The Hindu Business Line : Maharashtra Seamless proves it is ahead of peers

Maharashtra Seamless’s recent order win worth Rs 757 crore from ONGC for the supply of seamless casing pipes is likely to provide a significant thrust to its revenues.

Its order book is now pegged at Rs 1,370 crore (roughly 0.9 times its FY08 revenues), the highest in a year. But what holds considerable significance is that Maharashtra Seamless (MSL) has procured this order at a time when some of its peers are facing a slowdown in demand.

The fact that this is a repeat order from ONGC, for whom MSL has previously executed many orders, also reflects well on MSL’s execution skills.

Immediate gains

A good part of this order may get reflected in the company’s revenues this year itself as, under the contract, the order is to commence immediately. The entire revenues, however, may take over 15 months to accrue.

While details of the average realisation of pipes for this order were not available, it is less likely to face any pressure on the margins front. This is because MSL had already procured material for a significant portion of its orders. And even if (given the size of this order) its raw material inventory falls short of the requirement, it is unlikely to affect its margins negatively as the prevailing soft steel prices could still help it maintain its margins.

That said, the two rounds of price hikes carried out by MSL so far this year may also help it sustain its margins.

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