kalyani steel limited

Kalyani Steel Limited

Presented By-Sadasiva Bhaskar (2009B29)Vikram Veer (2009A16)Deepak L (2009A28)Shreeya Bhat (2009A13)

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Agenda

• Overview of Indian Steel Industry• Key Metrics• Major Recent Developments• Competitive Scenario• Kalyani Steel Limited• Space Matrix• BCG Matrix• GE’s Spotlight Matrix• Future Prospects

SPACE Analysis - Project Management (Presentation for Prof. Nag)


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Indian Steel Industry• India is the 5th largest producer of steel in

the world, behind China, Japan, Russia and the United States.

• It produced 55.1 million tonnes of the alloy in 2009, but is still only a tenth the size of China, the No.1 steel producing country.

• Contributes about 2% of India’s GDP.

• SAIL (13.8 MT) , Tata Steel (7 MT), JSW Steel (6.9 MT) are leading players. (capacity in India)

• India's steel producing capacity is likely to touch 120.62 MT by 2011/12, according to the federal steel ministry.

STEEL CHARACTERISTICS• Steel is an alloy consisting mostly of iron, with varying

amounts of other elements like carbon, manganese, chromium, silicon, oxygen etc

• There are more than 3000 catalogued grades of steel available• It is a major component in buildings, infrastructure, tools,

ships, automobiles, machines, and appliances• It is environment friendly, can be recycled and requires

considerably less energy to produce than some other metals• Steel market is primarily divided into two categories - flat and

long– Flat Steel: Plate or a (hot or cold) rolled strip product– Long Steel: Rod or a bar

Projected per Capita consumption of Finished Steel in India (kg)

Year Per Capita Steel Consumption

2011-12 48

2019-20 80

2024-25 110

2029-30 135

2034-35 175

Source: Ministry of Steel, JPC Report

Optimistic Case Medium Growth

Conservative

Fin. Steel Cons.Growth Rate

Consum-ption(mTpa)

Fin. Steel Cons. Growth Rate

Consum-ption (mTpa)

Fin. Steel Cons. GrowthRate

Consum-ption (mTpa)

2005-2020

7.6% 100 6.9% 90 * 5.5% 76

2020-2030

6.5% 188 5.5% 147 4.5% 118

2030-2040

5.0% 305 4.0% 217 3% 158

2040-2050

5.0% 498 4.0% 322 3% 212

GROWTH SCENARIOS

* - Also projected by National Steel Policy Estimated Steel Production by 2020 = +200 MT


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Major consumers of steel

Source: Annual Report 2009-10, Ministry of Steel

Price Movement


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Supply-Demand Forecasts


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State Wise Performance

State No. of MOU’s Signed Capacity (MTPA)

Orissa 49 75.66

Jharkhand 65 104.23

Chattisgarh 74 56.61

West Bengal 12 21

Other States 22 18.20

Total 222 275.70

Source: Annual Report 2010 published by Ministry of Steel, Government of India.


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Leading Companies (PSU’s)PSU Net worth as on 31.12.2009 ( in Rs. Crores)

Steel Authority of India Ltd. (SAIL) 32,046

Rashtriya Ispat Nigam Ltd. (RINL) 12,884

Sponge Iron India Ltd. 14,052

Source: Annual Report 2010 published by Ministry of Steel, Government of India.

Tata Steel Limited 29,704.60

JSW Steel Limited 7,959.25

Jindal Steel & Power Limited 5,415.32

Essar Steel Limited 4,738.36

ISPAT industries Limited 2031.88

Kalyani Steels 276.84

Leading Companies (Private)


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Major Recent Developments:

• Essar Steel signs 10 year ore deal with Orissa miners. (http://www.steelguru.com/news/indian.html)

• The present steel production in the country is not matching the growing consumer demand. (Demand growing @ 10%, industry growing @ 8.5%)

• Jindal Steel is recognised as the 2nd largest value creator in the world by in a survey conducted by BCG.

• Arcelor Mittal has decided to modify its strategy in India. From now on, it will focus on the small and medium enterprises(SMEs) instead of just completely concentrating on mega-projects.

http://www.steelguru.com/news/indian.html


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Competitive Scenario

SAIL; 32; 32%

TSL; 11; 11%RNIL; 8; 8%

ESSAR, ISPAT, JSW; 19; 19%

OTHERS; 30; 30%

Market Share

SAIL TSLRNIL ESSAR, ISPAT, JSWOTHERS

• SAIL is the largest player with 32% market share.

