Tata Steel is a lot more than just one of
India’s leading steelmakers. The Tata Group of
which it is part enjoys the status of a prized national
institution. One reason for this is because when it started
making steel at Jamshedpur well over a century ago, overcoming
all odds from identifying iron ore and coal deposits to
mobilizing funds, that marked a major step towards
India’s economic self-reliance during colonial
times. In addition, Tata Steel’s rigorous
corporate governance and care for its employees and communities
around its mills are seen both in the private and government
sectors as a benchmark for the industry.
In an interview with Metal Market Magazine, Tata
Steel CEO and managing director T V Narendran said: "We will
always be guided by the principle laid down by our founder
Jamsetji Nusserwanji Tata that the 'community is not just
another stakeholder but the very purpose of our
existence.’ We faithfully put that into practice
in all that we do."
Respected on the world steel stage as well as in
India’s domestic industry, Narendran faced a
litmus test last year in the face of the rapid countrywide
spread of the Covid-19 virus and a two-month national lockdown
that started on March 25. The challenge in his own words was
manifold. "While we had the permission during the lockdown to
keep our plants running under the Essential Services Act, we
found most of our supplier partners in the country and also our
customers were not operating. Therefore, keeping our long and
complex supply chain operational to ensure that our mills were
not shut for want of raw materials was a major challenge. Of
great concern for us was to keep our employees coming to
factories safe and healthy. That led us to enforce strict
protocols," he recalled.
As local demand was down in the first quarter (April to
June) of the year 2020-21, Tata Steel faced the prospect of
rising inventories of finished steel even though production was
cut in April and May. "Producing steel products that we could
not sell would have sucked out cash from the system. We had to
think quickly on our feet. We shifted our focus from the
domestic to export markets. That resulted in as much as 50% of
our first-quarter production being exported. And much of our
exports went to China where recovery was faster than expected.
By June end, we were back to full production," Narendran said.
While he found the first half of 2020-21 highly challenging
because of pandemic-related uncertainties, he saw domestic
steel demand improving since, aided by "accommodative policies,
stepped-up government spending and easing of mobility
restrictions."
In synchronization, Tata Steel in India produced its highest
ever quarterly crude steel output of 4.75 million tonnes during
the period January to March 2021, along with its all-time best
quarterly Ebitda. Recovering rapidly from the pandemic-related
slow start in 2020-21, "We managed to deliver a strong
performance in India with broad-based, market-leading volume
growth supported by our agile business model. We performed
extremely well in all segments, especially automotive steel.
This happened due to our powerful distribution network, robust
customer relationships, strong brand equity and unwavering
focus on new product developments and their commercial
launches," Narendran said. He also pointed out that the
company’s robust digital marketing platforms
enabled it to reach new markets and to be future-ready.
Benefiting from all these factors, Tata Steel actually
lifted steel deliveries in the final quarter of the 2020-21
year to 4.67 million tonnes, up by 16% year on year for that
quarter. Helped by a good market and improved demand in the
second half, Tata Steel achieved a per tonne Ebitda of Rs
26,309 ($358) or an Ebitda margin of 40.9%, Narendran noted.
The difficulties in the first two quarters, however, reduced
whole-year 2020-21 steel production to 16.92 million tonnes
from 18.20 million tonnes in 2019-20, reflecting wider steel
sector trends.
At the same time, under the watch of Narendran, who is a
distinguished mechanical engineering alumnus of the National
Institute of Technology, Trichy, India, and who has an MBA from
the Indian Institute of Management Calcutta, steel deliveries
of Tata Steel Europe (TSE) in the final quarter were up 3% year
on year to 2.47 million tonnes, with Ebitda posting a "sharp
rise to £125 per tonne during that period." He is also an
alumnus of the CEDEP-INSEAD institution for executive
development in France.

