Mesco Steel plans Rs. 700-crore investment to ramp up production.

As part of its plan to take its annual steel-making capacity to 4.5 MT from 1 MT now, Odisha-based Mesco Steel has embarked on expansion of its two existing units in the state, with an envisaged investment of Rs. 700 crore.

The soon-to-be listed company is setting up a basic oxygen furnace (BOF) importing from China, currently available cheaply, one rolling mill to produce billets and one ductile iron pipe unit for Rs. 150 crore each at its original Kalinganagar unit.

Mesco Steel’s chairperson-cum-managing director Rita Singh said since China is rationalising its domestic steel capacity, hence used equipment, almost as good as new, are available at “throw away” prices.

The enhanced pig iron, from 1 MT now, and the billets would be used to make finished long products at its 100% subsidiary Maithan Ispat, an ailing firm which Mesco acquired last year for Rs. 1,160 crore, but yet to be merged with the parent company.
Delisted from the BSE in 2005, Mesco would be listed both on BSE and NSE in next three months or so, Singh said.

The debt-free company is in talks with a couple of banks to part-finance the capex part and will finalise the deal soon. However, the company will time the expansion in sync with the turnaround of the, which is a certainty given India’s thrust of infrastructure and housing, she said. The slow-but-steady rise in pig iron prices augurs well for the company.

Since acquisition, Maithan Ispat has been doing good clocking around Rs. 350 crore turnover last fiscal and has turned profit-making. While the company was only paying the interest part of its long-term loan of Rs. 450 crore, it has already started paying the principal component also from the current fiscal.

Impressed with the turnaround of Maithan Ispat, lenders have also agreed to extend the Rs. 170 crore of sanctioned credit as part of the acquisition deal, Singh said. The fund would be used to set up an electric arc furnace, billet caster and rebar mill among others. Mesco is putting Rs. 85 crore from internal sources taking the total capex to Rs. 255 crore.


THE FINANCIAL EXPRESS