Jindal Pares Investment In Steel Venture With Ugine

The product mix has also been altered. According to the revised plan, the company will now set up a plant to produce cold rolled strips with an installed capacity of 80,000 tonnes per annum.

Jindal Ugine, the 50:50 joint venture between the Jindal group and Ugine Steel, had earlier decided to invest around $700 million in a project to manufacture hot rolled stainless steel strips in the country.

The plant was to have a melting capacity of 400,000 tonnes out of which 360,000 tonnes of HR strips were to be produced.

A high level technical team from Ugine is currently in the country to re-examine some of the technical and economic parameters of the project.

 

As per the revised estimates, the project will be carried out in phases.

In the first phase, the plant will source raw material in the form of hot rolled (HR) strips from group company Jindal Strips to produce high value-added cold rolled stainless steel strips.

Nearly 50 per cent of the production will be earmarked for exports while the remaining will be sold in the domestic market.

The new project has a proposed debt-equity ratio of 1:1. This means the two promoters, the Jindal group and Ugine will be investing around $75 million as equity in the project. The rest of the funds will be raised through borrowings and debt.

The promoters have no immediate plans to tap the market for funds, Arvind Parakh, vice president (corporate finance), Jindal Strips Ltd told Business Standard. However, the revised package is yet to be approved by the financial institutions The company has shorlisted three possible sites for the new plant including Hissar in Haryana, besides Orissa and Gujarat. A final decision is expected within a month.

Sources point out the plant is likely to come up near Jindal Strips' existing unit near Hissar, to take advantage of the lower transportation costs for HR strips. Jindal Strips is one of the largest manufacturers of stainless steel with a capacity of 94,000 tonnes per annum.

The promoters decided to restructure the implementation schedule of the project and the product profile keeping in mind the existing market conditions.

Industry sources say if all the proposed investments in the HR sector come through, there is likely to be a glut in the domestic market. On the other hand, the domestic demand for value-added cold rolled strips is estimated to go up in the coming years as most of the international majors in the consumer durables sector are setting up manufacturing bases in the country.