Monnet Ispat plans Rs 230 cr expansion

To increase sponge iron capacity to 750,000 tonne by next financial year

Monnet Ispat Ltd has lined up an investment of Rs 230 crore to expand its sponge iron capacity to 750,000 tonne from the existing 300,000 tonne by the next financial year.

The company will also soon start sourcing coal and iron ore from its own mines as part of a plan to become a fully-integrated steel producer, Ajay Bhatt, vice president (corporate finance), Monnet Ispat, told Business Standard.

Monnet Ispat hopes to complete the merger of its sister company, Monnet Power Ltd, with itself by September 2004. This would lead to a combined entity with estimated revenues of over Rs 600 crore. "We are in the process of merging the two companies by August-September 2004. The amalgamation date will be with effect from March 31, 2004," said Bhatt.

"The merger will create an integrated company and will help us grow further," said Bhatt. The new merged entity will have access to coal and iron ore, prime raw materials of sponge iron. It will also have access to captive power.

According to Bhatt, the company will start mining coal from a mine in Raigarh in Chattisgarh within the next 2-3 months. Initially, 300,000 tonne of coal would be mined, which would be ramped up to 500,000 tonne in the first year and 1 million tonne within 30 months.

Monnet Ispat is also trying to procure an iron ore mine in Eastern India and another one in Chattisgarh. "The first one will be for the long-term while the second mine will be for the short-term. Both the transactions should be closed by the end of this financial year," said Bhatt.

Initially, 450,000 tonne of iron ore would be procured, which would be increased to 900,000 tonne in two years as the company hikes its sponge iron capacity.

With the operationalising of the iron ore and coal mines, the company would save on freight costs and also on outflow of money owing to procurement of these raw materials from other companies.

The operationalising of the mines and the savings from lower freight cost are likely to have strong favourable impact on the financials of Monnet Ispat, which grew by 50 per cent annually over the past 3-4 years, said Bhatt.