Scoda Tubes Ltd. IPO: Key Details

Scoda Tubes

• Scoda Tubes is coming out with a 100% book building; initial public offering (IPO) of 1,69,23,000 shares of Rs 10 each in a price band Rs 130-140 per equity share.
• Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
• The issue will open for subscription on May 28, 2025 and will close on May 30, 2025.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 10 and is priced 13.00 times of its face value on the lower side and 14.00 times on the higher side.
• Book running lead manager to the issue is Monarch Networth Capital.
• Compliance Officer for the issue is Nishita Sanghvi.

Profile of the company

Scoda Tubes is a stainless-steel tubes and pipes manufacturer based in India having over 14 years of experience. The company’s products are broadly categorised into: (i) seamless tubes/pipes; and (ii) welded tubes and pipes, under five (5) product lines, namely, (i) stainless steel seamless pipes; (ii) stainless steel seamless tubes; (iii) stainless steel seamless “U” tubes; (iv) stainless steel instrumentation tubes; and (v) stainless steel welded tubes and “U” tubes (“Products” or “Stainless Steel Products”). Seamless pipes are pipes without a seam (end joints) and are manufactured using Round Bars whereas welded pipes are manufactured by welding the flat steel strips into a round / circular shape.

The company markets its products under the brand, “Scoda Tubes”. The company’s Products are used by a diverse range of customers like engineering companies, EPC and industrial companies engaged in Oil and Gas, Chemicals, Fertilisers, Power, Pharmaceuticals, Automotive, Railways and Transportation sectors. In addition, it operates a hot piercing mill for the production of mother hollow, which is the principal raw material for its stainless-steel seamless products. Currently, its hot piercing mill has a production capacity of 20,000 MT per annum. Its ability to produce its principal raw material enables it to achieve backward integration of its seamless products’ processes, allowing it to control its production costs and reduce reliance on suppliers. Currently, any quantities of mother hollow in excess of its captive consumption are sold in the open market. In addition to its manufacturing business of seamless tubes/pipes and welded tubes and pipes, it also generates revenue from sale of services which consists of revenue earned from job work services like annealing, straightening, pickling and marking provided to other customers.

It has one manufacturing plant which is strategically located at Ahmedabad-Mehsana Highway, Rajpur, Kadi, Mehsana, Gujarat (Manufacturing Facility) in close proximity of around 360 kilometres from the Mundra port, which serves as a key port for exports, and is located 23 kilometres from Inland Container Depot, ensuring sound access and connectivity, and aiding it in reducing its logistics costs. Its Manufacturing Facility utilizes a plot of land measuring 21,199 sq. mtrs. and has separate seamless and welded divisions with product-specific equipment and machineries, including hot piercing mill, pilger mills, expanding machine, cold drawing lines, bright annealing furnace, eddy current testing machine, hydro testing machine, Spectro testing machine, tensile testing machine TIG/MIG welded tube mill, etc.

Proceed is being used for:

• Capital expenditure towards expanding production capacity of seamless and welded tubes and pipes
• Funding the part incremental working capital requirements of the company
• General corporate purposes

Industry Overview

India is a prominent producer of stainless steel. The domestic stainless-steel industry has a healthy mix of large and mid-sized corporates, including public sector and micro, small and medium enterprises (MSMEs), across the country. Large players that produce a wide range of stainless-steel long and flat products. MSMEs majorly have induction-furnace facilities and are primarily in the segment of ‘patta’, which is a narrow strip of chromium-manganese stainless steel with less than 1% nickel. This industry segment is mainly focused on kitchenware and is highly fragmented, comprising small-scale players, generally located in the northern and western regions of India. The Indian stainless-steel industry is fully globalised, with large imports and exports of major raw materials and end products, and with end-product prices driven by both raw material prices and international prices of stainless steel.

