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Tata Steel to enhance Kalinganagar plant by increasing capacity by 5 MT

Going ahead company may reduce aggression to acquire NCLT-listed companies, say brokerages

Aditi Divekar  |  Mumbai 

Tata Steel
Tata Steel

As part of Tata Steel's long-term strategy to expand in the domestic market, the comapny's board on Tuesday approved a plan for the next phase of expansion at in The country's largest steel producer plans to add five million tonne capacity in taking the company's total domestic steel capacity to 18 million tonnes over the next four years.

In a BSE filing today, the company said the new expansion plan at was expected to cost Rs 23,500 crore as it would include investment in raw material expansion, upstream and midstream facilities along with downstream units such as a cold rolling mill.

The mode of financing for this second phase expansion at would be a combination of debt and equity with project expansion expected to be completed in 48 months, informed

Currently, has a 13 million tonne capacity in India with 10 million tonnes coming from Jamshedpur and balance three million from Kalinganagar phase I. The capacity utilisation level is 98 percent for the domestic market.

The new capacity would focus on flat products as it is aimed at meeting requirement of automotive, general engineering and other value added segments.

The announcement for capacity expansion comes even as is said to have evinced interest in and which are undergoing insolvency proceedings, indicating that the company has chalked out a definite roadmap for growth plans in India.

Brokerages, however, are of the view that the company's aggression for National Company Law Tribunal (NCLT)-listed entities may come down going ahead given the certainty of its organic growth route which also talks about raising funds via a rights issue for the expansion.

"listed are dealing with several issues such as whether existing promoters should participate at all in the process, uncertainty over timelines regarding the entire procedure, along with huge participation from private equity players and non-core business entities making the process noisier.

A clear organic growth route of this kind offers more clarity in terms of timeline, funding and overall market share capturing strategy," said a senior analyst on condition of anonymity.

Tata Steel board also approved the financial plan to raise capital for the expansion today and the company will be issuing equity via a rights issue for an amount not exceeding Rs 12,800 crore, it said in the statement.

"What is crucial to watch here is at what price is the rights issue made. If the price is high, retail participation is expected to fall for this issue and (promoter) could then raise its stake in the coming by stronger participation in the rights issue," said another Mumbai-based analyst on the condition of anonymity.

Tata Steel is not the only primary producer of steel to plan expansion in the domestic market. Sajjan Jindal-led is also investing Rs 19,200 crore in several brownfield projects to enhance its capacity in line with national steel policy.

Tata Steel's Growth Plan

  • To add 5 million tonnes at Kalinganagar plant
  • Total project cost at Rs 23,500 crore
  • Project timeline of 48 months
  • Funding to be combination of debt and equity
  • Company to raise part capital via right issue of Rs 12,800 crore

First Published: Tue, December 19 2017. 23:11 IST