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Wednesday, July 6, 2011

Electrosteel Steels Ltd:-Buy/sell/,growth prospects and recommendation,news and results,target price and analysis,views and outlook,multibagger

Scripscan:Electrosteel Steels Ltd

Story:The Electrosteel Steels Ltd. (ESL) is promoted by Electro steel casting Ltd. (ECL) to setup a 2.2 MTPA Integrated Steel and Ductile Iron Spun Pipes project in Jharkhand, India. ECL has obtained mining blocks of iron ore and coking coal in the state of Jharkhand and has set up ESL for implementing the integrated steel and DI pipe plant. The company is setting up a plant near Siyaljori village in Bokaro District of Jharkhand. The proposed plant will be based on Blast Furnace (BF) - Basic Oxygen Furnace (BOF) - Billet Caster and Hot Rolling Route and will produce 1.2 MTPA of long steel products. It will also have a 0.33 MTPA DI pipe production facility in the same complex and will be provided with hot metal from the Blast Furnaces. The plant will also have production facilities for 0.27 MTPA of Commercial Billets and 0.40 MTPA of Pig Iron.Given the cost competitiveness of the project and a substantial portion of the capex having been already spent (56.6% of Rs 73.6 billion), the project on completion will create long term value for investors.But high equity base of the company at over Rs. 2,000 crores, low promoters stake of 34%, stiff competition in the sector, low financial capability of the promoters and high debt equity ratio are some risky and unfavourable features which makes one wary.It seems that the company and its promoters are taking a leap beyond their capacity, raising fears of the company and its promoters falling flat on their noses.At least that is the inference which one can draw from the past experiences of some leading industrial groups in 94-96, like Jindals, Essar, Lloyd,ushaIspat,Ispat Industries etc.At best a hold at present prices.

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