New Delhi: Infrastructure conglomerate Jaiprakash Associates said on 3 August it has acquired Malvika Steel at Jagdishpur in Uttar Pradesh for Rs207 crore and will be investing Rs1,800 crore over the next three years to take the capacity of the plant to 1 million tonnes per annum.
“The company already has interests in power, engineering, construction and cement and a foray into the steel segment was a natural diversification for us,” JAL executive chairman Manoj Gaur told reporters here.
He said acquiring the company, which marks the city-based infrastructure group’s foray into the steel sector, was a strategic investment since setting up a greenfield unit and making it operational would have taken a minimum of five years.
“With this steel plant, we have the basic infrastructure in place and the plant can be made operational in the next 24 months,” he said, adding that the company would leverage the tremendous growth opportunity in the sector in northern region, especially Uttar Pradesh and Bihar.
In the first phase, the company would be investing Rs800 crore by December 2008 when the capacity would be 5 lakh tonnes. It would invest another Rs1,000 crore by March 2010 to take the total capacity of the steel plant to a million tonnes.
”With the steel plant, the backward integration for the group is complete, giving it a leverage in cost of construction as well as reliable supply position,“ Gaur said.
The company acquired Malvika Steel, earlier promoted by Usha Group, in an open auction made by the Debt Recovery Tribunal. The steel firm was taken over by some financial institutions after it failed to meet its interest obligations.
The fresh investments would be funded through a mix of debt and internal accruals, Gaur said. The group would also leverage a part of $400 million raised recently through an offshore convertible bonds issue.
Jaiprakash Group seeks to produce long steel products used mainly in construction.