Electrosteel to spend Rs 10K cr

KOLKATA: Electrosteel Castings, a manufacturer of ductile iron pipes, has lined up investments of over Rs 10,000 crore to expand capacity. The plans include setting up a 1.3 million tonne per annum (mtpa) integrated steel plant and a 1,200 MW power plant over the next few years.

The company has just floated a new entity called Electrosteel Integrated to raise funds for its proposed steel plant in Jharkhand.

The proposed investment for the unit, which is expected to be commissioned in 2011, is around Rs 5,000 crore. The company is looking at a debt: equity ratio of around 3:1.

Company sources told DNA Money the debt has already been tied up with a few public sector banks led by State Bank of India. This amounts to Rs 3,717 crore.

The new company has an equity requirement of around Rs 1,240 crore, which will be partly funded by promoters and private equity and strategic investments. This is likely to be finalised in the next three-four months.

The option of tapping qualified institutional buyers may be explored, too.Promoters’ stake in Electrosteel Integrated may be around 40%.

Though not immediately, the new company may go in for an initial public offer after a year or two, sources hinted.

Electrosteel is yet to take a decision on its coal-based power plant, which is estimated to cost Rs 5,500 crore.

Sources said the project is still on the drawing board. Meanwhile, the company is waiting for approvals to undertake mining of iron ore and coal.

The thermal coal blocks in north Dhadu have certified coal reserves of 224 million tonnes.

The development of these mines on an opencast pithead basis is estimated to cost around Rs 600 crore.

The iron ore mines, on the other hand, are located in Kodilabad and are said to have certified reserves of over 100 million tonnes.

Electrosteel Castings is looking at a 10% growth in revenues during the current fiscal compared with Rs 1,200 crore in the last.