Steel_Industry

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STEEL INDUSTRY:

STEEL INDUSTRY

OVERVIEW OF INDIAN ECONOMY:

OVERVIEW OF INDIAN ECONOMY The Indian economy has continuously recorded high growth rates and has become an attractive destination for investments India's economic growth is expected to remain robust in 2012 and 2013, despite likely headwind of double-dip recessions in Europe and the US. The Indian economy is expected to grow between 7.7 per cent and 7.9 per cent this year. India is the second most preferred destination for foreign investors, according to the report 'Doing Business in India' by Ernst & Young. The report explores India's key sectors, investment climate, funding scenario, laws and regulations, to aid companies that are doing, or plan to do business in India.

CONT’D:

CONT’D The wealth of high net worth individuals (HNIs) in India, is set to grow by a compounded annual growth rate (CAGR) of 23 per cent over the next four years and will touch a staggering Rs 249 trillion (US$ 5.05 trillion), highlighted a report by Karvy Private Wealth - the wealth management arm of the financial services firm Karvy Group. India has emerged as the world's top recipient of officially recorded remittances for the fourth straight year. India is expected to receive US$ 58 billion this year, followed by China, and Mexico, as per the latest issue of the World Bank's Migration and Development Brief

THE ECONOMIC SCENARIO :

THE ECONOMIC SCENARIO Innovation and efficiency are the keys to boost the growth of exports from the country, according to Mr M Veerappa Moily , Union Minister for Corporate Affairs. He also suggested that there is a need to develop innovation centers at the district levels to boost exports Exports from special economic zones (SEZ) grew by 17 per cent to Rs 260,973 crore (US$ 52.99 billion) during April-December 2011 from Rs 223,132 crore (US$ 45.31 billion) during the corresponding period in the previous year, according to a statement by the Export Promotion Council for Export-oriented Units and SEZs (EPCES) The total amount of foreign direct investment (FDI) equity inflows during April 2011- November 2011 stood at US$ 22,835 million, according to the latest data published by Department of Industrial Policy and Promotion (DIPP)

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The Government of India has approved 20 proposals of FDI worth Rs 1,935.24 crore (US$ 392.94 million), according to an official statement. The approvals were given, based on the recommendations of the Foreign Investment Promotion Board (FIPB) "India's GDP is expected to grow at 7.7 per cent, which clearly underlines India's potential as an investment destination. The fact that FDI has increased by 31.5 per cent across major sectors further evidences the attractiveness of the Indian economy,” as per Gaurav Karnik , Tax Partner, Ernst & Young Foreign exchange reserves stood at US$ 293.383 billion for the week ended February 10, 2012, according to the Reserve Bank of India's (RBI) weekly Statistical Supplement

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With 56 deals, November 2011 has recorded the maximum number of private equity (PE) investment deals in a month. Real estate, hospitality and construction (RHC) sectors received the highest amount of investments. The investment activity during November 2011 was also significantly higher compared with the corresponding period last year, which was US$ 402 million across 18 deals in November 2010 India Inc raised US$ 1.6 billion through external commercial borrowings (ECBs) in November 2011. Under the automatic route, 78 companies raised US$ 1.3 billion. At present, the Government allows the companies to raise up to US$ 750 million under the automatic route in a year Overseas direct investment by Indian companies has increased at a steady pace in 2011-12, with cumulative investments amounting to US$ 23.81 billion, according to the Reserve Bank of India (RBI) data. Investments by Indian companies in overseas joint ventures (JV)/ wholly-owned subsidiaries (WOS) aggregated US$ 2.74 billion in November 2011

CURRENT  MACROECONOMIC  ENVIRONMENT:

CURRENT  MACROECONOMIC  ENVIRONMENT

BUSINESS CYCLE:

BUSINESS CYCLE A business cycle refers to periods of expansion and contraction. A peak is the high point following a period of economic expansion. A trough is the low point following a period of economic decline.

4 STEPS OF BUSINESS CYCLE:

4 STEPS OF BUSINESS CYCLE Expansion: Increase in production and prices, low interests rates. Crisis : Stock exchanges crash and multiple bankruptcies of firms occur. Recession : Drops in prices and in output high interests rates. Recovery: Stocks recover because of the fall in prices and incomes.

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..\Downloads\ind-eco.pdf INDICATORS

INDUSTRIES IN INDIA:

INDUSTRIES IN INDIA Textile Food Processing Chemical Cement Steel Software Mining Petroleum

SECTORIAL SHARE IN GDP (%):

SECTORIAL SHARE IN GDP (%) 2010-11

INDUSTRY LINKAGES WITH GLOBAL AND NATIONAL ECONOMY:

INDUSTRY LINKAGES WITH GLOBAL AND NATIONAL ECONOMY

STEEL INDUSTRY OVERVIEW:

STEEL INDUSTRY OVERVIEW Steel industry was delicensed and decontrolled in 1991 & 1992 respectively. Today, India is the 4th largest crude steel producer of steel in the world. In 2010-11 ( prov ), production for sale of total finished steel (alloy + non alloy) was 66.01 mt . Production of Pig Iron in 2010-11 ( prov ), was 5.54 mt . India is the largest producer of sponge iron in the world with the coal based route accounting for 78% of total sponge iron production in the country (27 mt in 2010-11; prov.):

