1. u 54 u
August 17-30, 2015
Business India u the maga zine of the cor por ate wor ldCorporate Reports
W
ay back in the early 1990s,
when Mideast Integerated
Steel Ltd (misl) branded
as Mesco Steel, a part of $4 billion
(about `24,000 crore) Mesco group,
decided to venture into steel mak-
ing, the Delhi-based J.K. and Rita
Singh, the husband-and-wife team
of serial entrepreneurs heading it,
decided to enter Odisha. Accord-
ingly, they applied for iron ore mines
when, back in the 1990s, there were
few takers. The Biju Patnaik-led gov-
ernment recommended in 1996-97
that a lot of 1,500 hectares with,
what the company estimated, nearly
a billion tonnes of iron ore, be allot-
ted to Mesco Steel. And the Centre
approved the same in 1999.
“But it took a good six years just
to get the area demarcated,” explains
Rita Singh, cmd, misl (Mesco Steel).
“And, there was added delay due to
the lack of clarity on what was the
forest area that needed approval,
etc.” Singh had set out with a vision
to set up two steel plants, backed by
iron ore mines. The mine was to feed
both the pig iron plant – misl, which
sits on 584 acres and Mesco Kalinga,
a steel plant, for which 1,700 acres
had been allotted in Jajpur, Odisha.
Then, many onlookers and steel
veterans felt that it did not make
sense to be a miner as well as a steel-
maker. “Internationally, mining and
steel making are considered separate
activities. And not many have inte-
grated,” says Supratim Sarkar, evp &
group head, sbi Caps, who feels that
the early entry of Mesco’s integrated
approach into the sector was what
helped the company stage an opera-
tional and financial turnaround.
“The iron ore mines saved the
company. Even today, the ebidta
is `1,200-1,400 per tonne of ore
and, with value addition, it moves
higher,” calculates Sarkar, who has
been instrumental in Mesco Steel’s
recent acquisition of Maithan Ispat,
an integrated steel plant located adja-
cent to Mesco Steel’s Kalinganagar
plant for `1,160 crore.
“This will help us produce billets,
beams and section beams and tap
into the demand from infrastructure
projects,” explains P.C. Sahu, who
has been joint md, Mesco Steel, for
the last eight years and is a veteran in
the steel industry. Starting his career
with Steel Authority of India’s Dur-
gapur steel plant in 1969, Sahu had
risen to the position of ed (projects)/
executive director (works) in the
same plant.
Sahu visualises a host of synergies
between Mesco and Maithan, rang-
ing from raw materials, waste util-
isation, systems implementation,
human resources and knowledge
sharing, etc. “Maithan Ispat is now
getting a part of its required iron
ore from Mesco mines at Roida in
the desired size, which has resulted
in getting rid of the crushing pro-
cess which, in turn, led to energy
and man power saving. Maithan
Ispat is using misl (Mesco Steel)’ pig
iron and scrap to make billets. misl
(Mesco Steel) railway siding is also
being used by Maithan for inward
and outward movement of goods,”
he says. Besides, the mild steel scraps
generated in the parent company are
being used in Maithan Ispat, which
also accelerates productivity.
Mesco plans to invest fresh equity
and debt to add a 700,000 tonne elec-
tric arc furnace, for which Maithan
already has environmental clearance.
This will increase the firm’s capacity
to 2.2 mt. misl (Mesco Steel) already
has environmental clearance to raise
its own iron and steel capacity to
3.5 mt. It has a non-captive iron ore
mine, Roida mines, at Barbil, with an
annual capacity of 3 mt, being raised
to 6 mt. “We are geared to integrate
and extract all benefits,” says Shipra
Singh Rana, group director and the
younger of Singh’s two daughters.
She is also actively associated with
the mines in the group and all over-
seas mines acquisition in the group.
Shipra adds that ‘Mesco Gold’ has
been formed in Cambodia, and will
commence production in the second
quarter of next year. It has also incor-
porated ‘Mesco Metals USA Incor-
porated’ a poly metallic company,
which has 78 minerals concessions
in its fold. It will start production by
end of this year. “We are also in the
process of closing the deal on coking
Back in action
Mesco focusses on M&A, upgradation and expansion,
as also a re-listing on the bourse

2. u 55 u
August 17-30, 2015
Business India u the maga zine of the cor por ate wor ld Corporate Reports
coal in Australia,” says Shipra.
During the last three years (see
table), the company’s numbers have
turned positive, with the total oper-
ating income rising from `550 crore
in 2011-12 to `865 crore in 2013-14.
