Rashtriya Ispat Nigam Limited (RINL) – also known as Vizag Steel – has decided not to go ahead with the Initial Public Offering (IPO) route to raise funds for current and future expansion plans. “There is a plan of the government to offload 10% stake. That call has to be taken by the government taking into account market conditions. But we are not, at this point in time, looking for any additional funds,” said P Madhusudhan, chairman cum managing director of RINL.
This is surprising and contradicting as market conditions are excellent for new floats. As many as 19 companies have received market regulator’s approval to float IPOs this year, up from just five in the first six months of last year. Seven companies have already raised funds while Manpasand Beverages’ INR400 crore IPO is scheduled to open on 24 June 2015.
Rashtriya Ispat is one of the Navratna companies and its IPO could have acted as a catalyst to attract retail investors – a category which has shunned the market so far. The company is close to completing its greenfield expansion that would raise its annual hot metal capacity to 6.3 million tonne from the current level of 3.6 million tonne. The latest expansion has been funded from internal accruals and the company remains comfortable with debt levels.
Following the expansion, Rashtriya Ispat plans to undertake modernisation of its old plant – a move which is expected to result in the capacity going up to 7.3 million tonne or 6.5 million tonne of saleable steel by fiscal year 2017/18. “Once the cash flow starts flowing in from new expansion project, we are confident of funding our future projects through 1:1 debt equity ratio,” said the executive while addressing MCC Chamber of Commerce and Industry.
With the top official’s remarks, it appears unlikely Rashtriya Ispat’s IPO will see the light of the day any time soon. The company’s IPO plans were dashed in 2012 following a slowdown in the steel industry and again in September 2014 as the government postponed an offering citing weak valuation prospects.
