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P. Madhusudan took charge as chairman and managing director of Rashtriya Ispat Nigam Ltd on the 1st of January, 2014. A qualified chartered accountant, cost accountant and company secretary, Mr. Madhusudan has been working in the steel sector since 1983. He began his career as a junior manager (finance) at SAIL’s Bhilai Steel Plant, and worked there for about 24 years in various capacities before moving to IISCO in Burnpur, West Bengal, as general manager (finance). From there he joined RINL in November 2009, and was selected for the position of CMD in June 2014, assuming his new role in January 2014.
Mr. Madhusudan met with VIS Editor A.K. Sabharwal for an exclusive interview on RINL’s current status, the proposed IPO, which has been postpone for the third time, and the company’s expansion plans.
Edited excerpts from the interview:
Let us start with the status of your expansion plans, following Cyclone Hudhud. Are the plans on schedule and within budget?
The Stage-1 of the expansion has already been completed and all the units are operational except for the lime kilns, which are having some technical problems and are being attended to. The Stage-2 of the expansion consists of the 2 finishing mills, viz. special bar mill and structural mill. The furnaces of these mills were already commissioned in September and the total commissioning of the mills was to be completed by the end of December. However, because of Hudhud, the roof sheeting of these mills have got badly damaged and are being replaced. The mills are likely to be commissioned by March 2015.
How are you funding the expansion?
(Smiles) RINL-VSP is very healthy financially and almost a zero-debt company so the expansion has been mainly funded through our internal accruals. However, we have availed some short term loans to the tune of Rs.2,000 crores.
What is total equity of RINL and the total debt as on date?
We have a fantastic debt to equity ratio, probably the best in the country. The total equity of RINL-VSP is Rs.4,890 crores while the capex debt is around Rs.2,300 crores.
This year marks the 25th year of the commissioning of the first blast furnace of RINL-VSP, by former prime minister Vishwanath Pratap Singh, in 1989. What changes has RINL-VSP seen in the past 25 years?
A lot of changes have taken place in the last 25 years. The blast furnace which was commissioned by the former Prime Minister in 1989 has been totally revamped with the modern technology and its capacity has also been increased to 2.5 mtpa. The first PCI unit for BF-1 is also getting ready for commissioning in Q-4. The company has drawn out a detailed modernization plan to upgrade its existing assets to improve the operational and techno-economic efficiencies. The plant has also doubled its capacity to 6.3 mtpa and as I mentioned earlier we have funded the expansion mostly with our internal accruals.
The modernization would result in the hot metal capacity going up to 7.3 mtpa and therefore matching facilities on the steel making side have been created with ordering of an additional converter & caster.
As a part of the strategic initiative to spread our wings geographically, we have entered into an agreement with Indian Railways for setting up of country’s largest forged wheel Plant at Rae Bareli in Uttar Pradesh. The foundation for this project was laid in 2013 and it is scheduled for completion in 2018.
The relentless efforts for securing a captive iron ore block resulted in a LOI being issued for the first captive iron ore mine in Bhilwara, Rajasthan. The mining lease is expected shortly and RINL has plans to set up state of the art mining facilities, beneficiation/pelletisation plant for value addition in the state.
The other significant achievement has been the commissioning of 20.6 MW waste heat recovery plant from sinter cooler in collaboration with M/s NEDO, Japan in the first of its kind in the country. The other achievements for optimizing the waste heat energy recovery include commissioning of 14 MW power plant based on recovery of waste heat of coke and another 14 MW power plant of blast furnace based on the recovery of top pressure of BF gases.
ERP has been introduced which is expected to bring integration and transparency in our operations.
Your energy conservation strategy has attracted nation-wide attention. Can you throw some light on this?
Energy conservation has been given top most priority right from inception and the state-of-the-art technologies have been adopted.
RINL was the first PSU in the steel industry to adopt BS EN 16001 energy standards which was subsequently upgraded to BS EN 50001.
