Annual Report FY 2009-10 - Welspun

C rp LtdSWOT Analysis of the Indian Pipe IndustryStrengths• Most economical mode of transport for liquids and gases.Logistics forms an important part of the cost for most of the oil and gas companies and the cost of transportation through pipelines is now being encouraged. Market surveys show that transportation through pipelines is significantly more cost effective incomparison to transportation by railways and roads.• Indian players are globally cost effective and competitiveThe cost of manufacturing is comparatively lower in India due to low labour and power cost as compared to the developedcountries.• Indian companies have won accreditations from major oil and gas companies across the GlobeSome of the Indian companies have won the accreditations from major oil & gas giants across the globe which gives a potentialstrength to the players to get orders.• Positive flow of orders for Indian pipe companiesThe Indian pipe companies are continuously getting orders across the globe based on its quality and timely delivery.Weaknesses• Working capital-intensive industry as projects are of long duration in terms of execution. Average execution period for anorder is about 9-12 months.• Higher dependence on government spending for pipeline network development.• The large number of unorganized players leading to tough competition.Opportunities• Low pipeline penetration in India compared to developed nations provides a huge opportunity in the domestic market.• Government thrust on infrastructure development, irrigation & water supply leading to the boom in the pipe demand.• Rising oil and gas exploration activities in difficult and distant locations provides an opportunity for pipe laying across thefinds for transporting the oil & gas to the refineries and consumers.• City gas pipe projects provide an opportunity in the domestic market.• Replacement of old pipelines in USA.Threats/ Risks• Volatility in Steel Prices• Global Economic Environment• Crude oil prices• Regulations affecting the pipe industry• Ability to acquire raw materials at reasonable costs• Foreign exchange fluctuations33