November 2010 - Welspun
November 2010 - Welspun
November 2010 - Welspun
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On The Path of Global Leadership…<br />
WELSPUN CITY, ANJAR<br />
<strong>November</strong> <strong>2010</strong> Page 1
Disclaimer<br />
Certain statements made in this presentation may not be based on historical information or facts and may be “forward looking statements,” including<br />
those relating to general business plans and strategy of <strong>Welspun</strong> Corp. Limited (“WCL"), its future outlook and growth prospects, and future<br />
developments in its businesses and its competitive and regulatory environment. Actual results may differ materially from these forward-looking<br />
statements due to a number of factors, inter alia including future changes or developments in WCL's business, its competitive environment, its ability<br />
to implement its strategies and initiatives and respond to technological changes and political, economic, regulatory and social conditions in India.<br />
This presentation does not constitute a prospectus, offering circular or offering memorandum or an offer invitation, or a solicitation of any offer, to<br />
purchase or sell, any shares of WCL and should not be considered or construed in any manner whatsoever as a recommendation that any person<br />
should subscribe for or purchase any of WCL's shares. Neither this presentation nor any other documentation or information (or any part thereof)<br />
delivered or supplied under or in relation thereto shall be deemed to constitute an offer of or an invitation by or on behalf of WCL to subscribe for or<br />
purchase any of its shares.<br />
WCL, as such, makes no representation or warranty, express or implied, as to, and does not accept any responsibility or liability with respect to, the<br />
fairness, accuracy, completeness or correctness of any information or opinions contained herein. The information contained in this presentation,<br />
unless otherwise specified is only current as of the date of this presentation. WCL assumes no responsibility to publicly amend, modify or revise any<br />
forward looking statements contained herein, on the basis of any subsequent development, information or events, or otherwise. Unless otherwise<br />
stated in this document, the information contained herein is based on management information and estimates. The information contained herein is<br />
subject to change without notice and past performance is not indicative of future results. WCL may alter, modify or otherwise change in any manner<br />
the content of this presentation, without obligation to notify any person of such revision or changes. This presentation may not be copied and<br />
disseminated in any manner.<br />
THE INFORMATION PRESENTED HERE IS NOT AN OFFER INVITATION OR SOLICITATION OF ANY OFFER TO PURCHASE OR SELL ANY<br />
EQUITY SHARES OR ANY OTHER SECURITY OF WCL.<br />
This presentation is not for publication or distribution, directly or indirectly, in or into the United States, Canada or Japan.<br />
These materials are not an offer or solicitation of any offer of securities for purchase or sale in or into the United States, Canada or Japan.<br />
<strong>November</strong> <strong>2010</strong> Page 2
<strong>Welspun</strong> Group<br />
Brief Synopsis<br />
• One of the fastest emerging global groups, with multiple<br />
countries strategy and manufacturing facilities<br />
• Group companies enjoys market leadership positions :<br />
• Top 2 Large Diameter Pipe Company in World -<br />
Financial Times, UK<br />
• Globally renowned towel company<br />
• Global relationship with marquee clients including Fortune<br />
100 companies like Exxon Mobil (Golden Pass Pipeline),<br />
Chevron, Shell, Bechtel, Wal- Mart, Target etc<br />
• Equity investment by renowned investors like ICICI Life,<br />
Temasek (Govt. of Singapore), 3i (UK), Genesis (UK)<br />
• Excellent relationship with domestic and international lenders<br />
Global Recognitions<br />
<strong>Welspun</strong> Corp Star Performer Award for the year 2008-09<br />
All India Export Excellence Awards - EEPC <strong>2010</strong><br />
<strong>Welspun</strong> Corp<br />
Economic Times “Emerging Company of the Year Award”<br />
for Corporate Excellence - 2008<br />
<strong>Welspun</strong> India Gold Trophy for “Best Exporter” –<br />
Textile Promotion Council (TEXPROCIL) – 2008<br />
<strong>Welspun</strong> Corp<br />
2nd Largest (Large Diameter) Line Pipe Manufacturer<br />
in the World - Financial Times UK - 2008<br />
<strong>Welspun</strong> India Supplier of the Year Award – J C Penny - 2008<br />
Key Markets<br />
• 80% export mainly to US, Europe, Latin America, Middle East<br />
etc<br />
International Setup<br />
• Christy, UK<br />
• Sorema, Portugal<br />
• Textile facility in Mexico<br />
• Office in Manhattan-NY, Huston-US<br />
• Pipe facility in Arkansas, US<br />
• Pipe Facility in Saudi Arabia (In process)<br />
<strong>Welspun</strong> India<br />
Earth Care Awards – Times of India and<br />
