Mukand, Kalyani Steels In Strategic Link

Mukand has entered into a strategic alliance with Kalyani Steels and Kalyani Ferrous for its Rs 500 crore special steel and alloys plant with a capacity of three lakh tonnes per annum. The alliance is mooted under a new company Hospet Steel.

Confirming the move, Niraj Bajaj, managing director of Mukand said the Hospet Steel will be formed as a separate division under Mukand.

The special steel unit has already come up at Ginigera, Raichur district in Karnataka and the plant was commissioned on August 18, 1998.

Explaining the Hospet Steel division, Bajaj said the division will have no assets and will be only a management company to overlook the operations of the steel making unit.

However, the assets of the steel making unit will be under Mukand which will help the latter to avail of depreciation benefits. Moreover it will also benefit from the sales tax by saving on inter company sales.

The agreement also splits operations amongst the three parties: the iron making facilities will now be a part of Kalyani Ferrous, steel making unit will be under the aegis of Mukand whilst the rolling operations will be under Kalyani Steels. Besides Hospet Steel, Kalyani Ferrous also has iron making plant in the same location near Raichur. This unit with an installed capacity of 3 lakh tonnes was commissioned in June 1998.

Of the three lakh tonne alloy steel plant from Hospet Steel, 1.8 lakh will be availed by Mukand and the remaining 1.2 lakh tonnes will utilised by Kalyani Steels. Since Mukand and Kalyani Steel are the top two producers of Special and Alloy steel, the three lakh tonnes produced by the new plant will be easily consumed thereby utilising full capacity, indicated Bajaj.

Bajaj said the commissioning of the plant was done in a record 17 months from the day of the ground breaking ceremony. Out of the Rs 295 crore being brought as Mukand's part, Rs 165 crore will be funded by the financial institutions lead by Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, IIBI and SICOM. While the rest of Rs 130 crore is funded through internal accruals.

While the rest, Rs 205 crore will come from the Kalyani group.

The plant is now operating at a lower capacity utilisation. Bajaj said, by the end of the current financial year, the plant will be operating at the rated capacity producing around 25,000 tonnes of special and alloy steel per month.

The plant is going to use a new technology called energy optimising furnace (EOF), supplied by Tata Korf, which is expected to reduce the cost over 25 per cent against the normal electric furnace route. The steel plant to make special and alloy steel has a bloom caster, billet caster and a ladle set up by Mukand. In case of excess production from the plant, the produce will be shifted to the Kalwa unit of Mukand for rolling operations to produce wire rods.