Investing in Scoda Tubes IPO? Here's What You Need to Know

Scoda Tubes, a maker of stainless steel tubes, is launching a Rs 220 crore IPO through a fresh issue of 1.57 crore shares. The issue opens on May 28 and closes on May 30, 2025. The company aims to capitalize on rising demand and expansion-led growth, with listing expected on June 4

About the Issue:  

Scoda Tubes is launching its maiden IPO via the book-building route, offering 1.57 crore fresh shares to raise Rs 220 crore at a price band of Rs 130–Rs 140 per share. The issue, open from May 28–30, 2025, has a face value of Rs 10, with a lot size of 100 shares. It represents 26.23 per cent of post-issue equity, and the shares will be listed on BSE and NSE. Monarch Networth Capital is the sole BRLM and syndicate member; MUFG Intime India Pvt. Ltd. is the registrar. Promoters earlier acquired shares at Rs 8.90–Rs 9.22 and issued a 30:1 bonus in July 2024.

See the issue details below.

Objects of the Issue

Company aims to raise funds to support its capacity expansion and strengthen liquidity. Proceeds will be used as follows:

• Rs 76.99 crore for capacity expansion of manufacturing seamless and welded tubes
• Rs 110 crore for incremental working capital
• Balance for general corporate purposes

Promoter

The company is promoted by Samarth Patel, Jagrutkumar Patel, Ravi Patel, Saurabh Patel, and Vipulkumar Patel, who collectively hold 90.04 per cent of the pre-issue equity share capital.

Company Profile

Incorporated in 2008, Scoda Tubes Limited is a prominent Indian manufacturer of stainless-steel tubes and pipes, backed by over 14 years of industry experience. The company specializes in both seamless and welded tube/pipes, which are further divided into five key product lines: stainless steel seamless pipes, seamless tubes, “U” shaped seamless tubes, instrumentation tubes, and welded tubes including “U” tubes. These products cater to a broad customer base across sectors such as oil and gas, chemicals, power, fertilizers, pharmaceuticals, automotive, railways, and transportation.

Scoda markets its entire product range under the brand name “Scoda Tubes Limited.” A significant aspect of its operations is its vertically integrated manufacturing model, highlighted by its in-house hot piercing mill with a capacity of 20,000 metric tonnes per annum. This facility produces “mother hollow,” the core raw material used in stainless steel seamless tubes and pipes, giving the company backward integration and allowing it to reduce production costs, ensure consistent quality, and limit dependence on third-party suppliers. Excess mother hollow, beyond internal requirements, is sold in the open market, contributing to additional revenue.

In addition to manufacturing, Scoda Tubes also provides job work services—such as annealing, straightening, pickling, and marking—which form a secondary stream of income. This service segment reinforces its position as a value-added service provider in the stainless-steel industry. As of March 31, 2025, the company employed 500 personnel, including 156 permanent staff, underlining its operational scale and workforce strength.

Industry Outlook

The global stainless-steel tubes and pipes market grew at a CAGR of 3 per cent from 2019 to 2023, while India's demand surged at 9 per cent CAGR from FY20 to FY24. Domestic demand is projected to reach 0.45–0.47 million tonnes by FY29, growing at 6–8 per cent CAGR. Growth drivers include infrastructure, oil & gas, auto, and pharma sectors, aided by initiatives like “Make in India”, PLI schemes, and anti-dumping duties. However, the sector faces challenges such as raw material price volatility and long working capital cycles.

Financials

Over the last three years, with revenue from operations rising from Rs 194.03 crore in FY22 to Rs 399.86 crore in FY24 and Rs 361.17 crore in the first nine months of FY25. EBITDA has grown proportionately, improving operating margins from 5 per cent in FY22 to 17 per cent in 9MFY25, indicating better cost control and scale benefits. Net profit surged from Rs 1.64 crore in FY22 to Rs 24.91 crore in 9MFY25, with PAT margins improving steadily from 0.84 per cent in FY22 to 6.9 per cent in 9MFY25. EPS also jumped from Rs 0.72 to Rs 6.08 during the same period. The company's return on net worth and capital employed reflect improving capital efficiency. However, rising receivables and inventory levels hint at working capital strain, with cash flow from operations still weak despite revenue growth. Debt levels remain high but the debt-equity ratio has improved to 1.41 in 9MFY25 from 3.19 in FY24, suggesting better balance sheet management post equity infusion. Capacity utilization in seamless tubes remains healthy at around 70-80 per cent, though welded products continue to suffer under-utilization. Overall, Scoda's financial trajectory is promising, but efficient working capital management and optimal capacity utilization will be key to sustaining profitability and scaling operations further.

