State-owned steel giant SAIL is reassessing its ambitious ₹100,000 crore expansion plans, which aimed to increase capacity by 75% from 20 million tonnes per annum (mtpa) to 35 mtpa. The reconsideration comes in light of declining steel prices, a surge in Chinese imports affecting domestic markets, and higher-than-expected debt levels.
However, the company is moving forward with a ₹37,000 crore expansion project at IISCO, where a 4 mtpa flat steel product plant will be established. Meanwhile, expansion plans for the Durgapur and Bokaro plants have been put on hold, pending a review of capital expenditure.
“When we initially made these expansion plans, we projected a debt-equity ratio of 1:1. However, with the current market conditions, including reduced margins and lower steel prices, we need to reassess the financials,” said Anil K. Tulsiani, Director of Finance at SAIL, during a recent analyst call.
SAIL Expansion Moves Forward
The greenfield expansion at IISCO has received all necessary clearances, and the next phase, including the tendering process, is set to begin soon. Tenders are expected to be floated in the next couple of months, with contract finalizations anticipated within six months. Work orders and payments should commence by the end of 2025, with the majority of capital expenditure expected in 2027-28. Currently, IISCO’s long product plant has a capacity of 2.6-2.8 mtpa.
“In the case of the Bokaro and Durgapur plants, where expansions were planned to increase capacity from 2.4 mtpa to 7 mtpa and from 2 mtpa to 3 mtpa respectively, we are still in discussions. The consultant’s initial capex estimates were higher than expected, so we have asked them to reevaluate,” Tulsiani explained.
Additionally, SAIL has earmarked ₹11,000 crore for debottlenecking capacities at its Bhilai and Rourkela plants over the next three to four years. The company plans to spend ₹600 crore on capital expenditure in FY25, with a target of ₹7,000 crore for FY26.
Debt Reduction Efforts Underway
As of June 30, SAIL’s debt levels had risen by approximately ₹5,000 crore to ₹35,659 crore, driven by a significant increase in working capital due to higher-priced coal stocks and unsold inventory. The company aims to reduce its net debt to ₹30,000 crore or below by the end of the year.
The average price for SAIL’s long steel products stood at ₹54,600 per tonne, while flat products were priced at ₹53,500 per tonne, with an overall average of ₹54,500. Prices have further declined by ₹500-1,500 per tonne across various categories. According to a report by IDBI Capital, SAIL is lagging behind its peers in terms of new capacity additions, which is expected to result in lower volume growth over the next three to five years.
