Steel makers reap benefits of retail sales

Live Mint, Last Modified: Wed, Jun 24 2015. 08 12 AM IST

Retail sales growth for top three steel makers in FY15 raced ahead of sales to auto makers, large
construction firms. In 2014-15, retail contributed 16% to JSW Steels overall sales volume and 56% to SAIL, while branded products, retail and solutions contributed 36% to Tata Steels total
sales volume.
Mumbai: For Indias steel makers that started directly selling to customers three years ago
through dedicated retail stores, its finally time to collect the dividends.As customers turn
increasingly brand-conscious in an economy starved of industrial demand, retail sales growth for
Indias top three steel makers in the fiscal year that ended in March raced ahead of sales to auto
makers and large construction firms.
Retail sales volume at JSW Steel Ltd grew 8% in 2014-15 against the companys overall volume
growth of 2%. For Tata Steel Ltd, the branded products, retail and solutions volumes grew 10%,
against 3% overall sales volume growth in India. In the same period, retail volume at stateowned Steel Authority of India Ltd (SAIL) grew 2%, against a 3% fall in overall steel volume.
Essar Hypermart operates through a mixed model of franchises and company-owned stores, Tata
Steel sells through the franchise model which includes some exclusive branded showrooms and
SAIL operates through dealerships. JSW Steel stores are fully franchisee-owned.To be sure, retail
sales volume are still lower than bulk sales. In 2014-15, retail contributed 16% to JSW Steels
overall sales volume and 5-6% to SAIL, while branded products, retail and solutions contributed
36% to Tata Steels total sales volume.
JSW Steel is bullish on the retail segment, said Jayant Acharya, the companys director,
commercial and marketing. Demand in the smaller markets in the country, driven by demand
from construction in these areas, is doing better than that for larger cities... In addition, demand
for branded steel is seeing improvement as more customers are now looking for quality. These
factors have contributed to retail sales, Acharya said.
SAIL added 213 dealers to its retail network in 2014-15, a 9% increase over the previous fiscal
year. In view of our capacity expansion and the opportunities available in the retail sector, we
are focussing more aggressively on expanding the volumes in retail, a SAIL spokesperson
said.In the last three years, the company has spent close toRs.35,700 crore on capacity expansion
to reach a saleable steel capacity of 20.2 million tonnes in the current fiscal year, from 12.8
million tonnes in the last fiscal year .An email sent to Tata Steel on 10 June was not answered.
JSW Steel has approached retail markets with a more segmented approach. It has three categories
of retail storesJSW Explore for metros and urban cities, JSW Shoppe for urban and semi-urban
markets and JSW Shoppe Connect for semi-urban and rural markets. We are working on the
last-mile reach. Focus would be on adding more stores on the Connect side, JSW Steels
Acharya said. The company, which currently runs 480 stores, plans to add 200 more stores in the
current fiscal year.

If the total steel demand in the country grows at 6% this year, retail is likely to grow at 8%.
Most of this growth would be driven by construction and demand from small and medium
enterprises, Acharya said.Retail stores are normally located closer to warehouses, from where
goods are directly transported to the customerwho is either an individual or a small company
or a small manufacturer.
The smaller mom and pop shops, specifically in rural areas, are shutting down. The bigger
companies, in turn, are eating into this space as smaller shops have not been able to compete
with them on the cost side, said Chirag Shah, director of equity research and head analyst of
building materials, metals and mining at Barclays Capital Plc. Shah expects this retail growth
trend to continue.
In May 2014, Essar Steel merged its steel processing centre and distribution unit with its steel
retail chain Hypermart. Hypermart has also started selling non-Essar steel products, which
contributed to 30% to the steel retail chains total revenue in the last fiscal year.According to
Ravi Singh, chief executive officer of Essar Hypermart, the 2014-15 revenue of Rs.3,500 crore is
not comparable to 2013-2014, due to the merger. However, Singh believes total revenue for
Hypermart will double in the current fiscal year.Medium and small enterprises are filling in for
the lack of demand from large industries. That is where we see the demand coming from, Singh
said. Essar Hypermart contributes 20% to Essar Steels total revenue.
Online channels are also being tapped. SAIL last year tied up with Indias largest online vendor
Flipkart to sell kitchen sets. Steel products were sourced from SAILs Salem steel plant in Tamil
Nadu, which is renowned for kitchenware.The response from buyers on Flipkart has been so
encouraging that plans are afoot to expand this list of products to at least 40 items (currently 12
items) in the next few months, the SAIL spokesperson said.
Industry experts were baffled when the steel companies initiated their retail push, since they
traditionally focussed on the bigger buyers. Three years later, the retail success has vindicated the
companies strategic focus.

