For the exclusive use of N. Nguyen, 2023.

W21091

USHA MARTIN LIMITED: UNRAVELLING THE VERTICAL

INTEGRATION STRATEGY1

Professor Nitin Pangarkar wrote this case solely to provide material for class discussion. The author does not intend to illustrate either
effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying
information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
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University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.

Copyright © 2021, National University of Singapore and Ivey Business School Foundation Version: 2021-03-04

In May 2020, Usha Martin Limited (Usha Martin), a diversified engineering group based in India, was at a
critical juncture in its history.2 In April 2019, the company had divested its steelmaking and related
operations to reduce its debt load.3 Though the divestment meant a large decline in Usha Martin’s revenues
for the financial year (FY) ended March 2020, the move helped the company to reverse the trend of losses
incurred in several recent quarters and years to earn positive profits (see Exhibits 1 and 2). However,
attaining future growth remained a challenge for the small, focused company, especially given the weak
economic performance of the Indian and global economies as a consequence of the COVID-19 pandemic.
Many developing countries, including India and Brazil, which formed key markets for Usha Martin’s wire
and wire rope (WWR) business, were going through particularly difficult economic conditions as a result
of the pandemic.4 As the world economy slowly limped back to post-lockdown normalcy in several
countries, the near-term outlook for the scaled-down engineering group remained uncertain. With demand
for its industry’s products negatively affected around the world because of a slowdown in end-use sectors
such as construction and oil exploration,5 Usha Martin’s management would have to be strategically
creative in growing the company. International growth would be especially critical for the company because
it already enjoyed a large market share in India, making any further gains in market share difficult.

HISTORY

In 1961, two brothers, Basant and Brij Jhawar, partnered with the Scottish company Martin Black to form
Usha Martin, with Martin Black providing critical resources including capital and technology to the joint
venture. Usha Martin aimed to make WWR products in its plant in Ranchi, a city in an economically
underdeveloped state in India that was rich in natural resources such as coal and iron ore. Wire ropes were
used in numerous different sectors and products, including elevators, cranes, mining, construction, and
fishing and oil exploration (rigs). Because of the anemic performance of the Indian economy in the 1960s,
domestic demand for wire ropes was weak, but that did not stop Usha Martin from earning its maiden profit
in the Ranchi plant’s first full year of operations. Environmental uncertainty was magnified over the next
few years due to wars between India and China (1962), and India and Pakistan (1965), but the Jhawars and
Usha Martin overcame the challenges brought about by wars and economic uncertainty by enhancing core
operations and pursuing diversification and internationalization.6

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STRATEGY

Since its inception, Usha Martin had continuously enhanced its strategy in its core operations in two key
areas: (a) reducing costs without compromising the quality of its products, specifically by deploying
improvements and new systems such as automation; and (b) undertaking a variety of corporate social
responsibility (CSR) initiatives, including the promotion of natural resource management, renewable
energy, and women’s empowerment in the nearby villages, and even by opening schools. Its job creation
in an economically underdeveloped area combined with its CSR activities earned Usha Martin co-operation
from the local government as well as villagers, and helped in the timely and cost-effective implementation
of projects such as capacity expansions of the plant.7

Building and maintaining close relationships with governments was another pillar of the company’s strategy
since inception. For instance, during the Indo-Pakistani war in 1965, the company went to great lengths to
supply the special requirements of the Indian defence sector. In 1971, when India and Pakistan waged
another war, the Indian government approached Usha Martin for the special ropes needed for its aircraft
carrier INS Vikrant.8 Usha Martin completed this task in record time, earning praise and goodwill from the
government and opening the path to future government contracts. In 1976, the company was given the
contract for manufacturing cables for supporting another prestigious project, the Second Hooghly Bridge
in Kolkata, one of India’s most populous cities.9 More recently, Usha Martin supplied cables for the Statue
of Unity, (the world’s tallest statue) located in western India. As a result of close relations with the state
and central governments in India, the company received a lease from the state government of Jharkhand
(the state in which Usha Martin’s plants were located) to mine iron ore deposits.10

The emerging nature of the Indian economy challenged Usha Martin in terms of securing the right quality
of raw materials as well as reliable services such as electrical power. Though the company had pursued
vertical integration since its early days, it intensified its pursuit after FY 2004–05, when it faced bottlenecks
in production due to supply shortages and also experienced fluctuating profits because of volatility in the
prices of steel. The company ramped up capacity in steelmaking and accelerated its plans for operating a
coal mine. Interestingly, all of the key activities such as wire making, steelmaking, coal mining, and power
plant operation were located within 100 kilometres of each other.11 By 2011, the company had scaled up its
steelmaking capacity significantly and was supplying as much as two-thirds of its steel output to external
customers in automobile and engineering industries.12 Lured by the profit potential in end uses of wire
ropes, Usha Martin also utilized every opportunity to integrate forward into value-added products of steel
wire and ropes, including accessories and telecom cables (e.g., jelly-filled and fibre-optic cables) (see
Exhibit 3).13 In 2019, UM Cables Limited, a subsidiary of Usha Martin, achieved revenues of ₹1.031
billion14 and incurred a loss of ₹333 million due to intense competition, high input costs, and increased
finance costs. The business had made small profits for the two prior years.15

In addition to vertical integration, the company also developed and grew along two other directions. First,
it established international operations, sometimes through joint ventures. Many of the international
operations were for distributing products; a few had project-execution capability (e.g., engineering
contracts); and only three (in Dubai, Thailand, and the United Kingdom) had their own manufacturing
facilities.16 By 2020, the company’s reach spanned all of the key geographic regions, including Southeast
Asia, the Middle East, Africa, Australia, Europe, and the Americas (see Exhibit 4).

