PRESENTED BY

Mr.BIPIN BARAHATE, ASST MANAGER (Mech)

on 12/04/2009

NMDC, a brief introduction

NEW ERA OF DISINVESTMENT & DIVERSIFICATION
Established on 15th November 1958 as a Government company as per the provisions of the Companies Act Developed from being a single product (lump ore) single customer company to a multi product (lump ore, fines and calibrated lump ore), multi customer (>100) company over the years

19921993 Disinvested 1.61% to Financial Institutions

1998 Conferred the Miniratna status - Enabled the board of the company to exercise certain capital expenditure powers without reference to the GoI

2008 - Conferred the Navaratna status boards power to incur capital expenditure are further enhanced

19921993

19961997

1998

20072008

19961997 Disinvested 0.01% in favour of employees

Ranked the Best Performing PSU as per the survey carried out by the Department of Public Enterprises (DPE) for the year 2007 08 on the basis of overall performance on financial and other parameters

NMDC Highpoints
Indian iron ore producer accounting for: About 14% of Indias total production of iron ore * About 1.7% of world iron ore production **

Financial strength High net worth, zero debt, cash reserves

Among the worlds least cost producers of high quality iron ore 65%+ Fe content

Technological strength Highly mechanised iron ore mines Availability of technology and infrastructure at existing projects that can support further expansion with minimal incremental investment Highly experienced management and workforce Best performing PSU 200708, Navaratna status conferred in 2008
* Source: http://ibm.gov.in/mineralproduction.html ** Source: www.worldsteel.org, Tex Report

Significant growth and diversification plans Expansion and value addition in existing businesses Diversifying into new minerals

In house exploration expertise and R&D capability

When Does Diversification Start to Make Sense?

Strong competitive Weak competitive position, rapid position, rapid market growth -- market growth -Not a good time to Not a good time to diversify diversify Strong competitive Weak competitive position, slow position, slow market growth -- market growth -Diversification is Diversification top priority merits consideration consideration

Strategies for Entering New Businesses

Acquire existing company

Start-up new business internally

Joint venture with another company

ADVANTGES OF JOINT VENTURES

TECHNICAL EXPERTISE

CONFIDENCE OF SHARE HOLDERS

COST EFFECTIVE NESS

SKILLED MANPOWER

GENERATION OF FUNDS

NMDC Business Strategy

Forward Integration Value addition projects steel, pellets, critical beneficiation

Horizontal Integration Overseas expansion, new minerals, new leases in India & abroad

Core Business Exploration, evaluation, mining, beneficiation Core Strength Mining at minimum cost, eco friendly mining Backward Integration New exploration, prospecting, assistance to state

Horizontal Integration New JVs, collaboration through MOUs, technological advancements

NEW PROJECTS
IRON ORE
11B in Bailadila Kumarswamy Mines Sasangada Iron Ore Deposit, Jharkhand Ghatkuri Mine, Jharkhand Ramandurg, Karnataka Bailadila Deposit No.13, Chhattisgarh Bailadila Deposit No.4, Chhattisgarh

 COAL
Two Coal blocks at Shahpur east and West

STEEL PLANTS
3 MT steel plant at Jagdalpur 2MT steel plants at Bellary, Hosphet

PELLET PLANTS
1.2 Mt capacity at Donamalai 2.0 Mt capacity at Bailadila

CRUDE STEEL PRODUCTION 2008

SOURCE: STEEL STATISTICAL YEAR BOOK 2009

COUNTRY Germany Italy Turkey Ukraine Russia USA Brazil China India Japan S.Korea Others Total

PRODUCTION (in mt) 45.83 30.59 26.8 37.28 68.51 91.35 33.71 500.31 57.79 118.73 53.62 264.6 1329.12

CRUDE STEEL PRODUTION 2008

STEEL PRODUCTION
Germany Italy 20% 3% 2% 2% 3% 5% 7% 3% Turkey Ukraine Russia USA Brazil China India 38% Japan S.Korea Others

4% 9% 4%

YEAR WISE PRODUCTION(IN mt)

YEAR 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 INDIA 24.3 26.92 29.29 28.81 31.78 32.63 45.78 49.45 53.47 57.79 USA 94.27 101.8 90.1 91.59 93.68 99.68 94.89 98.58 98.1 91.35 CHINA 124.26 128.5 157.63 182.36 222.33 282.91 353.24 419.15 489.28 500.31

GROWTH RATES
550 500 450 400 350 300 250 200 150 100 50 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 YEAR

PRODUCTION

INDIA USA CHINA

National Steel Policy-2005

Approved by Government of India in September 2005 Milion Tonnes
Steel Production Imports Exports Consumption

2004-05 2019-20

38 110

2 6

4 26

36 90

Major Emphasis: Critical Input Raw Materials: Iron Ore and Coking Coal Infrastructure facilities like Roads, Railways and Ports. Focus: Human Resources Technology Research and Development Market outlook on prices of steel Environmental Concerns.

