September 10, 2014 4:38:39 am
Bailing out Kudremukh Iron Ore Company Limited (KIOCL) from the brink of closure, the government is set to merge it with the country’s biggest iron ore miner NMDC Limited.
State-run KIOCL has been passing through turbulent times for the past three years owing to depleted production, poor sales of pellets, stoppage of blast furnace operations, unpredictable market situation and near-total lack of raw material availability. The steel ministry which administratively controls it, has reasoned that the best way to prevent its closure is to merge it with a stronger NMDC. Seeking to examine the viability of such a merger, KIOCL had commissioned a study by global consultancy firm PwC in May.
The firm in its report is learnt to have suggested the merger is very much viable considering the combined synergy of the merged entity. PwC said the integration would be easy, as KIOCL’s assets would generate adequate revenue and reduce project risk, valuable skill experience of establishing a blast furnace unit and operating it. The captive berths being operated by BSE-listed KIOCL in Mangalore port would help make exports easy. KIOCL being raw-material starved, NMDC would be able to give it raw material security by supplying iron ore from its mines in Karnataka, a steel ministry official reasoned.
Net profit of KIOCL rose to Rs 9.24 crore in the quarter ended June 2014 as against Rs 0.78 crore during the same quarter ended last year.
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“Based on these findings, the steel ministry has planned to merge both the PSUs as NMDC has the requisite financial and technical wherewithal to integrate both the operations,” the steel ministry official said. However, a NMDC official expressed cautious optimism in this exercise saying integrating the operations and meeting the aspirations of the staff of merged entity would have to be properly addressed. KIOCL chairman Malay Chatterjee said that NMDC should not have any apprehensions on this proposal is a win-win for both the companies. “NMDC has cash reserve of nearly Rs 40,000 crore, while KIOCL has a net worth of around Rs 18,000 crore. Considering that both the firms are mining entities, there would be no issues in synergising operations. KIOCL would in no way be a liability to NMDC,” Chatterjee said.
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