(Source – Company’s RHP)

(Source – Company’s RHP)

(Source – Company’s RHP)

(Source – Company’s RHP)

(Source – Company’s RHP)

Peer Comparison

Scoda Tubes Limited holds a 5–7 per cent market share in the seamless segment and also operates in the welded segment, unlike peers such as Suraj and Welspun, which do not. While Scoda’s EBITDA margin of 14.70 per cent trails Venus and Ratnamani, it remains competitive. Its FY24 RoNW stands impressively at 28.77 per cent, higher than most peers except Welspun. However, Scoda's working capital cycle is slightly stretched due to higher inventory and receivable days. Despite this, it has maintained a robust profitability track record with consistent EPS growth and is favorably positioned in the niche seamless space, supported by backward integration and expansion plans.

(Source – Company’s RHP)

(Source – Company’s RHP)

(Source – Company’s RHP)

Analysis of Strength and Weakness

Strengths:
The company specializes in both welded and seamless stainless steel products, with a strong focus on a single-metal product line. This concentrated approach not only simplifies manufacturing and inventory management but also enhances operational efficiency across the board. With a sizable production capacity of 1,020 MTPA for welded pipes and 10,068 MTPA for seamless pipes with further planned expansion, the company benefits from economies of scale, helping it maintain competitive cost structures.

A key differentiator is its backward integration via a mother hollow piercing mill, commissioned in 2022 with a capacity of 20,992 MTPA. This rare facility in India allows Scoda to control raw material quality, reduce dependency on external suppliers, and improve margins while generating revenue from excess capacity sales.

Moreover, Scoda’s export footprint across the U.S., Germany, Italy, and France—and plans for expansion into Kuwait and the UAE—helps diversify its revenue base and reduce customer concentration risk.

Weaknesses:
Despite healthy topline growth, Scoda Tubes Ltd. faces several structural and financial challenges that cast doubt on its sustainability. Although revenue rose at a CAGR of 27.26 per cent from Rs 194.03 crore in FY22 to Rs 399.86 crore in FY24, with Rs 361.17 crore already achieved in 9MFY25, this growth is undermined by deteriorating financial efficiency. Receivables increased at a faster CAGR of 36.24 per cent, expanding from 18.21 per cent of sales in FY22 to 29.92 per cent in 9MFY25, indicating weaker collection efficiency or lenient credit terms that may strain liquidity. Cash flow from operations, while slightly positive at Rs 11.59 crore in 9MFY25, remains weak at just 3.21 per cent of sales.

The company also suffers from high customer concentration—58 per cent of revenue comes from its top 10 clients—making it vulnerable to order volatility. Its dependence on a few key stockists, including those in Maharashtra and the U.S., adds distribution risk, as any breakdown in these relationships could significantly impact performance.

Furthermore, it operates in cyclical sectors like engineering and EPC, increasing exposure to market downturns. The welded pipes segment, in particular, has seen severe underutilization—plummeting from 45.39 per cent in FY22 to just 3.82 per cent in FY24—while the backward integration benefits are confined to the seamless pipe segment.

Its modest market share of 5–7 per cent in a highly competitive industry and stockist-driven model present scalability risks. Finally, the planned use of IPO proceeds primarily for working capital highlights an ongoing dependency on external funding, raising concerns given the already debt-heavy balance sheet. Together, these factors raise red flags about the company’s financial resilience and operational balance.

Valuation and Outlook

Scoda Tubes Ltd. (STL) is gearing up to capitalise on the rising demand for stainless-steel tubes and pipes, driven by robust growth in infrastructure, construction, automotive, oil & gas, and chemical sectors. The company’s backward integration through a mother hollow plant has already enhanced margins and operating efficiency—evident from the sharp improvement in ROE and ROCE from 4.7 per cent and 5.8 per cent in FY22 to 28.8 per cent and 15.9 per cent in FY24. The upcoming expansion aims to replicate this margin-enhancing strategy in both seamless and welded pipe segments, especially addressing constraints posed by the currently underutilized 1,020 MTPA welded pipe capacity. These efforts are expected to improve product diversification, enable participation in larger tenders, and support long-term growth.

However, STL’s valuations raise caution. At the upper price band of Rs 140, the stock is valued at a P/E of 45.8x and EV/EBITDA of 16.6x—significantly higher than the peer median P/E of 26.3x and EV/EBITDA of 12.73x. While peers like Ratnamani and Venus trade at higher multiples, the comparability is limited due to differences in scale, business model, and financial strength. Moreover, STL's operating cash flows have remained negative for FY22–FY24, a red flag for a capital-intensive firm. Although the debt-to-equity ratio has improved from 3.19x to 1.4x due to a recent private placement, the company may still require additional Debt Funding, given management’s acknowledgement that internal accruals are insufficient to support future expansions. The IPO proceeds are largely allocated towards working capital rather than capacity building, limiting its near-term transformational impact.

Given STL’s modest market share, intense competitive environment, weak cash generation, and elevated valuation, the IPO does not appear attractively priced for short-term investors. While long-term investors bullish on India’s infrastructure growth may consider it selectively, caution is advised, particularly around execution, utilization of new capacities, and cash flow performance.

Recommendation: Avoid for short-term to medium term, High-Risk appetite investor may consider to invest with a long-term view.