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Mukand to revamp business with new range of products

Nevin John  |  Mumbai 

In a move to revamp the business, speciality steel maker Mukand is looking to improve its product mix by raising the production of its high-value products. The company aims to become a ‘one-stop-shop for speciality steel products’, majorly for auto and engineering industries.

“The company is enhancing the production of ball-bearing steel, cold-heading quality steel wire, peeled bars, bright bars and heat-treated bars for cashing in on the growing demand,” said Niraj Bajaj, Chairman and Managing Director.

With the revival in demand in the past two months, the order book of the company is full. The industrial machinery division has its highest-ever order backlog, worth Rs 580 crore. At all the segments, the company was cutting costs to weather any further slowdown, said Bajaj.

Niraj BajajThe demand for speciality steel products has improved from October, consequent to higher sales in the auto sector. Mukand, which sells 70 per cent of its alloy steel products to auto makers, has increased the prices of its speciality steel products by 5 to 7 per cent from the third quarter. The alloy steel products sale comprise 70 per cent of its overall revenue and the rest comes from sale of specialised stainless steel products. About 70 per cent of its stainless steel products are exported.

Mukand has increased its capacity to 500,000 tonnes per annum (TPA) from 300,000 TPA with an investment of Rs 350 crore. Production will increase to 500,000 tonnes from April 2010, said Bajaj.

Mukand, which underwent corporate debt restructuring (CDR) six years ago, is also planning to sell 60-100 acres at its plant site in Mumbai for halving the debt burden. It has around Rs 1,300 crore of debt on its books and is expected to fetch over Rs 600 crore from land sale. The sale will not include the location that accommodates its plant.

Bajaj said the land sale process would begin soon with the help of external agencies and would be completed in a year. The debt, raised mostly for working capital, would be prepaid immediately after the sale, he added.

The steel maker has repaid about Rs 900 crore of its CDR debt and the remaining Rs 500 crore will be paid by 2015. In this financial year, the CDR debt repayment would be in the range of Rs 50-60 crore.

The company has land holdings of around 42 acres at Sinnar (Nashik), 40 acres at Lonand (Pune) and 210 acres in the Thane-Belapur area, in addition to around 250 acres at Giningera in Karnataka.

The promoters of Mukand (led by the Bajaj and Shah families), who hold 53.44 per cent in the company, are also keen to revoke the pledged shares of over 17 million, about half of their holding.

“Mukand is financially well placed, considering the cash flow. The turnover has increased to around Rs 2,300 crore from Rs 700 crore during the time when we announced CDR. Our plan to bring the company to a world standard will reap fruits from the next financial year, as the capacity enhancement has been completed,” said Bajaj.

Mukand has posted a five-fold increase in its profit after tax in the second quarter, at Rs 16.35 crore as against Rs 2.9 crore in the year-ago period. The turnover, however, dipped 15.3 per cent to Rs 559.7 crore, following a drop in speciality steel products during the economic downturn. However, the volume increase of 24 per cent shows the company is becoming financially healthy, said industry analysts.

First Published: Wed, November 04 2009. 00:50 IST