India’s TOP 500 Companies 2020

INDIA’S TOP 500 COMPANIES 2020 117 Experts’ View optimization in such conditions? Many factors contribute to making a company a ‘low cost producer’ in the commodities market: a) Minimizing logistics cost: We worked out the best possible location for setting up the manufacturing facility in a potentially large but geographically constrained market. b) Control on fixed costs: We procure only bought-out items from reliable vendors and design and construct our own furnaces. c) Keep employee cost in check: In a non-bureaucratic motivating environment, people are happy to work and costs can be kept down. d) Maximizing variable margin: We have always invested in R&D and evaluated multiple output products as well as incoming raw materials. e) Minimizing production loss: We use our knowledge pool for continuous improvement and ensure minimum bottlenecks and breakdowns in the operation equipment. Recent pandemic and subsequent lockdowns have added to the woes to the infrastructure and allied industries. How do you sustain margins during the down cycles? We have a benchmark setting low fixed cost of 5%. With rawmaterials, power and variable component of ‘other expenses’ forming 80-82% of revenues, the outcome is an average 13-15% pre-tax profit and Operating ROCE exceeding 40%. Steel and ferro alloys have a 4-5 years cycle. Fluctuations are inevitable and even with a 25% variation from the mean, a worst year operating ROCE >25% are inevitable. During down cycles, when competition is forced to reduce capacity by 20-30%, we continue operating normally. What has been your strategy of de- risking Maithan Alloys’ proposition in the long run? We conduct our commodity business in a manner that is refreshingly distinct. This differentiation is reflected in the kind of products we have selected to manufacture, the high throughput we have consistently reported, the nature of long-term customers we cater to and our keen emphasis on process excellence. We are also very conscious about a few key points: a) Visibility of revenue stream: Achieved by maintaining a 2-3 months order book b) Commodity risk: Minimized by having contracted raw materials in line with the order book c) Forex risk: Covered by having a similar value of exports and imports and hedging the balance open position. Dun & Bradstreet