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JSW Steel tests its mettle in rural market with retail plan

Country's biggest private sector steel producer is going deeper into rural market with its retail plans.

Mumbai | Published: November 4, 2013 5:55:42 pm

The country’s biggest private sector steel producer,JSW Steel Ltd,is going deeper into the rural market with its retail plans. The company,which is the second steel firm in India after Essar to set up organised steel shops,is planning to set up centres across talukas to serve the rural market more effectively.

The company said it wants to be ready with a solid base to serve the demand coming from the rural sector in the next few years,which will surpass the urban demand.

“We are going granular. Earlier we were focussing on districts and now we will set up shops to serve the talukas,” said Jayant Acharya,director – marketing,JSW Steel.

He said the company will either open JSW Shoppe,its organised retail brand,or a smaller format of Shoppe,which will cater to the demand emerging from 3,500-5,000 talukas out of the 7,000 talukas India has. The company wants to achieve this in the next 3-5 years.

He clarified that this will not mean opening up as many Shoppes but different formats of retail centres that can serve two or three talukas.

So far the company was focussed at district level and has covered 175 of them out of the 600-odd districts in India. In all,JSW has over 400 organised retail outlets in the country.

“In the next few years,the rural steel demand in the county will be very strong compared to the urban demand and we want to have a retail base ready by then,” he said.

This rapid expansion of retail outlets across the country will not entail a major investment as these centres will be opened on a franchise model.

The company is contemplating populating these outlets with various product categories and brands it currently has,plus a few more to be added,especially in the value-added segment,Acharya pointed out.

Value-added categories such as galvanised sheets or colour-coated sheets are slowly catching up in demand and bring in higher premiums too compared to normal hot-rolled coils.

JSW steel has a capacity of 3.2 million tonnes of cold-rolled and coated steel (both a part of value added steel) and will be adding another 2.3 million tonnes by 2014,taking its total capacity to 5.5 million tonnes,around 40% of its total 14.3 million tonnes volume.

Goutam Chakroborty,analyst with brokerage Emkay Global said while the companies are rapidly expanding their presence in the rural landscape with their own organised retail chains,these outlets still contribute very less to their overall sales.

“The rural-urban mix will not change significantly for these companies for years to come but still these stores are important as they help in penetrating the company’s brand name deeper in rural pockets,” he said.

According to the ministry of steel,India’s total steel consumption per capita stands at 60 kg a person while the rural stands at a significant low of 10 kg per capita.

The rural market mainly accounts for the sale of construction-based materials or long products while flats are mainly used by white goods and automotive sectors,which are primarily categorised as urban consumption.

The sale of long products or construction material too are largely skewed towards urban projects comprising almost 65% of the total consumption,while rural amounting for just 35%.

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