Jindal Steel Ltd - 2008<br />
<strong>Welspun</strong> India Sustainability Award - Walmart - 2007<br />
<strong>Welspun</strong> Corp One of the fastest growing large companies in India –<br />
Business Today - 2007<br />
<strong>Welspun</strong> India 4 Gold Trophies for Outstanding Export Performance –<br />
Textile Promotion Council (TEXPROCIL) - 2007<br />
<strong>November</strong> <strong>2010</strong> Page 3
WCL – An Introduction<br />
• WCL, flagship company of <strong>Welspun</strong> Group, is one of the<br />
largest pipe manufacturing company in the world<br />
• Incorporated in 1995, the Company offers a complete range<br />
of high grade line pipes ranging from ½ inch to 100 inch<br />
used inter alia for transmission of oil & gas<br />
• Partner of Choice for more than 50 Oil & Gas Giants across<br />
the globe with a geographically diverse client base including<br />
Chevron, Exxon Mobil (Golden Pass Pipeline), Saudi Aramco,<br />
British Gas , Kinder Morgan etc<br />
• International footprint<br />
• Accredited with ISO 9001, ISO 14001 and OHSAS 18001<br />
certifications<br />
• Strong order book of U.S. $ 1.0 Bn<br />
Shareholding Pattern, as on Sept. 30, <strong>2010</strong><br />
Steady Growth in Revenues and Profit<br />
Consolidated Total Revenues<br />
(INR MM)<br />
80,000<br />
60,000<br />
40,000<br />
20,000<br />
0<br />
US $ MM<br />
Gross Profit<br />
12,500<br />
9,500<br />
6,500<br />
3,500<br />
500<br />
CAGR (07-10): 40%<br />
26,834 39,945<br />
57,395<br />
73,503<br />
42,742<br />
2006-07 2007-08 2008-09 2009-10 H1 <strong>2010</strong>-11<br />
(2)<br />
(3)<br />
(4)<br />
617 991 1,250<br />
(INR MM) CAGR (07-10): 62%<br />
US $ MM<br />
2,666<br />
5,845 4,768<br />
11,301<br />
6,747<br />
2006-07 2007-08 2008-09 2009-10 H1 <strong>2010</strong>-11<br />
(2) (3)<br />
(4)<br />
61 145 104<br />
150 (6)<br />
Summary Market Statistics<br />
(5)<br />
1,637<br />
252 (5)<br />
951 (6)<br />
35.41%<br />
40.83%<br />
Promoter<br />
Mutual Funds<br />
As of Oct 29, <strong>2010</strong> INR MM US$ MM (6)<br />
Share Price (INR/ US$) 249.05 5.54<br />
FII<br />
Market Capitalization 50,945 1,134<br />
19.54%<br />
Public, Banks and<br />
Financial Institutions<br />
Enterprise Value (1) 58,294 1,297<br />
4.22%<br />
Note<br />
3. Average exchange rate of US$1 = Rs.40.29 from 01-Apr-07 till 31-Mar-08<br />
Note<br />
4. Average exchange rate of US$1 = Rs.45.91 from 01-Apr-08 till 31-Mar-09<br />
1. Net Debt at INR 7,349 MM as on 31 Mar, <strong>2010</strong><br />
5. Average exchange rate of US$1 = Rs.44.90 from 01-Apr-09 till 31-Mar-10<br />
2. Average exchange rate of US$1 = Rs 43.51 from 01-Apr-06 till 31-Mar-07<br />
<strong>November</strong> <strong>2010</strong> 6. Exchange rate of US$1 = Rs. 44.935 as on 30 th Sept <strong>2010</strong><br />
Page 4
Corporate Structure<br />
Products<br />
Manufacturing Facilities<br />
WCL – An Introduction<br />
Promoters (40.83%) <strong>Welspun</strong> Corp Limited (WCL)<br />
Public and Others (59.17%)<br />
WCL – 100% WCL – 100%<br />
<strong>Welspun</strong> Pipes Inc, USA<br />
<strong>Welspun</strong> Plate and Coil Mill<br />
Division<br />
Manufacturer of state-of-art<br />
Plates and Coils<br />
<strong>Welspun</strong> Natural Resources<br />
Pvt. Ltd.<br />
Oil & Gas Exploration Activities<br />
<strong>Welspun</strong> Energy Ltd<br />
Solar & Renewable Energy<br />
100% Beneficial Interest 100% Beneficial Interest<br />
WCL – 100%<br />
<strong>Welspun</strong> Tubular LLC<br />
Manufacturer of Pipes,<br />
Coating and Double jointing<br />
<strong>Welspun</strong> Global Trade LLC<br />
<strong>Welspun</strong> Pipes Ltd.<br />
Proposed LSAW plant<br />
<strong>Welspun</strong> Infratech Ltd.<br />
Infrastructure (MSK)<br />
Pipes<br />
- Longitudinal (LSAW)<br />
- Helical / Spiral (HSAW)<br />
Plates & Coils<br />
Oil and Gas<br />
Renewable Energy &<br />
Infrastructure<br />
- Electrical (ERW)<br />
Anjar & Dahej Pipe Mills<br />
• Premier integrated set-up for manufacturing welded<br />
pipes. Installed state-of-the-art-technology and is<br />
completely geared to meet the requirements of the<br />
global industry.<br />
• The Longitudinal Pipes division (LSAW) has a<br />
capacity of 350,000 metric ton per annum.<br />
• The Spiral Pipes division (HSAW) has a capacity of<br />
550,000 metric ton per annum.<br />
• The ERW Pipes division has a capacity of 200,000<br />
metric ton per annum.<br />
• It also has Coating capabilities<br />
Little Rock , Arkansas, USA<br />
• With manufacturing facility on a 740-acre site adjacent<br />
to the Little Rock Port Authority, the $150 million<br />
facility commissioned in February 2009.<br />
• This API certified facility currently employs more than<br />
300 people and is capable of producing 350,000 tons<br />
of HSAW pipes annually for the use of the oil and gas<br />
industry.<br />
• The facility can produce Pipes from 24 to 60 inches as<br />
outer diameter; 6 mm to 25 mm as wall thickness and<br />
length of 40 -80ft.<br />
• It also has Coating and Double Jointing capabilities<br />
