Sail Weighs Ventures With Foreign Companies

Steel Authority of India Ltd (SAIL) is planning to go in for joint ventures with foreign companies to implement its modernisation and downstream projects all over the country.

With finances for the over Rs 15,000 crore modernisation programme in the second phase being difficult to raise, SAIL is mulling at the joint venture route for implementing its downstream projects as the alternative route.

Speaking to Business Standard, Arvind Pande chairman of SAIL said: "We need more funds for our expansion. However if we are not able to raise funds for future expansion, we will go in for joint ventures in downstream projects."

SAIL is already in talks with British and Australian companies for a tie-up to set up four service centres in the country. This is part of SAIL's marketing effort. SAIL is also appointing dealers to cover the entire country and considering closures of some of its stockyards. SAIL points out that fresh borrowings from the market would be very difficult for the company to implement its second phase of modernisation.

With an equity base of Rs 4,130 crore, SAIL's debt equity ratio is 1.76:1.

The public sector giant has asked the Industrial Development Bank of India (IDBI) to restructure its investments and fund raising and bring the debt equity ratio closer to 1:1. The bank is expected to give in its report and the possibility of reducing the company's debt burden in a few weeks from now. The conglomerate of public sector steel plants had borrowed heavily from the market to invest Rs 12,000 crore in modernising its Durgapur, Rourkela and Bokaro steel plants.

The result was that the depreciation and interest burden has gone up to a staggering Rs 2,000 crore. SAIL still need a large amount of funds for various modernisation programmes. This includes setting up of new mills required at Durgapur, at an investment of Rs 5,000 crore, for converting semis into finished steel. Similarly, the Bhilai Steel Plant also requires a new mill to convert semis into finished steel.