Mumbai: Jindal Stainless Ltd (JSL), the leading domestic stainless steel producer, is on an expansion spree. The company has lined up over Rs1,300 crore investments in the coming two-three years. It is building additional capacities and also setting up new plants. The company is also looking at acquiring facilities abroad.

JSL has undertaken expansion of its facilities at Hisar at a cost of Rs400 crore. This investment is being funded entirely through internal accruals. The Hisar expansion is likely to increase volumes by 15 per cent in FY05.

Also on the anvil are a 240,000tpa ferro alloy plant and a 300,000tpa coke oven battery in Orissa for which JSL has been allotted land at Duburi. The ferro alloy plant is expected to be completed by June 2005, while the coke oven battery is expected to be completed by March 2006.

This project is estimated to have total of Rs900 crore investment. It is expected to be done by a mix of debt and equity in 2:1 ratio. The company is likely to raise around Rs600 crore debt of which Rs200 crore has already been tied up at a rate of 6.9 per cent for 10 years.

The company is also acquring plants overseas and is in the process of acquiring a cold roll facility in South-east Asia region.

Market analysts say that though the effective cost of debt decreased substantially (from 8.5 per cent at beginning of year to 5.5 per cent), the absolute amount of interest is likely to increase in FY05E due to an additional off-take of debt for the Orissa plant as well as decrease in forex gains.

They feel that margins will continue to be under pressure, due to the virtual non-availability of steel scrap as well as rising nickel prices. Market analysts feel that currently, the company is in an investment phase and will witness flattish returns on the capital employed.

The outlook on steel prices beyond year 2005 continue to remain blurred due to unclear impact of possible slowdown in China. Jindal Stainless posted a profit after tax (PAT) of Rs501million for first quarter of this financial year. Jindal Stainless is among the top twelve stainless steel producers in the world along with Arcelor, KTS, Acerinox, Avesta Polarit, POSCO etc. It is a pioneer in the production of chrome manganese stainless steel.

Last year 90 per cent of Jindal Stainless' exports were to China where it has two offices.