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McNally Bharat in diversification mode

Calcutta, Oct. 31: McNally Bharat Engineering Company is planning to diversify into sponge iron, coal washery and contract mining within a year. The company has reported a nearly four-fold increase in net profit to Rs 7.19 crore for the April-September period this year from Rs 1.71 crore during the same period last year. Its turnover went up by nearly two times to Rs 222.39 crore.

Promoted by BM Khaitan and CK Birla families, the city-based engineering company plans to set up its sponge iron facility, of 500-600 tonnes per day capacity, either at Kumardhubi in Jharkhand or in Durgapur.

“We have a manufacturing facility at Kumardhubi and are in the process of buying out a sick steel re-rolling mill close to our existing plant. The total area of the mill is 170 acres and the plant is built on a 35-acre plot. We plan to set up the sponge iron unit on the vacant 35 acres,” said Srinivash Singh, managing director, McNally Bharat.

“However, a sponge iron unit attracts strict environmental regulations. If we want to build the sponge iron facility in Kumardhubi, we have to get the approval from the governments of Bihar, which owns the mill, and Jharkhand, which will give environment clearances” Singh added.

“So, we are contemplating another option at Durgapur,” he said. “We are in talks with SAIL to provide us the land to set up the sponge iron plant and supply us iron ore. In turn, SAIL can lift the entire produce from our plant as the company itself does not make any sponge iron,” Singh said, adding the public sector steel maker has shown interest in the proposal.

McNally Bharat has estimated an investment between Rs 100 crore and Rs 150 crore for the sponge iron plant, which will start production by 2009.

The company is also planning to set up coal washeries in Orissa in the Mahanadi Coalfield area and is in talks with Coal India regarding this. “Getting private land in coalfields is very difficult and that’s why we are talking to Coal India to set up the washeries on its land on a build-own-operate basis,” Singh said. The washeries will have a capacity of 4 million tonnes per year.

McNally Bharat will invest between Rs 200 crore and Rs 250 crore to set up a sponge iron unit and a coal washery over the next 12 months.

The company is also doubling capacity at its existing plants in Kumardhubi and Bangalore at an investment of Rs 15-20 crore in 2007-08. It has already raised about Rs 45 crore through foreign currency convertible bonds to Goldman Sachs and the promoters will contribute another Rs 20.56 crore by way of picking up 14.38 lakh convertible warrants.

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