Essar Steel in $6 bn play, plans global listing
After announcing giant investments in oil and power, the Essar group, promoted by the Ruias, is scaling up its steel business, reports Indulal PM.business Updated: Dec 03, 2007 22:59 IST
After announcing giant investments in oil and power, the Essar group, promoted by the Ruias, is scaling up its steel business. The group is investing over $6 billion (around Rs 24,000 crore) to expand its steel making capacity.
Essar Steel Holdings, the holding company for the steel business, will make the investments over five years. Early last month, the group had delisted Essar Steel after buying back floating stock.
The expansion is a prelude to international listing of Essar’s steel business, according to analysts. "An international listing is expected and the group may invite a financial or strategic partner in its global steel venture," said a Mumbai-based analyst with Goldman Sachs. “Money for the expansion will come from internal accruals and debt. Group ventures like Algoma Steel will generate revenue for the expansion,” said a source close to the situation. The group acquired Canadian steel maker Algoma Steel in April 2007.
The expansion will bump up capacity from 8.5 million tonnes to 25 million tonnes by 2012-13, mainly through brownfield and greenfield projects in Asia and the US. When contacted, an Essar spokesperson declined to comment.
The Essar group plans to set up plants with linkages to raw material sources. It plans to ship some semi-finished output of each plant to markets where finishing facilities are coming up. Essar Steel is likely to export 2 million tonnes of slab to Vietnam, where it is building a hot strip mill jointly with Vietnam Steel Corporation. In Indonesia, the company is planning to increase its cold rolled steel capacity to 750,000 tonnes.
Essar Steel has plants in India, Indonesia and Canada. The company is planning to set up another 4 million tonne plant at Hazira in Gujarat.
The company is planning to increase the capacity of its cold rolling facility in the UAE and is setting up a 15 million tonne mill in Chhattisgarh.