Mar 23, 2012, 09.45 PM | Source: CNBC-TV18

Will shut K'taka ops if ban not lifted: Kalyani Steel

Speaking to CNBC-TV18, RK Goyal, the managing director of Kalyani Steel says that even post the Supreme Court order revoking the ban on mining in Karnataka, it might take a good three-five months before iron ore is actually made available.

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Kalyani Steel was today up 10.2% on expectations of the Karnataka mining ban being lifted partially. The ban has been a bone of contention for the companies that have mining activities in Bellary and Chitradurg districts, who claim that lack of iron-ore has been impacting operations and many have indeed shut down plants. 

Speaking to CNBC-TV18, RK Goyal, the managing director of Kalyani Steel says that even post the Supreme Court order revoking the ban, it might take a good three-five months before iron ore is actually made available.

If the ban is not lifted, they may be forced to shut down owing to unavailability of raw material, he says. Remember that these high-power furnaces take months to regain capacity once shut down.

Goyal says that import of iron ore is an option, but is currently unviable considering the cost at global markets.

Below is the edited scription of the transcription. Also watch the accompanying video. 

Q: By when do you expect a decision on mining?


A: CEC is aware of the problem faced by the industry and they have assured that they will start mining soon to address the problem. CEC, in its report, submitted to the Supreme Court on March 13 recommended that category A mines, where there is no illegality or very minor illegality, should be started as soon as possible.


At the same time, CEC have categorised mines in four categories. Category phase 1 category A and B having area of more than 50 hectare were work can be started within two months once R&R plans are in place. In my opinion, at least 20 mines which are in category A and category B, will be opened in next two months, which will give more iron ore to the industry, and the industry will be able to operate at a much larger capacity.


Q: You mean two months from the date of Supreme Court order?

A: Yes, within two months from the date of Supreme Court order, but at the same time it looks very difficult. To mobilize the closed mines, the mine owners will take at least 2-4 months to clean up their mines and channalise their equipments, man power and other things.

The industry will at least take 3-5 months to get iron ore. As of now, the inventory with the mines is very low and there is hardly any material coming in for e-auction.


Q: What is the capacity your company and other steel companies are operating at this point?

A: We are operating at 50% of our capacity. We may be forced to close down, if mines are not opened soon and if more material doesn't come for e-auction. Large companies which have beneficiation and sinter plant will be able to survive for few more days but small companies like us who can use only calibrated ore and sponge iron plants will not be able to survive for long.


Q: Is the demand momentum strong and do you plan raising prices in the near term?

A: The price increase can be attributed mainly to increase in cost and not demand.

Since last several months we were pursuing our customers to increase our price and they accepted to hike our price for around Rs 1,500 per metric tonne.


Q: Is imports an option to proccure ore?

A: Imports is always a option. But we manufacture highly customised products and add lot of services besides the product, which is difficult to match by imports.


Kalyani Steels stock price

On November 27, 2015, Kalyani Steels closed at Rs 151.30, down Rs 2.7, or 1.75 percent. The 52-week high of the share was Rs 173.00 and the 52-week low was Rs 105.50.

The company's trailing 12-month (TTM) EPS was at Rs 23.73 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 6.38. The latest book value of the company is Rs 109.02 per share. At current value, the price-to-book value of the company is 1.39.

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