Visa Steel to raise Rs 1,136cr for expansion

Visa Steel has estimated a fund requirement of Rs 1,136.2 crore for the commissioning of the proposed 0.5 million tonne-per-annum (TPA) integrated special and stainless steel plant.

Addressing a press conference in connection with the company's initial public offering, Vishambhar Saran, chairman, Visa Steel, said that the company has tied up with a consortium of banks for an eight-year term loan of Rs 745 crore at an interest rate of 8.5 per cent.

Visa Steel intends to utilise the proceeds of the public issue to finance a part of the capital expenditure for a brownfield expansion of its plant at the Kalinganagar industrial complex in Orissa.

The company is going public with an issue of 35 million equity shares of Rs 10 each for cash at a premium to be decided through 100 per cent book building process. The price band is fixed between Rs 52 and Rs 57. This will enable Visa Steel to raise funds up to Rs 199.5 crore. The issue opens for subscription from February 23 to Feb 27.

The expansion will involve setting up of a ferro chrome plant, sponge iron plant, waste heat recovery power plant, special and stainless steel plant and associated infrastructure facilities. A significant share of the investment in the expansion plan will go into setting up of a plant and machinery amounting to Rs 680 crore. Civil works and building (including structural steel) would account for Rs 188.6 crore. Erection and installation of the project, design, engineering, preliminary expenses, contingencies and interest during construction would require about Rs 260 crore.

Under risk factors, Visa Steel's memorandum of understanding (MoU) with the Orissa government expired on December 25, 2005. The company signed an MoU with the Orissa government for the project capacity of 0.35 million TPA on December 26, 2003. However, the company is now implementing 0.5 million TPA special and stainless steel plan.

Visa Steel has already applied for the renewal of the MoU, and the proposal is pending with the Orissa government. Under the MoU, the Orissa government will assist the company in sourcing raw materials, land for the project etc. In the event of the MoU not being renewed, the Orissa government may not provide the support as envisaged in the MoU, which may adversely affect the business of Visa Steel.

However, Saran said that about 390 acres had already been allotted to the company on long-term lease in the Kalinganagar industrial complex, in addition to 132.98 acres of land, which was allotted during November 2005.

Since 522.98 acres has already been allotted, the business of the company would not be affected even if the MoU was not renewed, he added.