The Kirloskar Ferrous Industries board of directors has granted in principle approval for the acquisition of pig iron producer VSL Steels for not more than INR 135 crores ($18.3 million). Kirloskar plans to expand VSL’s pig iron production capacity to 541,000 tonnes/year from 391,400 t/y.

The transaction will be completed subject to fulfilment of certain commercial conditions, VSL Steels’ directors’ approval and other necessary approvals. It will be financed by way of borrowings and partly by way of internal accruals, Kallanish notes.

The transaction is to be completed in two stages. The operations of the pig iron plant are expected to commence within six months and that of the sinter plant within 18 months. VSL’s production units, located in Hiriyur, Chitradurga District, Karnataka State, are currently idle and generate no revenue.

In the fiscal year through March 2020 Kirloskar Ferrous Industries sold 358,146t of pig iron, flat on-year. Revenue was down -14% to INR 184,966 lakhs ($251.2m), but profit after tax rose 15% to INR 11,237 lakhs. It also sold 78,663t of castings last fiscal.

During the year the firm took steps to reduce coke consumption and improve power generation. It petitioned in late 2018 for the removal of India’s anti-dumping duties on imports of low ash metallurgical coke from Australia and China. The investigation is yet to be concluded. The firm commissioned a 200,000 t/y coke plant in March 2020 to reduce dependency on imports.