Tata Metaliks has terminated its joint venture agreement with Kubota Corportion and Metal One Corporation for its ductile iron pipe business.
In an intimation to the stock exchanges, the company has informed that it had signed an agreement with Japan-based Kubota Corporation and Metal One Corporation on March 25 terminating the joint venture agreement executed on July 20, 2007 in relation to Tata Metaliks Kubota Pipes Limited, a subsidiary of the company.
The ductile pipe business, however, could be integrated with Tata Metaliks. "We have just decided to terminate the agreement and integrate it with the company, Tata Metaliks managing director, Harsh K Jha, said.
The joint venture company had a ductile iron pipe plant with a capacity of 200,000 tonnes at Kharagpur in West Bengal.
Tata Metaliks Kubota was buying hot metal at market price and net realization had dropped by about 20 per cent over the last few years. An integrated model, would therefore, make sense. "Our basic assumptions for the business have changed," Jha explained.
However, it's not just Tata Metaliks's ductile business that has run into trouble. Most of the ductile pipe makers are facing problems. "Competition failed to realize that this product is project related, it's not about market share. At one point in time, prices of ductile pipes and pig iron prices were at the same level," he said.
Last year's annual report mentioned that Tata Metaliks Kubota suffered from low net realizations, as the industry was facing over capacity, especially in the eastern region.
However, the company was banking on the infrastructure growth to improve the performance of the ductile pipe business.
"TMKPL is banking on India's investment in infrastructure to power its growth," Tata Metaliks Chairman, Koushik Chatterjee, had said in chairman's statement in the last annual report.
Overall, Tata Metaliks's operations suffered losses due to higher raw material costs, disruption in iron ore supply. In October 2011, the company decided to close down its Redi plant in Maharashtra.
In FY11-12, Tata Metaliks posted a net loss of Rs 90.60 crore.
However, for the quarter ended December 2012, the company had recorded a net profit of Rs 1.74crore.