The Chennai-based Rs625.55 crore steel manufacturer Surana
Industries Limited, is setting up an integrated steel
complex at Raichur, Karnataka.
at a capex of Rs473 crore, the proposed plant will mainly
cater to the needs of the domestic automotive industry.
The company wants to cash in on the emergence of India
as a manufacturing hub for auto component and other industries.
to start functioning next December, the proposed plant
will have capacity of 1.28 lakh tonne of sponge iron,
1.36 lakh tonne of steel melting shop and 1.32 tonne of
rolling mill. The project also includes a 30 MW captive
power plant to be powered by heat recovered from the furnace
also by coal. The Karnataka government has allotted 164
acres for the project out of the promised 300 acre.
company hopes to generate a revenue of Rs500 crore from
the new plant in its full year of operations which would
take the turnover to Rs1,200 crore by March 2008.
Industries currently operates two plants one at
Gummidipoondi near Chennai, which produces 1.09 lakh tonnes
of thermo mechanically treated (TMT) bars and 30,000 tonnes
of mild steel ingots. The other plant at Madhavaram in
Chennai rolls out cold rolled steel products. The company
has a 12 MW windmill at Thirunelvelli.
fiscal the company, which has a Rs15.50-crore equity base,
posted a net profit of Rs23.44 crore. The company's reserves
stand at Rs76.27 crore.
to V M Swami, director, finance, the funding of the Raichur
project will be a mix of debt and equity. Excerpts
you give us the break up of the new project funding?
Rs473 crore project will be financed with a mix of term
loans from banks (Rs330 crore) and equity capital of Rs143
you be tapping the market with a public issue? Sometime
back the company announced that it would come out with
a public issue for Rs300 crore. What is the current promoter
holding and post issue what will be the shareholding pattern?
The equity part will be funded by way of equity issue
to the promoters to the tune of Rs30 crore. We will also
issue of foreign currency convertible bonds (FCCB) to
the extent of Rs72 crore to start with. Both the issues
will be at a premium of around Rs120-130 per share.
par value of our share is Rs10. In addition there will
be plough back of profits to tune of Rs40 crore. Ultimately
the total funds by way of promoter contribution, FCCB
and profits plough back will aggregate around Rs300 crore.
Several investors in Singapore and the US have shown an
interest in subscribing to the FCCB. Even though we need
only Rs143 crore from equity for the Raichur project,
the remaining amount will be utilised for retiring high
cost debt (around Rs61 crore) and the company's working
are also planning to have one more induction furnace at
Gummidipoondi plant. There will not be any change in the
shareholding pattern after the issue. The promoters holding
will remain at 49 per cent as they will pick up further
shares to maintain their holding ratio.
the bourses the company's scrip changes hands for around
Rs80. But we are raising the equity based on our expected
earning per share (EPS) of around Rs20 for 2008-2009.
is company's debt now? At what rate will you be raising
the additional debt to fund the Raichur project?
The company currently has a debt of Rs170 crore. The Raichur
project will have a debt component of Rs330 crore
66 per cent of the total project cost. Leading public
sector banks will be offering the debt at a coupon rate
ranging 9 per cent to 9.5 per cent per annum. The yearly
interest cost for the company will be Rs25 crore.
will the Raichur project to breakeven?
The company expects break even in the first year itself.
In terms of the appraisal report the cash break even is
around 35 per cent.
are the EPC contractors for the projects - steel mill
and power plant?
We will be buying the equipments and the arc furnace from
G A Danieli, a multinational company (MNC). We have also
shortlisted companies and the final decision on the EPC
contractor is yet to taken. We have offers from Tata Projects
and Thermax for the power project and Beekay Engineering
Corporation, Bhilai for the kiln and other equipments.
These are yet to be finalised.
will you source the raw material for the Raichur project?
Has the company got any iron ore mine on lease? If so,
where is the mine located; the ore reserves in the mine;
the lease period and the lease amount?
We have applied to the Karnataka government for an iron
ore mine and the application is being considered. In the
meantime we have entered into tentative contracts for
supply of iron ore from the others. India exports iron
ore and there is no dearth of raw material for steel manufacture.
there will be a slight cost increase if we continue to
buy iron ore from outside, it will have no bearing on
our operations. There are a number of steel mill in the
country, which do not own iron ore mines.