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Increasing the Competitiveness

of Indian Steel Industry?


MFSA Project

Background

Indian Steel industry is 3rd largest producer of crude steel in 2015

Current growth rate :- 6.2%(2015) and projected at 7%(2016)

Demand-supply gap is filled by imports from china, Russia

Indian steel industry loses out to cheaper imports

In fiscal 2015, India imported 9.3 million tonnes of finished steel, up 71.1% from a year ago, whil
it exported a mere 5.5 million tonnes

Between April 2014 and January 31 this year the country imported 8.38 million tonne (MT) of stee
of which 2.9 MT was from China against 1.08 MT in 2013-14.
Imports and Exports
10

9.32

7.93

8
7

6.86

6.66

5.37

5.98

5.59

4.59

5
4

5.45

3.64

3
2
1
0

2010-11

2011-12

2012-13

2013-14

IMPORT Total Finished Steel (alloy + non alloy)


Export Total Finished Steel (alloy + non alloy)

2014-15

What
What can
can be
be done
done to
to
improve
improve the
the situation
situation
The
The probable
probable reasons
reasons

The
The debt
debt be
be written
written off
off so
so as
as
to
to reduce
reduce debt
debt servicing
servicing
costs?
costs?

No
No

Financial Analysis as to how


large the debt costs are

Company specific financial


statements

If
to write
write off
off the
If it
it is
is feasible
feasible to
the
debt and
debt
and how
how will
will it
it affect
affect the
the
various
various stakeholders
stakeholders

Yes
Yes

Political and Economic


Conditions of India and
environment related to the
steel industry

The
The steel
steel companies
companies achieve
achieve
operating
operating efficiencies
efficiencies

Yes
Yes

Analysis of financial
statements and the main
costs involved

Company financial
statements

If
can be
be
If operating
operating costs
costs can
somehow
somehow reduced
reduced to
to make
make
the
the industry
industry be
be more
more
competitive
competitive

Hpw
Hpw can
can the
the demand
demand on
on the
the
global
global level
level be
be revived?
revived?

No
No

Factors that can lead to


revival of global demand

Industry reports

The
The current
current level
level of
of demand
demand
and
the
way
in
which
and the way in which can
can be
be
increased
increased if
if any
any

Are
Are firms
firms losing
losing revenue
revenue

No
No

Key
Key Comps
Comps and
and how
how the
the
revenues are
revenues
are distributed
distributed

Financial
Financial Analysis
Analysis

Fundamental
Fundamental Analysis
Analysis and
and
actual
actual loss
loss of
of revenues
revenues

IS
because of
IS it
it because
of the
the economic
economic
wide
wide factors
factors

No
No

Key
factors determining
Key factors
determining the
the
economy
economy wealth.
wealth.

Analyst
Analyst Reports
Reports on
on India
India Inc.
Inc.

If
If steel
steel industry
industry is
is really
really going
going
down
because
down because of
of some
some
economy
economy wide
wide factors.
factors.

IS
IS it
it because
because the
the firms
firms are
are
lacking in
lacking
in some
some dimension
dimension

Yes
Yes

IFE,
IFE, EFE
EFE &
& Space
Space

Company
Company website,
website, Analyst
Analyst
reports
reports etc
etc

How
How firm
firm wide
wide factors
factors will
will
help
help

Is
because of
Is it
it because
of industry
industry level
level
factors
factors

Yes
Yes

Porters
forces, Value
Porters 5
5 forces,
Value Chain
Chain
Analysis
Analysis

Industry
Wide Reports,Analyst
Industry Wide
Reports,Analyst
Reports
Reports

How
How can
can industry
industry level
level
factors
factors be
be solved
solved

Can
Can the
the government
government
intervene
intervene by
by introducing
introducing
quotas
quotas etc.
etc. on
on imported
imported steel.
steel.

News Search, Industry


Reports, Government Reports

If
If regulations
regulations can
can be
be put
put in
in
place
such
that
steel
place such that steel
becomes
becomes more
more competitive
competitive

Problem Statement
How can we
maximise the
CAPEX utilization

How to increase
the Operational
Efficiency if
Indian Steel
Industry?

How Indian Steel


industry remain
competitive
against
increased
imports?

Project: Steel
Introduction
Revival
Summary of Findings
7th August, 2015

Table of
Contents

Executive Summary

Definition of the
problem

Overview of the
Indian Economy

Overview of Steel
Sector and the
reasons for which
it is in dire straits.

