Alloy Steel Market Outlook - INDIA

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Alloy Steel – Product
Scope
• Definition : Higher quality Carbon and alloy steel grade refers
to steel that can be rotated, twisted or bended while usage. It
is mainly used for end use applications which cannot be
met by merchant quality steel.

• Grades
- Carbon/ Chrome and Chrome Alloyed/ High Speed
Steel/ Micro Alloyed/ Free cutting/ Die Steel / Valve /
Spring Steel

• Shape
- Wire Rod, Round, RCS, Flat, others

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Indian Alloy Steel Market

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Indian Alloy & Alloy Steel
Landscape

Sunflag Steel

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Alloy – Non SS Steel : Location &
Production North East
1)Aarti Steel 1)Usha Martin
2)Vardhaman 2)Bhushan Power & Steel
3)Arora 3)Adhunik
4)ASP, Durgapur
5)Jai Balaji
6)VISA Steel

South West
1)JSW 1)Mahindra Sanyo
2)Kalyani Hospet 2)Mukand
3)BMM 3)ISMT
4)SLR Metaliks 4)Kalyani Carpenter
5)Gerdau 5)Remi
6)VISL 6)RL Steel
7)SBQ Steel 7)Sunflag Steel
8)RINL 8)Jayaswal NECO
9)Sona Alloy

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An Over View – Alloy Steel
Producers

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 Indian Auto Industry
Performance

Source : Economic Times

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 Alloy Steel – Demand Split
Alloy Steel – Demand Split (FY 2016-17), Mn MT

• Automotive Sector accounting 43% of the total alloy steel demand in FY 2016 – 17
• Non Automotive segment – wires, seamless pipes, and fasteners together account for 66% of the
overall non-automotive segment demand (3.75 Mn MT) in FY 2016-17

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 Alloy Steel – Demand
SplitAlloy Steel – Demand Split (FY 2016-17), Mn MT

• Carbon steel grades accounted 1.65 mn MT of the total demand; seamless pipes and wired segment accounting about 67%
of the demand in FY 2016-17.
• Wire rods have accounted 56% of total demand used in manufacturing of wires, fasteners, springs, bearings etc.
• Rounds and RCS are mainly used for manufacturing of engineering components, seamless pipes, bearing while flat bars are
mainly used for making turbines, leaf springs etc.
• Cr-Moly steel grades like ASTM 335, SAE 4140, 4135 and 5141 are the key grades used in fasteners and oil & gas segments.
*Others include spring steel, Cr. Nickel-Moly, Cr-Manganese, Cr-Nickel, Micro Alloyed, Tool Steel, Free Cutting, Die Steel, C-Manganese etc.,
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 Indian Automotive, Wires and Defense manufacturing industries will
be the Backbone for future demand of Alloy Steel.
Indian Steel industry is expected to witness a healthy growth of 7% to reach 200 Mn MT by FY 2020. Alloy
steel will aid manufacturers in terms of fetching higher margins when compared to other steel grades used
across construction industry

Indian vision is for the Automotive industry to grow 3.5 to 4 times of the current value of $74 billion to $260
to 302 billion by the end of FY 2026. This growth will complement demand growth for engineering quality
steel.

India will become the 3rd largest automotive market by 2025, with nearly 7 million car sales during
this period. It will become the major car manufacturing hub for Asia with the likes of Hyundai
expanding manufacturing in India.

As per Automotive Mission Plan 2016-26 (AMP) the Indian auto component industry could attain an
impressive $200 billion in revenue by 2026, with exports of $80 billion. Contribution of Auto
Component Industry in India’s GDP will account to as much as 5-7% by 2026.

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Jayaswals NECO - OVERVIEW

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 Key Investment Highlights
 Wide range of products in alloy  Integrated operations across the
steel: Spring Steels, Forging value chain from Hot Metal
Quality Steel, Free Cutting Steel production to downstream
,Ball Bearing Steel manufacture of finished steel
 Diversified Castings business Wide Range Integrated  Integrated Blast Furnace, Pellet Plant,
with applications in automotive, of Products Operations DRI Unit, Sintering plant, Steel
construction and engineering melting Shops Rolling mills, and
Captive power plant.

 Extensive distribution network Jayaswal  New investments in Steel melting

across the country with strong
focus in East and North of
Neco and Bar & Structural Mill (BSM)
State of Art have state of art steel making
India Industries steel
Distribution capability
Limited facilities

 Access to high quality NMDC  Reputed clientele in domestic steel

mines located in Kirandul, Access to Reputed market including Tata Steel, Jamna
Chhattisgarh at close proximity Mines Clientele Auto, Sundaram Fasteners.
 Captive mines provide iron ore  Castings customers include big
which reduce the cost of industry names like Tata Motors,
production Mahindra & Mahindra, John Deere
India, etc.

