PSL shrugged off its reputation of being a thinly traded stock today by registering heavy volumes of 24 lakh shares on BSE.

Previously known as PSL Holdings, PSL, in fact, surged to its maximum permissible limit of 20% to Rs 47.90 by mid-session today. There were outstanding buy orders for 77,800 shares at the upper limit.

But the most astonishing feature of the counter today was the volumes of around 24.2 lakh shares. Average daily volumes over the last one year (till 23 May 2003) were just 2,816 shares on BSE. Over the past few months, the stock has been bound in a range of Rs 38-45.

The high volumes come across as even more surprising as there is very little institutional holding in the stock. As on 31 March 2003, institutional holding was just 0.83%. Promoters hold a large chunk of the equity at 78.9%.

PSL is the largest capacity manufacturer of large diameter steel pipes in India. It has a capacity of 5.25 lakh tonnes per annum, which is spread over five  units  across  the country -- Daman, Kandla, Nani Chirai, Chennai and Vishakhapatnam.

PSL also manufactures spirally submerged arc welding pipes (SSAW). Further, it is also into the coating business, where it undertakes coal tar enamel coating, internal epoxy coating and three- layered polyethylene coating. These  coated pipes are used for transportation of gas, oil, water and petroleum.

PSL announced improved Q4 ended 31 March 2003 results recently. For Q4, PSL reported an 80% surge in net profit to Rs 1.35 crore on a 9.8% fall in sales to Rs 92.83 crore.

In March 2003, the company reported that it had bagged an order worth Rs 450 crore  for supply of MS Spiral weld pipes of varying sizes of 230 km length and providing of anti-corrosion coating to the said pipes by way of cement mortar lining and external coal tar enamel coating. 

It further added that the  above  order  was for the Chennai Water Supply Augmentation project-1, and comprises  of  two different packages valuing Rs 245 crore and Rs 205 crore, respectively.

Compositely, the order for supply of pipes is around Rs 380 crore and for coating and transportation for Rs 70 crore.

The  Union  Budget  2003 has exempted pipes from excise duty, to the extent they are used for bringing raw water from the source to the treatment plant and  for  conveying  treated water to the storage place. This will benefit steel pipe  manufacturers like PSL, Saw Pipes, Electrosteel Castings, Man Industries, Welspun Gujarat Stahl Rohren etc.

However, the budget has declared that the coating of pipes and tubes of headings 73.04 or 73.05, with cement or polyethylene or other plastic materials will amount to manufacture. As a result, such coating services will be subject to excise duty from 1 April 2003.

Part of the gains  may be lost, therefore, as excise duty will be levied on the coating services undertaken by these companies.