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Anandi Steel Co Ltd

About the company

Anandi Steel is an Indian iron and steel company, with its headquarter in Kalingnagar Industrial

complex, Jajpur having a global reputation for landmark production and safety practices which

have played a central role in global benchmarking process in the steel industry.

Mission and Vision

The vision of the company is to be the world-wide leader in the steel and Iron products through

excellence in operational standards and cost leadership.

The mission of the company is to satisfy its customer with the best quality of products as well as

to provide its product to all possible sectors where there is a requirement of steel or iron.

Overview and Products

With the above vision and mission Mr. Som Prakash Anandi founded Anandi Steel in the year1963. Since its inception the prime focus of the company was to achieve breakthrough synergy in

production of steel with specialty grades like austenitic, martensitic, IS 403, IS 407, IS 409, IS

410, IS 411, IS 412, IS 413, IS 421, IS 423, IS 425.In addition they also engage in production of

specialist steel services for various industries like aircraft industry, consumer industry,

automotive industry, turbine industry, ancillary industry, packaging industry, construction

industry. It achieved cost leadership through, several methods like, optimized production

practices, mergers and acquisitions, cost cutting, achieving record level of resource utilization as

well as investing in training.

Acquisitions

It started the acquisition spree in year 1967 when it acquired Ghanshyam steel Limited whichwas famous for its long products division including TMT bars, rebars, sheets, gauntlets, joints,

pipes, reinforced pipes, and several other tertiary as well as second products. It went a step

further when it acquired Uttam Dass steel in 1971 , which was famous for its piping division

specializing in special types of annealed , supercritical cooled, crystalled , nitrated , quenched,

normalized critical steels, which catered to sectors like defense sectors, shipbuilding, aircraft

industry, utilities, nuclear power plants. Anandi steel furthered their acquisition spree when they

acquired general mild steel makers Balaji Steels, which was had a national reputation for

incorporation of latest technologies in production line as well as best technical quality

management practices which differentiated it from the industry brethren.

In-house expansion

In 1982 it went for the first time for the in-house expansion project which included

commissioning of several units like Hot strip mill, cold rolling mill, twin funnel coke ovens,

ferro alloys, blast furnaces, central machining workshop and a power plant of capacity 500

Mega Watt.

The commissioning details are as follows:

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Hot strip mill: a state of art hot strip mill of capacity 2.0088 MTPA of finished flat steel,in conjunction with a 500MW steins reheating furnace coupled with cooling ladders.

New commissioning includes 1.53 MTPA of raw processing capacities in tandem with

120MW steins heating furnace.

Cold Rolling Mill: Earlier the capacity comprised of 2.76 MTPA of raw processingcapability with the synergy of 12 high rolling mills of Siemens coupled with four 16 high

rolling mills from Hitachi. The associated annealing comb furnaces were from SMS-

Diemeg.

Coke Ovens: The twin funneled coke ovens were resource from Quingdao veishan-mechanical Company. The associated equipment of tuyers were sourced from Mcnally

Bharat. While the coke car, coke rack, the pusher and the finisher were sourced from

BAEMAERSK Nord ferro alloys.

Blast Furnace: The two blast furnaces sourced were of 2751cubic meter and 2389 cubicmeter supplied by Larsen & Toubro Company in collaboration with Quingzhan Metal

Works. The number of tuyers on the two furnaces were 38 and 32 respectively.Products

The Product Mix offered by Anandi steels are:

1) Slabs: Slabs produced vary in width from 1600 mm to 2300 mm, which would enableAnandi steels to cater to a wide plethora of markets which either have their inputs as

slabs, or have in-house strip and rolling mills.

2) Blooms: Blooms produced adhere to the dimensional variances of 1000mm by 750mmby 2300 mm which would enable in wide applicability to a plethora of industries

including canning, production packaging, shaping and joint industries.

3) Pig Iron: is a product catering to widespread manufacturing industries. Since it acts as abasic input for all class of foundries. Produced from the state of the art blast furnaces

with level 4 automation

4) HR coils: The pre-fabricated slabs freshly out of the melt shaft is sent to the roughingmill and then to the reheating furnance. After being reheated it is sent to the thinning rolls

which makes coils of varying thickness from 1 mm to 2.8 mm. These HR coils act as

intermediate product in same unit and can also be sold to other unit for processing. It

comprises of black coil and pickled coil. The pickling is done through an optimum mix of

nitric acid, sulfuric acid and hydrochloride acid so as to ensure a smooth surface finish

free of any rust. Black coils are HR coils which are sold as it is without pickling.

