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PUNE, Aug 27: Kalyani Steels Ltd's joint venture with Carpenter Technology Corporation -- Kalyani Carpenter Special Steels Pvt Ltd -- was a "pre-emptive" move as the speciality steels industry was witnessing a decline in both turnover and profits, according to Kalyani Steels Ltd chairman BN Kalyani.
PUNE, Aug 27: Kalyani Steels Ltd's joint venture with Carpenter Technology Corporation -- Kalyani Carpenter Special Steels Pvt Ltd -- was a "pre-emptive" move as the speciality steels industry was witnessing a decline in both turnover and profits, according to Kalyani Steels Ltd chairman BN Kalyani.
The joint venture will be formalised by mid-October following clearances from all agencies. Addressing shareholders at the 25th annual general meeting of KSL, Kalyani said that while the turnover had declined by 2.4 per cent, profits had dropped by 122 per cent, threatening the viability of the entire sector. He said a large number of established units have had to down shutters on account of poor turnover and profits. The threat to the speciality steels sector was largely due to an increase in the cost of basic inputs like scrap and power.
KSL, which has a strategic alliance with Mukand Ltd and Kalyani Ferrous Industries Ltd for its mini-blast furnace at Ginigera, Karnataka, has begun the manufacture of hot metal and cast blooms. It will begin steel rolling in November. Under the strategic alliance, Mukand, which put up 58 per cent of the equity, will get 58 per cent of the production in the first phase. KSL will get 42 per cent of the production, amounting to 120,000 tpa, while in the second phase the partners will get an equal amount. The alliance allows for risk, cost and production sharing.
Kalyani pegged the domestic demand for speciality steels at about 25,000 tonnes and an equal amount for exports. He said CTC, which will hold 26 per cent of the equity in KCSSL, would bring in Rs 43 crore as its share, allowing KSL to reduce its long-term loans. I-Sec, which carried out the valuation, had valued KSL's Mundhwa plant at Rs 172 crore. The joint venture would not involve any major capital expenditure for KSL while about 50 per cent of its production is slated for the export market.
Kalyani was confident that KSL would manufacture 120,000 tonnes of carbon steel and low alloy steel in the next year at its Karnataka plant. This is expected to go up to 200,000 tonnes in the next five years, valued at Rs 500 crore, with a similar turnover in the joint venture in the next five years.
In addition to the 74:26 manufacturing joint venture, KSL and CTC will set up another venture, Kalyani Carpenter Metal Centres Pvt Ltd, a marketing arm in which Carpenter will hold 51 per cent of the equity and KSL the balance. Investment in the two joint ventures is expected to be up to Rs 40 crore.
Kalyani Seamless turn corner
Kalyani Seamless Steel Tubes Ltd (KSSTL), the loss-making division of Kalyani Steels Ltd which was hived off as a separate company a few years ago, has turned the corner by entering into a strategic alliance with Tisco. Under the arrangement, KSSTL will supply all its production to Tisco. The company is already earning a monthly cash profit of about Rs 1.5 crore, which, according to chairman BN Kalyani, would go up to Rs 2 crore by next month.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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