Our BusinessDescription of our Manufacturing Facilities
Currently, we have two manufacturing facilities – a sponge iron manufacturing facility and a steel manufacturing facility.Our Sponge Iron Manufacturing Facility
Our sponge iron manufacturing facility is strategically located at Bileipada, near Joda, in the Keonjhar district of Odisha. At the aforesaid facility, we operate three rotary kilns, two with a capacity of 375 TPD of sponge iron each and one with a capacity of 500 TPD, to produce sponge iron using the indigenous TDR technology (with Lurgi Modification). The three rotary kilns together have an aggregate annual installed capacity of 3,90,000 TPA of sponge iron as at March 31, 2019.
Our manufacturing operations and machinery, including the kilns, coolers and electro-static precipitators (ESPs), are constantly optimized through implementation of projects with a view to maximise yield, minimise losses and optimise the number of available days. We have installed three coolers to reduce the temperature of sponge iron as well as de- dusting units at our sponge iron manufacturing facility. With the implementation of significant digitization initiatives, our production process aims to achieve greater efficiency without compromising on quality.
In consonance with our operational strategies, we had obtained environmental clearance to undertake increased production of sponge iron up to an aggregate of 4,25,000 TPA of sponge iron. Thereafter, to enable our future efforts to increase our operational efficiencies, we have obtained environmental clearance from the MoEFCC and OSPCB to undertake enhanced production of sponge iron up to an aggregate of 4,65,000 TPA of sponge iron. Accordingly, we shall be able to enhance our production in line with the revised clearance.
Our access to the continued availability of power is supported by our two captive power plants that generate power utilizing the waste heat emanating from our kilns during our manufacturing process. Our three WHRBs enable us to generate and utilize ‘green’ power in line with our commitment towards sustainable growth. Our two power plants had a combined generation capacity of 26 MW as at March 31, 2019. After meeting our captive power requirements, we sell the surplus power generated from our plants, providing us with a steady source of revenue. To facilitate the sale and transmission of power, we have erected an approximately seven kilometres long dedicated 220 KV power transmission line. Revenue from the sale of power constituted 6.79% and 5.37% of our gross revenue from operations for Fiscal 2018 and Fiscal 2019, respectively. Further, we have access to a captive railway siding adjacent to our sponge iron manufacturing facility, which helps in sourcing our raw materials as well as dispatching the finished goods.Our Steel Manufacturing Facility
Our steel manufacturing facility is strategically located at Adityapur, Jharkhand. The steel manufacturing facility comprises, inter alia, pellet plant, sinter plant, oxygen plant, lime kiln plant, coke oven, sponge iron plant consisting of five kilns, two blast furnaces and a steel melting shop. The pellet plant (using the grate kiln technology) is used to agglomerate and indurate iron ore fines into pellets, and the sinter plant is used to agglomerate iron ore fines into a coarse product, i.e. the sinter. Hard and semi-hard coking coal is heated in the coke oven facility which consists of two batteries containing 48 ovens each. While the sponge iron plant, consisting of five kilns with a capacity of 350 TPD each, is used to produce DRI (using the OSIL and Lurgi technology), the two blast furnaces, having a volume of 280 m3 and 380 m3 respectively. At our steel melting shop, we operate three electric arc furnaces, two with a capacity of 40 MT each and one with a capacity of 70 MT, to produce liquid steel. In addition to the aforesaid, the steel manufacturing facility also consists of a wire rod mill, bloom mill and a bar mill, where bars, billets, blooms, etc. are reshaped and resized into products of various dimensions. We also have access to a captive railway siding that help us bring in critical raw materials and move out finished products in an efficient and cost effective manner. Our continuous access to power at the steel manufacturing facility is supported by two coal based captive power plants (having power generation capacity of 25 MW and 30 MW, respectively), two waste heat recovery based captive power plants (having power generation capacity of 30 MW each) and a coal – gas hybrid captive power plant (having power generation capacity of 15 MW).
