Management

• Suresh Kumar Goyal (Chairman and Executive Director)
• Vikas Kumar Goyal (Managing Director and Chief Executive Officer)
• Bhavesh Khetan (Executive Director and Chief Operating Officer)
• Nidhi Thakkar (Independent Director)
• Manoj Khetan (Independent Director)
• Kishore Kumar Singh (Independent Director)
• Anu Garg (Chief Financial Officer)

Use of Proceeds

The total issue size is Rs.540 cr, which comprises fresh issue of Rs.440 cr and offer for sale of Rs.100 cr. The company intends to utilize a portion of the Net Proceeds towards Repayment/prepayment, in full or in part, of certain outstanding borrowings availed by the Company (Rs.390 cr) and rest for general corporate purposes.

Competitive Strengths

A single location backward integrated facility in India The company’s fully integrated manufacturing operations encompass production of intermediate products, namely sponge iron, mild steel blooms/slabs, HR coils, GP coils and CR Coils which are used primarily for captive consumption for manufacturing the company’s final products, namely ERW black pipes and tubes (hollow section), CRFH Pipes, Corten Steel Pipes, GP pipes, GI pipes, steel door frames. The company has also recently started manufacturing stainless steel such as blooms/slabs and HR coil, SS HRAP coils and CR Coils.

As a backward integrated manufacturer of ERW black steel pipes and structural tubes and SS coils, the company also benefits from utilizing mild steel as well as stainless steel scrap generated across its pipe and tube mill, hot rolling mill, cold rolling mill, steel melt divisions to manufacture blooms/ slabs. The company has consistently achieved high EBIDTA margins, due to its focused approach on integrated operations.

Strategically located manufacturing plants resulting in operational efficiencies The company’s manufacturing facilities are located in proximity to its key raw material suppliers. The company sources its iron ore requirements from a “Navratna” PSU’s mines, known for producing highest grade of iron ore. As per CRISIL, the enables the company to access directly reduced calibrated lump ore (“DRCLO”) grade iron ore as raw material for its products. Further, the company meets is coal requirements from a “Maharatna” PSU’s mines, which are located merely 250 kilometres from the Sarora (Tilda) Facility. This strategic proximity not only optimizes the Company’s logistics but also ensures a steady and efficient supply chain.

Well-positioned to take advantage of the growing demand for quality ERW steel pipes and tubes Steel pipes find applications in several industries and sectors. various projects and schemes initiated by the central government and state governments have been driving the demand for steel pipes in India. Government led schemes such as Jal Jeevan Mission, Har Ghar Nal Yojana, among others, are expected to continue to drive the steel pipes’ demand over the next few years. The demand for domestic steel pipes and tubes is projected to increase to 18.50-20.50 MTPA in FY 2029 at a 8-9% CAGR during the period between FY 2025 and FY 2029 on a high base.

The demand for steel pipes and tubes will also be getting the push from the potential substitution of conventional construction materials, such as concrete cement and conventional steel. Steel tubes are also finding opportunities in the construction of other infrastructure projects such as new airports, high-rise complexes, warehouses, data centers, water tanks and hospitals. The company believes that as an end-to-end ERW steel pipes and structural tubes manufacturer with in-house competence in procurement of raw materials, production, marketing and sales, the company is well-positioned to capitalize on the growth in the sector.

Strong process innovation and execution capabilities allowing the company to produce value-added products The company commenced its operations in 2018 with the manufacturing of sponge iron and have since then expanded the product offerings to include value added and customized pipe and tube products. The company’s innovation journey began with the manufacturing of narrow-width HR coils. As per CRISIL, the company’s narrow-width HR coil manufacturing capabilities, which are at par with those of primary manufacturers of HR coils, leads to reduced capital expenditure and costs during its pipe manufacturing process and reduce dependency on external HR coil suppliers. Other key process innovation techniques adopted by the company include the following:

• Manufacture of Stainless Steel through argon oxygen decarburization (“AOD”) process: This process consumes lower raw material and gives higher metallic yields than the other equivalent processes. Thus, better quality of product at a low cost and a minimum raw material consumption provides a degree of competitiveness edge to the Company.
• Manufacture of alloy steel through ladle refining process: This process allows the company to manufacture quality steel products (alloy steel) through induction furnace route.
• WHRB based power plant: Use of this process for power generation results in energy conservation as no fuel is involved.
• AFBC based power plant: the AFBC boiler installed by the Company is suitable for combustion of relatively low quality fuel (such as Dolochar) which is generated as a by-product during the sponge iron manufacturing process. This results in the reduction of the waste generated and a relatively cost-effective method for power generation.

Peer Comparison

Key Risks & Concerns

Increase in key raw material costs: An increase in the cost of or a shortfall in the availability of key raw materials such as iron ore, coal, iron ore pellets, sponge iron and mild steel scrap from suppliers could have a material adverse effect on their business, results of operations, profitability and margins, cash flows and financial condition.

Product concentration: The company derives a substantial portion of revenue from the sale of ERW pipes and tubes and any loss of sales due to reduction in demand for their products could adversely affect business, financial condition, results of operations and cash flows. Further, inability to successfully diversify product offerings may adversely affect its growth and negatively impacts profitability.

Heightened competitive intensity: SSTL faces substantial competition from other structural steel tubes, pipes and steel producers. Their inability to compete effectively could result in the loss of customers and market share, which may affect their business.

Cyclical industry The steel industry is cyclical in nature. The pricing in the steel industry is subject to market demand, volatility and economic conditions. Fluctuations in industry dynamics including the steel prices may materially and adversely affect their business, results of operations, profitability and margins, cash flows and financial condition.

Outlook and Valuation

Sambhv Steel Tubes Ltd (SSTL) is one of the key manufacturers of electric resistance welded (“ERW”) steel pipes and structural tubes (hollow section) in India in terms of installed capacity as of March 31, 2024. The company one of the two players in India manufacturing ERW steel pipes and tubes (along with hollow section pipes and tubes) using narrow-width HR coil, as of December 31, 2024. Sambhv Steel Tubes Limited presents a fundamentally strong and operationally integrated business model, supported by strategic raw material sourcing, robust distribution, and a growing focus on high-margin value-added products. Its backward integration offers cost advantages and supply chain control, positioning the company well for scalable growth.

Sambhv Steel Tubes stands out as one of the few players in India with a backward integration facility, enabling it to offer a diverse portfolio of premium products in a cost-efficient manner. Between FY24–FY25, the company enhanced its manufacturing capabilities to include Stainless Steel (SS) Bloom, SS Hot Rolled Coils, SS Cold Rolled Coils and SS HRAP Coils—products known for their high margin potential. Additionally, it commenced production of Pre-Galvanised (GP) pipes and GP pipes, further expanding its value-added offerings. The proceeds from the issue will be used primarily to reduce debt, thereby lowering interest costs and strengthening the balance sheet. With ramp up in capacity utilization of CR coils (SS) and Pre-galvanized (GP) pipes expected over the next 2-4 quarters, margins are likely to expand. Strong industry tailwinds, robust backward integration and a growing portfolio of value-added products, the company is well-positioned for sustained growth. The company is valued at an annualized EV/EBITDA multiple of 18.2x and a P/E multiple of 44.5x for 9MFY25, based on the upper price band and post issue capital. We recommend a SUBSCRIBE rating for long-term investors, considering Sambhv’s compelling fundamentals, cost advantages, and sectoral tailwinds.