Speaking to CNBC-TV18, chairman Vishambhar Saran said, the company's expansion plan remains intact.
"Visa Steel can expand within the existing land and double production capacity for all products from half a million tonne to 1 million tonne special steel, from 50,000 tonne to 1 lakh tonne of ferrochrome. We also has enough headroom for a captive power plant," he added.
However, the litigation on remaining 675 acres of land continues. The company's applications have been pending with the government since 2004 for this additional (675 acres) land.
Meanwhile, Saran expects the company's steel business to be fully operational by the end of first quarter.
Also read: Visa Steel inks JV with SunCoke Energy, stock rises 15%
Here is the edited transcript of the interview
Q: You are seeking some more land for capacity expansion. Could you tell us what is the status there? Is there an environmental issue or some other issue which is holding you back and by when do you expect this land to come to you? By when will you indulge in capacity expansion?
A: We had originally conceived a project of 1.5 million tonne, out of which at least 1 million tonne was supposed to be for special steel, and we had applied for 1200 acres of land. The government gave us around 475 acres and the idea was the that balance of that will be given to us as we progress.
It so happened there was some litigation with the remaining land which still continues. We have not made any fresh applications. Our applications have been pending with the government since 2004 for an additional 675 acres, and that is the only site where we can expand because that is the only area which is contagious to our present site.
We have been repeatedly reminding the government to give it to us but the matter is hanging in the Supreme Court. There was a party to whom this land was allotted much earlier who apparently did not pay for it and therefore the allotment was cancelled, and thereafter we applied for that. So subject to the decision of the Supreme Court, we would get that land and then set up additional facilities.
Q: When are you expecting a final verdict on the case? Assuming an adverse scenario where you don't get the land, will it mean a lot of capex loss? Have you already invested on the assumption that that land will be given to you?
A: Not really, because we have planned the configuration in such a way that we have at present half a million tonne of special steel with captive power, ferrochrome business, and the facility to double everything. We can expand within the existing land to one million tonne special steel, from 50,000 to one lakh tonne of ferrochrome and also we have enough headroom for our captive power plant.
Even for the coke plant we have enough headroom to expand. We have already a part of the additional land which has been transferred to Visa Bao a joint venture company of Visa Steel with Baosteel of China where we have given 50 acre of land for purpose of setting up another 100,000 tonne ferrochrome plant which is on the verge of being commissioned.
This 675 acres of land which is supposed to be the balance land will help us to set up an additional 1.5 million tonne of mild steel facility, and that we will plan only once we have the land.
Q: The company's Q3 income was down 40 percent and you reported losses of Rs 24 crore for the nine month period as well losses of Rs 169 crore. What is going wrong and do you think things will turn around?
A: We have in Visa Steel three businesses. One is the metallurgical coke business, second is special steel business and third is ferrochrome with captive power. The captive power and coke businesses have been running by and large smoothly. The problem has been the high capex-related expansions of special steel business where we have been greatly hit because of non availability of iron ore. We have been waiting for the government to grant us captive iron ore mining lease for which we are qualified. Meanwhile, we have been buying iron ore from time to time from various Orissa mining corporations and private mining companies, so that we at least have security of purchased raw material.
Unfortunately because of certain activities, so-called illegal mining and all that, there was an issue and the iron ore supplies have tapered down. However, we have a silver lining in front of us. Within next couple of months we hope and we are confident that for our pallet plant we will get the pallets from Stemcor which is next to our plant, and they are on the verge of commissioning their plant.
Q: You made a loss in FY12. Looks like in FY13 your loss would be more than FY12, going by the nine month numbers and the last quarter numbers. Is there a backup plan ready? For your share holders, do you have any message in terms of by when do you expect to turn into black because for the last few quarters you have been reporting losses?
A: We have reported losses in the first three quarters, but most of it is being made up in Q4 because we have hived off our metallurgical coke business to a joint venture company where Visa Steel will retain 51 percent stake, and 49 percent has been sold to SunCoke Energy of USA. This company has infused Rs 368 crore in the company which would save the annual performance of the company to a great extent.
Going forward, we are very confident that from end of Q1 we would be having our entire special steel business fully operational and we will become EBITDA positive, and going forward, we will be fully positive. From the money we have got from SunCoke we have paid our installments for the banks for not only FY13 and FY14, but also bulk of our installment and interest for FY15. And we have to pay under CDR a balance of about Rs 2000 crore on long-term debt over a period of seven years after 2015.
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