Order flow intact; expect good production: Tata Sponge

Suresh Thawani, MD, Tata Sponge, says that the company has performed 94% to the rated capacity. We expect good production for the rest of the year. He also says that Orissa block will be operational in two-three years.

Below is the edited transcript of his interview. Q: Can you give us an insight of this quarter? Most other manufacturing companies have seen the shadow of gloom cast on them because of the downturn. Your performance has been fairly good?
A: We have performed 94% to our rated capacity. But compared to last year we had a bad year due to some external factors. Otherwise, our performance in this quarter is normal as has been in years prior to this. Q: How is the iron ore situation? I believe group companies supply iron ore to you but is there any constraint at this point that you are facing because of all the issues that are plaguing the sector?
A: We have no constraint about iron ore supply. Last year we had some transportation and social economic problems but we have overcome the problem. This year we had some shortage of iron ore but that is also resolved and we expect very good production for the rest of the period. Q: Clearance of Orissa block is the next trigger seen for Tata Sponge. Is there any clarity by when this could come or be considered?
A: I think we will take two-three years to start the block. Q: What is the reason for the advancement of date of open offer?
A: I cannot comment on that at the moment. Q: How do things change for Tata Sponge in terms of managerial synergies once the open offer goes through?
A: Yes, it has been acquired by our promoters. They hold 43% shares and want to increase it to 51% and which still evaluates in future business decisions and growth. Q: How is the overall demand outlook shaping up? Have you seen any slow down? What is your expectation in the second half of this fiscal?
A: There is a certain slow down in the sponge industry. We are one of the best good quality sponge producers; we don’t see any decline in the order. But overall industry is certainly not doing too well. There is a decline in the production. Q: Will that tell on realizations or margins?
A: Certainly. The realizations and the margin are depended on the international price of pig iron and scrap which is a direct copy thing product for us. There is a decline since April in line with every commodity and international market. Q: Can you put a number to it? Has it declined by 10-20?
A: We already saw 10% decline. We seem to be entering a stable phase now. Q: Is the 10% fall getting wiped out by the rupee depreciation or did the fall come after we knew the rupee value, rupee depreciation?
A: We are not looking at any import and export. This is domestic market.