The country’s number two steel-maker Tata Iron and Steel Co (Tisco) expects sales growth of at least seven per cent in the next two years as construction and automobile demand will be strong in one of the world’s fastest growing economies, a top executive said on Friday. 

R C Nandrajog, chief financial officer of Tisco told Reuters in an interview that he expected to sell seven per cent more steel in the current financial year to March 2004. He said the growth rate will be higher at 7.0-7.5 per cent next year. 

“There are indications that growth will be strong over the next two years,” he said. “Typically, steel sector growth is 1.0-1.5 times the GDP (gross domestic product) growth.” 

India, Asia’s third biggest economy is expected to grow at around seven per cent in the year to March after receiving its best monsoon in a decade. A bumper harvest will boost rural incomes in this farm-dependant nation, where about 70 per cent of the population lives off the land, and fuel demand for consumer goods like automobiles and white goods. 

Since India began its reforms programme over a decade ago, Tisco’s sales have been growing at a compounded annual growth rate of about five per cent, in line with the average annual GDP growth. In recent years, steel demand has been rising after three-decade interest rates tempted consumers to buy more houses, cars and motorcycles. Infrastructure spending has also risen rapidly, promoting demand for commodities like steel and cement. 

India’s $14 billion National Highway Development Project to widen two-lane roads to four or six lanes, is soaking up over three million tonne of cement and some 3,00,000 tonne of steel each year. 

Tisco, India’s oldest steel maker plans to focus on capacity expansion over the next few years after having spent about Rs 100 billion in the past decade on technology upgradation and modernisation. The company is looking to expand its annual capacity to about 15 million tonnes by 2010 from four million, and some of the additional capacity will come from acquisitions, Mr Nandrajog said. 

The modernisation programme has helped the company increase the sale of high-margin, value-added products, a trend that will gather pace over the next two years. “We would like to see the share of value-added products grow to about two-third of the total volume,” Mr Nandrajog said adding that in the current year, value-added products will comprise 51 per cent of sales. 

Tisco is already benefiting from a rally in steel prices. 

A senior company official said spot steel prices for January has been raised by up to 7.3 per cent, the fourth price hike in the current financial year. 

Surging product prices have propelled a 180 per cent rise Tisco’s shares this year, helping the steelmaker outpace the benchmark index’s 69 per cent rise.