Time For Cyclicals To Move?

The proposed strategic sale of state-owned Kudremukh Iron Ore Company Ltd (KIOCL) has hit a road bloc, with the employees' union getting a stay from the Karnataka High Court against the government's disinvestment programme in the company.

According to sources, the union sought the court to stay the strategic sale plan of the government, arguing that the company is among one of the profit making public sector undertakings (PSUs) and therefore it should be allowed to remain in the public sector.

Steel ministry officials said the ministry has decided to contest the court decision. It is, however, understood that the ministry will also simultaneously pursue the strategic sale plans.

 

KIOCL is among the three public sector units - Balco and Modern Food being the other two, in which the government has decided to divest up to 74 per cent of its stake. It has already appointed Dresdner Klienwort Benson (DKB) as the global advisor for the strategic sale of the public sector iron ore major.

The ministry officials said DKB is yet to give its report to the ministry and only after getting the report the process of the disinvestment programme will gain momentum.

It is, however, understood that some Japanese and Australian multinationals are keen to acquire the company and have already sounded out the ministry on this.

Accordinng to industry sources, for the multinationals, acquiring KIOCL would be of highly strategic one as it would help them to stock iron ore for the next few years till prices start firming up. Iron ore prices have been in a depressed state internationally for some time now because of the fall in demand for steel and is expected to remain sluggish for some more time now.

KIOCL has been showing impressive financial performance steadfastly in the last several years, with the company's gross turnover touching Rs 600 crore in 1997-98.

The southeast Asian crisis, however, has adversely affected the company's performance in 1998-99, resulting in its turnover declining by about 8.5 per cent. The company's net profit is also expected to fall marginally from Rs 82.40 crore in 1997-98, mainly because the company has agreed to pay dues worth Rs 85 crore to the Karnantaka Electricity Board.