Usha Martin, the Rs 3,000-crore speciality steel and wire rope manufacturer, has just executed a Rs 2,100-crore capital expenditure plan. Coal and iron-ore mines were also integrated backwards to cut costs. With increasing domestic demand for value-added steel products and access to new overseas markets, the company has taken up another Rs 1,200-crore capex plan over the next two-and-a-half years. MD Rajeev Jhawar tells FE?s Sudipta Datta the company?s strategy to double revenue over four-five years. Excerpts:
Give us an update on the firm?s Rs 2,100-crore capex plans.
The expansion is done, except for one sinter plant, which will be commissioned by August end. The coal mines have been integrated. All the steel-making facilities, power generation etc have been commissioned and the results are beginning to show. We have taken up another Rs 1,200-crore plan over the next 30 months. We will focus on reducing cost. The expansion will help us reduce production cost by nearly Rs 3,000 a tonne.
What is you level of integration that is serving your steel plants?
With coal and iron ore mines at our disposal, we are fully integrated to produce steel up to 1 million tonne. Our raw material is secured for the next 30 years.
Besides steel, you are also into value-added products, how is your rope business faring? Has the European crisis hit sales?
The wire rope business is stable. We have seen bit of a slowdown is in the oil sector because of what?s happening in the US. Due to the oil spill, drilling activity has come down. The domestic market is strong, and South East Asia, Australia, Africa are also fairly strong markets. The company has performed reasonably in the business, except in the oil sector. This should stabilise by the second half of the year.
Do you still want to have 50% value-added products, and 50% saleable steel in your portfolio?
Pre-expansion, that was the objective, to have a 50:50 portfolio between value-added and saleable steel. Post-expansion, value-added has come down to 45%, but the objective is to have 50:50 in future. Last year, we did almost 190,000 tonne of value addition. We want to take it to 240,000 tonnes.
What are your target markets?
Our major focus is India, because we see fairly strong growth in the domestic markets. We also looked at China last year through our Singapore subsidiary. We propose to enhance our marketing activities because China is an important market, it does import specialised value-added products.We are also pushing our marketing activities in South Africa and South America, especially Brazil. Australia is important because of the mining activity.
Are you scouting for mineral assets abroad?
We are looking at resources within India as well as overseas. Unless, we are sure of the quality and the logistics, we won?t be looking to buy because sometimes logistics play a very important role in costs.
What are the growth targets for the company?
We expect to double our revenue in four-five years. We should cross revenues of Rs 6,000 crore in four years. Our focus is to reduce costs and to make our captive resources more efficient.
Is the volatility in steel prices a cause for concern?
Steel prices have dipped in the last two-three months. They are stable now, but not looking up. However, iron ore prices have shot up 100%; coal prices are also moving up.
Raw material costs are putting pressure on steel margins. Unless, there is a cost push or a demand pull, steel players will suffer.