Diversification formed the second key thrust of Usha Martin’s growth strategy. The company diversified
into many areas unrelated to its core business. At various points in time, the company was involved in
telecommunication (telecom) and outsourcing services, realty and construction, and the education sector.
For some of these initiatives, such as the telecom services, the company was able to make an early and

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Page 3 9B21M024

profitable exit. A few other initiatives (e.g., education and information technology) enjoyed some success
at specific points in time and were part of the overall portfolio (as related companies), even in 2020.
However, implementing a growth strategy along three different directions likely stretched the company’s
managerial and financial resources.17

The company’s expansionary strategy, in terms of entering different products or geographies, was fuelled
by the optimism of Usha Martin’s leadership, which consisted of the founders and their families. The
company’s leaders took special pride in Usha Martin’s vertical integration strategy and often spoke about
it in their public statements. For instance, in its annual report for 2016–17, the company made the following
comment:

The strategy of integration places the Company in a unique position by combining both ends of
value chain, from iron ore mining to high value wire ropes and further providing end use solutions
on its key product applications. In addition to providing benefits of quality, consistency and self-
sufficiency for principal raw materials, it provides captive markets for a sizeable portion of the
finished products. Also, it enables the Company to aspire to become truly competitive across the
entire value chain of its chosen product range.18

The strategy, which was viewed favourably by investors as well as lenders such as banks, led to good results
when the environment was conducive (e.g., when the broader economy was growing and/or supply was
unreliable because of the emerging nature of the Indian economy). For its golden anniversary year (ended
March 2011), Usha Martin’s (consolidated) profits after tax stood at an impressive ₹1.4 billion (versus
₹32.3 million for FY 2003–04), a compounded annual growth rate of 30.39 per cent.19 However, this would
prove to be the calm before the storm.

THE FLIP SIDE OF THE VERTICAL INTEGRATION STRATEGY

Although the vertical integration strategy provided the company with predictability of supply volumes and
prices, the strategy also exposed Usha Martin to a number of challenges and risks. One such risk was related
to environmental concerns. Steel (especially older-generation steel plants) and coal (all aspects related to
the mining and burning of coal in uses such as power plant operation) were considered environmentally
unfriendly and were subject to regulation as well as environmental activism and negative publicity in the
case of adverse events such as industrial accidents. Usha Martin’s end-to-end vertical integration strategy
meant that it was involved in steel, mining, and power plant operations; thus, multiplying the possibility
that it would run afoul of environmental regulations or activism.20

High capital intensity posed another risk. The steel business, in which Usha Martin had rapidly expanded
capacity between 2006–07 and 2010–11, was particularly capital intensive.21 The risk in investing large
amounts of capital in steelmaking was magnified because of two factors: the cyclical nature of the demand
for steel and the numerous external factors affecting the performance of the industry, over which the
steelmakers had little control.

Demand for steel was sensitive to the performance of the Indian economy (e.g., expansion or contraction),
in general, and demand for discretionary and durable goods such as cars and home appliances, in particular.
The supply of steel was affected by the demand–supply balance globally as well as the trade policies of the
Indian and foreign governments. For instance, domestic producers of steel could suffer from lower steel
prices due to excess supply in other countries and/or fewer trade barriers for steel imports into India, which
could imply a flood of cheap steel imports into India.22

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A third source of risk was political risk, especially with regard to acquiring licences for mining natural
resources such as iron ore and coal. The acquisition process was often politicized in India, with frequent
allegations of corruption or favouritism following the conclusion of any awarding of contracts.23

For Usha Martin, many of the risks in the vertical integration strategy came to pass after 2010. In 2011, an
environmental activist website, Down to Earth, accused Usha Martin of a poor occupational safety record
and of causing severe pollution that had impacted the lives of the villagers residing near the mill in a
multitude of ways, including by causing multiple health problems (e.g., respiratory problems among adults
and children). The website accused Usha Martin of discharging untreated waste water into a nearby water
source and of dumping solid waste near railway tracks, affecting many people’s lives and making the
agricultural land unproductive.24 While Usha Martin acknowledged the problem of pollution (especially
solid waste), it argued that it was in the process of upgrading the emission control equipment in its 25-year-
old plant, which would reduce pollution by 2012. It also suggested that, with a slated increase in its
steelmaking capacity to one million tons, it would reuse some of the solid waste and also dispose of the
remaining waste in an environmentally friendly manner.25

Political risks became a big issue for Usha Martin in September 2014. Because of alleged corruption during
the licence-awarding process, the Supreme Court of India ordered the deallocation of one of Usha Martin’s
key coal mines, (the Kathautia coal mine) which was considered a good mine in terms of the quality and
quantity of coal. The company also lost another mine, (the Lohari coal mine) which was less consequential
because it was non-operating. To further aggravate the situation for Usha Martin, the court directed the
company to pay fines of ₹837.3 million as compensation for underpayment for the coal it had extracted
from the Kathautia mine over the years.26

