Expect more surprises, says Tata Steel chief

Tata Steel is on a high. Helped by rising steel prices, its profits in the first nine months almost touched a record Rs 553 in 2000-01.

Managing Director B Muthuraman speaks with Business Standard on the company's future:

How do you see your first 18 months at the company?

Year 2001-02 saw events which further accentuated the troubles already facing the global steel industry: safeguard duties imposed by the US, and increasing protectionist stance adopted by other developing countries.

In this setting, Tata Steel has been among the better performing steel companies. It has shown the way for winning in a downturn.

Personally, it has been a year of great challenge. It was a period of learning and, in some ways, it is good that such a period came about early in my career as the CEO.

What are the factors that would impact Tata Steel's growth?

We have very modern and updated manufacturing facilities which provide and opportunity for product mix enhancement.

Many of our recently added facilities match with the growth of the value-added segment in India. There are also continuous efforts towards cost reduction and a powerful vision which employees have embraced.

On the negative side, we do have a large workforce resulting in a higher than desirable level of employee cost.

This factor is appreciated by all, including our union leadership and efforts are on to find out acceptable solution.

How do you see the dynamics of the steel industry changing over the next few quarters?

The global steel industry has a moderately positive outlook in the next 1-1.5 years. Global consumption is expected to rise 2 per cent this year, and by 3.5 per cent next year. Demand growth in China continues unabated.

Japanese firms have put a curb on the drastic price-cutting they were resorting to. Production has also been cut back.

The US economy has recovered faster than what most analysts had predicted. This has been responsible for prices firming up in grades that the CIS countries dominated.

The exemption of Indian companies from the US sanctions, coupled with booming prices, has given an outlet for galvanised products.

Domestic demand will ride the mild resurgence in construction activity and the relative turnaround in the auto sector. Consumer durables continue to maintain strong growth.

Interestingly, the fallout of the restrictions imposed by the US, EU and now China ironically seem to be having a positive impact on steel prices.

Restrictions would have little impact on long products but may cause a temporary surfeit in flat products. However, in spite of the duties, Indian steel is still competitive on US shores with the current rise in US domestic prices. Thus, by and large the steel sector is looking up.

What does the company propose to do with its huge surplus cash?

Our vision is to seize the opportunities of tomorrow and create a future that will make us EVA positive. Our surplus cash will find its way into new businesses that will revitalise the core business for a sustainable future.

Analysts are predicting record profits for Tata Steel this year. Most are saying you will cross Rs 800 crore (Rs billion) (Rs 8 billion) in profits. Comments?

(Laughs) I cannot comment on that. The last quarter should be better than the third (Rs 549 crore (Rs billion) -- Rs 5.49 billion -- in post-tax profits) as it has been traditionally.

I think we will have a lot of surprises in store when we announce the fourth quarter results.

What about the non-steel businesses of Tata Steel?

We are reviewing our entire portfolio. This includes the different subsidiaries of Tata Steel, and even the ones within the company such as ferro-alloys, bearings and tubes.

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