Tata Steel is planning to pare its costs by Rs 200 crore this financial year. "We have set a cost-cutting target of Rs 200 crore for ourselves this year," Tata Steel managing director B Muthuraman said.
Muthuraman disclosed that Tata Steel has formed a four pronged approach to meet the target. This includes improving operational efficiency, strategic procuring, a better handling of out-bound logistics and liquidating some "lazy assets" of the company including some land and buildings.
In addition, the company is also expected to bring down its interest costs during the year, Muthuraman disclosed. "In November, we are replacing a high cost debt with a low cost one. Our interest cost for the current financial year will be lower than last year," he said. At the same time, Tata Steel is targeting to reduce its workforce during the year from 48,000 to 45,000.
Later during the financial year, Muthuraman also plans to kick off a three -year programme aimed at improving the company's operational efficiency. Tata Steel is already regarded as the lowest cost producer of steel in the world. "We want to become an even lower-cost producer," he said.
Tata Steel is also planning to go for a brownfield expansion at Jamshedpur. It is planning to put up a capacity of one million tonnes of long products adjacent to its existing plant. The project is expected to cost Rs 1,500 crore and will be funded equally out of internal accruals and debt. "It will be the cheapest brownfield expansion and will bring about a balance in the operations," Muthuraman said adding that the new capacity would be up and running in 3-4 years' time.
Talking about the prospects of the Indian steel industry, Muthuraman said that he expects the market to pick up in the second half of the financial year. "The first quarter was flat and the second quarter is expected to be the same. But the second half could see a growth of 3-5 per cent," he said. Amongst the factors affecting growth in the second half of the financial year, Muthuraman listed the taking off of the Prime Minister's Rural Road Project and the Golden Quadrilateral Road Project and the pick up in the construction industry thanks to favourable monsoons. "The additional demand for steel could run into several million tonnes," he said.
