The Hindu Business Line : SEIL plans Rs 300-cr sponge iron plant in AP

THE Vizag-based Steel Exchange India Ltd (SEIL), engaged in steel manufacture and trading, has plans to set up a Rs 300-crore sponge iron plant in Andhra Pradesh, as part of its backward integration programme.

The company operates two steel manufacturing units in Andhra Pradesh with a combined capacity of 1.55 lakh tonnes, using both scrap and sponge iron as raw material.

"Right now we have to depend on Vizag Steel Plant and other external sources for our sponge iron requirement, due to which sometimes we face shortage of this raw material. In order to overcome this, we are planning to set up our own sponge iron plant," Mr B. Suresh, Director of the company, told Business Line.

SEIL plans to set up a 500-tonne-per-day capacity sponge iron plant either in Visakhapatnam or East Godavari district. After taking care of its captive requirement of about 250 tonnes of the raw material per day, it will be offloading the balance in the open market. "We will be financing the project through the debt-equity route. We plan to start work on the project in the next financial year," according to Mr Suresh. The company had reported a net profit of Rs 3.58 crore in the third quarter of the current fiscal, after providing for depreciation of Rs 58 lakh.

The company's present expansion programme is in full swing. It is investing Rs 10 crore to increase its steel manufacturing capacity at its East Godavari plant from the present 60,000 tonnes to 80,000 tonnes, apart from another Rs 1.5 crore to raise the capacity of its Simhadri unit from 50,000 tonnes to 60,000 tonnes.

SEIL has also been facing some problems regarding supply of scrap from domestic sources. Also, as prices of domestic scrap are higher than imported scrap, the company has decided to set up a joint venture entity with a Mauritius company for supply of this raw material.

"We have recently formed the joint venture, Steel Profiles (Mauritius) Co Ltd, with a Mauritius company, SVR International Coal Ltd. SEIL holds 55 per cent stake in the new entity and the balance is held by the Mauritius company," Mr Suresh said.

SEIL currently requires about 60,000 tonnes of scrap per annum, which is expected to go up to 80,000 tonnes after the expansion of its steel manufacturing unit.

"While scrap from domestic sources cost us in the range of Rs 15,000 to Rs 16,000 per tonne, procurement of this raw material through the joint venture company will cost us about Rs 10,000 per tonne," he pointed out.

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