ARJAS PLANS ₹200 CRORE INVESTMENT TO IMPROVE OPS, EXPAND CAPACITY

An integrated special steel producer, Arjas Steel, formerly known as Gerdau Steel India Private Limited completed 1 year after Private equity firm, ADV Partners, acquired Arjas Steel from the Brazilian entity, Gerdau Steel for about $120 million. Arjas Steel is in the mode of production capacity expansion and planning to set up its own R&D centre to better customise its products to suit the market requirements. Being the only large steel plant in Andhra Pradesh in private sector, Arjas has big plans to develop and shape up the state economy. In a freewheeling interview to Tamajit Pain of Steel Insights, Sridhar Krishnamoorthy, Managing Director, Arjas Steel shares the industries challenges and prospects and how the company is helping local economy by providing livelihood.

The automotive steel sector is undergoing a lot of hardships because of the economic downturn. How do you see automotive sector demand in the next 1-2 years?

The long-term trend for automotive demand in India has been and will be positive. If we keep that in mind the fact that India has quite some potential left for growth in infrastructure, energy, commercial logistics and of course consumer spending, automotive demand should be good in the next 1-2 years.

It is true that starting end of Quarter 1 and through Quarter 2 of FY20, automotive demand has dipped significantly. Commercial vehicles, passenger cars, two-wheelers, tractors, and construction equipment are down 15 percent to 40 percent in their monthly sales volume (year-on-year).

The slowdown has come about from a variety of factors most notably buildup in inventory of vehicles, financing of vehicle purchases as well as concerns in consumer minds on the economy and job security. Now in the month of November we are seeing a modest pick-up in demand, partly caused by lower inventories in the supply chain. Many OEMs had reduced production in the July-Oct period.

India is expected to emerge as the world’s third-largest passenger-vehicle market by 2021. The Indian passenger car market is anticipated to register a CAGR of 9.5 percent during the period 20192024.

Therefore, the Indian automotive component industry is expected to witness healthy growth during the forecast period, owing to increasing domestic demand, rising exports, and the increasing flow of investments in the automotive components sector. Thus, it makes India a key automotive components sourcing hub.

Export market for automotive components and automotive themselves have been good aided also by a weaker Indian Rupee. This export market is likely to continue

How are the automotive steel makers adjusting to the difficult market conditions?