KIOCL set to buy Tungabhadra Steel

Written by Jaishankar Jayaramiah | Bangalore | Updated: Aug 1 2010, 05:26am hrs
KIOCL (formerly Kudremukh Iron Ore Ltd), a state-owned enterprise run by the steel ministry, is considering acquisition of Tungabhadra Steel Products (TSPL), another Karnataka-based public sector firm. TSPL is a sick unit under the heavy industries ministry.

KIOCL CMD K Ranganath said the company might be required to invest Rs 150 crore to acquire TSPL and take care of its 100 employees.

The ministry of heavy industries has approached us. We are in talks to have clear picture on various aspects in connection with the acquisition, he said. KIOCL would acquire TSPL only if it was free from any liabilities, he added.

Ranganath added that TSPL had a government loan of Rs 227 crore and a loan of Rs 18 crore from the SBI. The union government is considering waiving its loan along with interest.

The company should negotiate with SBI to arrive at some decision over its loan. KIOCL will not take responsibility to settle wage arrears between 1992 to 2010, he added.

We can acquire the company provided its balance sheet is clear, without any liabilities, he said. If all these demands are met, the company will go for valuing TSPL for acquisition, he added.

If TSPL were to be acquired, he said its employees experienced in structural fabrication work would be helpful to the company. TSPL also has a mini hydel power plant with a capacity of 4 mw.

TSPL was established in 1960 to supply structural fabrications to Tungabhadhra dam under construction near Hospet in Karnataka. After the dam was completed, the business volumes to TSPL declined and it turned sick.

TSPL is doing structural fabrication work on contract basis.

He said TSPL has a fabrication facility, dedicated railway line cum sidings along with 88 acres.

KIOCL is looking at expansion plans at its Mangalore Pellet Plant. It is also weighing options on setting up an integrated steel plant in a joint venture with Bangalore-based United Telecom.

KIOCL, which has a cash reserve of about Rs 1,200 crore, reported a loss of Rs 177 crore last fiscal, compared with Rs 24 crore profit the previous year.

The company's turnover also declined to Rs 992 crore from Rs 1,228 crore during the same period. The loss was due to a shutdown in its captive iron mining facility in Kudrehmukh in 2005, following directions from the SC.