Essar Steel in retrospect may be relieved it decided to pull out of its bid to acquire US firm Esmark for $1.2 billion last year considering the economic meltdown and the plummeting metal prices that followed. However, the Ruia family-controlled firm is back in action with its ?recent buy? of assets of Pune based, Shree Precoated Steel Ltd (SPSL), for over Rs 700 crore. With Rs 800 – 900 crore liquidity position and debt-equity ratio of 1:1.1, Essar Steel is not only expanding its operations in India but is reworking its overseas operations, Minnesota Steel and Algoma Steel, which the company acquired in 2007.
According to J Mehra, CEO of Essar Steel, the company?s phase I expansion in Minnesota Steel, US will be a ?4.1 mtpa pellet plant? and phase II will be ?1.5 mtpa steel plant?, which is expected to be completed by 2012 and 2015 respectively. ?We are also working on a blueprint to expand our capacity of Algoma Steel, Canada to 5 mtpa from 4 mtpa,? revealed Mehra. Phase I expansion of Minnesota was earlier expected to go on stream in 2009 but had to be postponed due to global slowdown. The company plans to supply pellets produced in Minnesota to its Algoma plant in Canada. ?The investment in Minnesota Steel is expected to be $1.65 billion, which can marginally go up depending on the situation?, said an Essar Steel spokesperson. The company is betting on its internal accruals to fund its projects, however sources say that it might have to scout for other options for funding its huge expansion. Meanwhile, Essar Steel also plans to set up a 6 mtpa pellet plant in Orissa with initial investment of about $600 million in phase I.
With the acquisition of SPSL?s assets Essar Steel has become the country?s largest ?cold roller? and the largest producer and exporter of ?colour coated steel?. Essar Steel?s FY09 revenue was $ 5 billion with Ebidta of $ 791 million and shipments of 5.6 mt. The debt equity ratio is 1:1.1 and the long-term debt is Rs 5,200 crore while equity is Rs 4,800 crore.