Rama Steel Tubes’ Strategic Expansion in Anantapur, Andhra Pradesh

On July 9, 2024, Rama Steel Tubes Limited informed in a stock exchange filing that the company is strategically well positioned to leverage strong domestic steel demand by increasing a Manufacturing Capacity at Anantapur, Andhra Pradesh, through its wholly owned subsidiary Lepakshi Tubes Private Limited.

The company aims to leverage increased demand from critical sectors like real estate, infrastructure, and automobiles, anticipating a favourable impact from rising domestic demand and favourable material pricing trends.

The company stated that the structural steel pipes industry forms a vital component of India’s infrastructure and construction sectors, supporting a wide array of projects ranging from bridges and buildings to oil and gas pipelines.

With the government’s strong emphasis on infrastructure development and the rapid urbanisation of the country’s population, factors such as increased investments in infrastructure projects and growing demand for residential and commercial spaces are expected to drive the demand for structural steel pipes.

The industry’s adoption of advanced manufacturing techniques and the introduction of innovative products, such as high-strength and corrosion-resistant pipes, are anticipated to fuel growth in value-added products (VAP), thereby increasing their share in total sales volume. Moreover, advancements in technology are poised to unlock a range of opportunities, expanding the size of the Total Addressable Market (TAM).

They stated that industry leaders are currently focused on diversifying their product portfolios to meet customers’ evolving needs comprehensively. These strategic initiatives aim to address increasing demand, reduce costs, and ensure the widespread availability of products across all regions of India.

Additionally, to meet the additional demand, India’s hot-rolled (HR) steel coil production capacity is expected to expand. This expansion will support increased manufacturing of structural steel tubes, which predominantly use HR coils as their primary input. Industry projections suggest an additional 15 million tonnes of HR steel production capacity will come online within the next 3-5 years, building upon the approximately 46 million tonnes produced as of FY 2023.

The company added that the cost of expanding manufacturing capacity in Anantapur will be financed through unsecured loans and internal accruals. The total investment required for this expansion is approximately ₹10 crore.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.