The Hindu Business Line : Jindal Stainless plans equity issue to fund expansion

DOMESTIC stainless steel major Jindal Stainless Ltd (JSL), the Rs 2,500-crore flagship company of the O.P. Jindal group, is considering a proposal to expand its equity base by raising fresh equity.

The company is currently setting up a Rs 4,100-crore Greenfield project for the production of 4.8-lakh tonnes of ferrochrome and 16-lakh tonnes of stainless steel along with a 500-MW coal-based power plant in Orissa, the JSL Director, Corporate and International Marketing, Mr N.C. Mathur, told Business Line.

In the first phase, being taken up at a cost of Rs 1,100 crore, the company proposes to set up a 1.6-lakh tonne ferrochrome facility and a 8-lakh tonne stainless steel facility. At an investment of Rs 3,000 crore in the second phase, the capacities would be increased to 4.8 lakh tonnes of ferrochrome and 16 lakh tonnes stainless steel. The power plant would come up in the second phase.

Stating that majority of the funds required for the project would come from internal accruals, Mr Mathur said the company was also looking at borrowings and foreign currency borrowings, apart from the plans to raise equity.

"We are of the view that the current very low paid-up equity of Rs 19 crore does not make sense for the size of our operations," he said.

However, he declined to divulge further details on the equity raising issue and said the details were currently being worked out and would be finalised soon. The company has already committed an amount of Rs 200 crore for the project in the form of advance payments and others, he said.

Aimed at substantially bringing down the interest burden, the company has retired a part of its debt and converted a part of the expensive domestic debt by cheaper foreign currency loans. There has been a substantial reduction in debt and the average interest rate has significantly come down, he said.

"The carbon ferrochrome facility coming up in Orissa, with a capacity of 1.6-lakh tonnes, is three times bigger than any plant in the country. For the 500 MW power plant, the company has already firmed up coal linkages. With the new electricity enactment that allows wheeling of power from any plant, we expect to evacuate it to our Hissar plant. While the first phase would be ready by the end of 2006, the second phase would take off by end of 2008," Mr Mathur said.

Currently enjoying the leadership position a share of 40 per cent in the domestic market and 12th position in the global market, Jindal Stainless plans to emerge as the leading player in the region with the help of the proposed Greenfield project.

Mr Mathur said the Indian industry was expected to grow at 8 to 10 per cent during the next five years, which would be double the average global growth rate of around five per cent.