Electrosteel in expansion mode, eyes 10 mt capacity in 5-6 years

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Vedanta-led Electrosteel Steels is eyeing a capacity of 10 million tonnes (mt) in the next five to six years through organic and inorganic options.

Electrosteel’s 1.5-mt capacity greenfield plant in Jharkhand’s Bokaro will be scaled up to 3 mt over the next two years in the first phase of expansion. It is likely to cost Rs 4,000-5,000 crore.

Pankaj Malhan, deputy chief executive officer, said other phases were also being planned. While the ramp-up from 3 mt to 6 mt will happen at Bokaro, for the next phase, the company could look at setting up a greenfield project at some other site or consider an acquisition. Typically, the cost of setting up a greenfield plant of 1 mt capacity is $1 billion.

“We are evaluating options for locations. It could be in West Bengal or the South. It could also be an acquisition,” said Malhan.

For the second phase of expansion to 6 mt, Electrosteel has land at the existing location. The company has about 2,000 acres, of which around 900 acres is currently being utilised. But for the subsequent phase, it would have to consider other sites.

Electrosteel had a planned capacity of 2.5 mt, but the commissioned capacity was 1.5 mt.

The growth plans are in sync with Vedanta’s goal of making it one of the top three players in the industry. That’s the plan on a long-term basis, said Malhan. Vedanta acquired Electrosteel through the Insolvency and Bankruptcy Code last year.

In eight months, Electrosteel turned profit after tax (PAT)-positive, said Malhan. In 2018-19, Electrosteel’s PAT stood at Rs 284 crore.

The synergies of being part of a large group like Vedanta — a globally diversified natural resource company — are also playing out. The synergies stood at $30 million, said Malhan.

On Wednesday, Electrosteel launched its rebranded steel portfolio — TMT bars, wire rods, ductile iron pipes, billets, and pig iron. Malhan said that Electrosteel was the first steel company to brand wire rods.

However, as the company is charting out its growth trajectory, in the second phase of expansion, it is likely to move to flat products. The products would include hot-rolled, cold-rolled coil, and galvanised.

The finishing touch to Electrosteel’s makeover may be completed with a name change. Malhan said the board would decide, but something should happen in the next three to six months.

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