Fund crunch hits JSW cement, aluminium expansion plans

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Mumbai: Hit by the economic slowdown and short of funds, the $ 3.7-billion JSW Group has slowed down its Rs 1,900-crore expansion in cement and Rs 4,200-crore aluminium expansion plan till the market revives.

The group, which floated JSW Cement Ltd in 2007, will set up a slag-based 4.5 million tonne clinker facility in Andhra Pradesh. It has already completed 30-40% of its civil construction work and expects the plant to go on operation only in 2011.

The cement plant was initially expected to go on stream by 2009 but was postponed to 2010.

Talking to FE, JK Tondon, chairman JSW Cement said, “We are currently waiting for the financial closure for the equity part of it, which is about Rs 450 crore. Whereas, the debts are raised. It will take about 15 months, from September 2009 onwards, for the cement plant to go on operation.” With equity-debt ratio of 1:3, the company’s loan of about Rs 1400 crore has been sanctioned for its cement expansion. The facility will be a split location plant with the clinker plant in Andhra Pradesh near the limestone deposits and the grinding units will be spread across two locations, one in Karnataka and the other in Andhra Pradesh.

Similarly, despite achieving the financial closure for its 1.5 million tonne alumina project, the group is waiting for the markets to revive as it is still awaiting Rs 1,200 crore to be raised via equity.

“The group is currently focusing on expansion of its steel capacity to 10 mtpa by 2011. Only after September -October this year, when the picture is clear about the markets, we would decide on our other projects,” added Tondon. JSW Auminium has received the financial closure for its Rs 4,200 crore alumina plant in Vizianagaram district (Andra Pradesh), of which Rs 3,000 crore would be raised from financial institutions. ICICI is the lead bank along with 10-12 other banks lined up for funding.

JSW Aluminium Ltd. (JSWAL) was incorporated on July 8, 2005 as a special purpose vehicle (SPV) to implement this project and the plant was expected to go on operation in April 2010.

According to Tondon, the group will decide whether to raise money via promoter’s equity or via IPO after September 2009. JSW Steel shares on Friday were marginally up by 0.20% to close at Rs 550.75 on the Bombay Stock Exchange.