In an interview with Sudheer Pal Singh, Steel Authority of India Ltd (SAIL) Chairman C S Verma, who also holds additional charge of NMDC Ltd, talks on the steel giant’s follow-own public offer (FPO) plans, the status of the company’s Rs 75,000-crore modernisation and expansion plans and its demand outlook. Edited excerpts
Do you think current market conditions are ripe for the launch of the FPO of SAIL?
The timing of the FPO would be decided in consultation with the government of India/Book Running Lead Managers (BRLMs), keeping in view the market conditions.
How much money would the government be able to raise? What would be the extent of divestment of the government?
The money to be raised would depend on market conditions. The extent of divestment by the government may be around 10 per cent of its equity in SAIL. This would bring the government holding in SAIL to around 75 per cent, which will be in line with the recent thinking of Sebi (Securities and Exchange Board of India) for listed companies — of having 25 per cent non-promoters’ shareholding.
High coking coal prices have been one of the reasons for the delay in SAIL’s FPO in the past. How has the situation improved on this front?
There is no correlation between coking coal prices and issue of FPO. However, we would like to inform the imported coking coal prices have come down by about 20 to 30 per cent in the current year, compared to last year.
What is the borrowing and cash reserve position of SAIL at present?
The borrowing level of SAIL is Rs 16,320 crore and the cash reserve Rs 5,900 crore as on March 31, 2012.
What is the current status of the company’s Rs 75,000 crore modernisation and expansion plan by 2014? How much is the capital expenditure plan for the current financial year?
The current phase of modernisation and expansion plan of SAIL with an envisaged expenditure of Rs 72,000 crore is in an advanced stage of implementation, which would increase hot metal capacity from the current 13.8 million tonnes per annum (mtpa) to 23.4 mtpa. The plan includes modernisation and expansion of its five integrated steel plants at Bhilai (BSP), Bokaro (BSL), Rourkela (RSP), Durgapur (DSP), Burnpur (ISP) and Special Steel Plant (SSP) at Salem and iron ore mines, including new mines at Chiria and Rowghat. The modernisation and expansion plan for Salem Steel Plant has been completed in September 2010 and is under regular operation.
For other plants, completion of facilities has already commenced in a phased manner. The sinter plant at RSP has also been put into operation. Sinter plant, coke oven battery and wire rod mill at ISP are in an advanced stage of completion and likely to become operational in a few months. Apart from this, two new blast furnaces of 4060 m3 capacity, one each at RSP and ISP, are expected to come into operation by fiscal-end, thereby enhancing the installed capacity to around 20 mt. The overall completion of the current phase of modernisation and expansion is expected by 2013. The cumulative expenditure incurred so far on this programme is Rs 36,300 crore, including Rs 11,000 crore in 2011-12. For 2012-13, the expenditure is expected to be around Rs 12,000 crore.
What is the situation on the demand front?
The ‘Worldsteel Short Range Outlook April 2012’ states that “India is expected to resume its high growth trend in the next two years. In 2012, India’s steel use is forecast to grow by 6.9 per cent to reach 72.5 mt and in 2013, the growth rate is forecast to accelerate to 9.4 per cent on the back of urbanisation and surging infrastructure investment.” Further, according to the projections of the 12th five -year plan, dem-and of steel in the country is likely to go up to be 120 mt by 2016-17. Crude steel production capacity by the terminal year of the 12th five-year plan is likely to be 150 mt in India. India certainly has enormous potential, necessary resources and capabilities to become a global supplier of quality steel.