Domestic stainless-steel production grew from 2.3 million tonnes in fiscal 2020 to 3.3 million tonnes in fiscal 2024, clocking a CAGR of about 10%. During this period, production of stainless-steel flat products logged a CAGR of about 7% and that of stainless-steel long products, a CAGR of about 18%. India’s stainless-steel production volume remained range bound in fiscal 2021 owing to subdued domestic demand. However, in fiscal 2022, to cater to pent-up demand, production volume surged 24% on-year to 2.8 million tonnes. Domestic production volume increased 20% on-year in fiscal 2024 due to the government’s strong emphasis on localised manufacturing and higher domestic demand for stainless steel.

Stainless steel (in flat or long form), which is the primary raw material in the manufacturing of stainless-steel pipes and tubes, consumes metals like nickel and chromium for its production. The prices of these metals are derived from international commodity exchanges, and hence are volatile. This directly affects the production and inventory related cost of stainless steel and indirectly affects the cost of manufacturing stainless steel pipes and tubes. As a result, there is a risk that small-scale stainless-steel pipe producers temporarily or permanently shut down their stainless-steel pipe production operations. Consequently, this could create a demand supply balance and force the end use industries to opt for substitute materials.

Pros and strengths

Specialised production of Stainless-Steel tubes and pipes: The company is a tubes and pipes manufacturer, specialising in the production of seamless and welded products in a single metal category, i.e., stainless steel. Since its inception, the company has been catering to customers (both domestic and international) in only one metal segment, as a result, over the years it has built expertise in terms of the production process, inventory management and sale of products in the stainless-steel tubes and pipes segment, as well as the ability to accurately assess and respond to customer preferences in this segment. With its expertise in this segment, it is able to offer various specialised stainless-steel tubes and pipes products in terms of length, thickness and grades as required or preferred by its customers.

Customer diversification & international presence: The company’s Products cater to diversified industrial companies engaged in Oil and Gas, Chemicals, Fertilisers, Power, Pharmaceuticals, Automotive, Railways and Transportation sectors, both domestically and internationally. In the domestic market, it sells its products to stockists, engineering, EPC and industrial companies. In particular, it has a stockist based in Maharashtra authorised to exclusively sell its products in India. In International markets, it supplies its Products through stockist. In the United States, it has a stockist authorised to exclusively sell its products in United States market.

Extensive and effective quality control: All its Products adhere to national and international standards and go through extensive quality control procedures by trained and experienced personnel. As on March 31, 2025, it has a quality control team comprising of 14 dedicated personnel, working to ensure that it adopts and maintains high quality standards at all its manufacturing stages, from raw materials to the production of the final Products. Its raw materials and final products undergo rigorous quality control checks and are subject to various mandatory tests, including positive material identification test, spectrochemical analysis, eddy-current tests, ultrasonic testing and dye penetration testing.

Strategic location of manufacturing facility: The company’s current manufacturing facility is strategically located to enable easy and seamless access to key ports and junctions for efficient supply of Products. Its manufacturing facility is in close proximity, of around 360 kilometres from the Mundra port, which is a key port for exports, and Inland Container Depot which is located 23 kilometres away, ensuring sound access and connectivity aiding it in reducing its logistics costs. Currently, the company has 18 production lines for its seamless products and 2 production lines for its welded products. Its own in-house hot piercing mill enables it to achieve backward integration thereby captively producing raw materials at a lower cost and reducing reliance on suppliers. It enables it to realise efficiencies in production, deliver quality benefits and ideally positions it to fulfil the ever-growing demand for the raw material needed for the production of stainless-steel seamless products.

Risks and concerns

Maximum revenue comes from top 10 customers: For the nine months period ended December 31, 2024 and in Fiscal 2024, Fiscal 2023 and Fiscal 2022, the company derived 57.78%, 47.77%, 45.04% and 39.76%, respectively, of its revenue from operations from the sale of its stainless-steel tubes and pipes to its top ten customers. Its single largest customer contributed 18.50%, 16.26%, 16.33% and 6.70% of its revenue from operations for the nine months period ended December 31, 2024 and in Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively. Any loss of its single largest customer or any number of its top ten customers or a reduction in purchases by any of them could adversely affect its business, results of operations and financial conditions.

