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WCL - Investor & Analyst meet - Welspun Corp Ltd.

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<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

<strong>WCL</strong> - <strong>Investor</strong> & <strong>Analyst</strong> <strong>meet</strong><br />

Breaking the ‘Million Ton’ Barrier<br />

30 May 2013


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Disclaimer<br />

Certain statements made in this presentation may not be based on historical information or facts and may be “forward looking<br />

statements,” including those relating to general business plans and strategy of <strong>Welspun</strong> <strong>Corp</strong>. Limited (“<strong>WCL</strong>"), its future outlook and<br />

growth prospects, and future developments in its businesses and its competitive and regulatory environment. Actual results may differ<br />

materially from these forward-looking statements due to a number of factors, inter alia including future changes or developments in<br />

<strong>WCL</strong>'s business, its competitive environment, its ability to implement its strategies and initiatives and respond to technological<br />

changes and political, economic, regulatory and social conditions in India. This presentation does not constitute a prospectus, offering<br />

circular or offering memorandum or an offer invitation, or a solicitation of any offer, to purchase or sell, any securities of <strong>WCL</strong> and<br />

should not be considered or construed in any manner whatsoever as a recommendation that any person should subscribe for or<br />

purchase any of <strong>WCL</strong>'s securities. Neither this presentation nor any other documentation or information (or any part thereof) delivered<br />

or supplied under or in relation thereto shall be deemed to constitute an offer of or an invitation by or on behalf of <strong>WCL</strong> to subscribe<br />

for or purchase any of its securities.<br />

<strong>WCL</strong>, as such, makes no representation or warranty, express or implied, as to, and does not accept any responsibility or liability with<br />

respect to, the fairness, accuracy, completeness or correctness of any information or opinions contained herein. The information<br />

contained in this presentation, unless otherwise specified is only current as of the date of this presentation. <strong>WCL</strong> assumes no<br />

responsibility to publicly amend, modify or revise any forward looking statements contained herein, on the basis of any subsequent<br />

development, information or events, or otherwise. Unless otherwise stated in this presentation, the information contained herein is<br />

based on management information and estimates. The information contained herein is subject to change without notice and past<br />

performance is not indicative of future results. <strong>WCL</strong> may alter, modify or otherwise change in any manner the content of this<br />

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 />

SHARES OR ANY OTHER SECURITY OF <strong>WCL</strong>.<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<br />

Japan.


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Agenda<br />

FY13 SCORE CARD<br />

PROPOSED DEMERGER OF <strong>WCL</strong><br />

VISION & WAY FORWARD


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

FY13 SCORE CARD<br />

PROPOSED DEMERGER OF <strong>WCL</strong><br />

VISION & WAY FORWARD


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

FINANCIAL SCORE CARD


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Financial highlights – Consolidated – Stable operational performance<br />

‣ Challenging environment, however performance in line with expectations<br />

Particulars (In Rs. Mn) FY12 FY13<br />

Net sales 89,766 1,08,701<br />

Operational EBITDA 10,901 8,452<br />

Reported EBITDA 11,246 10,289<br />

EBITDA Adjusted* 12,488 11,562<br />

PBT before exceptional 3,732 597<br />

PAT Adjusted* 3,407 1,252<br />

Cash PAT* 7,089 6,352<br />

* Notes: a) Adjusted for forex losses of RS.1,278 mn in FY13 and Rs. 1,510 mn in FY12<br />

b) Exceptional item of Rs. 1,091 mn in FY13<br />

b) Cash PAT Adj = PBT before exceptionals + Depreciation – Current taxes (incl MAT<br />

credit, if any) + Post-tax Forex loss /(gain)<br />

‣ Equity dividend of Rs. 0.5/share declared; track record of dividend payments over<br />

the last five years<br />

6


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Financial highlights – Global Pipes & Plates – Continues to be strong<br />

