Extensive SWOT Analysis of KIOCL Limited – A Government Owned Iron Ore Producer

Quick Stats on KIOCL Limited

Founder	Government of India
Year Founded	1976
Origin	Kudremukh
No. of Employees	746
Company Type	Public
Market Cap	Rs 13,905.35 Crore (2022)
Annual Revenue	$325.96 Million (2016)
Net Income/ Profit	N/A

 

Products By KIOCL Limited

• Iron oxide pellets
• Pig iron

Competitors of KIOCL Limited

• Rio Tinto Limited
• Vedanta Resources plc
• Vale S.A
• Hindustan Zinc Limited
• Trafigura Pte Ltd

Now that we know everything we need to know about KIOCL Limited, let’s start with the SWOT analysis of KIOCL Limited.

SWOT Analysis Of KIOCL Limited

SWOT analysis is like a formula for identifying Strengths, Weaknesses, Opportunities, and Threats (SWOT) that a market possesses for a company. The main objective of this analysis is to help us, as investors and the company, to make business decisions wisely.

By using this method, we analyse where the company is falling short, where it is excelling, and what needs to be worked upon.

To better understand the SWOT analysis of KIOCL Limited, refer to the infographic below:

So let us first start by looking at the strengths of KIOCL Limited from the SWOT analysis of KIOCL Limited.

Strengths of KIOCL Limited

The strengths of a firm can be positive qualities that help the company to maintain goodwill in the market or give it a competitive advantage. Mentioned below are some of KIOCL Limited’s strengths: 

• Strong History: KIOCL Limited mines, mainly the Kudremukh mine, were one of the largest mines in its era which was in great demand from countries like China, Iran, Japan, and Taiwan and this in itself was one of the biggest strengths of KIOCL Limited.
• Continued its Businesses: After the closure of the Kudremukh mine in 2006, KIOCL Limited continued its business in other areas like developing resorts and refurbishments in the Kudremukh national park. Currently, the company is planning to construct a coke oven plant in Mangalore, Karnataka.
• Government Support: KIOCL Limited gets immense support from the government of India which is why the limited company is still generating revenues in increasing directions. 
• Diversified and Value Added Product Portfolio: KIOCL Limited is a globally recognized high-end, value-added iron ore manufacturer. Its businesses in ore mining produced tonnes of iron ore to meet different needs throughout the world. The iron ore manufactured by KIOCL Limited was used by many companies in different sectors like automobile, electrical transmission, oil and petrochemical, heavy engineering, construction, etc.
• The Great Old Experience: KIOCL Limited, a pioneer organisation in the Pellet manufacturing industry has over three decades of experience in Owning, Operating, Maintaining & Controlling the Iron ore.
• Fantastic Return: KIOCL Limited have made a fantastic return of 971% over the past five years. The share price has soared some 933% higher.
• CSR Activities: KIOCL Limited is always forward to taking interest in CSR activities. KIOCL Limited inaugurated a Rs 45 lakh medical oxygen generation plant in Sullia that has fulfilled emergency needs of oxygen from needy patients in the hospital and also patients from nearby areas. Such activities show KIOCL Limited’s devotion to society and its people.

Weaknesses of KIOCL Limited

Weaknesses are the areas where the company is lacking behind and needs improvement. Let’s have a look at the weaknesses of KIOCL Limited:

• Controversies: The Kudremukh mining permission was given to KIOCL Limited on a lease for 25 years from 1976 to the year 2001. But the company extended its operations till 2006 due to which it had faced legal issues for allegedly continuing its operations and exploiting the environment.
• Limited Portfolio Diversification: The portfolio of KIOCL Limited is not as diversified as compared other industry leaders like Tata steel, Reliance & BHEL, etc.
• Past Affecting Present: Due to the company’s uneven actions in the past, the projects and proposals by KIOCL Limited do not easily obtain environmental clearance from the central body. Since 2017, KIOCL Limited is trying to restart its captive mining operations at Sandur in the Bellary district.
• Government Intervention: Government intervention and decisions in the mining business can cause operation inefficiency and labour unemployment. 
• Proprietary Business: The company used to manufacture only two products i.e. iron ore and pellet due to which the closure of it had caused the whole organisation to suffer.
• Competitors Getting Ahead: It is a long time since KIOCL Limited is not getting permission to operate. Other competitors are getting ahead using advanced technology and KIOCL Limited is way backwards in terms of this.

Opportunities for KIOCL Limited

Opportunities are uncontrollable external events a person can potentially leverage. These are favourable external factors that could give an organisation a competitive advantage.

• Opening of Pellet Plants: KIOCL Limited is planning to open its pellet manufacturing plants within six months under the Union government undertaking in Mangalore to its vendors who will buy pellets and in exchange of it they will supply iron ore fines or concentrates to KIOCL. This plan will help KIOCL Limited to reduce the total losses. 
• Start of Operations at Ballari: The Union Ministry of Environment & Forest and Climate Change have given a Stage-1 approval and is working on to accord the state II environmental clearance for the diversion of 401.5761 hectares of forest land for iron ore and manganese ore mining in Devadari Hill Range in Ballari district by March 2022.
• Expected Rise in Domestic Iron Consumption: With a stable central government and a strong approach to programs like the “Make in India” movement, the domestic iron ore demand is expected to rise at a fast pace across all sectors. KIOCL Limited is favourably poised to take benefits in India’s next growth cycle with its start of operations at Ballari with a wide variety of outputs, advanced technology, and flexibility.
• Market Development: KIOCL Limited is finally getting permission to commence its operations which will help the company to decrease the competitors’ advantage and work in the favour of the environment to increase its competitiveness compared to other organisations.

Threats to KIOCL Limited

Threats are the external factors that may cause loss to the firm over time or all at once. Some of these are stated below keeping KIOCL Limited in mind:

• Competition: Competition from existing and foreign players is a huge threat to KIOCL Limited. Some of the competitors are Vedanta Resources, Hindustan Zinc etc. Vedanta Resources is its biggest competitor and is the market leader. Due to this ongoing competition, there are price cuts which lead to a decrease in profit margin.
• Government and Environmental Regulations: The government has slightly different and more strict laws for the iron ore industry because it is our natural core and to maintain their control over the consumption of natural resources. While on the other hand organisations concerned about the environment also have their eyes on the iron ore mining industry due to its threat to natural resources and the environment.
• Changes in the Prices of Raw Materials & End Products: For steelmaking, it requires iron ore, metallurgical coal, limestone, etc. All these resources are scarce and procuring them is a difficult task. Sometimes it’s very difficult to mine in certain areas hence the prices of these materials keep on increasing and even the end products’ prices tend to change, this is a backdrop of KIOCL Limited to stay price competitive in the market.
• Brand Image of Competitors: Good brand images of the competitors are one of the threats which shouldn’t be neglected by any company at any cost.
• Environment Regulations: The company previously got shut down for a big haul due to extending its bars and exploiting the environment. As a mining company, this time KIOCL Limited has to make sure to follow all environmental rules if not done so the company can again go through big losses.

This ends our complete  SWOT analysis of KIOCL Limited. Let us conclude our learning below.