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 Business
Overview
Background

•Jayaswal Neco Industries Ltd. (JNIL) is one of India’s leading alloy steel companies, with an Iron making capacity of ~ 1 MTPA and steel
making capacity of ~ 0.98 MTPA.
•Its integrated steel plant is located in Raipur (CG) while its Foundry Division is located out of Nagpur and Anjora(CG).
•The company commenced its operations in 1964 and later JNIL was formed in 1972. JNIL Steel Plant Division started by setting up a blast
furnace with captive power in 1996.
•JNIL is the 3rdlargest player in alloy products and they are leaders in Construction Castings.
•Product portfolio includes finished bar products, finished leaf spring flats, wire rods, bright bars, annealed coils, sponge iron, pellets, pig
iron, automotive castings, cylinder head castings, cast iron pipes, pump & gear housings and other engineering castings

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 Details of Specific Operational facilities
Facilit Sub-(1/2) Details of Production
y Units Facility *
Blast Furnace Blast Furnace 650 M3 Blast Furnace designed by Shougang 52,000 – 58,000
International, China equipped with pig casting MT
machine per month

Sinter Plant Sinter Plant 0.8 MTPA 2 x 36 M2 Sinter Plant Average Fe 55,000 – 60,00 MT
Content: 54 % per month

DRI Unit DRI Unit 1 Coal Fired Rotary Kiln: 350 Tons per Day 10,500 MT per
month
DRI Unit 2 13,500 MT per
month

Coke Oven Coke Plant 0.2 MTPA Non recovery type coke oven with 4 15,500 - 16500 MT
batteries; Each battery consists of 11 ovens. per month
Average coking time in coke oven: 63 - 66 hours

Usha Fuels – Third Party 7,000 – 7,500 MT

pe r
month
* Refers to monthly production for last 4 months
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 Details of Operational facilities
Facilit
y
(2/2)
Sub-
Units
Details of Production
Facility *
Iron Ore Mines Operational captive mines Lumps: 18,000 – 24,000 MT per month Fines: NA
at Metabodeli & 18,000 – 22,000 MT per month Total: 36,000 –
Laiondongri, located in 46,000 MT per month
Chhattisgarh

Steel Melting Shop Steel Melting Shop 1 Electric Arc Furnace: 40 Tons Laddle 15,000 – 18,000
Reheating Furnace: 40 Tons Vacuum MT per month
Degassing: 40 Tons
Continuous Caster Bloom Sizes: 130 x 130 mm,
160 x 160 mm, 180 x 180 mm
Electric Arc Furnace: 70 Tons Laddle 19,000 – 25,000
Reheating Furnace: 70 Tons Vacuum MT per month
Steel Melting Shop 2
Degassing: 70 Tons
Continuous Caster Bloom Sizes: 160 x 160 mm,
250 x 250 mm, 140 x 350 mm, 340 x 400 mm

Rolling Mills Bar Mill Rounds: 23 – 95 mm, RCS: 45 – 100 mm, 10,000 – 10,500
Flats: (63.5 – 80) x (6 – 28) mm MT per month
Wire Rod Mill Garret Line: 16 – 32 mm 18,000 – 21,000
Block Line: 5.5 – 15 mm MT per month
New Bar Mill
Rounds: 80 –140 mm, RCS: 75 – 180 mm 7,000 – 11,000 MT
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per month
 Product Profile & Customers (Steel Plant Division)

Steel Plant divisions manufactures a wide variety of special steel of standard quality In form of Hot Rolled Bars in rounds &square shapes,
Wire rods in Coils & High Strength Leaf spring in Flat shapes.

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 Product Profile & Customers (Foundry Division)
Foundry Division manufactures castings for industrial valves, engineering and automotive castings, cast iron pipes/fittings,
cast iron & ductile iron manhole covers, etc.

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 Historical Balance Sheets Rs. In Million
Particulars 30-Sep-17 31-Mar-17 31-Mar-16 31-Mar-15
I. Assets
1) Non Current Assets 5,39,40 5,50,19 5,73,51 5,53,63
(a) Property, Plant and Equipment 4,64,24 4,76,56 2,18,43 1,34,22
(b) Capital Work in Progress 47,90 44,03 2,84,00 2,98,44
(c) Intangible Assets 3,55 3,62 2,27 21,48
(e) Other Non Current Assets 23,71 25,98 68,81 99,49
2) Current Assets 1,60,42 1,46,30 1,34,20 1,65,18
(a) Inventories 72,63 68,14 63,05 92,46
(b) Trade Receivables 55,76 41,08 31,32 31,44
(c) Cash, Cash Equivalents, Bank Balances 5,55 5,81 4,16 5,54
(d) Other Current Assets 26,48 31,27 35,67 35,73
Total Assets 6,99,82 6,96,49 7,07,71 7,18,81

II. Equity & Liabilities 1,46,82 1,63,75 2,09,79 2,16,68

Equity
(a) Equity Share Capital 63,86 63,86 63,86 63,86
(b) Other Equity 82,96 99,89 1,45,93 1,52,82

