Hello Sir,

Hope you are doing well.

Recently, we came across Maharashtra Seamless Ltd. It's one of the largest makers of seamless pipes in India which primarily get used in oil & gas sector.

On the first look, the numbers for the company look interesting with good growth since FY 16.

The valuations also look low and what's interesting is that Promoters have been increasing their stake in the company.

To understand the company better, we have shared notes from the Q3 FY 23 con-call of the company:


Before that, a few days back we released our New Stock Recommendation for Alpha and Alpha + Members

It's a minerals processing company, largest in its segment, has captive raw material sources, grown PAT by ~300% in the last few years, de-leveraging balance sheet, 2nd generation promoters and available at around ~7 times post-tax earnings

You can get it along with other recommendations, by subscribing HERE


Maharashtra Seamless - Notes from Q3 FY 23 con-call

General Points

  • We have had another good quarter where margins have been very good and enabled us to maintain absolute EBITDA despite taking a maintenance shutdown in one of our Seamless pipe mills
  • This shutdown was targeted for the first quarter of FY24, but in view of our large order book, it was taken in the third quarter of FY23
  • We expect production volume in this mill to improve by 10%, and this increase will be immediately apparent in the fourth quarter of FY23
  • We are set to meet our EBITDA guidance given at the start of the year as margins have remained firm throughout the year, and our order book remains strong. We also have good visibility of orders for next quarter as well
  • In the fourth quarter, we expect good level of production, because we have undertaken refurbishment activities and maintenance activities in three of our mills in the past three quarters
  • More than 80% of the EBITDA is generated through the Seamless segment
  • On the point of value creation for shareholders, we have completed the bonus issue in December, and in the next Board meeting, we will come out with a dividend policy

Value added products

  • Drill pipe, this is a high value-added product where we benefit more than the regular pipes because of more value addition and more margins
  • Premium connections - So, there we are talking of a license agreement with JFE premium connections, and they have audited the mill. And they are very happy with the facilities, and they are doing the final stage for signing the agreement and commencing operations

Margins visibility

  • More or less the margins are consistent, and the steel price has corrected slightly towards the lower side. So, that might give us some additional margin, and if we do value-added products, like we just mentioned, premium connections and drill pipe, so that will add to our overall margins
  • I think in export, if we are targeting more exports, then, actually, overall contribution will be higher, because there we can get higher realizations

Order book

  • In Maharashtra Seamless, you have an order book in the Seamless segment of 1660 crores, and in United Seamless, you have an order book of 122 crores
  • We have also received orders for value addition products, especially drill pipes in Maharashtra Seamless
  • In terms of general visibility of orders, we expect orders to remain strong, because rig count have not declined. They remain consistent, and strategic petroleum reserve in the US continues to be at an all-time low. Therefore, crude is expected to remain strong and so will our order book
  • In the domestic segment, ONGC has a demand of 1 lakh tons every year, additional demand of 1 lakh tons every year which is regular
  • And even in our current order book, out of the total Seamless orders of Maharashtra Seamless of 1660 crores, 541 crores is from ONGC and Oil India. These orders will be executed over the next 4, 4.5 months, and we expect orders to get replenished and the strong position to continue both in United Seamless and Maharashtra Seamless

Export opportunity

  • Canada OCTG, the oil and gas sector has opened up again, and line pipe we were doing earlier also. So, the market in Canada and USA combined is significant volume where there is no shortfall as such
  • We still have our eyes open for orders in Middle East, North Africa and South America, but this is may not be essential, because USA and Canada is sufficient
  • In the recent past, the Canadian Market was a little under investigation for duties. Now it has been crystallized. So, the Canada market is once again open to us. We want to export more than what we did in the past

CAPEX plan

  • The total capital expenditure that we are targeting is 852 crores, and this will be entirely funded from internal accruals
  • Two projects have been given priority - The heat treatment and finishing line at United Seamless so that we are immediately able to double production at United Seamless and Cold Drawn pipes, which we want to expand in Maharashtra Seamless
  • We are also targeting setting up an OCTG line and Billet preheating surface in next financial year as demand for Seamless products is expected to remain consistent

Capacity Utilization

  • Despite taking preventive maintenance shutdowns in two seamless pipe mills in the past three quarters, we have achieved 69% in Maharashtra Seamless and 68% in Maharashtra Seamless ERW segment in three quarters

Balance sheet

  • In the third quarter of FY23, we have also undertaken prepayment of long-term debt of 315 crores, thereby bringing down our interest costs substantially
  • ICDs continue to reduce gradually as was committed. Currently, they stand at 95 crores, and we expect ICDs to be fully realized by next year March
  • Our cash balances have improved. We have reached a level of 640 crores as total liquid investments of Maharashtra Seamless, and our net debt is minus 469 crores after prepayment of debt of 315 crores
  • Corporate guarantee and SBLCs continue to reduce as was committed, and we expect them to be fully discharged by September of 2024

Promoter holding

  • Promoters continue to increase their holding in the company


  • FY 23 - regarding EBITDA, we had given a guidance of 895 crores, and out of that we have completed 75% of that in the first three quarters. So, right now, actually, we have done more than that. We have done around 85% of guidance. So, I think, we will probably end up closer to 1,000 crores than 900 crores, which will be evident in due course



Disclaimer: This is not a recommendation to buy/sell Maharashtra Seamless. The securities quoted are for illustration only and are not recommendatory.


Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/


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