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Abhrajit Gangopadhyay

BANGALORE, Nov. 6

REELING under an import duty of 20.8 per cent and facing the heat of competition, leading downstream products player, Jindal Aluminium Ltd (JIL), has staggered its plans for setting up its planned sixth extrusion facility costing Rs 35 crore, its Chairman Mr. S.R. Jindal, has said.

"We have deferred the plan to set up the unit for now", Mr. Jindal told Business Line.

The company, which is operating its Bangalore plant at 60 per cent of its overall capacity, said that this scale of production was "just enough to meet the operational costs".

"We are facing cut-throat competition in the market," Mr Jindal said, adding, "We have to increase production to bring down costs". The company has prepared a survival roadmap that envisages increased production and price cuts.

Reiterating his complaint against the Government for the very high customs duty, Mr Jindal said despite lower international prices of virgin aluminium, leading Indian companies continued to peg their prices very high.

This had put the downstream producers of aluminium products in a quandary. Faced with punitive import duty and very high prices charged by the domestic suppliers, several small units making aluminium products have closed down.

"The global cost of aluminium is the lowest in the decade at $1300 per tonne, but still virgin manufacturers have not decreased their prices," Mr B.D. Garg, President of JIL, said.

Jindal has scheduled a tentative price cut by seven to eight per cent in January 2003. "However, it is not final and we need to speak to all our dealers before the cut," he added.

The glut in the market is likely to limit Jindal's annual sales for the current financial year at 25,000 tonnes, down from 33,500 tonnes sold in 2001-02. Moreover, the current market conditions would not allow Jindal to achieve its proposed goal of producing 51,000 tonnes in 2002-03.

Despite offering discounts close to 10 per cent last financial year, the company recorded a net profit of Rs 3.28 crore over sales of Rs 37.95 crore. However, the company expects to report exports close to Rs 22 crore in the current financial year, up from Rs 17 crore a year ago.

"We had peaked in exports last year and we expect to better it this year," Mr Garg said. Primary export destinations for the company are the Gulf, Germany, UK and other European nations.

The company, which has a reserve of close to Rs 45 crore, ruled out any possibility of re-capitalisation. "We are a triple A rated company and raising money is not a problem... however, we do not want to increase our equity capital due to certain legalities," Mr Jindal said. The company invites deposits from its dealers and offers interest rates in line with bank rates, Mr Jindal added.

Commenting on future plans, Mr Jindal said, "We want to go more for forward integration by making and selling door and window frames to improve our topline and profitability."

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