JSW to raise Rs 3,000 cr debt for auto steel plant
Resource from: Business Standard Likes:3039
Jul 16,2012
JSW Steel Limited, the country's lowest-cost steel producer, plans to set up a 2.3 million tonne per annum (mtpa) cold rolling mill complex to manufacture high-grade automotive steel at Toranagallu in Bellary district. The project is being implemented in phases at an estimated cost of Rs 4,500 crore with Phase-I getting operational by March 2013 and Phase II by December 2013.
In addition to the CRM complex, JSW has also signed an MoU with the state government for setting up a 3.42 MTPA coke dry quenching (CDQ) plant to produce steel. The third new investment project planned by the company is a 1.20 MTPA DRI (direct reduced iron) plant. The total investment on the two plants is Rs 2,400 crore.
Seshagiri Rao, joint managing director and group CFO of JSW, said the company would explore the option of ECA (export credit agencies) backed loans, available at competitive rates to fund about 50 per cent of the cost. "As 50 per cent of the project involves import of technology and equipment, the ECAs in Japan and Europe would be available for us to raise loans. We are looking to raise about Rs 3,000 crore from Japanese Exim Bank to fund our project. We are importing technology from JFE Steel Corp of Japan for the CRM project and the equipment will come from companies both in Japan and Europe," he said.
He said the ECA loans are available at a competitive interest rate of 3.2 per cent for Dollar denominated loans for a longer tenure of 10-13 years. The loans would be drawn as and when the import of equipment happens, he said, adding the company has placed orders for the equipment for CRM project.
Though the company can access funds at lower rates, it would result in its debt position further going up close to Rs 20,000 crore. Presently, its net debt stands at Rs 16,600 crore. The company has already tied up finance from domestic banks for its DRI project, Rao added.
"We have signed an MoU with Karnataka to set up three projects at the global investors’ meet recently. There will be a lot of demand for automotive grade steel in India in the coming years. Presently, the country requires about 6-8 MTPA automotive steel and JSW Steel intends to produce a third of the requirement once we commission our new plant next year," Vinod Nowal, Director and CEO, JSW Steel, told Business Standard.
The project includes a 1.9 MTPA cold-rolled annealed and skin passed coils plant and a 400,000 tonnes per annum hot dip galvanised coils plant. The major features of the CRM complex are: pickling-cum-coupled tandem cold rolling mill, continuous annealing line, galvanising-cum-galvannealing line, Auto packaging line and Coil Tracking and Transport System and Yard Management systems.
JSW Steel, presently, operates a 10-mtpa steel plant at Vijayanagar in Bellary district. In 2010, it entered into an agreement with Japan’s JFE Steel Corp to collaborate in automotive steel manufacturing.
"Companies like Tata Steel, SAIL and Essar Steel are in the process of setting up facilities to produce automotive grade steel. Tata Steel is the first mover in this field, which is likely to commission its facility next year ahead of JSW Steel. These companies would produce about 5-6 MTPA of automotive steel in the next two years," Ritesh Shah, senior analyst, Espirito Santo Securities, said.
(Business Standard)
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