Candida Moraes

Growing by leaps and bounds takes nerves of steel. That's what drives Tata Steel as it bids to become one of the world's top 10 steel companies

Apparently, being the lowest-cost producer of steel in the world is not good enough. At least it isn't for Tata Steel, which has set its mind of becoming, over the next decade, one of the world's top 10 in its business.

India's oldest steel manufacturer comes across as leaner, meaner and more aggressive than its younger competitors, leaving its footprints across the globe in a carefully choreographed and finely executed ballet. Obviously, it means business.

If all goes according to plan, by 2015, Tata Steel will be producing 20 to 25 million tonnes of steel per year, with operations in India, neighbouring countries and South-East Asia. That's a five-fold increase in six years!

The Jamshedpur plant is in the process of increasing its capacity from 5 million tonnes per annum (mtpa) to about 7 mtpa by 2008. The first phase of the new 6-mtpa integrated steel plant being set up in Jharkhand has already got off the ground. New plants in Orissa (3 mpta) and Chhattisgarh (2 mtpa) are coming up and, most likely, will be commissioned by 2009-10. This will take Tata Steel's capacity up to 18 mtpa. The company also plans to have 4 mtpa of capacity outside the country, including the recent acquisition of NatSteel in Singapore. The writing on the wall is clear.

How does the company keep up such a breakneck pace? Tata Steel managing director B. Muthuraman says: "Change is fundamental to Tata Steel's way of functioning. The mindset of the employees is well attuned towards change and, in large part, this is owing to the number of two-way communication platforms we have set up within the company. The culture of improvement is ingrained in the system, in our training and in development initiatives."

That explains how this nearly 100-year-old has been able to transform itself to become a modern powerhouse. It reduced its cost of operations by improving operational parameters. It reduced manpower by half, through a highly creative early separation scheme that turned into a win-win deal for both employees as well as the company.

But that, it seems is only the beginning. "Our systems," says Muthuraman, "have taken years to build, and we are constantly trying to update them. Our focus at present is on improving the training and development systems and customising them to the needs of our employees."

This well-orchestrated march is part of a larger strategy behind the entire expansion-cum-globalisation drive. Muthuraman elaborates: "The opening up of the Indian steel industry and the resultant competitive scenario posed a stiff challenge for Tata Steel, but it also helped us become the lowest cost producer of steel in the world."

The operational excellence that enabled this and the competitive advantage it afforded the company continues to be the driving force behind the objective of becoming a world-class steel producer. "It gives us the confidence to expand our operations and continue to do well in the steel sector," muses the managing director.

Tata Steel is also preparing itself to grow in terms of environment, businesses, etc, given the changes the company has made so far, and others that are in process. "The consolidation of the steel sector, opening up of the India economy and the lowering of trade barriers for steel throughout the world, will drive further globalisation in the steel sector. This means steel companies of the future will have to be a minimum size to compete and to be cost competitive. Tata Steel is trying to achieve both these objectives," says Muthuraman.

"Our target is to be a 25-million-tonne company by 2015 and lay the foundation for becoming even larger. This will give us a competitive size and help to improve our operational efficiency, so we can continue to be the lowest cost producer of steel in the world. Our various growth and internal improvement initiatives are steps in this direction," he explains.

Anticipating the growth in steel demand both in India and overseas, the company has already fixed its sights on overseas projects. It is looking at South East Asia, Brazil and China. Besides, there is a strong focus on branding and establishing a presence in high-yield segments to maintain profitability across steel cycles. Various retail initiatives, including getting into downstream value-added segments, are in full swing. The proposed joint venture with BlueScope, for example, will help the company get into more downstream projects.

In India, the company's focus is primarily on integrated operations and the country's potential to become a large market for steel in coming years. The expansion of Jamshedpur and greenfield projects in Orissa, Jharkhand and Chhattisgarh are steps in this direction.

Part of Tata Steel's globalisation plan is de-integration and dispersal of facilities, to capture growth opportunities through a complementary presence in various low-cost manufacturing bases and high growth markets. Projects in Iran and in parts of South East Asia, like NatSteel, are part of this strategy.

With Korean giant Posco in Orissa and steel king L. N. Mittal in Jharkand both putting up world-class greenfield projects, isn't the prospect of cutthroat competition unsettling? Muthuraman seems fairly unruffled. "Of course there will be increased competition," he says, "but we are well positioned not only to take on competition but to create some ourselves in countries and markets of our choice."

Pointing out that getting into steel requires a huge risk appetite, Muthuraman says: "I must confess that I am not quite sure about the seriousness of all the players that are now throwing their hats in the ring. Only time will tell how many of these MoUs really fructify. It is unlikely that many of these plants will come up," he says.

Construction and automobiles are Tata Steel's chosen segments, and it is determined to constantly improve its presence in these sectors. "We are taking initiatives to improve our offerings to these sectors and we will continue to work on them, as they are poised for good growth," says the managing director.

The giant has awakened and is set with a terrific resolve, ready to take its place among the best. Tata Steel is determined to catch up with global steel players, to become one of the world's top 10 steel companies. To achieve this, it is leveraging its strong fundamentals, not only to expand exponentially, but to let the world know that it has arrived.

Uploaded on April 10, 2006