The Hindu Business Line : Rise in domestic, export demand — PSL likely to continue strong topline growth

PSL Ltd, which is expected to double its turnover for the year ended March 2004, is likely to continue a robust topline growth on the back of a surge in domestic and export demand for steel pipes for oil, gas and water.

The company has been able to garner in more orders for the supply of API-grade pipes for gas transmission, oil supply and steel pipes for water primarily because it has been able to turn in the orders ahead of schedule.

PSL plans to increase its pipe manufacturing capacity by 30,000 tonnes to one million tonne per annum during the current fiscal. The additional capacities would be set up in two units — Kandla, Gujarat and Vishakapatnam — at a cost of Rs 50 crore, which will be mainly sourced through internal accruals.

Capacity additions over the last four to five years have helped the company to turn in orders ahead of schedule and thereby improve its top line growth. It announced this month that it had completed a Rs 122.85-crore project for Indian Oil Corporation in nine months, ahead of the scheduled time of 12 months.

During the March quarter, the company had received an order of $3.2 million for the supply of API-grade X60 pipes for a gas transmission pipeline to be laid in Bangladesh. It also bagged another order worth $198 million from Sudanese oil & gas company, Petrodar, for the Melut Basin Oil Development Project in Sudan. This project, one of the biggest single product supply order, is to be executed in the next 10 months. PSL's clients include ONGC, GAIL (India), HPCL, BPCL and IOC.

Even as the company has been able to grow its revenues twice over during the 2003-2004 fiscal, it has been under pressure on margins, thereby profitability. "Volatility in steel prices has put tremendous pressure on our margins,'' Mr Ashok Punj, Managing Director, PSL, said. The company had ended 2002-2003 with a net profit of Rs 14.9 crore on a turnover of Rs 392.26 crore.

Profit margins, which stood at five per cent during 2001-2002, fell to four per cent during 2002-2003. "We should be able to hold it at four per cent during 2003-2004,'' he said.

However, the firmness in steel prices had promoted PSL to build in the costs in the projects in the latter half of 2003-2004, especially for some of its large southern projects. "Steel prices have also reached a peak. We should, therefore, see some improvements in margins this fiscal,'' Mr Punj said.

This fiscal should also result in an increase in export revenue, as several overseas projects would be completed during this period. Currently, export contribution to turnover stands at five per cent.

Even as exports are likely to see a surge, domestic demand would remain buoyant. The upturn in the economy has resulted in several domestic pipe-laying projects coming through, especially in the area of water supply.