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  •         News Details
Vardhman Special Steels
(12:47, 07 Jun 2019)
In interaction with Mr. Sachit Jain Vice Chairman and MD on 6 June 19

Key Highlights

Overall industry size of alloy steel will be around 5-5.5 M tons annually in India. More or less domestic and export demand is dependent on auto segment.

The company has an installed capacity of 2 lakh tons of melting shops where it produces alloy steel. It also has 1.8 lakh tons of rolling mills capacity where it produces billets which is further processed to make bars and also can be sold outside.

The company is waiting for Pollution Control Board (PCB) permission for expansion in Haryana facility which can be increased to 2.5 lakh tons of melting.

Around 90% of total sales is towards auto OEMs and rest 10% is towards general engineering and other sectors. Within Auto sales, around 38% is towards passenger car segment, 32% is towards 2W segment and rest is commercial vehicles and others.

FY 19 was a very bad year specially H2 FY 19. As against industry expectation of strong numbers, entire auto market tanked which resulted in higher inventories. As per the management, such a drastic fall was never seen in past 9 years.

The company also did not get the price hikes on raw materials and others which was agreed by auto OEMs in Dec 18. Hence Mar 19 was a disaster where it reported losses and had to take hit on higher inventories as well.

The company is carrying around Rs 100 crore of inventories in form of billets and electrodes as it has planned shutdown in June end or early July 19 for 45 days. Expects inventories to be consumed during this period of shutdown.

Not much recovery expected in H1 FY 20. Industry continues to struggle. Recovery expected only from H2 FY 20 onwards.

The company has been waiting for a Strategic Investment from a Global Steel Giant group in the company. While the letter of intent is signed, discussions are going on the price front and the quantum of investments.

This investment, will lead to lot of synergy for the company in form of better technology, higher export markets, new capacities, superior product profile etc. The strategic stake will result in a game changer for the company.

The company would require to do a Greenfield expansion eventually for new capacities and higher requirements. Eventually the company aims to be a million tons alloy steel company in next 5 years.

Value added products, more sales from existing customer base, higher exports (currently 6% of total sales) will drive growth going forward in near term. The strategic investor will lead to higher growth going forward.

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