Last year, Srikalahasthi Pipes saw its net profit double to Rs 83 crore, which showed the distance the company has covered since its loss-making days of two years ago. In 2012-13, the company, then known as Lanco Industries Ltd, turned in a net loss of Rs 21.33 crore. (The company was set up by the Lanco group, but was later taken over by the Kolkata-based Electrosteel group.)
The turnaround happened due to a change in the product mix—the company began making small diameter pipes the market for which was underserved. It also invested in expansion, bringing down the unit cost and raised in-house power production to get costs further down. As a result, the company’s net profit for 2014-15 increased to Rs 83 crore, from Rs 30 crore in the previous year.
The stock market took due notice. The SRIPIPES share went from a low of Rs 32 in May 2014, to a high of Rs 179 this May.
But Gouri Shankar Rathi, the company’s Director, believes the story is just beginning. “The full benefit of the capacity expansion will come to the company this year,” he told Business Line.
The expansion has happened in two phases. First, the company put in Rs 100 crore in a de-bottlenecking exercise and raised its production capacity by 50,000 tonnes to 225,000 tonnes. Alongside, it began Rs 325 crore investment programme to increase capacity by another 100,000 tonnes. Pretty soon, the company will therefore be capable of producing 325,000 tonnes of ductile iron water pipes. Higher production implies higher hot gases coming out of the furnaces—by-products for power generation.