‣ Pipes business delivers strong results backed by all-time high volumes<br />

Particulars - (In Rs. Mn) FY12 FY13<br />

Net sales 71,961 90,832<br />

Operational EBITDA 9,732 8,407<br />

Reported EBITDA 10,178 9,947<br />

EBITDA Adjusted* 11,044 11,046<br />

PBT before exceptional 4,386 2,832<br />

PAT Adjusted* 3,218 2,745<br />

Cash PAT* 7,612 8,524<br />

* Notes: a) Adjusted for forex losses of RS.1,104 mn in FY13 and Rs. 1,134 mn in FY12<br />

b) Exceptional item of Rs. 538 mn in FY13<br />

c) Cash PAT Adj = PBT before exceptionals + Depreciation – Current taxes (incl MAT<br />

credit, if any) + Post-tax Forex loss /(gain)


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Net debt/equity at a comfortable level<br />

Particulars – Rs. Mn FY12 FY13<br />

Share capital 1,139 1,315<br />

Net worth 48,816 56,578<br />

Gross debt 53,407 55,772<br />

Cash and current inv 29,686 24,537<br />

Net debt 23,721 31,235<br />

‣ Share capital increase on account of conversion of existing CCDs issued to<br />

Grenele <strong>Ltd</strong> (Apollo)<br />

‣ Net debt/equity comfortable at 0.55x<br />

‣ Debt increase mainly on account of capex and higher working capital


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Capex cycle close to completion<br />

‣ US$ 80 mn capex for US ERW mill completed<br />

‣ Remainder of Anjar Coating plant capex will be completed in FY14<br />

‣ Minimal capex going forward<br />

‣ To improve cash flows in the future which will contribute to debt<br />

reduction


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Working capital<br />

Days of sales FY12 FY13<br />

Inventory 102 84<br />

Receivables 60 57<br />

Other current assets 31 31<br />

Current assets 193 172<br />

Trade payables 130 99<br />

Other current liabilities 42 47<br />

Current Liabilities 172 146<br />

Cash conversion cycle 21 26<br />

‣ Better inventory management and strong execution results in lower inventory days<br />

‣ Payable days lower due to reduction in acceptances


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Comfortably placed for debt repayments<br />

‣ Repaid Rs. 1,700 mn of NCD<br />

‣ Repaid ECB of US$50 mn in April 2012<br />

‣ Bought back FCCB of UD$68.5 mn<br />

‣ Raised new NCD of Rs. 3,428 mn with repayments starting from FY20<br />

‣ Raised new ECB of US$100 mn with repayments starting from FY16<br />

‣ Effectively, replaced short term debt with longer term debt<br />

Debt maturing (Rs. mn)<br />

Remarks<br />

FY14 3,646 • Includes US$50 mn of ECB; already paid<br />

in April 2013<br />

FY15 9,427 • Includes US$50 mn of ECB (April ‘14) and<br />

US$81.5 mn of FCCB (October ‘14)<br />

• Sufficient cash balance<br />

• Exploring further FCCB buyback


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

OPERATIONAL SCORE CARD – PIPES AND PLATES


In '000 MT<br />

<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Volume highlights - At all-time highs<br />

‣ 1.02 mn tons - All time high annual Sales<br />

‣ Sales volume growth of 22% over FY12<br />

Total Pipe Sales<br />

1200<br />

1000<br />

800<br />

695<br />

CAGR (FY09-FY13) : 10.0%<br />

816<br />

909<br />

835<br />

1,018<br />

600<br />

400<br />

200<br />

0<br />

FY 09 FY 10 FY 11 FY 12 FY 13<br />

13


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

In '000 MT<br />

Volume highlights - At all-time highs<br />

‣ 1.01 mn tons - All time high Production in a year<br />

Total Pipe Production<br />

1,200<br />

1,000<br />

800<br />

717<br />

CAGR (FY09-FY13) : 9.0%<br />

814<br />

958<br />

819<br />

1,010<br />

600<br />

400<br />

200<br />

-<br />

FY 09 FY 10 FY 11 FY 12 FY 13<br />

14


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Order book highlights – Strong visibility for next year<br />

