Uttam Galva Steels plans to use funds raised through qualified institutional payments for strengthening its downstream facilities.
"We are planning some investments in the downstream space to increase value addition. Some minor capacity addition will also take place, but the major focus will be on creating more value addition and creating products which will replace imports," Ankit Miglani, deputy managing director, Uttam Galva told CNBC TV18.
The company recently took board permission for raising up to Rs 175 crore through Qualified Institutional Placement (QIP).
The steel manufacturer however has not yet fixed the timing and pricing for the QIP.
Uttan Galva has been facing high interest burden like many others in the sector. Miglani said the company hopes to cut debt and lower interest cost through external commercial borrowings.
High debt has however has not stopped the company from acquisition of 58.35 percent stake in Lloyd Steel last year. The company plans to use the capital expenditure for further enhancement of Lloyd's steel making capacity.
Lloyd Steel has a 1 million tonne steel making capacity near Mumbai. Miglani is confident that the new capital investment will help Uttam Galva to improve operating performance.
"We are very confident that the investments we will do over the next two years will significantly improve EBITDA. We feel that over time that will come down and EBITDA will go up and that will result in better bottom-lines going forward," Miglani said.
Uttam Galva plans to spend around Rs 400 crore as capital expenditure in next two years.