India's oldest steelmaker Tata Steel is looking to restructure its domestic business to reduce costs and increase productivity as poor demand and heightened competition from imports have shrunk profits, according to several people familiar with the matter.
Restructuring at Tata Steel will take place across all business functions such as human resources, production, transportation, marketing and so on. The company is in touch with all big consultants in India to roll out several costcutting and revenue enhancement projects. "There's definite restructuring about to take place in the company, and in the white collar segment. The 'Big Four' have been asked to bid for multiple projects where each one will have a hand in driving the cost cutting initiative," said aperson on the condition of anonymity. The 'Big Four' firms are EY, KPMG, PwC and Deloitte.
However, global consultancies such as BCG and McKinsey are also likely to be part of this exercise. A detailed questionnaire sent to Tata Steel spokesperson did not elicit a response till the time of going to press. Rival JSW Steel has a lower cost of production than Tata Steel if the latter's captive iron ore mine advantage is taken away, according to analysts. This is because the centuryold Tata Steel suffers from legacy issues in production at its Jamshedpur plant and has more than required workforce on its payrolls. Tata Steel India, with a capacity to produce 10 million tonne steel annually, has a workforce of 36,957, while JSW Steel, which produces 14.3 mt steel every year, has a workforce of only 12271 employees.
"Tata Steel is exploring ways on how to meet the current challenges," said another person, who did not wish to be identified. "It has a relatively higher percentage of manpower cost because of employee philosophies. However, it does not necessarily mean job cuts. The company will look at increasing the productivity of its assets." The Indian steel industry is undergoing one of the worst phases in history. Influx of cheap steel imports from China, Japan and South Korea are hitting profitability at not only Tata Steel but also JSW Steel and governmentrun SAIL. This does not augur well for Tata Steel, whose UK business is already a lossmaking operation for about a decade despite continuous restructuring.
Source: ET