Mumbai: Mumbai-based Uttam Galva Steel, plans a capex of Rs 300-500-crore over the next 2-years, a top company official said.
"We expect to spend Rs 300-500-crore, including for setting up a 60 MW power plant," Uttam Galva Steels Director, Ankit Miglani, told reporters on the sidelines of the company`s annual general meeting (AGM) here today.
"All our investment will go into down stream activities and for cost-reduction mechanism and the money will be raised through internal accruals and debt," Miglani said.
The power plant will help reduce its production cost significantly, he said.
The power plant would help in increasing productivity by giving better quality power and significantly reduce production cost. "We will use 30 MW internally and 30 MW will be sold, until we expand to consume it fully," he said.
Asked on its co-promoter ArcelorMittal`s role in future expansion plans, Miglani said, "Any new expansion plan will be initiated by joint decision once the new Board is constituted. After the open offer completes on November 18, 2009, and all regulatory approvals are received, the new Board will be formed which will take future decisions," he said.
"Going forward, with ArcelorMittal`s support, the company will expand profitably. With the hot rolled coil back-up and technology back-up, we are achieving a level of raw material security and technology enhancement which will add overall value to the organisation," Miglani said.
Upon successful conclusion of the offer, ArcelorMittal will hold a 35 percent stake in Uttam Galva Steels. ArcelorMittal is making an open offer at Rs 120 per share, while the Uttam Golva Steels share price is ruling at Rs 125.
Replying to a query whether ArcelorMittal would up the price of the open offer if the market response was poor, Miglani said, "Upping the price of open offer is out of the question. We have signed an agreement that in case the open offer fails completely or is partially filled, the promoters will divest their existing holding in the company to the extent such that both the promoter and co-promoter hold an
equal stake in the company."
"Today, we have a holding of 45 percent and assuming no one tenders their shares we would still divest half our holding to Arcelor such that both Arcelor and the existing promoters holds 22.5 percent equity," he said.
Arcelor is the largest supplier of automotive grade steel in the world and "we hope to benefit from this in the long term. The idea really is to bring them in as strategic investors," he said.
Miglani pointed out that the demand for steel in India is stable. However, since October 2008, the company has registered a minimum of 20-30 percent increase in volume YoY every month.
"We managed to market our products effectively and increase our market share in both global as well domestic markets, Miglani said.
"We expect the next couple of quarters to be turbulent because we don`t have clarity in any trend as far as prices are concerned. As far as demand is concerned, we see relatively stable demand," he said.