Tata Steel expansion cleared

Capacity to touch 7.5 mt by 2009

The board of Tata Steel has approved a capacity expansion of 2.4 million tonne at an investment of Rs 7,800 crore, taking the total capacity at Jamshedpur to 7.5 million tonne by 2009.

In an intimation to the stock exchanges, the company has informed that the board approved the expansion programme at a meeting held on June 30.

R C Nandrajog, vice-president (finance), Tata Steel said that the investment would be funded through internal accruals and long-term borrowings.

However, steel prices would play a role in determining how much of the investment would be made through internal accruals.

"If prices are good, then the entire amount could be funded through internal generation but, if the cycle turns we may have to borrow," he said. Nandrajog added that the company's debt-equity ratio was at 0.6, which was expected to come down further this year.

The 2.4 million tonne expansion was over and above the one million tonne expansion announced last year expected to be completed by September 2005.

At present the crude steel capacity was at around four million tonne. Nandrajog said the one million tonne expansion was being funded entirely through internal generation. The cost of the expansion was in the region of Rs 1,995 crore.

According to estimates, cash generation in the fiscal year 2004 was around Rs 3,636 crore.

Nandrajog said at present the capacity at Jamshedpur looked stretched but, in future with some technology the company could come up with a solution to take it to 10 million tonne.

The vision as chalked out by Tata Steel was to become a 15 million tonne entity by 2010, of which half would be at Jamshedpur and the balance would be spread over an alternative location in India and abroad. Market sources said Tata Steel was exploring growth opportunities in Ukraine, Singapore and China.

The Tata Steel stock reacted positively on the bourses, with the stock emerging as the chart topper on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) with volumes of 1,34,01,492 shares and 60,92,056 shares, respectively. The scrip was hovering around Rs 306.

Saleable steel output tops 1 million tonne: Tata Steel's saleable steel production has crossed the one million tonne mark for the quarter ended June 2004 at 1.02 million tonne, up 3 per cent against the quarterly production in the year-ago quarter.

Production of hot metal and crude steel was also higher by 4 per cent and 1 per cent respectively. Supplies of cold-rolled and galvanized sheets to original equipment manufacturers in the automobiles and white goods segments have risen by 41 per cent and 23 per cent, respectively.

Sales of branded products in galvanized sheets and cold rolled sheets have also witnessed an increase in sales at 31 per cent and 26 per cent respectively.