MSP Steel is looking to raise INR 100 crore through qualified institutional placement. In an interview with CNBC-TV18, Mr Saket Agarwal director of MSP said that the company is raising funds to fill its CAPEX plans.
He further said that “We are expanding our power capacity from existing 24 MW to 76 MW and we are enhancing our beneficiation and pelletization capacity from 0.3 million to 0.9 million. We are also doubling our sponge iron capacity from 200,000 tonne to 400,000 tonne.”
Below is a verbatim transcript of his interview with CNBC-TV18’s.
Q - Can you tell us what exactly the game plan is? When will you raise this money? What kind of equity dilution and why?
A - The basic reason for fund raising is for filling our CAPEX plans which is underway right now. We are expanding our power capacity from existing 24 MW to 76 MW and we are enhancing our beneficiation and pelletization capacity from 0.3 million to 0.9 million. We are also doubling our sponge iron capacity from 200,000 tonne to 400,000 tonne. So, basically the capacity enhancement is what is requiring this fund injection in the company.
The total project cost for the entire expansion is around INR 815 crore, for which we have financial closure of INR 545 crore from banks and financial institutions. The balance is what we are looking at raising through QIP and part will be brought in by the promoter themselves.
Q - By when do you expect to complete the process of fund raising, by when will you launch your QIP?
A - We should be closing the QIP within next one month.
Q - How much are the promoters bringing?
A - We have already brought in close to INR 80 crore in the company in the form of preference capital. The balance will be brought in by QIP. If required, we will bring in more funds into the company.
Q - This additional INR 100 crore is not QIP, INR 80 crore has already come in?
A - INR 80 crore has already come in and the additional amount of INR 100 crore will be coming in from QIP.
Q - There is no promoter buying in that part?
A - No.
Q - This INR 545 crore of debt that you have tied up is coming at what cost, what is the annual payout?
A - The interest cost on this is somewhere around 12-12.5%.
Q - When does this come on stream?
A - Out of the total INR 815 crore project, INR 450 crore has already been invested into the company. A part of the project, which is 18 MW power plant and 100,000 tonne of DRI, has already commenced operation in the last quarter. The balance project is to be commissioned by October this year. So, within the next six months, we are looking at completing the expansion, bringing in the entire project on stream.
Q - What does this do to your FY12 revenues itself, since your entire DRI expansion will be there?
A - DRI will be 400,000 tonne and pellet will be 900,000 tonne.
Q - What will that do to your revenues in FY12?
A - In FY12, we are looking at increasing the revenues by around 60% because six months of operation of expansion will come-in in FY12. So, FY12, we will see a jump in revenues by 60%. FY13 is when we are looking at the full year of operation coming in, so another 30-40% jump we are looking at in FY13.
Q - Will margins be maintainable at 25%?
A - We are looking at improving our margins from 25% up to 28 to 29% because pellet and beneficiation plant has much higher EBITDA margins than the existing operations. Also, the power expansion, which we are doing, will be used for merchant sale. And that will improve the EBITDA margins of the company to a good extent.
Q - Would you be comfortable diluting at the current market price? For the QIP price, do you think the current valuations are reflecting the value?
A - We are still working on the valuation, so that has not been closed down till now.
(Sourced from CNBC-TV18)
