The Nagarjuna group is shelving its Rs 50 bn, 2.5 mtpa Hot Rolled (HR) coil steel plant in Karnataka. Instead, the group has decided to focus on its upcoming refinery and power projects with investments to the tune of Rs 100 bn.
The Nagarjuna group has major interests in fertilisers and is also involved in agricultural research. It has diversified into power projects and refining, which it has identified as future growth areas. Its 1,000 MW power project is expected to be commissioned by December 2000 and the 6 mtpa refinery will be completed in early 2001.
The decision to set up the HR coil plant was taken in FY97 by the management, when steel industry was expected to thrive following a slew of infrastructure proposals during the period.
Since then, the steel sector scenario has changed. Steel consumption growth has been slow over the last two years. Moreover, the sector remained subdued and faced competition from cheaper imports from CIS countries, South Korea and East European countries. In the current scenario, though steel consumption is picking up and the government is focusing on clearing infrastructure projects, there is still ample supply in the sector. The current steel outlook is positive for existing players, but not for new entrants like Nagarjuna.
The Group hence is looking at other avenues like refinery and power projects to boost its future growth and has therefore put the steel diversification on the back burner.
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