Evonith to boost steel capacity to become India’s 5th-largest steelmaker by 2030

The company plans to scale up to 6 million tonnes per annum (mtpa) of capacity over the next three to five years from its existing 0.8 mtpa, according to chairman Jai Saraf.

“At Evonith Steel, organically we can grow up to 3.5 million tonnes," he told Mint in an interview on Wednesday. “The remaining 2.5 million tonnes is going to come from inorganic growth and turning around those new acquisitions to produce more to get to 6 million tonnes."

With planned expansion to 6 mtpa capacity, the company will only be the seventh-largest player behind JSW Steel Ltd, Tata Steel Ltd, Steel Authority of India Ltd, Jindal Steel Ltd, ArcelorMittal Nippon Steel India and Rashtriya Ispat Nigam. Evonith will be in lock step with Lloyds Metal and Energy, which itself has plans to scale to 4 mtpa over a similar timeframe after it starts production next year.

Evonith already has a plan in place to reach 1.4 million tonnes of steelmaking capacity by next year. Following this, it plans to invest in the brownfield expansion of its plant, including new blast furnaces, in-plant facilities, and finishing lines at Wardha in Maharashtra, which will require an investment of ₹5,500-6,000 crore.

To fund this capital expenditure, the company plans to list on Indian stock exchanges over the next 18 to 24 months, said Saraf, adding that the remaining capex will be funded through the redeployment of internal accruals.

The former Mittal Steel executive did not disclose any details on the IPO size, saying they have yet to appoint bankers for the listing.

In Wardha, Maharashtra, the company currently produces 0.8 mtpa of finished steel and expects to increase this to 1.1 mtpa by the end of the year as its ductile iron pipe facility becomes operational in December. Saraf expects capacity to reach 1.4 million tonnes by the end of next year.

Beyond 3.5 million tonnes, Evonith plans to pursue inorganic growth and acquire stressed steel assets to reach the 6-million-tonne target.

Acquisitions and turnaround strategy

In December 2020, Nithia Capital, along with CarVal Investors, made its first foray into the Indian market with the acquisition of Uttam Galva Metallics Ltd (UGML) and Uttam Value Steels Ltd (UVSL) for ₹2,000 crore, marking the beginning of what is now Evonith Steel.

At present, 12.5 % is owned by a private equity fund of Singapore, and Nithia Capital is the majority shareholder, said an executive requesting anonymity, adding that CarVal is no longer a shareholder and has exited.

Evonith focuses on distressed assets with a capacity of under a million tonnes and where promoters are willing to cede control, and then it turns around the business.

Nithia Capital's most recent acquisition was Topworth Urja and Metals Ltd for ₹300 crore, which is its third steel acquisition in India.

“A substantial rehabilitation and growth capex plan is envisaged to increase steelmaking operation to 0.5 mtpa and ensure the power plants are producing at full capacity," Nithia said in a press release.

The Wardha steel operations trace their roots to 1970, when the facility began as Gupta Tubes and Pipes Pvt. Ltd. It later became Lloyds Steel Industries Ltd. in 1986, and was acquired by the Uttam Group in 2012 and renamed Uttam Value Steels Ltd. Following the 2020 acquisition, the company was rebranded as Evonith Metallics (EML) and Evonith Value Steel (EVSL) under the Evonith Steel umbrella.

EML provides the hot metal/pig iron for EVSL and third parties to manufacture steel.

Pig iron is the raw molten iron used as the basic input to make steel. EVSL takes this pig iron and converts it into steel products such as hot-rolled coil, cold-rolled coil, galvanised coils and sheets and, in due course, ductile iron pipes–all used in automobiles and consumer durables.