and is a one-stop-solution provider to <strong>Welspun</strong>'s<br />
valued customers<br />
Dammam, Saudi Arabia<br />
• Manufacturing facility of 300,000 tons of<br />
HSAW pipes annually for the use of the oil<br />
and gas industry.<br />
Plate-cum-Coil Mill<br />
• This backward integration at Anjar, Kutch,<br />
Gujarat, India has annual capacity to<br />
produce 1.5 million tones of Plate and Coil<br />
with plates (up to 4.5 meters wide, 140 mm<br />
thickness) and Coil (up to 2.8 meters wide,<br />
25 mm thickness) with strength of 120,000<br />
PSI.<br />
• This mill can cater to high end specialized<br />
product requirement of Line Pipe Industry<br />
(API grades), Shipping, Heavy construction,<br />
Bridges, Boiler plates, Wind blades etc.<br />
<strong>November</strong> <strong>2010</strong> Page 5
8<br />
Growth at Infinity<br />
Revenue<br />
Rs. 42,742 mn.<br />
H1 FY <strong>2010</strong>-11<br />
Rs. 73,503 mn. <strong>2010</strong><br />
Rs. 57,395 mn. 2009<br />
Growth<br />
- 100,000 tons HSAW Plant in Karnataka<br />
operational<br />
Investment in Middle East with HSAW<br />
capacity of 300,000 MT<br />
- 350,000 MT pipe capacity addition under<br />
implementation in India<br />
Foray into infra & pipe laying for O&G and<br />
water through MSK Projects India Ltd.<br />
350,000 tons US Spiral Mill commissioned<br />
Rs. 39,945 mn. 2008<br />
150,000 MT Spiral Mill commissioned<br />
Commissioning of Plate Mill & 43 MW Power Plant<br />
Rs. 26,834 mn.<br />
2007<br />
Anjar Facility , A Key Contributor<br />
Rs. 18,298 mn.<br />
2006<br />
Approvals from O&G majors for new facility<br />
Rs. 10,385 mn.<br />
2005<br />
New Capacity at Anjar, Gujarat for HSAW & Coating<br />
Rs. 8,277 mn.<br />
2004<br />
Merger of coating J.V. with WCL<br />
Rs. 2,565 mn.<br />
Rs. 585 mn.<br />
Rs. 180 mn.<br />
1998<br />
2000<br />
2001<br />
Pipe Coating in JV with EUPEC, Germany<br />
Dahej, Gujarat<br />
LSAW, Dahej, Gujarat<br />
HSAW, Dahej, Gujarat<br />
Incorporated<br />
1995<br />
Embarked on a Growth Journey<br />
<strong>November</strong> <strong>2010</strong> Page 6
<strong>Welspun</strong> Corp Limited: Strong Value & Growth Story<br />
1<br />
Strong Industry Fundamentals<br />
2<br />
Robust Business Fundamentals & Healthy Order Book<br />
3<br />
Global Footprint & Pre Approved with Oil & Gas Majors<br />
4<br />
Strong Management Team with Proven Execution Capabilities<br />
5<br />
Exponential Growth in Revenues & Margins<br />
<strong>November</strong> <strong>2010</strong> Page 7
1. Strong Industry Fundamentals<br />
Relatively Few Major Players<br />
• Industry is highly capital intensive with high barriers to<br />
entry<br />
• Niche markets exist which have been effectively<br />
exploited by <strong>Welspun</strong><br />
• Reliability and reputation for excellence are<br />
paramount, as pipelines are used for critical<br />
applications such as oil and gas transport<br />
• Prospects for the industry brightening with oil prices<br />
gaining strength<br />
Global Demand<br />
• Business potential of around USD 88 Bn (3) - Simdex<br />
• Replacement of the old pipelines in US<br />
• New Gas is required to replace annual decline in<br />
existing gas supplies in North America, which shall<br />
enhance demand for new pipelines<br />
• Shale Gas gradually increase its share in total gas<br />
requirement in US<br />
• Alaska Pipeline project -another boost to the demand<br />
for pipes<br />
Domestic Demand<br />
• Low pipeline penetration in India provides huge<br />
potential<br />
• Natural Gas as a source of energy is growing at a rapid<br />
pace and shall grow the demand for pipelines<br />
• Formation of the Petroleum & Natural Gas Regulatory<br />
Board (PNGRB) to give boost to trunk pipelines<br />
• City Gas Distribution set to take-off<br />
• Liquefied Natural Gas (LNG) terminals projects to<br />
enhance pipe demand<br />
• Water Infrastructure projects: A Key driver for HSAW<br />
pipes<br />
Source: Industry Sources<br />
Company<br />
<strong>Welspun</strong> is well placed, with global clients and state-ofthe-art<br />
technology, to capitalise on this opportunity<br />
International Demand Outlook till 2015<br />
Region<br />
Projects<br />
Total<br />
Length<br />
(kms)<br />
Total Length<br />
(kms)<br />
Quantity<br />
(MMT) (1)<br />
Quantity<br />
(KMT) (1)<br />
Business<br />
Potential<br />
(US$ Bn) (2)<br />
North America 244 79,758 16 19<br />
Latin America 62 34,466 7 8<br />
Europe 139 48,778 10 12<br />
Africa 68 28,213 6 7<br />
Middle East 145 49,953 10 12<br />
Asia 192 108,761 22 26<br />
Australasia 59 18,315 4 4<br />
Total 909 368,244 74 88<br />
Source: Simdex, US, Sept <strong>2010</strong> Update<br />
Domestic Market Size<br />
Business<br />
Potential<br />
(US$ Bn) (2)<br />
GAIL 6,663 1,332 1.6<br />
RGTIL 2,750 550 0.7<br />
GSPL 5,675 1,135 1.4<br />
Total 15,088 3,017 3.7<br />
Source: GAIL India Ltd Presentation Aug 10 / Company data<br />
Share of Expected Demand<br />
Until 2015<br />
Asia<br />
