Ispat Industries
- Thread starter KonalGondal
- Start date
- Tags ispat industry
TODAY I RECEIVED A MAIL, WHICH DEALS WITH VARIOUS ASPECTS OF ISPAT INDUSTRIES..I am just copy, pasting it here, for our friends to have a look in to it.
*Ispat Industries Ltd. ** Not
Rated (CMP:** `** 23)*
*Market Cap:** `** 28,230 mn; USD 614 mn Bloomberg
code (NDEN IN)*
*We recently met with the management of Ispat Industries Ltd. (IIL) to have an understanding of i) status of IILs steel business, ii) IILs expansion
plans, and iii) strategy to improve balance sheet position. *
*110 MW power plant to produce power at ~**`** 1.5/unit vs. current cost of **`** 5.5/unit*
IIL is setting up a 110 MW thermal power plant at Dolvi majority of the
generation of about 98MW would be via waste heat recovery from gases of the blast furnace & coke ovens. IILs total power requirement is ~250 MW and the new power plant will suffice for IILs ~44% power requirement.
Currently, IIL procures power from the State Electricity Board at ` 5.5/unit, whereas the generation cost at the new 110 MW power plant is expected to be 1.5/unit. This is likely to bring down the blended cost of power from
` 5.5/unit to ` 3.75/unit. The power plant is expected to be completed by
Q4FY12 with an estimated cost of ` 4.9bn. This project will have a
debt:equity mix of 1:1 and IIL has tied up ` 2.45bn of debt and
brought in `1.75bn of equity.
*1mn MT coke oven in a JV with Stemcor to reduce cost, provide gas for power plant*
IIL is setting up a 1mn MT coke oven in a JV with Stemcor wherein IIL has
26% stake. The total estimated project cost (including pellet plant of 2mn
MT) is ` 11.25bn, which will have a debt:equity mix of 2:1. Financial
closure is expected by October 31, 2010. Of total equity contribution
of `3.75bn, IILs contribution will be` 0.975bn, whereas Stemcor will contribute ` 2.78bn.
As part of the agreement towards its equity contribution of ` 975mn, IIL will be contributing ~500mn in the form of land for the project. Stemcor will get a fixed 18% return on equity (ROE) on this project. This will not only ensure
cheaper coke supply for IIL but also provide waste gas, which is likely to
generate ~40MW of power for its steel plant. The project is expected to be
completed by Q4FY12.
For its 2.0mn MT of Pig Iron capacity, IIL uses pellet as feed mix imported
from third party sources outside India. IIL, in collaboration with Stemcor,
is setting up a 2.0mn MT capacity pellet plant, which is expected to be
completed in the next 2 years.
*Additional capacity at Dharmatar Jetty to be used for commercial use*
IIL has existing capacity of ~12mn MT at Dharmatar Jetty, which is to be
expanded to 15mn MT by FY11E. IIL utilizes ~9mn MT of its capacity at its
jetty. With overall capacity of 15mn MT at this jetty, IIL will have ~6mn MT
of additional capacity for commercial use, which will give it an additional
revenue source.
*HRC capacity to increase to 4.2mn MT from 3.3mn MT in next two years*
IIL has liquid steel capacity of 4.2mn MT; whereas its HRC capacity is 3.3mn
MT. IIL is increasing its HRC capacity by way of de-bottlenecking. Its HRC
capacity is expected to reach 4.2mn MT in the next two years.
*High possibility of takeover/acquisition of IIL *
The promoters hold 41.1% stake in IIL and the bankers hold 5%. The promoters have pledged 95% of their holding with the bankers, who have the option to takeover the promoters stake in the case of a default of key covenants.
The bankers have an option to takeover the company and then sell their stake to another interested steel company. Also the public holding in IIL is 44%, enabling additional acquisition of shares from the secondary market.
We believe IIL could witness a turnaround & be re-rated if acquired by any
leading steel mill as it is present in the high growth flat products
segment.
*Ispat Industries Ltd. ** Not
Rated (CMP:** `** 23)*
*Market Cap:** `** 28,230 mn; USD 614 mn Bloomberg
code (NDEN IN)*
*We recently met with the management of Ispat Industries Ltd. (IIL) to have an understanding of i) status of IILs steel business, ii) IILs expansion
plans, and iii) strategy to improve balance sheet position. *
*110 MW power plant to produce power at ~**`** 1.5/unit vs. current cost of **`** 5.5/unit*
IIL is setting up a 110 MW thermal power plant at Dolvi majority of the
generation of about 98MW would be via waste heat recovery from gases of the blast furnace & coke ovens. IILs total power requirement is ~250 MW and the new power plant will suffice for IILs ~44% power requirement.
