ESL Steel (Electrosteel Steels) Limited Unlisted Shares

ESL Steel logoESL Steel (Electrosteel 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.

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

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. The Company’s shares were listed on the National Stock Exchange of India Limited and BSE Limited till October 29, 2018. Currently, the company is a subsidiary of Vedanta Star Limited which is a wholly owned subsidiary of Vedanta Limited.

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.

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

Financials of Electrosteel Steels Limited: ( Figs in Rs Crores )

ESL Steel financials

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.

Inputs from Sauvick Mazumdar, CEO, Vedanta Iron & Steel interview

What is the plan for expansion in ESL?

Currently, we have around 1.5 million tonne per annum capacity at ESL and are working to take it to 3 mtpa with around Rs 4,000-crore investment. The expansion will be through the brownfield route. We are getting the requisite clearances and I believe in the next 9-10 months, this entire capacity addition will take place. The blueprint is also ready for taking the capacity further to 5 mtpa. It will require another Rs 8,000-9,000 crore.

What kind of product basket do you have now in the steel business?

Our product basket includes TMT bar, wire rod and ductile iron pipe in the steel segment. We are in the process of doubling the entire product basket. However, as we go forward, we will also get into the flat and special alloys segment. All the thinking is going on.

How do you feel about demand in the steel sector?

If you see in the current context, things are not picking up as one would like them. Per capita steel consumption in India is currently around 75 kg against the world average of around 228 kg. In China, it is around 691 kg. And, if we look at stainless steel, India’s per capita consumption is 2.5 kg against the world average of around 6-7 kg and China’s 16-17 kg. For a country of India’s size to develop, whether it is steel or stainless steel, this has to go up.

Apart from catering to the domestic market, will exports be an option?

Yes, that is always there. But I see it differently. Even in India, with a little bit of accelerated growth, there is and there will be enough demand going forward.

Recent developments

With its rapid expansion and use of the most advanced and state-of-the-art technology, ESL Steel Limited- Vedanta Group Company has reshaped the steel industry’s landscape.

Despite frequent COVID-19 lockdown(s), the annual steel production in the current fiscal climbed to 1.19 million tonnes, while the EBITDA stood at $ 131 per tonne. Additionally, ESL achieved its lowest ever cost during the acquisition, resulting in a higher EBITDA margin vis-à-vis the previous period ($95 per tonne versus $78 per tonne). According to the current design capacity, the company’s production capacity also increased to 1.2 mtpa (FY’19) vs 2.5mtpa.

N.L. Vhatte, CEO, ESL Steel Limited said, “I have been associated with Vedanta since the late 90s, and I understand the ethos of the brand. That is why when I was handed over the ESL operations as the CEO in early 2021, I knew exactly how to take it to newer heights.”

ESL Steel, acquired in 2018 saw its EBITDA/tonne at around Rs. 8000. Sunil Duggal, Vedanta said “We are working on internal efficiency, debottlenecking of furnaces and aiming at 100% value added products for ESL Steel”

ESL Steel Limited, a Vedanta Group Company has launched electronic vehicles for employees commuting in Bokaro, Jharkhand. This campaign is in line with the company’s commitment to completely shift to EVs by 2025 under its ESL Ride Green initiative. The company is working on various electric and hybrid vehicle solutions. By 2025, ESL plans to electrify the buses as a part of the next phase of its campaign.

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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