In expansion also, the focus has been on energy conservation and a number of waste energy recovery schemes have been adopted. RINL recently commissioned the waste heat recovery from sinter cooler in collaboration with M/s. NEDO, Japan, the first of its kind in the country. The company has also constituted dedicated energy teams to identify areas for improvement and implement schemes accordingly. The company is all set to become the leader in the country in a couple of years with the completion of the modernization plans which also focuses on energy efficiency. We are also planning to engage an external agency for energy audit to further enhance energy efficiency.
How do you see the future price trends as far as inputs like iron ore and coal are concerned?
As you know, China’s growth is slowing. It is therefore expected that prices for coal continue to be around the present levels in the medium term. As far as the iron ore is concerned, there could be another 10% downside from the current levels of about US $ 70 FOB in medium term. The projections are that the prices of iron ore and coal would be around the present levels at least for the next two to three years.
What is the status of the proposed IPO of RINL-VSP?
Government of India has planned to disinvest 10% in RINL. Accordingly, DHRP has been filed and actions are being taken for the listing of the company as per the time lines drawn by the Department of Disinvestment. Final call on timing the issue would be taken by DoD.
If you were a private steel producer, how much would you pay for getting majority control of RINL-VSP ?
(Laughs) Mr Sabharwal you should ask this question to persons/companies who are eyeing us and it is not for me to answer.
Steel producers are on a hunt for coal reserves overseas. What is RINL planning to do in this regard?
RINL is a member of ICVL, a Special Purpose Vehicle constituted to scout mining assets abroad. ICVL has been successful in acquiring an operational mine in Mozambique from Rio Tinto. A shipment from this acquired mine is expected shortly for trial purpose.
What is USP for RINL products?
Very good question, Mr Sabharwal, I can proudly say that Vizag Steel products are the best in the country and are highly corrosive resistant even in highly humid area. One can check the quality and specifications anytime, anywhere in the world and the consistency of our products will always be same every time. Most top-class infrastructure companies and even the governments prefer Vizag Steel products because of their quality, dimensional accuracy and chemical composition.
Sir can you name as to who are top companies that buy Vizag Steel products.
Well we have a long list of such clients, but to name a few Indian Navy, L&T, GVK, HCC, Afcons, Metro Railways, Indian Railways, Gammon, Simplex, Gayatri Projects, NCC, NEC also Tata-Aldesa who in a Joint venture are building Eastern Dedicated Freight Corridor and many more.
What is the total workforce at RINL-VSP?
At RINL-VSP we are proud to say that we are a committed workforce of 18,300. Each of my co-worker is committed to high quality production and our dedicated team is striving to maintain the highest standards at all times. Additionally, we create indirect employment for thousands of workers regularly. RINL is an economic powerhouse.
What is your contribution for the local industry both upstream and downstream ?
We are always encouraging the local industry both upstream and downstream and Government of India is stipulating many guidelines to promote MSMEs and local industries and we follow the guidelines. I may like to add here that today we operate in a highly competitive market and the entire world is the market place so the each vendor has to compete with best technology, prices and delivery schedules etc. The era of undue and excessive protection does not exist and RINL-VSP also has to compete while selling. Hope I am clear (smiles).
Additionally, what are you doing for existing customers and to attract new customers with the present expansion ?
We have been continuously striving to create optimum value for our customers not only in offering products as per their requirement, but also in developing new products that have the potential to be used at their end in future.
Many new facilities have been set up in expansion such as ladle furnaces, RH Degasser and electro-magnetic stirrers to ensure better steel cleanliness with decreased levels of N2, H2, O2 to meet specific customer requirements. The steel from these units have improved cast structures meeting the stringent requirements of the forging, bearing and pipe industries as well as the automobile sector. The finishing mills in expansion, viz. wire rod mill, special bar mill and structural mill, can meet the specific requirements of the auto industry to roll products of customized size with low tolerances. We have been recognized as a “well-known steel maker” by the Indian Boiler Regulatory Authority, which enables us to cater to segments that use steel for boiler applications. We therefore have the capability to meet any customer requirement and enhance the product portfolio.
