Central government may merge KIOCL with NMDC

 The Centre is planning to merge the ailing Kudremukh Iron Ore Company Limited (KIOCL) with the country’s leading state-run mining firm the National Mineral Development Corporation Limited.

The Steel ministry is of the view that the merger could prevent the closure of KIOCL, which has been struggling due to shortage of raw materials.

As both the PSUs are under the administrative control of the Steel ministry, their amalgamation would not be a big problem, a ministry official told Deccan Herald.

However, there are challenges for the merger, including getting the approval of the shareholders, company culture and structure, brand name, etc.

Shareholders reaction

Considering the strong performance of NMDC and the poor operating performance of KIOCL, shareholders could reject the merger proposal, said the official.

The ministry is studying these issues before arriving at a conclusion, said the official. Earlier, at the behest of the Steel ministry, KIOCL had commissioned a study by global consultancy firm PricewaterhouseCoopers (PwC) on sustainability and viability assessment of KIOCL. The report, which was submitted a few months ago, favoured the merger of the two entities.

“Considering both intangible and financial synergies of the combined entity, the merger with NMDC would be a highly favourable scenario for KIOCL,” PwC said in a report.

“Stronger organisational structure could also efficiently harness KIOCL’s human resource strength. Diversified customer base would support marketing of end products. NMDC’s Navaratna status would help the merged entity expand operations abroad,” PwC said.

Set up in 1976, KIOCL has 3.5 million tonne per annum iron oxide pelletisation complex and pig iron units in Mangalore.