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TATA STEEL: Steely Resolve

Renowned for its path-breaking policies, Tata Steel has played a key role in boosting the TATA brand’s performance.

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The economic slowdown in 2019 caught the major steel producers of the country including Tata Steel, in its grips impacting production. The Tata major, however, was able to push production and manage revenue thanks to the acquisition of Usha Martin and Bhushan Steel (now known as Tata Steel BSL) in 2018.

While the revenues decreased from Rs 18,498 in March 2019 to Rs 14,487 in September 2019, this year’s steel consumption has also slipped due to an extended monsoon, the trade war and importantly, due to the liquidity crunch in the economy. Steel prices have plunged 34 per cent. With poor import numbers, Tata Steel along with other major steel producers had to cut production to stay afloat. “The business environment in India and other geographies continued to be challenging and weighed heavily on steel prices. Tata Steel worked closely with customers across business segments to drive sales and maintain volumes,” informed TV Narendran, CEO & Managing Director, Tata Steel.

The company has received various accolades, including that of a 'Great Place to Work'. Renowned for its path-breaking policies, Tata Steel, a key segment of the Tata brand, has played a pivotal role in boosting the brand’s performance.

The company has increased its consolidated production by 11 per cent to 7.15 million tonne in its first quarter. The company has consolidated its business verticals into four major segments, including long products, mining, downstream and infrastructure, it has also begun to close its 100 legal entities. To stay afloat in its mining business after its Sukinda Chromite mine lease expiry, Tata Steel is looking out for better business models in terms of its chrome ore business to keep serving its global customers. However, the company’s consolidated deliveries in FY19 were 26.80 million tonnes whereas its turnover and profit after tax till March’19 was Rs 70,610 crore and Rs 10,533 crore, respectively. However, to remain significant in the country’s economy, Tata Steel has been deliberately making efforts which include deleveraging to rebuild the strength of its balance sheet. While in the first quarter of FY20, the imports were higher which exacerbated the demand-supply balance.

“The steel sector is facing significant headwinds, which have affected spreads and overall profitability. However, our strong business model in India has helped us counter the overall market weakness, including the slowdown in the automotive sector, by growing volumes in multiple customer segments,” said Narendran.

“Amidst challenging global economic environment including in India, higher input costs and weak demand conditions, Tata Steel reported a consolidated EBIDTA margin of 15.4 per cent on the back of a robust India performance of EBIDTA margin of 24.2 per cent. The EBIDTA per tonne in India business increased from Rs 12,061 to Rs 12,908 that reflected a 7 per cent QoQ increase,” said Koushik Chatterjee, Executive Director and CFO.

The consistent fall of the auto market in 2020 has affected the production and liquidity of major steel producing companies including Tata Steel. The industry and Tata Steel is looking forward towards a more balanced price environment along with an increase in consumption in the infrastructure and construction verticals.

Along with the industry, Tata Steel also looks forward to some relief from the upcoming budget along with the revival of flat steel production and auto sector.