Sujana Steels

8/10/2019 Sujana Steels

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Analysis of Macros and Micros

1) Give a brief description of your given Industry. Who are the servedcustomers, and what value do the rm deliver

Steel industry results in the overall economic growth in the long term of the country. Also, steeldemand, being derived from other sectors like automobiles, consumer durables andinfrastructure, its fortune is dependent on the growth of these user industries. The Indian steelsector enjoys advantages of domestic availability of raw materials and cheap labour. Rawmaterials i.e. Iron ore also available in abundant uantities. This provides major cost advantageto the domestic steel industry.

The Indian steel industry is largely iron!based through the blast furnace "#$% or the directreduced iron "&RI% route. Indian steel industry is highly consolidated. About '() of the crudesteel capacity is resident with integrated steel producers "IS*%. #ut the changing ratio of hotmetal to crude steel production indicates the increasing presence of secondary steel producers"non!integrated steel producers% manufacturing steel through scrap route, enhancing theirdependence on imported raw material.

India+s steel production is estimated to be around (( million tonnes "-T% in ( / and theproduction is e0pected to reach 12 -T by ( (. The per capita steel consumption increasedfrom /3 kilograms "kg% in ((3!(2 to 24 kg in ( ! . The 5orld Steel Association hasestimated steel consumption in India to grow at five per cent in ( /. Steel producers may see aspurt in demand in the medium term if the Indian 6overnment implements its 7S8 trillioninfrastructure investment plan. India+s steel!making capacity is slated to cross (( -T in ( /which will re uire about '(! 1( -T of iron ore.


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!ollowing are the ma"or customers of #teel Industry $

%) Industry characteristicsa. #i&e

*resently, steel contributes to nearly two per cent of the gross domestic product "6&*% and employsover 2((,((( people. The total market value of the Indian steel sector stood at 7S8 21.9 billion in

( and is e0pected to touch 7S8 42./ billion by ( '. India+s per capita steel consumption stood at21.9 kilograms in ( /, according to a 5orld Steel Association report and is e0pected to rise withincreased industrialisation throughout the country.In the year ( ! / the Steel rolling Industry had combined sales of 1. 1 crore.

: India+s iron and steel industry contributes about ) of gross domestic product, or about 7S& (billion to the country+s 7S& trillion economy.: India is now the fifth!largest producer of steel in the world, behind ;hina, o. steel producing country.: State!run Steel Authority of India is the largest producer, with capacity of /.9 million tonnes. TataSteel, the world+s >o. 9 steelmaker, has capacity in India of 1 million tonnes, while


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Regional governments have signed memorandums of understanding for planned capacity of 1'million tonnes.: India has immense scope for increasing consumption of steel. ;urrent per capita consumption isaround 3( kg, compared with (( kg in #ra=il, 2( kg in ;hina and a global average of 49 kg. Steeldemand is e0pected to rise 2!' percent annually until ( 4! (.

b. 'orters ( !orces $

*orters 2 forces are applicable to Steel Industry as mentioned in the above diagram.. Threat of new @ntry

As Steel industry is a high investment sector new entrants are difficult but as government hasbecome lenient more and more foreign players can enter in Indian -arket in future

. ;ompetitive Rivalry As the customers of Steel industry are growing in number the bargaining power of steelindustry may go down because of competition. #ut as there is a large scope of developmentin Indian infrastructure rivalry is supposed to be increased.

/. Threat of substitution Aluminium is seen a bigger threat to steel industry

3. Supplier *ower Suppliers possess less power than Steel industry as they are mostly fragmented and the ease

of substitution is pretty high.2. #uyers power


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The Steel Industry is very few in India and thus has got an upper hand. The steel Industry isalways backed by 6overnment regulations. Steel Industry forms the backbone of a country+sinfrastructure and other industries like automobile and has a booming market. It is e0tremelyprice sensitive. Bas a higher power of substituting raw materials and suppliersCow cost of substituting.

c. ear on ear growth * last ( years)India+s per cent growth in steel production in the last ve years was secondonly to -hina among the top ve producing nations. In the last ve years,domestic crude steel production grew at a compound annual growth rate of /.0

. #uch an increase in production was driven by 0.2 growth in crude steelcapacity, high utilisation rates and a / growth in domestic steel consumption,India+s production grew constantly in the last ve years from (/.2 34 in %552 to6 .( 34 in %550, 60 34 in %515, / .6 34 in %511 and /6./ 34 in %51%.India is pro"ected to grab the second slot in the world of steel production within

a year or two on new capacity e7pansions, mainly through the brown eld route. 4he capacity utilisation during %51 18 stood at 2% . 9owever, steelconsumption during the year grew by "ust 5.6 , the survey said.

-onstruction sector accounts for around 65 of the country:s total steel demandwhile the automobile industry consumes 1( . ;oth the sectors were plagued bya slowdown in the economy.

4he consumption of steel depends on the growth of the economy. < soundeconomy ensures higher consumption. =ser industries such as construction andconsumer durables had a bad run last scal resulting in a dip in demand.

4he government e7pects the countries installed steel production capacity to goup to %55 34 by %5%5 from around 05 34 now.

d. 9ow many competitors>!ollowing are the name of the -ompeting rms in #teel ?olling Industry $

e. 3ar@et shares of the competitors!ollowing is the mar@et share on the basis of 3ar@et -apitali&ation $


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3ar@et share on the basis of Aet #ales are as follows $

f. Who is most pro table>


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!rom the below table we can see that in the year %51 18 Balyani #teels hasbeen the most pro table

g. Who has * impression will do) the lowest cost structure 4he following table shows the cost structure of the top ( players $

9ence we see that the cost structure of Balyani #teel is the least as compared toother rms.

h. #upplier industry characteristics and power 4he following Industries are the suppliers for steel rolling Industry $

'ig IronCwrought Iron-oal Industry

i. ;uyer power

1. 4he #teel Industry are very few in India and thus has got an upper hand%. 4he steel Industry is always bac@ed by Government regulations.

