Ferro Alloys Corporation Ltd Company Summary

Ferro Alloys Corporation Ltd Summary

Ferro Alloys Corporation (FACOR) as an old as the Indian ferro alloy industry. Starting out with limited facilities to manufacture ferro manganese in 1957, it has grown today to become the largest producer of ferro alloys, producing almost all kinds of ferro alloys. It has production facilities in Maharashtra for various ferro alloys (inst. cap. : 72,500 tpa), rolled steel (45,000 tpa) and a 100% EOU for charge chrome (50,000 tpa). The fortunes of the ferro alloy industry are linked to the ups and downs of the steel industry, as ferro alloys are used in the production of steel. It is a power-guzzling industry and power tariff constitutes 35-40% of the production cost in India. The ever-increasing power tariff has led FACOR to enter into several disputes with the SEBs and, today, its outstanding litigation fees amount to around Rs 14 cr.The producers are not able to pass over the increase in the cost of production, mainly due to the presence of a large number of small-scale units which enjoy exemptions from excise duty and sales tax, and power tariff concessions. Enjoying a market share of more than 50%, they have pushed many established units, including FACOR, into the red. FACORs charge chrome unit, too, has performed badly as international prices touched rock bottom. To meet its working capital requirements, the company raised Rs 18.34 cr through a rights issue of equity shares in May 93 (premium : Rs 25). In terms of a rehabilitation package, the company has agreed to issue zero-interest convertible debentures to financial institutions to the extent of the amount of funded interest, aggregating about Rs 34 cr.During the year 1997-98, the company was referred to BIFR since Its networth stands fully eroded.During 1995-96 the turnover of the company increased to Rs. 406.15 Crores as against Rs. 289.45 Crores during 1994-95. The Ferro Alloys Division of the company at Shreeramnagar in Andhra Pradesh has been under lock out since 19/3/99 due to some labour problems. The BIFR have declared the company a a Sick Industrial Company and appointed ICICI Ltd as the Operating Agency to examine the viability of the company and formulate a rehabilitation scheme for its revival.During the year 1999-2000, the company received EEPC All India Trophy for highest exporters for the year 1998-99 in the category of Prime Metal - Ferrous and Non-ferrous Exporters - Non-SSI.The Ferro Alloys Division was reopened during the year 2000-2001,after a gap of 14 months and it operated only 2 furnaces out of 16 furnaces with available 16 MW NTPC power.The company has restructured its capital by implementing the following: 1.Trifurcation of the company into 3 independent entities as follows:a.Ferro Alloys division consisting of plant at Garvidi in Andhra Pradesh is transferred to a new company being formed in the name of Facor Alloys Ltd.b.Steel division consisting of Steel melting & rolling plant at Nagpur,Maharashtra is transferred to a new company being formed in the name of Facor Steels Ltd.c.Charge Chrome division consisting of charge chrome plant and mines in Orissa will remain with the existing company Ferro Alloys Corporation Ltd.2. The equity Share Capital of the company shall be split amongst the above mentioned three entities in the following ratio:i. Facor Steels Limited-20% - Face value per share Rs.2/-.ii.Facor Alloys Limited-40% - Face value per share Rs.4/-.iii.Ferro Alloys Corporation Limited - 40% - Face value per share Rs.4/-.Subsequent to the above split up of Share capital,the nominal and paid up value of equity shares held by the shareholders in each of the above 3 companies will be written down/derated by 90% i.e., from Rs.2/-,Rs.4/-, and Rs.4/- per share to Rs.0.20,Rs.0.40 & Rs.0.40 per equity share in Facor Steels Limited,Facor Alloys Limited & Ferro Alloys Corporation Limited respectively and consolidation of such reduced shares into shares of paid up value of Re.1/- each in all the companies.