The Hindu Business Line : Electrosteel expects mining lease for Jharkhand coal project by Sept

ELECTROSTEEL Castings Ltd will soon start work on a Rs 330-crore (including an interest element of Rs 46 crore) captive coal mine project, along with washeries, at Parbatpur coal block in the Jharia belt in Jharkhand,

To meet the costs, the company has decided to issue dollar denominated foreign currency convertible bonds (FCCBs) for raising $75 million (Rs 332 crore).

The issue of FCCBs is subject to the approval of shareholders at the company's ordinary general meeting on February 20, at Rajgangpur, Orissa, where Electrosteel Castings has its registered office.

Work on the coal mine project is expected to begin on receipt of the mining lease from the Jharkhand Government, which is likely before September this year.

Sintering plant: Electrosteel Castings plans to establish a sintering plant (as a backward integration) with a capacity of 850 tonnes per day (5 lakh tones per annum) for increasing the liquid metal availability from the blast furnace at its Khardah DI pipes plant, at an estimated investment of Rs 66 crore.

Work on this project is expected to commence on receipt of the necessary pollution clearance certificates, and will be completed within 15 months from zero date.

Mr S.Y. Rajagopalan, Director, Finance, Electrosteel Castings, said the subscribers for the 1 per cent (coupon rate) 5-year FCCBs (due for redemption in 2011) will be arranged by Citibank.

FCCB conversion: He said the company has retained the option for compulsory conversion after a lock-in of one year, which may be exercised depending on the response to the bonds.

There is a built-in put call option for equity conversion at a price that may be ruling at that time for the Electrosteel Castings scrip, he said.

Mr Rajagopalan said the Electrosteel Castings board at its recent meeting had cleared an estimated capital expenditure of Rs 337 crore to substantially meet the aggregate capital expenditure of both projects - the coal mine and the sintering plant.

The coal to be mined at Parbatpur block will be entirely for captive consumption, primarily for the company's coke oven plant at Haldia.

Mr Rajagopalan expected the mining lease to be made available by the Jharkhand Government by September.

He said coal from the captive mine, expected to be of prime quality with low ash content, will also be available for units of associate companies like Lanco Industries at Kalahasti in Andhra Pradesh.