SWOT

Strenghts :

Management Specific:

1. Sri A.S.Rao, Executive Vice Chairman of the Company - the Chief promoter, is a metallurgical Engineer by profession and has got rich experience of 45 years - 22 years in senior capacities in SAIL, the largest public sector undertaking in Steel in India and 23 years as an industrialist.
2. Sri A. Naresh Kumar, Managing Director of the Company is the elder son of Mr. A.S.Rao. He is chemical engineer by profession and did his masters in MS (Polymers) in U.S.A.  He had his initial stint of four years with Trans-national Companies in U.S.A. where he handled market research, project planning etc. He has successfully implemented technical improvements programme for the Company and handled modernization and expansion programme and setting up of a Greenfield project with aggregate investment of INR 3765 million. He is implementing integrated project with capex of INR 5870 million.
3. The Board comprises of eminent personalities who include (1) Shri K.Thanu Pillai, a banking professional who was earlier Managing Director of State Bank of Hyderabad  (2) Shri Khaja Ruknuddin, former Dy. Managing Director, State Bank of India and former Chairman-Banking Service Recruitment Board (3) Shri Syed Anis Hussain, Former Executive Director of RBI and Former Banking Ombudsman of A.P., (4) Shri S.N.Rao a mechanical engineer who had rich experience in Companies like RINL., Tata Chemicals Ltd., in senior capacities.
4. The Management is assisted by a team of professionals in technical, commercial, financial fields with good and rich experience in the respective areas.
5. The management has kept good track record in implementing the existing project without any time and cost overruns and also in operations during the last 18 years.  SIL has a rare distinction of being the only company in the Pig Iron segment in India which has maintained a continuous track record of profits even during the industry downturn in late 90s and 2008 financial crisis.
6. Open minded management and satisfactory business conduct with the term lenders and banks.
7. Excellent credit track record with banks and financial institutions. SIL has repaid the earlier borrowal to the financial institutions, as per agreed amortisation schedule and without availing any concessions in interest (which many of its peers availed concessions and defaulted the repayments) even during the business recession in the late 90s. SIL also repaid the modernization and expansion loans of brown-filed project and the Pig Iron unit once again became debt free in September 2008.

Company Specific:

1. The Company has locational advantages like proximity to consumption centers, closer to Bellary-Hospet mines for sourcing Iron Ore – a basic raw material.
2. Low initial project Cost - adding to the economic and financial viability of the project.
3. Co-generation power facility utilizing the waste blast furnace gas, thus avoiding any dependence on state grid.
4. Proven technology from SINO STEEL which was recently absorbed in place of China Shougang.
5. The company implemented a project for manufacture of 450000 tpa of Metallurgical Coke and 50 MW Co-generation as part of the proposed integrated steel plant at Greenfield Project site in Karnataka. 50% of the Metallurgical Coke is captively consumed and 50% is sold to nearest iron and steel making units Like JSW, Kalyani , Kirloskar Ferrous etc. The Co-generation power after meeting the captive requirements is sold to the tune of 40 MW to Indian Power Exchange and Discoms.
6. The activities are familiar to the promoters as the core promoter is technocrat entrepreneur with qualifications related to the industry.
7. Good financial management and credit standing with the Banks and Financial Institutions, which are pointers to its financial discipline.
8. The performance of the Company during the last fifteen years is considered satisfactory with consistent tract record of profits inspite of the slow down which are pointers to the capabilities of the Management.
9. The company had become debt free from the initial term debt of INR 326 million in
   2002-03 having repaid on schedule and without availing any concessions, inspite of recession in the iron and steel industry. The Pig Iron plant has once again became debt free in September 2008 after repayment of final dues of Term Loans availed for modernization and expansion of the said plant. The initial borrowal of Rs.1190 million for Greenfield Project for manufacture of Metallurgical Coke and Co-generation power plant would become debt free by 2014.
10. The present outstanding term debt is on account of borrowal by the company for implementation of expansion of Metallurgical Coke and Co-generation of Power and borrowal for integrated project for manufacture of Ductile Iron Pipes.
11. SIL is now implementing integrated project for manufacture of Ductile Iron Pipes with rate capacity of 210,000 tpa, 25,000 Foundry for manufacture of DI Pipe Fittings, 298,800 tpa Sinter Plant, 30 mw Captive thermal power Plant and modernization of Blast Furnace. Works on Blast Furnace and Sinter Plant are already completed. These projects are expected to be completed by April 2014. SIL’s profits are expected to swell once these projects are completed due to significant advantages due to value addition and lower input costs.

      Product Specific:

1. Pig Iron produced by the company has got brand value.
2. Low project cost with co-generation power yielding significant savings in cost of production.
3. For making iron castings Pig Iron is exclusively used.
4. Metallurgical Coke technology involving stamp charging and waste heat recovery for the Greenfield project is sourced from Ansan, P.R.China, whose technology is proven with installed capacities of over 200 million tons in China. Tata group in India, considering the superiority of the technology, has now taken up a project with similar technology.

Industry Specific:

1. Demand potential for Pig Iron of over 6 million tons p.a. and demand growing at about 7% in the last few years.
2. Demand potential for Metallurgical Coke in the Bellary region alone is 6.5 million tons. Moreover fifty percent of Metallurgical Coke is captively used.  Co-generation Power has tremendous potential as the shortage of Power is severe in Karnataka. Company has already signed a PPA with PTC India Ltd, for sale of 30 MW of Power upto May 2013. Company is also selling power on power exchange.
3. Although the Pig Iron industry is subject to cyclical growth, it is expected to grow significantly in the future due to booming Automobile, Textiles Machinery, construction industry, Agriculture implements etc. industries and Governments thrust on these areas.
4. With the thrust given by the Government of India in its 12th Five year plan with a target expenditure of INR 12000 billion and vast export potential in the middle east, African and European countries, the Ductile Iron Pipe and Pipe Fittings would place the company in a big league.

Weakness :

1. Steel Industry has witnessed recessionary trends due to general economic slow down during the last decade.
2. The unit is import dependent for the raw materials and will be affected by international market trends and foreign exchange fluctuations.
3. Compact Board.

Opportunities :

1. Potential for increasing the capacities in the Industry as the company is free from the existing debt (other than Greenfield project debt) in 2008. Company is implementing an Integrated project at an outlay of INR 5870 million.
2. Being in the intermediate stage, there is an opportunity for both backward integration
   (like sinter plant etc) and forward integration (like manufacture of Semis, steel making etc). Company is implementing a project for manufacture of Ductile Iron Pipes.
3. Availability of cheaper raw materials, iron ore, lime stone, quartz, manganese ore and dolomite from the nearby mines.

Threats :

1. Import threat on metallurgical coke imports from China.
2. Future competition from the prospective domestic manufactures.

Critical Risk Factors :

1. Dependence on imported Coking Coal;
2. The International price fluctuations on key raw materials and foreign exchange fluctuations may adversely affect the cash flows of the company.

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