Financial Daily from THE HINDU group of publications
Wednesday, Nov 27, 2002
`Perform or perish' diktat has helped us: Indian Seamless MD
PUNE, Nov. 26
THE Pune-based Indian Seamless Steel and Alloys Ltd (ISSAL) has for the first time since inception in 1993 recorded profits during the second quarter of the current financial year. The company posted a net profit of Rs 5 crore on a turnover of Rs 107 crore during the quarter.
Mr O.P. Kakkar, Managing Director, ISSAL spoke to Business Line about the turnaround.
Excerpts from the interview
How did you bring about this turnaround?
This turnaround has achieved through a multi-pronged strategy that the company adopted and which has been under implementation for the past six months. The management gave a straight forward communication of `perform or perish to the employees.'
The company signed a wage agreement with its employees, which is applicable from January 2002, though the agreement was signed during June 2002. The second part in the strategy included a survey of the "total health of the plant" to improve its productivity.
Danielli of Italy undertook this exercise and suggested corrective actions to be taken. ISSAL has adopted many technological innovations and that has shown in the results.
In fact this level of performance would have been achieved during the first quarter of the current financial year itself had the plant not been closed for 13 days due to non-availability of power. This reduced the production level by about 6,500 tonnes. We are dependent on the MSEB grid and even if we own a captive power plant, the requirements of the plant far exceed the captive plant capacity.
For an electric arc, the consumption of power is close to 4,000 MW which can supplied only by a grid.
How is your order book position?
Currently the capacity of the plant is booked for the next two months. Usually in the steel segment, the orders are given about 20 days in advance and since our capacity is booked it shows that the market is looking up. The capacity of the plant is 1,90,000 tonnes per annum and we already have firm orders for production of 30,000 tonnes per month.
Of this about 12,000 tonnes would be taken up by ISMT (Indian Seamless Metal Tubes) and the rest would be sold in the domestic market. ISMT is the single largest buyer of ISSAL and provides it with the base operating load.
How is the company likely to perform in the second half of the year? Will it be able to sustain the current performance?
During the first half of the current fiscal, we have achieved a turnover of Rs 193 crore and we are positive of touching a turnover of Rs 400 crore plus by the end of the current fiscal.
In the Indian scenario, about 40 per cent of the business takes place during the first half. The third quarter has begun well and the outlook is very positive.
Do you have any plans to increase capacity?
ISSAL is planning to increase its capacity from the present 1,90,000 tonnes to 2,50,000 tonnes within the next two years without any major investment. The investment would be to the tune of only Rs 15 crore which is to be carried out in a phased manner and this would be utilised for equipment purchase.
Does this mean that you will be adding manpower?
We are a young company, about 10 years old, and we have a well-controlled manpower. Our total strength is close to 500 employees and we are not looking at addition as ISSAL is looking at only equipment addition and process modification.
What about products? Any plans to add to your existing portfolio?
The company is looking at manufacturing different kinds of value added products and we are also looking at increasing our alloy steel mix as against the carbon steel. At present the ratio is 50:50 and we are looking at 70:30 ratio. This is because alloy steel has better realisation in terms of value and has specific applications unlike carbon steel, which is used for any application. The products that we are looking at include tool steel (engineering tool for machines), spring steel (coil springs for automobiles) and bearing rays. The bearing rays have a huge export market and the other products include manufacturing of tubes of smaller diameter.
Currently we have tubes with diameter ranging from 65 to 22 mm and the company is looking at tubes with lesser diameter of about 9 mm.
Are there any developments on the export front?
We had exported about 8,600 tonnes during the first half of the current financial year. ISMT, the parent company, is estimating an export of 35,000 tonnes for the current year which would be about one-third of the total turnover. ISSAL is currently exporting to Europe, the US, Indonesia, Taiwan and trial orders from China have also come in.
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