Chairman’s Message
Mr. Mukesh Bhandari
Chairman & CTO
Dear Shareholders,
The fiscal year 2010 – 11 was a journey of recovery from the global meltdown, consolidation and
development of path breaking new products. The global economic climate posed several challenges, but
we made the best use of our resources and abilities to grow. Our world class manufacturing & project
implementation standards helped our clients build their own enterprises of tomorrow.
The global steel giants from across the world have shown interest in the Indian steel industry in the
recent past. Both China and India’s domestic steel demand not only survived the economic slowdown,
but actually grew at a remarkable rate. China accounted for 45% of steel production in 2010 and India
was recently confirmed as the world’s fourth largest steel producer. The crude steel production in India
registered a year-on-year growth of 6.4% in 2010 and reached 66.8 Million Metric Tons.
In India, the secondary producers of steel are currently playing an important role in production and
growth of steel industry. In the annual report for FY 2010-11, the Indian Ministry of Steel recognized
the contribution of several relatively smaller and medium scale units such as Sponge Iron Plants, Mini
Blast Furnace units, Electric Arc Furnaces, Induction Furnaces, which not only play an important role
in production of secondary steel, but also contribute substantial value addition in terms of quality,
innovation and cost effectiveness.
Perhaps the greatest challenge facing the steel producers is a sharp increase in the cost of iron ore, coal
and oil that have not yet been matched by price increases for customers. These have created pressures on
the viability of the steel industry and consequently the competitiveness of the user industries.
Inspite of an extremely volatile raw material market, cost escalations and non-availability of key raw
materials, the company has achieved a 15% growth in sales to clock a turnover of Rs. 2311 Crores.
Engineering & Projects Division
With the introduction of larger capacity Induction Melting Furnaces (IMF), the total installed capacity for
Steel production through induction route has steadily increased in India over the years. World’s largest
40 ton IMF for billet making introduced sometime back is gaining popularity with the mini steel plants
in India and is helping customers produce steel at lower cost. This is also helping them build plants of
capacity of 0.3 – 0.6 MTPA through the induction route.
The price realisations of products like Billets and TMT bars in export markets that we service (Turkey,
Middle East, Iran, Africa, Pakistan and Bangladesh) have gone up considerably in comparison to the
financial year 2008 – 09, making the billet production through Induction Furnace route viable again. We
are seeing an increased number of enquiries for setting up turnkey steel projects over the last 6 months
from such markets. Therefore, we expect our export sales to go up significantly in the year 2011 – 12 as
against 2009-10 and 2010 -11 helping us to not only increase our sales for the E & P division but also
improve our realisations/ margins.
The company has spent substantial amount of resources in design and development of Continuous
Casting Machine (CCM) for billets suitable for small induction based steel plants. This, we believe,
will be a highly successful product because the small steel manufacturers using induction route want to
migrate from ingot making to billet making. We have a large captive base of existing customers who can
use this product. Over the next 5 years, we expect to sell large numbers of CCMs and help our customers
improve their productivity, yield and price realisations.
Along with the growth of the auto industry in India, the foundry sector is also booming. Over the next 5
years as India aims to gain a dominant position in the auto ancillary market, we see a large market for our
foundry furnaces.
Induction heating and hardening is another area which is growing along with the auto sector. The forging
industries are also switching from conventional fuel fired furnace to induction heating furnace due to
increasing cost of oil, pollution related issues and low productivity. We are therefore, seeing a good
growth in the sales of our Induction heating & hardening equipment.
We have been working on a new steel making technology along with a scientist Mr. Louis J. Fourie from
South Africa for the past 10 years. This technology has the potential to dramatically reduce the cost of
steel production through the use of inferior grade raw materials. The Ministry of Steel and the Department
of Science & Technology have recognized our continuous efforts to bring this concept to a pilot stage and
have sanctioned & released amount of Rs. 6.55 crores from their Steel Development Fund (SDF). We
appreciate the contribution from Ministry of Steel and the Department of Science & Technology which
will help us to take this concept to the next stage of development.
The transformer manufacturing started in the year 2009 – 10 has shown good progress. The company
increased its market share in the furnace transformer sector and clocked sales of more than Rs. 20 crores.
In the coming years, the company plans to widen its focus to cater to non-furnace segments and grow this
business multifold.
Steel Division
The biggest challenge the company faced during the last financial year was the non-availability of iron
ore from the Hospet/ Bellary area forcing the company to source this critical raw material either from east
or through imports thereby increasing the cost substantially. The problem still continues and will continue
to effect the operations till the Karnataka Government and the Central Government together resolve this
serious issue facing the steel industry.
Domestic DI pipe demand grew steadily at the rate of 12% over the last five years and the total
manufacturing capacity in India stood at about 1.2 MMT by the end of the year 2010-11. The Company
has retained its position as the third largest manufacturer of DI Pipe (by actual production), and is
augmenting its capacity further. The company has commissioned its 128 m³ Blast Furnace and new
facility for DI Pipe production of higher diameter up to 1200 mm. The Company also got BIS approval
for higher sizes of DI Pipes up to 1200 mm. The marketing and distribution network for DI pipes has
been expanded by opening offices across 14 states in the country and experienced people have been
leading the marketing function across the network.
With the approval from Power Grid Corporation, the company has established credibility in the market
and is poised to increase the production of angles for Transmission Line Tower (TLT) applications. The
Company has also received BIS approval for its MS Billets which has improved its realization in the
Gujarat market.
“Electro TMT Plus” bars have emerged as the premium brand in rebar segment in Gujarat. With the
kicking in of full Hans Ispat capacity, “Electro TMT Plus” bars has become the largest selling TMT brand
in Gujarat. With a strong brand image, the price realizations are steadily improving and the product has
been approved for supply to various large Government and private projects. The new variants of TMT
introduced by the company like CRS (Corrosion Resistant Steel) and EQR (Earth Quake Resistant)
are gaining acceptability in the market and the volumes are slowly increasing resulting into higher
realisations per ton.
With the commissioning of ladle refining furnace and induction refining furnace, the company will focus
more on production of value added products like stainless steel and forging grade low alloy steel.
The Company renewed the appointment of ECS (Eicher Consultancy Services, subsidiary of Price
Waterhouse Coopers) to help it with productivity and EBITDA improvements through FY 2010-11.
Several process improvements have been made in SMS, TMT Mill and Structural Mill to improve the
productivity and optimize cost.
Electric Vehicle Division
Electric 2 wheeler market has seen an upward trend in India in the recent past on account of subsidy from
the Central Government, petrol price hike and improved performance of our products due to various R &
D efforts.
We hope to take the maximum advantage of the above situations because of being the longest standing
brand in the market, our reputation of being the EV technology leader and a vast dealer network across
India. We expect more than 50% growth in our revenues in the coming financial year and an exponential
growth from there on.
We are improving our key internal operations to ensure a consistent and positive experience for our
customers, partners, suppliers and employees.
As a Group we remain committed to corporate and social responsibility. In all of our actions we strive to
ensure that all economic, environmental and social aspects are considered. We believe that this approach,
driven by our principles of respect, trust and integrity, makes us more responsible and informed as a
company.
I wish to record my appreciation to all for their contribution towards the growth of the company and look
forward to take on new challenges and scale new heights of achievement in future.
Chairman & Chief Technology Officer
Mukesh Bhandari