Over the last few quarters, steel manufacturing units have been joggling through a few issues such as expensive raw material, low steel demand, liquidity crunch etc, and all of it at the same time. In the last quarter, quite a few units have either closed down operations or been put up for sale.
A major steel plant in Raipur, manufacturing TMT bars faces threat of permanent closure. The TMT manufacturer has failed to pay its debt and is on the verge of closing down its business.
Based on industry data and sources, the TMT manufacturer had always tried to influence the market by pricing its Re-bar product in a very competitive way and offering at a discount of Rs 300-500/MT to the market price.
The manufacturer also had a different way of managing its cash conversion cycle with always buying the key raw material – Ingot on a credit period of 25 days and selling the finished material for cash on a regular basis.
Rise in input cost leading to low conversion ratio and poor off-take has badly hit the company's margins and revenues respectively and it is being heard that the plant's director has taken a decision to shut down the plant permanently.
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