Monnet ispat plans acquisitions in Africa, East Europe

Monnet Ispat and Energy Ltd plans to acquire mines in Africa and East Europe in the current financial year, Executive Vice Chairman and Managing Director Sandeep Jajodia said Wednesday.

He said Monnet is open to buying steel plants abroad and may also issue an initial public offer of shares for its upcoming Orissa power plant.

"We are looking to acquire mineral resources. We want to acquire deposits... Africa and East Europe are the most lucrative (areas)," Jajodia said.

He said the company's overseas plans are still at an exploratory stage.

"If anything (steel plant) looks good, we can look at it... We are not interested in green field steel units," he said.

As of now, the company has no overseas steel plants.

Several Indian steel companies are scanning the radar for overseas acquisitions for raw material sources, which are scarce in the subcontinent.

In 2005-06, the Monnet group had acquired an abandoned manganese ore mine in Zambia.

However, the Zambia unit is yet to start operations in the absence of logistical linkages and power supplies.

"We are negotiating for power and logistics (rail links)," he said but did not say when the mining operations would begin.

Once this unit starts operations, Monnet plans to build a ferro-manganese unit of 100,000 tonnes in the African country at a cost of Rs 100 crore, Jajodia said.

Monnet will build a 300-megawatt power plant at Angul, Orissa, at a cost of around 12 billion rupees through a special purpose vehicle.

The group plans to start construction on the first phase of 300 MW by 2006 end and launch commercial operations by March 2009.

The first phase of the project will be funded through a combination of debt and equity in a ratio of 70:30. The equity component of 3.5 billion rupees will be either partially or fully-subscribed by the Monnet group.

Jajodia said an IPO was one option the group may consider, along with others.

"This (power project) will bring in huge value to Monnet Ispat," he said.

Monnet Ispat is diversifying into energy with a view to "de-risking" its business.

"The steel business is cyclical in nature and energy is not. This (power plant) will insulate the company to a great extent," Jajodia said.

Almost 50% of the company's profits come from the energy business""coal and power.

Part of the power from the plant will be sold to the state grid, and partly used by the group for captive purposes.

Currently, the company has one captive power unit in Chhattisgarh, with a capacity of 60 MW, where it is adding another unit of 90 MW.

The company is spending around 11 billion rupees in 2006 and 2007 on a green field steel plant in Raigarh.

The project comprising .5 million tonnes each of sponge iron, hot metal and 1 million tonnes of liquid steel, besides a 90 MW captive power unit, will be completed in 2007.

The sponge iron plant unit and captive power unit will be completed in 2006 itself, Jajodia said.

Post-expansion, the company will have a capacity to produce around 0.8 million tonnes of sponge iron while its liquid steel making capacity will rise to 1.3 million tones. The company does not produce hot metals.

The expansion project has been funded through a combination of debt, equity related instruments and equity.

Monnet Ispat plans to increase coal production at its captive mine in Chhattisgarh to 1.2 million tonnes from 0.7 million tonnes to cater to the demand of its new steel unit in Raigarh.

Production will further be increased to 1.5 million tonnes once government allows captive mining firms to sell coal to specified end users, he said.