Kalyani Steels

According to the latest annual report for the year 1996-97, the investment portfolio of the company which is in the range of Rs 200.20 crore is near to that of a non-banking finance company (NBFC) portfolio. The current market value of these investments depicts the type of investments the company has made. Market value has been halved in the current year to Rs 72.34 crore, which was Rs 146.16 crore on an investment of Rs 200.36 crore in 1995-96.

The companys investments are spread among its group companies -- Kalyani Seamless Tubes worth Rs 74.70 crore, Bharat Forge to the tune of Rs 72.12 crore -- while the investments in its subsidiaries amounts to Rs 42 crore.

Part of its investment in Bharat forge consists of 28,85,000 shares subscribed on exercise of option attached to warrants at a premium of Rs 146 per share against the current market price is around Rs 80 per share. The Kalyani Seamless Tube stock has declined by more than 75 per cent to Rs 10 in the last one year.

Another surprising fact is that at a time when the company is planning investments in greenfield projects, it has locked up its funds to the tune of Rs 115 crore by giving loans to its subsidiaries and group companies. Most of these subsidiaries include small investment companies with very low profitability and on the verge of sinking into red, anytime.

Instead of blocking its funds by giving loans and investing in these low-profile subsidiaries, the company could have repaid some of its borrowings amounting nearly Rs 231 crore at the end of 1996-97. The huge borrowings have resulted in the interest burden increasing by 11 per cent to Rs 40.91 crore.

Like other steel stocks, Kalyani Steel stock, too, had a severe hammering on the bourses last year. The scrip, which declined to Rs 19 in April 1997, has gained nearly 85 per cent to the current level of Rs 35 with the steel industry showing a minor recovery.