The Hindu Business Line : Sesa Goa plans Rs 1,000-cr investment

Mumbai, Dec 7 The Sesa Goa group is investing Rs 1,000 crore to ramp up its pig iron production capacity to one million tonnes within the next two years. Sesa Industries Ltd, a subsidiary company of Sesa Goa, at present produces 0.27 million tonnes of pig iron.

The capacity expansion will be through both the greenfield and brownfield routes. While the capacity of its existing facility will be increased, a new unit will also be set up, Mr Tapan Patnaik, General Manager of the company’s pig iron plant, said on the sidelines of the seventh Asian Steel Conference here.

Vedanta Resources plc has acquired, through its subsidiaries, 51 per cent controlling stake in Sesa Goa Ltd from Mitsui & Company Ltd in April 2007.

The pig iron business of the company has posted higher profit of Rs 41.6 crore during 2006-07, an increase of 35 per cent. On commissioning of the hot blast stoves, productivity has gone up and the specific consumption of coke, the costliest raw material, has come down.

Margins under pressure

The company expects growth in the auto and auto component sector to drive demand for pig iron. However, margins are expected to be under pressure owing to increasing price of inputs such as metallurgical coke and iron ore in international markets. Availability of high-grade lumpy iron ore, volatility in the price of pig iron and rate of inflation remain cause for concern for the company.

The pig iron expansion programme will be funded from the company’s internal accruals. The company has begun negotiations with equipment suppliers, Mr Patnaik said.

He indicated that pig iron prices in India may see an increase of Rs 2,000 to Rs 3,000 a tonne from the existing level of Rs 20,000 a tonne in the next three months owing to rise in input costs. Prise of coal, for example, has risen from $220 a tonne in the beginning of the year to $480 a tonne at present.