Lloyds Steel, the flagship company of the Rs 2,000-crore Lloyds group, is raising Rs 245 crore ($70 million) as external commercial borrowings, to part-finance its Rs 394-crore 80MW captive power plant at Wardha.
The company has already received the ministry of finance approval for the loan. It is now being processed by the Reserve Bank of India. Domestic funding institutions like the IDBI, ICICI and IFCI have cleared a syndicated rupee loan of Rs 64 crore to part-finance the plant.
The company proposes to meet the rest of the fund requirements through internal accruals, a company source said.
The coal-based power plant, to be situated close to the companys existing 8.75 lakh tpa steel complex is expected to reduce current production cost of hot rolled coils from Rs 11,300 to Rs 8,800 per tonne, cold rolled coil from Rs 13,000 to Rs 10,000 per tonne, and GP coils from Rs 15,300 to Rs 12,300 per tonne thereby resulting in gross savings of Rs 140 crore for the company, the source said.
The company has appointed Fichtner India as consultants for the project which is expected to be commissioned by April 1999.
In a bid to concentrate on its core areas like steel, engineering and finance, the group has decided to either sell or close down its pharmaceutical unit, Lloyds Laboratories, which was launched in 1995-96.
The power bill, which takes up nearly Rs 150 crore of the companys input costs, is expected to come down on account of the state governments recent decision to reduce night tariff to 0.80 paise and the 0.15 paise duty removal for the Vidarbha region. Lloyds Steel is likely to save Rs 22 crore per annum on account of the decision.
Though the demand for flat products maintained its upswing, multiple factors like increased power, coal and fuel costs have undermined the domestic steel industry. In order to offset the increased input costs Lloyds has decided to widen its range of value-added products like cor-ten steel, CR and galvanised steel thereby increasing margins, the company source added. Lloyds currently manufactures 6 lakh tonne of HRC, 1.5 lakh tonne of CRC and 1.25 lakh tonne of galvanised sheets. The company is in the process of increasing its CRM capacity to 3.5 lakh tonne by July.
