Financial Daily from THE HINDU group of publications
Wednesday, Jul 13, 2005
Electrosteel plans to boost exports to Europe through JVs
Kolkata , July 12
ELECTROSTEEL Castings Ltd, which has positioned itself as an international manufacturer of ductile iron (DI) pipes and fittings, has chalked out plans to give a special thrust to exports in 2005-06 through the newly-created special purpose vehicles (SPVs) in Singapore and the UK.
Highly placed company sources told Business Line here that the joint ventures have been formed to create more space for DI pipes and further strengthen the marketing arrangements for greater penetration of the quality-conscious European markets.
The company's exports during 2004-05 have shown a growth of 45 per cent at Rs 200 crore over the performance in the previous financial year.
These 60:40 SPVs have been formed with reputed corporate entities in the region, which were earlier distributing Electrosteel pipes and fittings, along with products of other companies.
As per the new arrangement, the ventures will function as exclusive distribution arms of Electrosteel in the European DI pipes market segment, aiming to create that much-needed India brand equity.
The two new joint ventures are Singardo International Pte Ltd (Singapore) and Chesterfield Ductile Group Ltd (UK), apart from the two wholly owned existing subsidiaries of Electrosteel, Electrosteel Europe Spa and Electrosteel Algerie Spa, in Europe and Algeria, respectively.
The shareholders of the company, at the recent AGM, cleared the proposed $50-million GDR issue, which will be utilised to meet the expansion of DI pipe production capacity (from the present 2 lakh tones to 2.5 lakh tones per annum), estimated to cost Rs 51 crore, and also the incremental capital requirements of Rs 49 crore.
The balance proceeds from the issue are to be used to retire the high-cost long-term debt of Rs 100 crore.
The capacity expansion project is expected to be completed by the middle of 2006.
The members have also okayed the proposal to increase the authorised capital to Rs 50 crore from the existing Rs 20 crore.
It is learnt that work on the Rs 48-crore, 12-MW waste heat recovery-based (from the coke oven plant) co-generating captive power plant of the company at Haldia is now apace.
The unit is likely to go on stream by September 2005.
And to reduce dependence on the high-cost MS scrap, the company is also setting up a sponge iron plant in Haldia at a cost of Rs 111 crore.
This is also expected to be completed by September this year. The company already has a 3.75 MW captive power unit at the Khardah Works.
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