55 12.01 14.32 15.5 51.9 35.42 46.5
Tax 36 2.84 24.75 2.60 45.5 87.14 50.75 71.7
Profit After Tax 70.25 5.54 47.13 4.94 49.1 176.2 100.73 74.9
Source : Capitaline

Pipes and Tubes
Welspun Gujarat stahl Rohern limited (Welspun Gujarat)
3rd Qtr % of 3rd Qtr % of VAR Full Full VAR

in cr) Sales Sales
200603 200503
Net Sales 740 100.00 455.6 100.00 62.4 1829.8 1038.5 76.2
PBIDT 95.8 14.86 30.2 7.13 217.2 167.4 94.5 77.1
Interest 19.2 2.59 8.7 1.91 120.7 41.9 20.3 106.4
PBDT 76.6 10.35 21.5 4.72 256.3 125.5 74.2 69.1
Depreciation 12.2 1.65 8.3 1.82 47 35.2 24.1 46.1
Tax 23.2 3.14 5.2 1.14 346.2 29 16.3 77.9
Profit After Tax 41.2 5.57 8 1.76 415 61.3 33.8 81.4
Source : Capitaline
Mah. Seamless
Ltd (MSL)
200612(Rs. Net 200512 Net [%] Year Year [%]
in cr) Sales Sales
200603 200503
Net Sales 342.63 100.00 270.77 100.00 26.5 966.17 769.41 25.6
PBIDT 94.1 27.46 68.94 25.46 36.5 226.23 140.55 61
Interest 0.59 0.17 1.57 0.58 -62.4 4.83 3.81 26.8
PBDT 93.51 27.29 67.37 24.88 38.8 221.4 136.74 61.9
Depreciation 4.22 1.23 4.48 1.65 -5.8 14.55 10.5 38.6
Tax 28.62 8.35 19.62 7.25 45.9 62.5 32.77 90.7
Profit After Tax 60.02 17.52 41.73 15.41 43.8 139.6 84.88 64.5
Source : Capitaline
Ratnamani Metals & Tubes Ltd., (RMTL)

in cr) Sales Sales
200603 200503
Net Sales 187.52 100.00 111.39 100.00 68.3 319.12 180.85 76.5
Total Expenditure 145.27 77.47 91.39 82.05 59 255.81 151.69 68.6
PBIDT 42.25 22.53 20.04 17.99 110.8 63.38 29.17 117.3
Interest 3.47 1.85 2.68 2.41 29.5 8.9 3.79 134.8
PBDT 38.78 20.68 17.36 15.58 123.4 54.48 25.38 114.7
Depreciation 3.31 1.77 2.38 2.14 39.1 7.39 4.36 69.5
Tax 13.8 7.36 2.99 2.68 361.5 7.42 2.23 232.7
Profit After Tax 21.67 11.56 9.87 8.86 119.6 33.54 13.25 153.1
Source : Capitaline

Pipes and Tubes
PSL Limited
in cr) Sales Sales
200603 200503
Net Sales 498.84 100.00 408.11 100.00 22.2 1539.06 1440.54 6.8
PBIDT 53.94 10.81 48.48 11.88 11.3 149.29 103.5 44.2
Interest 13.44 2.69 19.71 4.83 -31.8 48.53 36.13 34.3
PBDT 40.5 8.12 28.77 7.05 40.8 100.76 67.37 49.6
Depreciation 11.65 2.34 12.79 3.13 -8.9 33.86 23.36 44.9
Tax 8.05 1.61 2.52 0.62 219.4 17.25 10.01 72.3
Profit After Tax 20.8 4.17 13.46 3.30 54.5 49.19 32.01 53.7
Source : Capitaline
Conclusion
Currently, exports are major ingredient of sales. But going ahead, improved domestic demands
from the new pipeline projects will provide strong domestic demand growth. The line pipe
manufacturer will either have to increase their operating rates or will have to reduce exports, so
as to cater to the new demand. In sum , the Indian pipe manufacturer have the ability to service
the additional Rs. 244 billion worth of orders over the next 3-4 years.
Disclaimer
The information and views presented in this report are prepared by RR investors. The information
contained herein is based on our analysis and upon Sources that we consider reliable. We,
however, do not vouch for the accuracy or the completeness thereof. This material is for personal
information and we are not responsible for any loss incurred based upon it.
The investments discussed or recommended in this report may not be suitable for all investors.
Investors must make their own investment decisions based on their specific investment objectives
and financial position and using such independent advice, as they believe necessary. While
acting upon any information or analysis mentioned in this report, investors may please note that
neither RR any person connected with any associated companies of RR accepts any liability
arising from the use of this information and views mentioned in this document. The author,
directors and other employees of RR and its affiliates may hold long or short positions in the
above-mentioned companies from time to time.
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RR Information & Research 1 Industry Research

RR Information & Research 2 Industry Research

OUTLOOK KEY INDICATORS

So growth in natural gas will drive the growth pf pipes

INDUSTRY ATTRACTIVENESS PEER GROUP

Bargaining Pow er Of suppliers

Bargaining Pow er of Buyers Company PE

Threat of subsitutes JSW Steel 9337 39 30 14 26 9

RR Information & Research 3 Industry Research

RR Information & Research 4 Industry Research

Different Types of Pipes and Tubes

2. SAW Pipes (L SAW Pipes and Spiral Pipes)

RR Information & Research 5 Industry Research

3. Spun Pipes (DI/CI)

RR Information & Research 6 Industry Research

Key Demand Drivers of the Industry

Less demand met to be 2 We estimate demand for

RR Information & Research 7 Industry Research

Demand for Transportations in next five years

Existing (kms) Expected additions (kms)

Major Customers and Their Requirements

Existing players in Pipeline Network

(km) Onshore Offshore Total

RR Information & Research 8 Industry Research

Key Demand Drivers

Usage of Pipes and tubes in various categories

E&P in Oil Transportation of Natural Gas

Seamless HSAW LSAW ERW DI/CI HSA ERW

Source: (Annual Report)

1 .OIL & GAS

RR Information & Research 9 Industry Research

Share of Pipes and tubes in total oil Transportation

India 32% USA 59% Global75%

Area covered under Pipeline in various countries

RR Information & Research 10 Industry Research

Proposed Pipelines Network in India

RR Information & Research 11 Industry Research

Rivalry Among the

Threat of Substitute: - Low Barriers to entry: - High

RR Information & Research 12 Industry Research

Global Demand Scenario

Region No. of Projects Total Average Length

Source: World energy Outlook 2004

RR Information & Research 13 Industry Research

Capex Survey (Bn $)

2005 2006 Change

Rising Global Demand for OCTG

2003 (%) 2004 (%) 2005 (%) CAGR

Export Advantage of Indian Manufacturers

US$/ton Indian Mfr Foreign Mfr

RR Information & Research 14 Industry Research

MT for international players

US$/ton Indian Mfr Foreign Mfr

RR Information & Research 15 Industry Research

Major Players of the Industry

Future Plans-De-bottlenecking of DI pipes facility to increase pipe production, installation of PQF

Future plans-company does not have any immediate planned expansion.

3. Welspun Gujarat Stahl Rohern Limited (welspun Gujarat)

4. Maharashtra Seamless Ltd (MSL)

RR Information & Research 16 Industry Research

5. Ratnamani Metals & Tubes Ltd., (RMTL)

Financial summary of 2006-2007

Company Sales(Rs in Sales in Operating Debt CMP AS P/BV P/E Order