The Hindu : Business : JSW to set up new plant at Vijayanagar

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Friday, Nov 11, 2005

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JSW to set up new plant at Vijayanagar

Staff Correspondent

Ties up with Siemens VAI for the 2.8 million tonnes unit

MUMBAI: JSW Steel, part of the O. P. Jindal group, on Thursday announced the signing of a contract with Siemens VAI for setting up a 2.8 million tonnes per annum (tpa) blast furnace at its Vijayanagar works in Karnataka. The company at present has a capacity of 2.5 million tpa and is implementing an expansion to reach 3.8 million tpa by March 2006. The installation of the blast furnace will take the capacity to seven million tpa by 2008.

The new capacity of 2.8 million tpa will come in by 2008. The company has already announced the setting up of a ten million tpa steel plant in Jharkhand at an investment of Rs. 35,000 crore.

For the Vijayanagar expansion JSW Steel will incur a cost of Rs. 5,000 crore with a debt: equity ratio of 1.5:1. The Rs. 3,000-crore debt portion will be financed through international and domestic markets and the Rs. 2,000-crore equity portion will be financed through cash accruals, rights issue, public issue, GDR and ADR. "The expansion project will make slabs which have a good demand in the international market. Several steel producers have already approached the company to have long term tie-up to buy slabs,'' said Sajjan Jindal, Vice Chairman and Managing Director, JSW Steel, while addressing the media here on Thursday.

"We expect that capacity in Vijayanagar to reach ten million tpa by 2010-11. The project in Jharkhand, if all approvals are received, will be for ten million tpa by 2012. So we are targeting a total capacity of 20 million tpa by 2012,'' he said.

Regarding the MoU signed for the Jharkhand project, Mr. Jindal said, the financing was still being worked out and the investment would include those in power, oxygen, infrastructure and the steel plant.

He said Jharkhand had an abundance of both raw materials — coking coal and iron ore.

Mr. Jindal said that last year's high steel prices cannot be expected to sustain. "Last year was a fluke year for the steel industry. Manufacturers work on an EBIDTA (earnings before interest, deprecation and tax) margin of 25-35 per cent normally. But last year the EBIDTA level was too high at 48-50 per cent.''

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