Jindal Saw Ltd reported lacklustre results for the three months ended 31 December, though that wasn’t entirely unexpected.

Pipes can be a lumpy business with orders coming in a rush and delivery spread over several quarters. Events like a temporary mill shutdown and unseasonal rains didn’t help. Jindal Saw’s volumes fell 30% from a year ago and revenue by 22.4%.

The company did bring down its raw material to sales ratio by 3.3 percentage points from a year ago, to 60% for the December quarter. But despite that, earnings before interest, tax, depreciation and amortization fell 25%.

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Operating margin, too, slipped by 68 basis points to 20.62%. As a result, profit after tax came in at 125 crore, down 26.5%. The stock fell nearly 1% on Monday in a weak market. One basis point is one-hundredth of a percentage point.

However, there may be light at the end of this pipe. The company is pruning costs further. It recently signed a lease with the Rajasthan government to mine iron ore, which could help reduce costs by 3,500 per tonne of that input. The benefits are expected to kick in from September.

Revenue, too, is likely to improve in the coming quarters. Jindal Saw has already swelled its order book to $1.02 billion ( 4,695 crore), up 30% from the end of the September quarter. It is spending some 1,200 crore next year to build new pipe and pellet factories.

More importantly, energy demand is increasing. More rigs, shale gas discoveries and higher crude oil prices are all expected to boost demand for pipes. Jindal Saw, which gets half its revenue from overseas, is also likely to benefit.

Last year, the stock—as with most pipe companies—underperformed the broader market, reflecting the weakness in demand. But ever since Jindal Saw announced the Rajasthan deal at the beginning of this year, the scrip has gained 14.3% while the BSE-100 index of the Bombay Stock Exchange has shed 10.3%.

Also, Jindal Saw has some 3,000-3,500 crore worth of investments that it plans to hive off into a separate company and unlock value for investors. The management indicated that the demerger would likely happen in September. That should also help sustain further buying interest in the stock.

Graphics by Yogesh Kumar/Mint