Improving the performance of the operation of TSE, which
produced liquid steel output of 9.55 million tonnes in 2020-21
by comparison with 10.26 million tonnes in the previous year,
is another focus for Narendran. Attempts to form a joint
venture between TSE and Germany’s ThyssenKrupp
Steel, which would have created Europe’s second
largest steelmaker after ArcelorMittal, failed in May 2019 due
to the opposition of the European Commission’s
business competition authorities.
Asked about other future options, Narendran said: "We made
attempts to drive further consolidation in the European steel
industry. This we thought was important for the long-term
future for steelmaking in Europe. However, this
didn’t happen for a number of reasons. We are now
focused on continuing the transformation work in both the
Netherlands and the UK. We expect our European business to do
well this year on the back of the good work by the teams there
and also favorable market conditions. We are separating the
Netherlands and the UK businesses as each has unique challenges
and calls for different approaches."
In the meantime, continuing improvement in steel fortunes
and progress in Tata Steel’s south-east Asia
business centered in Thailand and Singapore have led the
company to do away with a former classification for that
business as "assets held for sale." The decision of the
Narendran-led management is to focus on further improving the
"fundamentals of south-east Asian business" where the operating
profit improved significantly in 2020-21.
Almost as late as in March 2021, the industry was drawing
comfort from the World Steel Association (Worldsteel) forecast
that Indian steel demand would grow by 19.8% to 106.1 million
tonnes this calendar year after there was a sharp fall in
consumption by 13.7% in 2020. The sentiment was further buoyed
by the International Monetary Fund (IMF) saying that
India’s gross domestic product (GDP) this
financial year will be growing at the fastest rate of 12.5%
among all emerging and advanced economies. Narendran is a
member of the executive committee of Worldsteel, for which he
has also served as a board member.
There are questions now about whether those forecasts will
hold good when over 200,000 people have been contracting
Covid-19 daily in India and state after state is declaring
lockdown. Narendran said: "No doubt the second and the third
wave of Covid-19 will leave an impact on India and elsewhere.
But I’m confident that in the medium and long
term, steel demand will be strong in our country and also
globally. Consider this – we in India traditionally
had consumption-led growth and so steel-use growth in most
years was less than our GDP growth rate. But now with the focus
being on infrastructure building, I am seeing more-investment
led growth and that is more steel intensive. I shall,
therefore, be expecting steel consumption growth to mirror GDP
growth or higher than that. This was the case with China for
most of the past two decades."
He is also positive about global steel demand outlook in the
context of governments from the US to China seeking to "spend
their way out of trouble through big spending in
infrastructure." Narendran’s observation,
therefore, supports Worldsteel’s forecast that
global steel demand could grow by 5.8% to 1.874 billion tonnes
in 2021.
The way that Tata Steel went on adjusting production,
domestic sales and exports month by month during 2020-21,
depending on the severity of the pandemic, is an example of the
agility of a Narendran-led management. Some of his colleagues
suggest that it also reflects the personal agility, discipline
and flexibility needed for his long-held passion for drumming
as a hobby – a musical talent that he occasionally
demonstrates at Tata Steel functions.
Domestic and global demand
The deteriorating environment for public health in India is
once again making the country’s steelmakers wary
about short-term demand for various steel products. Take
automotive steel, where Tata Steel has a domestic market share
of around 40%, for example. Supply chains are again being
disrupted by Covid-19. Upstream, cryogenic tankers usually used
to transport industrial gases are now being used to carry
oxygen for medical application. Downstream, many car and
two-wheeler buyers are postponing purchases to a better day,
which has led automobile industry leaders such as
Maruti-Suzuki, Toyota, Hyundai and Honda to advance maintenance
shutdowns. This is likely to result in a sharp fall in
automobile production in May and June, if not beyond.
Difficulties in mobilizing migrant workers in times of
lockdown and shortages of gas are interfering with construction
and house-building work. Narendran said that Tata
Steel’s priority will at all times be to make
maximum supplies of steel to the domestic market. "But in case
there is demand fall here, we have the option to export," he
added. Tata Steel scaled down exports to 25% of production
during July-September 2020 from 50% in the previous quarter.
