Uttam Galva Steels is in talks with Russia's largest steel manufacturer, Magnitogorsk Iron and Steel Works, for a joint venture to construct a 10 million tonne steel plant with an investment of around Rs 50,000 crore (Rs 500 billion).
After Posco and Mittal Steel, MMK is the third foreign player to evince interest in setting up a greenfield steel plant in the country.
Sources close to the development said discussions between the two companies entailed setting up a steel plant with a capacity of 10 million tonne, comprising three million tonne each of hot rolled, long products and tinplate capacities. In the first phase, HR production would be started.
Ankit Miglani, director, Uttam Galva Steels said the company was still exploring options and nothing has been finalised as yet. MMK has a production capacity of 11.38 million tonne and happens to be one of the major suppliers for Uttam Galva. The locations for the proposed steel plant being considered were Orissa, Jharkhand and Chhattisgarh.
Sources indicated that the total investment in the venture would be in the region of Rs 40,000 to 50,000 crore (Rs 400 to 500 billion). The companies have not yet decided on the equity pattern of the joint venture.
Besides, Uttam Galva is on a major expansion spree. The company was one of the shorlisted bidders for US-based Detroit Steel Company. Detroit Steel Comapny has 1.6 million hot-rolled capacity, finishing equipment and cold rolling facilities.
On the Detroit Steel Company bid, Uttam Galva sources said discussions were at a preliminary stage. A decision on the bid was expected to be finalised within the next quarter. Uttam Galva currently has a capacity of cold rolling capacity of 600,000 to 700,000 tonne per annum.
After the expansion, the company's cold rolling capacity would increase to one million tonne per annum.
The company embarked on the Rs 350 crore (Rs 3.5 billion) expansion programme in late 2004. As part of the expansion, Uttam Galva had also installed a new paint line to add more value to its products.
The Uttam Galva scrip today closed at Rs 45.50 on the Bombay Stock Exchange and at Rs 45.60 on the National Stock Exchange. Volumes were significant at 1,060,862 shares on BSE and 2,161,057 shares on NSE.