The Central government is planning substantial concessions to stimulate coastal shipping. How is RINL-VSP planning to leverage these concessions?
RINL-VSP is fully aware of the boost that the Government of India is giving in terms of incentives and refund of freight, concessional port charges and many more incentives. We are actively pursuing coastal shipping. We have issued tenders to evaluate the freight advantages in this regard. In fact, we are now in the process of finalizing the tender.
Being a shore based plant, VSP has advantage over other steel plants in India. So how is RINL-VSP doing in the export market. There is a huge demand for special steel like seamless tubes for international markets and similarly high carbon wire rods for the Railways, and transmission lines and HT grade blooms for the power sector, but strangely RINL-VSP is not manufacturing such items which will give much higher sales realization, Why ?
Firstly, we are fully aware of our strength in being a shore based plant and we have already opened our first overseas office in Colombo, Sri Lanka. Taking advantage of the concessional Customs-Duty structure and the local taxation policy in Sri Lanka, we will send billets from Vizag and not the finished products to Colombo and the same will be rolled there by local rolling mills and the products thus produced from our billets will be sold locally. We will also focus on selling the products to countries like Myanmar, Singapore, and the Philippines, besides meeting the local demand in Sri Lanka.
VSP has definite advantage being a shore based steel plant. However, our high quality is the main attraction though our cost of production when compared to our competitors may be higher due to lack of captive mines of iron ore and coal. But again our high production standards, specifications and consistent quality always gives us a challenging opportunity to compete in the international market, hence we at RINL are able to establish our presence in the export market.
Don’t you think it is better for RINL-VSP to keep the focus to produce special steels instead of competing with ordinary rolling mills?
No, no. Let me proudly state that Vizag Steel is the most preferred steel be it by an infrastructure project, fly overs, highways, sky scrappers, high rise buildings or modern homes. People prefer quality, not price alone.
As regards special steels like seamless tubes, you may be aware that setting up seamless tube mill is highly capital intensive. But we are already on this job and getting the market studied in this regard including present capacities available, its utilization and potential growth in demand in this segment etc. As far as high carbon wire rods are concerned, we are already in the market and our products are well accepted. With respect to transmission line towers, we have already entered into JV with Power Grid Corporation to manufacture tower lines and tower parts and agreement is likely to be concluded shortly. We intend to set up a unit exclusively for manufacture of transmission towers to cater to the requirements of Power Grid.
Do you think it is better to merge NMDC with RINL to achieve better economies of scale for both companies and eliminate the raw material crisis at RINL ?
Mr Sabharwal, this is a policy matter and such decisions are taken at the Government level.
Do you think Government should ban export of Iron- ore to meet the demand of the local Industry in India ?
Mr Sabharwal, I will refrain from making any statement on Government Policies, Please.
There has been a talk of setting up a Central Despatch Yard in VSP to gain quick turnaround of Railways wagons and reduce detention of wagons. When is it likely?
We are constantly evaluating our strengths and weaknesses to reduce cost of each operation. Accordingly, we have already finalized the scheme for the Central Dispatch Yard and are in final discussions with the Railways to freeze the modalities. The yard should be operational in the next 24 months.
Is the Andhra Pradesh government extending any support by way of allotting iron ore mines to RINL-VSP?
Yes, we at RINL-VSP are thankful to the Chief Minister, Mr Chandrababu Naidu, who extended his full support to us during Hudhud and our power lines were restored in record time by APEPDCL with full support from the Chief Minister himself. I am sure State Goverment will extend all support for allotment of iron ore mines also, We are on this job and coordinating with the government.
Sir your message to readers of Vizag Industrial Scan ?
Mr Sabharwal I compliment you on publishing a very useful publication from Vizag. You regularly highlight the new potential and opportunities and bottlenecks. Please keep up the high traditions that you have been following. I on behalf of myself and the entire collective Vizag Steel wish you and the readers of VIS Good luck and a very Happy New Year.