In this episode of Midcap Mania, CNBC-TV18’s Nigel D’Souza talks about Kolkata-based KIC Metaliks Ltd.
KIC Metaliks manufactures pig iron, which is an intermediate product used to manufacture finished steel and is consumed mainly by the iron foundry industry that serves as a backbone of construction and manufacturing sector.
The company has a manufacturing facility at Durgapur in West Bengal with an installed capacity of 108,000 million tonne of pig iron per annum. At present, KIC Metaliks has a mini blast furnace capacity of 165,000 million tonne per annum (MTPA), which is not backward integrated in terms of its key revenue market share like iron ore and met coke.
Iron foundry industry produces different varieties of iron cast products, which are used in the manufacturing of a number of machinery including automobiles under the capital goods industry.
The company has never paid dividend in the past few years and the promoter holds 58.28 percent in KIC Metaliks, out of which 34.32 percent is pledged.
However, the company is steadily delivering strong numbers and its H1FY19 results are better than the entire FY18. Though, sustainability of this performance will be keenly tracked ahead.
So, can KIC Metaliks reduce Rs 70 crore odd debt or increase their EBITDA to Rs 100 crore odd? Going by their annual report 2018, there are various triggers to pump up FY20E EBITDA.
To remain more competitive, KIC Metaliks has set up pulverised coal injection (PCI) system along with oxygen and nitrogen gas plant in the existing mini blast furnace, which will reduce the metallurgical coke consumption rate and increase in the production capacity of the existing furnace from 165,000 MTPA to 235,000 MTPA.
Also, the company is setting up a second 25 m2 annular sinter plant, which consumes iron ore fines for making of pig iron and consequently will reduce the requirement of costly iron ore lumps that are more expensive.
Can these measures reduce the cost of production by 1,000 per tonne? How much higher can EBITDA per tonne go from current 3,600 per tonne?
The key threats company face include poor demand from foundries led by declining demand from the automobile industry, higher and volatile prices of iron ore and coking coal, which are two key inputs for production of pig iron.
First Published: Jan 21, 2019 7:36 PM IST
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