The Telegraph
Saturday , September 22 , 2012
Since 1st March, 1999
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Tatas offer mine to sell sick unit

Calcutta, Sept. 21: Tata Metaliks has decided to use an iron ore mine as a bait to sell its mothballed pig iron plant at Redi in Maharashtra.

The Tata Steel subsidiary expects to complete the deal with a potential buyer over the next few months.

“We are in discussions with two Indian players. The option is to sell the plant in entirety or on a piecemeal basis,” Koushik Chatterjee, chairman of Tata Metaliks, said after the annual general meeting of the company.

Tata Metaliks had bought the facility for around Rs 115 crore in January 2006.

However, the company failed to run the plant profitably after the prices of crucial raw materials such as iron ore and coking coal jumped in the international market. It buys both the raw materials from the market as it has no mine of its own.

An iron ore mining ban in places such as Bellary in Karnataka and Goa also did not help, and it decided to put the 200,000-tonne unit on the block.

Earlier this year, a deal to sell the unit to Fomento Resources fell through because of differences over valuation. Chatterjee, who is also the group CFO of Tata Steel, today disclosed that the selloff efforts had been renewed.

Sources said this time the company decided to transfer a prospecting licence of an iron ore block in Maharashtra’s Konkan region along with the plant to sweeten the deal for the prospective buyer.

The clubbing of two assets is likely to shore up the valuation of the Redi plant and help the company to cut losses. A successful completion of the deal is likely to bring the company back into profitability.

Kharagpur plan

Chatterjee said the company was planning to set up a power plant and a coke oven plant with a cumulative investment of Rs 120 crore at its existing plant at Kharagpur, Bengal.

Tata Metaliks is likely to partner another firm to build these units. It has acquired 22 acres privately near its plant to put up the units.

The coke oven will have a capacity of 120,000 tonnes, and the steam from the plant will be used to fire the 12MW power plant.

“These measures are expected to reduce our cost of operation and increase profitability,” Chatterjee said.

The company will light up a new mini blast furnace next week and a sinter plant next year. This will also reduce the cost of operation as it will be able to use lower quality iron ore. The capital expenditure on the sinter plant will be Rs 65 crore.

The company also hopes to ramp up production of ductile iron pipe with Japan’s Kubota by 20 per cent this year.

Last year, the Kubota-Tata joint venture saw a production of 49,000 tonnes. The year before the joint venture produced around 20,000 tonnes.

“I am hoping better capacity utilisation will help the overall business,” Chatterjee said.