While the operating profit (ebidta)
has gone up from `146 crore to `233
crore, the profit after tax too has
moved up from `90 crore to `116
crore. There has been a drop in profit
due to the fact that iron ore mining
in India has been facing regulatory
challenges in the last two years.
“But now, despite its current chal-
lenges with subdued pig iron prices,
Mesco Steel is in a place far removed
from its troubled past. With min-
ing activity resuming, during this
current financial year, we expect
a bounce back in profit margins,”
explains Natasha Singh Sinha, direc-
tor, finance, misl, and the eldest of
the Singh daughters, who is spear-
heading the steel business, while also
looking at finance, new projects and
acquisition strategies.
The mining issue in India had a
backlash on many companies and
misl (Mesco Steel) was no exception.
For starters, there has been a mining
ban since May 2014. And, in accor-
dance with this, misl’s mining oper-
ations had been suspended. Also,
since misl’s mining lease had expired
in 2003 and it was operating on the
deemed renewal of licence basis, the
apex court had ordered misl (Mesco
Steel) to stop mining activity. How-
ever, on 20 March 2015, the Parlia-
ment passed the bill to amend the
Mines and Mineral Development &
Regulations (mmdra) 2015, which
provides for extension of lease till
March 2020 for merchant mines and
till March 2030 for captive mines.
This has come as a big relief to many,
including misl, which has restarted
mining activity.
Back on track
“misl (Mesco Steel)’s operations are
expected to improve from 2015-16
onwards, with resumption of min-
ing operations as well as expected
better utilisation of pig iron capac-
ity from second half of 2015-16.
During 2014-15, the company’s min-
ing operations were suspended, fol-
lowing the Supreme Court order
for suspension of iron ore mines in
Odisha, operating without second or
subsequent renewal of mining lease.
However, with the passage of mmdra
2015 bill in the Parliament, mining
operations resumed,” says Divyesh
Shah, agm, care Ratings.
With this financial turnaround
and resumption of mining activ-
ities, the Singhs are all set to make
a mark in the country’s metals and
mining space through organic and
inorganic growth plans. The group
acquired Maithan Ispat in April 2015
and has taken over the company-
owned Jajpur Steel’s producing facil-
ity in Odisha. “Mesco is well on its
way to becoming a 3.5 million tonne
per annum integrated steel plant
from the current production of 1.2
million tpa,” says Sinha.
Both Rita and J.K. Singh have been
first generation entrepreneurs. The
group’s entry into steel was driven
largely by design, and a bit by des-
tiny. Rita Singh started her first busi-
ness venture by setting up a dairy
farm at the Air Force station, where
J.K. Singh was posted. But this was
too tiny for her entrepreneurial appe-
tite and she soon started to explore
more, especially in trading.
Soon, she found herself dealing
Rita Singh: fired up by an entrepreneural spirit J.K. Singh: persevering
2012/ 2013/ 2014/
Operating income 550 735 865
Operating profit 146 184 233
PAT 90 140 116
Sharp turnaround
(` crore)
2014
2013
2012
PATOperating
profit
Operating
income
550
865
735
146
184
233
90
140 116

3. u 56 u
August 17-30, 2015
Business India u the maga zine of the cor por ate wor ldCorporate Reports
in fur and leather, and then shoes.
Between 1985 and 1995, she set up
eight units for leather garments and
shoes and then set up tanneries, inte-
grating backwards. Soon, she was
also forward integrating, retailing in
shoes. Soon, going in for some pub-
lic issues helped her learn the finer
nuances of finance.
“Times were getting challeng-
ing,” says Rita, who soon sensed that
the time was possibly ripe for taking
some big risks. This, combined with
the vision of J.K. Singh of acquir-
ing mines at a time when they were
considered a poor investment area
and his background – he did met-
allurgy from Yale University – took
the Singhs to consider the minerals
and metals sector. The seeds of a steel
plant were sown during a time when
biggies like Tata Steel and sail were
making the commodity.
In 1992, misl was formed in tan-
dem with a Chinese firm now called
Sino Steel (then it was called cmie),
with a plan to mine iron ore (annual
capacity: 3 million tonnes) and pig
iron (590,000 tpa). In addition, it has
a sinter plant (700,000 tpa) and a 22
mw power plant operating on blast
furnace gas. By 1996, more iron ore
mines were acquired as part of busi-
ness strategy. The plant was to be
commissioned in 1999, but suddenly
it found itself in the midst of many
challenges. For one, the economy
was in turmoil. Also, funds were few
and far between.