THE FLUCTUATING PERFORMANCE OF THE STEEL BUSINESS, AND THE DIVESTMENT DECISION

Between FYs 2006–07 and 2010–11, Usha Martin invested heavily in boosting capacity for steelmaking.
For instance, while the value of its net fixed (i.e., depreciated) assets grew by 22.14 per cent between March
2003 and March 2007 (from ₹8.981 billion in March 2003 to ₹10.970 billion in 2007), this value grew by
almost another 170 per cent by March 2010 to ₹28,575.3 million and to ₹31,299.9 million by 2011. Many
of these fixed investments had been financed through borrowings, and the company’s debt level went up
correspondingly.27

Despite the massive investments in steelmaking, Usha Martin was a small player in India’s steel industry
and even smaller on a global scale. In 2011, the global steelmaking capacity amounted to 1,527 million
tons, with India accounting for 72.2 million tons.28 Usha Martin’s capacity was 1 million tons,29 just over 1
per cent of the capacity of ArcelorMittal SA, the world’s largest global producer, which had a capacity of
98.2 million tons. Tata Steel Limited (Tata Steel), India’s largest producer, had a capacity of 23.2 million
tons, and Vizag Steel, also based in India, was the 46th-largest steel producer in the world and had a capacity
of 3.2 million tons.30

Over the next few years, the steel business would prove to be volatile due to a variety of factors, including
downward pressure on prices from excess capacity both globally and in China (especially between 2014
and 2017) and the fluctuating performance of the Indian economy, in general, and the appliances and
automobile industries, in particular.31 Usha Martin’s extensive usage of debt to finance expansion of
steelmaking capacity also magnified the impact of demand and capacity utilization fluctuations on the
company’s profits (see Exhibit 1).

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The interest burden that resulted from the company’s high debt level caused Usha Martin to make negative
net profits for each quarter between FYs 2013–14 and 2016–17. In FY 2017–18, there was a slight
improvement in performance, driven by an improvement in Usha Martin’s steel business, which achieved
higher revenues (a 16.57 per cent increase), and a marginally higher contribution to the overall sales of the
company (63.35 per cent of revenue against 62.48 per cent).32 The improved performance, in turn, could be
attributed to the global rise in steel prices resulting from China’s decision to reduce its steel capacity.33 The
boost of firmer prices was sufficient to overcome the adverse effects of the loss of coal mines and the high
prices of raw materials such as coking coal and ferro-alloys. The good results enabled the company to repay
a small portion of its debt.34

Pressured by numerous losses, Usha Martin attempted to deleverage its balance sheet through divestment
of the WWR business. In January 2016, when the oil prices collapsed to US$30 per barrel from US$108 in
2014,35 the WWR business suffered, due to lack of demand from the oil and gas exploration sector. In its
2017–18 annual report, Usha Martin’s managing director, Rajeev Jhawar, noted the following:

The Company has also been working, albeit with moderate success, on the disposal of identified
non-core assets as a short-term measure to meet its liquidity challenges. Our endeavour to address
the debt burden of the Company by looking for a buyer for our Wire and Wire Ropes business has
not met with success so far. We do realise that in the changed business environment, deleveraging
the Company is imperative and we’ll continue to strive to achieve it in a manner which is in the
best interest of all stakeholders.36

After it failed to sell the WWR business, despite vigorous efforts over 18 months, the company’s top
management considered the other possibility: divestment of its steel business. Though the company
expected full recovery of its steel business over the coming years because of an anticipated uptrend in the
Indian economy and automotive industry, the high debt load was causing extreme stress.37

In June 2018, the board pressed the management for the sale of the steel division, which included a one-
million-tons-per-annum specialty steel plant in Jamshedpur, a 135-megawatt captive power plant, a
functioning iron ore mine, and a coal mine (in development). Clarifying the change in the strategy, a
company representative said that initially the plan was to hive off wire rope, but the company realized later
that valuation of the steel division could be better. Incidentally, the turnover of the steel business was ₹30
billion, while the WWR business had a turnover of ₹18 billion.38 A company source close to the
development said, “Since, wire ropes is a global business and has historically been UML’s [Usha Martin’s]
mainstay—the company started off in the 1960s as a wire ropes maker—the board felt it would be
appropriate to retain it for the time being and instead scout for buyers for the steel unit.”39

Usha Martin also expected that a global turnaround in the steel business cycle over the previous year would
increase the valuation of its steel assets.40 However, selling the steel business would completely dismantle
the end-to-end integration strategy, which could mean volatile input prices for Usha Martin’s WWR
business. Despite this risk, the divestment strategy made sense to the company’s management.41

Usha Martin’s board created a six-member committee to oversee the divestment process. Tenders were
invited, and the process attracted interest from almost all of the major Indian steel manufacturers, including
two of the biggest—Tata Steel and JSW Steel Ltd.. In September 2018, after evaluating all of the offers,
Usha Martin’s board approved divestment of the fixed assets of its steel business to Tata Steel for
approximately ₹46 billion. With the inclusion of nominal working capital of ₹6 billion, the sale was worth
₹52 billion. The Tata Steel–Usha Martin deal surprised many observers and analysts because it was a rare
case of an Indian corporation opting for divestment to meet its loan obligations. After the deal approval,

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Rajeev said, “Ours is a unique case where lenders will get paid back without any haircut. . . . We had certain
obligations to our lenders and we have kept our commitments despite the hardship.”42

