The Hindu Business Line : `We hope to cash in on the construction boom'

It currently produces 1,20,000 tonnes per annum of pig iron on technology obtained from Korf of Brazil. Besides catering to the demands of the domestic market, pig iron and cast iron castings manufactured by the company are exported to Europe and the US.

It also exports non-standard and non-conventional products to Australia and Europe. Buoyed by the upswing in the steel sector, the pig iron manufacturer, whose plant is located at the industrial township of Durgapur in West Bengal, has firmed up an expansion plan, which entails an investment of Rs 100 crore. A 1,50,000 tonnes per annum steel billet manufacturing facility is being set up. The idea is to cash in on the demand for steel, which is definitely expected to last for at least the next five years, says Mr R.K. Kajaria, Chairman & Managing Director of KIC Metaliks Ltd, in an interview with Business Line.

Mr Kajaria discussed his company's growth and investment plans and his perception about the growing demand for steel not just in the domestic market but also in China and other South-East Asian countries.

Excerpts from the interview:

What is the outlook for the steel industry in general and your company in particular?

The outlook for the steel industry is very bullish now and will continue to remain so for the next five years at least, thanks to the construction boom not just in India but also in China. Hence, we have decided to go in for an expansion project and set up a 1,50,000 tonnes per annum capacity steel billet manufacturing facility at our Durgapur plant at an investment of Rs 100 crore. Our billet plant will be operational within the next six to nine months. That will give us a headstart over greenfield projects, which will take at least two years to go on stream. Of the pig iron that we manufacture, 75,000 tonnes will be set aside for billet plant. We will purchase another 75,000 tonnes of sponge iron or scrap to produce 1,50,000 tonnes of steel billets per annum. A 4-MW capacity power plant will generate power out of waste gases generated by the blast furnace. This will bring down the energy bill, which, in turn, will have a positive impact on the company's profitability.

How do you propose to raise the funds for the expansion project?

Although ours is a listed company, we do not plan to raise funds from the capital market. We will raise the resources through internal borrowings and debts, may be external commercial borrowings as well.

How will you market the billets?

Currently, we sell pig iron through local area agents and our distributors' network. Cast iron castings are sold through marketing channels in India, the US and Europe. As regards the billets, we are in the process of finalising our marketing strategy. Suffice to say that the construction industry will be the major customer for our billets. Besides, there are over 2,500 re-rollers in India and all of them need billets. At a later date, we may well use the balance 45,000 tonnes of pig iron at our disposal to make long products, which would eventually be converted to TMT bars. For that, we would be required to set up a re-rolling mill.

How has the company fared on the export front?

Earlier, almost 100 per cent of our production of cast iron castings was exported to the US and Europe. About 20 per cent of our pig iron production is also exported. The billets that we are going to produce will be primarily meant for the domestic construction industry. However, if prices in the export markets are good, we would be keen to export to China and countries in South-East Asia and West Asia.

What are your turnover targets for the current fiscal and subsequent years when the impact of the current investment would be reflected in the company's profit & loss account?

In 2004-05, we hope to achieve a turnover of Rs 150-170 crore, up from Rs 131 crore in 2003-04. Subsequently, in 2005-06, we should touch Rs 300 crore and the following year, when the impact of the present investment would be there in full, our turnover should not be less than Rs 500 crore.

More Stories on : Interview | Bearings | tings & Forgings

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page