Despite the global slowdown and sluggish market conditions, RKKR Steels, one of the oldest and leading steel manufacturers in south India, has secured private equity (PE) infusion of Rs 136 crore from Mauritius-based ADG Fund to part-fund its ongoing 0.5 million tonnes per annum integrated steel project in Andhra Pradesh.
RKKR is implementing a Rs 1,100-crore integrated steel project at Krishnapatnam, which would be set up under a separate company called SBQ Steels, will make special and alloy steels for automotive ancillary units. The project is being implemented over three phases.
“We have received a term sheet for private equity from ADG Fund in Mauritius, which is managed by Montrosa Asset Management for Rs 136 crore. The dilution in equity by the promoter group will be to an extent of less than 10 per cent,” chairman of RKKR Group Rajiv Rai said. “In this global meltdown, getting PE meant that the company exhibited a good and robust business plan with a road map, which is clear and capitalised on the strengths of the group that has been in steel making for over 58 years. Another factor was the speed in implementation and for the many firsts that the company had to its credit, which only meant adding value.”
This funding from ADG will be for the equity requirement for Phase-3 of the project, where the company has tied-up for term lending to an extent of Rs 280 crore from various banks in India, he said.
The Krishnapatnam steel project comprises coke ovens, sinter, blast furnace, sponge iron, steel melt shop and rolling mill units. However, the company has already completed the blast furnace, coke and sinter plants.
As part of Phase-3, the company will be setting up a captive power plant and putting in place other cost-cutting measures in addition to some marginal increase in iron-making capacity. With the captive power unit, the steel plant will not only be 100 per cent self-sufficient in its power requirement but can also sell its surplus power.
“By and large, the company has utilised its resources to the very best because the cost per tonne of annual capacity has been just $500 against $800-1,000 in most other greenfield plants that have been recently set up in our country, said Rai.
Source: My Digital FC