Calcutta, March 7: SPS Steels Rolling Mills Ltd (SSRM) will raise Rs 40 crore through an initial public offering (IPO) to part-finance its expansion project.

This is the second issue from the steel sector following Jai Balaji Sponge Iron’s Rs 10-crore IPO.

The flagship company of the Rs 400-crore SPS group is setting up a greenfield sponge-iron manufacturing unit at Jharsuguda in Orissa for Rs 300 crore.

It also plans to increase its production capacity in the Durgapur plant.

Chairman and managing director B. K. Vohra said the public issue will have a premium of Rs 10 on every share of Rs 10.

The fund generated from the issue will enhance the company’s paid-up capital to Rs 29.60 crore from Rs 9.60 crore at present.

Vohra said promoters will reserve the right to subscribe for 50 per cent of the issue, while the remaining will be offered to retail investors.

The issue will enhance the group’s borrowing capacity, which is needed to fund the investment programme, he added.

The first phase of the Jharsuguda unit, with an investment of Rs 120 crore, will be on steam by May.

The billet caster in the Jharsuguda will be ready by January 2005. The blast furnace and power plant will come up by October 2005.

While the unit needs 70 MW power, the captive generation, based on waste gas, will be around 20 MW.

The SPS group, which is set to register a combined turnover of Rs 450 crore in the current financial year, plans to cross the Rs 1000-crore turnover mark by March 2006.