India’s largest steel producer, Steel Authority of India Ltd (SAIL) has increased its planned investment in capacity expansion for 2011-12 by over 25% to R14,337 crore.
It had invested R11,280 crore in 2010-11.
The firm is nearing the end of its R72,000 crore modernisation drive that will see its production capacity go upto 23.46 million tonnes from the current 13.8 mt by March 2013. While its expansion in the past has been entirely within India, the next round of growth could be overseas.
“We are exploring possibilities of setting up steel plants in Mongolia, Indonesia and also Afghanistan,” said CS Verma, SAIL chairman. “Out of this, Indonesia is in the advanced stage.”
These investments have not been accounted for in this year's budget yet, but with a R8,000 crore follow-on public offer on the anvil next month, half of which will be available to the firm, and a low debt burden, capital seems to be the least of the company's problems."We are a maharatna company and our debt equity ratio is only around 0.5:1," Verma said. "With our net worth of over R35,000 crore, we can borrow upto twice our equity and hence the headroom is immense. Shoring up capital for any of these overseas ventures should not be an issue at all."
Last year, SAIL borrowed R3,650 crore more from the markets to fund its increasing investments (see chart). As March 31, its borrowings stood at R20,162 crore and cash reserves of R17,000 crore. Half of the company’s debt, though, is long-term in nature.