Interview with Alakesh Roy, Zamil Steel India

The biggest challenge for the Pre-engineered Building (PEB) industry today is that it is still perceived as a low-rise product, but, with new regulations and the current scarcity of land, my personal feeling is that going vertical will soon be the order of the day, says Alakesh Roy, Managing Director, Zamil Steel, India.

What is the current scenario in the PEB industry?

Over a certain period of time, when the market potential was great, a lot of companies began to set up manufacturing facilities with the thought that PEB is anybody’s game. As a result, the current PEB potential is at 4 lakh tonnes against the total capacity of 15 lakh tonnes, which means that only 40 percent of the actual potential is being utilized as of today. We are now focused on strategic pricing in an effort to avoid even the appearance of overpricing. This year, we expect to acquire almost 10-12 percent of the market share, which seems good when compared to the overall capacity that we have vis-à-vis utilization. Today, our utilization is almost 50 percent, and when we raise it to the level of 70-80 percent, it will be time to begin the next phase of expansion within our group.

What is the future of PEB in terms of high-rise construction?

From the perspective of growth potential, the biggest challenge for today’s industry is the continued perception of PEB as a low-rise product. When you offer a solution to the customer, you present a solution to a problem, but you also have to create a need. Today, while almost every PEB player operates on a horizontal platform, we are now trying to go vertical. We recently built a 54-metre high building, which is now nearing its completion. A PEB solution of this height was previously unheard of in India. Companies had completed jobs of 20-30 metres in height, but this 50-metre high job was a landmark for us, however, with new regulations and the current scarcity of land, my personal feeling is that going vertical will soon be the order of the day.

What made you believe that you could go high-rise with PEB?

Zamil in Dammam has always maintained two distinct lines of businesses: the structural steel solution, which is typically used in high-rise structures, and the PEB solution. Both markets are distinct in Saudi Arabia, but, in India, fortunately or unfortunately, one cannot distinguish between these two segments. Today, whether you choose a plate or a section, ultimately it is the same, and likewise the customer is no longer interested in differentiating between a high-rise and a low-rise. If the building demand requires a certain height, you must build it to specification. And to do that, you need to know the product availability in the market, and accordingly design it and provide a solution. We cannot differentiate between these two segments in our country, rather, we need to integrate elements from both, and subsequently offer the customer one comprehensive solution. If you approach Zamil, whether for PEB or cladding or a high-rise structure, you will get a single solution. We receive many requests for high-rise structure quotes from outside India, and export a 6000-tonne job from India, and apart from this, we are also getting quotations from many large groups for additional high rise buildings.

What will be Zamil’s contribution to the high-rise construction industry?

I have ensured that our design team has had exposure to all the best potential global solutions. First of all, you need to create the image of the building in mind, and then choose the sections. Accordingly, our global design head and myself have travelled extensively around the world to see which mills manufacture typical products, so that designing and choosing the appropriate sections becomes easier. We visited many places in Dubai and Emirates and also in Eastern India, including the JSPL mills, and identified a few manufacturers who are capable of providing certain sections which we never knew existed. The practice of offering a comprehensive solution for the building began there. We continue to incorporate many design inputs in terms of the availability of various sections. From our point of view, no other PEB player today implements BIM software solutions – we are perhaps the only organization investing in BIM software solutions today. We have created a separate Tekla cell within the detailing group and are now capable of executing almost 2000-tonne of structural solutions per month. We have already started building up the potential to design and manufacture structural steel jobs in India, and once this happens, our next target will be the 100-metre structures, for which we have already started quoting.

Do you think that the section and grade availability in India is sufficient, or is there a need for steel manufacturers to increase their range?

From the basic steel manufacturer’s point of view, they were happy producing only hot rolled plates. Among the larger players, TISCO was the first plant to begin using the cold rolling mill. At that point in time, people thought that it was profitable to produce thinner sections and cold roll products. Slowly it was understood that there is a margin in this product too, provided that you invest in it correctly. Companies in India have invested in facilities where they have produced international level parallel flange sections. However, this type of facility is located only in the east—there are none located in the western regions— so for us to ship these materials from the east costs an additional Rs 3 per kg, resulting in an increase in the final cost. The time has come for the western players to establish such mills in the west, which will make operations more economical overall. Furthermore, from the design perspective, we formerly created the building using MBMA Design, which was the easiest design to do. Because most of the PEB players used US-based technology, they followed American Standards. But now, we are designing in accordance with the Indian Standards, with which Indian-made sections are compatible, and that is the biggest benefit that we enjoy today. Knowing which sections are available is of paramount importance to our industry.

Which obvious benefits does the client receive when appointing an experienced fabricator with in-house engineering know-how over the conventional pre-engineered fabricators?

