Company’s initiative to enhance the shareholder value
The Company’s initiatives on various fronts – reduction in cost of production, increase in production capacity, process reengineering, upgrading the facilities and capturing high value niche markets have started yielding positive results. This has translated into higher income and better operating margins.
The management has drawn up a three-point programme for enhancing the shareholder value. These are:
Capacity enhancement
The capacity has been enhanced from 2 to 2.4 mmtpa, and the production plan of 2.2 mmtpa has been set for the year 2000-01. This achievement would mean a 44% increase in the production over the year 1999-2000. With further modification under way/on the anvil, the capacity for the year 2001-02 has been set at 2.7 mmtpa without any major capex, which is an increase of 76% over the actual production levels over the year 1999-2000.
Contribution enhancement
Improvement in sales realisation
With the upturn in the steel markets and the company having established its product in the high value niche markets where price fluctuations are minimum, the company expects its realisation to increase by Rs. 1500 per tonne during the current year over 1999-2000.
Reduction in cost of production
The steps taken to cut costs have yielded results, the benefits of which will be fully harnessed during the course of the current fiscal year when the cost is expected to be Rs. 1500 per tonne lower compared to 1999-2000.
With the increase in the production capacity, the sales realisation and reduction in the cost of production, the company expects to improve its contribution by around Rs. 3000 per tonne.
Finance cost reduction
Reduction in finance cost
A clear focus is to reduce the debt and the cost of debt. The company proposes to reduce the debt by Rs. 8000 million during the year 2000-01 through dis-investment in its assets and investments which will be used for repayment of high cost loans. As a result of the reduction in high-cost debt and improvement in working capital management, the finance cost will reduce by about Rs. 2500 million annually.
Extend maturity profile
The efforts of the company to restructure its profile in terms of maturity have reached the final stages and the company hopes to extend the maturity of the debt from the present level of about 3 years to 8 years, which will facilitate the Company to repay the debt from internal accruals.
It may be noted that besides the physical assets, the company, over a period of time has developed intangible assets which as per the recent study of Ernst & Young are valued at Rs. 14000 million, which the company proposes to harness in the coming years.
All these measures would contribute significantly to improve the shareholders’ value.
CORPORATE
