We were some weeks ahead in tackling Covid in India: Tata Steel's Narendran

In telephonic Q&A, the MD & CEO of India's oldest steel producer, dwells on how his firm kept domestic operations ready for the pandemic, taking cues from Europe much before lockdown got announced

With companies looking to conserve cash amid uncertain times, Tata Steel — the country’s oldest steel producer — has chalked out a plan to have its working capital segment release Rs 1,000 crore cash this financial year. In a telephonic interview with Aditi Divekar, T V NARENDRAN, chief executive officer and managing director, talks about how domestic operations readied for the pandemic, taking cues from Europe, even before the lockdown in India. Edited excerpts:

Tata Steel has mentioned keeping sharp focus on cash conservation. How are you implementing it for the working capital segment, where the company has sizeable requirement?

In 2019-20 (FY20), we had a very good cash release of Rs 1,500 crore in the working capital segment, apart from what happened in the last 10 days of March, which disturbed the final number. While managing inventory, keeping a tight supply chain are some of the measures taken in 2020-21 (FY21). 

Payment flexibility with larger suppliers to manage cash and deferring buffer expenditure are some steps taken this financial year. For FY21, too, we would like a cash release close to FY20’s, but the stock levels in the beginning of the financial year were not something we would have liked to have. We aim for a release of at least Rs 1,000 crore cash this financial year.

What are your plans on fundraising and debt refinancing for FY21?

Currently, we are in a comfortable position, with a lot of our debt refinanced. Hence, have no major repayments this financial year. Around $300-350 million could be repaid in FY21. From the portfolio call, we are looking to complete and close the Southeast Asia transaction, which will give us some cash. Optimising capital expenditure, following cost efficiencies, to generate more cash from the operating part of the business, is also part of the plan to manage debt.

What are the lessons learnt from the pandemic? How would you compare the impact on India operations with your overseas business? 

Business has to be resilient. Since the past few years, we have been investing in technology in India and I think it has been a timely investment. It has made the India business resilient and agile, mainly because of the technological infrastructure. Moreover, because we knew what Europe was going through in February, we had started preparing the India operations for something similar. When the lockdown hit us in the third week of March, we had already taken action on health care. I am not saying our preparation was perfect. Maybe we were a couple of weeks ahead of others and that is why we did not have to bring down production levels below 50 per cent. Our technological advancement in India helped us.

Did you witness any weak points in your logistics segment during the lockdown?

We have a fairly long and complex supply chain. The challenge was in inbound supply chain, as many of our vendors could not operate. The plant had the permission to operate, but for vendors to get permissions from local authorities, there were issues at the district level.

Did you face a shortage of migrant workers at your facilities in the early part of the lockdown?

The migrant worker issue did not directly impact us, but we were indirectly impacted because many of our customers employ migrant labourers. Therefore, the impact was more indirect than direct. As far as the hiring strategy is concerned, we had made some recruitment before Covid-19. In the current scenario, there is no fresh hiring.

Are you going to consciously hire locals? 

We are comfortably placed when it comes to hiring locals. At most of our sites, blue-collar workers are from the local community and a lot of contract workers are also from the local community. I do not see it as a big problem.

Have there been paycuts or changes in the salary structure amid weak revenue visibility? 

In Europe, we have had pay deferrals, which the local management has discussed. But in India, a part of the employee salary is linked to the earnings before interest, taxes, depreciation, and amortisation, as a variable pay component and so it will vary depending on company performance. This, however, has been the salary structure for the past four years and, therefore, not a new change.