Electrosteel Steels - Motilal Oswal

Chinese equipment & engineering enable savings in capital cost

Phase-wise trial runs on at 2.5mtpa ISP; watch for plant efficiency on full-scale operations

- We visited the 2.5mtpa integrated steel plant (ISP) that Electrosteel Steels (ELSS) is setting up at Siyalijori village, near Bokaro in Jharkhand.

- It is India's first steel plant based almost entirely on Chinese equipment and engineering, enabling savings of 20-25% on capital cost. The total project capex is INR96b, of which INR87b has already been incurred. Most facilities are complete and trial runs are being carried out.

- Parent, Electrosteel Castings (ELSC) will supply 30% of the coking coal and 100% of the iron ore requirement on cost plus 20% for 20 years. This will help ELSS to save on raw material cost, too. ELSC has begun partial production at the coking coal mine and is awaiting stage-II forest clearance for the iron ore mine.

- ELSS targets 1.5m tons of saleable steel production in FY14 and expects EBITDA margin of 35% on full-scale operations. As at end-FY12, D/E was 3.2x. The stock trades at 0.9x FY12 BV. Not Rated.

Source : Equity Bulls

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