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Latha Venkatraman

Mumbai , Sept. 21

FIRMING prices of crude oil has hurt a large number of industrial sectors, but PSL Ltd, a steel pipe manufacturer, is at an advantage when crude oil price hardens.

The company is expected to benefit from a surge in pipeline contracts that have become a reality in the backdrop of rising crude prices.

"We are bullish. This year the international market is active in pipeline contracts," said Mr Ashok Punj, Managing Director, PSL Ltd. The upward movement of crude prices has driven refining margins up prompting international companies to make investments in pipe laying.

"The oil and gas pipeline market would remain buoyant as long as crude price trades above the levels of $45-50 per barrel,'' Mr Punj said. At present, crude oil prices are ruling at around $67 per barrel.

The company is sitting on an order book of around Rs 1,000 crore, both domestic and overseas projects to be implemented over the next six months. "At any given time we have outstanding orders to the tune of Rs 1,000 crore for a six-month period. We are comfortable with this order book and do not want to take on any projects beyond our capacity," Mr Punj said.

Bags $55.5 m order from Qatar

The company today announced that it has bagged a $55.5-million from the Qatar Government's Dolphin Pipeline Project. This order, according to Mr Punj, is representative of what is in store for Indian pipe manufacturers. With crude oil prices ruling high, several onshore and offshore pipeline projects are expected to be implemented.

The impact of this deal would be felt on PSL's book during the second half of the fiscal.

PSL Ltd had recently raised around Rs 250-300 crore through a foreign currency convertible bonds and domestic debt to fund its capacity expansions.

The softening of steel prices in the first six months of the current fiscal also augurs well for PSL Ltd. "Though steel prices are firming up now, the declines over the last six months have helped us," Mr Punj said. Profit margins, which were under severe pressure in the preceding 18 months, are expected to edge up. Steel accounts for 60-70 per cent of input costs. "If steel prices do not turn volatile our margins could improve further,'' he said.

Shares of PSL have been on an upward move, gaining 15 per cent in the last one month. On Wednesday, the stock closed at Rs 214.10 on the BSE.

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