January 2007 | Ashwin Tombat

Redi, steady, go!

Taking over a dysfunctional plant at Redi in January 2006, Tata Metaliks has turned it around remarkably quickly. The company is well on its way to become the world's largest pig iron producer by end-2007

The tall blast furnaces at the top of the Redi Hill, overlooking the shimmering Arabian Sea in the remotest corner of Maharashtra's industrially backward Konkan region; silent for so many years, now operate round the clock. At the Tata Metaliks (TML) new Redi plant, it's business as usual. Since the Kolkata-based pig iron manufacturer acquired the assets of Usha Ispat at Redi in January 2006, tings have never really stopped moving.

Everybody, from the managing director to the junior-most worker, is pulling their weight to make this once-sick unit profitable again. Tata Metaliks MD Harsh Jha visits the plant at least once every month for a few days. Instead of living in a luxury hotel in nearby Goa, the MD lives in the guest house on the premises, so he can spend more time at work instead of driving up and down each day.

The workers, on their part, volunteered to work even though they did not have appointment letters, pending the medical tests they had to undergo. "Our people have never had to work so hard before," admits employees' union leader Pramod Rawool. With two furnaces working 24 hours and producing 9-10 cast per furnace every day, Rawool seems a little apprehensive about what the workload will be when the third (and biggest) furnace becomes operational in a few months. However, he says, the employees' confidence in the company's future has never been higher.

Red hot and rolling
After buying the Redi unit in January 2006, the company found out that the biggest of the three blast furnaces was just an empty shell, having been completely cannibalised to keep the other two going. Besides, the design of the Mannesman Demag blast furnaces needed some improvements to realise the unit's installed capacity of 300,000 tonne of pig iron.

"Each of the two operational furnaces is now casting 250 tonnes of pig iron a day," says safety officer SA Fernandes. The third and largest blast furnace is now undergoing refurbishment. When completed it will have better and thinner refractory lining and higher hot blast temperature stoves. It would thus be able to produce pig iron at 350 tonnes per day.

The Redi plant — spewing pig iron 24x7

That's not all. Two 3.5 mw steam turbines generate electricity from the hot flue gases, which takes care of the plant's entire power requirements and more. "Earlier, our power bill used to be Rs35 lakh per month," says Fernandes proudly. The electricity also fulfils a critical CSR function. Mining for low-grade iron ore in the area (which TML cannot use) has lowered the water table, causing huge water shortages. Now, electric pumps powered by Tata Metaliks' generators pump water all day into the lake below the plant, so the local villagers have a proper water source for irrigation.

Having taken physical possession of a completely dysfunctional plant in January 2006, the company hopes to reach full production by the end of 2007. Jha expects the Redi unit to add Rs350 to Rs400 crore to the topline of the company within one year of operations.

HR and there
If there is one aspect that stands apart from the rest, it's HR. "We held meetings with the local people and the employees even before we put in a bid for the plant," says SK Mohapatra, chief, HR corporate. The top management also met local authorities and politicians, and explained the Tata Code of Conduct to them, so that there would be no unrealistic expectations. As many as 95 per cent of the employees are local, in the Tata tradition. The company now has a strength of 450 employees, with an average age of 37 to 38 years.

And more work is not the biggest worry on Rawool's mind. Rather, it's development. He is anxious for the unit to reach full production and break even, as that will encourage the setting up of ancillary units, creating employment in the area. He also wants the by-products to be used, for example, the setting up of a small cement unit based on the slag the plant produces.

Rawool appreciates a number of the measures the new management has taken, especially the improvement of the road and building a compound wall for the plant, regular health check ups for employees and health camps for school children.

Asked about what has changed from the era of the previous management, the first thing that Rawool talks about is the setting up of an ATM in the premises, so that the employees are saved the humiliation of standing in a queue to collect their wages. Giving employees the respect they are due, it seems, works at least as well if not better than monetary incentives.

In the pipeline
But it's the projects in the pipeline that has everybody excited. The first of these is the setting up of a railway siding at the nearby Sawantwadi station on the Konkan Railway, so that the iron ore (that now comes from Hospet) can be brought in by goods trains instead of by truck as at present. This will also boost the local economy, as local trucks will be required to transport it to the plant.

And second: "The company is looking to acquire high grade iron ore mines in the Hospet-Bellary area, so that we have a captive source of ore at controlled prices," says Subhasis Dey, general manager (corporate services) and company secretary.

Slag in the mettle
But major challenges still need to be overcome. Bringing the quality of the Redi product on par with Kharagpur is the first challenge, which is well on its way to resolution. Second, and more important, is to reduce the cost of production so that the unit becomes economically viable. So far, the addition from Redi has boosted the company's total output by 60 per cent, but slashed its profits by 30 per cent. "We would like to completely cast off the drag by the time the Redi unit reaches full production at end-2007," says Dey.

Dr SN Mishra, head of the Redi plant, is quietly confident that his team of officers and workers can make the plant break even on target. All systems, he says, are in place and ready to go. The company, which implemented SAP in a record time of six months, has now migrated to mySAP at its plants in Kharagpur and Redi from November 1, 2006, so that all parameters are accessible online in real time at the company's Kolkata headquarters.

Looking for more
The company is poised for a major growth spurt once the Redi unit is on track, and industry pundits forecast a volume CAGR of 40.5 per cent for the 2006-08 earnings. Demand for iron ore is strong, and though rising raw material costs is a problem, the foreseeable future seems rosy. The company's stock has been steadily on the rise on the bourses, and things look good. But it's difficult to keep a man like Jha satisfied for long.

"We want a factory in a garden, not a garden in our factory," he says. Landscaping has temporarily taken a back seat to core business fundamentals, while the company is working to reach full capacity and break even. But he's got a plan for that and, once his hands are untied, wants to make Redi a model, both in looks and operations.