Tata Sponge, Usha Martin will create a nucleus for long product growth: TV Narendran, Tata Steel

TV Narendran, MD & CEO, Tata Steel, spoke about the quarter results, growth expectations, and steel pricing among others during an exclusive interview with Swati Khandelwal, Zee business. Edited Excerpts: 

Q: Tata Steel has posted sound results for the September quarter and it has managed to beat the street estimates. Tell about the growth triggers of the quarter?
A: This was a good quarter for us as the domestic demand was quite strong despite being a seasonally weak quarter. Rupee depreciation helped us in keeping the prices at a stable level and improvement of cost efficiencies has also benefitted us.  In addition, growth in production of sales when compared to the previous quarter has also played an important role. 

Q: You were talking about EBITDA that has gone up in the last two quarters. Do you think that you will be able to maintain this growth cycle throughout the reason, if yes, then let us know about the expected margins?
A: Yesterday, we were saying that the EBITDA per ton will stand between Q1 and Q2 as there is certain pressure on the market. We are looking forward towards the impact that NBFCs will have on the market. 

Q: What is your outlook on demand and supply in steel segment in both domestic and global market? 
A: There is a positive growth in the demand for steel in the global market especially in the major steel consuming countries like China, the US and Europe. We have seen a demand growth of 7 per cent in pa
In the past eight months, we have seen a demand and supply has grown by 7 per cent and 6 per cent respectively in China. 

In fact, the export outside China has gone down from 10 million tonnes/month to 5 million tonnes/month, which is a reasonable level. In addition, the macroeconomic conditions in the US and Europe are favourable and the demand is growing. The demand was already high in India and South East Asia and this is a reason that we are seeing that overall the steel industry is in a good place as compared to the last 3 years. 

Q: There are better signs across the globe but do you think that the demand-supply tightening will go ahead?
A: It will depend on the local demand. normally, this is a season that goes weak but this was a year when the season went very strong for us. We are just looking on certain things like NBFC issue, liquidity pressure, impact on our customers from construction and automobile segment. 

Normally, January to June is the best months for steel demands and we are looking for the next two quarters. This quarter October to December is normally better than July to September as demand goes up after the festival season ends. This is a reason that makes us feel that the steel consumption will grow around 7 per cent in India this year. 

Q: What is your outlook on steel pricing? Do you see any headwinds on steel prices?
A: I feel, there will be no change in prices as the situation that existed 2-3 years ago was an unusual circumstance and now it has reached a longterm more stable level. The global steel prices, hot roll coil, lies between $550-600/tons and it is not a very high price to me and it is an average price when looked at the prices of past 15-20 years. I feel, there is a stability in demand and supply and the current price are at a sustainable level. 

Q: Any update on integration with Bhushan Steel in terms of output for the year and the next financial year?
A: Bhushan steels EBITDA stood around Rs1100 crore in the last quarter and the PAT was a positive one. We have done quite well in the first three months. Productions and margins have increased. Margins have gone up from Rs 8000/ton to more than Rs10000/ton. We are working on many other things and hope that Bhushan Steels performance both in terms of volume and profitability will continue to show a positive trend. 

Q: Tell us about the synergies that are visible to you by acquiring Usha Martin?
A: We are in a transaction process at Usha Martin and they have received shareholders approval to go ahead with the transaction. The process will be completed in the next 3-4 months. We feel that long products business is slightly different from the flat products and even the cost structure is different. In addition, the physical configuration is also a different one. That's why we thought to expand our long products business, which is our ambition. 

The existing sites Jamshedpur, Kalinganagar and Angul are mainly into flat products. We feel, that through Tata Sponge and Usha Martin, we will be creating the nucleus of the company that can participate in the opportunities for long products growth. As we believe that long product facilities will be available in the market.