Sail To Raise Rs 1,500cr Next Year To Fund Expansion

The Steel Authority of India Ltd (SAIL) is finalising plans to raise nearly Rs 1,500 crore from the market in the next financial year through a combination of external commercial borrowings (ECB), domestic debt and a global depository receipts (GDR) issue.

Steel ministry sources suggest that the size of the ECB is likely to be around $300 million, though SAIL chairman Arvind Pande refused to comment on the size of the ECB, the GDR issue or the domestic borrowing, saying that plans were in the process of being finalised.

The move forms part of SAIL's plan of infusing Rs 15,000 crore into the company in the ninth plan period, Pande said.

 

The capital infusion is expected to increase the company's steel-making capacity from 10 million tonne to 17 million tonne in the next 10 years. This, however, excludes the production at Indian Iron and Steel Company in Burnpur.

The SAIL management has also proposed that the government divest 20 per cent of its 85.8 per cent equity holding in the company.

If the government allows this, then a part of the funds required for IISCO's revival can be met, since it could help raise resources worth nearly Rs 100 crore, Pande pointed out.

SAIL currently has an equity base of Rs 4,130 crore, of which 85.8 per cent is held by the government, 3.5 per cent by GDR holders, while the financial institutions (FIs) and the public hold the rest.

He said that the 10-year growth plan hinges on the assumption of a normal growth rate of 7.5 per cent of the gross domestic product (GDP) which normally leads to around 10 per cent growth in steel consumption. That way, SAIL will be able to fund 60 per cent of its Rs 15,000-crore requirement through internal accruals, Pande said and added that the balance will be met through the ECB, GDR and domestic debt.

The lock-in period for its maiden $125 million GDR issue launched in 1995-96 expired last year in December.

Pande pointed out that in case the GDP growth rate slumps below 7.5 per cent, it would consequently have an adverse impact on the demand for steel and SAIL would have to revise its growth plans accordingly.

Pande said, SAIL is aiming to become the third largest steel-maker in the world after Nippon Steel of Japan and Pohang Steel Company of Korea. Since none of the other top 10 companies are planning to expand capacity, SAIL is automatically tipped to improve its position.

With a 10.4-million tonne capacity, SAIL is the tenth largest steel-maker in the world in terms of production.

In the first phase, the capacity will be increased to 14 million tonne in the next five years. As part of the plan, the capacity of the Bhilai and Bokaro plants would be increased from four million tonne to 5.5 million tonne. Installation of a new mill at Durgapur and the upgradation of the cold rolling mill at Rourkela steel plant is also on the cards.

Apart from this, an additional billet caster at Durgapur's alloy steels plant, and a 12-mw gas-fed power plant at Visvesvaraya Iron and Steel Company and a steel melting shop at Salem plant would comprise the balance.

SAIL's investment in the Rourkela and Durgapur units undertaken during the eighth plan would start yielding results from next year. After modernisation, Rourkela and Durgapur have attained capacities of 1.8 million tonne and 1.6 million tonne, respectively.

Above all, increased efficiency of operations, reduction in energy consumption, continuous casting and oxygen conversion would also be emphasised in all the plants.