After selling off steel business to the Tatas, Usha Martin turns focus on consolidation

Shobha Roy Kolkata | Updated on September 21, 2019 Published on September 21, 2019

Rajeev Jhawar, MD, Usha Martin   -  Business Line

Usha Martin Ltd (UML) will focus on consolidating and strengthening its wire rope business over the next three quarters before embarking on organic and inorganic growth opportunities once demand revives.

According to Rajeev Jhawar, Managing Director, UML, the company — with its deleveraged balance sheet post the sale of its steel business to Tata Steel and with healthy cash flows — will look to strengthen its position among the top three wire rope players globally.

The company claims to be among the top five wire rope players globally. “With the deleveraged balance sheet and healthy cash flows expected out of the business, we hope to grow both organically and inorganically over 3-5 years and rank among the top three players globally,” Jhawar told BusinessLine.

Growth and funding

Jhawar, however, clarified that any growth — organic or inorganic — will be funded largely through internal accruals.

“I would never like to grow on the strength of taking debt; it would be more on internal accruals and a very conservative financial commitment,” he said.

As on March 31, 2019, UML’s standalone turnover was close to ₹1,700 crore, while on a consolidated basis it was around ₹2,500 crore. The Ebitda on a consolidated basis was around ₹250-300 crore.

Impact of slowdown

The current slowdown, both in the domestic and international markets, might impact UML’s topline this year. However, once demand revives, the company expects to be able to clock 10-15 per cent topline growth and “a decent growth in profitability” in about three years.

UML’s wire rope business manufactures wire, strands, LRPC and wire ropes, which cater to various industries, including steel, infrastructure, construction and auto.

“This year, steel and the other sectors are going through a slowdown; it will affect our topline. But we are trying to push volume growth through exports;and with various cost-cutting measures, we hope to achieve ₹250-300 crore Ebitda this year,” he said. Exports account for about 40 per cent of turnover, and the aim is to take it to 50 per cent.

While the domestic market will be the prime focus, since the company has a manufacturing base, flexibility between domestic and export switch-over will help in better capacity utilisation, he clarified.

The company has a manufacturing capacity of around 230,000 tonnes per annum across its two facilities in India — at Ranchi (Jharkhand) and Hoshiarpur (Punjab) — and three overseas units in the UK, Thailand and Dubai.

Usha Martin recently sold its one million tonne integrated steel plant at Jamshedpur to Tata Steel for around ₹4,200-4,600 crore. UML’s steel business had a producing iron-ore mine, a coal mine under development and captive power plants.

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Published on September 21, 2019
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