‣ Booked orders in excess of 1 mn MT in FY13<br />

‣ Closing Order Book of 657K MT of pipes as on 1 st April 2013<br />

Pipe Order book in K MT<br />

Pipe Orders Booked<br />

Pipe Orders<br />

Executed<br />

Closing Pipe Orders<br />

Year MT (in '000 tons) MT (in '000 tons) MT (in '000 tons)<br />

FY 2008-09 807 695 781<br />

FY 2009-10 824 814 791<br />

FY 2010-11 844 909 726<br />

FY 2011-12 762 835 653<br />

FY 2012-13 1,022 1,018 657<br />

‣ Current order book at 757 K MT<br />

‣ Prospective new bids of over 4 million MT<br />

15


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Current Order book details<br />

Order book by Product<br />

ERW<br />

3%<br />

HSAW<br />

59%<br />

LSAW<br />

38%<br />

South East<br />

8%<br />

Order book by destination<br />

India<br />

20%<br />

MENA<br />

37%<br />

Americas<br />

31%<br />

Europe<br />

4%<br />

16<br />

Saudi<br />

15%<br />

Order book by source<br />

US<br />

20%<br />

India<br />

65%


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Other Operational highlights in Pipes & Plates business<br />

‣ US ERW Mill commissioned<br />

‣ Received the API certification<br />

‣ Customer accreditations ongoing<br />

‣ Saudi mill received approvals from Saudi Aramco<br />

‣ Currently, only local mill to be approved by Saudi Aramco<br />

‣ Received orders over 100K MT from the client<br />

‣ Capacity expansion of 50K tons in Spiral mill in Mandya completed,<br />

received API certification<br />

‣ Anjar Coating plant close to completion<br />

‣ Overall pipe capacity now at 2.425 mn MTPA – One of the largest line pipe<br />

players with multi-location facilities in India, Saudi Arabia and USA.<br />

‣ Plates business: Production only on need basis<br />

17


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

<strong>Welspun</strong>’s Global Reach – Serving more than 35 countries<br />

AMERICAS<br />

EUROPE & CIS<br />

Canada<br />

USA<br />

Mexico<br />

Bahamas<br />

Trinidad & Tobago<br />

Venezuela<br />

Colombia<br />

Peru<br />

Bolivia<br />

Spain<br />

Czech Rep.<br />

Tunisia<br />

Algeria<br />

Nigeria<br />

Libya<br />

Egypt<br />

Sudan<br />

Russia<br />

Iraq<br />

Qatar Iran<br />

UAE<br />

Saudi Oman<br />

India<br />

DOMESTIC<br />

China<br />

Bangladesh<br />

Myanmar<br />

Thailand<br />

Malaysia<br />

SOUTH<br />

EAST ASIA<br />

AUSTRALIA<br />

Indonesia<br />

Plant Locations<br />

Anjar, India<br />

Dahej, India<br />

Mandya, India<br />

Dammam, Saudi<br />

Little Rock, USA<br />

Marketing Offices<br />

Mumbai, India<br />

Delhi , India<br />

Dammam, Saudi Arabia<br />

Dubai, UAE<br />

Houston, USA<br />

MENA<br />

Plants<br />

Mktg Office<br />

Countries served


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Journey to become the most respected Pipe Company in the World<br />

How <strong>Welspun</strong> will sustain<br />

How <strong>Welspun</strong> reached here<br />

• Technology<br />

• Product profile<br />

• Approvals<br />

• Accreditations<br />

• Serving challenging orders<br />

• People<br />

• Zero Harm - Safety<br />

• Niche markets -deep offshore/ sour<br />

pipelines<br />

• Stringent client specifications<br />

• Local presence in key markets<br />

• Highly trained workforce<br />

• Zero Tolerance – Quality Standard<br />

Humble beginnings<br />

Today<br />

The future


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

FY13 SCORE CARD<br />

PROPOSED DEMERGER OF <strong>WCL</strong><br />

VISION & WAY FORWARD


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Rationale<br />

Key Considerations<br />

‣ <strong>WCL</strong> is a Business conglomerate with interest in – Pipes (Pipes & Plates), Steel (DRI)<br />

and Infra (Infra, O&G and Energy)<br />

‣ Each business segment has its own plans and business dynamics<br />

‣ Presently <strong>Welspun</strong> <strong>Corp</strong> business model is considered complex as multitude of business<br />

being run under the Parent company <strong>Welspun</strong> <strong>Corp</strong>.<br />

