Steelco Gujarat irons out woes, eyes spread

Scripting a recovery tale, the Bharuch-based Steelco Gujarat Ltd has not only come out of the red in the past one year, but also chalked out a recovery path through an expansion drive.

At present under the Board of Industrial and Financial Restructuring (BIFR) regulations, the company will become debt-free by June 2005.

Gujarat Steelco manufactures cold rolled steel and galvanised products at its plant at Palej GIDC in Bharuch district of Gujarat, exporting about 65 per cent of its total production.

Observing the fiscal year from October 1 to September 30, the company has registered profits in three successive quarters ended June 30, 2003.

While the results for the year ended September 30,2003, are to be announced, the company expects a turnover of over Rs 400 crore, up Rs 150 crore compared to the turnover in the year ended September 2002.

It is also aiming at a profit of over Rs 10 crore in the year ended September 30, 2003.

"The company has come a long way in the past couple of years. From a loss-making unit, we have converted it into a profit-making unit. And after June 2005, we should be able to embark on a big expansion plan, with the aim of at least doubling our turnover," said M P Sinha, managing director, who has had a work experience at the Bokaro unit of SAIL, at Salem Steel and ISPAT before taking over as managing director of the company when it was going through a financial crunch.

Ever since the company began commercial production in 1994, it began incurring losses because of an imbalance in the capital structure and mismanagement.

Gujarat Steelco was referred to BIFR for rehabilitation. According to the arrangement arrived at, the interest amount was waived off and the PLR lowered, thus bringing down the interest liability.

In return, promoters of Gujarat Steelco were asked to pump in more capital and told that Rs 45 crore must be paid back to the financial institutions, mainly ICICI Bank and IFCI, over a period of three years.

While the first installment has already been paid in June 2003, the second installment will be paid in advance before June 2004 and the third will also be paid in time, company officials said.

The other major condition was that the company will not indulge in any major capital expansion, but with the company on the path of recovery, Gujarat Steelco has approached BIFR seeking permission to upgrade existing facilities even while ensuring that the existing cashflow is not disturbed.

"We will be a debt-free company by June 2005, although a few other BIFR regulations will continue to be in place until 2008. It is after June 2005 that we will embark on our proposed expansion drive in a big way," Sinha said.

To begin with, the galvanising plant of the company, presently having a capacity of 36,000 tonnes per annum, will be upgraded to a capacity of 60,000 tonnes per annum.

This is likely to take place in the current fiscal year itself.

"We expect to break even within a year of commissioning of the new galvanising line," Sinha said.