Liabilities 5,53,00 5,32,74 4,97,92 5,02,13

1) Non Current Liabilities 2,70,31 2,90,68 3,23,60 3,25,06
(a) Financial Liabilities 2,70,29 2,80,77 3,00,64 2,96,34
(b) Other non current Liabilities 2 9,91 22,96 28,72
2) Current Liabilities 2,82,69 2,42,06 1,74,32 1,77,07
(a) Borrowings 98,92 1,04,58 1,09,62 1,02,25
(b) Trade Payables 39,59 28,65 18,32 25,45
(c) Other Current Liabilities 1,44,18 1,08,83 46,38 49,37
Total Equity & Liabilities 6,99,82 6,96,49 7,07,71 7,18,81
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 Historical Profit & Loss Account Rs. In Million

Particulars Half Year Ended FY 2016-17 FY 2015-16 FY 2014-15

30-Sep-17

Revenue from Operations 1,72,06 2,84,77 2,95,19 3,35,63

Other Income 49 2,88 3,49 1,73
Total Income 1,72,55 2,87,65 2,98,68 3,37,36

Cost of Materials Consumed 85,23 1,37,39 1,57,18 1,66,19

Purchase of Stock in Trade 1,08 3,09 9,50 30,46
Changes in Inventories of FG, WIP and Stock in Trade 7,80 - 8,12 7,77 - 4,18
Excise Duty and Service Tax 10,03 33,13 30,97 33,20
Employee Benefits Expense 9,07 17,43 13,64 15,76
Other Expenses 43,47 73,84 54,16 58,27
Total Expenses 1,56,68 2,56,76 2,73,22 2,99,70

EBITDA 15,87 30,89 25,46 37,66

EBITDA margin % 9.20% 10.74% 8.52% 11.16%

Finance Costs 30,69 54,89 22,33 18,49

Depreciation and Amortisation Expense 12,75 25,51 8,20 8,28
Exceptional Items -84 - 5,83 9,16
PBT - 26,73 - 49,52 -10,90 1,73
Tax Expenses -9,86 -3,59 -2,19 1,53
PAT -16,87 - 45,93 - 8,71 20

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VISA STEEL LIMITED - OVERVIEW

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 Business
Overview
Background

•VISA Steel has production facilities of Special Steel (0.5 MTPA) and High Carbon Ferro Chrome (0.15 MTPA) at
Kalinganagar, Odisha
•VISA Steel has 6 submerged arc furnaces with 3x25 MW power generating units to meet part of the requirement of power for
Ferro Chrome production.
•Company has seven associated companies, of which joint ventures are VISA BAO Limited, VISA Sun Coke Limited,
Ghotaringa Minerals Limited, and wholly owned subsidiaries are Kalinganagar Special Steel Private Limited, Kalinganagar
Chrome Private Limited, VISA Ferro Chrome Limited and VISA Special Steel Limited.

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 Shareholding & Balance sheet
Summary of Balance Sheet Rs. In Mn
Particulars 31-Mar-13 31-Mar-14 31-Mar-15 31-Mar-16 31-Mar-17 30-Sep-17
Net worth 5200 3670 (3360) (9380) (6480) (7357)
Debt 22250 24110 30870 39050 41560 41692
Other Liabilities 7730 9640 6960 4320 3770 4071
Total Equity & Liabilities 35180 37420 37830 43370 45330 38406

Fixed Assets 26080 28540 30690 29430 33500 32905

Current Assets 3600 3450 2740 3820 4800 4934
Other Assets 5490 5430 1050 740 550 567
Total Assets 35170 37420 34480 33990 38850 38406

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 5 Financial Year Performance
Summary of Profit and Loss Acccount Rs. In Mn
Particulars 31-Mar-13 31-Mar-14 31-Mar-15 31-Mar-16 31-Mar-17 30-Sep-17
Revenue (Net of Excise Duty) 10190 10300 9220 10110 13970 7745
- Material Cost 9040 7780 6820 7270 9590 5572
- Other Direct Expenses 350 1190 1350 1670 2510 NA
Contribution 800 1330 1050 1170 1870 --
Contribution % 7.8% 12.9% 11.4% 11.7% 13.3% --
Employee Cost 390 290 350 580 640 374
Other Cost 730 650 720 820 1060 1962
EBITDA (320) 390 (20) (230) 170 (163)
EBITDA % -3.2% 3.7% -0.2% -2.2% 1.2% -2.10
PBT (910) (1520) (2370) (5750) (1430) (876)
PBT% -8.9% -14.8% -25.7% -56.9% -10.2% -11.31
PAT (910) (1520) (2410) (6030) (1430) (877)
PAT% -8.9% -14.8% -26.2% 59.6% -10.2 -11.31

• Production costs : Consumption of stores and spares, power and fuel, lease rent for production facility, machinery
repairs and material handling expenses.
• As reported in FY 2016-17 annual report, due to the violations of terms by one of the lenders (HUDCO) and undue
delay in the approval of the Scheme, the Company had lost the opportunity to induct investor and infuse funds in
VISA Special Steel Limited and hence decided to withdraw the Company’s application pending with Hon’ble High
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