Bhattacharya: Upbeat

Calcutta, Jan. 29: Usha Martin Ltd is set to double its speciality steel capacity to capture a larger portion of the burgeoning automotive steel market.

The company, which is currently expanding its steel and wire rope making facility for an investment of Rs 450 crore, is likely to spend a similar amount to take the nameplate capacity to 1 million tonnes.

Usha Martin, the second largest wire and wire rope player in the world, now produces about 350,000 tonnes of steel. This will go up to 500,000 tonnes in the present phase of expansion, which its board approved last year. The new capacity will be added at the existing location ? Jamshedpur.

Half of the capacity is used by the company itself to make wire and rope, while the rest is sold to auto and auto ancillary companies.

“We have finalised the detailed project report for the expansion,” Usha Martin joint managing director P. Bhattacharya told The Telegraph.

While the blueprint is being chalked out, it has initiated talks with Tata Motors and auto component maker Sundram Fasteners for a long-term supply contract.

The company is also considering the possibility of foraying into the high-volume auto component market.

“The idea is not to stop at only supplying to auto majors but also go up the value chain. We might take the acquisitions route to make a foray. A greenfield venture would take a long time,” Bhattacharya said.

India has become a hub for manufacturing auto components and supplying to international companies. Bharat Forge and Sundram Fasteners are the leading firms among the manufacturers.

Usha Martin sees a big opportunity in forging and making different kinds of springs.

The current phase of expansion would be completed in two years from now while the 1-million-tonne expansion would be in place in another two years from then.

By that time, Usha Martin will be a fully integrated player with captive coal, iron ore mines and power generation at the back end and wire, wire rope and auto component at the front end.

The focus on speciality steel would also insulate it from the vagaries of the commodity cycle since the company would sell a larger pie of its produce than it internally consumes.

The company is yet to work out the financial model even as Bhattacharya hoped it would not be difficult given its strong cash flow.

The ongoing programme is being funded through a mix of debt and equity.