JSW steel on expansion path by kvc89466



                    JSW steel on
                    expansion path

     JSW Steels Ltd. is planning to       from    the    company.       The       than the best in the industry. This
expand its capacity of steel plant from   implementation period will be 36        expansion is expected to boost the
3.8MTPA to 7MTPA mainly looking at        months and the project will be on       profitability of the Company
the buoyancy in                                                                                    substantially.
economy and expected                                                                                 The company is also
surge in steel demand.                                                                             setting up a cold
This would add further                                                                             rolling mill (CRM)
impetus to volume                                                                                  complex with a
growth in the financial                                                                            capacity of 1 MTPA
year 2007-08 and                                                                                   which will significantly
2008-09        at   an                                                                             enhance the value
estimated cost of Rs                                                                               added        products
5000 crore to be                                                                                   bouquet of the
financed Rs 2000                                                                                   company. The CRM
crore out of internal                                                                              complex will be
accruals and Rs 3000                                                                               commissioned by
crore by way of debt in                                                                            march 2007 at an
the international and                                                                              estimated cost of Rs.
domestic markets.                                                                                  1000 crores to be
This expansion project                                                                             financed out of the
envisages to produce                                                                               rights issue proceeds/
slabs having good                                                                                  internal accruals of Rs.
demand        in   the                                                                             400 crores and
international market. Several Steel       stream by March 2009. The specific      balance Rs. 600 crores out of debt.
producers of repute are approaching       investment cost per tonne is Rs.            The CRM complex will be focused
to have long term tie up to buy slabs     16,000/- which is significantly lower   primarily on the value added products

28 • Steelworld • January 2006

for the auto and white goods industry.     depreciation and tax in the current          company has also approved issue of
     Both the expansions put togther       quarter are Rs. 438.05 crores as             equity shares on rights basis up to a
(3.8 MTPA to 7 MTPA and CRM                compared to Rs. 393.07 crores in the         maximum amount of Rs. 400 crores
Complex) will cost Rs. 6000 crores         previous quarter (11% growth). The           to part finance the cost of setting up
financed out of Rs. 2400 crores            cash profit stood at Rs. 348.54 crores       1 MTPA cold rolling mill complex at
internal accruals / rights issue and Rs.   recording a growth of 18.5% over             Vijayanagar works. The entitlement of
3600 crores of international / domestic    previous quarter. Profit before tax is       the rights will be in the ratio of 1 equity
debt.                                      Rs. 230.81 crores as against Rs.             share for every 8 share held on the
                                           168.42 crores in the previous quarter.       record date to be fixed later. Besides,
Status of onging expansions                Net profit for this quarter stood at Rs.     every share allotted on rights basis will
     The company is currently in the       139.20 crores compared to Rs.                also have two attached warrants
process of expanding capacity of its       106,.29 crores in the previous quarter       separately tradable as series ‘A’ and
Pellet Plant from 4.20 MTPA to 5           (growth of 31%).                             series ‘B’ warrant. Series ‘A’ warrant is
MTPA, modernization of hot strip mill          In spite of falling sales realization,   convertible into one equity share
from 2 MTPA to 2.5 MTPA and                the company has shown good                   between 18 to 36 months and series
expansion of steel plant capacity from     performance due to volume growth             ‘B’ warrant is convertible into one
2.5 MTPA to 3.8 MTPA. These projects       and cost efficiencies. The company           equity share between 24 to 48
are expected to be operational in phase    repaid debt to the tune of Rs. 227           months. The warrant conversion price
by the first quarter of                                                                                will be fixed based on a
Financial year 2006-                                                                                   formula linked to the
07 due to which the                                                                                    then prevailing market
company            will                                                                                price. The terms of issue
continue to have                                                                                       of these securities will be
significant volume                                                                                     decided         by      the
growth in the F.Y. 06-                                                                                 committee of directors.
07. On completion of
these projects, the                                                                                   About JSW Steel Ltd.
company will have a                                                                                         JSW Steel Ltd. is a
3.8 MTPA integrated                                                                                   multi-product company
steel plant with                                                                                      involved       in      the
state-of-the-art                                                                                      manufacturer of carbon
facilities and value                                                                                  steel primarily focusing
added        products                                                                                 on flat products like H. R.
contributing                                                                                          Coils. C. R. Coils,
signigicantly to the bottom line.          crores during the third quarter of           Galvanised products and auto grade /
     JSW Steel Ltd., the second largest    2005-06 and reduced its debt equity          white goods grade CRCA Steel.
specialty and carbon steel                 ratio to 1:1 as on 31 st December            Incorporated in 1994, it has grown to
manufacturer in the private sector, has    2005, thereby interest cost has been         US$ 1.6 billion company in little over
recorded a gross turnover of Rs.           reduced by 23% for the quarter in            a decade and continues to grow further
1645.63 crores for the third quarter       comparison with the corresponding            with these expansion. It is country’s
ending 31 st December 05 as                quarter.                                     third largest sell company with a 12%
compared to Rs. 1691.88 crores in                                                       share of the domestic market.
the previous quarter.                      Rights Issue
     Earnings before interest,                The Board of Directors of the                              GGG

                                                                                            Steelworld • January 2006 • 31

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