Ruia plans sponge iron, steel units

Investment would be a combination of debt & equity

The Pawan K Ruia group, which took over Jessop & Company some years ago, has embarked on a backward integration drive and has firmed up plans of setting up a one million tonne greenfield finished steel plant at an investment of Rs 1,500 crore and a sponge iron unit at Durgapur, while applying for allotment of a coal mine.

Talking to Business Standard, chairman P K Ruia said that three possible locations were being considered - West Bengal, Jharkhand and Orissa. "We are in the process of zeroing in on one of these states where we are looking for 500 acres of land for the plant," he said.

The plant would be set up in technical collaboration with a foreign party.

Jessop also applied for a coal mine to feed its steel plant. Talking about the status of allotment of coal blocks, Ruia, said, "We are in the process of signing a memorandum of understanding (MoU) with the Jharkhand government after which the allotment process is likely to speed up." The investment would be through a combination of debt and equity, ideally in a 1:2 ratio.

Jessop had made presentations and submitted a detailed project report to bankers and financial institutions.

"The steel plant would have to be a new company and cannot be a subsidiary of Jessop as it is an engineering company still under BIFR company and thereby barred by law from floating a new company or making investments in new ventures. The steel plant will therefore have to be a new Ruia group company or a subsidiary of some under company under the group," sources said.

Steel from the plant would be 1used for in-house to make couplers and parts for railway wagons, the main product of Jessop.

Jessop was building a sponge iron unit in Durgapur and production from the plant will be used to make steel.

A part of the production would be sold in the market.