Avoiding the commodity trap

From Rs 2,000 Crs to Rs 5,000 Crs

Pawan Kumar Mishra Piyush Arora Pradip Kumar Nishant Singh Ankul Anand
Group 5 CGT19015 CGT19016 CGT19019 CGT19014 CGT19007 1
Content

Introduction to company
Journey till now and future aspirations
Products offered
Future outlook and key challenges
Value drivers for coated steel company
The Nirma Way : Cost structure and levers available
Creating multiple price points: things to know
Focusing on niches : taking control of the consideration sets
Customized approach : Bringing all levers under one roof
Recommendation : Evaluation of ‘Out of box’ innovative ideas

2
 Formed by two world leading organisations in Steel industry, Tata Bluescope has the rich heritage and
competency to lead the chosen niche . . . . .

Nov 2005 - 50 : 50
JV between Tata
Steel & BlueScope
Steel Australia

3rd Roll
forming
Rs 1,000 Crs ILIOS™ ; Solar
facility at Jamshedpur
landmark Module Mounting
Chennai plant
Solutions is launched

2008 2013 2015

2006
2007 2012 2014 2017

Roll forming Durashine Foray into Ezybuild

facility at Solar mounting
Pune and steel structures
Bhiwadi
3
Source: https://tatabluescopesteel.com/
In last 8 years the TBSL revenue has grown at ~ 18%, ~ 3x with respect to industry…Growth has been
achieved with excellent improvement in supply side, cost leadership and M&S initiatives in B2B and B2C
segment

Sales (KTPA)
+245%
239 234 245
220 Coated steel products in ~ 2% of Indian Steel Market (~91
192 201
154
MnT – FY’19)

95
71 TBSL currently has ~ 10% of the Indian coated steel
product market (~ 245 KT – FY’19)
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19
While Steel Sector is expected to grow ~ 6.5% , coated
steel market is estimated to grow @ 6% to 10% annually
Revenue(Rs Crs)
+287%
Figs in Rs Crs
1969 From 2013 to 2019, TBSL growth had a CAGR of ~ 17% -
1614 1707 18%
1438 1479
1326
1005
692
TBSL aspires to become a Rs 5,000 Crs company by FY’22,
509 requiring ~ 32% growth annually

4
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19
TBSL has products in three verticals offering eight different branded products catering to a plethora of
customer segments. . .

Business Vertical Brands Products Customers

• Roll Formers
Coated Steel • PEB Manufacturers

• Residential
• Small Industries &
Commercial Projects
Liners, Roof sheets, wall sheets, Tiles

• EPC
Building • Industrial & Infra.
Products Projects
Roof & Wall Cladding, Purlins, Decking System

• Light Pre-Engineered
Buildings
Light Structural Buildings

Pre-Engineered • Pre-Engineered
Building Buildings
5
While comparing to the developed economies, coated steel share of business can be presumed to be still in
nascent stages. . However with Indian growth rate more than world market, the break-out looks nearby . .

Coated Steel Share

12-15%

~2%

India Developed Economies

The world market for colour
coated steel is expected to grow Potential for growth in India is high as
at 4.8-5% over next 5 year India aspires to move from 100 to 300
MTPA by 2030

Indian coated steel sector if expected to grow at ~ 6% to 10% in the next few years
6
Threat of substitutes and new entrants in chosen segments is very prominent . . . Therefore growing at 3x
– 4x of the market would require careful positioning and execution of the brand positioning . . .

Polycarbonate roofing sheets Plastic roofing sheets Asbestos corrugated roofing solutions

7
For achieving ~ Rs 5,000 Crs revenue in FY’22, TBSL needs to resolve significant challenges with both -
supply side and market side . . . . .

+118%
Key challenges for future
5000
 Availability of material for sale
2297  Competitors selling similar products at
cheaper prices
223
1969 511  Stiff challenges posed by Roll Formers
 Increasing penetration faster than
competition
FY’19 Growth @ 8% Price trend @ 3.3% TBD FY’22 (Asp)  Riding the big of India Growth story

Supply for sales has to increase by 127% @ Market share : From Higher NR through sales channel mix
CAGR of ~ 32% 10% to 19% (~2x) optimisation

+127% +90% B2C Sales 49 51 56 57

557 19 B2B Sales 51 49 44 43
424
322 FY 16 FY 17 FY 18 FY 19
245 10
+19%

Avg NR 80228
67414 72898
(Rs/ton) 67230
2019 2020 (Est) 2021(Est) 2022 (Est) FY’19 FY’22 (Asp)
FY 16 FY 17 FY 18 8FY 19
The key value drivers for creating the marketing differentiation for coated steel is economic growth,
pricing, interaction with competition, access to raw material and effective supply chain. . . .