5) CR coils: The input from Hot Strip mill which are black coil of unpicked nature undergothe cold rolling in complex processes comprising of combination of 12 high and 20 high

tandem mill of Hitachi and Siemens respectively which effectively reduces the thickness

from 2 to 0.1 mm. The output is a product having high economic value addition which

leads to remarkable contribution margin.

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6) Coin Blanks: It is the source of raw material supplied to central governments, federalbanks and mints throughout the globe for coining purposes. It comprises of state of the art

machinery to produce precision enabled product.

For producing 1 ton of Coin blank, generally around 200 kg of coke is required. The cost

of Low quality coke is 150/kg while the cost of high quality coke is 300/kg

7) Billets: They are intermediate products with dimensional variances to the tune of 100mm * 230 mm * 50 mm. They form a bulk of the B2B sales experienced by Anandi and

despite low margin earns great revenue.

Industries Served

The various customer segments are:

Manufacturing Industry: The basic raw material for manufacturing Industries as well as their

ancillaries was provided by the Martensitic and Austenitic grades and other specific grades

produced by Anandi steels. It formed the bulk part of their business.Auto and Ancillary Industry: The different auto grade steels for instance IS4052, IS413 were

provided exclusively by Anandi steels where in it was able to charge a premium over the market

price.

Aircraft Industry: General verities of mild steels where supplied by Anandi steels. It was a

minor element in sales.

Construction Industry: It was also a major supplier of construction grade steels to big players

in the market, the market although lucrative yielded less margins.

Steel Industry Overview:

The iron and steel industry in India has grown from the initial efforts of TATA which culminated

with the establishment of first steel plant at Jamshedpur in 1907. Thereafter the grown exhibited

by the industry for next 4 decades was very sluggish. The industry thereafter picked pace with

establishment of steel authority of India in 1954 and entry of Jindal steel in 1952. Anandi steel

initially was established as a cost effective produce of steel which catered to regional defense

industries in southern India. Later it increased its portfolio of products after a slew of

acquisitions. In present day the challenges faced by steel industry are numerous. The industry

which is suffering from the problem of bad quality of raw steel as well as rising raw material

costs in face of environmental legislations. Solutions to these problems were addressed by Shanti

Steel, which resorted to raw material blending in raw materials for the pig iron producingprocesses. In addition in also resorted to vertical integration in certain aspects like oxygen

production as well as internalizing the by product sales. Shanti steel pioneered the process of

blending the raw materials like coal for the coke production process, as well as modulating

product proportions in several processes like iron making. It also resorted to integrate vertically

segments like oxygen procurement which earlier used to lead to greater transport cost. Anandi

steels took their cues seriously and the management decided to decide the future course of

actions at the company headquarters. On 23rd June 2012, Aditya Prakash, the company MD

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convened a board meeting where functional heads of marketing, finance, sales, operation, R &D,

HR as well as other board directors were present. The imminent question before the board were

what was ailing Anandi steels. There were several opinions and perspectives. But primarily the

questions that emerged were:

Since contribution margin is very high 435050000 while profit is very low that is only .5 %.

Somprakash is concerned about the present and the future of the company, so he called a

consultant for the recommendations.

Following points came out after discussion of the consultant and Somprakash.

As Anandi Steel operates during the next year which product should be emphasized more than

others?

What should be done with the ailing product: should it be removed or is there another option

available to improve on it?It is noticed that the fixed cost is too high, what actions must be taken to reduce it?

Question:

Annual sales for next year is expected to be around 100 crores. The management expects an

industry margin of 2% as its margin. What should be the target cost structure and the extent of

cost streamlining?

Question:

As company mission to serve all possible industries, It thought of venturing out into the specialty

steel segment which mainly constitute of surgical instruments and other instruments used in

Biomedical fields. In order to do so it went on an advertising campaign and incurred a fixed

advertising cost of 90 lakhs. It aims to supply specially treated CR coils which requires an

additional cost 12000/ton. It aims to sell this at 25% higher price than that of normal CR coils.

How many extra units should it produce to recover advertising cost? How many units should it

produce to gain 10% profit on this specially treated CR coils.

Question:

For producing Coin Blank Steel, a mixture of two types of Coke is used, one which is locally

produced which is of low quality and the other is imported from Australia, in the ratio 60:40

respectively. The local coke is stored in small quantity by the company as company uses JIT

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inventory management technique whereas the imported coke as having a high transportation cost

is stored in bulk. A regular customer of the company urgently requires 1000 tons Coin Blank

steel. As the delivery date is too short the company is not able to get the locally produced coke in

the required quantity and as the stored inventory of the low quality coke can be used to produce

only 10% of the required order, Taking care of the delivery date, it is only possible to use the

imported coke (which is stocked in sufficient quantity) to produce the remaining quantity. Whatprice can be quoted to the customer so that the company can incur a profit of 9% higher than that

of the normal profit?