30%<br />
Middle East<br />
14% Africa<br />
8%<br />
Proposed pipeline of GAIL<br />
Phase I by 2011 (Under Execution)<br />
Name of Pipeline<br />
Length<br />
(Kms)<br />
Cost<br />
(Rs Cr)<br />
Add. Cap<br />
(MMSCMD)<br />
DVPL Ph -II / Vijaypur Dadri 1,115 10,830 80<br />
Dadri - Bawana - Nangal 646 2,349 31<br />
Chainsa - Jhajjhar - Hissar 349 1,259 35<br />
Sub Total 2,110 14,438 146<br />
Phase II by 2012 (Approved in 2009)<br />
Name of Pipeline<br />
Australasia<br />
5%<br />
Source: Simdex, US, July <strong>2010</strong> Update<br />
Length<br />
(Kms)<br />
North America<br />
22%<br />
Europe<br />
16%<br />
Latin America<br />
9%<br />
Cost<br />
(Rs Cr)<br />
Add. Cap<br />
(MMSCMD)<br />
Jagdishpur - Haldia 2,050 7,596 32<br />
Dabhol - Bangalore 1,389 5,014 16<br />
Kochi - Mangalore - Bangalore 1,114 3,263 16<br />
Sub Total 4,553 15,873 64<br />
Grand Total 6,663 30,311 210<br />
Source GAIL India Investor Presentation , August <strong>2010</strong><br />
Note<br />
1. Conversion rate of 200 tonnes / km 2. Conversion rate of $1,200 / ton 3. As illustrated in the adjoining tables<br />
<strong>November</strong> <strong>2010</strong> Page 8
2. Robust Business Fundamentals & Healthy Order Book<br />
Strongly Positioned<br />
• <strong>Welspun</strong> serves several marquee<br />
customers like Exxon Mobil (Golden<br />
Pass Pipeline), Kinder Morgan, Ruby<br />
(El Paso) and GAIL because of its<br />
specialized offerings<br />
• It has long term contracts with giants<br />
like TransCanada; and framework<br />
agreements with Chevron, Saudi<br />
Aramco, etc<br />
• Successfully expanded into highly<br />
competitive North and Latin America to<br />
take advantage of higher realizations<br />
Current Capacities<br />
‘000 MT pa<br />
2,200<br />
1,800<br />
1,400<br />
1,000<br />
600<br />
200<br />
(200)<br />
350<br />
350<br />
300<br />
1,000<br />
200<br />
650<br />
LSAW HSAW ERW Total<br />
Pipe<br />
Existing Capacity<br />
1,550 1,500<br />
Plate Mill<br />
Proposed Capacity<br />
Going Strength to Strength<br />
Oil & Gas Co<br />
Approval<br />
Production<br />
( '000 MT)<br />
Revenue<br />
(US$ MM)<br />
PAT<br />
(US$ MM)<br />
No. of countries<br />
FY07 FY09 FY10<br />
36 >50 >50<br />
501 717 814<br />
571 1,250 1,637<br />
36 47 136<br />
Glob<br />
al<br />
Global<br />
Global<br />
Export Market 67% 76% 77%<br />
Production Growth<br />
Export Market Gaining Dominance<br />
‘000 MT<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
814<br />
670<br />
718<br />
501<br />
508<br />
377<br />
384<br />
193<br />
228<br />
FY06 FY07 FY08 FY09 FY10 H1 FY11<br />
Pipes Plates<br />
100%<br />
80% 33%<br />
60%<br />
17% 24% 23%<br />
40%<br />
67%<br />
83% 76% 77%<br />
20%<br />
0%<br />
FY07 FY08 FY09 FY10<br />
Export Domestic<br />
<strong>November</strong> <strong>2010</strong> Page 9
2. Robust Business Fundamentals & Healthy Order Book<br />
Process<br />
Process<br />
Process<br />
Raw Steel<br />
Steel Slab<br />
(API Grade)<br />
Steel Plates/<br />
Coils (API Grade)<br />
Pipes<br />
(API Grade for O&G)<br />
Selling Price (1) :<br />
Selling Price (1) :<br />
Selling Price (1) :<br />
$ 700-800 /ton.<br />
$ 900-1,000 /ton.<br />
$ 1,300-1,400/ton.<br />
Welpsun’s Value Chain (from Slabs to Pipes)<br />
Backward integration into plates provides critical value advantage<br />
Opportunity to service the high end steel category which is currently serviced through imports<br />
Note<br />
1. Indicative market prices<br />
<strong>November</strong> <strong>2010</strong> Page 10
2. Robust Business Fundamentals & Healthy Order Book<br />
Order Book<br />
Current Order Book – Geographical Distribution by Volume<br />
• Orders Booked during FY 09 - $ 1.6 bn<br />
100%<br />
85%<br />
• Orders at the beginning of FY 10 - $ 1.6 bn<br />
‣ Orders Booked during FY 10 - $ 1.3 bn<br />
‣ Orders executed during FY 10 - $ 1.6 bn<br />
• Orders at the beginning of FY 11 - $ 1.4 bn<br />
‣ Orders Booked during FY 11 (YTD) - $ 0.5 bn<br />
‣ Orders executed during H1 FY 10 - $ 0.9 bn<br />
80%<br />
60%<br />
40%<br />
20%<br />
0%<br />
Export<br />
15%<br />
Domestic<br />
• Current Orders in Hand (650 k Tonnes) - $ 1.0 bn<br />
• Raw material tied up for all outstanding orders<br />
• Majority of the shipping finalized<br />
Some of the Top Clients for Pipes<br />
Client<br />
Ruby – El Paso<br />
Enterprise<br />
Transcanada Pipe Line Limited<br />
Gas Authority of India Ltd.<br />
Indian Oil Corporation of India<br />
Saudi Aramco<br />
Country<br />
USA<br />
USA<br />
Canada<br />
India<br />
India<br />
Middle-East<br />
<strong>November</strong> <strong>2010</strong> Page 11
3. Global Footprint & Pre Approved with Oil & Gas Majors<br />
Global Market Expansion<br />
World’s largest diameter steel pipe producers (1)<br />
2007 output (million tonnes)<br />
Salzgitter/Europipe* (Germany) 1.3<br />
Saudi Arabia<br />
Iraq<br />
<strong>Welspun</strong> (India) 1.0<br />
Canada<br />
Spain<br />
Venezuela<br />
Russia<br />
JFE (Japan) 0.7<br />
Sumitomo (Japan) 0.7<br />