CONT’D:

CONT’D Indian steel industry : Production for Sale (in million tonnes) Category 2006-07 2007-08 2008-09 2009-10 2010-11* Pig Iron 4.93 5.284 6.21 5.88 5.54 Sponge Iron 18.34 20.37 21.09 24.33 26.71 Total Finished Steel (alloy + non alloy) 52.53 56.07 57.16 60.62 66.01 Source: Joint Plant Committee; *provisional

CURRENT INDUSTRY SCENARIO:

CURRENT INDUSTRY SCENARIO

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Top 5 Steel Authority Of India Limited Tata Iron And Steel Company Limited Jindal Iron And Steel Company Limited Essar steel Isphal Steel MAJOR PLAYERS & COMPITITION

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National Steel Policy, 2005 Institutional and Policy Settings Allowing Private Ownership & Foreign Investment Deregulation Of Pricing And Distribution Of Iron & Steel.. Custom Policy Special Economic Zones Special Investments Regions REGULATORY ENVIRONMENT

 TECHNOLOGICAL ENVIRONMENT:

TECHNOLOGICAL ENVIRONMENT

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CRITICAL FACTORS FOR SUCCESS OR FAILURE

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GROWTH DRIVERS OF INDUSTRY

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All fig in million tones; Tata Steel Estimates FY06: 34.1 million tones Construction : 21 Cap Goods : 3.7 Auto : 2.7 Others : 4.0 Packaging : 1.7 Cons Dur : 1.0 CONSTRUCTION & AUTOMOTIVE ARE THE KEY SEGMENTS

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A growth of 24% expected till FY 07, with an expenditure of Rs 1,400 bn Housing shortage of 41 million units estimated as per 10 th five year (02-07) There is a need to invest over Rs.4,000 bn over 10 years Estimated that every INR 1 invested in housing / construction adds 78 paise to the GDP Home Loan Disbursement (Rs bn ) Source: National Housing Bank, HDFC, Cris-Infac, www.dwge.com 38 % 24 15 CAGR in % RAPID GROWTH IN HOUSING SECTOR

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RS Billion FY 03 FY 04 FY 05 FY 06 FY 07 F Planned Exp in next 5 years Airports 20 15 15 24 25 400 Irrigation 151 139 208 222 252 1300 Ports 7 5 5 10 20 500 Power 232 312 340 350 346 2000 Railways 121 135 153 146 140 750 Roads 206 190 199 212 213 1700 Telecom 133 126 89 116 116 800 Urban Infra. 162 174 184 220 250 1400 India has potential to absorb US $ 150 billion in next five years in the infrastructure sector alone. The tenth plan investment in infrastructure has been revised to Rs. 11,088 Billion from earlier 10,894 Billion during mid term appraisal . PROJECTED INVESTMENT Till 2012 by Committee on Infrastructure INVESTMENT IN INFRASTRUCTURE SEGMENT

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25 Government focus on infrastructure & Roads Availability of consumer finance at low interest rates Excise Duty reduction & Tax SOP’s by government to boost demand Higher disposable income – Double working households on the rise CAGR 7 % CAGR 15 % PV – Passenger Vehicle CV – Commercial Vehicle WHILE AUTOMOTIVE WOULD REGISTER THE HIGHEST GROWTH

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Source : Tata Steel Estimates FY-12 CAGR in % 6.7 9 12 All fig in million tonnes THE OVERALL GROWTH IN DEMAND OF STEEL IS THEREFORE HEALTHY

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Environmental Priority to Indian Companies Heavy tax & tariffs on Imports ISSUES

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Unremunerative Prices Endemic Deficiencies Systemic Deficiencies High Cost of Capital Low Labor Productivity High Cost of Basic Inputs and Services CHALLENGES

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Other systemic deficiencies include: Poor quality of basic infrastructure like road, port etc Lack of expenditure in research and development. Delay in absorption in technology by existing units. Low quality of steel and steel products. Lack of facilities to produce various shapes and qualities of finished steel on-demand such as steel for automobile sector, parallel flange light weight beams, coated sheets etc. Limited access of domestic producers to good quality iron ores which are normally earmarked for exports and High level taxation.

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The biggest opportunity before Indian steel sector is that there is enormous scope for increasing consumption of steel in almost all sectors in India. Unexplored Rural Market Other Sectors Export Market Penetration OPPORTUNITIES

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Point of Inflection Point of Saturation India China Trigger Point Singapore Japan EU USA Peak Point India will be a part of The new Steel world … 2010-11 Per capita in KG INDIA HAS A POTENTIAL FOR EXPONENTIAL GROWTH IN STEEL CONSUMPTION

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Strengths Increase Demand Availability of labour at low wage rates Huge Resources Of Raw material Environment laws Weaknesses High cost of capital Lack of infrastructure Slow decision making Low labor productivity Insufficient transport system Opportunities High potential to be tapped Unexplored rural market Export market penetration Consolidation Threats Cheap Imports Slow Industry Growth Technological change Price sensitivity and demand volatility Threat from substitutes Huge bottlenecks in foreign invested projects S.W.O.T ANALYSIS

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