Detailed Narrative
Historic Order Book vs. Execution Realities
Jindal Saw achieved a record order book of 19.25 lakh tons, providing multi-year visibility. However, Q2 execution was hampered by domestic liquidity issues and heavy rains, leading to a 23.9% YoY revenue decline. The company is banking on a massive 6.22 lakh ton KSA helical pipe order to drive future export volumes.
Domestic Liquidity Crunch in Water Infrastructure
Management highlighted severe cash flow stress due to extended payment cycles from Indian EPC companies. Approximately 80-90% of the domestic business is through EPCs, who are currently facing year-long payment delays from state governments. This liquidity bottleneck resulted in lower output and tighter margins during the quarter.
Strategic Expansion in the GCC Region
The company is investing $400-425 million in three new projects across Abu Dhabi and Saudi Arabia, including seamless and helical pipe facilities. These projects are expected to be completed in 2-3 years, with 30% equity funding. Management views local manufacturing in KSA as essential to bypass emerging anti-dumping duties on Indian imports.
Seamless Segment: A New Growth Lever
A new seamless piercing mill is undergoing trials, adding 1,50,000 metric tons of annual capacity. Management expects the quarterly run rate for seamless pipes to reach 90,000 tons by Q4 FY26. This segment is targeted at high-margin oil, gas, and industrial applications.
Transition to Job Work Model for KSA
The major Saudi Arabian contract is structured as a job work order valued at $180-190 million, where the buyer provides the steel. This model significantly reduces working capital intensity by eliminating steel inventory costs. Management expects profitability on this order to exceed domestic business levels.