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 — Manoj Kumar Agarwal, Managing Director, Adhunik Metaliks Ltd
AdhunikMetaliks Ltd, the flagship company of
Adhunik Group of Kolkata, is engaged in the production of
value-added steel, alloy steel and stainless steel products
for the automobile, construction engineering and
household industry. The company, which manufactures a
wide range of products in carbon, alloy and spring steel, is
increasing its steel capacity to 800,000 tpa and also
ramping up operations in the mining and power sectors.
Sandeep Menezes interviewed Manoj Kumar Agarwal.
What is the current and future
scenario in the Indian iron and
steel industry?
Emerging economies like India
are on the road to recovery which
is a positive sign for steel industry.
Infrastructure activities have
picked up with lots of projects that
were on hold now restarting. The
automobile industry is also showing
good volume growth which is
supporting demand.
World Steel Association has
estimated that the domestic
steel consumption in FY10 will
grow at around 6.5 per cent.
However, we feel that growth
can be higher keeping in
view that second half will be
much better than many analysts
feel. With strong demand
prices are also firming up and
we believe that it will continue
its upward trend in the next
few quarters.
The outlook in the long term
also looks very promising for the
industry. While the demand for
steel will continue to grow in
traditional sectors such as infrastructure,
construction, housing,
automotive, steel tubes and
pipes, consumer durables,
packaging, and ground transportation,
specialised steel
will be increasingly used in hitech
engineering industries
such as power generation,
petrochemicals and fertiliser.
New airport and railway metro
projects will require a large
amount of stainless steel.
What are the challenges faced by
the iron and steel industry?
The biggest challenge will be to
operate in an environment of
ever-changing policies. It is very
critical for any company in metal
and mining sector to adapt to the
ever-changing government policies
towards environment, land
acquisition and mines allocation.
Government regulations
and policies should also be
framed in such a way so as to harness
the potential in the industry
which has the competitive
advantage to produce steel and
steel products.
Another major challenge facing
the metal and mining industry is
infrastructure. Unless infrastructure
development catches up,
especially in mining regions, we
will not be able to harness the true
potential of metal and mining
industry in India.
Does Adhunik Metaliks have
plans for the overseas markets?
We do have plans to supply to
leading Global OEMs. We are
in process of getting approvals
from these OEMs. We intend to
get 30 per cent of revenues
from overseas market in the
next two-three years and go for
value addition of our products
at global customer locations
to get higher contribution or
net realisation.
What is your future business
strategy?
Our future business strategy
will be to build on the resources
which we have got in all three
focused business areas. In steel
business, we are looking to consolidate
the facilities and
improve operational efficiencies.
In mining business, we
intend to ramp up the capacity
to global scale of operations as
soon as possible. In power business,
we intend to successfully
execute all our power projects
and grab the opportunity provided
by the robust merchant
power market.
Do you have any expansion
plans?
We have shown tremendous
growth in the last few years.
We have added merchant
mining and merchant power to
our business portfolio. We will
continue our growth path in
all the three core business
areas. In steel, we intend to
enhance our capacity to
800,000 tpa supported by captive
resources.
In mining business, we intend
to enhance our mining operations
significantly in the next five
years to achieve global scale of
operations by fully developing
and mechanising huge reserve
areas which we have got. We also
have plans to set up a 1.2-million
tpa pellet plant along with iron
ore beneficiation plant and
50,000 tpa ferroalloys plant,
along with a 30-mw captive
power plant, to utilise the fines
and low-grade materials as they
do not command a good price in
the merchant market.
We will be venturing into
power business in a big way. We
have signed an MoU with the
Jharkhand, Bihar and Chhattisgarh
governments to set up
1,000-plus mw in each state.
Out of 1,000-plus mw planned in
Jharkhand, 540 mw is being
implemented in Sareikela-Kharsawan
district of Jharkhand
Growth will be primarily organic
with expansion of existing business.
However, we will be open to
opportunities which will expand
our capabilities.
Can you elaborate on your plans
in the power sector?
Adhunik Power & Natural
Resources Ltd, the power venture
of Adhunik Group, has
signed MoUs with the governments
of Jharkhand, Bihar and
Chhattisgarh to set up 1,000-mw
power plants in each state. Pursuant
to the MoU with the
Jharkhand government, APNRL
is implementing a 540-mw
power plant in the district of
Sareikela-Kharsawan in Jharkhand.
We have already achieved
financial closure for the project.
We have also signed definitive
agreement with IDFC to invest
Rs 250 crore in the power project
to part finance equity requirement
of the project. We have
placed order for BTG with
Bharat heavy Electricals Ltd. We
have also been allotted captive
coal block of 69 million tonnes
for this power project.
We intend to enhance our
capacity in Sareikela-Kharsawan
in Jharkhand to 1,080 mw. We
also intend to implement 1,320
mw supercritical thermal power
plant, each in Bihar and Chhattisgarh.
However, we are looking
at further allotment/acquisition
of captive coal resources to
serve the requirement of intended
expansions.
When will Adhunik enjoy the full
benefits of backward integration
between iron ore and power?
The full effect of integration will
be visible in 2010-11 when the
company captures more than 80
per cent of its production cost
from captive sources, relatively
insulating itself from external
volatility. We expect that our
EBIDTA margins will improve by
300-400 basis points.
With EU and US imposing tariff
barriers on Chinese iron and steel
imports, how will it benefit Indian
players in the global market?
It does provide opportunities to
Indian players in the global market.
However, domestic demand
has been robust enough to surpass
the domestic supply. Indian steel
industry will be mainly driven by
domestic demand. That is why
global steel producers like Posco
and Arcelor Mittal are planning to
set up steel plants in India.
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