Role of SME’s in Steel Sectors Development in India

1. Role of SME’s in Steel Sectors Development in India Presented by: Kamdhenu Ispat Limited

2. Introduction- Kamdhenu Ispat Limited • Incepted in the year 1995 • Listed with NSE and BSE having more than 15,000 shareholders • It is only of its kind of company to introduce and successfully sustain ‘Franchisee Association Business Model’ in India in Steel Sector. • Emerging as one-stop-destination for all construction related requirements • Employs a huge workforce of 600 Members directly and 4000 Members indirectly • A large family of over 50 Franchise Units and 3,500 channel partners in Steel and more than 5000 channel partners in paints and other verticals • From a humble beginning with a Brand Turnover of Rs. 20 crore, today it has reached to more than Rs. 3,500 crore benchmark

3. Products • Reinforcement Steel Bars (TMT/HSD) • Structural Steel (Angles, Channels, Flats and Beams) • Wirebond • Plywood • PVC Pipes • Paints- “ColourDreamz” • Recently Launched “ Kamdhenu Fresh” Packaged Drinking Water (FMCG Products)

4. Achievements • Always been focused towards applying the best technology available for production of reinforcement steel • Developed a strong system for quality assurance and serving the customers better • One of the foremost companies to educate the customers at the grass root level to increase their awareness about the need of quality products in construction sector • One of the pioneers in the Indian reinforcement Steel segment to introduce ‘Brand’ concept • Set an example of emergence of a national brand by organizing network partners at national level

5. Cont… • One of the pioneers in Indian steel industry to develop ‘Franchise Association Business Model’ • Sustaining successful application of this model in other businesses also except paint business • Provided efficient marketing assistance to its network partners and thus ensured collective growth for all • Created enormous employment opportunities at various levels • Putting efforts towards social welfare through its social wing ‘KamdhenuJeevandhara’

6. Small Scale Measuring Paramount Heights

7. Contribution of SMEs in World’s Economy • Employ more labor-intensive production process, so generate more employment opportunities • In industrialized countries SMEs are major contributors to private sector employment • SMEs contribute to over 55% of GDP and over 65% of total employment in high income countries, account for over 60% of GDP and over 70% of total employment in low income countries, contribute about 70% of GDP and 95% of total employment in middle income countries

8. Indian Overview

9. Contribution of SMEs in Indian Economy • Play a significant role in the Indian Economy • Represent over 60% of overall active industrial enterprises • Contribute 45% of the Industrial output • Contribute 40% of the exports • Second largest employer; Provide employment to 42 Million • Create One Million jobs every year • Produce more than 8,000 products for Indian and International markets

10. Challenges • Arranging funds for working capital and investment requirements • Technology upgradation and modernization • Quality improvement of the output • Establishment of Research & Development facilities • Impact of environmental policies of the Government and international agencies • Procuring raw materials

11. Cont… • Marketing of finish Products in the era of competition • Acceptance of steel products without any brand strength by consumers

12. Opportunities • Higher growth rate of Indian Economy (approx. 8%) • Favorable policies of the Government are supporting SMEs • Higher investment by the Government in infrastructure development • Increasing purchasing power of middle income group • Plenty of economic & efficient labor and well trained managers

13. Steel Industry

14. Steel Sector in India • Economic development of the country is measured by its steel consumption • Crucial sectors such as construction, housing, ground transportation and specialized engineering industries get impacted by steel sector • Broadly there are two types of producers in India viz. integrated producers and secondary producers • There are only a very few integrated steel producers in the country • Rest of them fall in the category of secondary producers, comprising of about 2000 working mills countrywide spread in clusters namely MandiGobindgarh / HP, Raipur, Orissa, Kolkata / Durgapur, Chennai, Ghaziabad /Bhiwadi /Jaipur

15. Cont… • India is world’s fifth largest producer of crude steel and is likely to become second largest producer of crude steel by 2015-16 (Annual Report Ministry of Steel, India) • Production in the fiscal 2009-10 has been 60 Million Tonnes (Ministry of Steel) • Overall consumption in the year ended March, 2010 has been 56.3 Million Tonnes • The domestic steel sector has attracted a staggering investment of about US $ 238 billion during last financial year (Ministry of Steel)

16. Role of SMEs in Steel Industry • 75% of the steel sector units in India fall under medium and small scale enterprises’ category • Contributes significantly towards the growth of steel sector and hence the overall economy • Although, the Ministry of Steel has been very helpful, yet more assistance is required for uplifting the industry • Providing employment to a large workforce • Contributing highly towards meeting the domestic steel demand • Reach up to Village/District level for marketing of finished steel products

17. Challenges • Acquiring knowledge of advanced production technology • Ensuring better quality in the finished products • Getting hold of energy efficient production system • Procuring the raw material • Executing the Greenfield projects in the predetermined timeframe • Arranging financial backing for taking up new projects

18. Cont… • Complex labor laws of the country • Higher duties, taxes and complications for stock transfer and branches, due to lack of infrastructure for marketing

19. Opportunities • Higher growth rate of Indian Economy (approx. 8%) • High consumption potential in the domestic market (Average per capita steel consumption in India is 46 kg much against average per capita steel consumption of 150 kg in other developing countries and 400 kg in developed countries) • Huge Iron ore reserves • Low cost and efficient labor force

20. Cont… • Increasing consumerism (rise in the middle class income) • Rapid Urbanization • Increased investment in Infrastructure development sector by the Government • Lower cost of production and overhead fixed expenses due to much lower investment in land, Building , Machinery and Marketing cost

21. Problem Faced • Lack of technical know how • Lack of energy efficient production system • Lack of support of the financial institutions • Lack of market information system • Lack of efficient debt recovery system

22. Cont… • Delay in execution of Greenfield Projects • Difficulty in the procurement of raw material • Lack of support for export of products • High prices of raw materials • Reach in very limited area due to limited resources.

23. “A problem is a chance for you to do your best.”

24. Analysis & Recommendations • SMEs have a great role to play in the development of overall steel sector of the country • There is huge demand potential in Indian Market, so the role of SMEs will be crucial in order to ensure flawless supply • Although, the Government is providing assistance to SMEs to a certain extent, however, further assistance is required specially for steel sector units • Increased availability of institutional credit would further brighten the growth prospective of not only the individual unit but also the entire industry • The Government should set up a market information bureau to which SME units have easy access • Relaxation in Labor Laws, Tax Policies, Environment Clearance Policies would decrease the time consumption and would result in better productivity

25. Analysis & Recommendations • Business management guidance would help them increasing the productivity of their business • Better assistance would contribute towards increased exports by SMEs • Legal and Regulatory guidance would enable them to follow the legal regimes better and would reduce the complexities in the business • SMEs can play an important role in marketing of products manufactured by SMEs and integrated steel plants as they are having direct approach to consumers through retail network • SMEs can be utilized as carrier to storage and supply chain management, by the bigger producers of steel products, due to low cost of marketing at the lowest and last level of consumption • SMEs can opt branded finished steel products for consumers which normally bigger steel projects do not manufacture

26. Thank You