Even as the project took off, misl
(Mesco Steel) had to suspend its
pig iron project in 1996-98, follow-
ing several legal and taxation issues
against the company, which in turn
delayed the commissioning of the
plant. This also led to cost overruns.
“The total shortfall was `40 crore
(capital cost: `25 crore + `15 crore,
working capital) to start up the blast
furnace,” recalls Rita, who wrote to
some 100 steel companies, including
sail and Tata Metalics, for a bailout.
Subsequently, lenders accelerated
debt recovery and filed for recourse
with the debt recovery tribunal,
besides filing a winding-up petition
in the high court. “It took me seven
years, running to courts, banks,
financial institutions, etc, for some-
one to hear me out,” she says. And,
in 2004, “someone did turn up to lis-
ten to her and misl (Mesco Steel) tied
up with the UK-based Stemcor group,
which extended financial support in
the form of equity infusion for 10 per
cent strategic stake and advances to
the tune of `527 crore”.
“When I first looked at Mesco in
2004, the steel plant had not yet
been commissioned and their mine
had not yet started production,” says
Matthew Stock, then md, Stemcor’s
India operations, and now director
(projects), Mesco Steel. There were
many problems and obstacles to over-
come too. But what led me to believe
in and trust the promoters was their
positive and their honest attitude to
business and life in general. Not only
were many promises made but they
were also honoured. So, in short, I
J.K. Singh was a pilot in the
Indian Air Force and his wife
Rita was born and brought up
in a middle class family with
no business background –
her father was a professor
and retired as Principal. It was
only after marriage that her
innate entrepreneurial capa-
bilities began to find expres-
sion. She dreamt of making
it big, of becoming a wealth
creator. She has a passion to
work and a never-say-die atti-
tude – an ideal combination
for an entrepreneur.
She started businesses
from scratch and dabbled
in diverse fields such as
shoes, leather, tannery, air-
lines and pharmaceuticals
in the 1980s and 1990s. At
the time, women entrepre-
neurs were rare and the capi-
tal market facilitated all kinds
of business excesses. The
Singhs launched one business
after another – shoes, phar-
maceuticals, steel, shipping,
airlines. Between 1992 and
1995, three of the Mesco
group companies raised
`178 crore of equity via six
visits to the primary mar-
ket. They were among the
upstarts of the early 1990s
who made it big during the
capital market boom. How-
ever, only steel and aviation
remain today.
But the good times did not
last. From a peak in 1996, all
the businesses had imploded
by the close of the decade,
and were in the dumps. The
Singhs stood accused of fraud,
cheating, tax evasion, diver-
sion of funds and forgery,
and even jailed by the cbi on
charges of fraud, forgery and
cheating. The cbi had alleged
that the group indulged in
cheating insurance compa-
nies, financial institutions and
banks. The amount of misap-
propriation was estimated at
over `125 crore. The cbi has
also charged the group with
cheating the public by issuing
fake shares. Some of those
cases have been settled,
some are ongoing, but Singh
is making a quiet comeback
in business.
The Singhs have two
daughters – Natasha and
Shipra – who have been
thrown into the business.
Elder daughter Natasha Singh
Sinha has a ba (Economics)
degree and with more than
25 years of experience she is
in tune with the current mar-
ket. Since 1994, Natasha has
been actively involved in the
day-to-day activities of the
company. As the whole time
director of the company she
has been instrumental in
the growth of the company,
defining investment plans,
business strategy, market ori-
entation, customer relations
and handled ipos.
Shipra Singh Rana, as md
of Mesco, focuses on sourc-
ing materials and equipment
both domestically and glob-
ally for a wide range of busi-
ness requirements. She is also
actively associated with the
mines and shoes business of
the group.
Rita, now in her late 60s
has been the driving force
of the group. She has spent
the last eight years, in rela-
tive anonymity, rescuing her
flagship steel and mining
business. Singh says she has
repaid her company’s debts
in the last eight years and is
“doing business again with
a lot of people to whom she
owed money”. She plans to
invest `13,500 crore in the
next five years to diversify
and expand the steel busi-
ness, even buy coal mines
abroad. “In the meteoric rise
and fall, we have learnt a lot of
pitfalls of rapid diversification
and in the recast that should
stand us in good stead.” u
The meteoric rise and fall

4. u 57 u
August 17-30, 2015
Business India u the maga zine of the cor por ate wor ld Corporate Reports
saw the company when it had not
got started, saw the opportunity, and
over the last 10 years I have watched
the company grow and flourish.”
