Merge KIOCL with NMDC to make it viable: PWC
23 May 2014 4:26 AM IST
The viability of KIOCL, earlier known as Kudremukh Iron Ore Company, lies in merging with state-owned NMDC, says global consultancy firm PWC. ‘Considering both intangible and financial synergies of the combined entity, merger with NMDC would be a highly favourable scenario for KIOCL,’ PWC said in a report on KIOCL's sustainability and viability assessment report which is yet to be made public.
PWC was asked by KIOCL to prepare a way-forward report as the Bangalore-based firm was passing through challenging times with production, sales of pellets, halt of blast furnace operations, uncertain market conditions and lack raw material availability.
Set up in 1976, KIOCL has 3.5 million tonne per annum (mtpa) iron oxide pelletisation complex and pig iron units at the coastal city of Mangalore.
According to the report, KIOCL will bring synergies to the merged entity and the utilisation of its assets will generate stable revenue and reduce project risk, valuable skill and experience of establishing a blast furnace unit and running it successfully. Its captive berth will also support exports.
NMDC will bring raw material security for the pellet plant and the blast furnace unit, it said, adding that the supply of iron ore from its mines in Karnataka will reduce logistic costs. Better raw material quality will also help it fetch better pellet price. ‘Stronger organisational structure may also efficiently harness KIOCL's human resource strength. Diversified customer base would support marketing of end products. NMDC's Navaratna status would help the merged entity expand operations abroad,’ PWC said.
Based on various calculations, PWC said the merged entity could bring in synergy worth Rs 678 a tonne in exports, and Rs 1,326 per tonne in domestic sales.
However, there are challenges involving getting nod of the shareholders, company culture and structure, brand name and leadership challenge among others.
PWC was asked by KIOCL to prepare a way-forward report as the Bangalore-based firm was passing through challenging times with production, sales of pellets, halt of blast furnace operations, uncertain market conditions and lack raw material availability.
Set up in 1976, KIOCL has 3.5 million tonne per annum (mtpa) iron oxide pelletisation complex and pig iron units at the coastal city of Mangalore.
According to the report, KIOCL will bring synergies to the merged entity and the utilisation of its assets will generate stable revenue and reduce project risk, valuable skill and experience of establishing a blast furnace unit and running it successfully. Its captive berth will also support exports.
NMDC will bring raw material security for the pellet plant and the blast furnace unit, it said, adding that the supply of iron ore from its mines in Karnataka will reduce logistic costs. Better raw material quality will also help it fetch better pellet price. ‘Stronger organisational structure may also efficiently harness KIOCL's human resource strength. Diversified customer base would support marketing of end products. NMDC's Navaratna status would help the merged entity expand operations abroad,’ PWC said.
Based on various calculations, PWC said the merged entity could bring in synergy worth Rs 678 a tonne in exports, and Rs 1,326 per tonne in domestic sales.
However, there are challenges involving getting nod of the shareholders, company culture and structure, brand name and leadership challenge among others.
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