Vesuvius India Limited

Vesuvius India emphasizes its strong focus on innovation, with new products contributing a 'significant percentage' of its revenue, aligning with a key performance indicator for management. The company benefits from its parent organization's substantial R&D investment of 35-36 million pounds annually, enabling access to advanced technologies. Recent innovations include new refractory recipes for blast furnace trough linings, designed to reduce erosion and extend operational life, and advancements in black refractory for improved cost and performance. The company has also introduced robotic technology in India, with a robot already operational at Tata Steel, Kalinga Nagar, to enhance safety and efficiency in hazardous molten steel environments.

The company views non-steel businesses, particularly aluminium, as a major growth area and has established a dedicated sales team, leveraging global technology. While this journey is still in its early to midway stages, Vesuvius is actively exploring opportunities. In the steel sector, beyond traditional blast furnaces, the company is targeting induction furnace players, focusing on lining products. It has successfully entered the furnace lining (brick business) segment, previously dominated by competitors, and is developing high-performance slide gate mechanisms and plates for super large ladles (300+ tons), with successful trials completed.

Vesuvius acknowledges increased competition from international players like RHI, Krosaki, and IFGL, who have invested in India. However, management asserts that Vesuvius maintains a '55% market share' in its core segments due to its 'technological edge' and comprehensive service model, which includes 24/7 support. The company's strategy is to avoid commoditized markets and compete on technology and reliability, ensuring its products perform with 99.9999% uptime, which significantly reduces incidents and creates value for customers, allowing Vesuvius to command a premium.

Vesuvius India has strategically invested in capacity ahead of demand, particularly during 2021-2022, and possesses 'a lot of headroom to grow.' The company's plants in Kolkata and Vizag offer significant brownfield expansion opportunities at 'marginal and very low incremental capex cost,' with Vizag utilizing less than one-third of its 42 acres. Management's philosophy is to invest in capex only after maximizing the utilization of existing assets through debottlenecking, ensuring efficient capital deployment. The company aims to 'far exceed' previous capex guidance of ₹1000 Crores over the next few years, funded by its strong balance sheet without external debt.

Despite consolidated customer buying power, Vesuvius maintains pricing power by demonstrating the value its products create, such as breaking world records for casting hours with a single piece of refractory, leading to cost savings for customers. Management confirmed that they 'are increasing prices' in response to rising raw material costs, asserting that it is 'out of scope that we would not increase prices when our costs are going up.' The company employs a dedicated team to identify raw material risks and systematically develop alternate suppliers, leveraging the Vesuvius Group's global procurement power to secure better prices.

Vesuvius India has demonstrated a strong ability to outgrow the market, achieving a 22% topline CAGR over the last 4-5 years, significantly higher than the steel industry's 8-9% growth, indicating consistent market share gains. Management's ambition is to 'continue that streak of outgrowing the steel industry,' aiming to increase market share in its chosen segments. While acknowledging that growth rates vary year-to-year, the company expects to outgrow the overall market by 1-3% on average over a cycle, driven by its technological leadership and strategic market entries.

Management views discussions around decarbonization, particularly hydrogen in steelmaking, as 'more talk than action' for the foreseeable future, especially in India where scrap generation for electric arc furnaces (EAF) is not yet significant. The shift from blast furnaces to EAF with gas-based DRI in mature economies is considered 'neutral' for Vesuvius, as refractory consumption patterns remain similar. The refractory cost as a percentage of steelmaking cost, currently around 2-3%, is believed to have 'plateaued' and is not expected to change significantly, with future value creation coming from technological advancements rather than further reductions in specific consumption.