‘We are concentrating on greenfield expansion’

P K SINGH, outgoing chairman and managing director of state-owned Steel Authority of India (SAIL), says a large company has to first focus on problems within in dealing with sectoral stress. Edited excerpts of a talk with Megha Manchanda & Jyoti Mukul.

There was an improvement in your financials in the past two quarters, after losses for the earlier 10. What is your assessment for the coming period? And, as you retire, your view on the company’s focus?

I came in the last quarter of 201516. In that full year, SAIL made a profit before tax (PBT) of ~72 billion but, operationally, we were making a loss. The sector was also not doing well; there was a lot of dumping from other countries. First, we started making operational profit and that continued for 2016-17 and 2017-18. With the second quarter of last year, we also started making a cash profit.

It was all gradual. I give credit to my team, all employees and stakeholders. We had submitted a turnaround plan to the government and it has been on similar lines. In the third quarter of FY18, we made a PBT, even if a modest ~820 million. In the final quarter, a profit. The momentum will go on for the coming quarters. Our production in 2017-18 was 14 million tonnes and we are targeting 17 mt this year.

One factor is SAIL capacity but from the demand side, did the market turnaround contribute?

It is not the increase in the price of

steel that has led to improvement in our performance. We had an improvement (operational revenue) of nearly ~70 billion last year due to the price increase. This is not because of increase in the demand for steel but mainly due to increase in the price of raw material, of which ~50 billion was only on account of coal.

Margins improved because of our internal action. High-end products like rails, plates, etc, helped. And, many more actions and initiatives in marketing. On manpower, we have reduced cost, ~3.7 billion in the past financial year. We have identified inefficient routes in the company, where we have drastically reduced costs. We shut down four blast furnaces in all under our turnaround plan; these plans will continue.

The challenges in continuing with these plans?

In large companies like ours, internal action plans are more important than the market. What the top management decides has to be followed by the entire employee base. The steps taken have to be continued -- for instance, cost reduction and efficiency has to be brought in. At the production end, we must reduce Sail Semis (blooms, billets and slabs), focus more on the finished product, more on high value items, more production of rails, plates and cold-rolled products.

You talk of producing more highend products but the joint venture with ArcelorMittal for specialised auto grade steel has not taken off.

These joint ventures (JVs) take time. Many commercial issues are involved. The time period of the proposed JV is 25-30 years and one has to be very careful about future market conditions, challenges, etc. We are very close to a definitive agreement with ArcelorMittal; it might happen in the next one or two months. We have already started exploring the various sites where the plant would be set up.

Both companies have to ensure the venture remains profitable for the next 25-30 years and neither exits the JV. Finished goods export is an area where we are concentrating on and trying to enter Europe.

The world over, external issues have affected steel companies. So, what makes you say that internal plans are more important than the external market situation? Has your challenge in SAIL been different from others?

If you safeguard yourself internally, the impact of external factors would be much less. We have tremendous strength within us and the way we managed our finances in the past two-three years in the given circumstances, we could turn around the company. A large number of non-performing assets (bank loans gone sour) that have happened in the sector is because of turmoil; dumping has taken place from outside. More important are the internal actions so that, as a company, you remain competitive. Such blips will happen in the future and companies should have the strength to sustain that.

Insolvency in the steel sector has led to turmoil and realignments but SAIL has kept away by not bidding for any of the insolvent companies. Why, and what are the lessons?

In any business, problems will happen and there should be policies in place to take care of those. If there is no policy, that business or unit becomes sicker and, ultimately, it is all taxpayer money that is wasted. These initiatives by the government should continue; advanced countries also have such measures in place.

We already had invested ~700 billion on modernisation. Our priority is to ramp up production from these units, attain 21 mt (annual) production and regain the glory that we are the country’s number one producer; improve our top line and reduce our cost of production. We should first concentrate on our internal issues. We do not have the time to look at units outside. We are concentrating on new projects.

Any regret as you demit office?

I wanted more speed. It is very important. The market will not wait. We should always be ready. Our speed should not determine the market but our speed should be determined by the market.