Stock, a Britisher, is an ‘Indophile’,
having lived and worked in India for
20 years now.
Stock’s achievements include
building of a number of substantial
businessesforStemcorinIndia,asalso
joint ventures with Essar Steel (such
as Hy-Grade Pellets Ltd), the creation
of a green field `1,500 crore com-
pany (Brahmani River Pellets), Stem-
cor’s highly profitable investment in
an iron ore mine (Aryan Mining &
Trading) and the revival of Mideast
Integrated Steels, “which perhaps
is my greatest achievement and
contribution to Stemcor”.
Unfortunately, a couple of years
ago, Stemcor ran into financial prob-
lems with its group lenders in Europe
and has been forced to sell its non-
core assets, in particular its assets
in India, though they were the ‘jew-
els in its crown’. As a result, Stock
departed from Stemcor earlier this
year and decided to join Mesco Steel.
“I have worked closely with Mesco’s
promoters for more than a decade
and consider them not only to be
visionary entrepreneurs, but also
as close friends,” adds Stock, who
now helps Singh and team build
the group and create value for
Mesco’s shareholders.
According to Stock, Mesco Steel
has the advantage of its own iron
mines and the promoters, rightly,
wish to invest in enhancing their val-
uation addition of the iron ore avail-
able to them. “Iron ore has been and
will be the company’s key ingredi-
ent and the company’s strategy is
to invest in value addition to turn
their iron ore into steel. Mesco Steel
can become one of the larger steel
producers in India, using new tech-
nologies and innovative ideas
to achieve greater productivity
and profitability.”
Find infustion
Incidentally, when the Mesco group
was in the doldrums, the public per-
ception was that the Singhs’ lifestyle
was the main reason for the down-
fall. But Sanjiv Singhal, who worked
with Standard Chartered Bank in
2005 (where he headed structural
finance) felt differently. “I actually
took a sharp look at the company and
found that the ground reality was
exactly the opposite. The promoters
were hard-working and determined
to succeed. The company also had
superb assets on the ground,” recalls
Singhal, taking a tough call at that
time to arrange $100 million in two
tranches ($20 million and $80 mil-
lion) of loan for Stemcor to bailout
Mesco. “Today, I have proved my crit-
ics wrong,” adds Singhal, currently
md, Banyan Tree, where he contin-
ues to support the Mesco group.
With the Stemcor funds, misl
(Mesco Steel) started operations on
15 January 2005 and also started
repaying lenders under the ots (one
time settlement) scheme. “All undis-
puted secured and unsecured loans
were cleared by June 2012. Instead
of going belly up, the company came
out of the woods,” adds Sinha.
While the turnaround was partly
facilitated by British trader Stem-
cor through Standard Chartered
Bank, by the time the company
had commissioned its plant by end
2004, iron ore prices had also surged.
This further helped misl earn
healthy profits.
“Being in Odhisa, misl (Mesco
Steel) enjoyed strategic advantage of
being closer to several steel plants,
including those of Brahmani River
Pellets (of the Stemcor group) and
Essar Steel, to whom misl (Mesco
Steel) had made commitments. So,
it had a ready off-take. Additionally,
the pig iron plant is 110 km away
from the Paradip port, 15 km away
from the national highway and has
two railway rakes and railway sid-
ings within the premises that are
connected to the adjacent main
broad gauge rail line. These arrange-
ments also paid off,” says Shah of
care Ratings.
On the expansion front, the
Singhs have drawn out an invest-
ment plan worth `13,500 crore for
misl (Mesco Steel)’s brown-field
expansion to take the steel capac-
ity to 4.5 million tonnes in the next
three-to-five years from the present 2
million tonnes. Capacity at the steel
plant in Jajpur will be raised to 3.5
million tpa from the existing capac-
ity of 1.2 million tpa, while 1 mil-
lion tpa capacity will be achieved at
the recently acquired Maithan Ispat.
Natasha: profits to bounce back Shipra: geared for integration
sanjayborade
sanjayborade

5. u 58 u
August 17-30, 2015
Business India u the maga zine of the cor por ate wor ldCorporate Reports
The process for modernisation and
expansion of Maithan Ispat has been
initiated. The first phase of expan-
sion envisages an investment of `254
crore, for which funds have already
been tied up through a consortium
of banks that were involved in the
takeover of Maithan.
misl (Mesco Steel) has also
recently signed an agreement with
South Korean steel giant Posco for
shifting the latter’s patented Finex
plant to India. “But this is at nascent
stage, various evaluations are on,”
says Rita, who is looking at more
acquisitions. Some proposals from
Odisha are also being evaluated,
with an aim to moving up the peck-
ing order among steel manufacturers
to meet global demand.
