With insolvent entities getting new owners through the National Company Law Tribunal (NCLT) route, brand building is going to be a tougher battle for new entrants like UK-based Liberty House against domestic players such as Tata Steel and Sajjan Jindal-led JSW Steel.
Last month, the insolvency tribunal approved the Aion Capital-JSW Steel resolution plan for the 1.5-million-tonne Monnet Ispat. Sanjeev Gupta-led Liberty House bagged auto component maker Amtek Auto and alloy and special construction steel manufacturer Adhunik Metaliks, while Tata Steel acquired Neeraj Singhal-led Bhushan Steel.
The change of ownership has paved the way for brand-transition and brand-building exercise in the coming months for these entities. Experts are of the view that brand spending would go up sizeably with efforts varying depending on residue of previous acceptance.
For instance, Bhushan Steel products enjoyed strong brand name. It manufactures different grades of steel, pipes, billets, and sponge iron, and brands its high-selling galvanised products.
“The trust and reliability remains intact for Bhushan Steel customer. With Tata Steel coming in, it will only strengthen and lift the customer confidence,” said Nitin Johari, former chief financial officer of Bhushan Steel.
At Tata Steel’s 111th annual general meet last month, chairman N Chandrasekaran informed shareholders that since Bhushan Steel plant was located at Angul in Odisha, adjacent to its existing plants — Tata Steel Kalinganagar (TSK) and Tata Steel Jamshedpur (TSJ), the newly acquired plant would see its brand name changed to Tata Steel Angul (TSA) at some point in time.
In the case of JSW, its chairman Sajjan Jindal plans to merge Monnet Ispat & Energy with the parent JSW Steel and sell long products of the former under the already established JSW brand.
Tata Steel to rebrand Bhushan Steel Tata Steel Angul
Liberty House to take six months to chalk out branding strategy for India business
Brand spending could go up disproportionately for new entrants
Gestation period typically is 30 months for new entrants
The company sells its TMT bars under brand name Neosteel and few more products under Vishwas. It sells a basket of products like hot and cold rolled, colour-coated steel among others under the tagline ‘better everyday’.
“Brand transitions are time consuming and are built on trust and reliability, which cannot be earned overnight. For someone, who is an alien to a market like Liberty House, which may be an established player elsewhere but not in India, the battle to build the brand gets not just tougher but also needs increased spending,” explained Harish Bijoor, chief executive officer, Harish Bijoor Consults Inc.
Liberty House, however, is yet to plan the company’s branding strategy for India businesses. A company executive, who did not want to be quoted, said it would take the firm at least six months to chalk out the plan.
Sanjeev Gupta’s GFG Alliance would be running the businesses acquired by Liberty.
“Typically, for serious players with no presence in a market, brand spending goes up disproportionately and the exercise does not deliver any immediate revenue. At least a 30-month gestation period is needed to see some impact of brand building on ground,” Bijoor added.