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The Rs 600-crore IFGL Refractories Ltd may rope in a technology partner in its ailing Brazilian outfit, Monotec Refractarios Ltd. Also on the cards is an infusion of fresh capital to widen the subsidiary's product range to enhance its presence in the Brazilian market.
IFGL is a Kolkata-based refractory supplier to steel plants. In 2005 the company acquired the UK-based Monocon Holdings Ltd and its subsidiaries in the US, China, Brazil (Monotec) and Taiwan.
While the Taiwanese unit was closed down in 2007-08, the other four are in operation. Mr Pradeep Bajoria, managing director, IFGL, said the Brazilian unit was doing well till it slipped into the red recently.
Single product
“The Brazil unit has not been doing too well recently and cash-flows have been impacted. We are therefore planning to restructure it to improve profitability,” Mr Bajoria told Business Line . Restructuring plans will be firmed up in the next year.
According to him the Brazilian unit is a single-product manufacturing facility and there was a need to diversify the product basket.
Although Brazil contributes a “small portion” to IFGL's topline, the unit's poor performance has dragged down the company's profits. During the year, IFGL had written-off goodwill amounting to Rs 3 crore for the Brazilian and Czech units. The manufacturing operations of the Czech unit were closed down last fiscal.
Focus on Brazil
“Brazil is an important market for us; however, we recently lost a substantial market in the region due to our product orientation,” he said.
The ailing Brazilian unit, Mr Bajoria said, manufactures only sprayed refractory materials (used in blast furnaces); while steel-makers prefer bundled products. IFGL now plans to introduce multiple products such as degassing vessels.
Estimated investments for restructuring could vary between Rs 10 crore to Rs 81 crore, depending on the technology used.
The refractory supplier has seven manufacturing units overseas, including the one in Brazil. These are in Germany, China, the Czech Republic and the US. Overseas business accounts for almost 60 per cent of its turnover.
In India, the company has facilities in Rourkela, in Odhisa, and Kandla, in Gujarat.
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