US (Trader Mkt.)<br />
US (Projects)<br />
Mexico<br />
Peru<br />
Bolivia<br />
Tunisia<br />
Algeria<br />
Libya<br />
Egypt<br />
Columbia<br />
Oman<br />
Qatar<br />
Indonesia<br />
Sudan<br />
China<br />
Bangladesh<br />
Malaysia<br />
Evraz** (Russia) 0.6<br />
Nippon Steel (Japan) 0.6<br />
Riva (Italy) 0.6<br />
PSL (India) 0.5<br />
JSW (India) 0.3<br />
ArcelorMittal (Luxembourg) 0.2<br />
Year 2000–2001 Year 2001–2002 Year 2002–2003 Year 2003–2004 Year 2004–2005<br />
Year 2005–2006 Year 2006–2007 Year 2007–2008 Year 2008–2009<br />
Year 2009–<br />
<strong>2010</strong><br />
Stupp (US) 0.1<br />
Tata/Corus (India/UK/Netherlands) 0.1<br />
Others*** 7.3<br />
What Sets WCL Apart From Competition<br />
• Decade Long Experience<br />
• All Solutions Under One Roof<br />
• High Capacity Equipment to Meet Future Demand<br />
• Backward Integration with In-house Plate-cum-Coil-Mill<br />
Framework Agreements<br />
• Features<br />
- Selected few companies considered for supplies that meet stringent process of qualification<br />
- Typically customers with large requirement over a period of time<br />
- Flexibility in pricing terms and continuous business<br />
• Current Framework Agreements<br />
- Chevron, Saudi Aramco (pipe purchase agreement)<br />
WCL was rated 2 nd largest Pipe Company in 2007 and has since added further capacity of 0.55 MTPA<br />
Note<br />
1. As reported by Financial Times on April 13, 2008<br />
<strong>November</strong> <strong>2010</strong> Page 12
3. Global Footprint & Pre Approved with Oil & Gas Majors<br />
AGIP<br />
BECHTEL<br />
BRITISH GAS<br />
BRITISH PETROLEUM<br />
CHINA NATIONAL PETROLEUM CORPORATION<br />
CPMEC, CHINA<br />
CHEVRON (Framework Agreement)<br />
DOW<br />
RUBY (ELPASO)<br />
EGYPTIAN GENERAL PETROLEUM CORPORATION<br />
ENTERPRISE<br />
EXXON-MOBIL (GOLDEN PASS PIPELINE)<br />
GAIL<br />
GASCO, ABUDHABI<br />
GASCO, EGYPT<br />
GAZPROM (STROYTRANSGAZ)<br />
KINDER MORGAN<br />
MOGE, MYANMER<br />
N.A.O.C. - NIGERIA<br />
NPCC, ABU DHABI<br />
NTPC<br />
ONGC<br />
PETRO CHINA<br />
PETRONAS, MALAYSIA<br />
PDO, OMAN<br />
PGN, INDONESIA<br />
QATAR PETROLEUM<br />
RELIANCE INDUSTRIES LIMITED<br />
SAIPEM, SNAM<br />
SAUDI ARAMCO (Framework Agreement)<br />
SHELL<br />
STOLT OFFSHORE – Acergy<br />
SONATRACH<br />
TOTAL<br />
TECHNIP<br />
TRANSCANADA (Long Term Contract)<br />
UNOCAL<br />
PERU LNG (HUNT OIL)<br />
VIETSOPETRO<br />
Accreditation Process<br />
A significant entry barrier<br />
Setting up plant<br />
2 years<br />
Seeking API<br />
approval<br />
1 year<br />
3 - 5 years<br />
Approval from<br />
major domestic<br />
/ international<br />
oil and gas<br />
companies<br />
2 – 3 years<br />
<strong>November</strong> <strong>2010</strong> Page 13
4. Strong Management Team with Proven Execution<br />
Capabilities<br />
Management Team<br />
Mr. B.K. Goenka is the Chairman, and the chief architect<br />
of the <strong>Welspun</strong> Group. Today, with his entrepreneurial<br />
ability and professionalism, he has built up one of the most<br />
admired business conglomerates<br />
Mr. Asim Chakraborty is Executive Director and Plant Head<br />
of the Anjar facility. A Civil Engineer from the University of<br />
Kolkata, Mr. Chakraborty has been instrumental in timely<br />
construction of various projects<br />
Mr. R.R. Mandawewala is the Managing Director. He has<br />
been a key contributor in <strong>Welspun</strong>’s journey. A Chartered<br />
Accountant by profession and with over 20 years of<br />
experience, he has cross-industry expertise varying from<br />
Textiles to SAW pipes.<br />
Mr. L. T. Hotwani is Director, Supply Chain Management<br />
of <strong>Welspun</strong> Corp Limited. With a rich experience of over 36<br />
years, Mr. Hotwani is instrumental in sourcing raw materials<br />
and managing supply chain with global players<br />
Mr. M.L. Mittal serves as Executive Director. A Chartered<br />
Accountant by profession, Mr. Mittal has been instrumental<br />
in arranging Long Term Loans and Working Capital<br />
Facilities. During his tenure, the Company has successfully<br />
funded several expansions projects.<br />
Mr. Lauri Malkki serves as CEO. Mr. Malkki has over 30<br />
years of experience within the international steel and pipes<br />
industries. Prior to <strong>Welspun</strong>, Mr. Malkki was the Managing<br />
Director, responsible for the global sales, of Europipe GmbH<br />
in Germany. For more than 20 years he was the head of the<br />
middle European operations of the Rautaruukki Group,<br />
Finland.<br />
Mr. B.R. Jaju serves as Director & CFO. A Chartered<br />
accountant by profession, member of Company Secretary (FCS),<br />
as well as a Law Degree (LL.B). He has a rich experience over<br />
30 years in finance and global M&A activities. Mr. Jaju has been<br />
awarded 3 times as Best Performing CFO in the year 2003, 2005<br />
and 2006, by the most credible nationally renowned jury.<br />
Mr. Prashant Mukherjee serves as Director of Welded<br />
Pipes. A Graduate in Science (Engineering, Mech) with over 24<br />
