Venus Pipes- Pipes & Tubes

ABOUT COMPANY
Venus Pipes and Tubes Ltd is one of the growing stainless steel pipes and tubes manufacturer and exporter which was incorporated in 2015 by 4 friends of different background from Kutch area. They produce in two broad categories: (i) seamless tubes/pipes and (ii) welded tubes/pipes, under which they are currently manufacturing five product lines, namely, (i) stainless steel high precision & heat exchanger tubes (ii) stainless steel hydraulic & instrumentation tubes (iii) stainless steel seamless pipes (iv) stainless steel welded pipes and (v) stainless steel box pipes. The Company have one manufacturing plant which is strategically located at Bhuj-Bhachau highway, Dhaneti (Kutch, Gujarat) in close proximity, around 55 kilometres and 75 from the ports of Kandla and Mundra, respectively, that helps the company in reducing their logistic costs on procurement of raw materials and imports and export of their products.

HISTORY
2015- Incorporation of our Company
2015 -Established manufacturing plant at Dhaneti, Bhuj-Bhachau highway, close to Mundar and Kandla Ports.
2015- Commenced the production of stainless steel welded pipes, stainless steel high precision & heat exchanger tubes, stainless steel hydraulic & instrumentation tubes and stainless steel box pipes at our manufacturing plant located at Dhaneti, Kutch, Gujarat with capacity of 200 MT per month.
2017 -Addition of stainless steel seamless pipes to production line.
2017 -Started exporting stainless steel welded and stainless steel seamless pipes to countries in the European Union, Brazil, UK, Israel etc.
2021 -Conversion from a private limited company to public limited company.

INDUSTRY
Stainless Steel is a value-added product with high corrosion resistant properties. Higher levels of Chromium and additions of other alloy elements (Nickel, Chromium, etc.) enhance the corrosion resistance. Compared to traditional steel, stainless-steel has higher resistance to corrosion, superior aesthetic finish, low maintenance and higher life span these properties has made stainless steel a preferred metal for application in diverse sectors.
Global stainless-steel melt shop production grew by 10.6% to 56.3 Mn Tonnes in 2021 compared to ~50.9 Mn Tonnes in 2020 (Source: International Stainless-Steel Forum). In 2021, China with over 54% share in global SS production observed moderate 1.6% growth in 2021. India’s SS output was estimated to be 3.5 Mn Tonnes and is 3rd largest stainless-steel producer in the world.
The Indian stainless-steel sector, has a total manufacturing capacity of more than 5 Mn tons of stainless steel annually. Since 2011, stainless-steel production has increased at a CAGR of 7.8% per annum from ~2.16 Mn Tonnes in 2011 to 3.93 Mn Tonnes in 2019.
In India, 12% of the stainless steel is used in construction and infrastructure, 13% in automobiles, railways and transport (ART), 30 % in capital goods and 44% in durables and household utensils and 1% in others.
Despite being one of the largest producers as well as consumers of stainless steel, the per capita stainless steel consumption in India remains low. India’s per capital stainless steel consumption has increased from 1.2 kg in2010 to 2.5 kg in 2019, however, its consumption is comparatively much lower compared to the world average of 6 kg per capita, This low consumption pattern is an indication of the inherent opportunities existing in the sector.
Globally, the SS pipes and Tube industry was estimated to be valued at nearly USD 32.4 billion in 2019 contributing 23% share in global pipes& tubes industry. In coming years too, the SS pipe & tube is expected to observe a stable growth of 4% through 2025 with the total market size estimated to cross USD 40 billion.

KEY HIGHLIGHTS

• 165 cr IPO was fresh issue no promoter sale. IPO money is to be use in capex and backward integration.
• Margins have improved because they are directly suppling to B2B customers instead of stockiest.
• Have acquired lots of approval for direct supply to B2B customers in chemical, pharma & engineering field.
• Working capital intensive industry.
• Placed in Kutch Gujarat, near to Mundra port. All promoters are from Kutch area.
• For seamless pipes raw material (hollow pipes) is procured from overseas. For that company will be putting piercing plant for backward integration and will be using steel billets for raw material.
• TOP 10 customer constitute between 32%-44% of sale with on long term agreements.

PRODUCT & SEGMENTS
2 broad categories: (i) Seamless tubes/pipes (ii) welded tubes/pipes.
5 product lines, namely,
(i) Stainless steel high precision & heat exchanger tubes;
(ii) Stainless steel hydraulic & instrumentation tubes
(iii) Stainless steel seamless pipes
(iv) Stainless steel welded pipes
(v) Stainless steel box pipes

END USER
(i) Chemicals
(ii) Engineering
(iii) Fertilizers
(iv) Pharmaceuticals
(v) Power
(vi) Food processing
(vii) Paper
(viii) Oil and gas
(ix) Aerospace
Major contribution to top line in last 3 year were Chemical and Engineering contributing 85-92%.

RAW MATERIAL
The Company’s basic raw material includes SS coils and hollow pipes and they procure their raw materials based on market availability, pricing and quality through three main channels: (i) domestic suppliers such as steel manufacturers, stockists and traders (ii) international suppliers from China, Indonesia, Malaysia and Singapore and (iii) high sea purchases. The cost of materials consumed (including purchase of stock in trade and changes in inventory) by the company in their operations accounted for 82.09%, 84.53%, 88.29% and 85.58% of their revenue from operations for the nine-month period ended December 31, 2021 and Fiscals 2021, 2020 and 2019, respectively.