We have recently acquired the Steel Business Undertaking from UML. However, certain assets are pending transfer and are thus subject to hold backs of Rs. 64,000 lakhs. For further information on risks associated with the Acquisition, please refer to the section titled on “Risk Factors” beginning on page 15...Production and Power Generation Process Description of the Sponge Iron Production Process
Iron ore and non-coking coal are the prime raw materials for the production of sponge iron. These are charged into a rotary kiln in requisite proportion along with some dolomite. Coal serves as a reductant as well as fuel for providing heat to maintain the requisite temperature inside the kiln at 950-1050°C. Unlike in a blast furnace, the reduction process occurs in solid state in rotary kilns. The crucial factor in this reduction process is the controlled combustion of coal and its conversion to carbon monoxide to remove oxygen from the iron ore.
The overall process of direct reduction takes about 10 to 12 hours inside the kiln. During this time, iron ore is optimally reduced and the hot reduced sponge iron along with semi-burnt coal/char is discharged to a rotary cooler for indirect cooling to a temperature of between 100°C to 120°C. Sponge iron being magnetic in nature, the discharge from cooler consisting of sponge iron, char and other contaminations are routed through electromagnetic separators, to separate other impurities (i.e. non-magnetics) from sponge iron.
The product is then screened in size fractions of lump (greater than 3 mm) and fines (lesser than 3 mm). Separate bins are installed to preserve its quality, reduce re-oxidation and facilitate faster loading on to the trucks. Automatic bagging machines have been installed just below the bunkers for bagging sponge iron, which are then sent to customers through rakes from our captive railway siding or through trucks, as per customers’ preference.Description of the Steel Production Process
Iron ore fines and lumps and coking coal are the prime raw materials for the production of steel. Firstly, hard and semi-hard coking coal are heated in the coke oven in the absence of air to produce metallurgical coke. Simultaneously, iron ore fines are agglomerated into sinter and pellets through the sinter and pellet plants, respectively, and iron ore lumps are reduced to DRI in the sponge iron plant. The sinter, pellets, metallurgical coal and quartzite are fed into the blast furnace where the mixture, through a reaction with preheated air, is reduced into liquid hot metal and pig iron. Thereafter, the hot metal, DRI, scrap and lime are charged into the electric arc furnace, and an electric current is passed through the electrodes to form an arc. The heat produced by the arc melts the mixture into liquid steel.
The liquid steel is then reheated in the ladle refining furnace, and alloying metals such as manganese, nickel, chromium, ferro manganese, ferro silicon, ferro chrome and vanadium are added to the same to produce different grades of steel. The filled ladle is taken to the vacuum degassing facility, where gases such as nitrogen, oxygen and hydrogen are extracted from the liquid steel. Later, the liquid steel, through the process of continuous casting, is solidified into semi-finished billets or blooms for subsequent rolling in the finishing mills. The billets or blooms are then passed through the wire rod mill, bloom mill and bar mill, as the case may be, where their size is reduced depending upon the desired end product. The finished materials are then shifted to the conditioning and finishing department for final inspection and allied activities.Power Generation at our Manufacturing Facilities
At our sponge iron manufacturing facility, waste hot gasses at a temperature of about 800 to 1000°C emanate from the sponge iron kilns. Our three WHRBs, together with the electrostatic precipitators and turbines, enable us to utilize the aforesaid waste heat and convert it into ‘green’ power. The power requirement at our steel manufacturing facility is met through two coal based captive power plants, two waste heat recovery based captive power plants and a coal – gas hybrid captive power plant.Production Process
The TDR process that we employ for manufacturing sponge iron is set out in the chart below:Legend:
- E.S.P. = Electrostatic Precipitator
- MS = Magnetic Separator
- W.H.R.B. = Waste Heat Recovery Boiler
- PB = Product Bin
The process that we employ for manufacturing steel is set out in the chart below:Production Optimization Initiatives
We endeavour to constantly optimise our manufacturing operations and equipment with improvement projects with a view to maximise yield, minimise losses and optimise the number of available days. Some of the recent improvement initiativesthat we have undertaken at our sponge iron manufacturing facility in this regard are described herein below:
- Kiln Pressure Control: We have introduced a kiln pressure control system that maintains pressure within a desirable band for controlling accretion formation inside the kiln.