years experience mostly in the Oil & Gas Pipe Industry, Mr.<br />
Mukherjee has been instrumental in implementing expansion<br />
projects in the Company<br />
Mr. Akhil Jindal serves as Director of Corporate Affairs.<br />
He graduated with an Engineering Degree and thereafter an<br />
MBA from Indian Institute of Management, Bangalore. Mr.<br />
Jindal is responsible for strategic inorganic/organic<br />
initiatives within the Group and has spearheaded large fund<br />
raisings, cross border acquisitions, private equity raisings<br />
and financial closure of projects exceeding over US$ 1<br />
billion<br />
Mr. Vipul Mathur is the Director of Marketing & Sales<br />
(Pipes & Plates Division). A Science Graduate and Masters in<br />
Business Administration (MBA) in Marketing, he has a rich<br />
experience of over 16 years in the Oil & Gas Pipe Industry<br />
<strong>November</strong> <strong>2010</strong> Page 14
4. Strong Management Team with Proven Execution<br />
Capabilities<br />
LSAW Pipes<br />
ERW Pipes<br />
HSAW Pipes<br />
Coating of Pipes<br />
<strong>November</strong> <strong>2010</strong> Page 15
4. Strong Management Team with Proven Execution<br />
Capabilities<br />
Plates<br />
Plates<br />
US Plant<br />
<strong>November</strong> <strong>2010</strong> Page 16
4. Strong Management Team with Proven Execution<br />
Capabilities<br />
US Plant<br />
• Rationale for US Plant<br />
– Opportunity to locate closer to customers who were facing supply challenges<br />
– Transportation cost becomes quite large for inter-continental shipment<br />
– Existing capacity in the US was not able to serve the requirement of US clients<br />
• State of the art facility at Little Rock, Arkansas. Commissioned in Feb-09 and has obtained all API<br />
approvals<br />
• Key supplier for last 5 years in US with client list that includes Chevron, Exxon Mobil (Golden Pass<br />
Pipeline), Kinder-Morgan and Ruby (El Paso)<br />
– Framework agreement with Chevron, making <strong>Welspun</strong> one of the three global preferred vendor for<br />
next 3-5 years<br />
– Supplied pipes for world‟s deepest pipe- line in Gulf of Mexico<br />
• In H1 FY 2011 utilization levels ramp-up to 60%<br />
<strong>November</strong> <strong>2010</strong> Page 17
5. Exponential Growth in Revenues & Margins<br />
(„000 MT) (INR MM)<br />
CAGR (06-10): 22%<br />
814<br />
100,000<br />
850<br />
695<br />
641<br />
75,000<br />
650<br />
501<br />
(#) 476<br />
450 371<br />
387<br />
50,000<br />
250<br />
50<br />
# Plates<br />
(INR MM)<br />
12,000<br />
8,000<br />
4,000<br />
0<br />
US$ MM<br />
1,655<br />
CAGR (06-10): 68%<br />
(INR MM)<br />
(8)<br />
13,186<br />
CAGR (06-10): 78%<br />
6,000<br />
3,384<br />
6,555 6,348<br />
Notes<br />
1. Excluding Other Income<br />
2. Using avg. exchange rate of US$1 = Rs.44.28 from 01-Apr-05 till 31-Mar-06<br />
3. Using avg. exchange rate of US$1 = Rs.43.51 from 01-Apr-06 till 31-Mar-07<br />
4. Using avg. exchange rate of US$1 = Rs.40.29 from 01-Apr-07 till 31-Mar-08<br />
7,339<br />
2005-06 2006-07 2007-08 2008-09 2009-10 H1-<strong>2010</strong>-11<br />
(2)<br />
37 78<br />
Sales (volume) Consolidated Revenues (1)<br />
(#)<br />
154<br />
(3) (4) (5)<br />
(7)<br />
231<br />
(#)<br />
2005-06 2006-07 2007-08 2008-09 2009-10 H1-<strong>2010</strong>-11<br />
EBITDA (1)<br />
163 138<br />
(6)<br />
25,000<br />
0<br />
2005-06 2006-07 2007-08 2008-09 2009-10 H1-<strong>2010</strong>-11<br />
US$ MM 413 (2) 617 (3) 991<br />
(4) (5)<br />
1,250 1,637 (7)<br />
(9)<br />
951<br />
4,500<br />
3,000<br />
1,500<br />
0<br />
18,298<br />
614<br />
CAGR (05-10): 42%<br />
26,834<br />
1,425<br />
Profit After Tax<br />
3,408<br />
39,945<br />
2,135<br />
57,395<br />
6,104<br />
73,503<br />
PAT Margin (%)<br />
3,685<br />
2005-06 2006-07 2007-08 2008-09 2009-10 H1-<strong>2010</strong>-11<br />
(2)<br />
(3) (4) (5)<br />
294 163 (9) US$ MM 14 33 85 47 136 (7)<br />
82 (9)<br />
42,742<br />
16.0%<br />
12.0%<br />
8.0%<br />
4.0%<br />
0.0%<br />
Notes<br />
5. Using avg. exchange rate of US$1 = Rs.45.91 from 01-Apr-08 till 31-Mar-09<br />
6. Includes extraordinary items : forex provisioning of INR1,256MM, Inventory write-down of INR 385MM,<br />
ECB provisions of INR 178MM<br />
7. Using avg. exchange rate of US$1 = Rs.44.90 from 01-Apr-09 till 31-Mar-10<br />
8. Includes recovery of past forex provisioning ( in FY09) , which is reflected in better realization and cost of material<br />
9. Exchange rate of US$1 = Rs.44.935 as at 30-Sept-10<br />
<strong>November</strong> <strong>2010</strong> Page 18<br />
(6)
5. Exponential Growth in Revenues & Margins<br />
EPS (Rs./Share)(Diluted)<br />
35<br />
28<br />
CAGR (06-10): 61%<br />
28.4<br />
21<br />
18.3<br />
16.6<br />
14<br />
7<br />
4.2<br />
8.7<br />
11.5<br />
0<br />
2005-06 2006-07 2007-08 2008-09 2009-10 H1-<strong>2010</strong>-11<br />
ROCE and ROE (%)<br />
25%<br />
20%<br />
15%<br />
14.7%<br />
12.2%<br />
17.3%<br />
21.8% 21.7%<br />
19.1%<br />
11.4%<br />
R OC E<br />
