Surana Inds in JV with Malaysian company

Steel manufacturer Surana Industries, which is investing Rs 473 crore to set up an integrated steel complex and a 35-Mw captive power plant at Raichur in Karnataka, has entered into an agreement with Malaysia's Agate Group to float a 49:51 joint venture for coal procurement from Indonesia.

Surana's JV with the Agate Group comes on the back of the company meeting its coal requirements for its steel mill and captive power plant at the Raichur Steel Complex.

The steel complex will have a sponge iron facility with a capacity of 1.28 lakh tonne per annum (tpa), a steel melting shop with a capacity of 2.25 lakh tpa, and a rolling mill with a capacity of 2 lakh tpa. It is expected to commence production by March 2008.

Kuala Lumpur-based Agate Group, engaged in finance, mining, consulting and technology activities in Malaysia, Singapore, India and Indonesia, has already set up a company called 'PT Agate Resources Indonesia' in Indonesia to exploit coal reserves in that country. PT Agate Resources will be hived off as a joint venture firm with Surana Industries picking up 49 per cent stake, amounting to Rs 40 crore.

Surana expects to save around Rs 60 crore on its bottomline through this deal. It will spend only about Rs 2,800 ($70) per tonne as against the present market price of Rs 4,000 ($100) per tonne, thereby providing savings of Rs 1,200 per tonne.

The company intends to import 500,000 tonne of coal from Indonesia. The Indonesian coal will have less ash content ranging between 1.5 per cent and 10 per cent.

Through this deal, Surana expects to ensure regular supply of coal to the Raichur plant. The mines operated by PT Agate Resources have 50 million tonne of coal reserves.

PT Agate has a capacity to produce 1.2 million tonne of coal per annum, which would be scaled up in the future.

After meeting Surana's requirements, the remaining coal could be sold in the market and profits accrued to the Indonesian company will also be shared between the two partners, thereby boosting Surana's profits further, said a company official.

The coal mined in Indonesia will be shipped to Chennai port from Indonesian port. From there, it will be transported to Raichur by trucks or rail.