- Char Feeding with Injection Coal: This initiative helps us in reducing moisture content in coal during the monsoon, which results in the reduction of interruption in coal injection. This leads to improvement of product quality and production rate.
- Modification of Injection Coal Throw System: We have undertaken a modification in the injection coal throw system with an individual line to the rotary feeder from the roots blower for uninterrupted operations.
- Container Loading System: We have installed a container loading system in one of our kilns to improve product handling to reduce packaging costs.
- Installation of Magnet Pulley: We have installed a magnet pulley fixing at the injection coal weigh feeder so as to trap foreign magnetic materials and reduce interruption in coal injection.
Raw MaterialsSponge Iron Business
The key raw materials to produce sponge iron are iron ore, non-coking coal and dolomite. Sponge iron manufacturing is highly sensitive to raw material characteristics that would help obtain the rated capacity and the desired product quality. To ascertain the suitability of our raw materials in a rotary kiln, we have established a modern quality assurance facility that is responsible for conducting various tests in respect of the chemical and physical properties of our raw materials.
- Iron Ore: During sponge iron manufacturing, iron ore is reduced in solid state. To optimise yield during sponge iron making, it is essential for us to select an ore with high iron content and a low gangue content. By virtue of our strategic location in northern Odisha, we enjoy proximity to large iron ores reserves. We primarily source our iron ore from the mines of Tata Steel in Joda, Odisha, as well as from other nearby mines, as and when required.
- Coal: To enhance productivity at an optimal cost, improve our product quality and kiln campaign life, we use coal sourced from South Africa. We also procure coal of specified quality from India.
- Dolomite: Dolomite is an important ingredient and acts as a de-sulphuriser removing sulphur from the feed mix during the reduction process. Control of sulphur content is an essential pre-requisite for the manufacture of good quality steel. We procure dolomite from Tata Steel’s Gomardih dolomite quarry.
The key raw material that are required to produce steel include, inter alia, iron ore fines and lumps and coking coal. Our Company procures a major portion of the iron ore fines and lumps from localized mines. We procure coking coal and non-coking coal from indigenous as well as foreign sources. Certain other kinds of coal such as anthracite coal and thermal coal (for the sponge iron plant) are procured locally. Thermal coal that is required for power plants is purchased either through e-auction or from coal traders, domestically. The essential materials which are used in the steel manufacturing process like dolomite, pyroxenite, anthracite coal, burnt lime, calcined lime fines, etc. are purchased from various domestic suppliers.Capacity Utilization
The details of the aggregate sponge iron capacity utilization at our sponge iron manufacturing facility for Fiscals 2018 and Fiscal 2019, are set out below:
The aggregate average PLF of our power plants for Fiscal 2018 and Fiscal 2019, was 87.48% and 88.00%, respectively.Quality Control
We are committed to consistently delivering high-quality products to our customers. The quality of raw materials and their relative proportions determine the quality of the final product and the efficiency of our rotary kilns and blast furnaces. Thus, the quality of raw materials is of paramount importance to us in our sponge iron production process. To verify the same, we have established a modern quality assurance facility at our sponge iron manufacturing facility, which is equipped with precision equipment, that is responsible for conducting tests and checks in respect of the quality of our key raw materials.
We strive to produce sponge iron that would constitute high metallic iron content along with consistent chemical and physical characteristics, as per the requirements of our customers. During the production process, we particularly focus on ensuring lower sulphur and phosphorus content as well as negligible tramp element. The end product is screened in size fractions of lump and fines. Additionally, we undertake bagging in quality bags so as to standardize the quantity in each bag as well as avoid to spillage or tearing during handling and transit. We move our final products through trucks and railway wagons so as to preserve quality and reduce and/or prevent re-oxidation.
