Rashtriya Ispat Nigam Limited, the corporate entity of Visakhapatnam Steel Plant, is passing through a challenging time due to flooding of cheap steel products from China and Commonwealth of Independent States, high production cost and depleting reserves.
With borrowing of capital expenditure (Capex) at 1:1 ratio for modernisation of blast furnaces to increase the total capacity of VSP to 7.3 million ton after stabilising units under 6.3-million ton expansion project, the company has to spend around Rs.250 crore on debt servicing every year. To implement further its expansion plan, it has to go for heavy loan. The prolonged slump in the market also gives sleepless nights to the management though it exudes confidence that due to increased thrust to infrastructure and strengthening rural economy, development of smart cities and towns and construction of capital region near Vijayawada, the demand for steel will go up.
The per capita consumption of steel has remained around 60 kg compared to global average of 200 kg.Disinvestment
RINL has spent Rs.12,300 crore on completing expansion through internal accruals. With dwindling cash reserves, it is poised to face difficult times.
The disinvestment of RINL will become inevitable in the coming months as listing will only be a viable option to mop up resources to fund future expansion, according to the management sources.
RINL clocked a turnover of Rs.11,718 crore during 2014-15. During 2013-14, the company recorded a turnover of Rs.13,489 crore.
“With product diversification, significant improvement in techno-economic parameters, cost reduction, optimum utilisation of manpower and investment in asset creation, we are confident of having better days ahead,” RINL Chairman-cum-Managing Director P. Madhusudan said during a briefing on company’s performance.
RINL at the beginning of 2014-15 set an internal target of Rs.20,000 crore and wanted to progressively increase it to Rs.30,000 crore by 2016-17.
With product diversification and improvement in
techno-economic parameters, we are confident of having better days ahead
P. Madhusudan
CMD of RINL
