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BW Businessworld

Steadfast As Steel

Tata Steel is focusing on conserving cash and ensuring adequate liquidity to ride out any potential disruptions.

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Established in 1907 as Asia’s first integrated private steel company, Tata Steel is one of the most profitable and low-cost producers of steel in the world today with captive iron ore mines and collieries located near its manufacturing facilities in Jamshedpur and Kalinganagar. Its comprehensive portfolio of products and brands caters to multiple industries and segments making it an integral part of the everyday lives of Indians.

Undoubtedly, FY 2019-20 was a challenging year not just for Tata Steel, but for most businesses across the globe. Almost all countries faced a slowdown in economic growth amidst rising trade tensions and policy uncertainties. This had its bearing on the steel industry as well, in terms of weak demand and falling steel prices. Making matters worse, the Covid-19 outbreak in early 2020 brought global economic activities to a near standstill as nationwide lockdowns and social distancing norms were enforced to contain the spread in the affected countries. Despite these challenges, Tata Steel managed to increase deliveries, remain profitable, launch new products and retain its position as the largest steel manufacturer in India.

“Our crude steel production in India grew about 8 per cent while deliveries increased by 4 per cent. The ramp-up of operations at Tata Steel BSL and the integration of the acquired steel business of Usha Martin with our subsidiary Tata Steel Long Products enabled us to continue delivering improvements in operating KPIs, which translated into better profitability,” said T.V. Narendran, Chief Executive Officer and Managing Director.

TATA STEEL EUROPE: “We launched a transformation programme at Tata Steel Europe to make our European operations simpler, leaner and sustainable, and generate savings across multiple initiatives. Tata Steel Europe showed a turnaround in performance with an EBITDA of about £8 million in the fourth quarter of FY 2019-20. However, profitability was affected by weak market conditions aggravated by the pandemic impact,” Narendran added.

Tata Steel is focusing on conserving cash and ensuring adequate liquidity to ride out any potential disruptions. That is why the company has pivoted business decisions on cash flows and successfully driven cash neutrality in its operations by reducing spend, managing working capital and curtailing capital expenditure. “Our liquidity at the end of FY2019-20 remained robust at Rs 17,745 crore, including cash and cash equivalents of Rs 11,549 crore.

We have also raised additional funds to build a contingency buffer,” said Narendran.

Talking about the company’s growth strategy, Narendran says: “In line with the Tata Group objective, our growth strategy is built on three pillars -- simplify, synergise and scale. We continue to focus on making our India operations stronger. Tata Steel BSL is integrating well with Tata Steel. We are also in the process of amalgamating Tata Steel BSL with Tata Steel to simplify operations and derive synergies.”

With the acquisition of the steel business of Usha Martin through its subsidiary Tata Steel Long Products, the company aims to enlarge its footprint in the long products market. “We are focused on integrating and stabilising the various operating units and realising identified synergies in various areas,” adds Narendran.

The road ahead for Tata Steel is certainly challenging. Says Narendran: “Because, we operate in a highly cyclical industry. However, Tata Steel has always risen to challenges and emerged stronger through down cycles, which bears testimony to its future readiness. Since 1907, the grit and determination of our people have enabled us to overcome adversities and we believe that this time too, we will learn, adapt and take Tata Steel to greater heights,” he says.