We have adopted modern management tools, techniques and standards to help us manufacture steel products of the highest grade. At the steel manufacturing facility, we have several modern equipment and facilities for aiding our upstream and downstream quality assurance processes, including, inter alia, optical emission spectrometer, optical microscopes, Jominy hardenability set up, flame photometer, saturated magnetic analyser, wet chemical laboratory muffle furnace and blue fracture testing machine.Distribution and Marketing
We cater to the metallic requirements of steel producers in select geographies and have successfully established our presence in the sponge iron market. Customarily, we process orders from our customers through advance payments, letters of credit or on ex-works basis. While we have not entered into long-term contracts with our customers, we believe that the quality of the manufactured sponge iron has enabled us to continue to secure repeat orders from our customers. The dispatch of products is organized by either the road and railway networks based on the customer’s requirements. We believe that our captive railway sidings provide us with a logistical advantage that enables us to deliver our products in a timely manner.
Our steel business caters to the needs of the automobile and engineering sectors, amongst others. A significant percentage of our alloyed steel products are sold to manufacturers of parts and componentsin the conventional vehicles and farming industries. Additionally, we also supply alloyed steel to various players in the bearings, earth-moving, mining and oil and gas sectors, amongst others.Key Customers
The list of 5 of the key customers for DRI is furnished in below. As is evident from the list, these 5 customers purchased >54% of the entire product during 2017-18, from the total lot of ~39 customers. As regards sale of power, the entire surplus generation is exported to Tata Steel’s units in Odisha – Ferro Alloys Division, Joda and Bamnipal, Keonjhar Dist. under the Open Access Route.
|Sr.No.||Name of the Customer||% Share|
Sponge iron is sold mostly against advance payment with a few key customers have been provided the privilege of using LC facility. In case of LC facility, the company charges interest for the period until its maturity. For some of the DRI companies, the source of revenue is also through sale of steel and iron ore.Safety, Health and Environment
Our operations are subject to various central and state laws and regulations, including in respect of technical safety and environmental protection, pertaining to aspects such as, inter alia, restriction of air pollution and noise, discharge of waste products into soil or water above and below the ground and other occupational health and safety regulations.
We believe that sustainable production is the cornerstone of our development and acts as a key driver for our future growth and prospects. We aim to comply with applicable health and safety regulations and other requirements in our operations and have adopted safety, health and environment policies and procedures that are aimed at complying with legislative requirements, requirements of our licenses, approvals, various certifications and ensuring the safety of our employees and the persons working at our facilities or under our management. We believe that accidents and occupational health hazards can be significantly reduced through a systematic analysis and control of risks and by providing appropriate training to our management and employees. Thus, we strive towards integrating safety, health and environmental requirements within our business-planning and decision-making processes.
We have invested in various pollution control devices and implemented various practices as part of our approach towards the preservation of our ecosystem. Further, we have set up a dedicated pollution control department at the sponge iron manufacturing facility to monitor and ensure compliance with pollution control norms. This department is equipped with advanced pollution monitoring equipment such as high-volume samplers, stack monitoring kit and sound level meters, and is responsible for taking periodic readings at different locations in the plant, ensuring continuous and efficient operation of the pollution control equipment and liaising with government authorities on various environmental issues.
We believe that our sponge iron manufacturing facility is one of the cleanest coal-based sponge iron plants in India, since our facility was proposed as a benchmark plant in relation to an initiative undertaken by the West Bengal Pollution Control Board in collaboration with independent industry bodies for the purpose of identifying good manufacturing practices and clean technology options in the sponge iron industry. For instance, the Central Pollution Control Board (“CPCB”) together with Odisha SPCB conducted a trial run in relation to our practice of using spent ion exchange resin for energy recovery in our DRI kilns which was thereafter added to the standard-operating- procedure prescribed by the CPCB. Further, we have received several awards in respect of our safety, environment and health practices. For additional details, please refer to “- Awards and Accreditations” beginning on page 91.
