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The Indian market is graduating into a very quality conscious one

Venugopal Pillai ,  Thursday, January 31, 2013, 17:05 Hrs  [IST]

Nitin Kumar Gupta-Nitin Kumar Gupta, Managing Director, NLMK India

NLMK is the world's foremost suppliers of slabs and transformer steel with more than 15 million tonnes of capacity for flat and long steel products. In 2011, NLMK acquired Parekh Grouppromoted National Lamination Industries, enhancing NLMK’s presence and reach in India. In this exclusive exchange, Nitin Kumar Gupta tells us more on NLMK’s operations and goals in India. Gupta is confident of a huge business opportunity given the country’s power sector ambitions. An interview by Venugopal Pillai.

At the outset, please take us through the NLMK group in brief, explaining the various steel grades manufactured and also the group’s global footprint.
With more than 15 million tonnes of steel making capability, NLMK Group is vertically integrated and is one of the world’s foremost suppliers of slabs and transformer steel. We also manufacture other high value-added products including prepainted, galvanized electrical steel and a wide range of plates as well as a variety of long steel products. With our state-ofthe- art production facilities we are at the cutting edge of modern steel production. Our business is highly diversified across a range of sales markets with product deliveries to more than 70 countries worldwide.

From our facilities in India, we offer a complete range of Grain Oriented Steel (brands: NLMK and VIZ STAL) in mother coils, slit coils, laminations and packaged cores as per customers’ requirement.

When did NLMK enter India and what are the main products/services offered in the subcontinent?
NLMK has been one of the most significant players in India’s CRGO market for a long time. In line with our global ambitions we opened a representative office in India focused on acquisitions in 2010. Since then we have completed acquisition of a CRGO service centre that is fully operational now. We continue to selectively look at other acquisitions in the subcontinent. In addition NLMK has also started stocking and distribution business of other niche steel products.

Tell us about the acquisition of National Lamination Industries last year. How do you see this shaping up your business objectives in India?
As a philosophy we believe to collaborate with our end customers and directly offer products and services wherever possible. In line with that philosophy and maturing CRGO (transformer steel) landscape in India we decided to start the service center operations. Since acquisitions are part of the NLMK DNA, we acquired one of the most prestigious brand names in laminations and continue to take the legacy forward.

With this acquisition we now have both distribution and direct sales options that we can offer to our customers. Also, we intend to use these operations to introduce newer grades and technology in which NLMK has invested heavily in the last five years.

Apart from transformers, which other segments does NLMK cater to in India?
NLMK caters various niche industries in India. Apart from transformers, we cater to special application plates that are used in various heavy applications, slabs and dynamo steel.

We understand that cold-rolled grain oriented (CRGO) steel is produced by only a handful of manufacturers worldwide. Why has technology generally not spread around the world?
CRGO is not only a complex technology but also highly capital intensive, thus keeping the barriers to entry high. NLMK has invested over a $1 billion in the last few years as a part of the upgradation programme for its CRGO portfolio.

Tell us in general terms the role played by a good lamination in the working of a transformer. Can efficiency of the transformer be improved directly through better laminations?
Lamination is the core to the functionality of any transformer. A well-processed lamination can make significant difference in the transformer efficiency. That is the main reason why NLMK uses only fully automated computerized machines to process the laminations.

Referring to the perception that the failure rate of Indian distribution transformers is amongst the highest in the world, do you feel that better laminations can improve the quality?
India is a huge country and there are a lot of areas for improvement in the distribution infrastructure. The same is being heeded to and we think that the market is moving in the right direction. Good quality laminations are going to form the backbone of this improvement.

India has had a very difficult time with good quality CRGO steel. It is alleged that a large quantum of substandard or scrap CRGO steel is dumped into the country and this finds its way in distribution transformers. What is your view?
Indian market is continually graduating from a substandard user to that of being a very quality-conscious one. Government is also working with the same agenda and initiatives like BIS certification, higher import duties on sub-standard material etc are going to supplement the efforts. Direct presence of CRGO itself as part of the distribution infrastructure is also going to help the customers and the market.

India is in the process of allowing the use of only BIS-certified electrical steel (including CRGO steel). What is your reaction?
We welcome this move by the government. In the short term there might be some logistical difficulties but as a country India only stands to gain from such a move. An efficient energy infrastructure is going to be a huge gain for an energy-deficient country like India.

Do you see the Indian distribution transformer market and how is it distinct from those in other emerging economies?
India is one of the most competitive distribution markets in the world and majority of the distribution infrastructure is owned and run by the state. It is also highly fragmented both in terms of supply and demand pockets. Another differentiating parameter is that procurement of most distribution transformers is done directly by government distribution companies (or discoms).

India has planned to add significant power transformation capacity in the coming years. In light of this, how do you rate the demand for electrical steel/laminates from the power sector?
We are excited about the prospects of new capacity that is going to come online in the coming years. India is one of the largest markets of CRGO already and would continue to grow for another decade.

In the coming years, do you think India has the potential to make a significant contribution to NLMK’s business worldwide?
India is a focus market for NLMK. We continue to explore exciting opportunities in India and are willing to deploy resources as and when suitable.
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