Essar Steel has commissioned five million tonnes of capacity at its flagship Hazira plant in Gujarat, now India’s largest flat steel unit. Prashant Ruia, group chief executive, Essar Group, talks to Shubhashish & Arijit Barman about Essar's global steel strategy and the ongoing telecom controversy. Edited excerpts:
The Hazira plant is now 10 mt. What does the future look like for the company and the plant?
It’s a big day today for all of us. This journey started in 1989 with just 0.8-mt steel making capacity and is today a 10-mt plant. This is the world's fourth largest single-location flat steel plant and the largest in India.
How do you see the steel sector in India, with the growing concerns of slowdown? Even steel demand growth is nowhere near past years.
In India, we still import around seven mt of steel against total production of close of 70 mt. Our endeavour is to cater to this demand that is being met by imported steel. This is still a big market and there is a long way to go.
We have been exporting 20-30 per cent of our total production historically and that will continue. Because of our port-based location, we are logistically very competitive with other steel makers in India and cater to Asia, Africa and Europe. Domestic demand is growing but we would like to maintain around 20-30 per cent exports.
You have spent a total of Rs 37,500 crore on your India expansion plans. What is the spending break-up?
Broadly, the debt to equity ratio for this expansion is 2:1. The debt has been fully tied-up and we don't need any more financing. This Rs 37,500-crore investment includes the beneficiation plant in Chhattisgarh, slurry pipelines in Vizag and the pellet plants in Visakhapatnam.
Are there plans to raise money through a bond issue?
No. We are fully funded. The focus is to ramp up the plant and commission the forthcoming projects.
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By when will the Hazira plant reach full capacity?
By the end of the next fiscal, we will be at 80-85 per cent of the capacity and reach full production the following year. This is the normal ramping-up trajectory for steel plants.
Are you looking to bring any partner in Essar Minerals, given its vast mining (iron ore and coal) portfolio?
There are no plans to bring any partner, mining or any other, in Essar Minerals. It is a totally integrated company.
Are you looking at creating a holding company like you did for power and then list it abroad?
We already have Essar Steel (Mauritius). All the different operations in India and abroad come under that. So, we already have a structure in place. There are no immediate plans to list the company. Our focus is to complete the expansion plans and to meet steel demand. There has been no decision made to list the company anywhere and it’s speculative to say anything on this.
Have all the issues in Zimbabwe sorted out?
We have completed the acquisition and are in the process of evaluating and putting together a plan. It is too early to say when we will start production, as we need time to get certain approvals, etc.
Do you think the 2G (telecom spectrum) chargesheet will adversely impact the other businesses?
We have largely exited the telecom business by selling our stake in Vodafone-Essar. All our businesses are very different from each other and I see no reason why the telecom controversy should have a negative overhang on the group. We have maintained that we have done nothing wrong. The matter is in court; nobody knows what our strategy will be in court. So, how can people come to any conclusion at this point?