Consumables

9
Roll formers sell at ~ 10% discount1 of TBSL and JSW steel . . . therefore access to substrate material dn
sensitivity to product price is very critical for roll formers . . . .

Cost Structure2 (Large and organised players) Cost Structure2 (Roll formers)

 Current capacity utilisation of roll formers ~ 50%  Opportunity for in-organic growth or strategic
alliances with roll formers for creating supply
 Restriction to access to domestic availability of FHCR may lead to capability
further drop in capacity utilisation
 NIRMA way would help tackle the competition
but would compromise the profitability.
 High prices of imported steel may also adversely impact the capacity
utilisation, thereby reducing the pressure of competition  Not a sustainable solution for 5K topline

10
Source: 1Indiamart, 2RBSA_Indian_Steel_Industry_Analysis
While increasing the number of points might help penetrate markets. . . it may also lead to difficulty in
decision making for customers . . . Further price point creation can be done for specific utility and purposes

11
Coated steel product in India in governed by IS 15965 and only 15 firms are registered under the code as
manufacturer . . .

 Advocacy for limited consideration set : IS code info can be

# LICENSE NO FIRM NAME AND ADDRESS used to reduce the consideration set in the Govt projects
1 7400004698 JSW STEEL COATED PRODUCTS LIMITED (railways, metro, airports, post office, etc).
2 8700036417 BHUSHAN STEEL LIMITED
3 7700014811 JSW STEEL COATED PRODUCTS LTD
4 7700053914 TATA STEEL BSL LIMITED
5 7700074518 JSW STEEL COATED PRODUCTS LIMITED
6 8200080106 National Steel and Agro Industries Ltd
7 7200129708 LATIM SOURCING (INDIA) PRIVATE LIMITED
8 5200073081 Bhushan Power and Steel Limited
9 7700137617 Colour Roof India Ltd
10 6600044106 COLORSHINE COATED PRIVATE LIMITED
11 5200074790 Tata Steel BSL Limited
 Risk marketing : Creating awareness among user
12 5800020611 Tata BlueScope Steel Private Limited
(households and small organisations) for risk of life and
13 5100146580 Jindal (India) Limited property due to usage of inferior and uncertified products
14 7600107508 INDIAN STEEL CORPORATION LIMITED
15 5710041610 Manaksia Steels Limited

12
 Evaluation of ‘Out of box’ innovative ideas
Marketing Strategy Positives Negatives Remarks
Not suitable for premium
The Nirma way – one Increase customer base with a TBSL should not adopt this
products; dilutes the market
product for masses low price strategy strategy
positioning of a product
Aspirational growth target of
Slow and steady wins Assured growth of 10-15% Slow response to market
35% CAGR will not be
the race without any rigorous efforts dynamics
achieved by TBSL
Any mismatch between TBSL can consider this
Multiple price points supports
Brand for each price product offering and strategy as it can exploit the
differentiated products and create
points customer needs result in multiple uses market of
value for the company
failure of strategy coated steel
Micro segmentation fetches
Companies have to bear the This strategy is important as
premium for the company and
Niche Marketing cost of failure as the risk is TBSL can grow only by value
works well with multiple price
high addition and downstream
points
Catering to specific needs of
Customised vs Mass Complexity increases and TBSL can adopt this strategy
customers creates value for the
Marketing hence also the risk for building solutions vertical
company 13
 Evaluation of ‘Out of box’ innovative ideas
Segment
Business Vertical Brands Strategy
Targeted

Coated Steel Forward integration: Tie-ups with Roll-formers B2B

Forward integration: Tie-ups with Roll-formers B2B

Tie-ups with real estate clients like Tata Housing, etc B2B
Focussed approach on niche applications: micro
Building Products
segmentation in infrastructure - rural housing, housing for B2B, B2C
poor, solar panels, railways, etc
The functional products can be differentiated for various
B2B, B2C
segments, each segment with a particular price point

Customised solutions for projects B2B

Building Solutions To increase the product offerings- focus on new product

B2B, B2C
solutions

Change the pond strategy for the new products B2B,

14
B2C
End of presentation

15
16