Mr SK Tripathi CDM of MSTC spoke to Excerpts of Business Line about how the high dividend paying company is reengineering its strategies to adapt to changing economic realities and improve profitability.
Q-How has the economic slowdown affected MSTC this financial year?
A-The margin is definitely under pressure from an average of 1.75%in 2011-12 it has tended towards 1.5%.But we are set to clock higher volumes.We hope to achieve a total volume of business worth around INR 30,000 crore this fiscal against INR 21,751 crore in the previous year.In terms of business strategies,we have become discreet in certain segments on increased risk element,but we have also expanded activity in some areas of our activity.
MSTC has also planned its first diversification away from trading into shredding of auto grade steel scrap to add a new revenue stream and improve profitability in the near future.Customers in the trading segment are feeling the heat of general slowdown in the economy and a virtual drying up of investments in infrastructure sector.
Q-Which segments are set to bring in more revenue?
A-E-commerce division,already the biggest revenue churner for the company,is expected to generate increase in revenue through expansion of its product basket.Revenues from e-auction of minerals,such as coal and chrome ore,are also set to go up.
You seem to be more discreet in the trading business this year.
Slowdown has increased export-import trading risk perception.We are a little more cautious,as it also involves trade financing.For example,the segment engages in imports of raw materials on behalf of domestic buyers on LCs,warehouses and makes deliveries on installments payments.Though the business is secure as the product that we finance remains pledged to MSTC under its custody,the slowdown especially in the steel sector,where we primarily finance,has resulted in the delays in payments and slow movement of processed materials.This year,we have undertaken such import assignments for some local importers such as Haldia Petrochemicals(naphtha),Essar Oil(crude)and Essar Steel(iron ore and coke).
Q-Why is MSTC venturing into auto-grade steel-scrap shredding?
A-It's a pilot project.We hope it contributes to our future profitability as around 9 million tones of shredded steel scrap is imported per year from advanced countries at a high price.The success of this new venture will however depend on local sourcing of shreddable cars and other white goods at reasonable prices.This would require support from all the ministries and departments to give their replaced vehicles to MSTC for shredding.MSTC in any case is auctioning these condemned vehicles through e-auction.
