Mesco buys Maithan Ispat at Rs 1,160 crore

Finished steel production from the acquired plant to start this month

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Pig iron producer Mesco Steel, which has become an integrated steelmaker with the acquisition of 0.2 million tonne per annum steel plant of Maithan Ispat, said, it will start producing finished long products from next week onwards.

“Maithan has become wholly owned subsidiary of Mesco. We hope to start finished steel production from next week onwards,” said J K Singh, Chairman of Mesco Group.

The group has bought out the integrated steel plant located adjacent to its Kalinganagar plant at Rs 1,160 crore in a mix of debt-equity deal.   

Maithan has nearly Rs 500 crore debt on its book, while Rs 350 crore is convertible preferred shares owned by a consortium of banks led by State Bank of India. Mesco will infuse Rs 310 crore of cash equity as part of the deal for infrastructure upgradation of the plant. “We will add an electric arc furnace at Maithan plant. It will use hot metal and pig iron produced by Mesco plant, along with sponge iron of Maithan to produce high beam steel, which is used in construction activities,” Singh said.

The Maithan plant capacity will be expanded to 1 million tonne. With two plants in Mesco Steel fold, the company’s steel capacity would go up to 2.2 million tonne, he added.

Maithan Ispat is an integrated steel player with a sponge iron plant, steel melting shop and a rolling mill for producing long steel. However, it had several hurdles in steel making due to non-availability of raw material such as iron ore.

The inorganic expansion of Mesco to become an integrated steel player is in line with its plan to become a 3.5 million tonne finished steel producer. Last month, it had signed an agreement with South Korean steel maker Posco for relocation of latter’s finex plant to its premises which will add 600,000 tonne per year hot metal capacity.

Mesco Steel currently has two blast furnaces at Kalinganagar, and produces only pig iron. The company is in search of funds to install other equipment for production of finished long steel in the plant premises.    

It has an operating iron ore mines at Barbil with production capacity of 3 million a year and is in the process to enhance the ore output to 6 mtpa. Besides, its captive mine located at Malangtoli in the state has not started operation.