Adhunik Metaliks to sell Orissa Manganese stake to PE funds

Kolkata-based steel manufacturer Adhunik Metaliks is in talks with private equity players for picking up stakes in its wholly owned subsidiary, Orissa Manganese & Minerals.

According to Adhunik Metaliks Managing Director Manoj Agarwal, the deal will be concluded in the next one month following which the promoters can dilute 10-11 per cent stakes in the company.

Orissa Manganese & Minerals has six manganese ore mines and one iron ore mine.

"The iron ore mine has reserves of 80 million tonne and will start production by June-July 2008," said Agarwal.

Adhunik acquired the company for Rs 60 cr in April 2007.

The mines don't have captive clause and the manganese and iron ore can be sold in the open market to various end users.

The company has mining rights of 15 million tonne for its manganese reserves.

Adhunik Metaliks has lined up its third phase of expansion, which entails forward and backward integration to increase its earnings before interest, taxes, depreciation and amortisation (EBITDA) from 18 per cent to 26 per cent.

The third phase would be completed by October 2009, but the benefits would kick in by the end of 2008-09, he said.

Adhunik will be closing its current financial year with a profit after tax (PAT) of Rs 96 crore, which is expected to increase to Rs 176 crore in 2008-09.

The investment in the third phase will be Rs 422 crore, of which debt will account for Rs 274 crore.

The expansion plans include raising the sponge iron capacity from 150,000 tonne to 315,000 tonne, setting up a captive power plant of 17 mw and a Sinter plant to use the fines.

He said raw material accounted for 80 per cent of the companies expenditure, which was expected to come down to 40-50 per cent after the expansion plans were implemented. – Business Standard