L&T in race for KIOCL's Rs 300 crore order

Larsen & Toubro is the front-runner among two companies in the race to bag the Rs 300 crore order for construction of the ductile iron spun pipe (DISP) plant of KIOCL Ltd, earlier known as the Kudremukh Iron Ore Company Ltd, the public sector undertaking under the ministry of steel and mines. KIOCL plans to set up a 100,000 tonnes per annum DISP plant at Mangalore as part of its diversification.

L&T has emerged as the L1 bidder for the project. Recently, the KIOCL board shortlisted L&T and another company through a global bidding route for the proposed project. The KIOCL board is likely to meet next week to take a final call in this matter, K Ranganath, chairman-cum-managing director, KIOCL said.

The scope of work includes design, engineering, procurement, manufacturing, inspection, packing and forwarding, supply, erection, testing, commissioning and performance guarantee tests and handing over of 100,000 tonnes per year capacity of ductile iron spun pipe plant on lump sum turnkey basis.

This is the second time that L&T has been shortlisted for the project. Earlier, in April 2008 the company participated in the global tender to bag the project. However, KIOCL board had called off the project following a higher price quoted by a bidder as against the company’s expectations. The board wanted a better offer due to global recession and decided to go for fresh tender in January this year. Subsequently, in February this year, the company floated global re-tender. In response, it received three offers.

However, following techno-commercial evaluation, two offers were found acceptable including L&T. “The price bids of both the acceptable offers were opened and L&T has emerged as the L1 bidder. The proposal for placement of order on L1 party is being processed for approval of placement of order. L&T is asking some extra points and we are currently negotiating with them and once the board decides the bid will be finalized,” Ranganath told Business Standard.

KIOCL, as of March 31, 2008, has a cash reserve of Rs 1,468 crore.

KIOCL, an export-oriented public sector unit, planned to build the DISP plant adjacent to its pig iron plant in Mangalore on the west coast. The proposed plant will utilise pig iron with low phosphorous and low sulphur, already produced by the company.

Ductile iron spun pipes are used in most advanced and developing countries because of its superiority over the cast iron spun pipes. Even in India, there is a huge demand for spun pipes from various state governments, urban development bodies. They are used in irrigation projects, drinking water supply and sewerage projects and other large infrastructure projects.

Meanwhile, the company has restarted its pellet plant in Mangalore, which had been closed for six months due to a lack of demand for its products in the international market.

The plant, restarted on July 18 is presently producing around 9,000 tonnes per day. Its first consignment of about 50,000 tonnes was sold at close to $76 per tonne to Bhushan Steel in the domestic market. The second consignment, its first overseas shipment of another 60,000 tonnes at $97 per tonne, is presently being loaded at Mangalore port for a Chinese customer, the sources said.