Currently, IIL procures power from the State Electricity Board at ` 5.5/unit, whereas the generation cost at the new 110 MW power plant is expected to be 1.5/unit. This is likely to bring down the blended cost of power from
` 5.5/unit to ` 3.75/unit. The power plant is expected to be completed by
Q4FY12 with an estimated cost of ` 4.9bn. This project will have a
debt:equity mix of 1:1 and IIL has tied up ` 2.45bn of debt and
brought in `1.75bn of equity.
*1mn MT coke oven in a JV with Stemcor to reduce cost, provide gas for power plant*
IIL is setting up a 1mn MT coke oven in a JV with Stemcor wherein IIL has
26% stake. The total estimated project cost (including pellet plant of 2mn
MT) is ` 11.25bn, which will have a debt:equity mix of 2:1. Financial
closure is expected by October 31, 2010. Of total equity contribution
of `3.75bn, IILs contribution will be` 0.975bn, whereas Stemcor will contribute ` 2.78bn.
As part of the agreement towards its equity contribution of ` 975mn, IIL will be contributing ~500mn in the form of land for the project. Stemcor will get a fixed 18% return on equity (ROE) on this project. This will not only ensure
cheaper coke supply for IIL but also provide waste gas, which is likely to
generate ~40MW of power for its steel plant. The project is expected to be
completed by Q4FY12.
For its 2.0mn MT of Pig Iron capacity, IIL uses pellet as feed mix imported
from third party sources outside India. IIL, in collaboration with Stemcor,
is setting up a 2.0mn MT capacity pellet plant, which is expected to be
completed in the next 2 years.
*Additional capacity at Dharmatar Jetty to be used for commercial use*
IIL has existing capacity of ~12mn MT at Dharmatar Jetty, which is to be
expanded to 15mn MT by FY11E. IIL utilizes ~9mn MT of its capacity at its
jetty. With overall capacity of 15mn MT at this jetty, IIL will have ~6mn MT
of additional capacity for commercial use, which will give it an additional
revenue source.
*HRC capacity to increase to 4.2mn MT from 3.3mn MT in next two years*
IIL has liquid steel capacity of 4.2mn MT; whereas its HRC capacity is 3.3mn
MT. IIL is increasing its HRC capacity by way of de-bottlenecking. Its HRC
capacity is expected to reach 4.2mn MT in the next two years.
*High possibility of takeover/acquisition of IIL *
The promoters hold 41.1% stake in IIL and the bankers hold 5%. The promoters have pledged 95% of their holding with the bankers, who have the option to takeover the promoters stake in the case of a default of key covenants.
The bankers have an option to takeover the company and then sell their stake to another interested steel company. Also the public holding in IIL is 44%, enabling additional acquisition of shares from the secondary market.
We believe IIL could witness a turnaround & be re-rated if acquired by any
leading steel mill as it is present in the high growth flat products
segment.
some good news on ISPAT.......
STEMCOR wants to buy out pellet plant, hike equity beyond 10%.
Stemcor, which last month agreed to pick up 10 per cent in Ispat
Industries, is now hungry for more. The Indian arm of one of the
worlds largest steel trading companies has sent feelers to Ispat to
buy it out entirely from its 3 million tonne per annum pellet plant.
The final negotiations now underway may also see UK-based Stemcor
hiking its stake in Ispat beyond 10 per cent. Ispat is promoted by
Vinod and Pramod Mittal, brothers of the world’s largest steel
maker, LN Mittal.
"Till now we have signed a shareholders’ agreement with Ispat
only for the coke oven battery. Discussions on all other counts (pellet
plant and power plant), including the stake sale in the parent
company, are underway. We have only signed a memorandum of
understanding. The full clarity will emerge in a month’s time,"
Stemcor India Managing Director Mathew Stock said.
On September 19, cash-strapped Ispat Industries, which has a debt of
around Rs 6,700 crore on its books, announced a strategic cooperation
agreement with Stemcor. As part of the deal, Ispat agreed
to prefentially allot 10 per cent equity to Stemcor for Rs 250-300
crore. Apart from equity, Stemcor was to also help Ispat build a one
million-tonne per annum coke oven plant, a pellet plant and a 110-Mw
power plant at Dolvi in Maharastra.
In all the proposed joint ventures, Stemcor was to hold 74 per cent
equity, with Ispat holding the residual 26 per cent. The combined
investments were to exceed Rs 3,000 crore.
