Essar Steel plans expansion, production increase at Indonesia unit

24 April 2015

PT Essar Indonesia, part of Essar Steel and the largest cold rolled producer in the country's private sector, has major plans for the next two years comprising production increase, targetting new demand areas, introducing new value added products and expanding capacity sometime in FY17.

"For this year, our focus is going to be on cold rolled annealed segment which will allow us to have increased presence in the auto and white goods industry where demand potential is seen high," Dattatreya Tembhekar, chief executive officer told Business Standard in a telephonic conversation today.

The company, which reported 22 percent year-on-year growth in its EBITDA in the year ended March, 31, 2015, already has strong presence in the construction and infrastructure sector.

At present, PT Essar Indonesia has an installed rolling capacity of 400,000 tonne including 150,000 tonne of galvanized products and 100,000 tonne of cold rolled soft products. In the year ended March, the Indonesian company produced 317,000 tonne steel products, up 2 percent from same period last year.

Going ahead, it plans to up overall production by 10 percent this year to tap the increasing demand.

In a bid to strengthen its EBITDA further, the company will also be introducing a new value product in the market. "We do have plans to bring in a different value added product in the market this year which can help us keep a strong EBITDA," Tembhekar said without revealing much details.

The change in product mix towards high value grades had resulted in higher EBITDA for FY15, the company said in its earnings press release.

"Higher realisations was also due to timely deliveries and change in marketing strategies which helped improve EBITDA," said Tembhekar.

Meanwhile, the company is gearing up to increase its capacity in cold rolling as well as galvanised segment and plans to go ahead with expansion in FY17.

"We will be taking the cold rolling capacity to 225,000 tonne from 200,000 tonne now and loans have already been done for the $10 million capex. About 80 percent of the funds will come via loans and balance through internal accruals," said Tembhekar.

The galvanised unit to have a capacity of 100,000 tonne is yet on the drawing board wih finances still to be tied up, he said without revealing the fund requirement for setting up the plant.

Apart from Indonesia, Essar Steel has a footprint in Canada, the US and West Asia in the overseas market.