Further, Tata Steel would supply steel to Usha Martin at market price for five years, thus protecting Usha
Martin’s WWR business from either potential shortages or high prices of raw material in the near future.
Employees of Usha Martin’s steel business would also be transferred to Tata Steel. The transition for
employees who had been transferred to Tata Steel was helped by the fact that the Tata Steel and Usha
Martin plants were just 16 kilometres apart.43

Post-divestment, the company was optimistic that the WWR business would get rejuvenated, as there would
no longer be as much stress on the company’s cash flow, caused by the high debt burden.44 Having suffered
from the ill effects of a heavy debt load, the company was looking to adopt a rather cautious approach,
especially toward using debt to fund future expansion. In September 2019, Rajeev spoke about ambitious
plans for the company. He said, “With the deleveraged balance sheet and healthy cash flows expected out
of the business, we hope to grow both organically and inorganically over 3–5 years and rank among the top
three players globally.” 45 To this he added, “I would never like to grow on the strength of taking debt; it
would be more on internal accruals and a very conservative financial commitment.”46

THE ROAD AHEAD

With the divestment of the steel business, which had contributed the majority of the company’s revenues,
the WWR business became the key driver of Usha Martin’s future growth (see Exhibit 4). Other than a few
dips in performance over the years, the WWR business had generally performed well (see Exhibit 5). For
instance, after hitting bottom in FY 2015–16 due to the oil price collapse, the WWR business was back on
the recovery path by the end of 2016. In FY 2017–18, the WWR business showed significant growth over
the previous year, with improvement in most end uses (with the exception of oil and offshore wire ropes),
reflected in an impressive 41.95 per cent increase in earnings before interest, taxes, depreciation, and
amortization. The WWR business continued to remain the undisputed leader in India, with 60 per cent
market share. The sales volume also rose by 40 per cent, helped by a robust surge in demand.47

However, the road ahead seemed challenging for several reasons. First, there was the short-term challenge
posed by worldwide government-imposed lockdowns intended to help stop the spread of COVID-19,
bringing industrial and commercial activity, including construction, to a halt. For an industrial product such
as wire ropes, this could mean drastically reduced demand.48 Second, in the longer term, some of the end-
user industries of the WWR division, such as mining and oil exploration, would face challenges posed by
environmental concerns.49

On the other hand, there was also a positive trend for some end-user industries. Increasing urbanization
meant greater use of high-rise buildings for both office and residential use, which would lead to greater use
of elevators, in turn boosting the demand for wire ropes. The construction sector, even in developing
countries, was likely to use equipment such as cranes, which would give the demand a further boost. Though
the COVID-19 pandemic had raised some short-term doubts about the trends of continued urbanization and
high-rise office and residential buildings, the broader trend might remain intact as long as the pandemic did
not last too long.

The smaller portfolio of businesses created several major challenges for Usha Martin. First, the company
had to find new sources of growth in revenues, which was especially difficult considering the struggles of
key end-user industries such as construction and oil exploration. Because of Usha Martin’s large domestic

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Page 7 9B21M024

market share, gains in the domestic market were challenging as well. Second, fluctuations in demand for
WWR products (especially negative), such as those that occurred after the oil price crash in 2015, would
have large impacts on the sales and profits of the more focused Usha Martin, and the company had to find
ways to achieve stability in revenues and profits—for instance, by growing its international operations.
Finally, having reversed its end-to-end integration strategy, the company had to manage its exposure to
fluctuating raw material prices. Regardless of the strategy through which the company chose to achieve
profitable growth, Usha Martin would have to arrange resources and manage risks. Having suffered the
negative effects of taking on a large amount of debt, the company would be careful to deploy debt, at least
in the near future. In summary, Usha Martin’s management was faced with a number of key decisions that
would have a bearing on its long-term future.

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EXHIBIT 1: USHA MARTIN, STAND-ALONE RESULTS (₹ MILLIONS)*

Year Ending
March March March March March
2020 2019 2018 2017 2016
Revenue from Operations (Gross) 13,926.2 16,531.9 13,834.0 35,059.7 37,291.4
Less: Excise and Service Taxes, and
0.00 0.00 31.02 359.39 383.01
Other Levies
Revenue from Operations (Net) 13,926,2 16,531.9 13,523.8 31,465.8 33,461.3
Total Operating Revenues 13,926.2 16,904.8 13,866.5 32,465.4 34,317.9
Other Income 298.9 472.0 751.5 1,167.6 343.6
Total Revenue 14,225.1 17,376.8 14,618.0 33,633.0 34,661.5
EXPENSES
Cost of Materials Consumed 7,409.0 11,552.9 8,806.8 14,277.7 13,804.4
Operating and Direct Expenses 0.00 0.00 0.00 0.00 0.00
Changes in Inventories of FG,WIP, and
761.2 (674.3) 325.0 25.2 1,878.1
Stock-in-Trade
Employee Benefit Expenses 1,275.1 1,138.7 1,044.6 2,320.1 2,301.1
Finance Costs 580.7 902.2 764.8 5,490.1 5,311.4
Depreciation and Amortization Expenses 277.7 281.0 289.6 2,685.8 2,731.1
Other Expenses 2,543.0 2,484.4 2,122.4 11,850.3 13,159.0
Total Expenses 13,078.0 15,736.8 13,404.6 37,182.5 39,450.6
Profit and Loss before Exceptional
1,147.1 1,640.0 1,213.4 (3,549.5) (4,789.1)
and Extraordinary Items and Tax
Exceptional Items 0.00 0.00 0.00 0.00 0.00
Profit and Loss before Tax 1,147.1 1,640.0 1,213.4 (3,549.5) (4,789.1)
Tax Expenses—Continued Operations
Current Tax 2,007.5 6.5 0.00 0.00 0.00
Less: MAT Credit Entitlement 0.00 0.00 0.00 0.00 0.00
Deferred Tax 0.00 (2376.0) 0.00 0.00 (594.2)
Tax for Earlier Years 0.00 2.27 0.00 0.00 0.00
Total Tax Expenses 2,007.5 (2,346.8) 0.00 0.00 (594.2)
Profit and Loss after Tax and Before
(860.4) 3,986.8 1,213.4 (3,549.5) (4,194.9)
Extraordinary Items
Profit and Loss from Continuing
3,954.0 3,986.8 1,213.4 (3,549.5) (4,194.9)
Operations
Profit and Loss for the Period 3,954.0 590.0 (2,823.4) (3,549.5) (4,194.9)
Other Additional Information
Earnings per Share
Basic EPS 12.98 1.93 (9.27) (11.65) (13.77)
Diluted EPS 12.98 1.93 (9.27) (11.65) (13.77)