But Stemcor is now keen to buy out Ispat entirely from its pellet plant
project and has made its intention known. "We would like to have 100
per cent stake in the pellet project. There is a lot of demand in the
western region for pellets and there are no plants. So we see this as a
great opportunity. Since Ispat’s contribution in the pellet plant is
only the land, we are in talks with it to buy the land or to lease it for a
long term." said Stock.
According to Stock, Ispat's own requirement for pellets is 2 million
tonne per annum. The additional million tonne can be sold to third
party customers who will guarantee offtake.
Stemcor is already setting up a four million tonne pellet plant in
Orissa with an investment of close to Rs 1,500 crore. The plant will be
operational next month. The raw material for the Orissa project will
come from its own mines in the state. The extra supplies can be
diverted to the Ispat plant in Maharastra, if required. "If we feed our
own iron ore in the plant then we would like to capture the full value
of that," Stock said. The objective for Stemcor is to have a plant each
in the east and the west coast.
Pellet pricing will also be crucial for the deal. "If we use 100 per cent
of our own iron ore then we expect Ispat to pay us the market rate
for the pellets," said Stock. But with Ispat having its own iron ore
supply deal with NMDC, Stock also made it clear that if Ispat's ore
supply is used in the proposed pellet plant then it will get a negotiated
price that is lower than market rate.
Apart from the pellet plant, Stock said that the company is also keen
in setting up a three million tone benefication plant next door to add
value to the iron ore that will come out of the pellet unit. The
benefication plant will require an investment of Rs 500-Rs 700 crore.
Ispat Industries Director (finance) Anil Sureka did not comment. He
said, "The deal is still under negotiations and will take 30 to 40 days
more to seal." When asked specifically about Stemcor's intention to
wholly own the pellet plant or raise equity in the company, Sureka
said: "This is news to me."
Sources added the 15 lenders of Ispat Industries, who just a month
back had threatened to induct a strategic player in the company, will
play a crucial role in these final negotiations between Ispat and
Stemcor. As of now, they are not revealing their strategy. A debt
restructuring approved by Ispat's shareholders give them the option
to convert part of their loan into equity and hike their combined stake
to 31 per cent from the current 10.9 per cent in case of a default.
Indian banks like State Bank of India, IDBI and ICICI Bank have a
$1.5 billion exposure to Ispat.
good luck......
uday
STEMCOR wants to buy out pellet plant, hike equity beyond 10%.
Stemcor, which last month agreed to pick up 10 per cent in Ispat
Industries, is now hungry for more. The Indian arm of one of the
worlds largest steel trading companies has sent feelers to Ispat to
buy it out entirely from its 3 million tonne per annum pellet plant.
The final negotiations now underway may also see UK-based Stemcor
hiking its stake in Ispat beyond 10 per cent. Ispat is promoted by
Vinod and Pramod Mittal, brothers of the world’s largest steel
maker, LN Mittal.
"Till now we have signed a shareholders’ agreement with Ispat
only for the coke oven battery. Discussions on all other counts (pellet
plant and power plant), including the stake sale in the parent
company, are underway. We have only signed a memorandum of
understanding. The full clarity will emerge in a month’s time,"
Stemcor India Managing Director Mathew Stock said.
On September 19, cash-strapped Ispat Industries, which has a debt of
around Rs 6,700 crore on its books, announced a strategic cooperation
agreement with Stemcor. As part of the deal, Ispat agreed
to prefentially allot 10 per cent equity to Stemcor for Rs 250-300
crore. Apart from equity, Stemcor was to also help Ispat build a one
million-tonne per annum coke oven plant, a pellet plant and a 110-Mw
power plant at Dolvi in Maharastra.
In all the proposed joint ventures, Stemcor was to hold 74 per cent
equity, with Ispat holding the residual 26 per cent. The combined
investments were to exceed Rs 3,000 crore.
But Stemcor is now keen to buy out Ispat entirely from its pellet plant
project and has made its intention known. "We would like to have 100
per cent stake in the pellet project. There is a lot of demand in the
western region for pellets and there are no plants. So we see this as a
great opportunity. Since Ispat’s contribution in the pellet plant is
only the land, we are in talks with it to buy the land or to lease it for a
long term." said Stock.
According to Stock, Ispat's own requirement for pellets is 2 million
tonne per annum. The additional million tonne can be sold to third
party customers who will guarantee offtake.
