Rashtriya Ispat detours, drops IPO in favour of debt funding

Rashtriya Ispat Nigam Ltd (RINL), twice unlucky with its Initial Public Offerings, has decided not to approach the equity market anymore to fund its current as well as future expansion projects.

"There is a plan of the government to offload 10% stake. That call has to be taken by the government taking into account market conditions. But we are not, at this point in time, looking for any additional funds," P Madhusudhan, chairman cum managing director of RINL said.

RINL, which operates the Vizag steel plant, is about to complete its greenfield expansion that aims to take the hot metal capacity to 6.3 million tonne from 3.6 million tonne now.

The new capacity would be commissioned next month. After that, RINL would begin modernisation of its existing old plant, which would result in the capacity going up to 7.3 million tonne or 6.5 million tonne of saleable steel by 2017-18.

"This expansion we have carried out through internal resources. We are comfortably geared at this point in time. Once the cash flow starts flowing in from new expansion project, we are confident of funding our future projects through 1:1 debt equity ratio," Madhusudan said while addressing MCC Chamber of Commerce and Industry.

The government in September deferred the initial public offering following weak valuation prospects while RINL had previously postponed its IPO in 2012 after slowdown in steel industry kicked in.

RINL has a long term plan to take its capacity to 20 million tonne in future to leverage its land holding of about 1900 acres, which is strategically located near highway and close to ports in Visakhapatnam as well as in Gangavaram.

For this, RINL is even contemplating venturing into power generation in joint venture with NTPC within its own premises. "As we expand, our need for captive power will increase. The talks with NTPC however are at a very preliminary stage," Madhusan said.

Beyond its own site, RINL would like to partner NMDC and state government owned Industrial Development Corp of Orissa for the proposed ultra-mega steel plant in Odhisa. "We are also seeking to take 20% stake in the iron ore mining SPV (special purpose vehicle) possibly by taking some stake from NMDC where Odhisa Mining Corp would be the third partner," he said. Finer details of the project, including capacities of steel as well as mining project would be finalised only after the MoUs are signed.