Uttam Galva Steels Ltd., an ISO 9001- 2000ispepune.org.in/jispe308pdf/BURANG3.pdfSales and Marketing...

VOL. 20 NO. 3 THE PERFORMANCE OF INDIAN IRON AND STEEL INDUSTRY ... 469

4.1.5. Essar Steel Ltd.

Essar Steel, owned by the Essar group,incorporated in 1976, is a global producer of steelas it exports to the USA and European markets,and to the growing markets of South East Asiaand the Middle East. It is a fully integrated flatcarbon steel manufacturer, from iron ore toready-to-market products. Its products find wideacceptance in highly discerning consumersectors, such as automotive, white goods,construction, engineering and shipbuilding. Thefirm is India’s largest exporter of flat steelproducts and aims to reach a capacity of 25 m. t.p. a., regardless of the current capacity of 9 m. t.p. a.only. Essar Steel has registered office at Suratin Gujarat. One of its plants located at Hazira,Gujarat produces HBI and HR Coils. The steelgoliath also has an iron pelletisation plant atVishakapatnam to meet the requirements of itsHBI plant. Essar Steel is the first steel companyto set up the only retail chain for steel productsunder the brand name Essar Steel Hypermart. Ithas a strong network of over 60 Steel Hypermarts.The outlets are conveniently located across thelength and breadth of the country to cater to thecustomised requirements of enterprises.

The fifth position, just above the industryaverage is held by Essar Steel Ltd. (table 13), aprivate ‘other major’ producer, as classified bythe Ministry of Steel. The difference of score withRINL is a vast 5.30, testifying to a divide betweenthe first four firms in the industry and thefollowing firms. Essar Steel heads the consumersatisfaction index (along with three other rivals)as it puts good efforts in the direction in spite ofthe lesser weight of the indicator forcompetitiveness in the iron and steel industry.Similarly, the firm performs reasonably well inproductive performance, sales and marketingstrategy and foreign trade, standing at the fourthposition in all the three indices. It has the secondbest labour productivity in the industry, and onthe other hand it spends comparatively well onthe marketing of the products. Noteworthy is itsperformance in trade as it has recorded the bestnet forex earnings for the year. The weakness ofthe firm lies in its unsatisfactory financial

performance due to inadequate liquidity and assetutilisation, lesser attention on technological upgradation and poor growth trends in some of thekey variables in the last few years.

Table 13. Competitive Performance of Essar Steel Ltd.

Indicator Weighted RankScore

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Productive Performance 7.96 4Financial Performance 3.48 9Cost Effectiveness 8.86 9Sales and Marketing Strategy 2.71 4Stock Market Performance 0.86 10Consumer Satisfaction 6.04 1Technology and Environment 1.38 12Human Resource Development 0.51 8Foreign Trade 4.97 4Growth Variables and Potential 2.74 11Overall Competitiveness 39.52 5

4.1.6. Jindal Stainless Ltd.

Jindal Stainless Limited (JSL) was establishedin 1970 in the form of a single unit plant at Hisar(Haryana). However, now one more plant hasbeen added at Vizag (Andhra Pradesh). JSL, aISO: 9001 and ISO: 14001 company, is alsosetting up a greenfield integrated stainless steelproject in the state of Orissa with capacity of 1.6m. t. p. a. Formally incorporated in 1980, the firmfulfils the country’s demand of stainless steel andmanufactures continuous cast slabs and blooms,hot rolled stainless steel coils, hot rolled annealedpickled coils, hot rolled annealed pickled plates,cold rolled stainless steel coils, chequered plates,customised products for crucial applications likenuclear applications and applications in turbines.The R&D division at Hisar plays a pivotal role inretaining and consolidating company’sleadership role in stainless steel business bycontinuous up gradation of quality, process andservices, and innovating development strategiesto come up with new products with costcompetitiveness. The R&D division closelyinteracts with reputed national and internationallaboratories to avail of expert services for criticalinvestigation.

470 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JULY-SEPT 2008

Figure 9. Performance in Competitiveness Indicators

The sixth position in the overall

competitiveness in the iron and steel industry, just

below the industry average, is occupied by Jindal

Stainless Ltd. with a total score of 38.87. As can

be seen from table 14, Jindal Stainless Ltd. has its

strength in consumer satisfaction and foreign

trade with good net foreign exchange earnings

and export as a percentage of sales. Also the firm

has performed fairly well in technological and

environmental performance (fifth rank) as it has

balanced its energy usage and paid attention to

environmental issues. However, its poor

performance due to low productivity (tenth rank)

and indifference to human resource development

(tenth rank) has led to its comparatively lower

overall score. Its stock market performance at the

eighth position is also one of the weaknesses, as

the yield (dividend divided by the current market

price) and EPS are very low. The firm has scored

below industry average scores in 6 out of ten main

indicators of competitiveness (figure 10).