Notes: *All figures (except per-share figures) are in ₹ millions; ₹ = INR = Indian rupee; The figures for 2018 and 2019 were
restated to reflect the divestment of the steel business; The figures for 2017 and 2016 included the results for the steel
business; FG = finished goods; WIP = work in progress; MAT = minimum alternate tax; EPS = earnings per share.
Source: “Usha Martin Ltd.,” Moneycontrol.com, accessed January 28, 2021,
www.moneycontrol.com/financials/ushamartin/consolidated-profit-lossVI/um01#um01.

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EXHIBIT 2: USHA MARTIN, CONSOLIDATED RESULTS

Year Ending
March March March March March
2020 2019 2018 2017 2016
Revenue from Operations (Gross) 21,538.2 24,246.7 20,589.1 41,489.8 44,144.6
Less: Excise and Service Taxes,
0.00 0.00 339.5 3731.6 3929.6
and Other Levies
Revenue from Operations (Net) 21,538.2 24,246.7 20,249.6 37,758.2 40,215.0
Total Operating Revenues 21,538.2 24,695.2 20,657.2 38,819.4 41,122.4
Other Income 533.5 397.6 767.9 1199.1 325.1
Total Revenue 22,071.7 25,092.8 21,425.1 40,018.5 41,447.5
Expenses
Cost of Materials Consumed 11,495.6 15,904.7 12,827.8 17,376.3 17,251.5
Operating and Direct Expenses 0.00 0.00 0.00 0.00 0.00
Employee Benefit Expenses 3,060.6 2,789.1 2,488.0 3,711.2 3,733.1
Finance Costs 7,41.8 1,135.3 924.8 5,642.4 5,466.3
Depreciation and Amortization
636.2 608.6 602.6 2,999.8 3,079.8
Expenses
Other Expenses 3,912.4 3,819.7 3,198.8 12,874.6 14,417.4
Total Expenses 20,600.1 23,475.7 20,003.2 43,567.4 46,258.8
Profit and Loss before
Exceptional and Extraordinary 1,471.6 1,617.1 142.19 (354.89) (481.13)
Items
Exceptional Items 0.00 0.00 0.00 0.00 0.00
Profit and Loss before Tax 1,471.6 1,617.1 1,421.9 (3,548.9) (4,811.3)
Tax Expenses—Continued
Operations
Current Tax 2,097.3 76.7 51.8 78.1 75.0
Less: MAT Credit Entitlement 0.00 0.00 0.00 0.00 0.00
Deferred Tax 0.00 (2,374.0) (0.7) (25.1) (622.2)
Other Direct Taxes 0.00 0.00 0.00 0.00 0.00
Total Tax Expenses 2,097.3 (2,274.6) 51.1 46.3 (547.2)
Profit and Loss after Tax and
(625.7) 3,891.7 1,370.8 (3,595.2) (4,264.1)
before Extraordinary Items
Profit and Loss from Continuing
4,206.5 3,891.7 1,370.8 (3,595.2) (4,264.1)
Operations
Profit and Loss for the Period 4,206.5 464.6 (2,687.9) (3,595.2) (4,264.1)
Minority Interest (22.4) (13.2) (32.8) (13.5) (13.7)
Consolidated Profit after MI &
4,188.4 479.8 (2,712.3) (3,589.1) (4,297.2)
Associates
Other Additional Information
EARNINGS PER SHARE
Basic EPS 14.00 2.00 (9.00) (12.00) (14.00)
Diluted EPS 14.00 2.00 (9.00) (12.00) (14.00)

Notes: *All figures (except per-share figures) are in ₹ millions; ₹ = INR = Indian rupee; The figures for 2018 and 2019 were
restated to reflect the divestment of the steel business; The figures for 2017 and 2016 included the results for the steel
business; MAT = minimum alternate tax; EPS = earnings per share.
Source: “Usha Martin Ltd.,” Moneycontrol.com, accessed January 28, 2021,
www.moneycontrol.com/financials/ushamartin/consolidated-profit-lossVI/um01#um01.

