Financial Daily from THE HINDU group of publications
Monday, Feb 02, 2004
Nava Bharat plans to expand chrome capacity Mulls option to cut input cost
Hyderabad , Feb. 1
AIMED at meeting the growing demand from the domestic steel industry, Nava Bharat Ferro Alloys Ltd is planning to further expand its ferro chrome production capacity.
The company's board at its meeting held recently has approved a scheme of de-bottlenecking-cum-expansion of its ferro chrome facility located in Orissa, the Director-Finance, Mr G.R.K. Prasad, told Business Line.
According to Mr Prasad, the expansion to be taken up at a cost of around Rs 10 crore would increase the production capacity to 75,000 tonnes per annum from the existing level of 50,000 tonnes.
The capacity expansion would be ready during the next financial year.
The city-based Rs 427-crore ferro alloys major is seriously contemplating various strategies for capacity expansion and cost reduction on a continuous basis to meet the increased competition due to capacity addition and the continued mismatch of input costs in the Indian ferro alloys industry.
With power and ore constituting nearly 80 per cent of the ferro alloy production cost, the company has drawn a plan to control these costs effectively.
Towards this, it has set up captive coal-based power plants both at its Orissa and Andhra Pradesh ferro alloy facilities.
It has a 50-MW power plant at its Andhra Pradesh unit and 30-MW power facility in Orissa.
Nava Bharat is also contemplating to increase the capacity of these power projects to insulate the company further from the market vagaries and help in sustaining optimal capacity utilisation for ferro alloy production.
"Having successfully controlled the power costs, we are now looking at bringing down the input costs of manganese and chrome ore. Gaining control over input costs is the thrust area and we are now exploring various possibilities in this direction.
The options include obtaining mining allocations and also acquiring mines," Mr Prasad said.
On the debt restructuring efforts, he said it was a continuous exercise and the company has already brought down its average cost of borrowings to nine per cent.
"We are initiating measures to further bring down the cost of borrowings and exploring various means," he said.
Nava Bharat, with core competencies in ferro alloys, sugar and power generation, proposes to explore further cost reduction to protect its profit margins.
The company had posted a net profit of Rs 30.27 crore on a turnover of Rs 426.55 crore for the fiscal ended March compared to a net profit of Rs 16.99 crore on a turnover of Rs 299.28 crore in the previous fiscal.
For the nine-month period ended December 31, 2003, the company posted a net profit of Rs 36.36 crore on a turnover of Rs 321.09 crore compared to Rs 23.28 crore on a turnover of Rs 302.8 crore.
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