Mumbai: Billionaire Anil Agarwal-led Vedanta Iron & Steel is aiming to double the steelmaking capacity at its Bokaro plant to 3 million tonnes per annum (mtpa) by the end of 2026, nearly a year ahead of the timeline indicated in the company's annual report, according to two people familiar with the matter. The report had guided that the capacity expansion from 1.5 mtpa to 3 mtpa would be completed by the end of FY28.
The Bokaro expansion has faced multiple regulatory hurdles since Vedanta acquired ESL Steel Ltd in 2018. The project was delayed by pending statutory approvals, including environmental clearances and consent-related approvals from regulators, the people cited above said on the condition of anonymity, adding the steel arm is now awaiting the final regulatory clearance, expected within the next six months.
The company is also preparing its next phase of expansion, raising steelmaking capacity to 5 mtpa by FY29, according to their investor presentation on 22 May. The plan involves debottlenecking the existing plant to add about 0.5 mtpa of capacity, along with setting up a 1.5 mtpa blast furnace, one of the two people cited above said.
At 3 mtpa, Vedanta Iron & Steel would be comparable in size to middle-sized domestic steelmakers such as NMDC Steel (2 mtpa) and Evonith Steel (1.4 mtpa).
The proposed expansion reflects Vedanta Iron & Steel's independent growth strategy following the metals-to-oil conglomerate’s demerger process. “As a standalone listed company, Vedanta Iron & Steel can make its own investment decisions more quickly. While the expansion plans have been in the works for some time, the board has now decided to speed up the project to meet rising demand for steel and increase production of higher-value steel products”, the person added.
The 5 mtpa expansion would be financed through a combination of internal accruals and borrowings. Internal cash generation remaining after dividend payouts to parent Vedanta Ltd is expected to fund some of the capital expenditure, while the balance may be raised through debt from the market, the person added.
Vedanta Iron and Steel will assume only a "very small" portion of Vedanta Ltd's $6.7 billion debt, chief financial officer Ajay Goel said during the company's post-earnings call in January. This leaves some room for the steelmaker to raise debt to fund expansion without the burden of servicing legacy debt.
The expansion would mark a key milestone for Vedanta's steel business. The company has consistently maintained its intention to double Bokaro's capacity since acquiring ESL Steel in its annual reports, but has not seen progress due to delays in obtaining statutory approvals.
Vedanta Iron & Steel has outlined a $1.3 billion capex programme through FY29 to expand its integrated operations, targeting 5 mtpa steelmaking capacity and 18.5 mtpa iron ore production capacity by FY29. The expansion is expected to shift the business towards higher-margin value-added steel products and lift consolidated Ebitda to $526 million by FY29, according to an investor presentation.
A detailed emailed questionnaire sent to Vedanta on expansion timeline, pending regulatory approvals, future capacity plans and funding strategy remained unanswered.
On 15 June, four demerged Vedanta group entities: Vedanta Aluminium Metal, Vedanta Power, Vedanta Oil and Gas, and Vedanta Iron and Steel, made their stock market debut, marking a key milestone in Agarwal's effort to split the diversified natural resources group into sector-focused businesses. Vedanta Iron and Steel’s share price has jumped 2x since its listing, while benchmark Nifty rose by 1.34% during the same period.
The 71-year-old chairman, who started out as a copper trader in Bihar before building Vedanta into a mining conglomerate, told investors that each of the five companies could eventually be valued at $100 billion and would benefit from India's growth story.