Stemcor is already setting up a four million tonne pellet plant in
Orissa with an investment of close to Rs 1,500 crore. The plant will be
operational next month. The raw material for the Orissa project will
come from its own mines in the state. The extra supplies can be
diverted to the Ispat plant in Maharastra, if required. "If we feed our
own iron ore in the plant then we would like to capture the full value
of that," Stock said. The objective for Stemcor is to have a plant each
in the east and the west coast.
Pellet pricing will also be crucial for the deal. "If we use 100 per cent
of our own iron ore then we expect Ispat to pay us the market rate
for the pellets," said Stock. But with Ispat having its own iron ore
supply deal with NMDC, Stock also made it clear that if Ispat's ore
supply is used in the proposed pellet plant then it will get a negotiated
price that is lower than market rate.
Apart from the pellet plant, Stock said that the company is also keen
in setting up a three million tone benefication plant next door to add
value to the iron ore that will come out of the pellet unit. The
benefication plant will require an investment of Rs 500-Rs 700 crore.
Ispat Industries Director (finance) Anil Sureka did not comment. He
said, "The deal is still under negotiations and will take 30 to 40 days
more to seal." When asked specifically about Stemcor's intention to
wholly own the pellet plant or raise equity in the company, Sureka
said: "This is news to me."
Sources added the 15 lenders of Ispat Industries, who just a month
back had threatened to induct a strategic player in the company, will
play a crucial role in these final negotiations between Ispat and
Stemcor. As of now, they are not revealing their strategy. A debt
restructuring approved by Ispat's shareholders give them the option
to convert part of their loan into equity and hike their combined stake
to 31 per cent from the current 10.9 per cent in case of a default.
Indian banks like State Bank of India, IDBI and ICICI Bank have a
$1.5 billion exposure to Ispat.
good luck......
uday
Dear Dr Uday
I am really surprised that you remembered about my post and topic even when i pasted it so long back .
Thank you so much for your insights.
I am still holding on to ISPAT .Will try and increase it slowly if i see any movement.
Can you also please advise on other similar stocks (based out of your vast knowledge of current news and updates ) in case you have researched the same.
I wish to do a similar study on other stocks but I guess i am just lacking identifying prospective stocks due to lack of time :-(
Warm Regards
KG
I am really surprised that you remembered about my post and topic even when i pasted it so long back .
Thank you so much for your insights.
I am still holding on to ISPAT .Will try and increase it slowly if i see any movement.
Can you also please advise on other similar stocks (based out of your vast knowledge of current news and updates ) in case you have researched the same.
I wish to do a similar study on other stocks but I guess i am just lacking identifying prospective stocks due to lack of time :-(
Warm Regards
KG
Dear Optimist......
Apart from ISPAT.... watch the scrip, Brushman Industries. quoting @8+.....
Use simple logic...... once the market tastes the 6300 nifty.... it wish to taste it again and again.... this time... it will be more than 6300... may be 6800 or even 7500+.... somebody predicted even 10000... but when....
It all depends on liquidity... how much money is avaialble... you might have seen how the mkt responded in 2009-2010... so fast mkt is recovered....
everybody, brokers, operators, FIIs, DIIs, banks, politicians, and even govt. realises the market is is the easy way to earn...
Now the time to look into the scrips which has not participated in the 4000 to 6000 rally.. and catch them.... be positive.... at the same time be cautious.....
Ispat and Brushman and even Suzlon are such scrips... low priced banks.... (CUB, South Indian bank, DCB).... low priced PSUs (NHPC, Neyveli)... looks hot favourites to me... and even Bellary Steel(due to interest generated to mining scrips after Coal India IPO....)
Rest is your choice......
Good luck....
uday
Apart from ISPAT.... watch the scrip, Brushman Industries. quoting @8+.....
Use simple logic...... once the market tastes the 6300 nifty.... it wish to taste it again and again.... this time... it will be more than 6300... may be 6800 or even 7500+.... somebody predicted even 10000... but when....
It all depends on liquidity... how much money is avaialble... you might have seen how the mkt responded in 2009-2010... so fast mkt is recovered....
everybody, brokers, operators, FIIs, DIIs, banks, politicians, and even govt. realises the market is is the easy way to earn...
Now the time to look into the scrips which has not participated in the 4000 to 6000 rally.. and catch them.... be positive.... at the same time be cautious.....
Ispat and Brushman and even Suzlon are such scrips... low priced banks.... (CUB, South Indian bank, DCB).... low priced PSUs (NHPC, Neyveli)... looks hot favourites to me... and even Bellary Steel(due to interest generated to mining scrips after Coal India IPO....)
Rest is your choice......
Good luck....
uday
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