Objective<br />

‣ Simplify the business models<br />

‣ Provide flexibility to grow the different businesses with sharper focus on each of the<br />

businesses<br />

‣ Business segments with different risk-return profiles need to be aligned separately<br />

21


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Proposed Resultant Structure<br />

Promoters<br />

Public<br />

Promoters<br />

Public<br />

36% 64%<br />

36% 64%<br />

<strong>WCL</strong><br />

Listed<br />

WEPL<br />

Listed<br />

Pipes -<br />

WPI US<br />

Pipes -<br />

Saudi<br />

WNRL<br />

WITL<br />

Maxsteel<br />

WEL<br />

WIPPL<br />

AWEL<br />

WPL<br />

Leighton<br />

Pipes & Plates Business<br />

Group<br />

Infra + Steel + DRI<br />

Business Group


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Highlights of Demerger<br />

Key Parameters Resolution<br />

Appointed Date 1 st April 2012<br />

Demerged<br />

Company<br />

Resulting<br />

Company<br />

Court Scheme<br />

Jurisdiction<br />

Expected<br />

Completion<br />

Approvals<br />

Required<br />

<strong>Welspun</strong> <strong>Corp</strong> Limited (<strong>WCL</strong>)<br />

• Pipes & Plates undertaking<br />

• All other assets & liabilities including secured and unsecured loans (including outstanding<br />

ECBs and FCCBs) held at <strong>WCL</strong> level and subsidiaries related to Pipe Business<br />

<strong>Welspun</strong> Infra Enterprises Limited to be renamed as <strong>Welspun</strong> Enterprises <strong>Ltd</strong> (WEPL)<br />

• Steel undertaking (<strong>Welspun</strong> Maxsteel Limited)<br />

• Infra undertaking (Infra, O&G exploration and Energy)<br />

• Scheme of Arrangement under section 391-394 of the Companies Act<br />

• To be compliant with the “demerger” definition under Section 2 (19AA) of Income Tax Act<br />

Gujarat High court<br />

31 st January 2014<br />

• NOC from Stock Exchanges & SEBI<br />

• Shareholders Approval<br />

• Secured & Unsecured Creditors Approval


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Indicative Timeline<br />

Sr.<br />

Event<br />

Days<br />

1 Approval of the Scheme by the Board of Directors X + 0<br />

2 Application to BSE and NSE for its NOC and SEBI Observation X + 5<br />

3 Application to FIPB, RBI, etc X + 5<br />

4 Receipt of BSE/ NSE approval, SEBI Observation - (Upload the SEBI Observation and<br />

other Documents on the Company website with 24 hrs of receipt) X + 90<br />

5 Filing of an application with the High Court of Judicature at Gujarat directions to<br />

convene <strong>meet</strong>ings under Section391 of the Companies act,1956 X + 96<br />

6 Receipt of High Court Directions X + 105<br />

7 Dispatch of Notices to shareholders, secured creditors and unsecured creditors, along<br />

with Scheme and SEBI Observation Letter X + 113<br />

8 Publishing notice in newspapers informing about the <strong>meet</strong>ings X + 116<br />

9 Holding of Court convened <strong>meet</strong>ings X + 145<br />

10 Filing of Chairman's report with the High Court X + 148<br />

11 Companies to file Petition in the High Court X + 152<br />

12 Receipt of approvals from FIPB, RBI and others, if any (to confirm with the lawyers) X + 168<br />

13 High Court to admit Petition X + 175<br />

14 Petitions to be filed with Regional Director X + 182<br />

15 Receiving clearance from Regional Director X + 189<br />

16 High Court order approving scheme X + 210<br />

17 Receipt of High Court Order X + 228<br />

18 Filing of Order with ROC (Scheme Effective) X + 231<br />

19 Application for Listing X + 238<br />

20 Application for Adudication of Court Order for stamp duty X + 265


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Advisors assisting in the Demerger process<br />

