Adhunik Industries eyes buyouts of steel units, plans QIP

Adhunik Industries, which got listed in May, has zeroed in on a new way to grow in size: It is looking at acquiring beleaguered steel making units, scatted across the eastern region, many of which have shut shop in recent times.

The banks which had lend money to these firms have approached Adhunik as well as other financially sound steel makers with takeover proposals, managing director Jugal Kishore Agarwal told dna.

"We are looking at acquiring fundamentally sound steel units, which are lying closed or have turned sick due to difficult economic environment. We would consider units that make steel through all the available routes like blast furnace, DRI (direct reduced iron) and also SMS (steel melting shops)," Agarwal said.

Adhunik currently makes rolled steel products, mainly TMT bars, rounds and wire rods, at its rolling mill that has a capacity of 2.22 lakh tonne a year at its plant at Durgapur in West Bengal.

The demand for TMT and wire rod is cyclical in nature and co-related with the state of the construction industry. During the past two years prices remained highly volatile forcing many units like Ramswarup Industries or SPS Steel to close shop and turn up as non performance assets for the banking sector.

But due to strategic location and access to inputs at competitive costs Adhunik survived as the group. Its other listed entity Adhunik Metaliks have mining resources including iron ore, coal, manganese ore and limestone, which are the key inputs of production.

These factors helped Adhunik to survive in a difficult time marked by global commodity slowdown, ban of mining in several states and liquidity crisis. In the last fiscal, the company achieved 14% growth in profits at Rs 4.35 crore on a turnover of Rs 441 crore, which grew 6%.

In the first quarter of current year its bottomline rose 8% to Rs 1.73 crore on flat sales of Rs 118 crore.

To fund acquisitions, Adhunik is planning to either go for qualified institutional placements (QIPs) or raise money overseas.

"We plan to raise money to fund the acquisitions as well as expansion programmes. Both QIPs and foreign currency loans are being explored as sources of raising money, and the size would depend upon the acquisition proposals we would shortlist. Banks have already approached us with several proposals," Agarwal said.

Adhunik on Thursday got approval of shareholders to raise equity of up to Rs 250 crore and alter Memorandum of Association to increase authorised share capital by five crore additional shares of Rs 10 each to aid its fundraising plan.