Sujana Metal plans expansion in 3 steel units

Hyderabad: Sujana Metal Products (SMPL), a part of the Hyderabad-based diversified Rs 3,000-crore Sujana group, has acquired three steel companies at a cost of Rs 180 crore. The company intends to invest an additional Rs 100 crore in modernisation and expansion of these units located in Visakhapatnam, Hyderabad and Chennai.

With the latest acquisitions, SMPL's takeover tally has increased to five in the past one year. It had earlier acquired Kamini Steels and Handum Industries at a cost of Rs 90 crore. SMPL manufactures a range of construction steel products, including thermo-mechanically treated (TMT) steel bars.

'The acquisitions are in tune with the company's strategy to enhance its capacity to 1 million tonnes per annum (mtpa) by 2010 through acquisitions and expansion plans,' Sujana Group Chairman Y S Chowdary told mediapersons recently.

With the takeover of the three steel plants, he said, an additional capacity of 300,000 mtpa had been added, taking the total capacity of the company to 728,000 mtpa. This apart, Sujana Metal is planning to acquire a sponge iron company near Suryapet in Nalagonda district of Andhra Pradesh.

According to Chowdary, SMPL has embarked upon a Rs 800-crore expansion programme, which includes establishing a greenfield sponge iron unit and a billet manufacturing unit in Hyderabad and Chennai at a cost of Rs 300 crore.

The expansion project is being funded through term loans of Rs 470 crore, promoters' contribution of Rs 200 crore and internal accruals of Rs 130 crore.

The promoters have already contributed their money through purchase of company's warrants recently.

Stating that the company intended to go in for complete backward integration, Chowdary said SMPL was also in the process of acquiring an exploration licence for iron ore mining. 'We are hopeful of getting the licence in six months,' he said.

In the financial year ending June 2008, SMPL expects to post a turnover of Rs 1,400 crore and a net profit of Rs 50 crore. During the nine-month period ending March 2008, the company posted a turnover of Rs 1,150 crore. Its target is to achieve a turnover of Rs 3,100 crore and a net profit of Rs 300 crore by 2010.