Description<br />

Advisor<br />

Agency<br />

AXIS CAPTIAL<br />

Legal<br />

Amarchand Mangaldas<br />

Valuation & Share Swap Ratio<br />

Auditors<br />

Walker Chandiok & Co. (Part of<br />

Grant Thorton Network)<br />

MGB & Company


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

FY13 SCORE CARD<br />

PROPOSED DEMERGER OF <strong>WCL</strong><br />

VISION & WAY FORWARD


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Vision for <strong>WCL</strong><br />

An employer<br />

of choice<br />

The organization<br />

with highest quality<br />

standards<br />

Widen global<br />

presence<br />

A preferred business<br />

partner to all its<br />

customers and<br />

suppliers<br />

“MOST<br />

RESPECTED<br />

PIPE COMPANY<br />

IN THE WORLD”<br />

Socially responsible<br />

and sustained value<br />

creator for all its<br />

stakeholders


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Key Focus Areas– Pipes business<br />

FOCUS ON<br />

• Delivering Profitable Growth<br />

• Growing Volumes without sacrificing margins<br />

• Producing where it is cost-effective and selling where it is most profitable<br />

BETTER MARKETING FOCUS<br />

• Targetted focus on delivering quality products and services to the customers<br />

• Organisation structure reworked in order to be closer to the customer<br />

• Enhancing market share in our strong turf – North America, Middle East and India<br />

• Increase market share in relatively new geographies - Latin America, Europe and<br />

North Africa<br />

MINIMAL CAPEX GOING FORWARD<br />

• All planned capex completed or close to completion<br />

• No new growth capex unless clear medium-term visibility<br />

• No plans for new greenfield plants; any new venture will be brown field with<br />

potential shifting of existing plant


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Status and Way forward for each businesses in WEPL<br />

‣ Infra business<br />

‣ Transfer of Infra EPC business to Leighton <strong>Welspun</strong> (LWIN)<br />

‣ Received 7.5% stake in LWIN as consideration<br />

‣ <strong>Welspun</strong> group stake in LWIN rises to ~40% from 35%<br />

‣ Consolidation of EPC completed; synergy benefits to improve performance<br />

‣ Self-sufficient business to <strong>meet</strong> its commitments and liabilities<br />

‣ BOT business fully operational with positive cash flows after servicing debt<br />

obligations<br />

‣ Extremely cautious on bidding for new projects


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Status and Way forward for each businesses in WEPL<br />

‣ Maxsteel business<br />

‣ No interest and loan repayment obligation till September 2014<br />

‣ Gas situation likely to improve with new gas finds by Reliance in KG-D6<br />

‣ Reliance price negotiation with government in advance stage; increase in APM<br />

price likely to improve gas availability<br />

‣ Exploring options of alternative gas through producer gas plants which can cater<br />

to 40% of gas requirement at an average price of ~US$ 7/MMBTU with net capex<br />

of Rs. 1,200 mn<br />

‣ Mott MacDonald already carried out techno-economic study for the PGP<br />

price and the results are encouraging<br />

‣ Oil & gas exploration<br />

‣ No new acreages


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Status and Way forward for each businesses in WEPL<br />

‣ Energy business<br />

‣ One of the largest renewable energy players in India<br />

‣ Largest solar energy capacity in India<br />

‣ Operational capacity of 130 MW in FY13<br />

‣ Operational capacity expected to rise to ~400 MW by 2014<br />

‣ Solar business already profitable<br />

‣ Project locations across six states


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

On The Path of Global Leadership…<br />

Thank You


<strong>Welspun</strong> Group | <strong>Welspun</strong> <strong>Corp</strong> <strong>Ltd</strong><br />

Contacts<br />

For further details, please contact:<br />

Akhil Jindal<br />

Director – Group Finance and Strategy<br />

Email: akhil_jindal@welspun.com<br />

Harish Venkateswaran<br />

GM - Group Finance and Strategy<br />

Email: harish_venkateswaran@welspun.com<br />

Company Website: http://www.welspuncorp.com

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