Welspun Corp — Q1 FY25 earnings call

Call held 8 Aug 2024

Management summary

Welspun Corp delivered a strong Q1 FY25, characterized by significant profit growth and a robust order book across its diversified segments. The company is successfully transitioning from a standalone pipe manufacturer to a broader building materials and infrastructure player, with Sintex and DI pipes becoming major contributors. Management remains bullish on the U.S. market and the domestic water/oil & gas sectors, supported by a ₹2,300 crore expansion plan in the plastic pipes segment.

Highlights

  • Consolidated PAT increased by approximately 50% YoY, rising by ₹248 crores.

  • Total pipe volumes (India, U.S., and DI pipes) grew 8% YoY to 229,000 metric tons.

  • DI pipe order book remains strong at over 300,000 tons, valued at approximately ₹2,500 crores.

  • Stainless steel volumes rose 57% YoY to 4,700 tons; TMT sales volume grew by 175%.

  • Sintex revenue for the quarter rose by 14% YoY; announced acquisition of Weetek Plastics for ₹85 crores.

  • Maintained an annualized ROCE of over 20%.

  • Announced a ₹2,300 crore capex plan for Sintex to be spread over two financial years.

  • Line pipe order book for India and U.S. stands at approximately 0.5 million tons.

Key financials

  1. PAT Growth 50% +50%YoY
  2. Annualized ROCE 20%
  3. Total Pipe Volume 2,29,000 metric tons +8%YoY
  4. DI Pipe Order Book Value ₹2,500 Cr

What they filed

Q1 FY27: revenue down 14.3%, net profit down 54.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,033 2,449 2,281 1,828 1,822 −10%2,378 −3%2,270 −0%1,567 −14%
EBITDA191 268 244 236 188 −2%265 −1%334 +37%173 −27%
Net profit108 156 464 255 366 +239%161 +3%232 −50%116 −55%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Sintex (Building Materials)
    14% Revenue Growth11% Volume Growth
  • Stainless Steel
    4,700 tons Volume57% Volume Growth₹300 Cr Order Book Value
  • DI Pipes
    3,00,000 tons Order Book16% Current Margins

Guidance & targets

Capex

  • Sintex Expansion Capex Capex · next 2 years · High confidence ₹2,300 crores
    this INR2,200 crores or INR2,300 crores announced capex... is spreaded over 2 financial year. In this particular financial year, we would see around close to 40% of that capex to happen.

    — Vipul Mathur, MD & CEO

Capacity

  • DI Pipe Capacity Enhancement Capacity · by end of Q3 FY25 · High confidence 600,000 tons

    From 500,000 tons today

    Welspun is further enhancing its capacity from 500,000 tons to 600,000 tons without any additional capex... by the end of the quarter 3, this facility should get -- should be installed and commissioned.

    — Vipul Mathur, MD & CEO

Margin

  • Steady-state DI Pipe Margins Margin · FY26-27 · Medium confidence 13-15%

    From 16-18% today

    on a steady-state basis, my assumption that would be that the margins would be anything between -- should be around 13% to 15% margin business.

    — Vipul Mathur, MD & CEO

Volume

  • U.S. Business Volume Target Volume · Sustained basis · Medium confidence 250,000 - 300,000 tons
    on a sustained basis, we should be able to close anything between 250,000 tons to 300,000 tons of business in U.S.

    — Vipul Mathur, MD & CEO

Other

  • Internal ROCE Threshold Other · Ongoing · High confidence 18-20%
    As a threshold at a corp level here we do not do anything which has ROCE of less than 18% to 20%.

    — Vipul Mathur, MD & CEO

Risks & concerns

  • Raw Material Price Volatility

    medium

    Management noted that benefits from falling coking coal and iron ore prices are lagged by about two quarters due to inventory positioning.

    Analyst acknowledged

  • Execution of Large Capex

    medium

    The ₹2,300 crore Sintex capex requires a 2-3 year horizon to reach full potential, implying a period of high investment before peak utilization.

    Both acknowledged

  • U.S. Market Continuity

    low

    Analysts questioned if U.S. elections would delay pipelines; management expressed high confidence in the Permian Basin's fundamental strength.

    Analyst downplayed

Areas of evasion (2)

  • Specific volume breakups for India vs U.S. for the quarter (deferred to offline sharing)
  • Specific size of the U.S. bids currently in progress

Q&A highlights

2 direct
U.S. Business Delays Direct
Typically, what happens in U.S. when you have completed a one major project of a Permian, it takes around 2 more -- 2 quarters before they come back with a new project.

Clarifies that the perceived delay in U.S. orders is a cyclical project gap rather than a structural or political issue.

Asked by Deepak Lalwani, Unifi Capital

EPIC (Saudi) Dividend vs. Capex Partial
It has an independent Board. It has an absolutely independent management... we continuously evaluate all the options at every point in time.

Explains the capital allocation strategy for the Saudi associate, balancing shareholder returns with growth opportunities.

Asked by Miraj, Arihant Capital

Sintex Challenger Strategy Direct
Sintex, if you would all know is a premium position brand... we intend to carry on that premium positioning into the pipes business.

Reveals that Sintex will not compete on price/margins alone but will leverage its premium brand equity to enter the plumbing pipe market.

Asked by Deepak Lalwani, Unifi Capital

2 min read 5 chapters

Detailed narrative

Strategic Pivot to Building Materials

Welspun Corp is aggressively expanding its footprint in the building materials sector through Sintex. The company announced a ₹2,300 crore capex for Sintex, with 40% to be deployed in FY25. The acquisition of Weetek Plastics for ₹85 crores further accelerates their entry into the plastic pipe segment, adding 20,000 tons of capacity in Chhattisgarh. Management expects Sintex to grow faster than the market, leveraging its premium brand position.

DI Pipe Segment Emerges as Growth Engine

The Ductile Iron (DI) pipe business shows strong visibility with an order book exceeding 300,000 tons, valued at ₹2,500 crores. This provides clear revenue visibility for the next 9 months. Capacity is being enhanced from 500,000 to 600,000 tons by Q3 FY25 through process engineering without additional capex. While current margins are high at 16-18%, management conservatively guides for a steady-state margin of 13-15% in the coming years.

U.S. Market Outlook and Project Cycles

Despite a temporary gap in major project execution, management remains highly optimistic about the U.S. market, particularly the Permian Basin. They are targeting sustained annual volumes of 250,000 to 300,000 tons. The company is currently in a bidding phase for several large projects and expects to convert these into the order book shortly, ensuring business continuity beyond FY25.

Saudi Associate (EPIC) Performance

The Saudi associate, EPIC, has a confirmed order book exceeding 2.5 years and recently received multiple contracts from Aramco valued at over 1.65 billion SAR. These are expected to contribute significantly to financial performance starting in Q4 FY25. Management clarified that while EPIC is a listed entity with its own board, Welspun remains the largest shareholder and actively participates in its strategic direction.

Operational Excellence and ROCE Focus

Welspun Corp has successfully maintained an annualized ROCE of over 20%, reflecting efficient capital allocation. The company has evolved from a standalone pipe manufacturer with ₹7,000 crore revenue to a diversified player with ₹17,000 crore revenue in just two years. Management emphasized a strict internal threshold of 18-20% ROCE for all new investments and acquisitions.

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