Tata Sponge may invest Rs 3,000 crore to set up steel manufacturing facility

MUMBAI: Tata Sponge Iron may invest around Rs 3,000 crore to set up a steel manufacturing facility, a person with knowledge of its plans said.

“The project is under active consideration,” said the person, speaking on the condition of anonymity. The Tata Steel subsidiary had announced last year that it would set up a 1.5 million tonne steel plant at Joda in ironore rich Odisha. The state also houses its current facility.

“Considering the future growth potential of the steel industry, the company has applied to the ministry of environment, forests and climate change for permission to set up a 1.38 million metric tonne steel plant in phases at Joda,” the company had said in its annual note to shareholders for the year.T he company is looking to set up a blast furnace and expects the integrated steel plant to be ready in the next four years.

Even though it will be sourcing iron ore from parent Tata Steel, Tata Sponge is on the lookout for acquiring iron ore and coal mines as and when these are auctioned by the government, the note added.

“As a progressive company, Tata Sponge has been evaluating various avenues of growth aligned to the group objectives,” the company said in an emailed response to ET’s questions, declining to offer further comments.

Tata Sponge Iron reported a net profit of Rs 141 crore on revenue of Rs 816 crore in fiscal 2017. For the first quarter of the current fiscal year, it reported 49% year-on-year growth in profit at Rs 46 crore.

The company is planning to also add 30,000-35,000 MT to its current sponge iron capacity of 3,90,000 tonnes.

The management has indicated in the past that it would be executing the steel project in two phases. "The company might be in an overall comfortable position to execute the first phase of 0.6-0.8 MT and might finance it through internal accruals, debt and some external equity funding," said Abhisar Jain, lead analyst for metals and mines at Centrum Broking.

Tata Sponge Iron has Rs 700 crore of cash on its books.