As part of its measures to counter the overriding slump, Essar Steel will initiate a business restructuring programme to review all aspects of its operations. Management consultant KPMG has been roped in to undertake this restructuring exercise.

KPMG's mandate will be to suggest ways of strengthening operations and reducing Essar's losses which touched Rs 213 crore in the first quarter ended June 30, '01, compared to a net profit of Rs 4.8 crore in the same period last year. The company attributed the loss to sharp fall in realisation, over capacity and closure of US markets.

Essar Steel officials declined to comment on the appointment of KPMG. As a first step, KPMG met all lenders of the company last week, to appraise them of the move.

Essar Steel had completed its financial recast in December '00, which included extending debt maturity and lowering interest rates. Of its total Rs 4,400 crore debt, Essar Steel has Rs 2,400 crore from Indian lenders alone.

The management consultant was approached as there does not seem to be any major improvement in prices of steel products in the coming months. Hot rolled coils, the base grade product for steel, have regis-tered a Rs 4,000 per-tonne fall from the Rs 17,000 per tonne price that they were at a year back.

KPMG's scope would cover manufacturing, product mix, marketing, logistics, procurement and finance activities.

Essar currently produces less of hot rolled coils and more of value-added API (American Petro-leum Institute) grade. The review would look at how to improve this product mix.