Major PEB players have the ability to fabricate on-site as well as off-site. With factory fabrication, the quality aspect is guaranteed, and secondly, the speed increases because on-site fabrication involves material handling, which becomes a major issue. We have cranes and automated machines here at the factory that are not available on site. All the advantages that you can provide from the factory cannot be provided at the site. In a site fabricated job vis-à-vis our fabrication, we handle 30-60 jobs per month, and our level of material optimization is very high. In on-site fabrication, the scrap level is almost 10-12 percent, whereas our scrap level is below 3 percent. Customers often think that on-site fabrication is cheaper, but at the end of the day it is costlier because scrap is always sold at half the value, so the wastages and pieces are no longer replaced. Also, with regard to the gestation period, the productivity of on-site fabrication is only 20- 30 percent of that of the plant, and production is subject to other influences such as rain, heat, etc. When taking the PEB route, traditional buildings are completed within the 6-9 months, and if you go by the on site route, it takes more than 1.5 to 2 years. So you see, there is a distinct advantage to plant fabrication in terms of the speed of completion.

What are the most significant challenges faced by the industry today, and how do we overcome them?

The first challenge is in understanding the changing needs of the customer, as adaptability will become an important issue. No business has a cycle life of more than 5-10 years, so we must change in order to keep up with new product technology. In earlier days, concrete and brick were construction staples for ages, but later were supplanted by steel, and today my worry is that even steel is being replaced to a degree by other composite materials that are available in the market. Mix these materials with concrete, and you can create solutions that don’t require steel. Another factor, which will affect the industry, is energy efficiency regulation. The new energy conservation norms for buildings will go into effect very soon. The law will soon require that the domestic consumption shall be 0.26 kW per sq. ft. per day, so steel will face many challenges, and insulation aspects will become critically important. We must think about ways in which to make our buildings more energy efficient, and are, in fact, currently studying alternative technologies to that end. Today, platinum and gold ratings of IGBC are optional, but in another ten years time they will probably become mandatory, and we need to begin preparations now. Today we are evaluating alternative technologies, and we are studying the market to determine ways in which we can address segments like cold storage. We view every act or every government proposal as a potential opportunity. One act will have a cascading effect down below, so if you are not into the cold storage, you will have missed out on an opportunity. In the future, Zamil will not miss out on opportunities that come our way. Accordingly, high-rise structures offer one opportunity, and insulated buildings offer another. Traditionally, steel has never been used in a residential solution, and that is also another area where we feel that we can succeed, with proper cladding. We have also worked in acoustics, adding it to our key areas of exploration for future options.

Could you share details about your manufacturing facility, the production capacity and your future plans?

Our current manufacturing facility is located at Ranjangaon, which is 45 kms from Pune and has a capacity of almost 60,000 tonnes. We are trying to develop a good vendor base that takes care of all our standard products, and are partnering with established players who are quality global suppliers. This complements our business so that to our 60,000 tonnes capacity, we can actually add an additional 10-15 percent more product. Although this doesn’t increase our exposure, it definitely increases our capability. We are also trying to set up a small base in Northern India which will solve some transportation issues. This should augment well in the near future; since our motto is that we should not turn down any customer across India. We should be able to supply the customer with what he needs, at the price that he wants, and at the right time. With that objective in mind, we have a short-term plan wherein we will spend roughly 40-50 million in the coming year to balance out the whole facility. We are also moving into the component business in a big way, and in the near future you will see many new profiles coming from the Zamil table in an effort to augment the low-end market.

What steps should the government take to support growth in the industry?

The differential tax structure across states is helping no one. The GST is the solution, considering the spread of markets. If the government wishes to actually see the industry grow, it must create a tax structure which is transparent and uniform across India. The other big issue is the transport sector, which is not conducive to business. At the end of the day, it is not the cost of diesel, but rather the check post fee and the toll tax that are heavily burdening each and every segment of business. For a highly capital-intensive industry that produces capital goods, it becomes a major deterrent. If a customer finds a cheaper solution in Uttarakhand, why come to Zamil, since Zamil is a quality leader and not the cost leader in the region. So, actually, you are not creating a healthy atmosphere for business. It is not only the PEB industry that is suffering, but also the trucking industry. Another key aspect is the availability of skilled manpower, which can become a major deterrent in any industry in every state. We boast that we have the manpower, but training in the required skills is not being imported. Government needs to take action by setting ITIs in each and every village, so that people will be able to educate themselves and train to meet the needs of specific employers.

How would you describe platforms such as India Logistics Expo?

Platforms such as India Logistics Expo is an extreme important networking opportunity and builds avenues to meet all the stakeholders of the industry who share a common goal & responsibility of enabling the growth of the Indian Logistics Industry. It is a platform to meet people with diverse ideas and experiences, and enrich our knowledge and understanding of our industry & its imperatives through interactions at multiple levels.