Exploring The Pipe Chance

B.K. Goenka made the right move when, in 1995, he forayed into large-diameter pipe manufacturing. Demand surged as India opened up its oil and gas industry to the private sector. "Besides, existing infrastructure of rail and road in India was inadequate, more expensive, and had an element of hazard," he says. Welspun Corp, of which Goenka is the promoter, is now one of the world's biggest large-diameter steel pipe manufacturing companies.

Delivering pipes for some of the world's most difficult projects, the company rode the surge in oil exploration activity during 2005-08 and saw its top line grow an average 39 per cent — from Rs 1,911.77 crore in 2005-06 to Rs 6,905.84 crore in FY2009-10 — making its mark as the fifth super heavyweight company. Eighty per cent of its revenue (Rs 8,000 crore in FY2010-11) is expected from exports.

The company has also played its cards smartly. While cheap labour and handling costs in India gave it an edge over its international peers, it also set up a pipe mill in the US and acquired a mill in Saudi Arabia.

The economic slowdown of 2008 and the rising US protectionism knocked down demand somewhat. The challenge now is to manage volatile raw material prices and forex. Entry of new overseas players is also a challenge. However, as per Simdex, which provides data on stainless steel tube and pipe manufacturers, total pipe requirement globally over the next four years is worth about $123 billion. That should keep Welspun firmly on the growth wagon.

(This story was published in Businessworld Issue Dated 23-05-2011)