. #teel Industry forms the bac@bone of a country:s infrastructure and otherindustries li@e automobile and has a booming [email protected]. D7tremely price sensitive(. 9as an higher power of substituting raw materials and suppliers6. Eow cost of substituting

j. What can substitute your product3aterial substitution has been one of the toughest challenges facing the steelindustry. 'lastic, aluminium, wood and bamboo have been replacing steel in

various application areas. !or the last one and a half decade, the automobilesector, which holds a % %( mar@et share in global steel consumption, has


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been toying with the idea of increasing aluminium use to lighten weights, boostfuel eFciency and cut down emissions. #tudies reveal that aluminium isincreasingly nding its way into hoods, doors, fenders, dec@ lids, lifts, tail gatesand body structures in cars and truc@s. Its use is increasing at ( per annum.

) What are the macros that a ect your industry>

a. 'olitical> 9ow>

3inistry of #teel, Government of India, is considering setting up a strongresearch and development *?H ) missionCcentre, virtual or otherwise, to step upinnovative research and technology development in the country:s steel industry.

4he -entre:s #teel evelopment !und *# !) and 'lan #cheme presently providenancial assistance for ?H in the sector. =nder the # ! scheme, 2% ?H

pro"ects have been approved with total pro"ect cost of ?s 6// crore *=#J 11%.61million) where in # ! assistance is ?s /5 crore *=#J 61.(8 million). =nder the'lan #cheme, eight pro"ects have been approved with a total cost of ?s 1% .%/

crore *=#J %5.(1 million) where in government assistance is ?s 2/.%2 crore *=#J18.(1 million).

In order to increase industrial activity, the Government of India, through the3inistry of #teel, has signed 3emorandums of =nderstanding *3o=s) with all thema"or steel producing 'ublic #ector =nderta@ing *'#=) companies such as #


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nancial assistance is provided from #teel evelopment !und forthis purpose. D orts are being made to further augment ?Hactivities in the country.

2. Interacting with #tate Governments to provide power at

reducedC concessional tari s especially to mini steel plants allover the country. #imilarly, the freight rates adopted by the?ailways have been rationali&ed after interaction with the ?ailway;oard and freight cost on raw material transportation for steelproducers is reduced.

0. ?ationali&ing the classi cation of co@ing coal in consultationwith the -oal 3inistry so as to reduce the impact of royaltypayable on this basic raw material. Import duties on several rawmaterials, such as, scrap, ships for brea@ing, co@e, non co@ingcoal etc. used by the steel industry has been reduced steadilyover the past 8 ( years.

Import 'olicy Induced istortions in the -ompetition in the 3ar@et

4he government+s scal policy has been somewhat supportive to the domesticsteel industry and against the interest of the consumer industriesM these could beconsidered to be anticompetitive.

4a@e for instance the import duty on steel, which remained at very high levels fora long time, at %( percent till Nanuary %558. It is only now that anti inOationaryaction has led to import duty being waived.


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industry also gives encouragement to the permanent employment to the peoplebut on the other hand it divides the area in to the rural and urban sector becausethe industry is only in the particular area which leads to the particulardevelopment of that area only and not overall the development. ;ecause of thewor@ing conditions the people which are employed in the steel industry facedmany health problems which are incurable in the nature and many industries arenot paying the attention on the health of the employees.


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4here is still plenty of room for improvement to bring this down to levels near&ero, but it is not e7tremely high.

Interestingly, steel does not have that high of an impact on global warming asmany people focus on.Eoo@ing at the chart above comparing e7tremely common materials, steel hasabout an average environmental impact.

#teel is also 155 recyclable thereby greatly reducing the carbon footprint andenvironmental impact.


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Dnvironmental managementKDnvironmental waste management means Q3anagementQ as the


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as blast furnace, co@e oven, sinter plant, refractory plant, etc. to get a rst handinformation on the process and practices and also to carry out stac@s andambient air Luality monitoring to establish the nature, Luality and Luantity ofpollutants, emitted by the source, evaluate the performance of pollution controleLuipment if any, and also to compare it with emission standards so as to assessthe necessity of controlling the emissions either at source by suitably altering theprocess parameters or by improving the eFciency of pollution control measures.Dnvironment 'rotection


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#u"ana spearheads its service with #mart#teel. 4hey also have 434 bars rolledwith world:s best proven technology from 4herme7, Germany. 4hey have thelargest 434 long steel products manufacturer with widest range in India. When itcomes to #tructural steel they are one of India+s fastest growing players.Kalyani Steels

!ollowing are the products of Balyani #teels $?olled ;ars for


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c. Growth


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d. !inancials $;#,' HE , -ash Oow, #toc@ price, ?PI, 3argins , !i7edcost , !inance charges ,D7port #alesC4otal sales, ?H C#ales, ;oo@Ralue of stoc@ vs


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() 9ow sustainable is the competitive advantage of the company and why>

Wor@ing -apital ?atio #u"ana en"oys a higher ratio of around % ascompared to 1 of industry *9)

Suic@ ?atio #u"ana has a high Luic@ ratio of around %.( *9) -?? #u"ana has higher ratio of 5.5 ( as compared to 5.51 of competitors

*9) Aet ebt change 4he debt has increased but it has increased at a slower

pace than its competitors *9)

Sujana Steels

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