Shah Alloys plans Rs 40 cr capacity expansion

Shah Alloys Ltd, one of the largest manufacturers of sponge iron and ferrow alloys, is geared up to set 10,000 metric tonne per annum capacity plant to manufacture cold rolling sheets and coils mills with investment of over Rs 40 crore.

The company would convert special steel HR coil manufactured in-house into CR SS sheets and coils to broadbase their export and domestic market.

"The company has already placed orders for the machinery. Term loan amounting to Rs 20 crore has already been sanctioned from Bank of India and the remaining portion would be funded through internal accruals. The plant is expected to be commissioned by this December," Rajendra Shah, chairman and managing director, Shah Alloys Ltd told Business Standard on Friday.

The value addition in the cold rolled products is higher compared with other products of stainless steel. The cold rolled products are forward integration of hot rolled products. They find their application in industrial grade products.

Entry barriers are high on account of the capital intensive nature of the product coupled with specilised and high technical nature of activity. The stabilisation period is about 6-9 months after the commencement of production.

With the increasing appetite for stainless steel bright bars in the US and the European markets, the company has implemented bright bar project and is at present increasing its captive power plant by installing one DG sets of five mega watts and a captive gas plant with a capacity of 2,600 cum per hour to meet the increased requirement of power and gaseous products.

"Shah Alloy is the only company in India, which can manufacture sheets and coils up to 1,800 mm width, so the SS sheet and coil products of the company can be termed as import substitute as the sheet and coil above 1,200 mm width are generally imported," said Shah.

The company has reported a turn over of over Rs 1,000 crore in the last financial year and targets to cross over Rs 1,200 crore in the current financial year. Exports contributed to Rs 400 crore this financial year, which accounts for around 40 per cent of the turn over. The exports for the current financial year is targeted at around Rs 500 crore.

SAL Steel Ltd, a backward integration greenfield project of Shah Alloys group is entering the capital markets with a public issue of 4.2 crore equity shares with a face value of Rs 10 each.

The entire issue is to be made through the book building process and the price band has been fixed between Rs 12 and Rs 14. The offer will open on November 1 and closes on November 5.