Steel PSU Neelachal Ispat Nigam Ltd (NINL) has sought Rs 250 crore from one of its promoters - Odisha Mining Corporation (OMC) - as short-term corporate loan to meet its working capital requirement.
NINL has been struggling to keep its operations afloat as buying iron ore from external sources is weighing on its expenditure.
"In last fiscal, iron ore fines prices were ruling high in the range of Rs 3,500-4,000 per tonne. Of late, it has fallen to around Rs 2,200 a tonne but even at that price, we are finding it tough to carry on our operations. We have requested OMC to provide us Rs 250 crore loan to help tide over the crisis and meet our working capital requirement for two months. NINL is ready to offer 12.25 per cent interest to OMC on this loan," said a company source.
OMC's chairman cum managing director S N Girish could not be reached for his comments. The state-run miner has been offering inter-corporate loans to another state PSU and power trading firm Gridco Ltd. OMC is sitting on cash reserves exceeding Rs 6,000 crore.
NINL, known to be the country's biggest pig iron exporter, is running a 1.1 million tonne per annum (mtpa) at Kalinganagar, the steel hub of the state in Jajpur district.
The steel PSU has charted an ambitious plan to expand steel making facility at its Kalinganagar plant to five mtpa. Phase-I expansion would ramp up steel output from 1.1 mtpa to 2.2 mtpa and this is expected by 2020. Full capacity expansion, estimated to cost Rs 25,000-30,000 crore, is slated to be achieved by 2025.
But lack of equity infusion by the promoter firms has posed a big hurdle to NINL expansion.
Apart from MMTC (that has a controlling stake of 49.9 per cent), two state government entities- OMC and Industrial Promotion & Investment Corporation of Odisha Ltd (Ipicol) - own stakes in NINL. Central PSUs like National Mineral Development Corporation (NMDC), Bhel Ltd and Mecon have minor equity holdings.
MMTC has assured to pump in Rs 500 crore as equity contribution. But that would happen only after Mecon Ltd submits the techno-economic feasibility report (TEFR) for steel project's expansion. The equity infusion by OMC and NMDC has been pegged at Rs 112 crore and Rs 38 crore respectively.
Already, Rs 3,600 crore has been invested on the NINL steel plant at Kalinganagar. Investment banker, SBI Caps has projected that NINL would turn profitable in 2016-17 with stabilisation of its steel melting shop (SMS) and commissioning of its captive iron ore mines at Koida.
This would make the NINL plant self-sustainable and also help generate adequate internal resources for contributing to its expansion in the offing.
The steel PSU hopes to save at least Rs 250 crore every year on commencement of operations at its captive mine with an estimated deposit of 110 million tonne.
