Steel companies sitting pretty on a buoyant market are busy redrawing their strategies. No wonder the Ruias are again at the drawing boards trying hard to make Essar Steel an even larger integrated steel company through some strategic acquisitions. High on its agenda is the buying out of 51 per cent stake in High Grade Pellets Limited (HGPL) from UK-based Stemcor. Essar already holds the remaining 49 per cent stake in this Vizag-based company that has a 3.3 mtpa pelletisation plant besides a 268 km slurry pipeline from Bailadila mines to Vizag. The second in line is Steel Corporation of Gujarat Limited (SCGL), which is a 100 per cent subsidiary of Stemcor. The exact valuations of both the acquisitions, however, are yet to be arrived at. The company has put in place its fund mobilisation plans for the acquisitions — to raise $500 million or about Rs 2250 crore through the issue of convertible shares, bonds or debentures to both promoters and non-promoters. An Extraordinary General Meeting (EGM) of the company has been scheduled on January 15 to consider this. The EGM would also seek shareholder approval to increase authorised capital of the company to Rs 7275 crore from the existing Rs 5000 crore. According to the company’s notice to The Stock Exchange, Mumbai (BSE), the issue could take any of the forms — preferential shares, equity shares, convertible bonds. As per the notice, Prime Holdings Limited, Mauritius, the existing promoters could get allotments up to $375 million, while Asia Steel Holding (non promoter) would be eligible for an allotment up to $125 million. Good going guys, make hay while steel shines. Excel by exporting The B.K. Jhawar Group flagship Usha Martin seems to have effected some strategic course corrections. Its backward integration measures in the form of setting up a small captive power plant and a production unit of Direct Reduce Iron (DRI) and acquisition of iron ore mines would definitely enable it to exercise greater control over its input costs. During a period when hike in key input costs has proved to be a dampener for the whole sector, this could prove to be critical to its export efforts. Debt restructuring through prepayment of borrowings has bore fruit for the company enabling it to bring down the cost of capital drastically. In fact encouraged by the benign effect of prepayment on the balance sheet, the company is already considering prepayment of another tranche of debt amounting to Rs 150 crore before the yearend. Exports have always been a key growth driver for the Jhawars. They constitute 22 per cent of its revenues today. No wonder the company’s future growth strategy hinges critically on exports. Having recorded net sales of Rs 567.6 crore during the first half of 2004-05 as compared to Rs 356.58 crore during the corresponding period last year, the company expects to maintain the scorching growth rate through the rest of the year. This second largest producer of steel wire ropes in the world seems well on course to match its revenue target of Rs 1250 crore for the current fiscal. Biotech coupling Dr Krishna M. Ella, an alumnus of the University of Wisconsin and Madison and Dr Suchitra Ella are a rare entrepreneurial couple having professional competence in the same field — biotech. Bharat Biotech International, the brainchild of the Ella couple is making news in this hot new business arena. This biotech mini, credited with building the largest state of the art manufacturing plant in the Asia-Pacific at a cost of Rs 100 crore offers processes and products under CGMP (current good manufacturing practices). Riding on contract R&D from its early days, the company is striking new partnerships. It’s already active on the rotavirus project for diarrhoea that has received a grant of $7 million from the Children’s Vaccine Programme of Bill and Melinda Gates Foundation and PATH. Its partnership with World Bank’s Spread Programme has also enabled it to diversify its product base further. With contract-manufacturing agreements with US biotech majors like Wyeth and Agennix, the company is certainly making news in the outsourcing world. New product development for the African continent, which is plagued by many tropical diseases, is next on the card for the company. African focus is expected to be a productive initiative in view of the fact that major health aid programmes of the international donor agencies are concentrated on the continent. The couple is already negotiating with venture funds for funding the upcoming programmes. dilipcherian@hotmail.com
