Design Hitches Drive Indian Seamless To Sell Rolling Mill

The ailing Indian Seam-less Steels and Alloys (Issal) has decided to put its imported PSW 200 steel rolling mill on the block following major design flaws in the mill.

The steel mill sale will be routed through global steel mill dealers who deal in second hand mills. Issal has been in the red following defective mill supply by SMS Schloemann Siemag of Germany, but was compensated last year by the German firm with a new four-stand rolling mill free of cost. Besides, the German firm has also paid Rs 23.8 crore as damages and provided Issal with a 7-year soft loan of DM 37 million at 4 per cent interest for the first four years and half percentage point above Fibor for the next three years.

"We are expecting a price of around Rs 6.5 crore for the defective mill as against the original purchase price of Rs 28 crore," B R Taneja, managing director of Issal said. At present, the defective mill is lying at Issal's Jejuri plant, near Pune.

Taneja said that PSW 200 mill was a new technology, supposed to reduce cost and give variety to its product range. "We were not guinea pigs as we were the seventh firm to install such a mill in the world," he added. "However, as the mill was poorly designed, it failed to work. As a result of a long delay in streamlining production, we lost shareholder confidence. We have now let down financial institutions and our brand name has been tarnished," he admitted.

As of March-end 1998, Issal had accumulated losses of Rs 22.94 crore caused due to the failure in streamlining the PSW 2000 steel mill and due to intense competition in its product range.

High interest cost was another factor that has been bleeding the company. Last year, Issal paid around Rs 56 crore on account of interest cost. As part of the restructuring package, IDBI alongwith other banks has decided to reschedule the loans of over Rs 300 crore on the condition that the promoters bring in Rs 41 crore as fresh equity capital.

Indian Seamless Metal Tubes (ISMTL), the flagship company of the Seamless group, has already brought in Rs 25 crore and the balance Rs 16 crore is to be brought in over the next two years.