The Hindu Business Line : Electrosteel Castings set to raise $25 m

At a glance
Shareholders’ approval will be sought on December 15, for the fund raising proposals.
With rising raw material costs, the margins in the third quarter are likely to be squeezed.

Mr Umang Kejriwal

Mohan Padmanabhan

Kolkata, Dec. 6

Electrosteel Castings Ltd (ECL), now in expansion mode along with a backward integration (captive iron ore and coal mining) programme to reduce operating costs and ensure steady supply of ore, is planning to raise close to $25 million (a little over Rs 100 crore) through the private placement route for its Rs 337-crore capex plan.

Talking to Business Line here on Thursday, Mr Umang Kejriwal, Managing Director of ECL, said this could be through an issue of equity shares and warrants to a non-promoter company based in West Asia.

Expansion activities

This is over and above the Rs 75 crore ECL has planned to raise through private placement with the UK-based PGS Invest Ltd.

According to Mr Kejriwal, the same procedure may be adopted for the next round of $25 million, which may complete the fund requirements of ECL for its expansion activities.

He said shareholders’ approval will be sought on December 15 for the fund raising proposals. The entire process is expected to be completed by end-December.

Outlining the vision plan for the company, Mr Kejriwal said ECL needs to have more products in order to compete effectively globally, as a lowest cost producer of ductile iron (DI) pipes. Besides being a major player in DI pipes, ECL is also entering manufacture of construction steel through a 1.5 million tonne greenfield steel project being taken up by Electrosteel Integrated Ltd, an associate company, in Jharkhand. Mr Kejriwal said financial closure for the steel project, scheduled for completion by 2008-09, has already been achieved.

Iron ore mine

ECL has been allotted an iron ore mine in Kodolibad, Jharkhand, and the required infrastructure to exploit the deposits are now being developed.

The company has taken up a coal mining project in Jharkhand, for which the Parbatpur coal block in the Jharia coal field has been allocated.

Mr Kejriwal expects the benefits of this to start accruing from 2008- 09 onwards.

The company is also setting up a sintering plant at the Khardah site with a capacity of 850 tonnes per day for increasing the liquid metal availability from the blast furnace at an estimated investment of Rs 66 crore.

The sinter plant will use iron ore fines instead of the costly lump iron ore and help contain raw material costs.

Mr Kejriwal, however, said that combined with the rising raw material costs, the margins in the third quarter are likely to be squeezed.

The ECL stock closed slightly lower on BSE at Rs 82.75 (Rs 83.85) on Thursday.

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