Baba Kalyani, the promoter of Kalyani Seamless, had approached Tisco with the offer to buy out his company after the Tata flagship closed down its seamless tubes plant earlier in the year. The Kalyani Seamless plant at Baramati in Maharashtra is located close to the largest market -- western India. It also has the latest hot scetion plant from Mannesmann Demag of Germany.

Tisco officials confirmed that the company had been exploring certain possibilities like buying out the promoters' entire stake or forging a joint venture. "But now, the Tata Steel board has taken a conscious decision to get out of the seamless tubes business altogether."

"We have expertise in marketing seamless tubes since we have been in this business for years. But that iswhere our relationship with Kalyani Seamless ends," Tisco sources explained.

It is learnt that Kalyani Seamless' high debt burden has also been a deterring factor. The loss-making company's outstanding debt figure for the year ended March 31, 1998, is Rs 181.69 crore.

Tisco had signed a memorandum of understanding (MoU) to market Kalyani Seamless' carbon and alloy seamless tubes. It will continue with the marketing arrangement.

Tisco's tubes division, along with other non-core businesses like cement, bearings and ferro-chrome, have all been incurring heavy losses. The company realised that it was the seamless tubes unit that was making the maximum losses, following which operations were stopped.

In the last fiscal, the tubes division is believed to have eroded Tata Steel's bottomline by close to Rs 20 crore in 1997-98. Although the seamless tubes unit was closed to stem losses, Tisco continues to manufacture standard pipes, precision and structural tubes.

Tata Steel officials said that during thecurrent year, the bearings and cement divisions may record profits. Tisco's seamless unit has an installed capacity of 52,000 tonne per annum while Kalyani Seamless produced around 21,000 tonne during the last year.

Kalyani Seamless, which has a net worth of Rs 94.23 crore, has outstanding liabilities of Rs 181.69 crore. Its total `loans & advances' are at Rs 71.03 crore.

The company has recorded a net loss of Rs 26.39 crore for the 1997-98 financial year on a turnover of Rs 144.1 crore. Although the turnover jumped substantially from Rs 97.71 crore, and the loss figure also reduced from Rs 38.91 crore in the previous year, the company's raw material costs have shot up substantially.

The seamless tubes industry also faces the threat of cheaper imports from the CIS and south-east Asian countries. The lack of fresh investments in the petroleum and gas pipeline sector has also hit the seamless tubes industry.

Manufacturing not lucrative:

Tisco was interested in Kalyani Seamless Tubes as afterbuying the unit, it would have been one of the two major players left in the country. But as Kalyani Seamless Tubes has seen numerous delays, by the time the unit came up in 1995-96, the company was facing severe financial crunch. In addition the industry had lost its charm with the government's policy decision of zero duty imports on seamless tubes. Getting the deemed export status did not help the industry as ONGC and new refineries continued to import seamless tubes, instead of buying from local producers.

Further, the reduction in finished goods price by 10 per cent and simultaneous rise in cost of production by 8.5 per cent has made the manufacturing of product not very lucrative.