Some people believe that that the steel tube business is a capital intensive business, there is little value addition and there is no moat.
Yes, it is a capital intensive business. Applying for tenders requires a company to demonstrate 1) Net worth 2) Working capital 3) Turnover.
Once a company starts getting accepted by the major customers, it seem to become easier to get bigger orders. Getting approved by major companies is not easy unless you have the size and execution ability. This is why companies which have been able to manage this have created huge wealth over time. APL Apollo Tubes was Rs.50 in 2009. It touched 2487 in January 2018. That’s a 50 fold return in less than a decade. Ratnamani Metals was Rs.35 in 2009. In touch 1095 in January 2018. That’s a 30 fold return in less than a decade. All companies in an industry are not going to be multibaggers. But if we can find well run companies with honest managements which know how to execute, expand and manage cash flow, those who have vision, big money can be made.
The time to invest in an industry is when huge demand is expected and GAIL’s expansion will create that demand. At least 2-3 companies from that list will be multibaggers in the next decade. The question is which ones?