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Page 10 9B21M024

EXHIBIT 2 (CONTINUED)

As at January 1 of the various years, the USD to INR exchange rate was as follows:

Year Exchange Rate (USD/INR) Year Exchange Rate (USD/INR)

2005 (March 28) 43.70 2014 62.01
2008 39.28 2015 63.34
2009 48.25 2016 66.28
2010 46.52 2017 68.01
2011 44.83 2018 63.44
2012 52.89 2019 69.89
2013 54.65 2020 71.32

Note: Exchange rates are approximate and based on historical exchange rates for the date closest to January 1 of the year
indicated.
Source: “U.S. Dollar to Indian Rupee Spot Exchange Rates for 2005 to 2021 from the Bank of England,” Pound Sterling Live,
accessed January 28, 2021, www.poundsterlinglive.com/bank-of-england-spot/historical-spot-exchange-rates/usd/USD-to-
INR.

EXHIBIT 3: USHA MARTIN’S VERTICALLY INTEGRATED MODEL

Coal was a fossil fuel, and coke was a processed form of coal. Direct reduced iron (also called sponge
iron) was a processed form of iron ore.
Source: Usha Martin Limited, Annual Report 2009–10, 10, accessed January 28, 2021, www.ushamartin.com/wp-
content/uploads/2014/04/UMIL-AR-2009-101.pdf.

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Page 11 9B21M024

EXHIBIT 4: LIST OF USHA MARTIN’S SUBSIDIARIES AND JOINT VENTURES

Subsidiaries and shareholding as on March 31, 2019:

1. UM Cables Limited (100%)

2. Usha Martin Power & Resources Limited 11. Usha Martin Italia SRL* (100%)
(100%) 12. Brunton Wolf Wire Ropes FZCo. (60%)
3. Bharat Minex Private Limited (100%) 13. Usha Martin Americas Inc. (100%)
4. Gustav Wolf Speciality Cords Limited 14. Usha Siam Steel Industries Public Company
(100%) Limited (98%)
5. Usha Martin International Limited (100%) 15. Usha Martin Singapore Pte. Ltd. (100%)
6. Usha Martin UK Limited* (100%) 16. Usha Martin Australia Pty Ltd.* (100%)
7. European Management and Marine 17. Usha Martin Vietnam Company Limited*
Corporation Limited* (100%) (100%)
8. Brunton Shaw UK Limited* (100%) 18. PT Usha Martin Indonesia* (100%)
9. De Ruiter Staalkabel BV* (100%) 19. Usha Martin China Company Limited*
10. Usha Martin Europe BV* (100%) (100%)

Joint Ventures
20. Pengg Usha Martin Wires Private Limited (40%)
21. CCL Usha Martin Stressing Systems Limited (50%)
22. Tesac Usha Wirerope Company Limited** (50%)

Notes: * Represents a step-down subsidiary; ** Represents a step-down jointly controlled entity.

Source: Usha Martin Limited, Annual Report 2018–19, 151, 2019, accessed January 28, 2021,
www.ushamartin.com/report/annual-report-2018-19/.

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Page 12 9B21M024

EXHIBIT 5: PERFORMANCE OF USHA MARTIN’S WWR BUSINESS (₹ MILLIONS)

Year Ended
March 2020 March 2019 March 2018 March 2017 March 2016
WWR Revenues 13,909.7 17,050.5 15,179.6 13,535.5 13,038.1
Profits before Tax
1,995.9 2,511.5 2,093.8 1,410.7 1,457.2
and Finance Costs
Assets 10,485.6 10,745.2 10,622.4 10,674.4 …..
Liabilities 3,191.8 2,687.8 3,068.1 3,113.0 ……
Assets minus
7,701.9*
Liabilities

Note: For the year ended March 2016, the results announcement listed only the assets and net liabilities and did not list assets
and liabilities of the WWR business separately; WWR = wire and wire rope.
Sources: Shampa Ghosh Ray (company secretary, Usha Martin Limited) to secretaries of the BSE Limited, the National Stock
Exchange of India Ltd., and the Societe de la Bourse de Luxembourg, letter announcing results for the quarter and year ended
March 31, 2020, with attachments, June 6, 2020, accessed January 28, 2021, www.ushamartin.com/wp-
content/uploads/2020/06/SEIntimationBMOutcome06062020.pdf; Rajeev Jhawar (managing Director, Usha Martin Limited) to
secretaries of the National Stock Exchange of India Ltd., the BSE Limited, and the Societe de la Bourse de Luxembourg, letter
announcing audited financial results for the quarter and year ended March 31, 2019, with attachments, May 27, 2019,
accessed January 28, 2021, www.ushamartin.com/wp-content/uploads/2019/05/UMLResultsQ4FY1819.pdf; Rajeev Jhawar
(managing Director, Usha Martin Limited) to secretaries of the BSE Limited, the National Stock Exchange of India Ltd., and
the Societe de la Bourse de Luxembourg, letter announcing audited financial results for the quarter and year ended March 31,
2018, with attachments, May 21, 2018, accessed January 28, 2021, www.ushamartin.com/wp-
content/uploads/2018/05/FinancialResults.pdf; Rajeev Jhawar (managing Director, Usha Martin Limited) to secretaries of the
National Stock Exchange of India Ltd., the Bombay Stock Exchange Limited, and the Societe de la Bourse de Luxembourg,
letter announcing audited financial results for the quarter and year ended March 31, 2017, with attachments, May 31, 2017,
accessed January 28, 2021, www.ushamartin.com/wp-content/uploads/2017/06/UML_Results_FY2016-17.pdf; Rajeev
Jhawar (managing Director, Usha Martin Limited) to secretaries of the Bombay Stock Exchange Limited, the Societe de la
Bourse de Luxembourg, and the National Stock Exchange of India Ltd., letter announcing audited financial results for the
quarter and year ended March 31, 2016, with attachments, May 25, 2016, accessed on January 28, 2021,
www.ushamartin.com/wp-content/uploads/2016/05/QuarterlyFinancialResults-31Mar16-.pdf; All announcements available at
ushamartin,com.

