SAIL’s Q4 net up 40%

The company declared a final dividend of Rs 1.70 per share which is in addition to the interim of Rs 1.60 a share already paid to take the total dividend to Rs 3.30 per share for the full year

Aided primarily by increased demand and better sales realisation, the recently christened ‘Maharatna’ Steel Authority of India Ltd (SAIL) belied market expectations by chalking up a 40 per cent growth in net profit at Rs 2,085 crore for the fourth quarter (January-March) of 2009-10 as compared to the Rs 1,485.20-crore net posted for the like quarter in the previous fiscal.

Briefing the media here on the company’s performance during the last quarter of 2009-10, Chairman SK Roongta said: “The company’s improved profitability in the fourth quarter was mainly due to several cost-efficiency measures, improved demand and sales realisation and reduction in cost of some inputs like coking coal.”
With domestic steel prices surging by about 30 per cent to nearly Rs 37,000 a tonne during the quarter as compared to the like period a year ago, Roongta said the factors that chipped in to improve SAIL’s profitability was a market-oriented product mix and a 37 per cent increase in value-added steel output, apart from a relative decline in raw material prices.

However, for the entire fiscal ended March 31, 2010, the net profit at Rs 6,754.37 crore marked an increase of 9.4 per cent over the Rs 6,170.40 crore earned in 2008-09.

The company declared a final dividend of Rs 1.70 per share which is in addition to the interim of Rs 1.60 a share already paid to take the total dividend to Rs 3.30 per share for the full year.

Going forward, Roongta said domestic demand for steel would continue to rise, mainly owing to higher consumption by sectors such as automobiles and infrastructure. That, however, would not lead to a rise in prices as a correction could be witnessed in June following higher availability of steel and a softening trend in global markets.

While SAIL produced 12.6 million tonnes of salable steel during 2009-10, it is working towards nearly doubling its production capacity to about 23 million tonnes by 2011-12 with an estimated investment of Rs 70,000 crore. For this fiscal, it has fixed a capital expenditure of nearly Rs 12,500 crore, of which 50 per cent of the funding would be through debt. “We plan to borrow at least Rs 6,000 crore in the current fiscal,” he said. The company has cash reserves of over Rs 22,000 crore. Later during the year, SAIL is also expected to enter the market with a public offering to mop up about Rs 16,000-18,000 crore. “The government has set-up an Empowered Group of Ministers, which will shortly decide the timeline of the follow-on public offer and appoint book runners-cum-lead managers for the share sale. We are fully prepared for the issue,” he said.

Meanwhile, SAIL will spend about Rs 1,75,000 crore to augment its annual production capacity to 60 million tonnes by 2020 from the current 14 million tonnes.

“You can say that (there will be) total investment to the tune of Rs 1,75,000 crore, by 2020, including what is ongoing,” Roongta said.
The country’s largest steel maker may raise debt to meet 60 per cent of its funding needs to take the capacity to 60 million tonnes by 2020, besides using cash reserves of Rs 22,000 crore.
“It has to be both internal accruals and borrowings. When the projects are firmed up, then we will decide. Even if it is 40 per cent internal and 60 per cent borrowing, it is prudent,” Roongta added. Currently, the steel maker is in the process of expanding its capacity to 23 million tonnes by 2012 at a gross sum of Rs 70,000 crore. “That remains our target (to take the capacity to 60 million tonnes). It is our directional plan and target,” he added.
Asked if the new leadership at SAIL would maintain the pace of the expansion projects, which has suffered delays at least twice in the recent past, he said, “I hope so. We have to not only defend our market share but also we have to grow it.”

Besides the ongoing expansion programme, the company is also looking to tie up with steel giants like Posco, ArcelorMittal, Tata Steel, in its pursuit for the targeted production capacity.
Asked if the mega growth plans are too ambitious for the steel maker, he said, “I don’t think so, because demand is growing rapidly and it’s not ambitious in this sense that we have infrastructure and our existing plants can be taken into capacities of 47 million tonnes and may be only one major greenfield plant and will be close to 60 million tonnes.”

Roongta is credited with turning the steel company into what it is today, a Maharatna (cash-rich) entity.

“One should be aggressive in pursuit of its business interests and I do not know what way you say I am soft. I am a soft spoken person. Yes, you have to be aggressive, you have to be passionate also. Not only aggressive but I am very passionate also,” he said, replying to a query.

He spearheaded the recent efforts on part of SAIL to join hands with global giant Posco for setting up steel plant in Jharkhand, besides a mill in Maharashtra, entailing an estimated investment of
Rs 15,000 crore.

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