JSW Steel is now the largest steel maker in India

Company reports higher revenue than SAIL and Tata Steel India in FY15, but lags both in profits
Aditi Divekar | Mumbai June 5, 2015 Last Updated at 00:36 IST
Sajjan Jindal: Cautiously opportunistic JSW Steel is back to incremental growth strategy. JSW Steel
switches to daily pricing for long products. Looking for strategic investors but cannot as certain it would
be Jindal brothers: Jindal Stainless Signs of steel prices bottoming out a ray of hope for steel players
Sajjan Jindal-owned JSW Steel is now the largest steel maker in the country ahead of long-time market
leader Steel Authority of India (SAIL). Last year, the company had overtaken Tata Steel to become the
number two in the industry.
JSW Steel reported net sales of Rs 52,971 crore in the year ended March against Rs 45,710 crore reported
by SAIL. In comparison, Tata Steels India operations reported net sales of Rs 33,666 crore in the same
period. Including its global operations, however, Tata Steel remains the largest with revenue of Rs
139,503 crore. Thats the reason why Tata Steel is not losing much sweat over the rise of JSW. Tata Steel
remains the preferred choice for marquee customers and we sell every bit of steel that we produce in
India, said T V Narendran, chief executive officer of the India operations of Tata Steel, at the company's
earnings conference. Analysts say the top slot in the domestic market in terms of revenues is a huge legup for JSW Steel and is the culmination of its long-term plan to close the capacity and product portfolio
gap with its two larger peers. The company has been steadily raising its production capacity in the home
market through brownfield expansion and strategic acquisitions.
JSW tops the industry in capacity utilisation, too. In the fourth quarter, it operated its plants at 90 per cent
rated capacity. In comparison, Tata Steel India operated at 80 per cent capacity due to raw material
shortage. JSWs revenue run-rate clearly indicates that it had higher utilisation levels compared to its
peers in the March quarter, said an analyst with a local brokerage house.State-owned SAIL had 19.5
million tonne capacity as on March 31, 2015, while 108-year old Tata Steel
India can produce 10 million tonne steel at its Jamshedpur works. JSW Steel,
on the other hand, has 14.3 million tonne capacity, making it the country's
second largest steel producer after SAIL in terms of production capacity.
Analysts, however, say a single quarter performance may be too short a
period to judge whether JSW Steel can sustain its position at the top as the
largest steel maker in the domestic market. Tata Steel is close to
commissioning its 3 million tonne green field unit in Orissa while SAIL is
raising its capacity to 23 million tonnes.
Also, JSW has a lot of ground to cover on profitability. At the operating level,
Tata Steel India was the highest at Rs 8,011 crore in the year ended March
(down 35 per cent yoy), followed by JSW Steel, which witnessed a marginal
fall of 0.25 per cent on a year-on-year basis to Rs 5,967 crore. SAIL though
showed a 19 per cent increase on year-on-year basis at the operating level to
Rs 2,858 crore in FY15.In terms of net profits, JSW Steel is much lower than
its peers. It recorded a net profit of Rs 1,796 crore in FY15 (up 75 per cent
from preceding year). SAIL saw its profits at Rs 2,117 crore down 24 percent
from same period last year on high finance cost. Tata Steel India led this list reporting a net profit at Rs
6,439 crore.

Essar Steel expects Hypermart to rake in USD 1 bn in FY16-17

June 26, 2016 PTI

Essar Steel expects retail chain Hypermart to clock a billion dollars (about Rs 6,789
crore) in revenue this fiscal on the back of growing demand in the infrastructure and
construction sector. The chain, run by Ruias-promoted steel maker, provides customised
services to original equipment manufacturers, retailers as well as small and medium
enterprises through a chain of 100 hypermarts and 200-300 franchises.
"We expect to clock USD 1 billion in revenue this fiscal as the concept of steel retail
chains has picked up and we are seeing a pickup in sales for flat steel products as well as
fabrications," Hypermart CEO Ravi Singh told PTI.The retail chain expects to sell 1.5
million tonnes (MT) of steel products in 2016-17, a growth of almost 67 per cent from
0.9 MT sales it had clocked in 2015-16 fiscal.
"In the last six months, Hypermart has sold 7 lakh tonnes of various steel products. In the
last two months alone we have sold 2.39 lakh tonnes. This growth is due to pick up in
demand from the construction industry, which is also edging requirement for
fabrications," he explained.Hypermart expects to sell flat steel products worth about Rs
6,000 crore. Besides, another Rs 600-700 crore will come from the fabrication and ehypermart segment, he added.
At present, the retail market for steel products in India is around 8 MT."Essar Hypermart
plans to secure 20 per cent of this market in current year by growing significantly.
Performances in April and May support this trend. This will account for 25 per cent of
Essar Steel's revenue," Singh said.Essar Steel had posted a gross revenue of Rs 17,162
crore in 2014-15 fiscal.
Fabrications are an important pillar of urbanisation, Singh said, adding that steel
fabrications are a green building solution and Essar Hypermart has been making inroads
in the power plant buildings, elevated roads and other customised buildings."With a PanIndia network and backing of steel mill (Hazira), we plan to significantly ramp up our
volumes by adding warehouses and residential structures. Essar Hypermart plans to be
the largest fabricator in India by volume in 2016-17," he noted.
E-Hypermart is a virtual platform that offers material handling equipments, industrial
paints, packaging tapes, pipes and Tubes, TMT bars and calibration services, Singh said.
4

The e-commerce platform of the company is clocking 10 per cent of retail sales. The
distinction between brick and mortar and internet environment is fading and customers
are happy to buy online, he added.