Institutional sources told The Financial Express that the the Chennai-based company struck the deal with Steel Strips promoter RK Garg last week. The Rs 65-crore Steel Strips is a large steel tubes producer in the north with a monthly capacity of 2,500 tonnes. However, following the slump sale, the company will become a shell entity. The company, which posted a net profit of Rs 1.6 crore in 1997-98 (1998-99 figures are not available), has been languishing at the bourses with stock prices ruling below par for the last three years. At the Bombay Stock Exchange, the scrip was last traded at a price of Rs 2 on November 5.

"The acquisition will offer strategicadvantages to TIIL. North India is a very good market for steel tubes, and with this acquisition, TIIL will be in a much better position to service this fast growing market," sources said. Earlier this year, TIIL had entered into a strategic alliance with Steel Tubes of India for production of steel tubes.

Tube Investments, a leading player in the steel tubes sector, has been a key supplier of steel tubes to the automobile and bicycle industry. The company has an installed capacity to produce 92,000 tonnes of ERW/CDW tubes per year.With the automobile industry out of the recession, industry watchers say the latest acquisition will help TIIL cater to the increasing demand from the auto sector. The engineering division, which services the automobile sector, recorded a 20 per cent growth in sales last fiscal. TIIL has appointed a management consultant for drafting a cost reduction plan. "Steps has already been initiated to reduce costs and step up productivity. The benefits from the exercise will flow fromthe current year," the company has said. Export volumes from the engineering division was, however, lower at 6,452 tonnes last fiscal (7,519 tonnes the previous year).

In a bid to generate higher export realisations, TIIL is re-orienting its focus in terms of markets, customers and product mix. The quality systems are also being upgraded to capture new export markets. Despite a slowdown on the export front, TIIL's cycles division recorded a 15 per cent growth during 1998-99 posting a turnover of Rs 285.49 crore. The company introduced 12 new products in this segment which helped the company prop up volumes in a difficult year.

TIIL reported a sales turnover of Rs 677.34 crore last fiscal, up from Rs 607.93 crore during the previous year. Profit before tax was higher at Rs 21.49 crore (Rs 17.44 crore in the previous year), while the net profit increased from Rs 16.01 crore to Rs 21.07 crore during the period.