Table 14. Competitive Performance of

Jindal Stainless Ltd.

Indicator Weighted Rank

Score

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Productive Performance 4.70 10

Financial Performance 4.11 7

Cost Effectiveness 9.16 7

Sales and Marketing Strategy 2.56 6

Stock Market Performance 1.15 8

Consumer Satisfaction 5.53 2

Technology and Environment 3.13 5

Human Resource Development 0.26 10

Foreign Trade 5.47 3

Growth Variables and Potential 2.79 10

Overall Competitiveness 38.87 6



4.1.7. Uttam Galva Steels Ltd.

Uttam Galva Steels Ltd., an ISO 9001- 2000

and TS 16949/2002 accredited company, is one

of the largest manufacturers of cold rolled steel

and galvanised steel in Western India. It has also

been awarded the highest exporter award by the

Engineering Export Promotion Council of India

for the past 11 years in succession. More than 70

per cent of the company’s products are currently

exported to over 138 countries worldwide and it

has a strong customer base in many advanced

markets such as Australia, France, Germany,

Greece, UK and the USA to name a few. The

company’s manufacturing facilities are located at

Khopoli, in Maharashtra, which are close to

Nhava Sheva and Mumbai ports. This provides

the company with easy access to imports of HR

coils and also for exporting its products. A close

proximity to the ports gives the company the

advantageof lowering its transportation costs too.

The company’s domestic sales are also within the

radius of 500 kms from its manufacturing

facilities. The firm has expanded and modernised

its operations at Khopoli which have increased its

cold rolling capacity. The firm has also increased

its Galvanised Plate (GP) capacity to 750000

metric tonne p.a. and added a new colour coated

line as of March 2008.

Table 15. Competitive Performance of

Uttam Galva Steels Ltd.


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Uttam Galva Steels Ltd. is the second firm

below the steel industry average score (39.07) at

seventh position with a score of 37.60 (table 15).

However, when its performance is examined in

the individual indicator indices, it is noticed that

the firm seems to be promising in foreign trade

and cost effectiveness, where it stands in second


and third positions respectively. This is mainly on

account of good exports by the firm and cost

efficiency in terms of miscellaneous

expenditures. It is worth mentioning that Uttam

Galva has ensured the last position in the sales

and marketing strategy index because of very low

market share, no expenditure on advertising and

minimal expenditure on distribution in the year

2006-07. Humanresource development and stock

market performance also needs to be improved

by the firm for a better overall competitive

position in the industry.


4.1.8. Ispat Industries Ltd.

Ispat Industries is the flagship company of

Ispat Group, and was incorporated in 1984 as

Mittal Galvazinc Ltd.. The company started

operations at Kalmeshwar in Maharashtra for the

manufacturing of thin gauge galvanised steel

sheets in technical collaboration with

Japan-based Nippon Denro manufacturing

company in 1985. Subsequently, its name was

changed to Nippon Denro Ispat Limited and in

1996 to Ispat Industries, as the company started

to produce primary steel products. It operates a 3

m.t. hot rolled coils plant at Dolvi in Maharashtra.

It has flexibility in the choice of steel making

route, be it the conventional blast furnace route

or the gas-based electric arc furnace route. The

dual technology process gives it the flexibility to

choose different combinations of raw materials

for its production. It also operates a direct reduced

iron plant of 1.6 m.t. and a pig iron plant with an

annual capacity of 2 m.t.. The pig iron plant was

added to Ispat Industries on account of

amalgamation of Ispat Metallics, a loss making

company of the group in 2005. The company in

recent times has expanded its capacities as well

as taken steps to integrate its manufacturing

operations. Production capacity for HR coil was

increased from 2.4 m.t. to 3 m.t.. It also added a

2.3 m.t. sinter plant and an oxygen plant with a

daily capacity of 1260 tonnes for its captive

consumption during 2005-06.

Ispat Industries Ltd., a major steel producer,


holds the eighth position on the competitiveness

index with a 37.28 score (table 16). To start with

the strong points, its high labour productivity has

ensured third position on the productivity index.

