Project finance


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Project finance

  1. 1. Shakthi Steel Plant<br />Presented By,<br />Manikandan.R, Ranjan Shetty, <br />SouravPramnik<br />VenkataRamana, Vijaydeepsharma<br />Project Appraisal<br />
  2. 2. About Us<br />Shakthi Steel Plant is a steel company based in Bellary, Karnataka, India.<br />To achieve best partner status with Group Companies in international business on a sustained basis. <br />Shakthi steel, incorporated in 1994, is engaged in the manufacture of Steel and refractory in India.<br />Expand plant capacity to .23Mt by 2009-10 with the mission to expand further in subsequent phases as per Corporate Plan.<br />Revamping existing Blast Furnaces to make them energy efficient to contemporary levels and in the process increase their capacity by .1 Mt, thus total hot metal capacity to .33 Mt<br />The net worth of the Company as on date is Rs. 123.86Cr.<br />
  3. 3. About the Project<br />Shakthi steel Industries, are into the manufacturing of steel business for the past 16years. The company has a capacity base of nearly .23mt steel as on 2009. <br />The company is buying its raw materials such as pig iron, Lam coke and limonite. <br />The company plans to produce coal, which is mainly used for producing Lam coke. This is a kind of “BACKWARD INTEGRATION” to the company’s production process.  <br />To start this project the company needs a huge amount of investment as 93crs. <br />The company will take nearly 18months to build the new coal mining plant and also start produce Lam coke and Steel of its own from 2010.<br />The estimated life of the project is considered to be 6years from the date of inaugurating the plant.<br />The company is also having a plan to start a power project by 2016. So, that will increase the company’s revenue even the steel demand is decreasing from 2016.<br />
  4. 4. Why this project<br />Industry Outlook<br />According to a report of South East Asia Iron and Steel Institute published in April' 09, India's Exports account for 14% of GDP.<br />Steel Demand & Production<br />As per WSA publication, World Steel in Figures 2009, India tops the list when it comes to growth during 2008 with a growth rate of 3.95%. <br />According to the World Steel Association, India's apparent steel use is forecasted to reach 53.5 million tone in 2009, a 1.7% increase from 2008 and is expected to reach 58 million tonne in 2010 an increase of 8% YoY. <br />Raw Material Scenario<br />According to Steel Business Briefing, India's iron ore production which was 123 million tonnes in 2003-04, nearly doubled in volume to 204 million tonnes in the fiscal year 2008.<br />The supply is mainly from domestic railways which supplied up to 1.1 million tonne of ferrous and non ferrous scrap in 2008-09. <br />Scrap supply in India remained healthy and is expected to be steady throughout year 2009. This will substantially impact the steel prices and profitability during 2009-10.<br />
  5. 5. Market Analysis<br />Despite the availability of minerals in large quantities, this district is considered to be an industrially backward district. <br />There are 23 units of large and medium scale industries in this district with an investment of Rs.447.76 crores employing around 9,222 persons At present it occupies ninth place in the state. <br />SathavahanaIspat Ltd. is the first Pig Iron plant setup in the region , Kirloskar was the next to follow with their Pig Iron plant. However with the commissioning of Jindal Vijayanagar Steel Limited at Hosapete, the industry scenario of this district underwent sea changes.<br />Mukund Steels and Kalyani Steels have started industries in this area. The inflow of investment into these industries would be around Rs.30,000 Crores.<br />
  6. 6. Scope of the Project<br />Bellary district is rich in natural resources which need to be tapped to a great extent for overall development of the district. <br />This district is endowed with rich mineral resources. It has both metallic and non-metallic minerals. <br />The annual production of Iron ore is between 2.75 to 4.5 million tonnes.<br />
  7. 7. Cost of project<br />
  8. 8. Source of finance<br />The new Debt-equity ratio of the company for the project comes to 2.26:1 compared to the old Debt- equity ratio of 1.85:1<br />
  9. 9. Past data v/s Future Analysis<br />The targeted Capacity utilized at our plant should increased steadily at a rate of 2% annually from Fy 10-11<br />
  10. 10. Past data v/s Future Analysis<br />The targeted sales been reduced at 2.5%annually from FY10-11 to FY15-16, and more than double the sales in the period of 10 years.<br />
  11. 11. Past data v/s Future Analysis<br />The change in market share is stable; the reason for a stable growth is the change in the economic growth at a rate of 8%-10% GDP, and also increase in production level of the overall industry as an outlook, and also increase in the utilization of production and sales regarded as a better competition in the market.<br />
  12. 12. Findings<br />There is a stiff competition in the iron steel manufacturing sector in India and there is a dominance of reputed and large scale operation companies,<br />The market competition would become stiff when the operation of Brahmani Steel, and Arcelor Mittal steel start at Bellary, the rate at which the sales are forecasted is decreasing by a steady 2.5% on an yearly basis.<br />Due to the poor infrastructure to the indurtry the variable cost is increasing on a steady trend, if better infrastructure is provided then the capacity utilization could be increased and cash flow would increase and further capital could be invested in the expansion of the project.<br />Further, prices are expected to decline in future as consumption levels are projected to continue plummeting, as china have started using the reserves.<br />
  13. 13. Thank you!<br />