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The great steel rush
Harish Rao
Is there a link between innerwear and steel? Perhaps, steel wires are used to dry out underpants in the sun? Not really. Ask Rupa and Co. Ltd, a leading manufacturer of innerwear in the country, and—hold your breath— one of several investors lured by the boom in the steel industry.
"The growth in consumption of steel is lower compared to other developing countries and now when the country's infrastructure is improving, it will boost demand for steel products," says Ravi Agarwala, Executive Director, Rupa & Co. Ltd, by way of explanation.
The company, which is synonymous with hosiery products, is investing Rs 400 crore in a pig iron plant at Durgapur in West Bengal. Phase-I of the project involving an expenditure of Rs 100 crore is nearing completion and will be ready by September. The current scene is reminiscent of the situation that prevailed in the mid 1990s when newcomers like LMW and MESCO had entered the field for different reasons and burnt their fingers. Is history set to repeat itself?
The steel industry has seen enormous demand-led growth in the last two years. Rupa & Co. Ltd apart, Tube Investments India Ltd, a Murugappa group company, has lined up Rs 3,400 crore investment for setting up a 3-million tpa greenfield project to manufacture hot rolled (HR) steel coils at Duburi in Jajpur district of Orissa. Value added steel products in the company's portfolio require steel of 0.6 million tpa. But the main attraction for the company is not captive consumption but the projected demand for steel. "TIIL's effort is
to be a part of the great leap India is about to take," says G. Harish, President of the company.
The Amritsar-based Rana Sugars Ltd is only the latest entrant to a growing list of steel entrepreneurs. The company is setting up a 1 million tpa integrated steel plant in Orissa. The project will be implemented in three phases with 0.3 million tpa earmarked for each phase. RSL is also installing a 105-mw captive power plant of which 38 mw will be installed in phase-I. Here too the projected growth in steel demand is the main attraction.
The rush to set up steel plants is somewhat akin to the craze of 2000 when just about everyone wanted to set up a software company. Many listed companies saw their share values gallop by merely adding "software" to their name. The same thing could happen with steel too. Take, for example, BS Holdings & Credit Ltd which last year announced plans to set up a steel plant in Chhattisgarh. Now the company has changed its name to Alliance Integrated Metaliks Ltd. A case of making steel while the sun shines!
On the flipside, there are some players who, apprehensive about the recent fall in steel price, changed their plans. Solar Explosives Ltd, which planned to set up a Rs 480 crore sponge iron plant at Butibori in Nagpur district of Maharashtra, has put the project on hold, which, company sources admit, was due to declining steel prices.
But such cases are insignificant and most of the steel entrepreneurs are raring to go despite the global fall in steel prices. After all "(ispat se) pyar kiya to darna
kya!"
[With inputs from Poonam Singh]
[23 May 2005]
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