The company has announced a 5-million tonne expansion that should be positive for medium-term growth. In addition, the company plans to raise $2 billion through equity and equity-linked instruments. The company has announced brownfield expansion at the Kalinganagar facility (KPO), increasing its capacity at KPO from 3 million tonne to 8 million tonne. The total estimated capex will be Rs 235 billion ($3.7 bn) and is expected to be completed over the next 48 months. The expansion includes (a) raw material capacity expansion; (b) upstream and midstream facilities; (c) infrastructure; and, most important, (d) downstream facilities including cold rolling mill. This will help the company increase the share of value-added products in its total volumes. The estimated capex implies a cost of $730/tonne (lower vs. capex of $1300/tonne incurred at KPO in the initial phase for 3 million tonne capacity), given the company has incurred capex towards land and some support facility in the initial phase itself.
The company plans to raise Rs 128 billion, through issuance of equity and equity-linked instruments including shares by way of a rights issue. Assuming the fund-raising is through equity shares at current market prices, this will lead to the issuance of 180 million shares (vs. current share count of 971 million) and will be 16% EPS dilutive without factoring in any reduction in debt or interest cost from the money raised.