Significant revenue from operations is derived in part from its exports: The company has exported its products to 11 countries. Its largest export jurisdictions for the nine months period ended December 31, 2024 were Germany, United States, Spain, Netherlands Switzerland and others. The company has garnered 30.52%, 30.84%, and 20.81% of its total revenue from operation from exports in FY22, FY23 and FY24 respectively. Due to heightened competition in international trade, foreign countries may from time to time impose anti-dumping or countervailing measures or other trade restrictions, such as imposition of duties on stainless-steel tubes and pipes exported from India so as to protect their own industries. There is no assurance that the tax policies of foreign countries will not change in the future. If such change occurs and results in the increase in tax liabilities on it or on its overseas customers, its business, results of operations and financial condition may be adversely affected.

Geographical constrain: The company currently operates only one Manufacturing Facility near Mehsana, Gujarat, India for manufacturing all of its Products. The company’s business will continue to be dependent upon its ability to manage and continue to maintain the operations of its Manufacturing Facility, which is subject to various operating risks, including those beyond its control. On the operating level, it may experience the malfunction or failure of its machinery, its equipment, its automation systems, its IT systems or any other part of its manufacturing processes or systems (together, its Manufacturing Assets) or power supply or processes, industrial accidents or the underperformance of manufacturing operations.

Stiff competition from domestic and international players: Although the stainless-steel tubes and pipes industry provides for significant entry barriers due to the high capital requirements, it faces increasing competition from its existing and potential competitors in India and in overseas markets. Competition in its business is significantly based on pricing, extent and efficiency of the distribution network, relationships with customers particularly in the engineering industry, product quality, delivery time, payment terms and compliance with government regulation, including environmental regulation. The company faces pricing pressures from domestic and international steel / stainless-steel tubes and pipes companies that may be able to produce stainless-steel tubes and pipes at lower costs and, consequently, may be able to offer their products at lower prices. It is unable to assure that it will be able to meet the pricing pressures imposed by such competitors, which would adversely affect its business, results of operations and financial condition.

Outlook

Scoda Tubes is a manufacturer of stainless-steel tubes and pipes. The company's products are broadly categorized into two types: (i) seamless tubes/pipes and (ii) welded tubes/pipes. The company has an authorized stockist in Maharashtra handles domestic sales. It has a dedicated stockist exclusively distributes products. On the concern side, the company’s business is primarily concentrated with its top 10 customers. Any loss of its single largest customer or any number of its top ten customers or a reduction in purchases by any of them could adversely affect its business, results of operations and financial conditions. Moreover, the company’s business involves prolonged working capital days and an extended cash conversion cycle. If it is unable to anticipate and respond to changes in market demands and customer preferences in a timely and efficient manner, its business, results of operations, cash flows and financial condition may be adversely affected.

The issue has been offering 1,69,23,000 shares in a price band of Rs 130-140 per equity share. The aggregate size of the offer is around Rs 220.00 crore to Rs 236.92 crore based on lower and upper price band respectively. Minimum application is to be made for 100 shares and in multiples thereon, thereafter. On performance front, the company’s revenue from operations increased by 31.05% from Rs 3,051.28 million in Fiscal 2023 to Rs 3,998.61 million in Fiscal 2024, primarily due to an increase in the sale of products by 30.48%. The company’s profit for the year in Fiscal 2024 was Rs 183.00 million compared to a profit for the year of Rs 103.36 million in Fiscal 2023 which is an increase by 77.05%. In comparison of total income, Profit for the Year increased from 3.36% of total income in fiscal 2023 to 4.55% of total income in fiscal 2024. 

In light of India’s decision in 2022 to impose anti-dumping duty on stainless steel seamless tubes and pipes imports from China for five years would also present an opportunity to domestic stainless-steel tubes and pipes manufacturing industry. This policy has historically resulted in increase in the capacity utilization rates of domestic stainless-steel tubes and pipes manufacturers, is expected to continue to provide benefits to the domestic players in terms of operational efficiencies and margins. In light of the anticipated growth of the stainless-steel tubes and pipes industry in India, it intends to expand its production capacities through acquisition of land and procurement of additional machines. Further, it has been working on expanding its production lines by purchasing and developing more land.