What will the future hold?

Linde India Limited: In May 2021, while a severe oxygen shortage occurred due to the COVID-19 outbreak in India, individual investors were rushing to purchase stocks related to the term ‘oxygen’. Linde India saw its stock price surge by 70% during this period.

During the initial wave of the pandemic, the company supplied 300 tonnes of liquid oxygen daily across the country. By the end of the year, volumes in the cylinder business were up 25% and sales were up 32%. In response to the unprecedented surge in demand during the second wave of COVID-19, Linde India has significantly increased its daily liquid medical oxygen supply to 1,700 tonnes.

In addition to gaining recognition during the pandemic, the company’s stock has posted an impressive return of 1086% from COVID-19 lows. The stock price has risen 73% over the past year. Let’s now take a closer look at the company’s business and its outlook for the future.

Linde India Limited

Company Overview

Linde India Limited, formerly known as BOC India Limited, is an integral member of Linde Plc. It holds a prominent position as one of the leading industrial gas companies in India.

The company combines Linde Plc.’s cutting-edge technology, deep understanding of its customers’ businesses and strong local expertise in gases and engineering to provide tailored solutions. These solutions aim to improve the efficiency, productivity and flexibility of our customers’ operations, while reducing energy costs and prioritizing environmental sustainability.

Diverse product portfolio

Linde India is actively engaged in manufacturing and distribution of various gases including oxygen, hydrogen, nitrogen, argon and special gas mixtures. In addition to gases, the company manufactures welding electrodes, rods, fluxes, gas and electric welding equipment, and even liquid oxygen explosives.

business division

Gas and related products

The Gas and Related Products segment covers many different aspects of the business. This includes providing pipeline gas supply (on-site) to key industrial customers in industries such as primary steel, glass and chemicals.

Linde India also supplies liquefied gases through cryogenic tankers (bulk) to meet the medium-sized demand of various industrial sectors. The company also supplies compressed gases (packaged gases) in cylinders to meet smaller demands, mainly in the manufacturing, manufacturing and construction industries.

With 35 production facilities and service stations across the country, including the largest air separation plant in Jamshedpur, Linde India boasts of India’s largest sales and distribution network.

Project Engineering Division (PED)

The Project Engineering Department (PED) focuses on designing, supplying, installing and commissioning medium to large scale air separation units (ASUs). The department is also involved in projects involving setting up nitrogen plants, pressure swing adsorption (PSA) plants and gas distribution systems.

PED also manufactures cryogenic vessels for internal use and external sale. The scope of operations of this division is to design, engineer, supply, install and commission on a turnkey basis air separation units and related projects, especially in the steel, oil and gas sectors.

In essence, Linde India stands at the forefront of the industrial gases sector, providing comprehensive solutions and leveraging cutting-edge technologies to meet the diverse needs of its customers.

Linde India Limited – Finance

Source: Annual Report

In February 2022, Linde India faced a new global challenge: the Russia-Ukraine conflict, which resulted in rising prices of critical inputs, especially energy. Nonetheless, the company achieved a noteworthy revenue of ₹3,136 crore from operations in fiscal 2022, a significant increase over the previous year’s ₹2,112 crore and an impressive growth rate of 48.5%.

Linde’s stock has delivered positive returns in seven of the last eight years, with the exception of 2019, when it saw a slight decline of 2.7%.

At the same time, net profit showed a commendable rise, growing 4.3% from ₹514 crore in FY21 to ₹536 crore in FY23. In FY23, Servotech maintained solid financial metrics, boasting a solid return on equity (ROE) of 17.13%, up a notable 270 basis points from 14.43% in FY21.

Return on Invested Capital (ROCE) also increased significantly from 14.04% to 17.75% in FY2023. Reflecting its strong balance sheet, the company’s debt-to-equity ratio for the same fiscal year was 0.01.

Linde India Limited – Future Plans

Linde India Limited expects the industrial gases market to grow by 9% in the coming years. Consolidation, productivity gains and expansion in the steel sector (SAIL, Tata Steel, Vedanta, etc.) have improved opportunities as gas demand increases.

With the Indian automotive industry expected to reach INR 24 trillion by 2023, demand for SPC and argon is expected to remain strong. The company also expects growth in SPC products (ammonia, silane, nitrous oxide) along with increased nitrogen opportunities (LIN/factory sales/field).

The company is poised to seize numerous opportunities with a particular focus on the healthcare sector, where it has a significant presence in medical oxygen. Providing medical oxygen to hospitals has been a pivotal driver of the medical business.

Despite a 22% decline in healthcare revenue in FY22 compared to FY21, Linde India remains optimistic about leveraging its presence in the medical oxygen space as market volumes normalize after the pandemic-induced surge in FY21.

Anticipating increased demand for industrial gases, the company plans to capitalize on opportunities in the steel sector through consolidation, productivity improvements and expansion plans. Linde India has identified key priorities including tapping into the fast-growing pharmaceutical market, meeting growing demand from the chemical and paint industries, and preparing for the rail and defense sectors.

In the bulk segment, the company is actively seeking merger and acquisition opportunities. One strategic approach is to implement de-captivation, a system in which another company acquires and operates a plant to increase operational efficiency. Linde India is also eyeing growth prospects in sectors such as electronics and photovoltaic manufacturing.

Demonstrating its commitment to sustainability, Linde India achieved a 9% reduction in energy intensity and 12% reduction in water consumption in FY22. The company has aligned its initiatives with global decarbonization goals, achieving a 15% reduction in Scope 1 and 2 greenhouse gas (GHG) intensity compared to the previous year. Scope 1 includes direct greenhouse gas emissions, while Scope 2 includes indirect emissions from purchased energy.

The company’s green initiatives serve as an additional positive aspect that complements its overall business strategy. So what do you think about the future of the company? Share your thoughts in the comments below!

A work written by Nalin Surya S.

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