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MSP Steel and Power, an integrated steel producer, will complete the first phase of Rs 800-crore capex to add one lakh tonne of sponge iron and 18-MW power capacity by next month at its Raigarh plant in Chhattisgarh.
In phase-II, which is expected to complete by July next year, the Kolkata-based company will add one lakh tonne of sponge iron, six lakh tonnes of pellet capacity and 34 MW of power production.
The capex would be funded in a debt, equity ratio of 1:2 besides internal accruals and preference allotment to promoters. Of the total capex, the company has spent Rs 350 crore till August. It has tied up Rs 545-crore term loan through a consortium of banks lead by State Bank of India, UCO and Corporation Bank.
Present capacity
Currently, the company has capacity to produce three lakh tonnes an annum of pellet, 1.92 lakh tpa of sponge iron, 1,44,109 tonnes of steel melting, 80,000 tpa of roiling mill, 1.28 lakh tonnes of structural rolling and 24 MW of power plant. It also has coal washery and railway siding.
Besides, the company has two iron ore beneficiation plants of five million tpa each at Jabalpur and Katni in Madhya Pradesh.
Mr Saket Agrawal, Director, MSP Group, said the company is focused on strengthening its backward integration by increasing the production capacity for sponge iron, pellets and power.
“The iron ore beneficiation plant has helped us to bring down cost of steel production by Rs 4,000 a tonne. The company's raw material cost will be down further when we start sourcing iron ore from mine allotted to us in Chhattisgarh. The mine has reserves of 35 million tonnes and will be operational by FY'14,” he added.
The company also owns 15 per cent in a coal block allotted to a consortium of five companies in Chhattisgarh. It is increasing the coal washing capacity to support increased usage of coal and modernising and extending its railway siding.
By October next year, MSP will have an installed power generation capacity of 76 MW against its captive requirement of 33 MW. “The revenue generation from power increase substantially as we intend to sign monthly contracts with state electricity boards in Orissa and West Bengal which offer Rs 4 a unit and Maharashtra up to Rs 5 for merchant power. Our production cost varies between Rs 1.50 and Rs 2 a unit,” said Mr Agrawal.
The demand for long products, used mainly in real estate and infrastructure projects, has just revived and expected to peak early next year, he said.
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