Hectic year ahead for Kanishk Steel

Chennai: It is going to be a hectic 2006 for the 45-year old Arvind Gupta, president Kanishk Steel Industries Limited. After initiating expansion plans last year, Gupta's plate will now be full translating those plans into projects worth Rs118 crore now lined up for implementation.

The plans include: a 12mw power project at Gummidipoondi near Chennai at an outlay Rs48 crore, a 1.5-lakh tonne per annum integrated steel mill in Myladuthurai, Tamil Nadu involving an investment of Rs50 crore and a Rs20-crore 5mw wind energy project in Tirunelvelli.

Once these projects are commissioned, Gupta says, Kanishk Steel will treble the existing 60,000-tonne per annum capacity and cut the steel maker's power cost by nearly 35 per cent. "We will even supply power to the grid in a sizeable way," says Gupta.

The Rs163-crore turnover Kanishk Steel, which manufactures thermo-mechanical treatment (TMT) bars and structural steel products like joists, channels, angles, flats, squares and rounds, drew its blue print for the future last year.

After taking over two group companies — Avanti Oil and Steel Industries Private Limited and O P Steels Limited — the company set up a 200-tonne per day (100tpd x2 kiln) capacity sponge iron plant costing Rs24.50 crore in Gummidipoondi.

The merger of O P Steels will enable Kanishk Steel to capitalise on scale in terms of production capacity, sales efficiency and the capacity and strength to take up large projects for expansion. "There will be a backward integration of operations with cost reduction / saving in payment of excise duty and sales tax for MS ingots, the raw material produced by O P Steels," explains Gupta.

The other company, Avanti Oil, was taken over for its 53 acres of land where the Kanishk Steel has put up its windmills.

According to Gupta, the proposed steel mill in Myladuthurai will make Kanishk Steel the fourth largest TMT bar maker in the country. The other three are, Rashtriya Ispat Nigam Limited, Steel Authority of India Limited (SAIL) and Southern Iron and Steel Company Limited (SISCOL). "The company's subsidiary OPG Energy Pvt Ltd has a 17.98mw natural gas-based power plant there and for the steel mill it is an ideal location. From there Kanishk Steel can easily cater to other parts of the state."

The company is acquiring a second-hand steel re rolling plant from Lamifer, Italy for Rs16 crore. "It is a fully automatic plant and will increase our production. In the case of a new plant, the lead time for getting it is around three years. The company has also acquired 15 acre land for this purpose. The project will be ready in January 2007.

Gupta says Kanishk Steel has a 5 per cent market share in the Rs2,500 crore/one million tonne TMT bars market in Tamil Nadu. "Our focus is on the Tamil Nadu market that is growing by 9 per cent per annum. This will continue as the housing sector will continue to boom with several new IT companies setting up their base in the state and the highly paid employees would be looking out for a home. Infrastructure is another sector where we see huge demand coming up."

The world over TMT bars are used for constructions, in India over 50 per cent of the steel rods used for construction are untested. "The price difference between the TMT bars and the untested ones is not much. It is the contractors, builders and architects who should be blamed for keeping the house owners in the dark about it," Gupta says.

But the times are changing; the manufacturers have started advertising heavily not only on building their brands, but also in creating awareness. In Tamil Nadu, particularly, advertisements for TMT steel bars are noticeable.

The company has formed a consortium of four big steel dealers in the state to market its products. "This way we can cut down costs by dealing with only four dealers instead of hundreds of retailers."

"By the end of this month, we will be finalising the financing pattern for all the projects. The windmill project will be financed from our internal accruals. Kanishk Steel has appointed Indure as the engineering, procurement and construction contraction for the 12mw power project that is expected to be ready by February 2007.

On the raw material pricing, Gupta does not foresee any major increase since prices have fallen by 12 per cent.