13.7%<br />
R OE<br />
19.5%<br />
21.0%<br />
10%<br />
5%<br />
0%<br />
2005-06 2006-07 2007-08 2008-09 2009-10<br />
<strong>November</strong> <strong>2010</strong> Page 19
5. Exponential Growth in Revenues & Margins<br />
Consolidated Balance Sheet (Rs. Mn.) FY2009 FY<strong>2010</strong> Change<br />
Sources of Funds<br />
Shareholders' Funds<br />
Share Capital 932 1,022 89<br />
Reserves and Surplus 14,664 27,990 13,325<br />
15,597 29,011 13,414<br />
Minority Interest 0 0 (0)<br />
Foreign Currency Monetary Item Translation Difference A/c - 75 75<br />
Loan Funds -<br />
Secured Loans 26,435 18,654 (7,780)<br />
Unsecured Loans 103 6,822 6,718<br />
26,538 25,476 (1,062)<br />
Deferred Tax Liabilities (Net) 2,488 3,352 865<br />
Total 44,623 57,915 13,292<br />
<strong>November</strong> <strong>2010</strong> Page 20
5. Exponential Growth in Revenues & Margins<br />
Consolidated Balance Sheet (Rs. Mn.) FY2009 FY<strong>2010</strong> Change<br />
Application Of Funds<br />
Fixed Assets<br />
Gross Block 34,844 38,810 3,966<br />
Less:Depreciation/Amortisation/Impairment 3,847 5,889 2,042<br />
Net Block 30,996 32,921 1,924<br />
Capital Work-In-Progress 5,808 5,412 (396)<br />
36,804 38,333 1,529<br />
Investments 1,140 1,596 456<br />
Foreign Currency Monetary Item Translation Difference A/c 355 - (355)<br />
Current Assets, Loans and Advances -<br />
Income Accrued on Investments 113 13 (99)<br />
Inventories 26,113 20,322 (5,791)<br />
Sundry Debtors 4,601 8,077 3,476<br />
Cash and Bank Balances 9,470 17,028 7,558<br />
Loans and Advances 5,552 6,031 479<br />
45,848 51,471 5,623<br />
Less : Current Liabilities and Provisions -<br />
Current Liabilities 38,955 32,291 (6,663)<br />
Provisions 601 1,219 618<br />
39,555 33,510 (6,045)<br />
Net Current Assets 6,293 17,961 11,668<br />
Preliminary Expenses 0 0 (0)<br />
Deferred Revenue Expenditure 31 25 (5)<br />
Total 44,623 57,915 13,292<br />
<strong>November</strong> <strong>2010</strong> Page 21
H1 & Q2 FY <strong>2010</strong>-11 Highlights<br />
Major Highlights<br />
• Sales growth of 4% on the back of:<br />
• Volume growth from US pipe plant<br />
• Higher plate and coil volumes<br />
• Lower steel prices lowers the realization. However,<br />
profitability inches up<br />
• EBITDA grows by 8%. However, operational EBITDA registers<br />
a growth of 20% as H1FY10 included realignment gain of Rs<br />
667.9 mn<br />
• Interest lower by 57% mainly on account of repayment of high<br />
cost term loans and higher interest income<br />
• Depreciation is higher in comparison to corresponding quarter<br />
on account of capitalization, commissioning of Coil Mill and<br />
consolidation of subsidiary.<br />
• Consequently, Profit after Tax at Rs. 3685 mn, reflects growth<br />
of 33% on YoY basis.<br />
• EPS grew by 13% despite dilution effect of $ 100 million equity<br />
raising by QIP (Qualified Institutional Placement) and potential<br />
dilution impact of $150 mn FCCB (Foreign Currency<br />
Convertible Bonds) conversion.<br />
• This quarter has witnessed higher sales volume and higher<br />
operational EBITDA. Interest cost is lower and depreciation is<br />
higher in line with H1 FY11 trend. Resultant PAT growth is 8%<br />
to Rs 1778 mn.<br />
Summary of H1& Q2 FY11<br />
Particulars<br />
Breakdown of Production and Sales in MT<br />
* Includes internal sales<br />
Q2<br />
FY 11<br />
Q2<br />
FY 10<br />
Growth<br />
H1<br />
FY 11<br />
H1<br />
FY 10<br />
(Rs. Million)<br />
Growth<br />
Sales 18,524 21,734 -15% 42,742 41,133 4%<br />
Reported EBITDA 3,504 3,703 -5% 7,339 6,775 8%<br />
Interest 374 610 -39% 592 1,361 -57%<br />
Depreciation 614 538 14% 1,155 1,030 12%<br />
PAT 1,778 1,651 8% 3,685 2,770 33%<br />
EPS (Rs./Share) - Diluted 8.02 8.79 -9% 16.59 14.74 13%<br />
Reported EBITDA Margin (%) 18.9% 17.0% 17.2% 16.5%<br />
PAT Margin (%) 9.6% 7.6% 8.6% 6.7%<br />
Production Volume<br />
(in MT) Q2 FY11 Q2 FY10 Growth H1 FY11 H1 FY10 Growth FY<strong>2010</strong><br />
Total Pipes<br />
Consolidated 254,337 210,469 21% 507,827 456,865 11% 813,750<br />
Plates & Coils 111,546 90,911 23% 228,356 183,163 25% 383,577<br />
Sales Volume (in MT) Q2 FY11 Q2 FY10 Growth H1 FY11 H1 FY10 Growth FY<strong>2010</strong><br />
Total Pipes<br />
Consolidated 229,688 209,023 10% 476,251 440,103 8% 815,550<br />
Plates & Coils* 128,358 113,611 13% 231,427 175,949 32% 387,224<br />
Status of Projects<br />
Capacity of Pipes is being increased to 2.2 million MTPA:<br />
• LSAW expansion of 350 K MTPA at Anjar in Q1 FY 2012.<br />
• HSAW plant of 100K MTPA at Karnataka is now fully<br />
operational.<br />
• After modifications, Saudi plant with capacity of 300K<br />
MTPA has started trial production and is likely to be on<br />
stream by the end the of 3rd quarter FY 2011.<br />
New Initiatives<br />
• Effective 16th August, <strong>2010</strong>, <strong>Welspun</strong> Infratech Ltd (a 100% subsidiary of <strong>Welspun</strong> Corp)<br />
acquired control on MSK Projects India Ltd and now holds 61.12%.<br />
