M & M Hunt On For Ugine Venture Ally

Mahindra & Mahindra is continuing to look for a strategic partner for its niche steel arm, Mahindra Ugine. The company is open to any kind of alliance for the steel business which, according to top company officials, does not fit into the three main core businesses of the Mahindra group -- automotive, infotech and infrastructure development.

Senior M&M executives said, "Mahindra Ugine does not quite fit into any of our three core businesses, and therefore, we are open to any alliance there, which would generate a return and value per share. At the same time, while we are running it, we are going to run it as best as we can."

"If one looks at the mortality rate in the steel business, and then compares it with our performance, then you will realise that we have done the least badly," the executive said.

Two years back, the Mahindras had entered into agreement with a steel multinational to offload equity, but the deal did not eventually materialise.

For the fiscal ended March 2001, it posted losses of Rs 14.22 crore, down from a loss of Rs 15.72 crore in the previous year. Its turnover declined to Rs 242.61 crore from Rs 276.29 crore in the same period last year.

Mahindra Ugine, which was so far solely dependent on the automotive sector for sales, has recently diversified away from the auto sector. It is now also concentrating on supplying steel to exporters of steel and steel-based products, in order to insulate itself from the current downturn in the automotive industry.

Also, the company has currently undertaken a massive cost cutting exercise and "a prudent cash management system".

"Our debt-equity ratio (at 0.65:1) is probably the lowest in the entire industry. What do you do then, except than wait it out till the shake-out finishes. As that happens, we should be able to provide some respite," sources added.

The group, it appears, is beating Mahindra Ugine into shape so that, as and when the steel sector revives, the company can be put up for divestment.