Tata Steel focus on thyssenkrupp venture – Mr TV Narendran
Amid an improved outlook for the steel industry in both developed and developing economies, Mr TV Narendran has been elevated as the CEO and managing director of Tata Steel. Mr Narendran, who takes charge at a time when the company is trying to bring to fruition a joint venture with thyssenkrupp AG to create a leading European steel enterprise, speaks on the firm’s plans to double capacity through the organic and inorganic route. Edited excerpts.
Q - What would be your immediate tasks in your new and expanded role ?
A - It is premature and not fair for me to comment now. Europe is not new to me as I have been on the Board of Tata Steel Europe. But there would be two immediate tasks for me. One is to continue to keep the company’s performance well and the other to ensure that the joint venture happens properly. There are a lot of things that need to be attended to and looked into between the signing of a memorandum of understanding and the conclusion of a deal.
Q - When do you see the entire deal concluding?
A - Sometime next year.
Q - Your views on the European market...
A - European market is a matured market rather than a high-growth market. In a growing market, the focus is on growth while in a matured market it is on the product mix.
Q - Is Kalinganagar plant becoming bigger than Jamshedpur ?
A - In Kalinganagar, we are in the process of finalising the configurations for Phase 2 and in all likelihood, we will add a further 5 million tonnes there, subject to our board’s approval. It should take about three to four years from board approval to commission Phase 2. This year, the capacity utilisation is over 90% and we are very happy with both the volume and the quality ramp up. Logically, Kalinganagar with the 3,000 acres, can house a larger plant. We have been able to plan our layout there better compared to Jamshedpur, where we have grown incrementally over 100 years.
Q - Your plans to double capacity and interest in stressed steel assets ?
A - Expansion would be through the organic and inorganic route. For inorganic growth, our decision will be based on the opportunity and valuations. We have submitted an EoI for all five steel assets on the block, but will decide the way forward after due diligence.
Q - Could you tell us a bit more about the the new HIsarna technology ?
A - This is a hybrid technology whose IP was partly owned by Tata Steel Europe and Rio Tinto. We bought out Rio Tinto’s IP. This new technology, which we expect to go commercial in about five to 10 years, will enable us to reduce our carbon footprints and costs. It is basically an iron-making technology which enables one to compete with alternate technologies now in use.
Q - What is your outlook on the Indian steel industry? How do you see prices moving and what would be Tata Steel’s future focus areas?
A - I expect the growth in demand to be in the 4-5% range. While the passenger vehicle and commercial vehicle sales are rising, construction activity has not yet seen the pick up we would like to see and since the construction sector accounts for about 60% of the consumption of steel, it has a material impact on the growth of steel demand in the country. The government is continuing its investments in infrastructure and this has potential for creating an upswing for the industry.
Prices will depend on what happens in the international markets. China is doing better than expected both in demand and in closing capacities. So, exports out of China have dropped significantly this year. This has led to steel prices stabilising at levels we last saw about three years back. Tata Steel will focus on growth opportunities in India through both organic and inorganic routes. In addition to our existing businesses, we will also develop the Services and Solutions business further. We have also made an entry into the oil and gas segment from Kalinganagar.
Q - What is driving Tata Steel’s profits now and what is your outlook?
A - We have always been focussed on operational efficiencies and customer intimacy. While much has been said about the advantages that we have due to our captive iron ore sources and some coal, it is also a fact that on many operating metrics, we are the Indian benchmark and compare favourably with the best in the world after normalising for raw material quality.
The one area where we need to cover a lot more ground is labour productivity, but that is largely because of some of our older, smaller units in Jamshedpur. In whatever we have built in the last seven or eight years in Jamshedpur or Kalinganagar, our labour productivity compares favourably with the best in India.
I like to believe that our deep understanding of our markets, our distribution network and the equity of the Tata Brand, our long standing relationships with our customers and our service levels are significant reasons why we continue to deliver benchmark performance on profitability not only in India, but also across the world.
Q - In which segments do you see retail B2C business growing? What is the share of retail sales to Tata Steel’s total turnover?
A - For B2C segments, the focus is on the house builder, the home maker and the farmer. Apart from our standard B2C brands like Tata Tiscon, Tata Shaktee, Tata Wiron, Tata Agrico etc., we are now going further down the value chain and developing doors, windows, furniture, gates, etc. Today, B2C business is about 20% of our revenue and Services & Solutions about 1.5% of our revenue. We hope to take the B2C business to 30% and Services & Solutions to 20% of our revenue.
Q - What is Tata Steel doing to augment its raw material security?
A - We are currently self-sufficient for iron ore, but will need to have new leases before 2030 when our existing ones come up for auctions. Around 30% of our coking coal needs are covered by our existing leases and while we will continue to try and increase our coal mining volumes, we also need to import some quantities of better quality imported coal.
Q - Jamshedpur is now an over 100 years’ old unit. What is Tata Steel’s thinking on it in general and on controlling its emissions in particular?
A - We may be 100 years old, but our emission standards are comparable with the best in the world. Jamshedpur at 10 million tonnes emits less than Jamshedpur, at 5 million tonnes. We have spent significant sums of money to bring our emission norms to world-class levels. However, we still have some more work to do.
Q - Do you think that in the present scenario, in the Indian Steel Industry with its stressed assets.. is affecting the overall sentiment?
A - To some extent yes. You are not going to have investors lining up to invest or banks lining up to lend if most of the incumbents are in the category of ‘distressed assets’ or ‘NPAs’. So, while the steel companies themselves need to focus on efficiencies and competitiveness, the government needs to help reduce the cost of doing business just as they have helped improve the ease of doing business.
Q - What is your outlook on Tata Steel Thailand?
A - In some ways, for us, Thailand is a similar but smaller footprint of what we have in India. In Thailand, not only are we one of the biggest steel plants, we are also one of the largest wire companies (like we are in India). Tata Steel Thailand went through some difficult times but has bounced back and is doing well. We are positive about its ability to remain profitable and we think, between Tata Steel Thailand and Siam Industrial Wires (our wire business), we have a good self-sustaining and material footprint in Thailand.
Source : Hindu