We believe that the health and safety of our people, including our contract workers is essential. At the sponge iron manufacturing facility, we have implemented integrated safety programmes, such as the DuPont safety requirements, positive isolation & tool box meetings, road safety training, firefighting training, reporting of near-miss cases and identification of unsafe acts and conditions, introduction of IT based safety management systems, pro-active identification of unsafe conditions and practices, among others. We have invested in setting up a laboratory and ambient air quality monitor systems (AAQMS) for monitoring dust and noise levels. Further, annual and periodical health check-ups of our employees and contract workforce are undertaken as a preventive measure to diagnose occupational illnesses. Health awareness workshops and knowledge sharing sessions are conducted for raising general awareness among employees on health-related issues.Waste Handling
As the sponge iron manufacturing process consumes and generates considerable amount of fine sized inputs and outputs, we believe it to be a necessity for us to adopt proficient waste management practices. In furtherance thereof, we have undertaken various initiatives such as the installation of an intake pump, development of a waste-dumping yard to dispose of waste materials and setting up of processes for segregation of biodegradable and non-biodegradable waste. In addition, we have also undertaken mass afforestation programmes. Further, we supply fly ash for the utilization of the waste fly ash generated in the power plant for purposes such as brick manufacture or road construction. The solid waste material generated from our steel manufacturing processes are either consumed internally (during other internal manufacturing processes), sold as secondary raw materials to external manufacturers, or are disposed off for land filling purposes.Research and Development and Intellectual Property
We have implemented several innovative IT-based platforms in our daily operations and processes so to improve our functional efficiencies and create headroom for our management to focus on our strategic initiatives. Additionally, we engage with renowned institutions, from time to time, to help us with adding specialized functionality to our manufacturing process and interlinked equipment and systems. For instance, we have entered into an agreement with IIT Bh to assist us in devising a model-based decision support and control system for accretion control inside the kilns to increase our sponge iron production through a research and development project. As a result of the foregoing engagement, we have greater control over different parameters of our production process, which has enabled higher throughput and lower accretion formation of fused material inside the kiln. We conduct our business using the “Tata” brand, and have licensed the use of the same from Tata Sons Limited under the terms of a licensing agreement.
Our Company has also applied for a patent on heat resistant paint composition based on the operational efficiency achieved by us through our research and development initiatives.Awards and Accreditations
Our corporate ethos and achievements in the areas of operational efficiencies, quality, social welfare and organizational standards are demonstrated by the various awards and certifications that we have received over the years, in relation to our sponge iron manufacturing facility. Our sponge iron manufacturing facility has received, and currently holds, the ISO 9001:2015 certification in relation to our quality management systems, ISO 14001:2015 certification in respect of our environmental management systems and OHSAS 18001:2007 certification in respect of our operational health and safety management systems.
We have also been recognised by various non-governmental institutions of repute for our dedication to quality and upholding high environment and social responsibility standards. Some of the awards that we have received recently include the following:
- CII Eastern Railway Productivity Award 2017-18 as “Champion – Significant Level”;
- CMO Asia’s 8th Best CSR Practices Award in 2018;
- CII SHE Excellence Award 2017-18 as “Winner” under the category of “Manufacturing – Large Scale”;
- CCQC 2018 Awards in 2018; and
- 1st Prize in CII Workskills Competition in 2018;
We have also received the Award for TPM Excellence, Category – A, from the Japan Institute of Plant Maintenance for 2012 and BE Star Award from CII & Institute of Quality in 2017.Human Capital
We believe that our work force is a key driver to the sustainable growth of our organization and maintaining our competitive position. Accordingly, our human resource policies focus on training and retaining our employees, with emphasis on leadership development and building robust employee relations. As of April 30, 2019, we employed 2450 persons, on a consolidated basis.