• Tata Steel is the second largest player with 11% market share.

• Kalyani Steel has a market share of only 2%


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Kalyani Steel Limited.

• Kalyani Steels Ltd, is a part of the over $2.1 billion Kalyani Group. Kalyani Steels Ltd is a leading manufacturer of forging and engineering quality carbon & alloy steels using the Blast Furnace route.

• The company’s captive power plant ensures regular power supply of 8 MW. It also plans to add 30-40 M wt power generation capacities to achieve self sufficiency in power requirements.

• The Company manufacturing unit is located at Ginigera, Karnataka and has capacity of producing 650,000 TPA of carbon and alloy steels.

• KSL has signed a Memorandum of Understanding (MoU) with West Bengal Industrial Development Corp to set up steel plant. It requires an investment of Rs.65 billion.

• The top line of the company is expected to grow at a CAGR of 8% over 2008A to 2011E.


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Share Holding Pattern

• Kalyani Group is the Promoter of this company

• Bharat Forge Limited is the Flagship company of the group


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Plant Capacities


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SPACE-Chart Analysis- Competitive Advantage:

Attribute Company Industry Rating

Market Share Production:1.2 tonnes Sales: Rs. 11.53 bn

Production:53 mn tonnes Sales: Rs. 1485 bn 6

Product quality Produce Special Steel for Engineering, Forging and Aluminium Alloy steels

Not a differentiator 4

Product life cycle Growth Growth 1Product replacement cycle Too Long Too long 1

Customer loyalty Very Strong Strong 1Competition’s capacity Utilization 100% 88.9% (Industry average) 4

Technology know-how High High 1

Vertical Integration Both Backward and Forward Integration

Backward & Forward integration into raw material sources

0

Average score 2.25


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Company’s Financial Strength

• Financial StrengthAttribute Company Industry Rating

ROI 10.08 13.82 3

Financial Leverage (debt-equity ratio) 0.58 2.76 6

Liquidity 1.22 1.01 4

Capital required/Available High High 4

Cash flow (Operating Income to Sales Ratio) 9.39% 10.82% 3

Ease of exit from market Difficult Difficult 3

Risk involved in business (Std dev in EPS) 8.62 8.19 2

Average 3.6


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Industry StrengthAttribute Industry Rating

Growth Potential CAGR : 8.4% (> GDP growth), Attractive 6

Profit potential High 5

Financial stability Stable, small variations due to factors like economic scenario, govt. boost etc.

5

Technological know-how Same in line with the global manufacturers 5

Resource utilization Scope for improvement 4Capital intensity Very High 2

Ease of entry into the market Very difficult (Small players taking the path of M&As) 6

Capacity utilization 88.9% Needs to be improved 4Flexibility/Adaptibility Low 3Average Score 4.444


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Environmental Stability• Environmental Stability

Attribute Industry Rating

Technological changes High 4

Rate of inflation Affects it to quite a high extent 4

Demand variability Moderate 3

Price range of competing products No-More or less the same 0

Barriers to entry into market High capital intensive 0

Competitor pressure Oligopoly 1

Price elasticity of demand High 4

Average Score 2.285


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Final SPACE Posture.

-6 -4 -2 0 2 4 6

-6

-4

-2

0

2

4

6

CA

ES

IS

•FS

DIFFERENTIATION

KALYANI ON BCG MATRIX

?

10X 1X 0.1X

RMS(RELATIVE MARKET SHARE)

GDP LINE

ANN

UAL

MAR

KET

GRO

WTH

RAT

E

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KALYANI

Kalyani Steel on GE’s Spotlight Matrix

Strong Average Weak

High Invest Invest Hold

Medium Invest Hold Divest

Low Hold Divest Divest

Business Strength

Indu

stry

Att

racti

vene

ss

Kalyani

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Strategy

• Concentric Merger • Internal Restructuring• Capital Expenditure• Explore New Markets with New Product offerings.• Searching newer & higher quality sources of raw materials.• Seeking out Greenfield & Brownfield opportunities for

development to achieve cost advantage, consistent supply & control

• Increase manufacturing agility by downstream integration • Gain distribution centres in future high growth markets


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References• Kalyani Steels Annual Report, 2009-10• Ministry of Steel, Annual Report, 2009-10• Joint Plant Committee Report• Steelguru.com• Capitalline database• CRISIL, Steel Sector outlook• UBS Steel Sector Analysis

kalyani steel limited

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