Jindal: Looking east

New Delhi, July 20: Jindal Stainless, the country’s largest integrated producer of stainless steel, will fork out between Rs 147 crore and Rs 161 crore to acquire an Indonesian stainless steel unit.

The acquisition of the cold-rolling plant from Indonesia’s Maspion Stainless Steel would help the firm gain a foothold in the expanding South East Asian market, said managing director Ratan Jindal.

“The demand for stainless steel is growing at over 10 per cent in South East Asia compared with 3-5 per cent in the rest of the world,” Jindal said adding, the Indonesian unit has a capacity of 50,000 tonnes.

Delhi-based Jindal Stainless will ship hot-rolled coils to the Indonesian plant, which will then process these into cold-rolled steel.

“The major benefit would come to the Indian plant which would export between 10 and 20 per cent of its capacity to the Indonesian unit," said Jindal.

Hot-rolled stainless steel is used to make pipes or can be processed into cold-rolled steel for household appliances and construction projects.

Demand for stainless steel has been mainly fuelled by countries with growing economy like China, Vietnam, the Philippines, Malaysia and Indonesia.

The company also plans to invest around Rs 950 crore in the first phase of its project, located in Orissa, to construct two large ferro-chrome furnaces.

In the second-phase, it will spend between Rs 520 crore and Rs 640 crore to build a captive power plant.

Around Rs 550-600 crore will be raised through debt, which includes external commercial borrowings (ECB) or foreign currency loans, rupee loans and debentures, Arvind Parakh, director (finance), told The Telegraph. While, the rest would be funded through the company's internal accruals, he said.

The government has recently relaxed regulations for raising foreign currency loans by allowing textile and steel firms to tap this route. But there is a rider: the raised amount cannot be used to fund working capital finance.

A foreign currency loan normally costs between 4 and 4.5 per cent, depending on the Libor, against a rupee loan which is available at rates varying between 6.5 per cent and 10.5 per cent and depending on the company's grading.