SLR Metaliks, Managing Director, Rajkumar Goel
SLR Metaliks, Managing Director, Rajkumar Goel

In 2012, SLR Metaliks, an alloy steel producer, was founded as a joint venture with Fomento Group. Today it is among the bigger alloy steel producers in India. It began production of alloy steel in the year 2013 and today, supplies to more than 40 OEMs (Original Equipment Manufacturers). Currently, 80 per cent of its production goes to the automobile sector and the balance is supplied to other customers like engineering and tube mill companies. The company’s Managing Director Rajkumar Goel in an interview with Free Press Journal’s Jescilia Karayamparambil and R N Bhaskar, talks about the company’s plan going forward.

Given below are edited excerpts:

What is the demand for alloy steel in India? How much do you produce?

In India, the demand for alloy steel is 6 million tonnes. SLR Metaliks is producing 0.3 million tonnes. We are going for capacity enhancement. Post which, we will produce 0.4 million tonnes. From August, our capacity will be 0.4 million tonnes. We are utilising this lockdown period to enhance our capacity.

If big players like Tata, JSW and others are also making alloy steel. So, why should a customer buy from you?

Before Usha Martin takeover, Tatas were not in alloy steel. No big player is active in this space. In the case of JSW, it is making alloy steel in Salem. Its capacity is 0.7 to 1 million tonnes. In India, the biggest alloy plant is JSW.

In alloy steel, a plant of 0.4-0.5 million tonnes is reasonably large.

Are there Chinese competitors for the blast furnace in alloy steel?

In the steel business, one cannot say that any plant is made without Chinese equipment. In our plant as well, we have Chinese equipment, but it is minuscule.

Chinese equipment is 30 per cent cheaper than European, Brazilian or American equipment. Yet, we opted to source our equipment from these countries, since rolling mills for alloy steel should be highly accurate. This was the reason we were able to deliver our material within one and half ears to OEMs.

If you want to set-up an alloy steel plant, then you cannot depend on Chinese equipment. If you put up an MS steel plant, then you can purchase Chinese equipment. The production of alloy steel is easy but the quality checks are tough.

Before us, Bhushan Steel was the only company that bought a brand new rolling mill for alloy steel. Our competitors all have access to old equipment which is over 20 years old.

Significantly, our mill is elevated five metres above the ground. So, the vibration is quite less.

Hospet unit
Hospet unit

What is the rejection percentage after the quality check?

Our rejection rate is 2 per cent. It is in line with industry standards.

What is your turnover and profit margins?

It was Rs 1,200 crore last year. April (completely) and May (partially) was a washout (thanks to the pandemic lockdown). In June and July, we touched 60 and 70 per cent of sales (pre-COVID-19 levels) respectively. But we do not know about tomorrow. If Coronavirus cases come down, then we can touch 90 per cent sales by December. But it will be difficult to predict today.

We are targeting to achieve last year’s sale but there are dampeners in the market.

Our EBITA is 14 per cent. Our net profit after tax was flat last year and this year also it will touch the bottom line. This year we will be struggling. But we expect growth from FY 2021-2020 onwards.

What is hurting you most, disruption in supply chain or demand?

As of today, both are disrupted. In June, there was about 50-60 per cent rise in demand for the automobile segment. But heavy and light commercial vehicles (which consume more alloy steel) are in a very bad share. So, I would say overall demand is less than 50 per cent and supply is disrupted.

Why are your exports so low?

We just export 5 per cent of alloy steel to overseas markets Domestic prices for alloy steel are better compared to Thailand or Indonesia.

In April-July, JSW and JSPL exported 40 per cent steel to China. This is mainly because domestic demand declined. In the case of alloy steel, we can sell alloy steel only to approved clients. Alloy steel is not like other steel where customers are quickly available. It is more selective.

What will be the annual growth if things stabilise?

The results of capacity enhancement will be visible in FY 2022. In FY 2022, our sales should increase by 25 per cent. This is because our capacity enhancement is 33 per cent.

Are you supplying to defence?

We are waiting for approval from DRDO. Within six months, we will get that approval as we are confident of the quality we produce.

How many people do you employ and did COVID-19 have an impact there?

We employ 2,000 people directly — payroll and contractual. The indirect employment will be larger.

We did not have to retrench anyone. In April we shut down the plant, but in May we started operating.

At the same time, our expansion will not involve additional workforce, as it will actually involve technology upgradation.

How are you managing your working capital?

It is a big issue. This is because we are producing more but selling less and our stock is piling up. Hence, we are thankful to the Reserve Bank of India (RBI) and the government that they extended the moratorium period to August.

We are asking RBI and bankers to further extend the moratorium with soft interest. This is a problem faced by 60 per cent of medium-sized Indian companies.

Have you considered opting for an IPO?

No, we do not have any plans right now. But once we reach one million tonnes, we will mull over that.

Are you planning to go for any greenfield expansion?

Now, we are making 0.3 to 0.4 million tonnes of alloy steel. In alloy steel, 0.5 to 0.6 million tonnes is fine. We find it tough to sell anything beyond this. We have land, water and other resources available at our disposal if we wish to expand.

But we are in discussion with Japanese, American and local companies to come on board as assured partners. It can come on board as an assured buyback customer or sell the enhanced capacity to others. In that case we are ready to enhance our capacity further.

Since our company is a JV with a Goan company, Fomento, run by the Timblos, iron ore supply should not be an issue.

We are open for any form of partnership (even if that means stake sale).

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