Brij Bhushan Agarwal, VCMD, Shyam Metalics and Energy Limited

13 Jul 2023 , 05:08 AM

Help us understand the company’s business model.

Shyam Metalics is a leading integrated metal producing company with a focus on long steel products and ferro alloys. We are amongst the largest producers of ferro alloys in terms of 163.5 MVA of installed capacity in India. All along the steel value chain, we have the potential to sell intermediate and finished goods. Regarding long steel goods, we are also among the top integrated steel and ferro alloy producers in India’s eastern area. The business has a track record of producing operating profitability, and since we started operating in Fiscal 2005, we have consistently produced positive EBITDA. We operate two “Ore to metal” integrated (forward and backward) steel manufacturing plants, one in Sambalpur, Odisha and one in Jamuria, West Bengal which comprise of captive railway sidings, captive power plants, iron pellet, sponge iron, billet, TMT, wire rod and structural mills and Ferro alloy plants. We also operate a manufacturing plant in Mangalpur, West Bengal which comprises sponge iron and Ferro alloy plants and a captive power plant.

Our business model is focused on generating revenue and create value for our customers. We also aim to value proposition, generate revenue streams, and nurture long-term relationships with our stakeholders. We can quickly adapt to changing market conditions and shift our production and product offerings to meet the continuously changing market climate and optimize our operating margins.

What are the company’s key strengths?

The most interesting aspect of our journey is that we have always evolved with changing times. Over the years, we’ve witnessed great achievements and successful endeavors – creating a legacy of strength and endurance. Since our inception, in the year 1991, we have focused on acquiring unique skills. We have also prioritized upholding our principles and drawing lessons from our past and have become one of the key companies in the iron and steel sector today.

We have several key strengths that set us apart from our competitors. They are:

• Our unmatched expertise in the sector
• Our economies of scale/ product portfolio
• Our unparalleled control over supply chain
• Our ability to innovate and customize products.
• Brand recognition

Also, with a diverse product portfolio, and the ability to innovate and introduce advanced solutions, we have consistently satisfied stakeholder requirements. The steel industry is marching towards an attractive phase of substantial growth enabled by robust demand and various geopolitical factors favoring our demography. We thus see tomorrow’s growth through the expansive prism of our solid foundations.

Share with us the growth strategy of the company.

In addition to growing, Shyam Metalics wants to improve its financial performance. In doing so, the Company is unmistakably reinventing itself through a variety of organic and inorganic activities that will greatly enhance the Company’s brand’s value. We want to sweat our existing assets to the utmost extent possible to maximize volumes and accruals and consolidate our position as a leading iron and steel firm. We are currently judiciously expanding our capacities in line with a carefully considered expansion strategy. To maintain low leverage and prioritize sustainability, we are expanding our current domestic steel capacity at our several manufacturing locations.

We are also focusing on expanding new product lines, entering new markets, increase operational efficiency, and identifying potential acquisition targets and conducting due diligence to assess their financial viability and strategic fit. This growth strategy is in line with our management’s goal of maximizing our offering and becoming a low-cost iron and steel producer.

How are things from a demand perspective amid a global growth slowdown?

Despite being one of the biggest producers of iron and steel in the world and the main supplier to important markets, India is unable to reach its full potential because of low labour productivity, expensive cooking coal, the global economic recession, and geopolitical concerns. Along with that, the other challenges the industry is facing today are: Low per capita consumption due to overall poverty, costly coal imports, low investment in technology, shortage of power, poor infrastructure.

However, during this global slowdown, the mining and metals sector is responding with more fundamental shifts to business and operating models. New business models offer opportunities for miners to reposition for a changing future, with many companies considering the benefits of strategies to rationalize, grow and transform. Miners are considering more innovative, sophisticated approaches to mitigating supply chain risk, including stronger relationships with suppliers and collaborative contracting.

The government has rolled back the export duty imposed on steel and iron ore. What are your views vis-a-vis the impact on the Indian steel industry?

We welcome this decision because it reflects a highly forward-thinking step towards rebuilding the overall steel sector. To control inflation and increase domestic availability, the government previously imposed export duties. Because it did make the international market more unpredictable, the industry had been hoping for this development. While such regulations are only going to benefit the industry in the long run, we anticipate the government to maintain its position on this.

Help us understand the risk of commodity prices for your business. How are you managing this risk?

The rise in commodity prices has a significant impact on the metal and mining sector, as the industry rely heavily on the prices of raw materials such as iron ore, copper, aluminum, and other metals.

The industry is facing various risks due to fluctuations in commodity prices like price volatility, increase in operating cost, and market uncertainty at a global level. However, I believe companies in the metal and mining sector need to monitor and manage these risks carefully to stay competitive and maintain profitability. This can involve strategies such as diversifying production and product portfolio, optimizing operations, and developing sustainable practices.

Share with us the key challenges facing the company. How are you mitigating the same?

The mining industry is facing several challenges and disruptions that are impeding its growth. There are many environmental aspects related to mining activities that create challenges in the expansion of mining. The issues of land use and conversion, waste generation, groundwater depletion, and pollution of air and water are some of the major factors that create concerns on the national level.

Furthermore, the sector is challenged to find innovative and advanced technology that will aid in achieving maximum efficiency while having the least impact on the environment. However, the challenges faced in the mining industry have forced miners to rethink the way they operate. Also, we remain optimistic that the mining and metals industry will respond with more fundamental changes to business and operating structures.

New business models will provide chances for miners to reposition themselves for a changing future. Companies that will examine and adapt their business strategies will have a competitive advantage as demand and expectations change.

Please share with us a snapshot of your company’s financial performance and the strengths thereof. 

The company’s total consolidated income for Q4FY23 is Rs. 3,410.94 crores as compared to Rs. 2,871.76 crores for Q4FY22. And the company’s consolidated income for the FY23 is Rs. 12,722.19 crores as compared to Rs. 10,453.96 crores for FY22. The consolidated net sales stood at Rs 3,380.08 crore for Q4FY23 up from Rs. 2,856.77 crores for Q4FY22. The consolidated net sales stood at Rs 12,610.18 crore for FY23 up from Rs. 10,393.96 crores for FY22.

The company’s total standalone income for Q4FY23 stood at of Rs. 1,803.69 crores as compared to Rs. 1,191.25 crores for Q4FY22. The company has reported total income of Rs. 6306.20 crores for FY23 as compared to Rs. 4753.50 crores for FY22. The standalone net sales for Q4FY23 stood at Rs 1789.49 crores as compared to Rs. 1182.11 crores for Q4FY22. The standalone net sales stood at Rs 6,243.21 crores for FY23 as compared to Rs. 4,658.40 crores for FY22.

Help us understand the overall ESG strategy of the company.

Shyam Metalics is committed to minimizing its environmental impact. We are dedicated to environmental preservation, protection, and promotion. Our target has always been to reduce specific direct net CO2 emissions.

Also, we have expanded our capabilities to use captive power to satisfy our energy needs, decreasing waste by employing alternative raw material sources like Dolochar, Iron ore fines, Coal fines without sacrificing the quality of our final goods. We work to drastically reduce noise and dust pollution, reduce wastewater generation, replenish groundwater supplies, and maintain zero-effluent discharge. The mission of our business is to provide communities with sustainable means of subsistence.

We also remain committed to elevating the lives of communities around our plant locations. Our company philosophy, which aims to support local communities and interact with all stakeholder groups, includes an approach to inclusive growth. To name a few of our activities for social sustainability, we are actively engaged in rural healthcare and education, social infrastructure development and awareness, and skill development.