Indian Potential for Steel

Huge Potential for Demand
High GDP growth rate of 7% 1 billion population Low per capita steel consumption of 33kg (World av. 181 kg

Human Resources

Growth Factors for India

Abundant Iron Ore

Reserves 23 billion tones

Government Policy
Stable currency Easing of regulations Strong Banking & judicial system Encouraging trade relations with ASEAN and other countries Infrastructure building Exploring new Energy resources

Raw Materials Requirement

Critical inputs for Steel Production Iron Ore Coking Coal Projected Requirement of Critical inputs
Iron Ore 2019-20 2004-05 190 54 Coking Coal 70 27

Million Tonnes Non Coking Coal 26 13

New Additions through BF Route (60%), Electric Arc Furnace (33%), others (7%)

SWOT ANALYSIS FOR NMDC STEELS

Strength Weakness Opportunity Threats

STRENGHTHS
Abundance of Iron ore Largest pool of man power Lower unit labour cost Vast untrapped domestic market Good market value of NMDC Favourable socio political condition

Comparative cost of steel production, %

Item Energy Iron ore Fluxes & ferro alloys Others Total material Labour Misc taxes Works cost Depriciation and interest Total cost USA 24.1 15.4 5.9 25.6 71.0 40.7 1.9 113.6 9.1 122.7 UK 19.8 12.7 7.6 27.5 67.6 27.1 1.9 96.6 6.6 103.2 France Germany 22.1 12.7 7.6 27.3 69.7 36.6 4.1 110.5 2.4 122.9 23.4 13.9 6.8 27.1 71.2 43.4 2.4 117.1 12.2 129.0 India 32.9 5.4 8.5 21.9 68.8 13.9 6.6 89.3 10.7 100.0

Source : IE (I) Journal-MM, vol 82,

MISMATCH IN PRODUCTION AND DEMAND

MISMATCH
6 5 import (mt) 4 3 2 1 0 1 2 3 4 5 year 6 7 8 9 Series1

WEAKNESS
Lack of Experience in Steel Industry Huge capital investment Lack of raw material like Coking coal, Nickel and ferro molybdenum Poor quality of basic Infrastructure Low labour productivity High level of taxation

Non Coking Coal Indian Scenario

Proven Non Coking Coal Reserves (as on 1.1.2004) - 75.1 BT Constitutes 82% of the total coal reserves in India.
1000

Non coking Coal production

271.1

282.8

299.1

311.1

331.8

100 1999-2000 2000-01 2001-02 2002-03 2003-04

Quantitatively, no problem faced by Indian Steel Industry. Qualitatively, require high grade of non-coking coal for sponge iron industry.

Coking Coal Indian Scenario

25 21.2

Coking Coal production

20

19.5 18 18.4 18.3

15 11.8 10 1999-2000 2000-01 2001-02 11.4

Metallurgical
11.8 11.1 10.7 Non-Metallurgical 2002-03 2003-04

Coking Coal declined from 33 MT (99-00) to 29.4 (03-04) Significant proportion of coking coal not suitable for metallurgical purpose. Production of raw coking coal has fallen Washed coal availability would be much lower.

