Recession or no recession, slowdown or no slowdown, people and crops need water — and that has augured well for Srikalahasthi Pipes Ltd, which manufactures iron pipes for transporting water.
Gauri Shankar Rathi, whole-time director of the company, told BusinessLine that the company booked orders worth ₹500 crore in the last six months, from the Andhra Pradesh government’s multilateral agencies-funded projects.
“Business is very good,” Rathi said, pointing out that the company was in the process of expanding capacity from 3 lakh tonnes a year to 5 lakh tonnes a year, a whopping 66 per cent. Coming up at its manufacturing facilities in the temple town of Kalahasthi is a 380-cubic metre mini blast furnace to make ductile iron.
Additional capacity
“We had ₹400 crore in our reserves and 150 acres of surplus lands, and the market is good — so why not expand?” Rathi said, explaining the rationale behind the expansion. The fully expanded capacity will kick in by mid 2021-22, though some additional capacity would become available in 2020-21 itself, he said.
Further, upon expansion, the company will be able to supply pipes of larger diameter (1,200 mm); currently, it produces pipes of diameter between 100-1,100 mm.
This, Rathi said, was significant because the market wants bigger pipes.
Increase in profits
Srikalahasthi Pipes had a good third quarter. Its sales increased 12.3 per cent to ₹443.62 crore, from ₹397.35 crore in the corresponding quarter of last year; more remarkable was net profit, which nearly doubled to ₹67 crore from ₹36 crore, previously. Rathi said this was because of softening of prices of raw materials, coal and steel, and cost-cutting measures.
Srikalahasthi Pipes was formerly Lanco Industries, before the Kolkata-based Electrosteel group took it over from the Lanco group in 2002, when it had become fit for reference to the then Board for Industrial and Financial Reconstruction (BIFR).
After expansion, its capacity will be on par with the industry leader, Jindal Saw Ltd. Further capacity expansion might be needed, as the company is seeing opening up of new markets in Odisha, Madhya Pradesh, Chattisgarh and Jharkhand.