SAIL to borrow Rs54K cr from market to fund expansion

SAIL to borrow Rs54K cr from market to fund expansion

New Delhi: Country’s largest steel producer SAIL plans to approach market for borrowing 50% of its Rs54,000-crore expansion cost to reach a production capacity of over 26 million tonnes in the next three years.

“We would borrow half the amount for our proposed brownfield expansion in 1:1 ratio of debt and equity. But this would be at an appropriate time," SAIL Chairman S K Roongta said.

He, however, said that the remaining investment would be met through internal accruals and the company had already made a provision for the same.

Steel major SAIL’s total income rose by 34% to Rs12,660 crore in the second quarter of the current fiscal, while its net profit by over 18% to Rs2,009 crore.

As per its corporate expansion plan, state-run SAIL has envisaged investing about Rs54,000 crore for scaling up the production capacity of its major steel plants to reach a total output of 26.2 million tonnes (MT).

At present, the steel major’s total production capacity is close to 15 MT per annum.

Besides expanding capacities of its existing units like Bhilai, Bokaro and Rourkela, SAIL also plans to set up a 12-MT greenfield project in Jharkhand with an investment of over Rs40,000 crore.

The Navratna PSU said it would go ahead with the current capacity augmentation, but would review the medium and long-term projects, depending on the market conditions.

As per its previous plan, SAIL intends to reach 60 MT of production capacity by 2020, thereby adding nearly 20% to the country’s envisaged steel production of 280 MT.

To meet iron ore requirement for its enhanced production capacity, SAIL has primarily pinned hopes on the Jharkhand government to decide on renewal of its Chiria Mines leases.

The steel major and the Government of Jharkhand have been into a legal battle over rights of Chiria Mines for a couple of years.

“All we know about Chiria is that the Steel Minister and the Jharkhand Chief Minister have jointly announced in a press conference about resolving the matter soon," Roongta said.

Asked if the company would be open to sharing iron ore resources of Chiria, which has an estimated reserve of over 2 billion tonnes, the SAIL Chairman refused to comment.

For achieving 26.2-MT production target, SAIL will need around 42 MT of iron ore, whereas for 60 MT, the requirement would be pegged at about 100 MT.

SAIL has already informed the Centre that its total iron ore requirement for a span of 50 years will be over 3 billion tonnes.

At present, the total iron ore available with the steel major from its mines in Orissa and Jharkhand is approximately 26.33 MT. In view of its 2011 expansion plan, the company has envisaged capacity expansion of its mines in Jharkhand and Orissa.

While production of iron ore from Gua, Kiriburu and Meghataburu mines in Jharkhand would be scaled up to 10 MT, 5.5 MT and 6 MT, respectively, by 2010, that of Bolani in Orissa is likely to go up to 10 MT.

As for meeting its coal requirement, the steel major is looking for properties both domestic and international.

In 2007-08, SAIL imported about 10 MT of coking coal and procured four million tonnes from the domestic market. The PSU is likely to procure 12 MT of coking coal this year.