Welspun Corp, the world’s largest welded pipeline manufacturing firm and the flagship of Welspun group, is facing some tough times. Over the past one year, while the benchmark Sensex has gained 19%, the stock has headed south — falling 22%.
Over the past five financial years, profits of Welspun Corp have declined from Rs. 140 crore in FY13 to Rs. 26 crore in FY17. Besides, the firm was also slapped with a tax demand notice of Rs.100 crore regarding its manufacturing unit in Anjar, Gujarat. The company, chaired by Balkrishan Goenka has had to bear the brunt of a slowdown in its overseas business, though its domestic operations continue to be stable. The company has seen delays in large overseas projects. It is seeing traction in India though, especially in the energy and water business. The management believes it can be more aggressive in terms of pricing in the domestic market besides ramping up volumes. Based on its net sales in the domestic market, Welspun Corp enjoys a market share of 16%.
Not surprising that for the first time in the current year, promoter entity MGN Agro Properties bought 60 lakh shares worth Rs. 50 crore in a bulk deal at Rs. 82.89 per share. After this transaction, MGN Agro Properties’ holding in the firm stood at 2.26%. Since April 25, when the deal took place, the share price has tanked by 2%. Incidentally, the promoters have increased their overall holding from 34.87% in FY13 to 45.99% as of March 2017.
The other institutional investors in the stock include Life Insurance Corporation of India, which holds a substantial 5.4%, followed by foreign portfolio investors who collectively hold 4.35%. Among domestic mutual fund houses, only DSP Blackrock Micro Cap Fund owns more than 1% holding in the company according to exchange disclosures.
Against the backdrop of a growing need for natural gas as a source of energy and the need to rehabilitate the existing infrastructure, the global market for a large diameter pipe industry is projected to reach 27 million tonne by 2022. From a long-term perspective, analysts believe Welspun stands to gain, but investors may not be ready to overcome the short-term pain.
Despite the company's volatile profitability, it seems the promoters are more bullish about the future than the investors.