VSP kicks off first phase of expansion

Visakhapatnam Steel Plant (VSP) has commenced the first phase of its planned expansion programme.

"Recently, we appointed Dastur and Co as our consultant for the expansion programme. They will submit a detailed project report with estimates and a feasibility report in the next two months. The company will then call for tenders without any delay," B K Panda, chairman and managing director of VSP, told Business Standard.

In the first phase of expansion, the VSP management plans to increase the production capacity from the current three million tonnes to five million tonnes. The expansion to be completed by 2008 is envisaged to cost around Rs 3,000 crore.

"If you want to set up a two million tonne capacity greenfield steel plant, it would cost around Rs 6,000 crore to Rs 7,000 crore depending on the location. But at VSP the two million tonne capacity will be added with only Rs 3,000 crore investment. Even the construction time would be less than that required for a new plant," he said.

VSP has already started the construction of the fourth coke oven battery works as part of the first phase of expansion. This is being taken up with an investment of around Rs 450 crore. Coke production from the fourth coke oven battery will meet the needs of a steel production unit with five million tonnes capacity.

At present, VSP is producing around 6-7 lakh tonnes of value-added products per annum. After the expansion, the production volume is expected to cross 10 lakh tonnes.

During the current fiscal, VSP is targeting a Rs 7,000 crore sales turnover. After expansion, the turnover is expected to cross the Rs 10, 000 crore mark. Even exports are likely to rise significantly.

"In the current year also, we expect to achieve more than Rs 1,300 crore net profit. We will raise most of the funds required for expansion through internal resources only. For the remaining funds, we will raise borrowings and several financial institutions are keen on financing our expansion project," Panda said.

Besides its expansion plans, the Vizag steel plant plans to invest Rs 500 crore in the equity of MMTC-promoted Nilachal Ispat Nigam.

"We are keen to invest in Nilachal. However, it is very competitive as several other big players are also seriously trying to invest in Nilachal," Panda said.