C. S, Verma, CMD, SAIL – India’s largest public sector steel company and the second-most profitable in the business in India Inc., refuses to believe that dampened economic sentiments are making life difficult for Indian steel businesses. For him, 10% is how the trajectory of growth appears for the industry. He might be right.
B&E: Besides being one of the highest profit-makers in India Inc., in recent years, the Rs. 503.5 billion topline-earning SAIL has worked on marketing its brand. How important is the brand to the company and its stakeholders?
Chandra Shekhar Verma (CSV): Today, branding activity in the steel industry in India is on the rise. And from September 1, 2012, the government of India will introduce the mandatory BIF standard, which will make branding compulsory for industry players. As far as SAIL is concerned, today, roughly 20% of our sales come from products that are branded. So, in times to come, brands and the power of branding will hold great importance for all in the steel industry. At present, we have more than 3,000 dealers and 67 warehouses across the country, so we expect branding to hitherto impact positively the efforts of SAIL as far as strengthening its front and back-ends are concerned. Investments in branding will also give us a distinguishing upper-hand over competition that is rising each day.
B&E: You mentioned competition – can you elaborate?
CSV: Today, government policy allows free import of steel from overseas – therefore it is a case of survival of the fittest. And this is again where I come back to the branding bit. We had to create brand equity in the minds of customers. Due to the marketing activities in recent past, I can say that SAIL has got a brand awareness that is unmatchable. Whenever customers or government officials talk about steel, they talk of SAIL. And the popularity of our slogan which goes as, “There’s a little bit of SAIL in everybody’s life”, proves the how SAIL has been able to position itself in a cluttered market where there are more than six to seven big players.
B&E: India’s steel consumption grew only by 5.5% in FY2011-12 to 70 million tonne due to lower demand from industries like auto, FMCG and construction. This figure shows lack of investment in industrial projects. There is all the talk about a slowdown in the steel industry – what is your take on how your company has performed vis-à-vis the industry during FY2011-12?
CSV: I don’t agree that either the Indian economy or the steel sector is facing a slowdown. India is a demand centre as far as consumption of steel is concerned, and even last year, despite an increase in production, we had to import steel to fulfil just our domestic demand. And the fact that the government has planned a total investment of one trillion dollar during the 12th Five-Year plan period is definitely an encouragement for investors and participating companies in the steel industry. Moreover, to achieve 1% growth in GDP, there has to be a growth of 1-2 times in production of steel. To be realistic, yes, we are not completely insulated from the happenings in Europe and US – the slowdown and crises across various markets have impacted India, but the fear of slowdown only lives in the mindset of people in this country. Today, the installed capacity of steel in India is about 82 million tonne a year, which is going to rise to about 140 million tone by the end of the current Five-Year plan and then to more than 200 million tonne by FY2020-21. The reason for a slowdown in the sector in Europe and US is that they are oversaturated economies and the low 1-2% growth in their economies cannot drive forward demand of steel. But if you look at growth of the steel sector in India it has averaged 8-10% over the past few years. And this growth will continue.
B&E: So you claim that the previous financial year was not a challenging period for SAIL?
CSV: Challenges were there. They still are. But the growth of more than 8% in demand and production of steel in India over the past few years, due to the India growth story, has been more than encouraging for us. There are challenges galore. More and more players are entering the industry today. The market is a free import market so if we are not cost competitive, there will be imports from China. Today, the total installed capacity of steel in the world is 1.8 billion tonne. Of this, 50% capacity is in China. And China is our next door neighbour. So, if we do not control costs and therefore prices, there will be free imports from China. So there are many more such challenges in the industry in India, but the opportunities outweigh the threats. And this is really not the case with other economies in Europe. India presents a growth opportunity for this industry.
B&E: Besides being one of the highest profit-makers in India Inc., in recent years, the Rs. 503.5 billion topline-earning SAIL has worked on marketing its brand. How important is the brand to the company and its stakeholders?
Chandra Shekhar Verma (CSV): Today, branding activity in the steel industry in India is on the rise. And from September 1, 2012, the government of India will introduce the mandatory BIF standard, which will make branding compulsory for industry players. As far as SAIL is concerned, today, roughly 20% of our sales come from products that are branded. So, in times to come, brands and the power of branding will hold great importance for all in the steel industry. At present, we have more than 3,000 dealers and 67 warehouses across the country, so we expect branding to hitherto impact positively the efforts of SAIL as far as strengthening its front and back-ends are concerned. Investments in branding will also give us a distinguishing upper-hand over competition that is rising each day.
B&E: You mentioned competition – can you elaborate?
CSV: Today, government policy allows free import of steel from overseas – therefore it is a case of survival of the fittest. And this is again where I come back to the branding bit. We had to create brand equity in the minds of customers. Due to the marketing activities in recent past, I can say that SAIL has got a brand awareness that is unmatchable. Whenever customers or government officials talk about steel, they talk of SAIL. And the popularity of our slogan which goes as, “There’s a little bit of SAIL in everybody’s life”, proves the how SAIL has been able to position itself in a cluttered market where there are more than six to seven big players.
B&E: India’s steel consumption grew only by 5.5% in FY2011-12 to 70 million tonne due to lower demand from industries like auto, FMCG and construction. This figure shows lack of investment in industrial projects. There is all the talk about a slowdown in the steel industry – what is your take on how your company has performed vis-à-vis the industry during FY2011-12?
CSV: I don’t agree that either the Indian economy or the steel sector is facing a slowdown. India is a demand centre as far as consumption of steel is concerned, and even last year, despite an increase in production, we had to import steel to fulfil just our domestic demand. And the fact that the government has planned a total investment of one trillion dollar during the 12th Five-Year plan period is definitely an encouragement for investors and participating companies in the steel industry. Moreover, to achieve 1% growth in GDP, there has to be a growth of 1-2 times in production of steel. To be realistic, yes, we are not completely insulated from the happenings in Europe and US – the slowdown and crises across various markets have impacted India, but the fear of slowdown only lives in the mindset of people in this country. Today, the installed capacity of steel in India is about 82 million tonne a year, which is going to rise to about 140 million tone by the end of the current Five-Year plan and then to more than 200 million tonne by FY2020-21. The reason for a slowdown in the sector in Europe and US is that they are oversaturated economies and the low 1-2% growth in their economies cannot drive forward demand of steel. But if you look at growth of the steel sector in India it has averaged 8-10% over the past few years. And this growth will continue.
B&E: So you claim that the previous financial year was not a challenging period for SAIL?
CSV: Challenges were there. They still are. But the growth of more than 8% in demand and production of steel in India over the past few years, due to the India growth story, has been more than encouraging for us. There are challenges galore. More and more players are entering the industry today. The market is a free import market so if we are not cost competitive, there will be imports from China. Today, the total installed capacity of steel in the world is 1.8 billion tonne. Of this, 50% capacity is in China. And China is our next door neighbour. So, if we do not control costs and therefore prices, there will be free imports from China. So there are many more such challenges in the industry in India, but the opportunities outweigh the threats. And this is really not the case with other economies in Europe. India presents a growth opportunity for this industry.
For More IIPM Info, Visit below mentioned IIPM articles
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