• With reulatory approval processes in Saudi Arabia underway, the transaction is expected to<br />
be completed soon. This development will contribute to <strong>Welspun</strong>’s global reach not just in<br />
terms of supply, but also for production facilities.<br />
• Mr David Delie, previously CEO of Berg Steel Pipe Corporation with over 30 years of<br />
experience in the industry, was appointed as the President of <strong>Welspun</strong> Tubular LLC. His<br />
appointment will tie in with the Company’s committment to supply products from multiple<br />
sources with quality unmatched in the industry<br />
<strong>November</strong> <strong>2010</strong> Page 22
Consolidated Balance Sheet as on 30 th Sept <strong>2010</strong><br />
A<br />
Particulars As at 30.09.<strong>2010</strong><br />
Unaudited<br />
(Rs. Mn)<br />
Sources of Funds<br />
1 Shareholders Fund<br />
a Share Capital 10,22.8<br />
b Reserves and Surplus 31,469.9<br />
c Share Application Money -<br />
d Minority Interest 15,48.4<br />
2 Loan Funds 38,913.5<br />
3 Foreign Currency Monetory Item Translation Difference Account 37.7<br />
4 Deferred Tax Liabilities-Net 3,761.2<br />
B<br />
Total 76,753.5<br />
Application of Funds<br />
1 Fixed Assets 40,295.9<br />
2 Build Operate and Transfer Projects Expenditure 4,158.5<br />
3 Investments 13,065.0<br />
4 Foreign Currency Monetory Item Translation Difference Account<br />
5 Current Assets, Loans and Advances<br />
Less<br />
a Inventories 19,002.2<br />
b Sundry Debtors 12,997.8<br />
c Cash and Bank Balances 13,131.6<br />
d Loans and Advances 4,964.4<br />
4 Current Liabilities and Provisions<br />
5<br />
a Current Liabilities 29,404.4<br />
b Provisions 1,482.3<br />
Miscellaneous Expenditure 24.8<br />
Total 76,753.5<br />
<strong>November</strong> <strong>2010</strong> Page 23
Summary<br />
1 Strong Industry<br />
Fundamentals<br />
• Capital intensive, high<br />
barriers to entry<br />
• North America expected to<br />
lead demand<br />
5<br />
Exponential Growth in<br />
Revenues & Margins<br />
• Revenues have grown at a<br />
CAGR of 42% over the last<br />
five years<br />
• PAT has grown at a CAGR of<br />
78% in the same period<br />
2<br />
Robust Business<br />
Fundamentals<br />
& Healthy Order Book<br />
• Strong volume growth<br />
• Order Book in excess of US$<br />
1.0 Bn<br />
• Capacities of global size<br />
• Comprehensive product mix<br />
4 3 Global Footprint & Pre<br />
Strong Management Team<br />
with Proven Execution<br />
Capabilities<br />
• Recognized by the FT as the<br />
second largest steel pipe<br />
producer in the world in 2007<br />
• First Indian company to supply<br />
pipes for offshore projects in US<br />
Approved with O&G Majors<br />
• Presence across more than 25<br />
countries<br />
• Pre-approved with more than<br />
50 O&G Majors<br />
<strong>November</strong> <strong>2010</strong> Page 24
<strong>Welspun</strong> on the Path of Global Leadership<br />
Scale Leadership<br />
Scale of operations through large economic plants across the globe<br />
Cost Leadership<br />
Produce world class products at the least cost and maintain competitive edge<br />
Technology<br />
Leadership<br />
Adopt and innovate cutting-edge technology to satisfy stringent<br />
requirements of customers<br />
Quality Leadership<br />
Consistent focus on quality at all levels; be the best in delighting customers<br />
Process Leadership<br />
Most efficient and effective processes to achieve optimal utilizations<br />
People Leadership<br />
Best in class people : Produce extraordinary results<br />
Global Leadership Serve Globally, Act Locally<br />
<strong>November</strong> <strong>2010</strong> Page 25
Key questions on recent updates<br />
What is <strong>Welspun</strong>'s exposure to current civil proceedings?<br />
During the previous year one of the customer reported defect in the pipes supplied<br />
alleging grade of steel used did not meet the specifications, the company replaced the<br />
defective pipes and also provided for the expected loss on this account. During the year<br />
the said customer initiated legal action against the company in the United States of<br />
America claiming loss / damages of $ 66 million on account of defects in the pipes<br />
supplied, consequently the company also initiated legal action against the steel supplier<br />
claiming corresponding loss / damages it may suffer on account of this claim of the<br />
customer. Hence the company does not expect any liability on account of the claim<br />
against it.<br />
<strong>November</strong> <strong>2010</strong> Page 26
Thank You<br />
For further details, please contact:<br />
Akhil Jindal<br />
Director - Corporate Affairs<br />
Tel.: +91- 22- 6613 5721<br />
Mob.: +91- 98- 7029 6187<br />
Email: akhil_jindal@welspun.com<br />
Navin Agarwal<br />
AVP - Corporate Affairs<br />
Tel.: +91- 22- 6613 5734<br />
Mob.: +91- 98- 7000 9224<br />
Email: navin_agarwal@welspun.com<br />
Company Website: http://www.welspuncorp.com<br />
<strong>November</strong> <strong>2010</strong> Page 27