Welspun Gujarat stalls Rs 5k-cr expansion

MUMBAI: Yet another steel company has put its high-value expansion programme on the backburner. Welspun Gujarat Stahl Rohren, the Rs 4,000-crore high-grade steel pipes maker, is learnt to have deferred a Rs 5,000-crore backward integration plan due to weak macro-economic conditions.

The backward-integration plan in Gujarat, which included captive resource mines and a steel plant, has now been pushed back as the industry is currently witnessing a sharp fall in demand and prices, according to sources close to the development.

It has also been learnt that the Welspun group on Friday had a board meeting to discuss strategic issues following the adverse global developments.

When contacted Welspun Gujarat director Akhil Jindal said: ���It���s a problem across all sectors, with everyone revising their expansion plans in this financial turmoil. However, we are still waiting for the regulatory approval for our recent acquisition of Vikram Ispat that is expected to be completed in the next three months and only then can we think of other programmes.���

Shares of Welspun Gujarat rose 0.8% to Rs 107.50 on BSE on a day when the broader index was down 1.5%. Early this year, Welspun Gujarat had bought out sponge iron maker and Aditya Birla group company Vikram Ispat for about Rs 1,050 crore in a deal that marked the entry of Welspun into high-end speciality steel products.

Welspun sources said that the company will now consolidate its existing production and focus more on costs as demand and product prices have fallen sharply.

Tightening of the liquidity market and fall in demand from China, the world���s largest user of steel, has led to a slowdown in the industry globally. Lack of financial resources for the user company, has led most steel companies to cut production and also reduce prices.

According to sources, Welspun Gujarat was planning a 2-million tonne steel plant in Mundra under its backward integration plan and was also looking at some iron ore mines in Brazil. Investment bankers say the company was also looking for potential investors in the proposed project and was planning to raise around $200 million (about Rs 1,000 crore) through private equity.