Gkw In Parleys To Sell Off Powmex Steels

The Krishna Kumar Bangur-controlled engineering major GKW Ltd, which is in the process of revamping its existing businesses and restructuring the debt components, is negotiating with overseas companies to divest its Powmex Steels following dismal performances for two consecutive years.

According to sources, the company is in the process of finalising the deal with an American firm.

GKW (formerly Guest Keen Williams) has been weighing different alternatives including identification of a new partner for a strategic alliance and working out a turnaround plan besides hiving off the division. The Bangurs could not be reached for comment owing to a bereavement in the family.

At the last annual general meeting, GKW chairman T K Faris had announced the company's plans to revamp its existing businesses in terms of technology tie-ups, joint ventures, and strategic alliances with overseas or Indian firms to improve its bottomline over the next 12 months.

The options before GKW as a whole included hiving off its existing businesses into a separate company in technical or financial collaboration with the prospective partner and fresh infusion of funds from prospective collaborators.

In keeping with the corporate strategy, the company has been working out a turnaround strategy for Powmex division in consultation with its auditors Lodha & Co, who had structured the takeover of the Orissa-based unit by the Bangurs.

A step in this direction was being explored as Powmex Steels' performance suffered a setback due to slack demand for high speed steel in the domestic and international market.

In addition, a large debt burden and the resultant high interest cost more than neutralised the operating margin, the management states in its corporate review for the last financial year 1997-98.

Orissa-based Powmex Steels Ltd, engaged in the manufacture of high speed steel and alloy steel in technical collaboration with Bohler of Austria, was referred to the Board for Industrial & Financial Reconstruction, after it suffered teething problems leading to time and cost overrun and problems in technology absorption.

Subsequently, the company was merged with GKW in the ratio of 12:1, that is, one share of GKW of Rs 10 was allotted for every 12 Powmex shares. The amalgamation was cleared by the Industrial Financial Corporation of India.

It was believed that the proposed merger would enable the ailing Powmex to cash in on the benefits of GKW's engineering skills and expertise of professional management.

Following the merger, GKW was also expected to emerge as leaders in India high speed steel market since Powmex has the largest capacity for the production of high speed steel.

Besides, the merger was also expected to help the engineering concern to contribute towards import substitution as indigenous user industries of high speed steel are still dependent on imports to a large extent. Contrary to the industry expectations, the company's performance took a beating for the second consecutive financial year.