Financial Background

Selected Financial Data (in INR Cr.)

Particulars 2018-2019
Sales 1,300
Operating Expenses 1,144
Operating Profit (EBIT) 156
Operating Profit Margin 12.00%
Interest 41
Tax 24
  91
Add:  
Depreciation & Amortization 134
  225
Add:  
CAPEX 115
  340
Add:  
Receivables 119
Inventory 87
  546
Less:  
Payables 297
FCF 249

Notes:
1) FCF = Free Cash Flow
2) The original data has been extracted according to the industry standard and has been scaled down with respect to
the revenue size of our firm. (Original Source – Annual Report of Bhushan Steel, JSW Steel, SAIL)

Revenue Channels

Products Quantity Produced Selling Price Total Revenue (in Margin

(Thousand Tons) (Thousand INR Cr INR)
Per Ton)
Pig Iron 134.9 28 377.7 28%

Sponge Iron 66.8 22 146.9 25%

Galvanized/Galvalume 100 52 520 36%

Color Coated Products 33.5 58 194.3 31%

Cold Rolled Products 47 13 61.1 18%

Plant Site No. Of Employees Total Cost (In Cr INR) Total Revenue (In Cr
INR)

Kolkata 280 162 274

Uttar Pradesh 360 254 325

Odisha 310 210 345

Punjab 440 287 412

Realignment Strategies
Quarter 1 (Apr 2019 – Jun 2019)

Ceasing Operations of the Manufacturing Plant in Uttar Pradesh

  Produces Sponge Iron and Cold Rolled Products
 Prior to that releasing a press release and contacting the suppliers and buyers by giving them a grace period
of 3 months to adjust
 Contacting the labor Union and providing compensation schemes to the workers and for employees
introducing golden handshake schemes
 Contacting an investment firm in these 3 months to find a potential buyer for this plant and also telling
them to evaluate the price of the assets. Jsw steels interested in this vertical as it is present in their long
term plan. Contacting JSW steels to set up negotiations and keeping the investment firm to help in the
proceedings.

Reasons:
 Legal and Political instability
 Plant has lower internal rate of return than the average rate of return of all the plants
 Higher operating margin compared to other sites.
 Inefficiency due to the use of old equipment and machinery used ( thermal furnaces )
 Quarter 2 (Jul 2019 – Sep 2019)

 Stopping production of Cold Rolled Products across all sites.

 With liquidity in hand setting up partnerships with a mining company, either collaborating to make sure
that raw material procurement becomes cheaper.
 Buying the ore mine first in bidding in Orissa, as we already have a manufacturing plant here and
government is also giving good incentives as well as it is up for sale.

Quarter 3&4 (Oct 2019 – Mar 2020)

 Setting up centers around the country to collect scrap metals at very low price.
 With the cash from the sale of assets setting up these centers after 3 months of sale of the property, setting
up these centers and using hub and spoke method to collect all the scrap materials and bring it to one spot
in Orissa .
 Setting up an recycling metal plant in Orissa as land is easily available.
 Going to labor Union to ask for labors and also collaborating with government and using Tata steels our
parent company to help with the setup of plant and technology.

Quarter 5&6 (Apr 2020 – Sep 2020)

 With the procurement of raw materials (iron ore) we can be a dominant supplier.
 From the recycling plant we then introduce ourselves in the next 2 Quarters with the production of TMT
bars and steel used in construction. (Construction is the way forward)
 This would be achieved by the formation of a SPV (Special Purpose Vehicle) by using a IPP Source od
financing using non-recourse loans (which our American JV Partner can’t be liable for). The financing
would be done by a consortium of industrial financial institutions and metal linked facility.

2022
Our long term vision is to be operating independently and hence, move towards a demerger after attaining internal
stability.