To fund Rs 3300cr expansion largely via debt: Jayaswal Neco

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Jayaswal Neco recently announced a big ticket expansion plan of Rs 3,300 crore. In an exclusive interview with CNBC -TV18's Soniya Shenoy and Reema Tendulkar, Basant Lall Shaw, Chairman of Jayaswal Neco explained the breakup and expectations from the expansion.

"The total expansion is for Rs 3,300 crore, out of which the debt is of Rs 2,143 crore. The balance will come from equity, inter accruals and maybe, some part of QIP," Shaw disclosed.

Below is a verbatim transcript of the interview. Also watch the accompanying video.

Q: How you plan to fund this particular expansion? What is the breakup between equity and debt?

A: The total expansion is for Rs 3,300 crore, out of which the debt is of Rs 2,143 crore. The balance will come from equity, inter accruals and maybe, some part of QIP.

Q: Will you need to dilute any kind of equity at parent company level to fund this project?

A: We haven't though of it at present. We hope that we will be able to cover it up from our internal accruals that is in the coming year.

Q: You're indicating that about Rs 1,100 crore would be raised via equity, part would be internal accruals and the other part would be via a QIP. How much would be the rough size of the QIP?

A: If we are unable to cover up the shortage ourselves, then we will go for the QIP. The position will be clear within the next 6 months.

Q: You also indicated that this would be for expansion plans. Could you outline the expansion plans and when would you be commencing operations for this?

A: Plans have already been finalized and I can give you the details about product expansion plans. We are setting up another integrated steel plant in sponge iron. The present capacity is 2.55 lakh tonne and it will increase to 5.55 lakh tonne.

We will be adding one more lakh tonne to the capacity of coke oven and the total subsidy will become two lakh tonne. Likewise, steel melt shop, which is currently at three lakh tonne it will become 7.5 lakh tonne.

Rolling mills will become 7.5 lakh tonne against the present capacity 4 lakh tonne. At present, we are generating 43 megawatts of captive power and it will become 105 megawatts. A new coal washery is also going to bring a capacity of 40 lakh tonne at two places - Jharkhand and Chhattisgarh.

Q: Post this debt component of Rs 2,140 crore, how much does the company debt stand at?

A: Out of the total of Rs 1,140 crore, we have planned for Rs 480 crore internal accruals and Rs 183 crore by promoters. We have already brought in Rs 183 crore till December.

Q: The government has asked for certain mines to be returned as they have not been developed on time. Are you getting any kind of feelers from the government on this?

A: We have not been delayed expect for the matters related to the environment. We are expecting the clearance due with environment ministry soon.

Q: Could you tell us about the current capacity of those mines in Chhattisgarh?

A: Currently, the coal mines at Chhattisgarh have a production capacity of around one million tonne. There is another mine which will be opening by March and that makes the capacity 2 million tonne in Chhattisgarh. We also have a cooking coal mine that none of the other new generation steel plants have.

Q: Your profit margins are sitting currently at about 16% or so. Will all this help you to increase your operating profit margins?

A: Yes, it will help us. The imported cooking coal that we are converting into coke will be very useful with the opening of our cooking coal mines in Jharkhand.

Q: What kind of a target can give us for the operating profit margins?

A: Operating profit margin will increase to 25% EBITDA.

Q: And that could be by when?

A: Within the next three years the entire project will be completed. Two iron ore mines are to be opened up within next three months. Our cost of iron ore would get reduced drastically with our own captive production of iron ore mines and cooking coal too.

Q: When would the benefit of all these expansion plans kick in and how will your revenues grow?

A: The gross turnover will be Rs 4,500 crore and the net turnover will be somewhere at Rs 4,000 crore. The EBITDA will be Rs 920 crore and the profit after tax is expected to be Rs 240 crore.