Tata Metaliks Ltd is working on its "next phase" of growth to transform itself into a full-fledged ductile iron (DI) pipe producer from a pig iron maker.
The Calcutta-based company plans to finalise its strategy to expand its DI pipe capacity and allied facilities within the next few months.
Koushik Chatterjee, chairman of Tata Metaliks, said the company would consider its existing site at Kharagpur in Bengal for the new projects vis-à-vis any new sites.
"Tata Metaliks will be a full-fledged DI pipe company. We are working on the next phase of growth. A strategy will be in place within few months," Chatterjee said at the sidelines of Tata Metaliks's 27th annual general meeting.
TML, a subsidiary of Tata Steel, started off as a pig iron maker before upgrading to DI pipes, with handholding by Kubota of Japan. The capacity steadily increased to 200,000 tonnes from 60,000 tonnes. Meanwhile, the pipe business became an integral part of the company after the exit of the overseas player.
At present, the blast furnace produces around half-a-million tonne of hot metal. After factoring in the production of DI pipes, used in water supply and sewerage, the rest of the hot metal is used for pig iron, the lowest priced commodity in the steel value chain.
"We have to see whether the expansion will be piecemeal or large. It is also function of land. Building a greenfield facility is also not easy as a lot of associated infrastructure, such as power plant, sinter plant, evacuation & railway sidings are to be built," Chatterjee, who is also group executive director (corporate, finance and Europe) Tata Steel Group, added.
In the last two years, the company had taken several initiatives to cut cost. It has put up a coke oven unit, captive power plant and sinter plant.
The demand for DI pipes is growing 10-12 per cent annually driven by the infrastructure push related to smart city projects. Rajasthan, Haryana, Chhattisgarh and Odisha have emerged the big buyers of DI pipes. TML, which has a market share of 12-13 per cent, is now operating at 100 per cent capacity with an order book of 10 months.
Sales in the first quarter of 2017-18 were, however, dented because of the transition to the GST regime from the fourth quarter of last year.
Profit was also lower because of higher coal and coke prices. It posted Rs 408 crore of sales in the first quarter and a net profit of Rs 30.62 crore compared with a Rs 334 crore turnover and Rs 34.44 crore profit a a year ago.
In the trailing quarter (fourth quarter of last fiscal), turnover was Rs 415 crore and profit, Rs 40.36 crore.
Sandeep Kumar, the newly appointed managing director of TML, said: "The company's order book in DI pipes is comfortable and is expected to improve further in view of robust market demand in water and irrigation sectors. However, volatility in coal and coke prices and rather muted demand of pig iron are areas of concern for the company."