In 2014, the world crude steel
production reached 1,665 million
tones, showing a mere 1 per cent
growth over 2013. China remained
the world’s largest crude steel pro-
ducer in 2014 (823 mt) followed by
Japan (110.7 mt), the US (88.2 mt),
with India (86.5 mt) at the fourth
position. The World Steel Associa-
tion (wsa) has projected Indian steel
demand to grow by 6.2 per cent in
2015 and by 7.3 per cent in 2016, as
compared to global steel use growth
of 0.5 per cent and 1.4 per cent
respectively. Chinese steel use is pro-
jected to decline in both these years
by 0.5 per cent.
The Indian steel industry has
entered into a new development
stage since 2007-08, riding high on
the resurgent economy and rising
demand for steel. Rapid rise in pro-
duction has resulted in India becom-
ing one of the top three producers of
crude steel in 2015 and the country
continues to be the largest producer
of sponge iron or dri in the world.
As per the report of the Work-
ing Group on steel for the XIIth Five
Year Plan, there exist many factors
which carry the potential of raising
the per capita steel consumption in
the country. These include, among
others, an estimated infrastruc-
ture investment of nearly $1 trillion,
a projected growth of manufactur-
ing from current 8 per cent to 11-12
per cent, increase in urban popula-
tion to 600 million by 2030 from the
current level of 400 million, emer-
gence of the rural market for steel
currently consuming around 10 kg
per annum buoyed by projects like
Bharat Nirman, Pradhan Mantri
Gram Sadak Yojana and Rajiv Gan-
dhi Awaas Yojana, among others.
At the time of its release, the
National Steel Policy 2005 had envis-
aged steel production to reach 110
million tonnes (mt) by 2019-20.
However, based on the assessment
of the current ongoing projects,
both in green-field and brown-field,
the Working Group on Steel for the
XIIth Five Year Plan has projected
that domestic crude steel capacity
in the county is likely to be 140 mt
by 2016-17 and has the potential to
reach 149 mt, if all requirements are
adequately met.
Government support
The National Steel Policy 2005 is
currently being reviewed, keeping
in mind the rapid developments in
the domestic steel industry (both on
the supply and demand sides), as well
as the stable growth of the Indian
economy since the release of the
Policy in 2005.
“We are happy that, with the pro-
active support from government, the
steel industry has come a long way.
With the production of about 110
million tpa in 2015, we have reached
the third position in world. We used
to import huge amounts of pig iron.
Today, thanks to private sector par-
ticipation, we have reduced this.
Production for sale of pig iron has
increased from 1.6 mt in 1991-92
to 6.7 mt in 2014-15. We do well in
sponge iron as well at about 47 mt in
2015,” observes Rita. She is placing
her bets on the government projec-
tions. Mesco Steel has several min-
ing concessions with huge reserves
for iron ore, limestone, dolomite,
and coal spread over Odisha and
Madhya Pradesh.
“At the core of the strategic
goals to meet the vision is misl
(Mesco Steel)’s consolidation plan
in India as a major integrated steel
player of at least 4.5 million tonnes
per annum capacity by 2020. It is
rightly exploring both organic and
inorganic options for this achieve-
ment,” observes V.V.L.N. Sastry of
Firstcall India.
“After consolidating in India, the
group is also expanding strategi-
cally overseas with a focus on South-
east Asia, Australia and US,” says
an ambitious Rita Singh, who has
learnt her lessons from the past and
is calculating her risk as she moves to
overseas turf.
Meanwhile, the Singhs have
some respite for the 200,000 share-
holders who still hold shares in the
company. As a promoter, the fam-
ily owns 78.3 per cent, while 24.61
per cent is with the public. But, since
the company was forced to get del-
isted in 2000 on the bse, there has
been no trading on the bourse and
Rita is keen to get it re-listed. “We
would like to maximise our share-
holder value.” At present, the shares
of misl (Mesco Steel) are listed on the
Calcutta Stock Exchange, Ahmeda-
bad Stock Exchange, Bhubane-
swar Stock Exchange and Madras
Stock Exchange. At present, there is
no trading activity on any of these
exchanges. In order to provide a
platform for about 200,000 public
shareholders to trade their shares,
Rita has been planning to re-list
the shares with one of the stock
exchanges, which has nationwide
trading terminals.
u L A NCELOT J OSEPH
lancelot.joseph@businessindiagroup.com
Stock: belief in misl