Interviewed by Ritwik Mukherjee
The pandemic may have put temporary brakes on realty and infra projects, but a strong global demand for steel can already be seen. A surge is demand for steel from domestic buyers is also expected. Besides, the newly approved Production-linked Incentive Scheme for speciality steel is turning out to be a major booster for ramping up production capacity by steel makers. However there still remains some pain points such as the ambiguity in duty structure and in iron ore production for example.
Speaking to The Corporate Review exclusively, Satish Kumar Agarwal, Chairman and Managing Director, Kamdhenu Group, takes a 360 degree look on the Indian steel and speciality steel sector, especially TMT Bar segment.
Excerpts
RM: How cost competitive is Indian steel sector in these challenging times (economic slowdown) triggered by COVID 19?
Agarwal: The impact of Covid-19 has been challenging for the Indian steel sector. However there is a strong global demand and with expected surge in demand from domestic buyers, the prospects for the sector looked rosy. With the Union Cabinet approving Production-linked Incentive (PLI) scheme for specialty steel, the sector is expected to see a boost in production capacity and hence become more competitive in pricing as well.
RM: With COVID-19 pandemic, an unprecedented toll has taken on the construction industry. The nationwide lockdown had not only put brakes on the ongoing real estate and infrastructure projects, but the allied TMT Steel industry had also suffered a setback. As the lockdown eases, are the stalled projects both in construction and infrastructure along with capital expenditure plans coming back on track and is demand for steel items recovering lost ground?
Agarwal: While the pandemic had indeed put the brakes on on-going real estate and infrastructure projects, demand for housing has ballooned. With the lockdown easing, stalled projects are being revived and we expect a surge in new projects to cater to the increasing demand. With capital expenditure on infrastructure creating reviving, the demand for steel items will not only recover it will see an exponential growth.
RM: Could you please throw some light on how Kamdhenu TMT is tweaking its plans and strategies to cope up with the new situation and grow even in these challenging times?
Agarwal: Kamdhenu has been focussed on taking care of its employees/dealers and supporting the government authorities in whichever way we can under the new normal. No Kamdhenu employee had been let off and no reduction in salary has been implemented. We have rolled out several initiatives to help our people both in cash and kind. We have also donated to the PMCares fund as well as to several state and local administrations. We have activated our social media platforms to spread awareness on precaution and importance of vaccination to help the national effort. We will look at tweaking business plans and adapting strategies in light of the new normal at an appropriate time.
RM: The difference between the conversion cost and cost of steel production, inverted duty structure resulting in “royalty on royalty”, the cost burden on the minerals sector and cess on domestic coal are some of the issues that the industry is grappling with. What is your take on this?
Agarwal: India is the global number 2 when it comes to steel and stainless steel. The holistic approach adopted by the government and policy support have contributed to this status. However there still remains some pain points such as the ambiguity in duty structure and in iron ore production for example. The government must take appropriate at the right time and in consultation with the various stakeholders so that sectoral growth and potential of the sector are realised.
RM: How is the overall TMT Bar market doing in India and how do you see the market growing over the next one year? Where does Kamdhenu TMT stand vis-a-vis other industry players?
Agarwal: TMT bars have huge application and is a growth area for the sector. Demand for TMT has been going strong over the years. With covid related restrictions currently lifted in a majority of the states, demand is reviving gradually. If the massive vaccination drives and other interventions adopted by the government in the fight against Covid-19 are successful and another lockdown like restrictions can be avoided, the TMT bar market will see a high growth trajectory on account of latent demand and increased demand for residential houses. Kamdhenu is the market leader when it comes to TMT bars due to its affordable quality. Our business model ensures that we are well prepared to expand rapidly and deliver assured quality products to buyers.
RM: What is your current capacity and any plans to ramp up capacity in near future?
Agarwal: To meet existing demand, we have an installed capacity of around 38Lakh MT TMT using the latest technology and world class manufacturing process for high grade pure FE500 & 500D. The enhanced strength and ductility of our product conforming to BIS standards makes it well suited for use in modern construction and there is high demand. We will be ramping up our capacity to 50Lakh MT in the next 2 years through the franchisee route.
RM: How many dealers- distributors do you have in your chain? Any plans to expand on that?
Agarwal: We have a committed chain of over 11,500 dealers and distributors throughout the country out of which 7,500 are exclusive for steel business. We are looking at avenues to expand our dealer-distribution network to serve more customers and deliver more high quality products at affordable costs to discerning buyers.
RM: What about your paints business? It must have been hit hard by the pandemic as well. How is this business doing and what are your plans in this space?
Agarwal: The demand for paint has seen a marked increase from individual buyers since the first lockdown was in place. This is mainly due to people staying at home and engaging in home improvement and renovation projects. However for institutional buyers, the lockdown led to shutting down of work and hence there has been reduced demand from them. Paint is an exciting business and we are looking for growth avenues in the sector.
