KIOCL Limited, (Previously known as Kudremukh Iron Ore Company Ltd.), a Flagship Company under the Ministry of Steel, was formed in 1976 for mining and beneficiation of low-grade iron ore at Kudremukh, at Chikkamagaluru district of Karnataka. The Company was conferred with Mini Ratna status in 1999. The country’s prestigious Export Oriented Unit (EOU) has its Pelletisation Complex and Pig Iron Complex (Blast Furnace Unit) at Mangalore and is engaged in the business of manufacturing high-quality Iron Ore Pellets for export and domestic market and supply of foundry grade pig iron in the domestic market.
Shri T. Saminathan, Chairman & Managing Director of KIOCL Limited, shares his views with the Indian Economy & Market about the current scenario and future plans. He has cut his professional teeth at KIOCL and has more than 3 decades of experience in the field of iron ore mining, Beneficiation, Pelletization, and Pig iron making. Besides bringing the tolling concept which has resulted in increased capacity utilization of Pellet Plant, he has also put in system improvement in supply chain and logistics, framed and implemented Risk Management Policy across the organization, introduced e-procurement through GeM Portal.
The company has a rich legacy. Please let us know the journey so far?
The Company was set up to mine low-grade magnetite iron ore at Kudremukh. The mine was developed to produce 22.5 million tons of ROM per year and beneficiation plant facilities to produce 7.5 million tons of Iron ore concentrate per year. This was considered to rank among the largest mines of Iron ores across the world. The entire operation was automated using a real-time online process computer, controlling equipment from crushing, conveying, beneficiation, and pumping of iron ore slurry to Mangalore. The transportation of iron ore slurry from Kudremukh to Mangalore through an eco-friendly pipeline of over 67 KM laid underground instead of conventional rail/ road transportation.
The Pig Iron Complex, which was commissioned in early 2001, has an annual production capacity of around 2.16 Lakhs tones. After the closure of operations from 2006 as per the Supreme Court order the company is producing Iron Ore Pellets by procuring iron ore from other sources of supply, mainly from NMDC. The Pellets are sold in both domestic and international markets. Removal of export duty and the concept of “Make in India” have pushed production to ramp up by expanding both supplier and customer base.
We’re expanding business in different sectors like Exploration of Minerals, Green Energy generation, Modernization of Blast Furnace Unit through forwarding and Backward Integration and the Company has carried out exploration in 4 blocks which are Limestone, Dolomite, Kaynite & Nickel under NMET Funding. Currently, Iron & Manganese ore comprising of 10 blocks funded by the Karnataka Government is being carried out for G4/G3/G2 level exploration. We’ve also established a full-fledged Mineral Lab in Mangalore. KIOCL is moving in the direction of making the Mineral Exploration wing one of its profit centers. We are also upgrading Pellet Plant to produce at the rated capacity by using all types of Ores from different sources by installing Pressure Filters, modifying Grinding Circuit, and other related units. KIOCL being an EoU, our preference is to sell more in the export market and export volume is currently about 80% which is expected to continue. We are also looking at the green option through harnessing solar energy in a big way. The Company is also in the process of implementing SAP S4 HANA ERP on MeitY empaneled cloud and for the same, we have engaged Tech Mahindra and Grant Thornton. We’ve expanded business across the world especially to Brazil, Vietnam, Mid East, South Korea, Japan, UK, Malaysia, China, etc., in the last few years.
Pellet Plant of the Company was shut-down supposedly for some maintenance works. When it is going to resume and what could be the financial impact?
Pellet Plant is under shut down for a period of six weeks for rectification of Indurating Machine alignment, replacement of refractories, major repairs, and other maintenance works and will resume operation from October 31, 2021. The shutdown will not impact financially much, since we are utilizing the lean period due to the downtrend in Pellet Market. However, we are operating a grinding and filtration unit to build up the stock of feed material to the Pellet Plant and this buffer stock will provide the Plant to run at optimum capacity.
When can you expect the pellet plant in Mangaluru to be fully utilized?
At present we are dependent on NMDC. The existing vacuum disc filters are not suitable to filter the iron ore sourced from Odisha or other sources which has a high alumina content, high Blaine, and is slimy in nature. To overcome this situation Company is installing 4 numbers of Vertical Pressure Filter and it is expected that the same will be commissioned by March 2021. We have also planned some modernization work in the Pellet Plant. By the next financial year the company may achieve the full utilization of the pellet plant.
The company has received Stage I approval for mining in Devadari Hill Range. When mining will start?
Ministry of Environment has accorded Stage I in-principle forest clearance for Devadari Iron Ore Mine. Compliances for obtaining stage II is underway and we’ve planned to mine 2 mtpa, Iron Ore, from Devadari Iron Ore, which will be utilized for captive consumption. On execution of mining lease deed with Govt. of Karnataka, the Company will commence the mining activities. Hopefully, mining activities may commence in next financial year.
What has been the impact of Covid at the export front?
The impact of the first outbreak of the covid-19 pandemic on export was unprecedented since the international market for Iron Ore & Pellets was under severe pressure. Due to the lock-down measures imposed in India and across the countries in the World, Courier services, both domestic as well as international services were severely disrupted which resulted in difficulties for timely collection of Shipping/Sales documents through Banks for the realization of sales proceeds. Further, due to the outbreak of the second wave, additional quarantine measures were imposed at the Chinese portside for Indian cargoes requiring a total waiting time of about 21 to 28 days before the customs clearance. Covid -19 precautionary measures for incoming Indian cargoes dampened demand further as longer clearance time meant higher associated costs for the buyers and delay in receipt of cargoes. This has also increased turnaround time for the vessels and reduced vessel availability for Indian exports. Demand from other key markets like Southeast Asia has also remained subdued due to restrictions, which has dented demand for Indian pellets.
Please share the latest financials.
I feel happy to share with you the financials of the first quarter of FY 2021-22 as, despite lockdown due to the second wave of COVID-19, the Company was able to maintain its normal operation by reorganizing its resources effectively. The Pellet Plant Operations continued at its optimum level after enforcing strict preventive measures against the COVID-19 pandemic.
During the quarter, Company reported a 139% increase in revenue from operations at Rs 1042.05 crore and a Profit Before Tax of Rs 295.22 crore and a Profit After Tax of Rs.215.92 crore. The total income earned is Rs 1059.50 crore as against Rs 460.58 crore, up by 130%. During the period Profit before Tax was Rs 295.22 crore as against Rs 18.97 crore, up by 1456 % whereas Profit after Tax was Rs.215.92 crore against Rs.12.02 crore, up by 1696 %. The company successfully maintained its upward journey as Pellet Production was 6.03 Lakh tons as against 5.11 Lakh tons of previous FY, up by 18%. Dispatches too was up by 11%.
You had been very active at the CSR front. Can you name some initiatives?
Under CSR, KIOCL has implemented various projects to combat the Covid-19 pandemic, like we contributed Rs.10.10 Crore to PM CARES FUND and have also rendered assistance to the state government. We provided Oxygen Concentrator Plant to AIMS, Belur, and 2 units of Oxygen Generation Plants to Govt Hospitals in Moodabidri and Uppinangady in Dakshina Kannada District. In addition to the above, KIOCL is extending all the necessary help in surrounding areas by distributing Grocery Kits, Food Grains, Masks, Sanitizers, etc..