Rashtriya Ispat Nigam Limited (RINL), popularly known as Vizag Steel under the ministry of steel, has embarked on a massive expansion-cum-modernisation programme involving an investment of over Rs 45,000 crore in the next few years. In an interview with Mahesh Kulkarni & Debasis Mohapatra, Pradip Kumar Bishnoi, chairman and managing director, RINL, outlines the company’s future plans. Edited excerpts:
RINL has embarked on an ambitious expansion plan. How is it going? What will be the expected capacity addition during this financial year?
We are in the process of completing our first phase expansion from 3 million tonne per annum (MTPA) to 6.3 MTPA during this financial year at an investment of Rs 12,500 crore. We have already invested Rs 10,000 crore and will complete the remaining by end of this financial year. In addition to this, we have also worked out a plan to expand further by another 4 MTPA at an investment of Rs 7,000 crore.
We are also planning to increase another 4 MTPA of special steel products, which will require Rs 25,000-crore investment. Our plan is to complete all these capacity additions by 2015. The overall capacity will be over 15 MTPA.
In the next few years, we want to produce 30 MTPA steel. For that, we have required infrastructure and availability of iron ore from different sources, including supply from National Mineral Development Corporation (NMDC).
What are the new products you will be adding to your basket of products post-expansion?
We are manufacturing long products like TMT rebars, wire rods, rounds, structurals, and squares. After the first phase expansion, we will start producing flat products and special steels like low, medium and high carbon, forging quality, bright bar quality steels.
Our upcoming products include case-hardening steel, cold-heading steel, electrode steel, spring steel, among others. Special products include seamless tube with large diameter of 300 to 350 mm for use in oil-field drilling, oil and gas transportation, boiler tubes for thermal power plants.
We will also make electrical grade steel, which has two varieties such as cold rolled non-grain oriented steel and cold-rolled grain-oriented steels used in motors.
How are you funding this expansion? Any plan of raising money in the future.
The government had approved 1:1 debt to equity ratio. We have already spent more than Rs 9,000 crore and not borrowed any money so far.
We still have about Rs 2,000 crore in the bank in the form of fixed deposits and need another Rs 6,000 crore. We will borrow some money and generate the remaining through internal sources. We had floated an expression of interest on at least three occasions earlier and at least 50 bulk lenders had come forward to lend to us. We have zero debt and land holding valued around Rs 1 lakh crore, so lenders are happy to lend to us. We are looking at raising just about Rs 2,000 crore this year.
How are your joint venture plans with KIOCL moving? Is there any substantial progress.
We are looking at setting up a 3 MTPA steel plant jointly with Kudremukh Iron Ore Company Limited (KIOCL) in Bellary-Hospet region. We have signed an agreement and formed a joint operation wing. KIOCL has got its own pellet plant in Mangalore and we want to set up a ductile iron spun pipe plant there.
We are working on the possibility of setting up a plant for different value-added products. KIOCL has also applied for a mining licence with Karnataka government and once it is allotted mines, we will firm up our plans.
RINL is interested to take majority control of Neelachal Ispat Nigam Limited (NINL). Are things moving in the right direction?
We have been discussing with different stakeholders on NINL issue. The government is keen about roping in a strategic partner for NINL. Today, NINL doesn’t make steel. They only have a one million tonne pig iron plant. So, the first step will be to produce steel. Also, they do have a lot of land, which can be used in increasing the steel capacity to five million tonnes.
We have conveyed to the government that we do have the expertise and track record to do this.
Meantime, our aim is to be a strategic partner in NINL, not to merge it with us.
If it happens, then Orissa government will be a partner in this venture. So, there is no conflict of interest with the state government on this issue.
You are also looking to acquire coal mines overseas to reduce your dependency on other sources. Is any deal in the offing.
We are part of the International Coal Ventures Pvt Ltd, which is the joint venture between five public sector entities to scout for international coal assets. We are likely to close a deal in Indonesia shortly. But, I can’t give you the details of the asset at this point of time.
RINL is looking to diversify into cement sector. Any update.
We are a focused steel company and we see a lot of scope in this space. The company is planning to enter into specialised steel and other value-added products in the near future. There are opportunities for us to enter into cement sector by using our waste products like fly ash, slag.
We intend to rope in some international partners in this venture. Some players have also shown interest in the proposed joint venture but we are yet to finalise anything.
Have you received any time line with regard to divestment of stakes in RINL? Will it happen in FY12?
We have not received any time line from the government regarding stake sale. It is for the government to decide. So, I can’t comment on this issue.