Ramp-up is on schedule, no room for worry: SAIL

Verma also points out to that prices in India have remained stable and are not a major deterrent for the government to divest its stake of 10.82% in the company. He is optimistic of the proposed expenditure of USD 1 trillion on infrastructure in the 12th Five-Year Plan.

Below is an edited transcript of the interview on CNBC-TV18.

Q: What will be the timeline, in your assessment, for this process of divestment? By when do you think the divestment will go through?

A: It is the divestment of the government of India’s share of 10.82% in the company. So the timing and everything else will be decided by the government or by the department of disinvestment after taking into consideration the market conditions.

Q: Any indication from the government regarding the kind of price it is looking for? Is the government waiting for the markets to improve?

A: It's too early to ask for the pricing. Though the decision was taken on late Thursday evening, only after other aspects including the appropriate timing are discussed, will the issue of pricing be taken up.

Q: Just to clarify - is the entire 10% in offer for SAIL or will fresh equity be raised by the management?

A: It is the divestment of the entire 10.82% held by the government of India. There is no money being raised by SAIL as of now.

Q: Do you think the divestment is being hampered by pricing?

A: In 2011-12, the growth in real consumption has been 5.5%. According to data from April to June 2012, the growth in real consumption was 8.8%. So as compared to the year as a whole and as compared to the first quarter of the current financial year, there has been an upsurge in the demand and the pricing level.

The price-levels in the international markets have fallen a bit, but the price-level in India has been more or less stable. During the last six months, I have not seen any changes in the prices and I expect price to remain stable in the times to come.

Q: What is your growth in volumes now?

A: The growth in volume will depend on demand and market conditions and it is only mid-July. The government of India has planned an investment of about USD 1 trillion in the 12th Five-Year Plan on infrastructure, which is roughly about 10% of GDP..

This will cause a surge in the demand of steel to at least 1.2 times the current level needed to achieve a 1% growth in GDP.

Q: There has been some concern of the investor community about your ramp-up of capacity expansion at IISCO with no follow-through coming on. Can you give us a timeline regarding the progress of the expansion programs?

A: Today over Rs 37,000 crore has been spent by the company already on various schemes of modernization and expansion and there is a minimum gestation period.

The schemes are in various stages of implementation and this year we expecting that two of the three blast furnaces at Rourkela will be commissioned sometime in November or December and blast furnace at Burnpur will be commissioned before the close of the year.

The ramp-up at Bhilai is scheduled for the next financial year. So by the commissioning of two large-sized blast furnaces, we expect our capacity to ramp up from 14 million tonne as of now to 19 million tonne before the end of the financial year and we are very much on schedule in Rourkela.

In fact, the central plant in Rourkela has already started commercial production from April 1.