SAIL to invest 50% in Kerala steel PSU, MoU on May 3

Written by Economy Bureau | Thiruvananthapuram, Apr 29 | Updated: Apr 30 2008, 06:49am hrs
Steel Authority of India (SAIL) is poised to invest 50% in Steel Industries Limited Kerala (SILK) for manufacturing high-quality steel with minimal carbon contamination. The memorandum of understanding (MoU) for the JV will be signed on May 3 in Kozhikode, in the presence of Union minister for steel Ram Vilas Paswan.

Although SAIL has indicated interest in as much as 50% stakes in Keralas ailing PSU, only 88% of SILKs holdings is with the State government. If the adjacacent Beypore port development and bulk raw material sourcing plans take off simultaneously, the scale-effect of the JV could emerge significant.

Parleys are on with FIs and private holders to glean up the balance 12% too.

Even if this is not available, the Centre and State governments are ready to have 50:50 equity pattern in the available 88%, Kerala industry minister Elamaram Karim said. The State government has also agreed that the CMD of the new SAIL-SILK JV can be a SAIL nominee.

Paswan will lay the foundation stone for a rolling mill for thermo-mechanically treated (TMT) steel this week, after the pact for SAILs Kerala unit is signed. This is expected to create about 90 extra jobs, besides conserving the present 350-odd staffers.

SAIL and SILK are also looking for a valuation agency to prepare the due diligence. The new entity is expected to complete formalities and come to existance in three to five months.

In a gesture of committment, the Central PSU had, as early as October 2007, provided the working-capital starved SILK with Rs 5 crore as interest-free loan. Steamed by this input, the loss-making company had optimised its annual capacity of 55,000 tonnes, posting Rs 3.5 crore operating profit in 2007-2008.

The recent surge in steel prices gave the momentum, PH Kurien, State industry secretary said.

SILK, with Rs 90 crore accumulated losses and about Rs 100 crore liabilities, is logged into the BIFR books. Capacity-expansion and diversification are in agenda. But the first priority is to haul it out of the BIFR net, Kurian said.