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Page 13 9B21M024

ENDNOTES
1
This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Usha Martin Limited or any of its employees.
2
Shobha Roy, “After Selling Off Steel Business to the Tatas, Usha Martin Turns Focus on Consolidation,” Hindu Business
Line, September 21, 2019, accessed February 2, 2021, www.thehindubusinessline.com/companies/after-selling-off-steel-
business-to-the-tatas-usha-martin-turns-focus-on-consolidation/article29475202.ece.
3
Rakhi Mazumdar, “Tatas to Take Over Usha Martin’s Steel Unit Today,” Economic Times, April 9, 2019, accessed May 10,
2020, https://economictimes.indiatimes.com/markets/stocks/news/tatas-to-take-over-usha-martins-steel-unit-
today/articleshow/68788378.cms.
4
Tathagata Bhattacharya, “Economists Say: No More a Recession, India Headed towards ‘Depression,’” National Herald,
June 22, 2020, accessed July 12, 2020, www.nationalheraldindia.com/opinion/economists-now-say-future-bleaker-than-ever;
“Brazil Economy to Shrink by 5% This Year, Says World Bank,” Reuters, April 13, 2020, accessed June 27, 2020,
www.reuters.com/article/brazil-economy-world-bank/brazil-economy-to-shrink-by-5-this-year-says-world-bank-
idUSL2N2C107F?mod=article_inline.
5
“Subdued Global Economic Recovery,” The World Bank, accessed March 3, 2021.
6
Nitin Pangarkar, Mohit Agarwal, and Natasha Pangarkar, “Usha Martin: Competitive Advantage through Vertical Integration,”
in Strategic Management: An Integrated Approach, 11th ed., ed. Charles W. L. Hill, Gareth R. Jones, and Melissa A. Schilling
(Stamford, CT: Cengage Learning, 2015), C-347–C-359.
7
Ibid.
8
Ibid.
9
Ibid.
10
“Usha Martin Ltd.,” Business Standard, accessed August 5, 2020, www.business-standard.com/company/usha-martin-
1076/information/company-history.
11
Nitin Pangarkar and Manav Garg, Usha Martin: Surviving a Perfect Storm (London: Sage Publications, 2019).
12
Pangarkar, Agarwal, and Pangarkar, op. cit.; Usha Martin Limited, Annual Report 2011–12, 12, accessed May 13, 2020,
www.ushamartin.com/wp-content/uploads/2014/04/Usha-Martin-Limited-Annual-Report-2011-12.pdf.
13
“Cable,” Usha Martin, accessed May 10, 2020, www.ushamartin.com/product/cable/.
14
₹ = INR = Indian rupee; US$1 = ₹75.6897 on May 1, 2020.
15
Usha Martin Limited, Annual Report 2018–19, 4, accessed May 5, 2020, www.ushamartin.com/wp-
content/uploads/2019/08/Usha-Martin-Limited-Annual-Report-2018-19.pdf.
16
“Facilities,” Usha Martin, accessed May 11, 2020, www.ushamartin.com/facility/facilities/.
17
Pangarkar, Agarwal, and Pangarkar, op. cit.
18
Usha Martin Limited, Annual Report 2016-17, 5, accessed January 28, 2021, www.ushamartin.com/wp-
content/uploads/2017/08/UM_AR_2016-17.pdf.
19
Usha Martin Ltd., “Profit and Loss Account of Usha Martin,” Moneycontrol, accessed July 2, 2020,
www.moneycontrol.com/financials/ushamartin/profit-lossVI/UM01/4#UM01.
20
Sanjeev Kumar Kanchan and Umashankar S., “Pollution Glorified,” Down to Earth, February 15, 2012, accessed June 2,
2020, www.downtoearth.org.in/coverage/pollution-glorified-35851.
21
François Rousseau and Luca Caruso, “Improving Returns in Capital-Intensive Industries,” IndustryWeek, February 24, 2016,
accessed February 2, 2021, www.industryweek.com/finance/article/21970802/improving-returns-in-capitalintensive-
industries; Pangarkar and Garg, op. cit.
22
Heather Timmons and Zheping Huang, “Charted: How China Turned the Global Steel Industry Upside Down in Just 15
Years,” Quartz, June 7, 2016, accessed June 5, 2020, https://qz.com/699979/how-chinas-overproduction-of-steel-is-
damaging-companies-and-countries-around-the-world/.
23
Dean Nelson, “Indian Government Accused of ‘Looting the Country’ over Coal Mining Contracts,” Telegraph, May 22, 2012,
accessed June 10, 2020, www.telegraph.co.uk/news/worldnews/asia/india/9160978/Indian-government-accused-of-looting-
the-country-over-coal-mining-contracts.html.
24
Kanchan and Umashankar, op. cit.
25
Ibid.
26
Usha Martin Limited, Annual Report 2014–15, 9, accessed May 19, 2020, www.ushamartin.com/wp-
content/uploads/2015/07/Annual-Report-2014-15.pdf.
27
Usha Martin Limited, Annual Report 2010–11, 28, accessed May 21, 2020, www.ushamartin.com/wp-
content/uploads/2014/04/Annual-Report-Delux-2010-11.pdf.
28
PTI, “India World’s Fourth Largest Steel Maker in 2011: WSA,” Times of India, updated January 29, 2012, accessed June
20, 2020, https://timesofindia.indiatimes.com/business/india-business/India-worlds-fourth-largest-steel-maker-in-2011-
WSA/articleshow/11675309.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst.
29
PTI, “Tata Steel to Buy Usha Martin’s Steel Business for Up to ₹4,700 Crore,” Mint, September 22, 2018, accessed June
23, 2020, www.livemint.com/Companies/BTqISSbsuRvOOAohbB0zKJ/Tata-Steel-to-acquire-Usha-Martins-steel-business-
for-up-to.html.
30
World Steel in Figures 2011 (Brussels: World Steel Association, 2011), accessed February 2, 2021,
www.worldsteel.org/en/dam/jcr:65dbfd1d-9429-4f71-ac68-
4fe5b4848776/World%2520Steel%2520in%2520Figures%25202011.pdf.
31
Timmons and Huang, op. cit.

