SAIL's Voluntary Retirement Scheme

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Case Details:

Case Code : HROB002
Case Length : 07 Pages
Period : 1999-2001
Organization : SAIL
Pub Date : 2001
Teaching Note : Available
Countries : India
Industry : Metals & Mining

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction

At a meeting of the board of directors in June 1999, the CEOs of Steel Authority of India's (SAIL) four plants - V. Gujral (Bhilai), S. B. Singh (Durgapur), B.K. Singh (Bokaro), and A.K. Singh (Rourkela) made their usual presentations on their performance projections. One after the other, they got up to describe how these units were going to post huge losses, once again, in the first quarter¹ of 1999-2000. After incurring a huge loss of Rs 15.74 billion in the financial year 1998-99 (the first in the last 12 years), the morale in the company was extremely low. The joke at SAIL's headquarters in Delhi was that the company's fortunes would change only if a VRS was offered to its CEOs - not just the workers.

Background Note

SAIL was the world's 10th largest and India's largest steel manufacturer with a 33% share in the domestic market. In the financial year 1999-2000, the company generated revenues of Rs. 162.5 billion and incurred a net loss of Rs 17.2 billion. Yet, as on February 23, 2001, SAIL had a market valuation of just Rs. 340.8 billion, a meager amount considering the fact that the company owned four integrated and two special steel plants.

SAIL was formed in 1973 as a holding company of the government owned steel and associated input companies. In 1978, the subsidiary companies including Durgapur Mishra Ispat Ltd, Bokaro Steels Ltd, Hindustan Steel Works Ltd, Salem Steel Ltd., SAIL International Ltd were all dissolved and merged with SAIL. In 1979, the Government transferred to it the ownership of Indian Iron and Steel Company Ltd. (IISCO) which became a wholly owned subsidiary of SAIL. SAIL operated four integrated steel plants, located at Durgapur (WB), Bhilai (MP), Rourkela (Orissa) and Bokaro (Bihar).

The company also operated two alloy/special steel plants located at Durgapur (WB) and Salem (Tamil Nadu). The Durgapur and Bhilai plants were pre-dominantly1ong products² plants, whereas the Rourkela and Bokaro plants had facilities for manufacturing flat products³...

Excerpts >>

1] April 1999 to June 1999.

2] Long products consist of bars, rods, angles, channels and other structural materials used by construction industries.

3] Flat products constitute HR and CR products and galvanized plain and galvanized corrugated (GP/GC) coils or sheets. HR products encompass a wide range of products, which can be categorized into coils or plates. Coils are further divided into wide-width and narrow width HR coils and HR sheets, strips and skelps. Similarly, CR products are divided into coils, which are classified on the same lines as HR coils. GP/GC sheets are essentially CR strips or sheet, coated with zinc.