Now exports are in the "range of 10% to 15%."
Narendran does not deny that there is local industry
temptation to export since hot rolled coil fetching around
$1,500 per short ton in the United States and over €1,000
($1,211) per tonne in Western Europe commands a good premium
over prices in India. Besides his group’s
commitment to give preference to the domestic market, Narendran
also has to contend with many import restrictions in the US and
the EU. He also cannot ignore the eagle-eye that New Delhi is
keeping on steel and cement prices because they have a major
cost impact on infrastructure development. Tata Steel has a
target to raise crude steel production in 2021-22 to 18.3
million tonnes through mill debottlenecking and is not yielding
to the temptation to export and thus restrict supplies to the
domestic market.
Narendran joined Tata Steel as an executive on completion of
his MBA in 1988. Over the years he was given assignments that
ranged from international and domestic marketing to the
handling of long and flat products, as well as managing
NatSteel in southeast Asia, which was the steel
group’s first overseas acquisition, made in
2004.
Exposure to operations and marketing as well as a stint as
principal executive officer to former managing
director
B Muthuraman prepared him to move to take up that role
himself on November 1, 2013.
At 48, Narendran became the youngest managing director of
Tata Steel, the crown jewel of India’s largest
conglomerate which also has a major presence in IT, automotive
and retail sectors. On taking up the leadership role, Narendran
set out to make Tata Steel a "global cost leader" through
digitization of processes and functions, enhancing employee
productivity, and improvement in logistical and supply-chain
efficiencies alongside capacity expansion. The goal is to be
"future ready, structurally, financially and culturally." At
the same time, Narendran is negotiating the challenge of
holding on to an Indian steel market share of around 20% by
expanding capacity, both organically and through
acquisitions.
Planning and initial work for a greenfield steel mill at
Kalinganagar in Orissa’s Jajpur district began
well before Narendran was made managing director. But his
success in convincing the local community of the good that the
steel plant would do in the region and speeding up project
implementation enabled the commissioning of the 3 million tonne
per year (tpy) mill in November 2015. Named the Kalinganagar
plant, it is designed to produce hot rolled coil. It has a
4,300 cubic metre blast furnace and a 5.8 million tpy capacity
sintering unit.
Beyond commissioning, Narendran ensured that the mill
achieved its rated capacity in a short time and that work
started on second-phase expansion that will make Kalinganagar
an 8 million tpy unit. But the challenge that he has given
himself is to finally expand it to 16 million tpy. The
available land, infrastructure and logistics will enable the
Kalinganagar plant to become the country’s largest
single-site steel plant.
This project, together with the scope for significant
capacity expansion at a mill in Orissa acquired in May 2018 and
since renamed Tata Steel BSL (TS BSL), will give Tata Steel
enough capacity for flat steel production in India. Given these
circumstances, Narendran’s decision is to bid for
future assets for long steel production.
For example, Narendran said that he will be interested in
acquiring the 6.3 million tpy shore-based long product mill of
Rashtriya Ispat Nigam Limited (RINL). This is prompted by New
Delhi’s resolve that "RINL will be privatized
despite opposition from the host state Andhra Pradesh and trade
unions." In addition to being next door to two major ports
– Vizag and Gangavaram – facilitating imports
of raw materials and exports of finished products, the
profit-making RINL owns considerable areas of surplus land,
which offers scope for a big capacity expansion.
Narendran is also keeping an eye on the privatization of 1.1
million tpy capacity Neelachal Ispat Nigam Limited (NINL). The
NINL plant, which produces pig iron and billets, has scope for
investment in downstream finishing mills.
Narendran’s interest in NINL is threefold. NINL is
in Orissa, where Tata Steel already has two big plants, at
Kalinganagar and TS BSL at Angul. That would help in terms of
regional synergy of operations. Secondly, NINL will add long
steel production capacity. And thirdly, NINL owns iron ore
deposits.
