The Hindu Business Line : PSL lines up $60-m capex; raising Sharjah unit capacity

Looking ahead
The expansion is to cost about $30 million and is expected to be completed by mid-2009.
PSL’s US plant is being set up at a cost of $103 million.

Amit Mitra

Mumbai, July 2 PSL Ltd, which manufactures large-diameter pipes for the transportation of hydrocarbon and water products, has lined up a capital expenditure programme of $60 million to ramp up its production capacities of its units both in India and overseas. The investment will be made over the next 12-18 months.

As part of its expansion, the company is increasing the capacity of its Sharjah manufacturing unit from the present level of 75,000 tonnes a year to three lakh tonnes a year. The Sharjah unit, which is the company’s first overseas unit, produces large diameter spiral pipes that are mostly used in the oil and gas industry.

Mr Ashok Punj, PSL’s Managing Director, told Business Line that the expansion was being taken up at a cost of about $30 million and was expected to be completed by the middle of 2009. The unit primarily caters to West Asia and North African markets, but with the expanded capacity it would look for new markets in Iran and Iraq.

The company is taking up the expansion of the Sharjah unit in the wake of a sharp rise in demand for pipeline transportation of oil and gas, with crude prices touching the $140-a-barrel mark.

“The high crude prices have led to the resumption of operations of a string of marginal fields that were closed down in the past when crude prices were at $40-mark. Now these fields were being re-opened and hence there is a sharp rise in demand for transportation of oil and gas,” Mr Punj said.

North American plant

PSL is currently setting up a 3 lakh tonne plant near Mississipi, US through its subsidiary PSL North America LLC. It expects the plant to be operational in the second quarter of the current fiscal.

Mr Punj said this plant will be primarily catering to the market that extends from New Orleans to Alabama, which is the Katrina relief zone. After the Katrina hurricane unleashed heavy damages along the US coast, the administration had undertaken a revival of industries in this zone on a war footing. And as part of this, it dished out a package of incentives to attract industries in the zone.

The PSL plant near Mississippi is being set up at a cost of $103 million, out of which $25 million is equity and the rest is being funded through local municipal bonds that carry a 30-year repayment period. “In fact, repayment can be started 17 years after the plant commences production — this was part of the package of incentives,” he pointed out.

He did not rule out the possibility of the company taking up expansion of the US facility at a later date, as the demand for such pipes was significant.

In India, PSL is expanding its Visakhapatnam unit from the present 75,000 tonnes to 3 lakh tonnes at a cost of about $20 million. This is in the wake of GAIL (India) announcing two major cross-country pipeline projects from Kakinada, near Visakhapatnam.

The company, which has five manufacturing units in India, is sitting on an order book of Rs 6,200 crore.

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