Electrosteel Steels Limited Unlisted Shares

Electrosteel Steels logoElectrosteel Steels Ltd (ESL) has set up 2.51 Million Ton Per Annum (MTPA) Greenfield Integrated Steel Plant near Siyaljori village, in the Bokaro district of Jharkhand. It primarily consists of a Sinter Plant, Coke Oven, Blast Furnace, Basic Oxygen Furnace, Billet Caster, Wire Rod Mill, Bar Mill, and Power Plant. ESL has established excellence at every stage of production by bringing international expertise and solutions from reputed manufacturers. Along with the latest technology, the plant operates in synchronization with the highest ecological standards.

The company’s product range includes Pig Iron, Billets, TMT Bars, Wire Rods and Ductile Iron Pipes.

Total Available Shares: Available
Face Value: Rs 10 Per Equity Share
ISIN: INE481K01021
Lot Size: 1000 Shares
Current Unlisted Share Price: Best rate

Vedanta in February 2020 said the National Company Law Tribunal, Kolkata Bench, has approved the scheme of amalgamation of its arm Vedanta Star Ltd. with Electrosteel Steels Ltd.

Post the amalgamation becoming effective, Vedanta will directly hold 95.48 percent in ESL. Vedanta had acquired ESL, after its resolution plan was approved by National Company Law Tribunal, Kolkata bench, through its wholly-owned subsidiary VSL.

The acquisition of ESL fits into Vedanta’s strategy of forward integration; complementing the existing iron ore set-up as well as mines in Jharkhand, it said. The business has seen a complete turnaround since its takeover with the combination of right people, higher volumes and better cost control leading to a visible positive change. This positions ESL to become a significant player in the Indian steel sector, it added.

Vedanta bought Electrosteel Steels in June 2018 (for Rs 5,320 crore— Rs 3,400 crore in debt and Rs 1,900 crore in equity); its revival, a mere one year later, is a remarkable feat for any company, more so for one that has never been in the manufacturing space. Ebitda per tonne is up to $130-$140 (FY19) as against $65 at the time of acquisition. It’s financial performance has increased multifold after takeover by Vedanta.

Financials of Electrosteel Steels Limited:

( Figs in Rs Crores )

Year Revenue EBITDA OPM PAT NPM Shares FV EPS
2017 2,875.86 141.12 5% -1,463.48 -51% 240.92 10 -6.07
2018 3,621.26 423.62 12% -6,138.85 -170% 240.92 10 -25.48
2019 5,006.73 883.01 18% 1,188.04 24% 196.17 10 6.06

Since June 2018, within 10 months of Vedanta’s ownership, the business has seen consequential improvements leading to a healthy financial position. There have been significant gains in operational efficiencies, such as a substantial reduction in the coke rate at blast furnaces 2 & 3 by about 3% and 7% respectively y-o-y; optimisation of the coal mix and iron ore blending; and improved yields of the finishing mill to 96.7% (from 95.9% in FY2018).

Initiatives on commercial excellence by leveraging Vedanta’s strong market presence, as well as best practices using the broader technical experience and expertise of the Group, have yielded exceptional results. This has been well supplemented by an internal cost optimisation drive and focus on value-added products. Consistent and reliable execution of the business strategy by encouraging partnership through leadership further accelerated the turnaround.

With operations completely revamped, FY2019 has seen record production levels. The business achieved a run-rate of 1.5mtpa in Q4 FY2019. The production ramp up and other operational efficiencies have resulted in a record EBITDA margin for the business, improving from US$53 per tonne in FY2018 to US$122 per tonne in Q4 FY2019.

Manufacturing Unit

The plant is located in Siyaljori Block, Bokaro District of Jharkhand State. The nearest town Bokaro, on the western side, is 22 kms away from the site. The land comprises mostly of barren land with small undulation. Source of water for the plant is the Damodar river and the location of the in-take pump house is will be near the bank of Damodar river, which is about 10 kms away from the plant site.

Expansion

The production ramp-up plan would entail ESL’s capacity being doubled to 3 MTPA in the next two years, with an investment of around Rs 4,000-5,000 crore. The second phase of the plan may see the capacity of the Jharkhand plant being upped to 6 MTPA. To further increase capacity to 10 MTPA, the group could go for greenfield projects or acquisitions. For greenfield projects, sites in West Bengal and South India are on the company’s radar.

Outlook

Vedanta has successfully used its experience to acquire businesses with unfulfilled potential and turn them around. Hindustan Zinc, BALCO and Cairn Oil & Gas are all examples of enterprises that have achieved exceptional growth since their acquisition by Vedanta.

These achievements, underpinned by a strong emphasis on safety practices, position ESL well to become a significant player in the Indian steel sector.

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