Monnet Ispat & Energy - acquired by AION and JSW Steel through the insolvency process - is looking to start integrated steel operations, in the wake of a pick-up in steel demand.
JSW Steel's joint managing director and group chief financial officer, Seshagiri Rao, said, "We have completed expansion of pellet plant to 2.4 million tonnes and we are also starting the integrated steel operations next month. So things should look better for Monnet."
Currently, integrated operations is completely shut. Monnet, which owed banks Rs 11,000 crore, was one of the 12 non-performing assets (NPAs) mandated for resolution under the Insolvency and Bankruptcy Code (IBC). A Rs 2,875 crore resolution plan, submitted by AION and JSW Steel (minority partner), was approved by the National Company Law Tribunal (NCLT) towards the end of July 2018.
JSW's second quarter results presentation mentioned that steel making operations were impacted by earlier announced maintenance shutdown and repairs.
In October, Monnet informed the stock exchanges that it would undertake modification of plant and machinery for manufacturing special steel products. The period of shutdown of the plant, other than pellet plant and DRI, with effect from June 21, had been further extended and it would restart its integrated operations on completion of the modification which was expected to be in Q4 of financial year 2019-2020, it had said then.
Post-acquisition of management control, operations of the Raigarh pellet plant was started in October and production was ramped up to around 90 per cent of the installed capacity.
Then in February, Monnet started integrated steel production through a blast furnace (for iron making), an electric arc furnace (steel making), ladle refining, continuous casting and bar mill rolling.
Consequently, revenues moved up from Rs 493.82 crore in December 2018 to Rs 660.44 crore in September 2019. In June 2019, it was even higher at Rs 777.09 crore.
However, towards the end of last year, the steel market started showing signs of weakness.
Steel prices had peaked in November 2018 at Rs 46,000 a tonne but then started moving downwards with realisations at around Rs 32,500 till recently.
The growth in finished steel consumption has moderated significantly; from 10.3 per cent in Q2FY2019 to 3.1 per cent in Q2FY2020 on a year-on-year basis.
However, the last two months, prices have moved up The recovery is fuelled by the infrastructure and construction sectors as well as retail. In October and November, companies hiked prices by about Rs 1,000 a tonne.
Monnet has a capacity of 1.2-1.3 million tonnes. There is however land available for expansion up to 3 million tonnes.
Monnet is eyeing a turnaround next year. That would also be about two years since it got acquired.