Tata Steel plans to spend about ₹1,000 crore for enhancing Neelanchal Ispat Nigam capacity to 5 million tonne per annum from 1.5 mtpa even while making all efforts to restart production.

TV Narendran, Managing Director, Tata Steel said the team has already taken over the plant, which was acquired on July 4, and the work is going in full swing to restart production.

Restarting production after acquisition

“We hope to start the blast furnace in three months and other facilities in subsequent months. The biggest problem is in coke ovens, which should not be shut down without taking pre-cautions. Unfortunately, that was done two years back, so it will take at least six months for us to revive it,” he added.

Mines associated with Neelanchal are already operational and raw material has started moving to the plant. Tata Steel plans to sell pig iron from Neelanchal by October and achieve rated steel production capacity of one lakh tonne per month by March, he said.

Tata Steel would require about ₹1,000 crore to revive Neelanchal and will be spending about ₹500 crore in the first year, said Narendran.

Tata Steel had acquired Neelanchal Ispat at Kalinganagar in Odisha for ₹12,100 crore from MMTC, NMDC, BHEL, MECON and two Odisha PSUs, OMC and IPICOL.

It has an integrated steel plant with a capacity of 1.1 mtpa at Kalinganagar, Odisha. The company was running in huge losses and the plant was closed on March 30, 2020.

Net debt-to-EBITDA ratio

Despite spending on acquisition and expansion, Tata Steel expects to maintain its net debt-to-EBITDA ratio below the target of 2.

“We will be able to maintain the target to reduce debt by $1 billion this year even while spending on growth capital. We believe that, starting this quarter, we will be releasing lot of working capital. Today, lot of money is stuck in working capital,” said Narendran.

The fall in raw material prices has helped most steel companies to cut down on working capital even as weak demand remains a concern.

“Even today, our net debt-to-EBITDA is at a very comfortable position. We wanted it to be below two but today, we are below one,” he said.

Net debt-to-EBITDA ratio is a ratio that shows how many years it would take for a company to pay back its debt if net debt and EBITDA are held constant.

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