India’s largest steel-maker, state-owned Steel Authority of India Ltd, will embark on the biggest expansion drive in its history to more than double its capacity to 50 million tonnes by 2025, a move that is likely to involve an an investment of Rs. 1,35,000 crore.
The expansion will be executed in two phases and will see the company’s steel-making capacity go from the projected 23.5 million tonnes per annum (mtpa) in 2015-16 to 35 mtpa by 2020 at the end of the first phase and then to 50 mtpa by 2025-26. This round is bigger than the ongoing Rs. 72,000-crore expansion started in 2012, which would see the steel-maker’s capacity go up to 23.5 mtpa by the end of 2015-16.
The company said it would fund half of its investment through cash generated through its operations while the other half would be raised as debt. "I do not think there would be a requirement for the company to divest its shares to raise the capital," CS Verma, SAIL chairman, told HT.
"For the current modernisation plan, we raised nearly two-thirds from internal accruals. We can easily generate cash for at least 50% of the capital required internally. We have an outstanding debt of Rs. 24,168 crore but our debt equity ratio is very healthy. There will be no shortage of lenders for SAIL," Verma added
The company has already began work by issuing some tenders for enhancing capacities at some of its facilities as it wants to hit the ground running in 2016. The biggest advantage for SAIL is that it does not suffer from either paucity of land or iron ore — both major stumbling blocks in upcoming steel projects in India. It has nearly 20,000 acres of land available at its various steel plants and its captive iron ore reserves top 3.5 billion tonnes, which is more than enough for the expansion.
"We have better technology available... so the requirement of land for each million tonne of steel produced has also gone down," he said. "Land is a critical component but it is not a problem for us."