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SUNDRAM FASTENERS: INCREASED FOCUS ON NON-AUTO SEGMENT

Last year Suresh Krishna handed the mantle of managing Sundram Fasteners to his daughters Arathi (Managing Director) and Arundathi (Dy. Managing Director).

The performance of the company under the new leaders has been impressive. The operations recorded a growth of 17 per cent in revenue to Rs 4002 crore. Profit after tax at Rs 437.12 crore was 18.9 per cent higher than the previous year. With operations spread across China and Germany and with handsome exports to the US and other markets, export sales were vibrant at Rs 1383 crore (Rs 1168 crore in FY 18). The booming exports demanded further expansion: SFL set up a third SEZ unit at the Mahindra World City and is in the process of setting up a new SEZ unit at Sri City. This unit will be used to expand products to the non-auto segment, including off-road vehicles for exports.

Attracted by the thrust given for production and export of defense equipment by setting up the defense corridor for the south, SFL has incorporated a new wholly-owned subsidiary Sunfast TVS Ltd to focus on aerospace and defense segments.

RELIANCE AHEAD OF INDIAN OIL IN REVENUES

With surging petroleum prices oil companies have been overtaking corporates engaged in other sectors in top line and bottom line growth. Remember, until the ascent of the retail giant, Walmart, Excon and other oil companies had been at the top of Fortune 500 companies for over three decades. In India, with a large expansion of the refining capacity and further consolidation through merging other public sector oil companies like Chennai Petroleum Corporation, Indian Oil Corporation (IOC)had fat revenue increase over the years.

IOC has been the undisputed leader in terms of corporate revenues. For the first time with a turnover of Rs 622,809 crore (44.6 per cent growth), this supremacy has been challenged by the private sector giant, Reliance Industries The latter has been expanding massively its capacity for oil refining.

RIL’s also a large producer of a wide range of petrochemicals that are enjoying high prices. RIL’s forays into two other fast growing segments, retail trade, and telecom (where it has captured in a very short time nearly a third of market share).

RIL and IOC have been expanding massively its capacity for oil refining. For decades, Indian Oil has been expanding its refining capacity and is the largest retailer of refined petroleum products in India. The large refineries of Reliance at Jamnagar have the capacity for 68.2 million tonnes, mostly for exports.

The public sector company is constrained by price controls as witnessed in the long period of election schedules when the prices of public sector oil marketing companies were frozen. Of course, in terms of market cap and profits
(Rs 39,588 crore), Reliance is streets ahead of Indian Oil.

L&T: EXPANDING GLOBAL FOOTPRINT

It has been another year of impressive growth for Larsen & Toubro. This is particularly welcome in the light of sluggish growth of the economy through the year.

During 2018-19 L&T had gross revenue of Rs 141,007 crore. International revenue was nearly a third of this. After-tax profits at Rs 8905 crore, registered a growth of 21 per cent. New orders won during the year amounted to Rs 176,834 crore. Over a fourth of this was international orders dominated by the infrastructure and hydrocarbon segments. At the end of the year, the consolidated order book of the group stood at Rs 293,427 crore. Managing Director and CEO, S N Subrahmanyam’s new thrust on IT and technology services and defense has been receiving increased focus.

TATA STEEL GROWS

2018-19 has been an important watershed for the centenarian company, Tata Steel. The company set up records in production, sales, profits and marketing. Making excellent use of acquisitions, TSL emerged the company with the largest capacity in India and the third largest in the world.

The consolidated turnover of the company including its European operations had revenues of Rs 156,669 crore (Rs 124,110 crore for FY 2018). Of these, revenues from the Indian operations recorded the lion’s share of the growth to Rs 88,987 crore from Rs 60,519 crore.

In 2018-19 TSL recorded a dramatic increase in capacity through the acquisition of Bhushan Steel, now Tata Bhushan Steel Ltd. This brought an additional 5 million tonnes of capacity. Also through the ramping up of size at the Kalinganagar plant of TSL, steel deliveries jumped by a third year on year to 16.26 million tonnes, and Indian Operations now account for more than 62 per cent of consolidated volumes. The company was pursuing efforts to transfer the European capacity to a joint venture with the German steelmaker ThyssenKrupp. A recent report indicates the JV not materializing. Tatas are likely to continue to keep the majority stake in Tata Steel Europe. TSL is in the process of selling off its south-east Asian operations in Thailand of Natsteel and Tata Steel, Thailand to the Chinese company HBIS.

TSL is thus focusing on unfolding Indian opportunities unfolding. The recent acquisition of the million-tonne capacity Usha Martin Steel for alloy steel and revving up the capacity of Tata BSL will further help sales in the current year. The expansion at Kalinganagar over the next couple of years will be followed by plans to phase out some of the small capacity blast furnaces at Jamshedpur. The move towards creating a 33 million tonne capacity over a decade could be realized even ahead.

