SAIL to borrow Rs 5,000 cr in FY'10 to fund expansion plans

Steel giant SAIL today said it would borrow about Rs 5,000 crore in the current fiscal to part finance its expansion plans even as the cost to double its production capacity has come down steeply.     

"We have a capex of more than Rs 10,000 crore this year. We will borrow at least 50 per cent of the capex. It could be through long-term debt," SAIL Chairman S K Roongta told reporters on the sidelines of AIMA Summit here.     

When asked if the company was considering Follow-On Public Issue or Qualified Institutional Placement of shares to raise funds, he declined to comment.     

The country's largest steel producer is enhancing its production capacity to 26 million tonnes from present 14 million tonnes. The expansion project is estimated to attract an investment of Rs 78,000 crore. However, Roongta said the cost of the expansion programme has come down.     

"The expansion cost has come down from the highs of the last year," he said, without giving any figures.

The cost to augment the production capacity of SAIL's steel plants touched the peak of about Rs 90,000 crore early last year as equipment manufacturers revised their rates upwards.     

However, a slump in overall demand in the economy on account of the global economic slowdown pushed down the cost of expansion and also the steel prices.

The company, which cut rates  Of long steel products, primarily used in the construction sector, by up to Rs 2,000 a tonne, said the prices are looking stable.     

"The prices are looking stable and are would continue to be stable," the SAIL Chairman said.     

In the past three quarters, steel prices have fell to $400-450 a tonne from the highs of $1,150-1,250 a tonne in early 2008 due to the slump in demand.     

Of late, the rates recovered in the domestic market on account of improvement in demand mainly from construction, automobile and white goods sectors.