Major determinants of international competitiveness

Item Unit India 41 34 30 41 52 6177 36 61 .91 44 Brazil 52 57 36 39 52 7729 37 61 .38 52 S.Korea Canada 61 49 59 47 57 9291 47 68 1.63 59 68 58 62 63 66 30034 40 62 1.32 63 Usa 60 70 63 58 74 44070 48 74 2.66 57 Japan 93 81 93 90 72 46671 79 72 2.85 82 Germany 93 71 88 79 76 38207 69 73 2.79 87

Product quality Index Product design Index On time delivery After Sales Service Distribution Network Labour Productivity Training Managerial Initiative Expenses In R&D Information Tech Index Index Index Index Index Index % of GDP Index

Source: Steel and Metallurgy

OPPORTUNITY
Option for absorption of newer and modern technology Can have limitation over workforce Enormous scope for consumption of steel Unexplored rural market Export market penetration Option of choosing the products

THREATS
Threats from competitors Price sensitivity Higher quality products from developed nations Non availability of capital from financial institution for steel Adverse social condition Threats of substitutes

PRICE RATES

STRATEGIES

SURVIVAL

GROWTH

SHORT TERM PLAN MEDIUM TERM PLAN MEDIUM TERM PLAN

LONG TERM PLAN

SHORT TERM PLAN

To set the plant in a) Least possible time b) Least possible cost To set a modern automated plant To start the production activity systematically Infrastructure development Ensuring raw material availability Generation and development of Human resources

MEDIUM TERM PLAN

Expansion plans for full fledged production Review of conditions and transforming activities Emphasize on low production cost Switching over from general to focused marketing Emphasize on R & D activity

LONG TERM PLAN

Achieving the vision Customer & Share holders satisfaction Achieve excellence in Quality Facilitates Excellent R&D Environmental friendly Peripheral development Planning to set up new plants Plan for further diversifications

FINANCIAL STRATEGY
Repayments of large borrowing Manage the cost and time overruns Ensuring future cost flows Improve profitability Develop a deep sense of cost consciousness Reduction in plant inventory Participation in influencing policy makers

BUSINESS STRATEGY
Systematic approach in setting plants Focused on the domestic demand Concentration on core competency Long term agreement to ensure supply of raw material Strategic partnership in non core business Outsourcing of non core services Servicing steels

Coking Coal Future Perspectives

2019-20 Requirement of coking coal Likely % available from imports 70 MT 85%

Strategies envisaged Allotment of new coal blocks to steel industry Joint Ventures and Equity participation abroad by steel and coal companies. Development and Adaption of technologies in synergy with natural resource base (non-coking coal). Investment in beneficiation of coal.

OPERATIONAL STRATEGY
Following closed loop theory of planning, Action, Follow up and review Active participation in erection and commissioning activity Ensuring safety in every aspect Reduction in scarp, rework and extra labour Reduction of WIP, inventory levels, material handling Proper utilization of tools and equipment and operational efficiency. Reducing the amount of customer complaints Minimize the wastages or utilization of waste

TECHNICAL STRATEGY
Selection between proven technologies and modern technology Applying automation Superior quality of finished products. Increase in production Reduction in cost of production Reduction in energy consumption Reduction in environmental pollution

Purdue Model for Control Hierarchy (5-Level Model)

Name Level 0 Level 1

Description Sensor Level (Measuring Devices): Pressure, Temperature, Speed, Accelerometer, Force, Position, Shape, Thickness, ...

Controller Level (Feed-back Closed Loop Control): Speed Regulator, Tension Regulator, Sequence Control, Position Control, Temperature Control, SCADA

Level 2

Machine Level (Set-up Models): Temperature model (e.g., EAF, LMF), Shape Control, Mill Set-Up Control, Coil Tracking Runout Table Cooling Control, ..

Level 3

Operation Unit Level: Blast Furnace, Electric Arc Furnace, LMF, Caster, Reheating, Hot Mill, Cold Mill, Annea Line, Pickle Line, ... Plant Level MES, MRP: Scheduling, Material Flow, Manufacturing Execution System (MES)... Corporate Level CRM, TMS, ERP: Order Process, Enterprise Resource Planning (ERP)...

Level 4 Level 5

R & D STRATEGY
Optimization of existing process technology Maximizing quality of steel Development of high value steels Reduction in specific consumption rates of raw materials Improving physico chemical properties of RM Improvement of BF productivity Technologies of preheat treatment of hot metal Reduction of energy requirements Making the plant pollution free Technology and knowledge transfer

HR AND CSR STRATEGY

Attracting candidates with experience or
expertise in erection and commissioning of steel plant Organizing workshop for the working employee Developing infrastructure around the area Maintaining social harmony Peripheral development

ENVIRONMENT STRATEGY
Plantation around the steel plant Recycling of water and water waste Set target to reduce energy consumption Recycling of byproducts Target to reduce air and water emissions and generation of hazardous waste Target to recycle, recovery and/or reuse of spent refactories