We cater to our workforce requirements with a balanced approach to talent acquisition, with a combination of fresh recruits from reputed institutes and experienced hires. Our motto and value systems are well imbibed by our workforce and they are trained on this right from their induction. We train our employees on a regular basis to increase the level of operational efficiency, improve productivity and maintain compliance standards on quality and safety. We offer our employees performance-linked incentives and benefits and conduct employee engagement programs from time- to-time. We engage with our employees through various programmes such as ‘Adarsh’, ‘Feel Good’, employee dialogue sessions, knowledge sharing sessions and social group activities, among others. We believe that our management has healthy and cordial industrial relations with our employees’ union, namely the Tata Sponge Shramik Sangh.Information Technology
Our IT systems are vital to our business and we have adopted IT policies to assist us in our operations. The key functions of our IT team include establishing and maintaining enterprise information systems and infrastructure services to support our business requirements and maintaining secure enterprise operations. We have implemented various programmes to facilitate the practice of confidentiality, information integrity and availability.Risk Management
We have established a risk management framework to identify, assess, monitor and mitigate various risks to our business. This framework seeks to minimize adverse impact on the business objectives and enhance our competitive advantage. The framework also defines the risk management approach across the enterprise at various levels. Risk management forms an integral part of our Company’s planning process, and the Risk Management Committee of the Board reviews the process of risk management.Insurance
Our operations are subject to hazards inherent to manufacturing facilities, such as work accidents, equipment failure, fire, earthquakes, flood and other force majeure events, acts of terrorism and explosions including hazards that may cause injury and loss of life, severe damage to and the destruction of property and equipment and environmental damage. Our principal types of coverage include boiler and pressure plant insurance, employee accident insurance, comprehensive employee and office insurance, fire insurance, comprehensive directors and officers liability insurance coverage (maintained by Tata Steel), marine insurance, equipment risks and motor vehicle insurance.Competition
The merchant sponge iron manufacturing industry is highly fragmented, and we face competition from a number of marginal players, having low production capacities, based in Eastern India. While most of the sponge iron manufacturers are also integrated manufacturers that focus on steel making, they also sell sponge iron in the market on an intermittent basis. We believe that our position in relation to our competitors will depend upon our ability to anticipate and respond to various competitive factors facing our industry, including product quality, pricing strategies, our ability to source raw materials cost effectively and increase production efficiencies. Further, we may also be affected by competition faced by our customers and end-users.
The long and special steel products industry is moderately fragmented, and business is characterised by way of competition from a number of domestic steel producers in India. Further, the quality expectations of customers and end-users creates a high barrier for entry into this industry.Corporate Social Responsibility
Our CSR objective is to improve the quality of life of the communities living in the areas where we operate. Towards this purpose, we have adopted a CSR policy in compliance with the requirements of the Companies Act, 2013, and the Companies (Corporate Social Responsibility) Rules, 2014, as notified by the Central Government. Through our CSR initiatives, we focus on helping in the upliftment of society by undertaking initiatives such as “Swabhiman” for enabling access to sanitation, implementing technology-based learnings and providing training to teachers. To determine sustainable CSR intervention in and around our Company, we have conducted surveys and engaged with partners of repute for implementation of various CSR projects and programmes. Recently, we have been selected by the ministry of corporate affairs to receive the honourable mention at the National CSR Awards 2018 in the category – CSR Awards for Contribution to the National Priority Areas, sub-category- Health, Safe Drinking Water and Sanitation. In Fiscals 2018 and 2019, we have incurred Rs. 180.46 lakhs and Rs. 236.25 lakhs respectively, on CSR activities.Properties
Our Company’s registered and corporate office is located at P.O. Joda, District Keonjhar, Odisha - 758 034.
Our sponge iron manufacturing facility and power plants are situated on parcels of land that have been leased by us on a long-term basis from Odisha Industrial Infrastructure Development Corporation and the Government of Odisha. Our steel iron manufacturing facility is situated on parcels of land that are either owned by us or are leased by us from the Government of Jharkhand and the Adityapur Industrial Area Development Authority for a period of 30 years, and includes the processing units, warehouses and working offices as well. We also have one marketing office in each of Jamshedpur and Kolkata, and a liaison office in Bhubaneswar. Further, our Company has also entered into operating lease agreements for office spaces and residential accommodations, the tenure of which generally vary from less than a year to three years and include an option for renewal on mutually agreed terms.