The Hindu Business Line : Indian Seamless to merge 2 group cos

THE Pune-based Indian Seamless Group, which has interests in seamless tubes and alloy steel (The Indian Seamless Metal Tubes Ltd and Indian Seamless Steels and Alloys Ltd), has decided to merge its two companies.

The new company will be named ISMT Ltd. The merger is expected to happen within the next four months, Mr B.R. Taneja, Chairman, ISMT, said. He said the reconstitution of the board is also expected to happen around the same time.

The merger is expected to save Rs 5-8 crore by reducing the fixed costs on common functions, the banking transaction costs and the operating costs due to synergy in procurement, inventories and so on. In addition, it will provide a hedge for ISSAL foreign currency loans and generate a bigger and a robust balance-sheet.

Mr Taneja said the new entity would be a one-stop supplier of steel-seamless tubes and value-added products and have a global edge and image.

On the performance of ISMT, Mr Taneja said supplies against the fixed dollar rate orders from oil companies had resulted in a loss of over Rs 11 crore due to an unprecedented increase in the price of steel. He said this order was almost complete and the nagging negative impact on the bottomline would end by the current fiscal. He said the focus of ISMT would be on cold-finished products so that the dependence on oil is brought down.

Mr Taneja said the company expected to close the current fiscal with sales of about 1,05,000 tonnes with exports accounting for about 30 per cent of the total. With exports the focus, there had been a scaling down of domestic supplies. He said the company was now not looking at long-term contracts (which meant three month delivery period) but at short-term or monthly contracts.

The Chairman said the company expected to generate revenue of about Rs 600 crore and achieve cash break-even. He said the company was going through a consolidation process in the domestic market and was focussing on quality, delivery and prices.

Mr Taneja said exports would become the thrust area and the strategy was to operate through product groups and strengthen the distribution network, particularly in the US, and de-risk through geographical spread.

The company, he said, has a customer in Sweden and added that it had just shipped a consignment to China. It is expected to ship about 1,000 tonnes per annum to China. Its other export markets include the Far East, Korea, Singapore and Australia.

Mr O.P. Kakkar, Vice-Chairman and Managing Director, ISSAL, said that for the fifth consecutive quarter the company had recorded a consistent upward movement. It touched a dispatch level of 20,405 tonnes in December alone, he said.

The gross sales of ISSAL for the quarter ended December 2004 stood at Rs 204.61 crore against Rs 145.42 crore for the corresponding previous quarter. The net profit stood at Rs 10.89 crore against a loss of Rs 5.21 crore during the corresponding period last year.

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