‘We have cut 7,000 crore of debt since April 2020,’ says Soma Mondal, Chairman, SAIL | Interview

Steel Authority of India (SAIL) has largely overcome the Covid-19 crisis, posting a healthy profit in the third quarter. In her first-ever interview since she assumed charge as chairman on January 1 this year, Soma Mondal speaks to Surya Sarathi Ray about the steel industry’s prospects in the near term and the company’s plan to reduce its debt further. Edited excerpts:

SAIL performed well in the December quarter of the ongoing fiscal. What’s in store from you in the last quarter and the 2021-22 fiscal?

The start of the current financial year saw us battling issues on two fronts. Firstly there was the pandemic which posed a serious challenge to the life and well-being of our employees. And then we faced liquidity and profitability issues while running operations at our plants at minimum levels. The SAIL family, however, stood up to these challenges and came out with flying colours. The fruits of these efforts were visible as early as June when the lockdown was lifted and the economy revived. The steel sector echoed the sentiments of the overall economy both in terms of demand and supply. In fact, SAIL posted its best-ever sale performance month after month and was back in the black in the second quarter results. With the markets regaining momentum in Q3, SAIL posted a net profit of `1,283 crore. The outlook for the industry is quite good. There is a lot of positive sentiment. The uptick in activity in the construction, infrastructure and manufacturing sectors augurs well for the industry in general and SAIL in particular.

What share of the steel market do you enjoy at present and how do you see that rising in the near future?

Out of the total steel produced in the country, around 60% comes from primary producers and the remaining 40% is contributed by the secondary sector. The primary sector has several steel players besides SAIL and these have gradually added capacity, increasing their market share over the years. Despite operating in a highly competitive market for a long time, SAIL has maintained its position among the top steel companies in the country. The company has continually evolved itself to respond to market requirements and expanded its product basket. SAIL will continue to traverse that path to maintain its position in the future.

What will be your focus areas in the upcoming fiscal? Do you plan to embark on the programme to expand capacity to 50 MTPA as was projected earlier?

The current financial year has been quite challenging. Despite the improvement in market conditions in its latter part, the volumes will be lower on a year-to-year basis. As far as 2021-22 is concerned, we will focus on consolidating overall volumes and increasing the share of finished and value-added steel in our portfolio. That should help us do better in both physical and financial terms. As for capacity expansion, the company has a long-term plan to enhance capacity to 50 MTPA, in keeping with the National Steel Policy 2017. While we will be moving in that direction gradually, we are equally focused on reaching out to customers through stronger marketing initiatives. We had launched branded structurals called NEX and branded TMT bars called SAIL SeQR and these have got established as the best in class in the market.

Coking coal, a critical raw material for the steel industry, is still largely missing from SAIL’s portfolio. Any plans to acquire a mine overseas?

Most of our coking coal requirements are met through imports. SAIL has a joint venture named International Coal Ventures (ICVL) with a few other PSUs, which aims to acquire mining assets abroad. ICVL has already acquired coal mines and assets at Benga and Zambezia in Mozambique with met coal reserves (ROM) of more than 700 MT. Another 6,000 MT of unexplored resources (ROM) are expected to be available at Tete. While supplies from these sources have commenced, the mining operations at these assets will gradually be enhanced.

Is there any plan to partner with a foreign player to produce auto-grade steel in the country?

The technology for making auto-grade steel is available with many steel companies and SAIL is exploring different options. Delegations of Indian steel PSUs led by the steel ministry have visited countries like Japan and South Korea and deliberated with steel companies there over expansion and technological collaboration to manufacture high-grade steel, including auto-body sheets, in India.

How do you plan to deleverage your balance sheet? What is the debt level now and to what extent will you pare it by the end of 2021-22?

We borrow as per our business requirements. And we move to cut debt depending on the company’s position and the business scenario. Apart from higher cash collections due to increased steel sales, the company is augmenting cash flows through auctions of iron ore and fines. As part of deleveraging, we have also adopted a mix of other measures including debtors’ management, monetising of idle assets and sale of by-products. At the end of the third quarter of the current financial year, SAIL’s debt stood at around `46,610 crore (IND AS), which is a reduction of almost `7,000 crore from its peak level of around `52,000 crore in April 2020. The company plans to bring it down further in the current quarter and the next financial year.

It seems buyers are not interested in your three special steel plants. Is there a plan B in place?

The government had earlier approved the ‘in-principle’ strategic disinvestment of the three special steel plants. The process is handled by the Department of Investment and Public Asset Management (DIPAM). As per the rules for disinvestment, we are not privy to its details.