Calcutta, Aug. 24: Electrosteel Castings Ltd, the Rs 579-crore ductile pipe manufacturer, plans to raise its production capacity to two lakh tonnes per annum by the end of the current financial year. This is part of the company’s overall programme to achieve five lakh tonnes per annum capacity by the year 2006. Electrosteel’s current capacity is 1.20 lakh tonne per year.
Confirming the move managing director Umang Kejriwal said, the company expects to export around 1.5 lakh tonne per annum which will raise the export earnings to over Rs 300 crore against the last year’s export earnings of Rs 80 crore.
Kejriwal said the company’s strategy is to expand the capacity first and then create market. “The increased capacity will enable us to strengthen the coverage of our fixed costs, which will empower us to reduce our selling price and enlarge the market,” he said.
The company is targeting a 25 per cent growth in its sales during the current fiscal.
Kejriwal said the organisational momentum would bring better results this year.
“But in our business, there can always be instances when the market is disturbed by short term aberrations, which temporarily impact our profitability. However, the strength of the management will be more clearly reflected in its medium term and long term performance,” Kejriwal said.
In order to have complete control in the domestic market, the company has already picked up a strategic stake in Lanco Industries, which was probably once its single competitor.
The company has also cornered sizeable shares in Lanco Kalahasthi to have better control in the south.
The company also plans to reduce prices even as steel prices zoom.
“The days of price increase is over. By being in a position to reduce the price and expand the market, we would be better equipped to enhance the shareholders value,” he said.
Kejriwal further pointed out that if the company’s prices are attractively low and volumes are high, the company expects to generate a higher quantum of profits each year through incremental volumes, not price increases.
“If our prices are low, we will eat into the market of the alternative pipe manufacturers and enlarge our market share. And most importantly, if our costs are low, we will export into the markets currently dominated by international giants. As a result, this single strategy will enable us to protect and attack at the same time,” he said.