Welspun Corp: Building a Full Investment Thesis on a Misread Business

Hastin identified Welspun Corp as a research opportunity in early 2025, when the stock was trading around 800 rupees and sentiment was negative. The market had seen a drop in reported earnings and assumed the business was a commodity cyclical in decline.

His starting point was a different read of the numbers. Financial year 2025 reported PAT of 1,900 crore included a 470 crore one-time gain from a partial EPIC stake sale. Stripping that out, adjusted operating PAT was approximately 1,430 crore, and the underlying business was growing. The market was comparing against an inflated base.

The Moat

He then examined what Welspun actually does. The company operates three pipe manufacturing facilities, in Gujarat, Arkansas, and Saudi Arabia, each producing large-diameter pipes to precise API specifications for oil majors, water utilities, and gas grid operators. The key insight was that this is not a commodity business: EBITDA per ton had expanded from 6,600 rupees in financial year 2023 to approximately 12,000 rupees in financial year 2025, an 81% unit margin expansion over two years, while HRC steel input prices were falling. The margin expansion was driven by a permanent product mix shift toward ductile iron pipes, where every DI turn adds 700 to 800 basis points of margin over a line pipe turn.

The new US LSAW mill, once commissioned, would be the only facility in the US capable of producing pipes up to 56 inches in diameter, with no competitor able to replicate that by financial year 2028.

The Rebuild

Hastin traced the company's trajectory from its trough. Net debt had peaked at 3,300 crore in financial year 2023, interest coverage had fallen to 2.06, and EBITDA margins were at 5.1%. From that low, the company had executed a disciplined rebuild: DI capacity scaled to 400 kilotons per annum, a JV in Saudi Arabia established, the US LSAW mill under construction, and a 650 crore DRI backward integration plant underway. Through all of this, the company deployed 1,722 crore of CapEx in nine months of financial year 2026 while remaining net cash, a level of capital discipline he found rare.

The Four Demand Walls

He identified four structural demand drivers firing simultaneously: the Jal Jeevan Mission with a 70,000 crore budget extended to financial year 2028 driving DI pipe demand; city gas distribution with 40,000 crore of proposed government investment by 2034; LNG terminal expansion from 52 to 86 metric tons per annum requiring high-spec transmission pipe; and the DRI plant commissioning in financial year 2027 replacing 15 to 20% of HRC purchases permanently, saving 150 to 200 crore annually.

Management quality passed his standard checks: eight straight quarters of delivery against guidance, honest acknowledgment of the Jal Jeevan Mission slowdown when it occurred, specific EBITDA targets stated and met, and auditors Deloitte and MSK with no change in three years.

The Model and the Pitch

He built a full financial model projecting through financial year 2030. For financial year 2026, he estimated revenue of approximately 17,550 crore, EBITDA of 2,315 crore at 13.5% margin, and adjusted PAT of around 1,600 crore with EPS of 60.5. For financial year 2027, revenue of 21,000 crore, EBITDA of 2,650 crore, and adjusted PAT of 1,900 crore. The main inflection year was financial year 2028, when the US facility would reach full utilization and free cash flow would expand significantly, with projected revenue of 28,000 crore, EBITDA of 3,500 crore, and PAT of 2,400 crore. At 800 rupees, he was buying the business at approximately 9x financial year 2028 earnings, a valuation he considered significantly below intrinsic value.

He pitched the thesis informally to his partner at Transaction Square, who acted on it. The stock moved from 800 to 1,600 rupees within three to four months.