Electrosteel Castings - A Blue Chip

BSE 500128, CMP Rs 52.90

The biggest spun pipe manufacturer in the country-Electrosteel Castings is entering a new era of exciting growth, which will propel the corporate into the big league of Integrated Steel producers like Tata Steel and Jindals.

For nearly 5 decades Electrosteel has made a name for itself in manufacturing Steel Spun pipes which are used for Civilian Water works across the country. Infact, the Electrosteel name is synonymous with the phrase "Making Water Move".

Some of the biggest water supply pipelines in the arid regions of Andhra Pradesh, Tamil Nadu and Karnataka have Electrosteel's spun pipes as the backbone. The corporate has also established its manufacturing footprint in parts of Asia and Europe, to serve local markets and meeting out the threat of import sanctions on third world imports.

The successful business strategy deployed by Electrosteel Castings is handed out as standard course material to budding management students at the HarvardBusinessSchool.

The financials speak for themselves. The corporate recorded a 18 per cent jump in Revenues at Rs 1123 crore in FY07, with after tax profits of Rs 106 crore (Rs 76 crore), a jump of 40 per cent.

FY07 EPS was placed at Rs 5 per share (Rs 3.7 per share), and Electrosteel paid out a record dividend of Rs 12.5 per share.

The promoter interest is close to 53 per cent and the FII/FI/MF holding is another 20 per cent. Leaving a small float with the public.

Electrosteel is now ready for its second leg of expansion worth Rs 10000 crore, which will be invested over the next 36 months.

This will include a 1 million tonne integrated steel plant with dedicated iron ore and coal mines to be set up under a new entity by the name of Electrosteel Integrated.

Electrosteel Castings will be investing Rs 500 crore as Equity into the project, with the promoters providing as much as Rs 100 crore by taking a preferential allotment of 20 lakh shares as per the Sebi pricing formula for preferential offers.

The Rs 10000 crore road map 2007-2010

Summation : Projects INR (Crs)

-1.2 MTPA Integrated Steel Plant Rs 3600 crore.

-
0.2 MTPA DI Pipe Plant Rs 250 crore

-Coking Coal Mine at Parbatpur Rs 600 crore.

-Iron Ore Mine at Kodolibad Rs 150 crore.

-1200 MW Power Plant Rs 4800 crore.

-Captive Non-Coking Coal Mine Rs 150 crore

TOTAL INR 9550 Crs.

A. Integrated Steel Plant
- Capacity 1.2 MTPA
-1.0 MTPA for Bars & Rods or other value-added products
-0.2 MTPA for Ductile Iron Pipe

Location –near Bokaro (acquired 350 acres of land, balance in process)

-Coking Coal Blocks near Bokaro (already allocated)

-Captive Iron ore mine at Kodolibad, 200 KM away.

-Captive Power plant of 50 MW, balance to draw from Grid.

-Cost of Project –Rs 4000 Crs (Approx) which includes :
-0.2 MTPA Ductile Iron Pipe plant Rs 250 Crs
-Iron Ore Mine at Kodolibad Rs 150 Crs
-50 MW Captive Power plants
-Project implementation time - 3 years (Approx.)

B. Ductile Iron Pipe Plant

Capacity 0.2 MTPA

Location -near Bokaro in the Integrated Steel Plant

Cost of Project -Rs 250 Crs.

Project Implementation Time -18 months

Raw Materials : Liquid Metal =Integrated steel plant

Power = Captive Power plant

C. Iron Ore Mine

-Kodolibad (Jharkhand) 12 KM from Chota Nagra.

-Reserve -More than 100 M Tons

-Mining Type –Open Cast

-Type of ore -Fe content over 65%

-Capital cost –Rs 150 Crs.

Present status –Allocation in advance stage.

D.Parbatpur Coking Coal Blocks

-Located at Parbatpur in Jharia coalfield near Bokaro (Jharkhand).

-Mineable Reserves –224.47 M Tons by CMPDIL

-Type of Coal –Prime coking coal

-Present status – Already allocated

-Capital Investment – Rs 600 Crs.

-Mine Type –Mainly underground

-Required Power from DVC & own railway siding

Purpose –Captive use for Integrated Iron & Steel Plant / DI Pipe at Khardah (Kolkata)

E.Power Plant

-Capacity 1200 MW

-Location –Pithead in Latehar Dist.(Jharkhand)

-Cost of Project -Rs 4800 Crores.

-Non-coking coal from Captive mine at North Dhadu having reserve more than 100 M Tons.

-Project implementation Time -3 Years

-Consultant: Tata Consultancy Engineers.

-Marketing of Power –By merchant trading.

F.Non Coking Coal Blocks

-Located at North Dhadu in North Karnapura coalfield (Jharkhand)

-Reserve – over 189 M Tons.

-Grade of Coal –F&E Grades

-Mining Type –Open cast

-Capital Investment –Rs 150 Crs.

Purpose –Captive use for 1200 MW Power plant at Pithead itself.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)

Undervalued shares recognized with dividend yield

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