Steel Authority of India Ltd (SAIL) is looking for ventures into analogous sectors. While the state-run company is going for a follow-on public offer (FPO) in early 2011, it is looking at some aggressive expansion plans, and mergers and acquisitions as well, said Chandra Shekhar Verma, chairman and managing director, in an interaction with Nayanima Basu. Edited excerpts:
What is the status of the process of disinvestment? Since you last said it might hit the markets by December-January, have you started the process of appointing the lead managers (BRLMs) and when do you plan to file the prospectus (RHP)?
We have already appointed six BRLMs, as well as the domestic and internal legal advisors for the issue. The board sub-committee has appointed Crawford Bayley in consortium with Dorsey and Whitney LLP as the domestic legal counsel. The issue will be appropriately timed, based on the market considerations. There's a meeting with the merchant bankers on Thursday.
After Coal India's blockbuster issue, all eyes are on SAIL. Do you expect this one to be equally huge?
Every company has to live with the market conditions. The most important thing in the steel sector is raw materials. For iron ore, we have captive resources but for coking coal, only 25-30 per cent of our need is met through internal resources, while 70 per cent we have to import.
When do you expect the SAIL-POSCO joint venture (JV) to see the light of day? Have you been able to arrange raw material sourcing?
We are finalising the Detailed Project Report for setting up a 1.5-million tonne (mt) steel plant based on Finex technology, which should be over by end-November. The commercial agreements will follow after establishing the techno-financial viability.
Will you be exploring more such opportunities for JVs with domestic and foreign conglomerates for producing high-end steel products?
We are in discussion with Kobe Steel for production of nuggets, a substitute for steel scrap. A feasibility report is in advanced stages of completion. Jvs with foreign steel majors are likely to provide opportunities for speeding up production of those products for which technology is not readily available. Recently, SAIL renewed its collaboration with CBMM, Brazil, to augment production of high-strength steel for pipeline applications.
Any plan for any mergers or acquisition in the coming years?
SAIL is scouting for attractive target assets in its value chain through mergers and acquisitions. We want to come in those sectors akin to steel, like transportation and power.
How much do you plan to invest on capacity expansion and consolidation?
The indicative investment for the current phase of modernisation and expansion is Rs 59,905 crore. This includes Rs 37,166 crore towards capacity expansion and balance. The other part is towards value addition, product-mix improvement, technical upgradation and modernisation.
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What is the status of some of the projects you had announced when you took over the mantle (this June)?
To maintain predominance and to face global competition, the company has undertaken modernisation and expansion of its integrated steel plants at Bhilai, Bokaro, Rourkela, Durgapur and the special steel plant at Salem, to enhance its crude production capacity from 12.8 mtpa to 21.4 mtpa in the current phase. The major packages have already been ordered. The current phase of modernisation and expansion is scheduled to be completed by 2012-2013.
What are you doing to enhance SAIL's image as one of the country's biggest steel producers?
In recent years, SAIL had developed a number of special steel products at different units for various key segments. We plan to increase the proportion of value-added products in our overall product basket from the current 37 per cent to 55-60 per cent in the coming years. And, to produce specialised steel for sectors such as automobiles, defence and power. We are also exploring the possibility of installing necessary facilities for the production of CRGO steel in the next few years. The production capacity will be doubled after completion of the first phase of the massive expansion and modernisation plan. With the addition of state of the art technologies in steel making, hot rolling and cold rolling areas, SAIL will produce highly sophisticated steel products, enhancing its image as the biggest and best steel producer in the country.
