There has been a huge upturn in Tata Steel’s financial performance in 2010-11 when compared with the previous year. What do you attribute this to?
In 2010-11, Tata Steel registered a turnover of $26.6 billion, up from $22.9 billion in 2009-10. This marked a 16 per cent increase year-on-year in turnover. In terms of EBITDA, the earning levels have increased very significantly on a yearly basis. For the Tata Steel Group (TSG), we have registered an EBITDA of $3.8 billion, a rise of almost 82 per cent from $2 billion in the previous year. In terms of profit after tax, the level of turnaround at $2 billion compared to a negative $450 million of the previous year, is even more significant.

TSG’s financial performance may be attributed to several reasons. Despite the fact that delivery (of around 23.5 million tonnes in 2010-11) was flattish, we have had a better product mix during the year. In FY 2011, global steel consumption went up significantly, driven by robust demand in emerging economies and a slow recovery in the developed economies. Our captive raw material assets helped us mitigate the impact of rising and fluctuating raw material prices. Our focus on a value-added product mix, an area where we are differentiated and where we have better margins, and of course our branded product offerings in the retail segments, where we have crossed a million tonnes in both flat and long products this year, have all contributed to the upturn in TSG’s financial performance in 2010-11. All this was possible due to the untiring efforts of all our employees.

What were the critical factors that affected Tata Steel’s growth and performance in 2010-11?
There were several factors. These include an increase in profitability on account of an improved product mix across all geographies, especially Europe and India. In India, the company also benefitted from improved prices. Our conversion costs have been under control thanks to productivity improvements. Various projects that have been undertaken across TSG are aimed at addressing cost issues. In a nutshell, improved productivity can be attributed to higher volumes and better product mix, better sales realisations, improvement initiatives to control conversion costs and one-off income such as sale of Teesside Cast Products, have contributed to Tata Steel’s growth and performance in 2010-11.

Tata Steel Europe has also generated encouraging financial results. What were the reasons for this rebound, and what are the challenges it faces in the months and years ahead?
For Tata Steel Europe, the year 2010-11 has been better than the previous fiscal. Volumes increased to 14.9 million tonnes, up from 14.4 million tonnes in the previous year (that included 2.3 million tonnes from Teesside, which we did not have in 2010-11).

The financial year 2010-11 witnessed positive EBITDA in each quarter, resulting in a turnaround of $1.2 billion year-on-year. The profit after tax also benefitted from the sales proceeds from the Teesside sales. The fourth quarter of last year registered very good delivery performance. The EBITDA in the fourth quarter was $350 million compared with $89 million in Q3.

The focus now is on the value side of the business and Karl Koehler [managing director, Tata Steel Europe] has put in place a strategic road map to achieve this. This road map has as its key objective the strengthening of customer relationships of the European business, which will be achieved through a customer-oriented market differentiation approach, technical innovation in products and processes, operational excellence and cost leadership.

What will be the impact of The Odisha Project, when it comes into production, on Tata Steel and its long-term prospects?
The Odisha Project is a six-million-tonne integrated greenfield project. Work at the Kalinganagar site is progressing very well. The steel plant is being constructed in two phases of three million tonnes each at an investment of $7.8 billion. Phase I of the project is expected to be commissioned in 2014.

The plant will manufacture high-end flat products to cater to our customers in the automotive, oil and gas, construction and capital goods sectors. The advanced and ultra-high-strength steels that we produce in this complex would specially help our customers in the automotive sector.

What do you reckon are the challenges facing Tata Steel, at home and abroad, as it seeks further growth?
Securing raw material linkages globally to mitigate the impact of volatility in raw material prices, adherence to strict environmental norms, managing growth to keep pace with demand, focus on R&D and innovation, and building and retention of quality human resources are among the challenges that all steel companies are likely to face, both at home and abroad.

Is the Indian steel industry still in underachieving mode when compared with countries such as China? What kind of pressures does the domestic steel industry face, especially with regard to environmental and people displacement issues?
With a per capita steel consumption in India of around 50kg and with the world average being around 180kg, India has not been able to realise the full usage of steel as compared to other countries.

Many issues lie before the steel industry in its attempts to grow and be able to provide adequate support to the economic growth. Some of them include availability of land, raw materials, environmental issues, infrastructure growth, intensity of steel consumption, human resources, government focus on infrastructure development, etc.

Large groups of people have been at the receiving end due to the behaviour of irresponsible business organisations. This has created scepticism among people. We need to address this scepticism with our genuine intent. We need to understand the local people and their aspirations. We need to have a communications cascade to address misguided and unwarranted apprehensions.

There are fears of transition among the locals from an agrarian to an industrial society. There are problems arising out of the aspirations of the people with regard to rehabilitation and resettlement, generation of employment opportunities, boosting local entrepreneurship, change in status of women, etc.

The changes in environmental regulations while according clearance to steel plants and mines has resulted in project delays. The uncertainty in the clearances given, which have often been withdrawn post clearance, has also created new challenges to the steel and mineral industry as these are very capital intensive and have long gestation periods.

How does Tata Steel see itself evolving over the next five years? What are the company’s plans and projections?
India is a growing market; the per capita consumption of steel in the country has a long way to go. In India, I expect a consistent 10 per cent growth year-on-year for the next few years. This growth will be driven by the infrastructure, automotive and white goods sectors. Globally, we are yet to reach consumption of the pre-crisis levels. Besides offering a value-added product mix, Tata Steel will focus on product differentiation with the introduction of new, innovative and value-added products.

In terms of growth, the TSG’s vision is to become a global steel producer with an annual production capacity of 40-50 million tonnes.

This interview is a part of the cover story of the August 2011 issue of Tata Review in which ten Tata CEOs talk about the past, present and prospects of the companies they head:

	Overview
	Gearing up for growth: RS Thakur, Tata AutoComp Systems
	Racing ahead: Praveen Kadle, Tata Capital
	‘We’re bigger and better’: R Mukundan, Tata Chemicals
	‘We have to keep doing different things’: N Chandrasekaran, Tata Consultancy Services
	‘Jaguar Land Rover has been the big positive’: Carl-Peter Forster, Tata Motors
	Powering up for the future: Anil Sardana, Tata Power
	The challenge of transition: N Srinath, Tata Teleservices
	Perfect timing: Bhaskar Bhat, Titan Industries
	Building on the positives: Sanjay Johri, Voltas