tips to buy Welspun Gujarat Stahl Rohren Ltd shares buying and selling shares in India

Welspun Gujarat Stahl Rohren Ltd (updated - 06 Oct 2009)
The successful pricing of foreign currency convertible bonds worth $130 million (approx Rs 650 crore) by Welspun-Gujarat Stahl Rohren could be an indication of the opening up of the global financial market and the appetite for Indian papers. The bond, from an Indian company after a lull of more than one year, has an upsize option of $20 million with a maturity of five years, and is priced at Rs 300 per share.

The price, at nearly a 20% premium to its average over the last month, may appear somewhat cheap, but is almost 70% over its six-month average. The total amount raised through the issue is nearly a fourth of its existing loan book size, and if fully converted, would represent nearly 20% of the diluted equity.

The company is in the business of manufacturing pipelines, having executed a number of oil pipeline projects. The company derives nearly 60% of its sales and existing order book of nearly Rs 7,000 crore from North America. To cater to this market, it recently commissioned a plant in the US. The company plans to use the funds raised through the issue for its expansion, after investing nearly Rs 2,300 crore over the last two years in this capital-intensive industry. The company has initiated another expansion project, of 0.6 million tonnes, after undertaking two projects, including one in the US, with capacity of 0.5 million tonnes.

These capacities will take nearly three years to become fully operational, by when the company expects the orders to nearly double from the current 0.9 million tonnes per annum. Any news of equity dilution is bad for the stock price, and not surprisingly, the market reacted sharply with a 3.5% decline in the price compared to a 0.53% fall in the Sensex during the day.

However, for longterm investors need not worry as the company is operating in a high growth market, and can reap the benefits in due course of time.
source - ET

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