According to analysts, the proposed 6 mn tpa (million tonnes per annum) steel plant by Tata Steel in Odisha would be operationally beneficial for the company.
This is because the proposed plant would have captive iron ore reserves, efficient logistical infrastructure reducing costs and technologically efficient plants.
The company is in the process of tying up funds for the project. The total project cost of the plant is estimated around Rs 32,700 crore and the firm plans to borrow around Rs 22,800 crore.
Given the AA rating of the steel major, a low interest rate of 10.7 percent is estimated. The rate will be low till the point the grade of the company remains above A.
However, generation of cash flows from existing operations might result in the company not raising the entire sanctioned debt limit.
The company drew only 50 percent of the approved limit, even in the last expansion of 3 mn tpa. The per unit cost of project might be higher than the assumed cost of $1,009. After adjusting for the cost escalations, analysts believe capex for the greenfield expansion will be around $1,150-1,200 per unit, analysts feel.
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