PSU steel-major SAIL is re-looking its ₹100,000 crore expansion plans – to up capacity by 75 per cent to 35 million tonne per annum (mtpa) from the existing 20 mtpa - considering a change in market conditions including fall in steel prices, continued influx of Chinese import impacting domestic market dynamics and a higher than expected debt levels.
The company plans to go ahead with a ₹37,000 crore expansion plan for IISCO where a 4 mtpa flat steel product plant will come up. But, brown-field expansion plans for two other plants – Durgapur and Bokaro – have been put on-hold at present, with the capex plans being reviewed, a source told businessline.
“When we had made the expansion plans, the debt-equity ratio (forecast) was 1:1. But, we now have to work out the numbers in terms of the changed scenario, dip in margins and fall in steel prices,” Anil K Tulsiania, Director Finance, SAIL, said during a recent analyst call.
“We need to recalculate the numbers now,” he added.
IISCO Expansion
Clearances for greenfield expansion at IISCO has been obtained. And stage – II clearances, that include, tendering processes will start soon. Tenders are expected to be floated in another two-odd months, with finalisation of contracts happening in another six months or so. Work orders and payments should “start towards the end of calendar year 2025”. According to Tulsiani, majority of this capex is expected in 2027-28.
At present, IISCO’s long product plant has a 2.6 – 2.8 mtpa capacity.
“In case of Bokaro and Durgapur plants, where expansion is expected from 2.4 mtpa to 7 mtpa and from 2 mtpa to 3 mtpa respectively, we are still in the discussion stage. The consultant have given a report where estimates (capex) are on the higher side. So we have gone back to them for re-evaluating the plans,” Tulsiani said.
Another Rs 11,000 crore is planned towards de-bottlenecking of capacities (at Bhilai and Rourkela) over a three-to-four year period.
The company aims to incur capex of ₹600 crore in FY25; while FY26 target is pegged at ₹7000 crore.
Debt Reduction Attempts On
According to Tulsiani, as of June 30-end, debt-levels increased by around Rs 5000-odd crore to around Rs 35,659 crore. This was due to a sharp increase in working capital build-up. An increase in coal stocks (of higher price) and unsold inventory stocks are seen as two key reasons.
The steel-maker will also work towards bringing down its net debt to “at or below ₹30,000 crore levels”. “We plan to bring it down in the balance period of the year,” he said.
The average price for long products (of the metal) stood at ₹54,600 per tonne and flat products stood at Rs 53,500 oer tonne with combined average of ₹54,500. Prices have “further declined” by ₹500 – 1500 per tonne across categories.
According to analyst firm, IDBI Capital, SAIL is lagging its peers in terms of new capacity addition. “(This) is expected to result in lower volume growth over the coming three-five years,” the report said.