SAIL against merger of HSCL
22 May 2007
Mumbai: The Steel Authority of India Limited (SAIL) has opposed a proposal to merge Hindustan Steelworks Construction Ltd (HSCL) with itself, citing lack of synergy between the two public sector entities. A parliamentary standing committee on coal and steel had suggested that HSCL, which is undergoing restructuring, might be merged with SAIL. It also suggested that SAIL entrust HSCL with new projects to bail it out from a financial crunch in the meantime.
SAI, however said both the companies are operating in an increasingly competitive world and a merger decisions that do not add to the total value, may not be desirable.
SAIL argued that merger decisions that would blunt the company's competitive edge might not be in the best interests of either company.
The Board for Reconstruction of Public Sector Enterprises (BRPSE), meanwhile, is examining a proposal for restructuring HSCL. The ministry has sought a blueprint from the PSU on its specific business strategy and the quantum of financial assistance required, sources said. HSCL is expected to submit its proposal by the end of this month.
SAIL, meanwhile, said the stage-II and final approval for the proposed Rs1,553-crore backward integration and expansion project of its Salem Steel Plant (SSP) is expected to come sometime next month, a year after its board gave preliminary nod in June 2006. According to SAIL sources, the second stage approval involves the final approval for all major components like suppliers, expenditure etc. The project would be commissioned 27 months after this approval.
The backward integration and expansion of the 26-year old SSP envisages installation of 1.8 lakh tonne steel making facilities, including a continuous slab caster, and expansion of the plant's cold rolling capacity from 70,000 tonne to 1.46 lakh tonne.
Simultaneously SAIL's Alloy Steel Plant (ASP) at Durgapur will increase its capacity to supply 1.9 lakh tonne of steel slabs to SSP. These two together would ensure availability of 3.7 lakh tonne of steel slabs to SSP, its basic raw material.
The backward integration had become essential for SSP to operate profitably. Since the raw slabs for the production of stainless and carbon steel were outsourced, SSP had to operate on a very thin or even negative margins.
SAIL achieved record turnover of Rs11,534 crore during the fourth quarter of fiscal 2006-07 driven by strong demand for steel, market-driven product mix, higher value-added special steel production and improved techno-economic parameters.
The turnover rose 14 per cent over the corresponding period of the previous year. During the quarter, the company achieved a profit before tax (PBT) of Rs2,925 crore - 133 per cent higher than the corresponding period of the previous year. The profit after tax (PAT) was Rs1,902 crore, up 72 per cent, a SAIL release said.
