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Kalyani Steel Limited

Presented By-
Sadasiva Bhaskar
(2009B29)
Vikram Veer (2009A16)
Deepak L (2009A28)
Shreeya Bhat (2009A1 )
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

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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.
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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
GROWTH SCENARIOS

Optimistic Case Medium Conservative


Growth
Fin. Steel Consum- Fin. Steel Consum- Fin. Steel Consum-
Cons. ption Cons. Growth ption Cons. ption
Growth (mTpa) Rate (mTpa) Growth (mTpa)
Rate Rate

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

Estimated Steel Production by 2020 = +200


* - Also projected by National Steel Poli
Major consumers of steel

Source: Annual Report 2009-10,


Ministry of Steel
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Price Movement
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

Leading Companies
( Private )
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
Source : Annual Report 2010 published by Ministry of Steel, Government of India.

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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.

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Competitive Scenario

•S A IL is th e la rg e st p la ye r
w ith 3 2 % m a rke t
sh a re .

•Ta ta S te e l is th e se co n d
la rg e st p la ye r w ith
1 1 % m a rke t sh a re .

•K a lya n i S te e l h a s a
m a rke t sh a re o f o n ly
2%

SPACE Analysis - Project Management (Presentation for Prof. Nag) 14


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 Production:53 mn tonnes 6
Sales: Rs. 11.53 bn Sales: Rs. 1485 bn
Product quality P ro d u ce S p e cia l Not a differentiator 4
S te e l fo r
E n g in e e rin g ,
Product life cycle Fo
G rorgwinthg a n d Growth 1
A lu m in iu m A llo y
Product replacement T o o Lo n g Too long 1
ste e ls
cycle
Customer loyalty V e ry S tro n g Strong 1
Competition’s capacity 100% 88.9% (Industry average) 4
Utilization
Technology know-how H ig h High 1
Vertical Integration B o th B a ckw a rd a n d Backward & Forward 0
Fo rw a rd In te g ra tio n integration into raw
material sources
Average score 2 .Nag)
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Company’s Financial Strength
Attribute Company Industry Rating
• Financial Strength
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 Strength
Attribute Industry Rating
Growth Potential CAGR : 8.4% (> GDP growth), 6
Attractive
Profit potential High 5

Financial stability Stable, small variations due to factors 5


like economic scenario, govt. boost
etc.
Technological know-how Same in line with the global 5
manufacturers
Resource utilization Scope for improvement 4
Capital intensity Very High 2
Ease of entry into the market Very difficult (Small players taking 6
the path of M&As)
Capacity utilization 88.9% Needs to be improved 4
Flexibility/Adaptibility Low 3
Average Score 4.444
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Environmental Stability
Attribute Industry Rating
• Environmental Stability
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.

FS

DIFFERENTIATION

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SAIL on BCG Matrix
RATE

 KALYANI ?
ANNUAL MARKET GROWTH

GDP
LINE

10X 1X 0 . 1X

RMS ( RELATIVE MARKET SHARE ) 23


Kalyani Steel on GE’s
Spotlight Matrix
Kalyani
Business Strength
Strong Average Weak

Indu High Invest Invest Hold


stry
Attr Medium Invest Hold Divest
acti
vene
ss Low Hold Divest Divest

24
Strategy
• Concentric Merger
• Internal Restructuring
• Capital Expenditure
• Explore New Markets with New Product offerings.
• S e a rch in g n e w e r & h ig h e r q u a lity so u rce s o f ra w
m a te ria ls.
• S e e kin g o u t G re e n fie ld & B ro w n fie ld o p p o rtu n itie s
fo r d e ve lo p m e n t to a ch ie ve co st a d va n ta g e ,
co n siste n t su p p ly & co n tro l
• In cre a se m a n u fa ctu rin g a g ility b y d o w n stre a m
in te g ra tio n
• G a in d istrib u tio n ce n tre s in fu tu re h ig h g ro w th
m a rke ts SPACE Analysis - Project Management (Presentation for Prof. Nag) 25
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

SPACE Analysis - Project Management (Presentation for Prof. Nag) 26

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