BT-YES Bank Emerging Companies - Raajratna Metal

BT-YES Bank Emerging Companies - Raajratna Metal

Raajratna Metal earns three-fourths of its revenue by exporting stainless steel wires and bars to 60 countries.

Arvind Sanghvi, Founder and Managing Director, Raajratna Metal Industries Photo: Shailesh Raval / Arvind Sanghvi, Founder and Managing Director, Raajratna Metal Industries <em>Photo: Shailesh Raval /</em>
Arvind Sanghvi, founder and MD of Raajratna Metal Industries, travels 15 days in a month across the globe to explore business opportunities. This is not surprising, given that the maker of stainless steel wires and bars earns nearly three-fourths of its revenue from exports to 60 countries. "We are always in search for newer markets," says Sanghvi. "If I come to know there is a market on the moon I will even travel to the moon."

Sanghvi understands the stainless steel business like the back of his hand. This is his second stint dabbling in stainless steel. Before he separated from his cousins 25 years ago, Sanghvi was making stainless steel pipes for the domestic and export markets. He set up Raajratna, based in Ahmedabad, in 1990 with a sum of Rs 1.25 crore and 40 employees to make stainless steel wires. The company now has about 1,000 employees. "It was a conscious effort not to get into the same business as my cousins because we wanted to avoid conflicts," he says. Within two years of starting operations Raajratna began exporting across the world to companies in oil and gas, textile, automobile and power sectors.

Raajratna depends on higher sales volume to maintain profitability, as it operates on wafer-thin margins of one to six per cent. Though the company exports 70-75 per cent of its production, it imports almost half of its raw material. So, a weak rupee does not help much to boost profitability. Excess steel supply in the market during 2011/12 also weighed on the company. It posted a 76 per cent drop in net profit to Rs 5.64 crore in 2011/12 while revenue rose 14 per cent to Rs 595 crore. But it rebounded in 2012/13, with profit surging to Rs 33 crore on revenue of Rs 612 crore. The company is also cash surplus and its long-term loan is no more than Rs 7 crore, says Sanghvi.

Despite the economic slowdown, banks are offering loans at nine per cent to the company, he adds.
Sanghvi says the company is planning to make value-added products to improve margins and boost growth. It is also looking to set up a factory in an Asian country. It already has marketing offices and warehouses in the US, the UK, Italy and Thailand. Sanghvi adds that Raajratna will grow organically and has no plans to make any acquisitions.

To avoid the mistakes of the past, Sanghvi has taken care of succession issues at the family-run business that has diversified over the years into electrodes, fasteners and solar power. The second generation of the family has been given responsibility of different businesses. One of his three sons works with him at Raajratna while his other sons and his nephews are involved in other businesses. But Sanghvi is not ready to hang his boots anytime soon. After all, he still has dozens of countries to explore.