The firm also performs well on the growth index

(fifth rank) and the stock market (sixth rank)

because of good insurance expenditure and

highest price to earnings ratio. However, it has

proven to be less cost competitive and shown

poor comparative performance with the last rank

in the financial indicators such as return on net

worth, debt to equity ratio and asset utilisation

ratio. The firm also needs to improve its foreign

tradeand cost effectiveness to remain competitive

in the industry.

Table 16. Competitive Performance ofIspat Industries Ltd.


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4.1.9. National Steel & Agro Inds. Ltd.

National Steel & Agro Inds. Ltd., incorporatedin 1985, was formerly known as National SteelIndustries Ltd. It was set up in technicalcollaboration with CMI, Belgium; PhoenixWorks, Belgium; and Stein Heurtey, France. Itbelongs to Ruchi Group and is engaged in themanufacture of secondary steel products andtrading of agro products. The company’s plant islocated at village Sejwaya, in Madhya Pradesh. It

manufactures galvanised plain steel coils andsheetsand galvanised corrugated steel sheets. Theproducts manufactured by the company haveapplications in agricultural implements, electricalappliances, automobiles, air conditioning ducts,consumer durables, construction, electricalpanels, rolling shutters, engineering fabrications,packaging, storage, roofing, furniture, ductingand slide walls. Its Agro Trading Division startedin 1990, deals in raw and processed pulses, beansand other agricultural products. The company


exports its produce in the markets of South EastAsia, African Countries, Middle East and otherneighbouring countries.

The firm, National Steel & Agro Inds. Ltd.,stands ninth on the overall competitiveness index,with a 37.24 score as seen in table 17.Remarkably, it has the highest capacity utilisationlevels of 130 per cent, which has helped it tosecure a second position on the productivityindex. Its productive superiority is also evidentfrom the fact that its score (9.87) in the index isfar above the industry average score (6.16) (figure13). Furthermore, the firm has proved to be costeffective too as it has a 10.10 score and secondposition on the index mainly because of lesserfinancial and extraordinary charges. However,barring the consumer satisfaction index (thirdrank); it has not proved itself on any other index,getting last ranks in technology and environmentand human resource development. The firm hasliterally no expenditure on either research or ontechnology imports. Its indifference to HRD isalso visible with little or no expenditure on

various employee compensation schemes as wellas their training for betterment of skills. Thefirm’s stock market, sales and marketing andgrowth performance also needs attention in orderto be competitive in the industry. Notably, all thishas pulled its overall score down. It may thereforebe concluded that being competitive in theindustry implicates overall performance in all theindicators, since conducting well in only a few ofthem does not help.

Table 17. Competitive Performance of NationalSteel & Agro Inds. Ltd.


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4.1.10. Bhushan Steel Ltd.

Bhushan Steel Ltd. was promoted by a

takeover of Jawahar Metal Industries in 1987. The

name of the company was changed in the year

1992 to Bhushan Steel & Strips Ltd. and again in

June 2007 to Bhushan Steel Ltd. The firm has

consistently over the years expanded capacities

and added new products to its portfolio. Cold

rolled steel and galvanised steel remain its major

products. However, it also produces value-added

products like pre-painted galvanised steel, tubes,

wire rods, steel strapping and high tensile

strapping. It operates two plants located at

Sahibabad in Uttar Pradesh and at Khopoli in

Maharashtra. The company is also planning

backward integration by setting up a hot rolled

steel manufacturing plant in Orissa. This will

transform the company into a fully integrated

steel manufacturer, having operations ranging

from iron ore mining to steel products. Its

technical collaboration with Sumitomo Metals

helped it to become a significant supplier to

almost all original equipment manufacturers.

Table 18. Competitive Performance

of Bhushan Steel Ltd.

Indicator Weighted Rank

Score

(1) (2) (3)

Productive Performance 6.65 6

Financial Performance 3.51 10

Cost Effectiveness 7.88 12

Sales and Marketing Strategy 2.26 8

Stock Market Performance 2.60 3

Consumer Satisfaction 1.51 5

Technology and Environment 1.90 9

Human Resource Development 0.16 12

Foreign Trade 5.16 5

Growth Variables and Potential 2.85 8

Overall Competitiveness 34.47 10



Bhushan Steel Ltd. has secured the tenthposition (34.47 score) on the overallcompetitiveness index in a sample of 14 firms.The firm has an average performance in most ofthe indicator indices (table 18), although it excelsin stock market performance at third rank (2.60score) with a good earnings per share. It hasmanaged the fifth rank in two of the indices, i.e.,consumer satisfaction and foreign trade witharound Rs. 362 cr. foreign exchange earned forthe year. In the growth variables (eighth rank), thefirm has exhibited ample sales (34.03 per cent)and assets (40.90 per cent) growth in the last threeyears. However, its rank and score on the costeffectiveness and human resource developmentindices are dismal as it stands on the twelfthposition in both the indices. The high financialand procurement costs incurred by the firm andminimal expenditure on staff welfare and traininghave led to this poor performance.

