Varun Industries plans Rs2,100 crore pig iron plant in Karnataka

Varun Industries, a Mumbai-based stainless steel player, is looking to invest Rs2,100 crore to set up a pig iron plant in Karnataka under its broader plan to achieve complete backward integration in the next five years.

“We are planning a 3.5 lakh tonne pig iron plant in Bagalkot district of Karnataka. Around 500 acres of land is approved for the project and we are also awaiting clearances for an iron ore mine,” said Kiran Mehta, chairman and managing director, Varun Industries.

Mehta said the company, however, will not make any capital expenditure towards the Bagalkot project in this fiscal as it will be preceded by a steel flats project of 60,000 tonnes per annum (tpa) in Jodhpur, where the company already has a 40,000 tpa capacity steel sheets plant.

“This (steel flats project) is the second step of backward integration of our steelware business which is expected to come up by May 2013. Once we have steel flats, we will be completely backward integrated in manufacturing stainless steel and related products,” he said.

Stainless steel is made from steel flats which are, in turn, made from steel sheets.

Steel sheets are made from pig iron. With presence in pig iron and steel sheet making, the company will achieve 100% raw material security.

In the current fiscal, the company is planning to invest Rs700 crore in the upcoming Jodhpur facility, which may stretch into the next fiscal, Mehta said.

Varun currently manufactures and exports close to 1,800 items in cookware, kitchenware and houseware from its plant in Vasai near Mumbai. The raw material for the plant is supplied from its stainless steel re-rolling plant at Jodhpur. The company also sells branded steelware from its seven outlets across the country under the brand name of Premium Kitchenware and more.

“We are focusing on setting up more and more franchisees in shopping malls as we find it a more efficient way to expand our reach, instead of setting up standalone outlets,” a company spokesperson said.

Varun is also focusing on diversifying its business interest in high-value sectors such as oil & gas and mining.

“We have over 1,000 oil & gas blocks in Madagascar and this investment will help the company in providing long-term valuations,” Mehta said.

He said the company is not planning to invest heavily in this activity; instead it is looking to bring in a partner to develop these blocks. “We are in talks with several companies and negotiations with a Hong Kong based firm in advanced stages,” he said.

Besides, the company, through its Australian joint venture partner Cluff Resources is scouting for mining opportunities in uranium and precious gemstones. The company also has interest in gold mines in Australia from where it plans to start mining soon, Mehta said.

“In the next five years, we see ourselves as a diversified player with substantial interests in oil and gas and mining, along with 100% backward integration in our core business of steel,” Mehta said, adding that the company might also set up a steel plant in future.