Mumbai, May 29: Tisco’s net profit in 2002-03 zoomed 394 per cent to Rs 1012.31 crore from Rs 204.90 crore a year back, driven by a more eclectic product mix, buoyant volumes and brisk sales of branded items.
The sizzling scorecard startled the market, where its share surged 4.33 per cent to Rs 152.95 from Rs 146.60 to become the fifth most traded stock on Dalal Street today. The board recommended a dividend of Rs 8 per share.
The spectacular profit leap is evidence of the way the company defied the odds in an industry known to be most vulnerable to the vicissitudes of business cycles.
The gains were built on a 26 per cent increase in sales income at Rs 9,793.27 crore as prices, wobbly over the past few years, firmed up and the company offered customers a wider range of value-added steel. Chairman B. Muthuraman said as much: “This is a story of how enrichment of product-mix exceeds benefits derived from surging commodity prices. We have moved up in the product mix and customer hierarchies.”
He said there was more to the bottomline boost than surging global steel prices — something analysts say is the biggest reason for the improvement in fortunes. “Not all the profit growth depends on prices. The rise should be put in the proper perspective. It is because we have improved the product mix and have been able to market it well. There are 1000 companies in business, but only a handful who sell the things we do.”
Automobile, auto components, construction and appliance industries were among those that lapped up products made by the country’s largest private sector steel maker in a way they had not been doing for years.
The company, which laboured to make the point that it manufactures items designed for other user-industries, said the ability to make skin panels for automobiles, galvanised steel for appliances puts it in a position where it can take on rivals — and cycles — better.
Branded steel, which accounted for 9 per cent of its sales in 2001-02, now makes up 14 per cent. The target is to take this share to 28 per cent (Rs 2500 crore) in 2003-04 and 34 per cent in 2004-05. The bulk of branded sales (66 per cent) were made to original equipment customers.
The company is focussing less on the spot market and more on forward contracts to hedge against price volatility. The string of captive iron mines helps cushion the impact on costs arising from spiralling ore prices.
Healthier finances were also the result of a drive to prune the payroll in the recent past. Tisco shed 3000 jobs year-on-year, and intends to keep up the pace in 2003-04 as well. At the same time, more skilled hands have been hired. It spent Rs 229 crore on employee separation costs last fiscal, almost the same as in 2001-02. The steel major’s capacity of 3.9 million tonnes will go up by one million tonnes and by three lakh tonnes in 2003-04.