His purchase of the steel business of Usha Martin Limited
(UML) through a Tata Steel subsidiary, now called Tata Steel
Long Products Limited (TS LPL), in 2019, and also his plans to
bid for two public sector undertakings (PSUs) earmarked for
privatization are seen as attempts to secure a major profile in
the long steel business. At Tata Steel’s over 10
million tpy Jamshedpur plant, long products have a share of 3
million tpy. TS LPL has crude steel capacity of 1 million tpy,
but its finishing capacity is only 650,000 tpy. The
subsidiary’s new management is ramping that up to
700,000 tpy through debottlenecking.
Narendran’s immediate priority is to give a
push to a capacity expansion by 5 million tpy of the
Kalinganagar plant, after "we took a pause last year because of
the pandemic." He is now poised to step up capital expenditure
in view of a better market environment and a good outlook for
steel prices. But he will not in any way "compromise on
deleveraging the company." During 2020-21, the net debt of Tata
Steel was pared by close to $4 billion, and now he is targeting
yearly debt reduction of $1 billion.
"We should be completing the Kalinganagar expansion by
2023-24," said Narendran. But the 2.1 million tpy cold rolling
mill and the 6 million tpy pellet plant "should be ready in the
next financial year." Other major features of the expansion are
installation of a 5,800 cubic-metre blast furnace and raising
the capacity of the hot strip mill to 6.5 million tonnes from 3
million tonnes. The expansion will enable Kalinganagar to make
high-value-added cold rolled galvanized and annealed products,
further strengthening Tata Steel’s presence in
automotive, general engineering and white goods
sectors.
Keeping around 20,000 construction workers safely stationed
at Kalinganagar during the pandemic for the expansion work to
be completed there on time will be a challenge, but whatever
the hurdles faced, Narendran is confident of making Tata Steel
a 25 million tpy group by 2025. Beyond that, he will be working
to take combined capacity at the company’s present
three sites to 40 million tpy – Jamshedpur to 14
million tpy, Kalinganagar to 16 million tpy and Angul to 10
million tpy.
Tata Steel has made significant successful investments under
Narendran’s leadership. The acquisition of TS BSL
under India’s insolvency and bankruptcy code (IBC)
has given the company a unit that produces flat steel for the
automotive, oil and gas and white goods sectors. The TS LPL
mill at Jamshedpur, which makes high-alloy long steel products
for the automotive industry and for wire rope production has
also proved to be a rewarding acquisition.
Some other steel companies in India that repeatedly failed
to service bank loans were put up for auction under the
supervision of the country’s National Company Law
Tribunal, providing plenty of acquisition options. Narendran
had to decide which one in terms of size, asset quality,
product profile and scope for expansion would be most suitable
for Tata Steel. After purchasing the 5.6 million tpy Bhusan
Steel (now TS BSL), Narendran had to select a small team from
his company to impart Tata Steel’s work culture to
the acquired steelmaker. Sooner than expected, both TS BSL and
TS LPL, the latter bought outside IBC, embraced Tata
Steel’s way of working, including safety
practices, care for the environment, strict compliance with
government regulations and discharge of corporate social
responsibility (CSR) to communities around the mills.
Narendran said that both the acquired units "have reached
rated capacity as we expected and we are making plans for their
expansion. It has been a good story of cultural integration,
operational performance and financial turnaround." The arrival
of Tata Steel offered job security and that boosted the morale
of existing staff at the units acquired. The employee
positivity created, synergies in raw materials procurement and
the marketing of the finished products of TS BSL and TS LPL by
using the Tata Steel’s large distribution network
aided the quick turnaround.
Tata Steel continues to meet the iron ore requirements of
all its existing steelworks from its mines in Orissa and
Jharkhand. But why did Narendran – given his ambition
to first lift Tata Steel capacity to 25 million tpy by 2025 and
then to 40 million tpy and to make new acquisitions –
not buy any iron ore mines in India’s recent round
of auctions?
