Mittal bros looking to exit Gontermann

Barely a year after they sold Ispat Industries to JSW Steel, the Mittal brothers — Vinod and Pramod — are on the lookout for a buyer for Gontermann-Peipers (India) Ltd, which makes rollers for steel mills, among other products.

The brothers, younger siblings of steel tycoon Lakshmi Narayan Mittal, had even approached Sajjan Jindal with a proposal to sell promoter stake in the company, but the talks didn’t go far, according to sources who refused to be named.

The Mittals own 56.13% in Gontermann. Institutions, including banks and mutual funds, have very little holding in it.
Besides Gontermann, the brothers currently control Balasore Alloys Ltd, Ispat Metallics Ltd and Ispat Profiles Ltd in
India.

Their holding outfit, Isle of Man-based Global Steel Holdings, also controls steel plants in Bulgaria and Nigeria and manages a steel facility in Zimbabwe.

The Mittals’ desire to dispose of Gontermann and Jindal’s reported refusal is understandable, looking at the company’s current health.

When the times were good for steel producers, its key clients, Gontermann was posting handsome profits and revenue growth. But its health and performance have gone downhill since, coinciding with the economic slowdown and a reversal in the fortunes of the steel makers.

The company posted losses in the last two quarters, reporting a loss of `2.90 crore in the quarter ended September as against a net profit of `2.25 crore in the year-ago period, as sales dropped 35% to `29.87 crore.

To add to its woes, Gontermann’s financial strength has deteriorated with a rating agency expressing concern over poor liquidity position due to mounting receivables.
Investors, on the other hand, have been peeved at developments including a plan to make an unrelated diversification into setting up a commodity bourse, announced a year back but not pursued in right earnest with the Forward Market Commission, the regulator for such exchanges.

In terms of fundamentals, however, Gontermann has a strong presence in the industry, being the largest steel roll manufacturer, with a presence in both cast and forged rolls, key components for hot-rolled and cold-rolled steel mills.

The Mittals have also invested in raising capacity to about 21,000 tonne, from 15,300 tonne. The additional capacity was commissioned at Gontermann’s plant at Pailan in West Bengal recently.