Essar Steel to ramp up capacity to 7mt in FY15

Essar Steel, part of the diversified Essar Group, hopes to be profitable by 2014-15 as the company is in the process of ramping up its capacity to seven million tonnes.

The company is producing around five million tonnes of steel in Hazira and plans to ramp up its capacity to seven million tonnes in 2014-15.

“We hope that current financial year will be better than last year with higher domestic steel demand and the steel firm aims to increase its capacity utilisation levels this fiscal. With increase in our production capacity and focus on value added products, we hope to be profitable this financial year,” said Dilip Oommen, CEO and MD.

Essar Steel has also invested around Rs 4,200 crore to set up an integrated facility in Odihsa that includes a 12 million tonnes per annum iron ore beneficiation plant at Dabuna and a 253-km slurry pipe line connecting Dabuna and Paradip. This will allow it to make use of easily available low-grade ore by converting it into concentrated pellets that are molten to produce steel in a furnace.

“The slurry pipeline in Odhisa will be operational in the next three months and our freight costs will be nil which would be a significant savings for the company,” Oommen said.

Further the company plans to reduce its debt as it hopes demand to pick up post elections in the domestic market. The company also plans to increase exports in 2014-15.

“Essar Steel which has a total debt of around Rs 26,000 crore, will also increase its focus on exports in the present financial year by taking it to 30 per cent of the total sales from present 25 per cent,” Oommen added.

The group also hopes to raise $2billion from overseas by the end of first quarter of the present financial year, to retire rupee debt, which will help the company to reduce its interest outgo.

“We hope to complete the raising of $2 billion loan from overseas market by June, to replace costly domestic debt and reduce our interest costs,” said Mahadev Iyer, director-finance and chief financial officer of Essar Steel.

“The conversion of rupee loans into dollar will also increase the tenor of repayment to an average of around 10 years. The savings on interest outgo would be around Rs 1,200 crore annually and the average interest cost would also come down to 6-7 per cent from 12 per cent after the completion of this process,” said Iyer.

In June last year, Essar Steel had raised $1 billion through external commercial borrowings, with an annual cost saving of around Rs 450 crore.

Essar Steel has a production capacity of 14 million tonnes per annum (mtpa) with presence in India, Canada, USA and Asia.

Analysts said that domestic steel demand is expected to improve post elections.

“In 2013-14, demand was subdued and the sector witnessed meager growth but post elections once there is a stable government, demand is expected to revive,” said Sanjay Jain, an analyst at Motilal Oswal.

This article taken from mydigitalfc :
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