His reply: "We were there at the auctions. However, we found
the prices being bid for mines would not work for us. We will
certainly participate in future auctions. But our bids will be
based on what are long-term viable prices to pay." By refusing
to pay fancy prices for mines, Narendran avoided the
winner’s curse, which fell on some of the winning
bidders who, after having paid unreasonably high prices for
mines, realised that they could not run them profitably.
Thinking through the long-term implications of securing
steelmaking raw material supplies at a commercially viable
price has served Narendran and Tata Steel well.
In parallel with building new capacity through organic and
inorganic growth, Narendran is working to protect Tata Steel
profits at all times. "We have a multi-fold approach to
reducing our vulnerability to the steel cycle," he
said.
"First, we must remain among the most cost-efficient
steelmakers in the world. This will ensure that we are the last
group standing in a down-cycle and generate significant free
cash flows during the up-cycle. Second, our focus will be on
maintaining leadership in high-end segments such as automotive
and oil and gas. Third, we will go on leveraging our brands and
distribution and service center network to make deep
inroads into B2C and B2 ECA (emerging corporate accounts
representing mainly small and medium enterprises)," he
explained.
Narendran also has a strategy in place to make the company
"bigger and stronger" in downstream businesses such as tube,
wire and tinplate. "As we go forward, we will be seeking a good
balance between capital-intensive and knowledge-intensive
materials," he said. This explains Tata Steel’s
growing investment in building a portfolio in graphene,
fiber-reinforced polymers and ceramics. Narendran is targeting
up to "30% of our revenues coming from services and solutions
and new materials by the decade end."
He believes that Tata Steel should leverage the innovative
potential of start-ups by way of collaborations and
partnerships and he says a new "platform called
'Innoventure’ has been created to take the idea
forward. Though it is still at an early stage, we have started
working with start-ups in several areas. We identify a problem,
invite start-ups to make a pitch offering a solution and then
decide who to work with." This trailblazing initiative has also
become a model for some other corporations in India.
Narendran is keen to "embed circularity in Tata Steel
business strategy." He wants the commissioning of the
company’s first 500,000 tpy steel recycling plant
at Rohtak in Haryana in July 2020 to be followed up by building
similar scrap-processing units in other parts of the country.
The group already has rich recycling experience in south-east
Asia. Narendran wants to use that for "shaping the way
recycling is done in India."
Formalization of scrap generation in an environment-friendly
way is the first step for him to start making "long products
through the recycling route, which is highly carbon efficient"
in different parts of India. Narendran is also working on
reviving the 300,000 tpy idled EAF at TS BSL under the TS LPL
umbrella, which will provide more long steel production
capacity.
Narendran claims to be making "tremendous progress" both in
Europe and India on the comprehensive digital transformation of
steelmaking. "This digitization journey will not only take cost
efficiency to another level through analytics and predictive
maintenance, but it will also give our customers and suppliers
a superior experience in working with us," he said.
"We are also banking on digitization for safety improvement,
emissions reduction and quicker product development and project
execution. We will remain engaged in leveraging technologies
available today and which are in process of
development."
However busy he may be in pushing Tata Steel to ever greater
heights, Narendran will remain deeply involved in
multi-dimensional CSR work, which "every year will touch over
1.5 million lives." Tata Steel’s CSR embraces
health, education, creation of livelihood opportunities in
areas around mills, sports and the welfare of Adivasi (the
original inhabitants of the Indian subcontinent).
India has still not been able to rid itself of the menace of
child labor. Narendran takes pride in saying: "We have made
many places child-labour free by ensuring that all school-age
children end up attending classes."
The best of an individual, as of a company, sometimes comes
out in a crisis. Last year during the pandemic, "We were
feeding over 50,000 people every day, besides doing some
wonderful work for migrant workers and daily wage earners,"
during the pandemic, Narendran said. And as the country is now
overwhelmed by a ferocious second wave of coronavirus, Tata
Steel is supplying large volumes of liquid medical oxygen on a
daily basis to ease national supply shortages.