4.1.11. Shree Precoated Steels Ltd.

Incorporated in 1985, Shree Precoated SteelsLtd. (SPSL) is part of the Ajmera Group ofCompanies. The company manufactures clad,plated or coated flat rolled steel products,aluminium plates, sheets and strips and doors,windows and their frames, etc. As a directcorollary to its commitment to quality standards,SPSL has already been accredited with the ISO:9001 Certificate by DNV Netherlands. Theregistered office of the firm is at Mumbai and itsmanufacturing facility is at Sanaswadi inMaharashtra. The products of the company areexported to Europe, the Far East, and the NorthAmericanmarkets. Its products are marketedwiththe brand names of Metacor, Metagalva andMetacolor. Metacolor plant is installed withtechnical collaboration from CockerillMechanical Industries, Belgium. This plant usesequipment like coating-laminating-embossing-printing stations, ovens combined with reverseroller coating technology for organic coating toproduce Metacolor.

There are some interesting observations whenthe competitive performance of Shree Precoatedis analysed. The firm has secured eleventhposition and 34.39 score on the overallcompetitiveness index making contrastingcompetitive performances inall the ten indicators.Shree Precoated has shown excellentperformance in foreign trade (first rank) as it hasthe highest (approximately 58 per cent) exportsearnings as a percentage of total sales in 2006-07.Besides, with first rank on the growth index, thefirm is expected to grow at a reasonable pace inthe coming years. It showcased more than 50 percent growth in the last three years (2004-06) interms of sales and net worth, whereas the samefigure for investments was 181.40 per cent. Alsoit is well insured for the future contingencies.However, the good performances in the abovementioned indicators of competitiveness couldnot offset its especially poor performance in fourof the indicator indices, namely productiveperformance (thirteenth rank), sales andmarketing strategy (tenth rank), technology andenvironment (tenth rank) and human resourcedevelopment (thirteenth rank).

Table 19. Competitive Performance ofShree Precoated Steels Ltd.


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4.1.12. Bhushan Power & Steel Ltd.

Incorporated in 1999, Bhushan Power & SteelLtd., is a fully integrated 1.5 m.t. p.a. steel makingcompany with turnover of Rs. 3873 crores with 7world class ISO: 9000 certified state of the artmanufacturing facilities in India and 2 overseas(1 in Nigeria and another in Nepal). It is a leadingmanufacturer of flat, rounds and long productsincluding value added products. It also producessteel wire rods and special alloy steels. Itsuccessfully commissioned a 1.5 m.t. p.a.greenfield steel and power plant in Orissa withHR Coil making facility, the first in the privatesector in Orissa recently. For the Orissa plant,technology and equipments are procured fromworld-renowned companies like Lurgi fromGermany, ABB Ltd., SMS Demag, Siemens, etc.The firm is selling its value added range ofproducts in secondary steel through a largedistribution network in India (comprising morethan 35 sales offices) and abroad.

Bhushan Power & Steel Ltd. is in the twelfthposition of the overall competitiveness index witha score of 34.23 (table 20). The most outstandingcompetitive performance of the firm is in terms

of its productivity, where it has secured firstposition with 10.26 score, mainly due to thehighest labour productivity. Also its HRDinitiatives are about average as it is in the fourthposition on the index with health and safety of theemployees’ certifications to the plants of the firm.The areas where the firm needs greatimprovement in order to strengthen its overallcompetitive position relates mainly to thefinancial indicators such as debtors turnover ratio,finished goods turnover ratio and asset utilisationratio, cost effectiveness, sales and marketingstrategy and stock market performance.

Table 20. Competitive Performance ofBhushan Power & Steel Ltd.


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Uttam Galva Steels Ltd., an ISO 9001- 2000ispepune.org.in/jispe308pdf/BURANG3.pdfSales and Marketing...

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