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Our Bureau

Hyderabad , April 16

ENCOURAGED by the buoyancy in the steel industry worldwide, Rashtriya Ispat Nigam Ltd (RINL), the corporate entity of Visakhapatnam Steel Plant, has decided to double its production capacity with an investment of Rs 8,529 crore.

The company has submitted a detailed project report to the Government and the initial assessment has been completed, the RINL Chairman and Managing Director, Mr Y. Siva Sagar Rao, told reporters here on Saturday.

The final specifications are currently under preparation and the company has sought environment clearances. The expansion, to take the total capacity of RINL to 7-million tonnes per annum (mtpa) from the existing 3.5 mtpa, will be completed by the end of 2007-08. Citing several demand drivers for the steel industry, Mr Rao said the domestic steel consumption is projected at 60 mt by 2012 and 110 mt by 2020. Though the existing layout of RINL in Vizag provides scope for expansion up to 10 mt, the company is currently going in for only 7 mtpa, he said.

The public sector steel major proposes to fund the expansion to the tune of Rs 5,500 crore through internal accruals and the rest through borrowings. Mr Rao said the debt component would include both Indian rupee borrowings and external commercial borrowings. The company will also consider suppliers' credit in the range of Rs 1,500 crore to Rs 2,000 crore on equipment.

Not ruling out an initial public offering, Mr Rao said, "It all depends on the prevailing market conditions at the time of raising funds required from external sources. If the markets then are very attractive, we will consider going public."

Currently a zero-debt company, RINL has a total capital base of around Rs 8,000 crore, which includes equity capital of Rs 4,900 crore and preference share capital of Rs 2,900 crore. The accumulated losses of the company, which stood at Rs 2,914 crore during 2003-04, are expected to come down to less than Rs 1,000 crore for the fiscal ended March 31, 2005. Thanks to an impressive record performance last fiscal, the company expects to post a growth of around 22 per cent in net profit (over Rs 1,547 crore posted in the previous fiscal).

On the fresh employment opportunities expected from the proposed expansion programme, Mr Siva Sagar Rao said though around 1,900 staff was estimated for operating the expanded capacity, the company proposes to re-deploy nearly 1,000 of its existing employees for the new capacities.

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