Muthuraman: Number game

Jamshedpur, Jan. 5: Tata Steel’s turnover is set to increase four-fold this year following the acquisition of Anglo-Dutch steel maker Corus early last year.

According to Tata Steel managing director B. Muthuraman, the private sector steel behemoth is likely to post a turnover of $25 billion or Rs 100,000 crore during this financial year. The company recorded a turnover of Rs 25,213 crore in 2006-07.

Muthuraman said the Corus numbers would be computed this fiscal as the acquisition was completed on April 3 last year.

However, the quantum jump in turnover will not immediately translate into profits as Corus does not have captive raw materials such as iron ore or coal.

“Our EBIDTA margin will be depressed for the time being, but this will change over next five years as two companies work out various synergies,” he said.

The EBIDTA, which stands for earnings before interest, depreciation, tax and amortisation, gives an approximate measure of a company’s cash flow.

As a combined entity, Tata Steel has a 12.5 per cent EBIDTA margin. This is expected to touch 25 per cent over the next five years. Before the Corus deal, the steel maker used to enjoy a 40 per cent margin.

One of the options before Tata Steel is to acquire raw material resources abroad. Muthuraman confirmed that the company was looking at Brazil to source raw material but made it clear that it would not set up any plant there.

“I had been there (Brazil) two weeks ago. We are exploring various opportunities,” he added.

The company has recently bought a coking coal mine in Mozambique and an iron ore block in Ivory Coast.

Once these two mines start production in three to four years, it will help Tata Steel improve its EBIDTA margin.

The company is also hoping to get fresh domestic iron ore linkages for new plants in Jharkhand, Orissa and Chattisgarh.

Muthuraman said the company would invest Rs 20,000 crore in Orissa’s Kalinganagar where it is setting up a plant. An identical amount will be spent on the expansion of the Jamshedpur unit, where the capacity will go up from 5mt to 10mt.

Tata Steel has already spent Rs 6,000 crore in Jamshedpur to increase capacity from 5mt to 7mt, which will be commissioned this year.

“Work on the new plant at Chattisgarh and Jharkhand are getting delayed. We hope to start work at Chattisgarh this year and complete it in 2012,” Muthuraman said.

“The Jharkhand project should start in 2009 and will be completed by 2013,” he added.

Gopalpur SEZ

Tata Steel is going ahead with its SEZ project in Gopalpur. Muthuraman said the company was searching for a partner to develop the 3,000-acre plot and was discussing the issue with various parties.

While the Centre has already notified the Gopalpur project, Muthuraman said it could be developed as a multiproduct SEZ.

He also announced a galvanised line with a capacity of 150,000 tonnes. It will come up at the Gopalpur SEZ at an investment of Rs 250 crore.