As new India strategy, ArcelorMittal to build smaller plants

Last Updated 26 October 2010, 12:10 IST

The company, however, maintained that it is committed to expanding the capacities of the steel plants later on as stated in pacts with the respective state governments.

"The idea is to set up small steel facilities instead of (big) steel plants so that we have more footprints and we can execute faster some of these ideas," ArcelorMittal CFO Aditya Mittal told PTI in a conference call, after announcing the company's third quarter financial results.

He added, however, "...At this point of time, we have not yet announced or decided the size of the plants...the first phase size is yet to be decided."

The world's largest steel producer had earlier proposed to set up Rs 1 lakh crore steel plants with annual production capacity of 12 million tonnes each in Jharkhand and Orissa, and a six million tonnes per annum unit in Karnataka at an estimated sum of Rs 30,000 crore.

"We will start construction next year," Mittal said, adding that the plants would go on stream after the work on installation is complete. The company, however, has not decided as to which of its India plants would go off the ground first.

"We are focusing on land acquisition as well as mining licenses (at present)," Mittal said. The company is in process of acquiring land in Karnataka and Jharkhand and is going slow with regards to the Orissa project.

It said last week that in the first phase of the Jharkhand project, it will trim investments by almost half to about Rs 25,000 crore and build "a 6 Million Tonnes Per Annum plant in 2-3 phase development to begin with".

However, regulatory bottlenecks and protests against land acquisition for the project stymied the mega venture. The company was also forced to move its plant location to Petarwar region in Bokaro district from earlier proposed site in Gumla and Khunti districts.

Besides, its plans to set up a plant of similar size in Orissa have faced similar difficulties. In the wake of such hurdles in the two states, the company last year entered into a pact with domestic steel firm Uttam Galva to mark its operational presence in India.

Also, the company has entered into a pact with Karnataka to set up a six million tonnes steel plant at an estimated investment of Rs 30,000 crore, the construction for which is expected to begin by next year.

Going ahead with the new strategy, the company may also look at acquiring small units in India and was reportedly in talks with at least a dozen firms for the purpose.

"As far as M&A activity is concerned... I should remind you that previously we stated that in India, particularly in developed steel sector, there are very limited opportunities for Mergers and Acquisitions (M&A)," ArcelorMittal Group Management Board Member Sudhir Maheshwari said.

Elaborating on the company's new strategy for India, Maheshwari said that the company will build smaller plants to make its operational presence felt in the country faster.

"We have tweaked our plans recently in terms of going more modular and building smaller modules. This is obviously not change of our plan. It is really an enhancement to our long term plan in order to set up operational presence faster," Maheshwari added.

(Published 26 October 2010, 06:53 IST)

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