Tata Metaliks counter has been buzzing for quite some time after it increased capacity for value-added product ductile pipes to grab 11-12 per cent market share.

Speaking to BTVi, Managing Director of Tata Metaliks, Sanjiv Paul, says the move to raise capacity for ductile pipes comes in the wake of growing urbanisation and the need for basic infrastructure of water and waste water. However, a sharp spurt in metallurgical coal prices from $120-130 per tonne to $200 will crimp margins, he warned. Excerpts:

Markets have been cheering the Tata Metaliks stock significantly. Help us understand your movement towards terms of value added products in the pig iron and selling more ductile pipes versus pig iron pipes. What are the margins you are enjoying currently as compared to the last year?

We have recently added around 60-65 tonnes of capacity. This will take our capacity from 100,000 tonne of ductile iron pipe two years ago to 200,000 tonne that will take the market share to around 11-12 per cent.

So we are looking to ramp up the value added product. Normally, we used to produce big iron for hot metal. So this is a value added product in that value chain. We are looking to increase the percentage of value added product.

What is the kind of competitive intensity in this space? Is there a strong demand for it?

No, there is a reasonable demand. There are 7-8 players in the ductile iron pipe market. As urbanisation grows in the society, the requirement of ductile iron pipe will increase because this is one of the basic infrastructures of water and waste water.

With the kind of uptick that can be expected because of this initiative, what is the plan around debt reduction?

In the last 3-4 years, we have significantly reduced debt and continued to grow as well. The aim of getting into more value added products is to help us reduce our debt faster.

What is the outlook on Tata Metaliks for the rest of FY17 as well as going forward?

The market is so volatile on raw materials that it is futile to make any projection. In just one month, metallurgical coal prices have gone up from $120-$130 per tonne to $200 plus. We are worried whether we will be able to pass this on to the consumers or the next customer in the vale chain. So there is no doubt we have to play the game smartly.

Will pricing for select products come under pressure?

Pricing will surely be under pressure as this sharp rise in such basic raw material is unprecedented. In fact, the last one year has been like that – particularly the last six to eight months. Earlier, coke prices were going up like this. Now, it is metallurgical coal prices. This will surely have an impact on margins.

Tata Metaliks has signed a MoU for skill development. Can you put in perspective what the skill development centre will do?

This is part of our Corporate Social Responsibility (CSR) activities. We have decided to impart skill to the youth as our CSR activity. The West Bengal government has agreed to handover one of its buildings in ITI Midnapore and we had this MoU signing in the presence of Chief Minister Mamata Banerjee on September 15. We will start with around 600 youth this year and train in around five courses.

Related Topics