The Hindu Business Line : RINL to advertise fresh EoI for Rs 4,346-cr debt

RASHTRIYA Ispat Nigam Ltd (RINL), which runs the Vizag Steel Plant, will soon advertise for a fresh EoI (expression of interest) for Rs 4,346 crore worth of debt for funding its proposed expansion plan.

According to Mr Y. Siva Sagar Rao, Chairman-cum-Managing Director of RINL, the EoI is likely to be advertised soon. Senior officials of the finance department are busy finalising the last details of this EoI.

The Rs 8,692-crore expansion project will be in two phases and will take four years time. The project will be funded through a mix of debt and equity at a ratio of 1:1.

RINL is likely to choose a number of banks and then form a consortium for the debt portion. "That we would decide once we get the responses for the banks and financial institutions," Mr Rao told Business Line.

The company would also consider ECBs (external commercial borrowings) if needed. It is also flexible on the debt instruments.

"We would study and duly consider all available options before us. Regarding ECB or domestic borrowing, let me state, we would go for whatever is the cheapest. There is no bar on us," he said.

He, however, added that the expansion project would not be held back because of the delay in finalising the debt portion of the funding mechanism.

According to him, initial activity would be funded from internal accruals.

"By June this year, we wish to complete the necessary infrastructure activities like approach road, water arrangements, power connections needed for the expansion work and lighting. By that time we hope to finalise the debt funding," he said.

RINL is increasing its capacity to 6.3 million tonnes per annum from the existing level of 3 mt per annum. The project has been approved by all the governmental authorities.

In the first phase, which would spread over three years, RINL would expand hot metal production facility, steel making facility, sinter plant, wire rod and seamless tube mill.

Subsequently, in the next year (second phase), a special bar mill and a structural mill would be added. "Jungle in the expansion area has been cleared. Site levelling and soil investigation is currently on," he said.

Earlier, this project was supposed to be funded at a debt equity ratio of 0.5:1. More than 40 banks and financial institutions had responded to an EoI advertised by RINL. However, it was scrapped when the Union Steel Ministry suggested a 1:1 debt equity ratio.

Despite its poor performance in the past, RINL had been registering healthy net profits. It grew from Rs 521 crore in 2002-03, to Rs 1,547 crore in 2003-04 to Rs 2,008 crore in 2004-05. Approximately Rs 4,500 crore worth of funds for expansion would come from internal accruals.