Maharashtra Seamless expects a 30-40 percent jump in volumes and revenues above Rs 1500 crores in FY15 and above Rs 2000 crore for FY16. The company saw hike in production, which in turn lead to lower manufactguring costs per tonne and higher profits said CFO, RK Gupta in an interview to CNBC-TV18's Nigel D'Souza and Reema Tendulkar.
With regards to safeguard duty, he said the industry has made a representation to the Directorate General of Safeguard for imposition of the duty and his hopeful of the safeguard duty being imposed by August 15.
Moreover, he is bullish on the outlook for the company and said the order book remains healthy and covers the production for the next two-three months.
Below is the transcript of RK Gupta's interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.
Nigel: There has been a lot of talk of safeguard duty imposed on seamless pipes given that imports from China were hitting your business? Can you please elaborate?
A: There has been a sudden surge of imports into India especially because of dumping by the Chinese and also other manufacturers. So the industry had put a representation to the Directorate General of Safeguard for imposition of safeguard duty. The DG Safeguard has recommended imposition of 25 percent duty to the government and it is now under consideration of the Commerce Ministry. So their special committee would be reviewing it and making a final recommendation to government.
We as industry are pretty hopeful that it should go through because that's the need of hour. We have put substantial amount of investment into the country for selling these pipes into India and not for exports, though we are also exporting substantial part of our production.
We see no reason why this duty should not come through which would be in the larger interest of the country because it is providing a lot of employment plus it would be safe valuable foreign exchange also.
Nigel: How long will it take for this safeguard duty to come into being?
A: It is already delayed and we understand that this committee would be meeting shortly and taking a decision. We are pretty hopeful that the committee should give its recommendation by July end and the duty should be in force by August 15.
Reema: Have you seen a pickup in your sales volumes or in your capacity utilisation and currently what is the targeted level for FY15?
A: We do not give any guidance for production but we were doing about 270,000 when we had single plant and last year we did about 153,000 metric tonne, so this year we should see a 30-40 percent jump and next year we should again see a 30-40 percent jump vis-à-vis level that we do in the current year once the sales get restored.
Reema: Will all this result into better margins given that in the last quarter they had dipped to 5 percent?
A: Absolutely because once the production level goes up our manufacturing cost per tonne will get lower and that would mean higher profitability for the company.
Nigel: What about your order book. Take us through that with regard to your global as well as your domestic business?
A: We are getting orders for line pipe but for the oil country tubular goods (OCTG) because of the final investigation report the orders are slow. Those orders will come once the final determination is done. Of course nothing is anticipated but the customers are waiting for the final order. But the book remains healthy in the sense that we are covered for next two-three months production though on the OCTG side the order book is little slow.
Reema: In FY13 you did revenues of close to about Rs 1,700 crore but last year it was down to sub Rs 1300 crore. What is the revenue guidance for FY15?
A: It should be in excess of Rs 1,500 crores for this year and next year we would like to do in excess of Rs 2,000 crores.
Mah Seamless stock price
On June 27, 2014, Maharashtra Seamless closed at Rs 296.80, up Rs 10.15, or 3.54 percent. The 52-week high of the share was Rs 346.65 and the 52-week low was Rs 151.05.
The company's trailing 12-month (TTM) EPS was at Rs 14.50 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 20.47. The latest book value of the company is Rs 435.54 per share. At current value, the price-to-book value of the company is 0.68.
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