For MSTC, diversifying is key to success

Written by fe Bureau | Updated: Mar 4 2011, 06:59am hrs
From 1964 till dateMini Ratna MSTC Ltd has been gaining from strength to strength. Starting off as a regulatory body for export of ferrous scrap and then becoming a SAIL subsidiary and a canalizing agency for import of ferrous scrap in 1974, MSTC till 1981 was only meant to support SAIL's steel making plants. Finally in 1982 its potential got unleashed and it became an independent Company under ministry of steel. But that was not where MSTC was destined to be. In 1992 it ceased to be a government canalizing agency for imports and gradually emerged as India's first e-commerce company with an auction and a procurement platform.

Though the years, after we were left alone to develop our trading platforms were tough, MSTC never slipped into red. Our net profits were as low as Rs 3-4 crore but we always remained a company looking for newer avenues of business, SK Tripathi, MSTC's chairman and managing director, said.

In fact, till 2000-2001, the companys business volume could not touch Rs 1000 crore and the net profit was restricted to a little above Rs 3 crore only. But in 2001-2002, when the company for the first time clocked a turnover of Rs 1,034 crore its profitability gradually started rising. From a level of Rs 4.54 crore in 2001-2002, MSTC net profit touched a peak of 92.20 crore in 2007-08 on net sales of Rs 11,923 crore. But during the slowdown in 2008-09, its net profit dipped a bit to Rs 85.05 crore, though business volumes went up to Rs 19,627 crore. The slowdown further pulled down MSTCs business volume to Rs 12,738 crore in 2009-2010 and net profit was flat at Rs 86 crore. This year though our volumes may come down a bit more we are expecting to make a Rs 95 crore net profit with profit before tax reaching Rs 140 crore, Tripathi said.

During the slowdown most of MSTC's customers in India were piled with huge inventories when the international prices of scrap, coal and coke was continuously rising. This made the industry adopt a wait and watch policy, which caused a slump in business. But against all odds MSTC retained its profitability, specially in the tumultuous year of 2008-09, which also had its spillover effect in 2009-2010, said Tripathi.

However, 2010-2011 has been a year holding some prospects with prices of scrap moving up, though slowly. But MSTC had never restricted itself to a single business vertical. Besides e-auction of scrap, its e-procurement platform, which procured metals, coking coal and tea gave its business equal support as that of the e-auction and trade financing, which started from 1998 to provide materials to small and medium entrepreneurs.

But at present MSTC has decided to open this window for PSUs too and companies like Hindustan Newsprint, Tyre Corporation of India Ltd, Hindustan Steel Works Construction, Braithwaite and Andrew Yule are in talks with it to lift materials in cash & carry model. Each of our segments contributes about one third to the total business and so our prospects are not dependent on any one of our verticals, Tripathi said adding: Wherever there is an opportunity, MSTC would drive into that situation.