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Page 14 9B21M024

32
Usha Martin Limited, Annual Report 2017–18, 5, accessed May 26, 2020, www.ushamartin.com/wp-
content/uploads/2018/08/UM-AR-ALL-PAGE_FOR-NET.pdf; Maytaal Angel, “China to Cut Steel Capacity but Excess Output
Still Expected – Eurofer,” Reuters, May 11, 2017, accessed February 2, 2021, www.reuters.com/article/us-steel-eu-
idUSKBN18703O.
33
Angel, op. cit.
34
Usha Martin Limited, Annual Report 2014–15, op. cit.
35
Larry Elliott, “Oil Price Falls to 11-Year Low with Global Glut Expected to Deepen in 2016,” Guardian, December 21, 2015,
accessed February 3, 2021, www.theguardian.com/business/2015/dec/21/brent-crude-oil-price-11-year-low; Udit Prasanna
Mukherji, “Management Woes at Usha Martin, Financial Institutions Seek Rejig,” Times of India, April 25, 2017, accessed
February 3, 2021, https://timesofindia.indiatimes.com/city/kolkata/management-woes-at-usha-martin-financial-institutions-
seek-rejig/articleshow/58350248.cms.
36
Usha Martin Limited, Annual Report 2017–18, op. cit.
37
Suhani Varma, “Usha Martin Clarifies on Sale of Wire Business,” Ways2Capital, September 25, 2017, accessed February
2, 2021, https://ways2capital-equitytips.blogspot.com/2017/09/usha-martin-clarifies-on-sale-of-wire.html; Keshav Sunkara,
“Kolkata-Based Usha Martin Explores Sale of Steel Division,” VCCircle, June 12, 2018, accessed February 2, 2021,
www.vccircle.com/kolkata-based-usha-martin-explores-the-sale-of-steel-division/.
38
Udit Mukherjee, “Usha Martin Forms Panel to Sell Steel Biz,” Times of India, June 12, 2018, accessed May 15, 2020,
https://timesofindia.indiatimes.com/business/india-business/usha-martin-forms-panel-to-sell-steel-
biz/articleshow/64550362.cms.
39
Rakhi Majumdar, “Usha Martin Plans to Sell Steel Business,” Economic Times, June 11, 2018, accessed May 15, 2020,
https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/usha-martin-plans-to-sell-steel-
business/articleshow/64545199.cms?from=mdr.
40
Avishek Rakshit, “Usha Martin Aims to Sell Its Steel Business by FY19 to Pare Debt,” Business Standard, August 17, 2018,
accessed February 2, 2021, www.business-standard.com/article/companies/usha-martin-aims-to-sell-its-steel-business-by-
fy19-to-pare-debt-118081601578_1.html.
41
Ibid.
42
Rakhi Majumdar, “The Big Surprise: Usha Martin Takes the Path Less Trodden,” Economic Times, September 24, 2018,
accessed May 12, 2020, https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/the-big-surprise-usha-martin-
takes-the-path-less-trodden/articleshow/65926016.cms.
43
Tata Steel Limited, “Signing of Definitive Agreements for Acquisition of Steel Business of Usha Martin Limited by Tata Steel
or Its Subsidiaries,” press release, Tata Steel Limited, September 22, 2018, accessed June 15, 2020,
www.tatasteel.com/media/7506/sep-222c-2018-press-release-signing-of-definitive-agreements-for-acquisition-of-steel-
business-of-usha-martin-limited-by-tata-steel-or-its-subsidiaries.pdf.
44
Usha Martin Limited, Annual Report 2018–19, op. cit.
45
Roy, op. cit.
46
Ibid.
47
Usha Martin Limited, Annual Report 2017–18, op. cit.
48
Bhattacharya, op. cit.; “Brazil Economy to Shrink by 5% This Year, Says World Bank,” op. cit.
49
PwC, Mine 2020: Resilient and Resourceful, 17, June 2020, accessed 15 July, 2020, www.pwc.com/gx/en/energy-utilities-
mining/publications/pdf/pwc-mine-2020.pdf.

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