Rathi has sought proposals for the restructuring of the existing financial arrangement of the company. HB Portfolio Leasing, the financial advisor of the company, has prepared a memorandum for interested parties. In fact, the JVG group had evinced interest in this company some time ago.
Mecon and Steel Authority of India's Centre for Engineering and Technology, which have been appointed by the promoters, have worked out a revival package worth Rs 238 crore for the ailing company.
Industry sources said under the current depressed conditions, it was unlikely that anybody would be willing in to pump in such a big amount to revive the company.
It would be more profitable to buy it out and alter the entire product mix to make the plant viable, sources said.
The current assets of the company's plant based at Alwar, Rajasthan, as assessed by Mecon, is around Rs 303 crore after revaluation. Rathi had hired the services of Mecon and Steel Authority of India's Centre for Engineering & Technology to suggest measures to improve the viability of the plant's operations.
Besides, it plans to install a rolling mill for long products to reduce costs incurred from outside sources.
It has also been suggested that the plant utilise the Consteel process for steel making. This is expected to reduce production costs and make operations viable.
Mounting losses, combined with a bad alloy steel market, a steep increase in power, fuel and interest costs, has taken the company to the brink of closure.
The country today has a 100 per cent overcapacity in alloy steel market. Its losses for the year ended September 30, 1995, went up to Rs 13 crore from the previous year's Rs 12.3 crore.
The losses as on March 31, 1996, after accounting for interest payable on non-convertible debentures (Rs 10.7 crore) stood at Rs 54 crore.
Though sales for the fiscal 1995 were up to Rs 125.74 crore from Rs 91.07 crore in the previous year, expenditure mounted to Rs 125.87 crore from Rs 91.99 crore. Interest and depreciation costs, too, increased to Rs 13.07 crore from Rs 12.29 crore last year. Rathi has borrowed to the tune of Rs 84.10 crore.
Rathi Alloy & Steel, part of the Rathi group, is an established player in the secondary steel sector. The company is engaged in the manufacture of mild and special-grade steel through the electric arc-furnace route. It also has facilities for the production of hot-rolled (HR) coils.
The company's current installed capacities include 84,000 tonne per annum (tpa) of steel ingots/billets, 1,25,600 tpa of hot-rolled strips and a 6.5 mw power plant. However, the plant has been under-utilised due to non-availability of steel slabs to meet the requirements of the HR mill.