How the
recommendation
s may prove to
be helpful to the
steel ministry

Indian Environment

PESTLE Analysis

Industry Structure

Current Strategy

Competitor
Analysis-CPM

Porters 5 forces

Value Chain
Analysis-Key
drivers

Firm Level Analysis

Company
Overview

How strong are


company
specific factorsIFE & EFE

QSPM Analysis

Financial
Analysis-SPACE
MATRIX

Recommendations

What can be
done by the
Steel Industry

Intensity of competition(Moderate to
High)
competition from foreign players
Spurt in Merger And Acquisitions activities
Excess demand met by import
High cost of exit
Commoditized

Suppliers power(Low)
High raw material
availability
Lack of transportation
Prices set as per
international benchmark

Porters Five
Forces

Threats of New
Entrant(low to
moderate)
High cost of basic inputs
and services
Industry is capital intensive
Regulatory environment

Buyers
power(Moderate)
increasing demand for Steel
Fragmented coke suppliers
Access to global market

Threats of
Substitute(High)
Use of Aluminum, Plastics,
Plastics, carbon fiber

India is expected to
become the world's
second largest
producer of crude
steel in 2015-16,
moving up from the
fourth position

PESTEL Analysis
Recommendations on captive mines(FDI of US$ 1,669.49 millions)
Political National Steel Policy to remove bottlenecks
Factors

Economi GDP Growth rate is appreciable now.(Steel industry Contribution in GDP 2%)
Reduction in custom duty
cal
Factors
Rural-Urban Divide

Social Higher disposable income


Factors

Technolo Popularity of steel plants(Iran has shown interest in steel and mines sector)
gical Application of SML(Steel Markup Language)
Factors
Environm
ental
Factors

Legal
Factors

High resource availability


Poor transportation infrastructure

Acquire land in India become more competitive


Slow legal procedures

The Indian steel sector enjoys


advantages of domestic availability of
raw materials and cheap labour. Iron
ore is also available in abundant
quantities. This provides major cost
advantage to the domestic steel
industry.
The steel industry reflects the overall
economic growth of an economy in
the long term as demand for steel is
derived from other sectors like
automobiles, consumer durables and
infrastructure.
These indicators suggest that India
will soon move up to the second
position both in production and
consumption of steel, according to a
sectorial analysis by Frost & Sullivan's
Metals & Mining Practice

Internal Factor Evaluation (Strengths & Weaknesses)


Factors taken into Consideration

Management( Planning,
organizing, motivating, staffing
and controlling)
Marketing

Finance/Accounting

Production/ Operations

Research and Development

Management Information
Systems

Value Chain Analysis( VCA)

Ratings:-1(Poor)-4(Superior)
Weights:- 0(Not important)
1(Very important)
Weighted score:- weights*Ratings
Total :- sum total of weighted
scores

External Factor Evaluation(Opportunities & Threats)


Factors taken into
Consideration
Management( Planning,
organizing, motivating,
staffing and controlling)
Marketing
Finance/Accounting
Production/ Operations
Research and Development
Management Information
Systems
Value Chain Analysis( VCA)
Ratings:-1(Poor)-4(Superior)
Weights:- 0(Not important)
1(Very important)
Weighted score:weights*Ratings
Total :- sum total of weighted
scores

Factors

Score(S Weight Total


)
age(W weighted
)
value(S*W)

Threats
Technology Risks

0.15

0.15

Raw Materials Security


and Price Volatility

0.12

0.24

Forex, Credit, Liquidity


and Counterparty Risk

0.07

0.14

Regulatory and
Compliance Risks

0.06

0.12

Health, Safety and


Environmental Risks

0.11

0.33

Macro environment

0.18

0.72

Industry Cyclicality

0.15

0.45

Growth Projects

0.12

0.36

Financing

0.08

0.24

Opportunities

Total

2.75

Access to Raw Materials


Strong Brand Value
Access to Corus talent pool
Risk Mitigation
Good Corporate Governance

High debt loads


Operational Inefficiencies
Low demand for existing products
Less product innovations
High attrition rate

Strength

Opportunitie
s
Competitive advantage by value of size
Growth of Infra Sector in India
Higher pricing opportunities in foreign
markets
Movement along Value chain front

Weakness

Company should
continue their
expansion strategies if
possible through
acquisitions in
domestic as well as
foreign market
Company should focus
more on technology
driven operations to
gain competitive edge

Threats

Socio Political Scenario/ Cap on


mining activity
Advancing technology
International Competition
Regulatory requirements
Rising prices of Coal

Company should focus


on alternative sources
of energy as they are
highly dependent on
coal mines

THANK
YOU