Essar Steel, which is under insolvency proceedings, has bagged Rs 5,000 crore order from Indian subsidiary of South Korean steel major Posco, the world’s fifth largest steel producer. Posco Maharashtra has signed a memorandum of understanding with Essar Steel for procuring one million tonne of hot rolled products and it is the fourth contract signed between both the companies.
GH Bang, Managing Director, Posco Maharashtra, said the company has found Essar Steel to be a very dependable partner to meet its requirements as it is able to meet the stringent quality standards and make delivery on time. The partnership has stood testing times and progressed to show how an Indian company can support a Global company realise its ‘Make in India’, he said.
Irrespective of the pending matter related to the ownership of Essar Steel, he added the company has continuously improved its operational and financial performance. Ruias-promoted Essar Steel has been under insolvency proceedings for last two years and a resolution is pending despite the committee of creditor voting in favour of bid placed by ArcelorMittal.
Posco's partnership with Essar Steel began with a trial order of 1,000 tonnes in 2014-15. After this, a bulk order of 10,000 tonnes was placed and ended the following year with a total supply of 62,000 tonnes. Completion of these orders strengthened bond between both companies, resulting in a first agreement for supply of 650,000 tonnes in 2015-16. The quantity was further enhanced to 850,000 tonnes and hit one million tonne per annum from there on.
With orders flowing in steadily, Essar Steel had developed 16 new grades of steel for auto and other special applications by Posco Maharashtra which has a two million tonne unit at Mangaon. Essar Steel has been ramping production over the last few years and currently operating at capacity utilisation of about 85 per cent. Last year it produced 6.9 million tonnes of crude steel and expects to cross 7 million tonne in the current fiscal.
For the first two months of this fiscal, crude steel production of Essar Steel has grown 11 per cent to 1.25 million tonnes, compared to 1.1 million tonnes in the corresponding period last year. The company had registered revenue growth of 8.5 per cent to Rs 5,545 crore (Rs 5,106 crore) in the first two months of this fiscal while Ebitda was up 17 per cent to about Rs 770 crore (Rs 660 crore) in the same period.