Detailed Narrative
Q4 FY26 Performance and Geopolitical Impact
Scoda Tubes Limited reported FY26 revenue growth of 7% to INR518.7 crores, with PAT increasing 22% to INR38.8 crores. However, Q4 FY26 saw revenue broadly flat at INR123.6 crores and PAT decrease by 7% YoY to INR6.3 crores. This was primarily due to a 15-17 day plant shutdown in March caused by gas disruptions stemming from geopolitical situations, which also led to a 25-30% increase in raw material prices. Management noted that these cost increases are passed on to customers, albeit with a lag.
Capacity Expansion and Product Diversification
The company is transitioning from a seamless-focused player to a diversified stainless steel tubes company. Seamless capacity increased to 20,000 MTPA in FY26, with optimum utilization expected by FY28. A new welded facility, adding 8,000 MTPA capacity, is under construction with an investment of INR40 crores, funded by internal accruals and term loans. This facility is expected to be operational by H2 FY27, reaching optimum utilization by FY29, and will target new end-use sectors like data centers, HVAC, and water treatment.
Capital Allocation and IPO Proceeds Utilization
In FY26, Scoda Tubes incurred INR110 crores in capex. From its IPO proceeds of INR220 crores, INR27 crores were deployed to capex and INR50 crores to working capital by H2 FY26, leaving INR74.2 crores in bank balance. For FY27, an additional INR100 crores capex is planned. Debt is projected to increase by INR50 crores to a peak of INR250 crores in FY27 due to capacity and solar project investments, with plans to reduce it post-utilization.
Solar Power Project and Cost Efficiency
Scoda Tubes is installing an 8.79 MW DC solar power project (4.99 MW for seamless, 3.8 MW for welded) to offset high electricity consumption, particularly in hot piercing. This project is expected to generate 137 lakh KWH annually, resulting in estimated electricity cost savings of INR8.63 crores per year and improving EBITDA margins by reducing dependence on grid power and buffering price fluctuations.
Market Outlook and New Opportunities
For FY27, the company guides for 25% revenue growth with 14-15% EBITDA margins, targeting a 40% export and 60% domestic revenue mix. Domestic growth is expected to be driven by the power sector (BHEL tenders expected July-August) and data center sector (for welded pipes). The company is in the final stages of Rina Marine approval for the Italian marine sector, expected within 3-4 weeks, which will open new market opportunities.
Working Capital Management and Inventory Days
Inventory days increased to 217 in FY26 due to the plant shutdown. Management aims to reduce this to 160 days in FY27, which will support revenue growth. Supply chain disruptions also contributed to higher debtor days across the industry, but the company is working on managing these. The company also noted that the 25-30% increase in raw material prices is passed on to customers.