Electrosteel Steels receives indication for investment from Tata Group

11 June 2015

Electrosteel Steels today said it has received an indication for investment in the company from Tata Group as well as from a Singapore-based financial investor.

"The bankers of the company as well as the company are exploring the proposals of investment," said Electrosteel Steels in a BSE filing notification.

Last month the exchange had sought clarification from Tata Steel with regard to a news piece which said the company is in advance talks to Electrosteel Steels, the alloy producer had then said that as part of the company's business strategy it regularly evaluates organic and inorganic growth opportunities across various segments of its operations.

"The Board and Management of Tata Steel is committed to making disclosures at the appropriate time so as to eliminate any asymmetry of information. The company has robust disclosure principles and follows a policy of not commenting on market speculation," it had said in an exchange notification.

Shares of Electrosteel Steels were up 13% from the previous close at Rs 4.24 on BSE, while that of Tata Steel were down 1.55% at Rs 301.20.

Electrosteel Steels is setting up 2.51 million tonne integrated steel plant in Bokari district of Jharkhand and currently has pig iron, billets, TMT bars, wire rods and ductile iron pipes in its product portfolio. With its debt close to Rs 10,000 crore as on March 31, 2014, Electrosteel Steels' debt-equity ratio has only seen a rising trend to 4.72 in FY14 from 1.76 in FY11.

In the year ended March 2015, Electrosteel has reported loss at its operating level itself since expenses were 10% higher from the net sales of Rs 1,831 crore churned. On a year-on-year basis, the company's net sales in FY15 increased more than three times but were unable to beat high expenses, a case similar to 2013-14 (Apr-March).

This apart, the company's finance cost was more than double on a year-on-year basis at Rs 451 crore in the period under review. Due to this, Electrosteel Steels' loss widened in the year gone by to Rs 624 crore from Rs 291 crore in the corresponding period last year.