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COMPETITOR ANALYSIS

 

TATA STEEL

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TATA steel is an Indian MNC based
at Mumbai, Maharashtra which is a part of Tata group of industries. It is
currently the second largest steel producer in India. It has its operations in
26 countries and it presence across 50 countries namely Singapore, China,
Australia, UK, Thailand and others. It is one of the top ten global companies
with an annual crude steel capacity of over 23.88 million tonnes per annum. It annually
raises over 14 million tonnes of ores from its captive collieries, iron ore
mines and quarries. TATA steel has command over raw materials.

TATA steel acquired a UK based
company Corus in 2007 which has become a strength for TATA as Corus has more
than 2000 metallurgists. Post this acquisition, TATA became world’s fifth
largest steel producer. It also acquired Nat Steel, a Singapore based company
in 2004 and acquired Millennium steel, a Thailand based company in 2005.

 

ESSAR STEEL

ESSAR steel is one of the top
players in Indian steel industry based at Mumbai, Maharashtra. It’s a part of
its parent company Essar Group. It is a fully integrated flat carbon steel
producer from iron ore to ready to market products. It also has its presence in
Minnesota, Vietnam, Canada, Indonesia and others. It produces hot rolled steel,
galvanised corrugated sheets, chequered plates, shot blasted plates, etc.

It is the largest flat steel
producer in India. Essar steel’s natural gas and power consumption in
operations has come down over years. In spite of the decline in economic
activity in steel industry, it managed to retain its adequate liquidity within
the company to meet its operational requirements and stood strong.

 

POSCO

POSCO India is one of the steel
producers in India based at Bhubaneswar, Orissa which is a part of its parent
company POSCO based in South Korea. It also has its projects in Maharashtra and
Karnataka. It has a strong market presence and operations globally. It has an
output of over 40 million tonnes of crude steel annually. It has its main
expertise in e-Procurement and e-Sales.

 

SAIL

SAIL is one of the top steel
producers in the world and is the market leader in India based at New Delhi. It
is a central government owned company. It is the 24th largest steel
manufacturer globally. It has its operations in Rourkela, Bokaro, Bhilai,
Durgapur, and others. SAIL is currently moving on a huge expansion and
modernisation in order to make its presence globally.

It has a strong raw material SCM
and technical and managerial expertise in the steel industry. SAIL partnered
with Bokaro steel, NTPC strengthening its market position. SAIL is also
reducing the manpower over years due to its enhanced productivity and
rationalised manpower.

 

FUTURE SCENARIO OF
STEEL INDUSTRY

 

India
is currently the 2nd largest crude steel producer globally.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STRATEGIC
MASTERSTROKE

In
2009, the steel demand in Indian markets fell down. JSW steel’s primary motive
was to expand its business and ISPAT owed a debt worth Rs 586 crores. In December
2010, JSW steel limited acquired ISPAT industries, and renamed itself to JSW
ISPAT steel limited by taking a historic step, investing Rs 2,157 crore in JSW
ISPAT and became the largest shareholder in JSW ISPAT. Currently, JSW steel is
the second largest integrated steel company after its merger with ISPAT steel
industries.

 JSW acquired 41.29% shares in ISPAT for 2157
crores and became the largest shareholder in JSW ISPAT. This acquisition was
done by issuance of 108.66 crore fresh shares worth Rs 19.85 per share which
gave a 2.23% rise of JSW’s stock at BSE. The Bombay High Court approved this
merger with 1:72 share swap ratio. JSW increased its outstanding shares to Rs
24.17 crore and equity capital to Rs 242 crore from Rs 223 crore by issuing 1.86
crore new equity shares, thereby. It also issued 48.54 crore new 0.01%
non-convertible cumulative redeemable preference shares to the preference
shareholders of JSW ISPAT. The holding of promoters in the merged entity got
diluted from 38.5% to 35.12%. Its overall public shareholding was fixed at
49.96%. The final merger led to an overall dilution of 8% in the shareholding
by JSW steel. The holding of the promoters in the merger entry came down to 3%.
As per the JSW steel Chairman, the expected overall capacity of the combined
entity would be 14.3 million tonnes and would be further enhanced to 40 million
tonnes by 2020.

 

The
main reasons behind this acquisition of ISPAT by JSW are the following:

1.       Inorganic growth opportunity

2.       Shore based facility

3.       Leading player in the growing
western markets

4.       Attractive valuation

5.       Cutting edge technologies

6.       Flexible combination of BF and DRI

7.       No project execution risks

8.       Expansion without gestation

 

Synergy:

JSW’s
management believed that the transaction would help JSW steel to achieve a
saving of Rs 300 – 350 crores by rationalizing administration and salary costs,
refinancing existing debt and negotiating better price for raw material. Also,
JSW ISPAT has a tax benefit of Rs 288 crore which is accrued on the new
combined entity. The merger brought down interest cost of JSW ISPAT by Rs 250
crore, as being a loss-making entity JSW ISPAT was paying 3.66% more interest
on loans. ISPAT’s plants at Maharashtra has helped in increasing the overall
capacity of JSW steel to 18 million tonnes per annum at present. JSW would have
to spend around $ 1000 per tonne to buy a new plant but this deal resulted in
the total operational facility of around $ 700 per tonne. JSW saw a sharp 30%
increase in book value. Their overall expected synergy benefit was Rs 300-500
crore.