Date:23/04/2005 URL: http://www.thehindu.com/2005/04/23/stories/2005042311691600.htm

Business

Murugappa group to foray into steel making

Special Correspondent

Project to come up in Orissa; aiming at 3 million-tonne plant

CHENNAI: The $1.2-billion Murugappa group has signalled its foray into steel making. It is planning to set up a green field project to manufacture hot rolled (HR) coils.

The project will come up at Duburi in Jajpur district of Orissia.

The Murugappa group is aiming at a three million-tonne capacity plant.

The project is expected to involve an investment of around Rs. 3,400 crores in the first phase. The initial phase will have a capacity of 1.34 million tonnes of HR coils a year. The project is being promoted by Tube Investments of India Ltd., a group company. An independent company will be formed shortly to implement the project. M. A. Alagappan, Chairman TII, estimated the eventual cost of the project to be over Rs. 5,000 crores.

TII on Friday signed a memorandum of understanding (MOU) with the State Government of Orissa for allotment of land, iron ore, coal and infrastructure. The Orissa Government is understood to have allotted 2500 acres to TII to implement the project.

A release from the company said TII was in the process of making technical and financial tie-ups for the implementation of this project.

Mr. Alagappan said TII saw "good business sense in venturing into steel making." After all, the group has been manufacturing and handling steel products for over five decades now. The move could not have come at any better time for the Murugappa group. The demand for HR steel in India is expected to grow at a compounded annual growth rate of nine per cent over the next few years on account of the sustained growth in the economy. "The per capita consumption of steel in India is just a little over 32 kg compared to the developed countries, which are around 400kg. This scenario is poised for a big change driven by the infrastructure projects and the growth of the automobile and other user industries," Mr. Alagappan said. Besides TII, the Essar group too is setting up a four million-tonne steel plant at Paradip in Orissa. The state has rich iron ore deposits. It insists on value addition inside the state if anyone is to be allotted mining lease.

Mr. Alagappan said the financial details of the proposed project were still being worked out. Asked if it would go in for an equity partner in the new company, he merely said things were at an early stage.