In an interview to CNBC-TV18, Ankit Miglani, deputy managing director, Uttam Galva gives details on the company's plans to scale up exports to achieve an equilibrium in the exports and domestic sales.
"Before 2008, our exports were 70% of our production. After the 2008 crisis, we moved to 70% domestic sales. So, we would like to diversify our product mix and reach an equilibrium of 50% domestic sales and 50% exports so that we can minimise our exposure to the fluctuations in the market," he says.
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Below is the edited transcript of Miglani's interview to CNBC-TV18.
Q: Give us some perspective in terms of this aggression that you all are planning to show on the export business side for Uttam Galva? How exactly do you want to go about it? What does it currently stand at? How much would you like to take it up to?
A: To be specific, our intention is not to focus on exports. Our intention is to focus on more value added products. That actually turns into a bigger thrust on the exports. What we want to do is diversify our risk. Before 2008, our exports were 70% of our production. After the 2008 crisis, we moved to 70% domestic sales. So, we would like to diversify our product mix and reach equilibrium of something like 50% domestic, 50% export so that we can minimise our exposure to the fluctuations in the market.
Q: Are you noticing a recovery? Is that why you are stepping up on the gas in export markets?
A: Absolutely not. We are not seeing any recovery in the global situation. Infact, the uncertainty is increasing every month. Next month we will have the Chinese New Year as well as the fiscal issue with United States. Then, in March there is the government taking control of the Chinese bureaucracy. There is going to be a lot of uncertainty in the next few months because we don’t have clarity on political policy, etc. However, it is important for us to continue to run at maximum capacity all through the year which is why we would like to have a diversified product mix so that we have an option where we can sell our products.
Q: How does this uncertainty translate to the steel market itself?
A: Primarily speaking, it is all about liquidity issues. Disposable income of corporates and individuals is at risk at this point, not only in China but in India, US and Europe as well. If there is less disposable income, clearly, there is going to be less consumption and more savings. The only place we can actually expect investment from, is the government which is why political policies are critical at this point. Indian GDP has about 29 percent of government’s spending, in China that’s much more. So, unless the government decides to spend money or print money, we are not going to see any uptake in demand.
Q: Finally, how does rupee depreciation impact you? Does it make life easier because you want to increase exports to 50%? Or does it make life tough because you have important inputs?
A: It doesn’t do either. It is entirely a pass through effect. Steel prices are always priced in dollars. All the raw materials are all priced in dollars. It makes a huge impact on consumers of steel because when the rupee appreciates, the price of steel in India will come down. When the dollar appreciates, the price will definitely become dearer. So in dollar terms, we don’t expect too much fluctuation in the price but in rupee terms, prices could be very volatile over the coming months.