Sujana Metal close to buying sponge iron producer

Hyderabad-based target firm also has a captive iron ore mine of 30 mt

MUMBAI: As part of its backward integration plans, Sujana Metal Products Ltd (SMPL) is planning to diversify into iron ore mining.

The company, which is on an expansion spree, is looking for another spate of acquisitions to take up its capacity to one million tonne per annum (tpa) by 2010, from the current 7,28,000 tpa.

V S R Murthy, group director, Sujana Group of Companies, said, “We are very close to acquiring a Hyderabad-based company, which has a sponge iron manufacturing facility of 67,000 tpa.”

He said the Hyderabad-based company, whose name he refused to divulge, already has iron ore linkage at Bellary in Karnataka, has a total capacity of up to 30 million tonne. SMPL would close the deal in the next three months. After acquisition, it would expand the capacity of the acquired company to 1,00,000 tpa.

S Hanumanth Rao, director, SMPL, said, “We have a plan to have an iron ore capacity of 1,20,000 tpa by the end of our second phase of expansion.” For this the company is looking at several other options in India and overseas.

SMPL is also looking at acquiring some iron ore mines in Indonesia as well, but things are at a very elementary stage, Rao said.

The company is in talks with another company, which is setting up a billet manufacturing capacity. Refusing to reveal further details, he said this company is based in South India.
Meanwhile, the company has recently acquired three steel units - one each in Vishakhapatnam, Hyderabad and Chennai. It has undertaken modernisation and expansion of the units and plans to invest Rs 800 crore in these by the end of December 2008. After which its second phase of expansion will start.

“Under the second phase, we will invest another Rs 800 crore over a period of two years and at the end of it our capacity will stand at a million tonnes annually,” said Murthy.

SMPL has targeted to reach a sales figure of Rs 3,100 crore and its profits to Rs 300 crore. Its sales turnover is expected to be in the range of Rs 1,350 crore to Rs 1,400 crore for the year July 2007 to June 2008. It expects a profit of Rs 42 crore for the year ending June 2008.

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