The EBITDA recorded a spectacular jump: from Rs 15,334 crore in FY 18 to Rs 23,883 crore in FY on Indian operations; from Rs 19,768 crore to Rs 30,734 crore in the consolidated operations. The profit after tax has more than doubled: from Rs 4170 crore to Rs 9652 crore in FY 19. You can now understand the satisfaction with which TV Narendran, CEO and MD, summed up the services: “Tata Steel continues to grow its footprint in India in terms of volumes, downstream capability and product portfolio.” Our volumes in India grew by over 33 per cent leading to a significant improvement in our overall profitability and cash flows. Kaushik Chatterjee, Executive Director & CFO, pointed to the company reducing the consolidated gross debt further by Rs 8781 crore in the fourth quarter of FY 19.  This finance wizard has been successful in his efforts to reduce the financial costs looking at opportunities for debt management.

SRI CITY ATTRACTS MORE CUSTOM

Tamil Nadu started off well in developing the northern part of the metro at Gummidipoondi. SIPCOT offered good infrastructure-large multinationals like Thapar-Dupont, Toshiba JSW Power systems, and John Deere setup units with a lot of promise though these did not flourish. The Mediville project of Dr. K M Cherian got stuck with financial difficulties. A significant lacuna was the high cost of land.

Mahindra World City has been replicating its successful Chengalpattu industrial park around Gummidipoondi and holds promise.
Sri City has been extremely effective in attracting investments. The quality infrastructure offered on attractive terms, proximity to the Chennai Metro and effective marketing by promoter Ravindra Sannareddy and his team backed up by the AP government have been effective in Sri City’s outstanding success.

Recent projects that moved over to Sri City included the KREA University, Sundaram Fasteners, and Super Auto Forge. The last one was trying to set up shop at Oragadam. The company won handsome orders for the regular supply of precision auto parts from a US manufacturer. The American company was in a hurry to shift supplies from China and contracted for regular supplies on attractive terms. After several weeks of efforts, the company could not succeed in getting the needed land at Oragadam. Sri City seized the opportunity and succeeded in persuading Super Auto Forge to locate the project across the border.

Southern Railway should introduce fast commuter services to Sri City. This would ensure upgrading the Railways Station for Sri City. Vice President, Venkaiah Naidu had recently demonstrated the speed and comfort of such commuting by traveling from Trisulam opposite to the airport to Sri City by a special train.

SWEDEN CALLING

A high power delegation from India led by the Additional Secretary Barun Mitra visited defense production units in Sweden. Defence Minister Nirmala Sitharaman announced two defense industrial corridors in Uttar Pradesh and Tamil Nadu. Senior IAS officers from UP and Tamil Nadu were part of the 25-member delegation. Our editorial consultant, Jayanthi Raghunathan, met the Tamil Nadu officials at Stockholm. With a large number of private units, especially the MSME sector entering this field, the visit can be expected to result in more extensive collaboration with Sweden.

STFC ASSETS CROSS A LAKH CRORE RUPEES

Shriram Transport Finance Corporation total assets exceeded a lakh crore rupees during 2018-19. The record of profitable operations continued. Profit for the year was at Rs 2563 crore, up from 1568 crore in 2018.

Managing Director, Umesh Revankar pointed to the company continuing to maintain its record for prudent financial management. The book value of the share was at Rs 697.91. Revankar said that loan disbursement growth further improved during the year, and expansion of the branch network continued.

The particular strength of Shriram is its ability to access the risk, effectively work with people at the grass root level, understand their problem, and meet their needs. Revankar said that his company has been mobilizing the increasing volume of funding required on attractive terms: “last year, we focused on borrowing $ 750 million and raised Rs 5000 crore through NCD issues,” said Revankar.

SHRIRAM GROUP

The Shriram group has been performing consistently well with the size of the assets handled exceeding Rs 100,000. The finance companies, STFC, Shriram City Union, Shriram General Insurance and Shriram Life Insurance, are all performing well. In particular, the two insurance companies have recorded stellar performance; most of the private life insurance companies have been struggling, with the need for frequent enhancement of capital and earning modest profits or incurring losses. Shriram Life Insurance Company, with focused operations, has been profitable right from its inception. Even more impressive is the performance of Shriram General Insurance which is estimated to have earned a profit of around Rs 1000 crore. The expertise of founder Thyagarajan in insurance, with his experience at J B Boda & Co and New India Assurance, reinforced by the assembly of experts in insurance and, importantly, the captive custom of thousands of truck owners funded by STFC, have been contributing to high levels of profits.

 

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