PLANT & CAPACITY
• Only one manufacturing plant at Dhaneti (Kutch) which is strategically located in proximity of Kandla & Mudra ports for enabling imports and exports.
• Facility on a land admeasuring 68,090 Sq. Mt.
• Surplus land of 45,690 Sq. Mt. available for proposed capacity expansion/integration.
• Total installed capacity of 10,800 MT per annum with approximate utilization of 90

COMPETITORS

CAPEX PLANS

Venus is also proposing to install an acid regeneration plant (ARP) wherein the consumption of acid in its manufacturing process will be reduced substantially which will help improve its operating profit margin (OPM).

MOAT
There is no moat in the company.

KEY MATRICS TO TRACK
Ebitda per ton. Q1 FY22 (9.35cr/2430 ton @ 90% utilization = 38477)- Q1Fy23 (14.47/ 2430 @ 90% utilization = 59547) growth in topline in Q123 is because of higher realization.

PROMOTERS

Jayantiram Motiram Choudhary, aged 38 years is the chairman, non-executive Director and one of the Promoters of our Company. He has been associated with our Company since its incorporation as a Director. He does not have any formal education degree. He has over ten (10) years of experience in the steel industry and over four (4) experience as a director of Accuracy Shipping Limited.

Arun Axaykumar Kothari, aged 44 years is the Promoter, managing Director and CFO of our Company. He has been associated with our Company since September 14, 2021 as a Director. He holds a bachelor’s degree in commerce from Rajasthan University and has been a qualified chartered accountant since 1998. He looks after and manages the entire accounting and financial operations of our Company and is responsible for setting processes, systems and procedures in place to control and streamline the financial and commercial transactions of the Company.

Megharam Sagramji Choudhary, aged 39 years is the Promoter and whole time Director of our Company. Being our Promoter, he has been associated with our Company since its incorporation. He has no formal education degree. He has over 15 years of experience in the stainless steel welded pipes and tubes industry. He is responsible for sales and marketing, customer relationship management and procurement and also looks after the HR activities of our Company.

Dhruv Mahendrakumar Patel, aged 36 years is the whole time Director and a Promoter of our Company. Being our Promoter, he has been associated with our Company since 2015. He holds a bachelor’s degree in engineering from University of Pune and a master’s degree in technology from CEPT University. He looks after production activities, streamlining of processes and procedures to facilitate smooth production process and enhanced productivity in the manufacturing process. He has over six (6) years of experience in the steel industry. He manages the entire production and also looks after the export of our Company.

GROWTH TRIGGERS
• Capacity expansion from 10800 MTPA to 25200 MTPA.
• Chinese government cancellation of export rebate in steel products. (54% India export was from China)
• Backward integration and cost optimization to improve margins . (Hollow pipes from SS round bar)
• Tap new geographies to increase export .

RISK
RELATED PARTY TRANSACTIONS
For the nine-month period ended December 31, 2021, Fiscal 2021, 2020 and 2019, the related party transactions accounted for approximately 6.01%, 11.61%, 23.84%, and 13.49% respectively .
CONTINGENT LIABILITY
Duty on import against Advance licenses for Export obligation 28.94 Cr.

WEAKNESS & THREATS

• Competition from other large and established competitors and unorganised players
• Products becoming obsolete due to a breakthrough in the development of technology or alternate products.
• Limited operating history in the highly competitive stainless steel pipes and tubes market.
• Volatility of pricing in the steel industry which will effect topline.
• Foreign currency exchange risks 24.8cr export and 37.2 cr purchase of raw material in FY22.
• May not yet be the supplier of first choice and not command goodwill and trust as they are new to the industry.
• Only one Manufacturing Facility and any adverse developments affecting this facility and the region could have an adverse effect on our business.
• Directors, Jayantiram Motiram Choudhary and Megharam Sagramji Choudhary do not have any formal educational qualification.
• Domestic revenue base is largely concentrated in Gujarat, Maharashtra and Telangana. In FY20-21 and FY21-22, Venus earned 93.81% and 90.59%, respectively, of its revenue from these three states collectively.
• Registered and corporate office, guest house, warehouse, godown and a portion of our factory are located on leased premises.
• 4366350 shares have been allotted in the ratio of 1:2 through Bonus basis on 21 sep 21 & 2122960 shares have been allotted at a premium of Rs.270 per share on preferential basis on 21 Oct 2021 before IPO.

STRENTHG, OPPOURTUNITY & THESIS.
• International certifications and product approvals,
• Specialised production of Stainless-Steel Pipes and Tubes,
• Multi-fold demand of Products- new product demand and replacement demand.
• Customer Diversification
• Capacity expansion from 10800 MTPA to 25200 MTPA.
• Backward integration.
• Tap new geographies to increase export .
• Increasing direct sales and management have guided for stockist to be around 20% in Fy25 from current level of 32%.

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Disclosures:- This is my personal view and i am not Sebi registered analyst & i am not invested, tracking the business. Please do your own work before investing.