Electrosteel to invest ₹5,000 cr to double production capacity

Having successfully turned around the operations of Electrosteel Steels Ltd (ESL) in less than a year post its acquisition, the Anil Agarwal-controlled Vedanta Ltd is now looking to scale up production capacity and revamp the product portfolio to improve profitability.

Plans are also afoot to give the company an image makeover and rename it.

Acording to Pankaj Malhan, Deputy Chief Executive Officer, Electrosteel Steels, the company will invest around ₹4,000-5,000 crore to double the production capacity of the plant at Bokaro to nearly 3 million tonne (mt) in the next two years. Its current capacity stands at 1.5 mt.

Consultant appointed

“We have appointed MN Dastur as a consultant to conduct a feasibility report for the proposed expansion. We hope to get the report soon and commence work on the project by the second half of this fiscal,” Malhan told newspersons on the sidelines of a press conference to announce the launch of the company’s rebranded steel product portfolio here on Wednesday.

The company will subsequently also explore the possibility of setting up an additional 3-4 mt steel making unit beside the existing the Electrosteel facility.

It also aims to add another 3-4 mt taking the total capacity to close to 10 mt in the next five-to-six years either by way of organic expansion or inorganic route. For its inorganic expansion, the company might look at assets in West Bengal or in the southern markets, he said.

Turnaround

For the financial year ended March 2019, ESL achieved an EBIDTA of $130-140 per tonne, as against $65 per tonne at the time of acquisition.

“The company posted record annual production at around 1.2 mt for FY19, registering a 17 per cent growth on a year-on-year basis. Ramping up of production and improving operational efficiencies resulted in 152 per cent rise in EBIDTA to $130-140 per tonne,” he said.

The company is hoping to maintain its EBIDTA at the current levels given that the steel industry has been going through a “tough patch”.

ESL is an integrated steel producer primarily in the long product segment.

According to Malhan, while the focus would be on long products in the first phase of growth, they will also roll out more variants aimed at specific geographies and tap the demand for niche customers.

This apart, the company will also focus on flat products including hot-rolled, cold-rolled and galvanised products, moving forward.

ESL would work closely with the Vedanta group companies that are in zinc, aluminium and copper sectors, to come up with new products and for better synergies.

“Some of them (new products) are in advanced stage and we hope to be able to roll them out soon,” he said.

When asked about the possibility of renaming ESL, he said that the board is likely to take a decision in this regard in the next three-to-six months.

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