Kalyani group in talks to buy Andhra steel firm

The Kalyani group is in talks with financial institutions to acquire SJK Steel Corporation, an ailing iron and steel company at Tadipatri in Andhra Pradesh.

The proposed takeover is part of SJK's restructuring package being hammered out by banks and financial institutions. The company's outstanding to financial institutions stood at over Rs 1,300 crore.

Sources close to the development said the Kalyani group would not be ready to invest more than what a greenfield venture of the size of the SJK plant would require.

A new plant with a blast furnace which can produce 2.5 lakh tonne steel a year would require an investment of Rs 450 crore. The time required for the plant to be set up is four years.

This is the second financial restructuring package for the billet (2.5 lakh tonne capacity) and pig iron making unit promoted by Jithin Kumar and associates.

The first revamp package for SJK, under the corporate debt restructuring mechanism, was finalised in 2002-03, along with a bailout package extended for steel units which were saddled with high-cost loans.

However, it's not known which company of the Kalyani group, whose flagship is Bharat Forge, might take over the SJK plant.

"A company having strong balance sheet would acquire it, if the talks with the financial institutions fructify," said a source in the group. Kalyani Steels, the group's steel company, might run the day-to-day operations of the plant post the acquisition.

The group is in advanced stages of negotiations with lenders for taking over control, including equity holding in SJK, the sources said.

The outstandings would be paid back by using revenues generated from SJK Steel. The group is expected to pick up 80 per cent equity worth about Rs 56 crore.

The payment of outstanding will have two components.