Shah Alloys plans unit in Gandhidham

Ahmedabad-based Shah Alloys (SAL), the second largest producer of stainless steel in the country after the Jindal group, plans to invest around Rs 1000 crore to set up a ferro alloys plant at Gandhidham. When complete, the unit will have a capacity of one lakh tonne.

SAL plans a Rs 50 crore initial public offering (IPO) in six months to fund the expansion. The company will also raise debt to fund the new plant.

SAL has recently set up a wholly owned subsidiary SAL Steel Ltd to handle the ferro alloys business.

"This would be the first plant of its kind in Gujarat. Apart from meeting its own demand for ferro-alloys (a major raw material in the production of stainless steel), the plant will also cater to the casting industry in the state," said Rajendra Shah, chairman and managing director, SAL.

The investment in the plant would be in four phases. The first phase will involve an investment of Rs 250 crore and is expected to be complete by the end of the current calendar year. Thereafter, the company will invest Rs 250 crore each in the next three years.

"The need for setting up a plant arose because ferro-alloys is now being brought from other parts of the country, adding to the costs of production," said Shah.

"The turnover from the new unit is expected to be Rs 200 crore at the end of its first year of operations. It is expected to log a net profit of Rs 50 crore. The company is likely to grow at the rate of 30 per cent after that," said Shah.

SAL recorded a turnover of Rs 786 crore in the financial year 2002-2003. It has already surpassed that figure in the first nine months of the current financial year.

The company expects to clock a turnover in excess of Rs 1000 crore by the end of the current financial year. "We are expecting to double the turnover to around Rs 2000 crore in the next five years," said Shah.

Over 50 per cent of the company's turnover comes from exports. SAL exports mainly to China, Italy and Germany.

"This year we exported around Rs 500 crore and target to export over 80 per cent of the turnover in the next financial year," said Shah.

The company faces competition at the international level from countries like Japan and Korea in terms of pricing but has an edge over them in terms of quality and with the new plant, the raw material would be available at cheaper rates, reducing the cost production and making the company globally competitive.