The Hindu Business Line : Vesuvius India to focus on exports

IN just a decade of its existence Vesuvius India Ltd has consolidated its position as a top player in the Indian refractory industry, maintaining a leadership position in flow control refractories.

In the April-June quarter, Vesuvius India has registered an impressive topline and bottomline growth. In the years ahead, exports will be a major growth driver. The company plans to make its resources available to parent group's global operations.

In an interview with Business Line, the Managing Director of Vesuvius India, Mr Biswadip Gupta, talks of the refractory industry in India, the company's growth plans and the challenges in the days ahead. Excerpts from the interview.

How has the refractory industry fared in the last few years and what is the outlook for the future?

The industry is doing well and that is evident from the quarterly results of the half-a-dozen major players in the business. However, overall profitability and capacity utilisation remain pretty low. Companies that make special refractories are running at full capacity.

The capacities of general, mass volume refractory manufacturers remain underutilised. Besides, even though the steel prices go up, we refractory makers cannot hike our prices though our suppliers can. For steel companies, we are important but small in the value chain. As such, their buying pattern does not reflect the value we offer. Also, suppliers to the refractory industry are themselves strong players. Most of the raw materials are obtained from China and prices have gone up by 20-25 per cent in the last three months.

Exports will be a major driver of growth for the industry. For Vesuvius India, too, exports are a major part of our business strategy. There will also be tremendous organic growth on the domestic front. The steel sector has to grow and they will need refractories. Besides, the glass, aluminuim and petrochemicals sectors can be tapped by Indian refractory makers.

What lies in store for the company in the future?

The company's focus is on sustainability. Performance has to be repeated quarter on quarter. We started with continuous casting refractories 10 years ago and went on to manufacture slide gate refractories.

Thereafter, we went into the manufacture of monolitics and then opened up on the non-ferrous front by acquiring a crucible plant at Mehsana.

Our strategy has been to spread the basket, ensure economies of scale, hedge risks and build blocks for sustained growth. From selling products, we have now graduated to selling solutions. In the years ahead, Vesuvius India will emerge as a hub for providing support to the Vesivius Group in terms of products, services, knowledge and solutions. We are happy that the topline growth is commensurate with the bottomline growth. This shows that the business is sound and stable.

What are the challenges ahead?

The first challenge is of indiscriminate imports that are a result of lower duties.

Second, China, which is a major raw material supplier to Indian refractory manufacturers, has withdrawn all benefits on raw material.

As a result, raw material prices have gone up by around 25 per cent. However, all benefits are available to exports of the finished product.

Thus, it is cheaper to buy the bricks from China instead of the raw material. There is also pressure from steel plants because of our underleveraged positions.

Finally, the refractory industry fails to attract good managerial talent as it is not a glamorous industry. The last issue needs to be addressed urgently.

In the years ahead, what is going to be the formula of success in your industry?

Stick to your customers. Work on the premise that the market will give you the price. Work on cost-effectiveness, support systems and rejections. Be customer-centric and try to be global as quickly as you can. Unless you are global, you cannot survive.

How are you placed on the exports front? Which are the major markets for your company?

Vesuvius India does not secure export orders on its own. The Vesuvius Group has a central ordering system. They tell us where to export. Our products go to Europe and South Africa. Last year, our export earnings stood at Rs 10 crore, up from Rs 3 crore in 2002. We expect good export growth this year as well. We are looking at making our resources available to the Vesuvius Group. Over the years, exports will be crucial to refractory companies.

How do you foresee competition in the days ahead?

There is enough room for all players in the industry to survive by catering to niche markets, such as monolitics, dolomite bricks, silicon bricks and flow control refractories.

Have you got any expansion plans on the anvil? If yes, how do you propose to raise funds for the purpose?

All our plants are on expansion mode. We need to double our capacity in flow control refractories in the next two years.

Our Mehsana plant will be the sourcing hub for South East Asia and the Asia Pacific. Expansion plans in Kolkata and Salem have been implemented. The mode of funding the fresh expansion plans is being worked out.