It is time
for consolidation and growth at Essar, the Rs 4700-crore
diversified group of the Ruias. The group, which has interests
in shipping, oil, power, telecom, steel and construction,
is drawing up plans to grow at 7-10 per cent rate per annum
in order to carve out a niche for itself in the domestic
market.
Says Essar director Prashant Ruia, "The task
ahead is to consolidate ourselves in the sectors we are
operating in and push up growth to increase shareholders'
value."
While
the major growth drivers will be shipping, oil, telecom
and construction, the other two sectors - power and steel
- are also expected to make substantial contribution
to the overall group turnover.
The consolidation
process, which is expected to see some major corporate
and financial restructuring exercises involving most
of the group companies, has already been kicked off.
Ruia is hopeful
that the exercises will be completed very soon in order
to take a leap forward.
The group's shipping business, for
instance, is the second largest operation in the country
having 35 ships which comprise 14 per cent of the domestic
shipping fleet.
The shipping outfit, which is vying for
the government stake in Shipping Corporation of India,
has already established itself as a major crude carrier
in the world. Over 2 per cent of the US total crude imports
is carried by Essar Shipping and the company is trying
to increase its overall market share by providing value
added services like logistics. It is also setting up, through
a 100 per cent subsidiary, a 32 million tonne crude terminal
at Vadinar in Gujarat with an investment of Rs 1874 crore.
Ruia said the
shipping business has a great synergy with the group's
oil business, which is setting up a 10.5 million tonne
refinery in Gujarat.
In fact, except telecom, the other
businesses are all inter linked with one another so as
to provide greater freedom in operation.
The group's 515
mw power plant at Hazira has been set up at Rs 2300 crore
not only to avail uninterrupted power supply to its steel
plant in the same area but also to provide around 300 mw
to the grid.
The power plant
can be operated both by gas and naphtha and hence it remains
largely unaffected by price fluctuations in any of the
two inputs.
Steel, which has pulled down the group's ambition
over the last four years because of unprecedented recession,
is now slightly looking up in terms of prices and demands.
Essar
Steel, one of the largest hot-rolled manufacturers, is
expected to turn the corner shortly if the prices and demand
sustain. The group however is negotiating with the financial
institutions for an interest restructuring, which, if in
place, may see a phenomenal growth in its steel business.
"We are
not asking for any fresh loan. Nor do we demand any debt
write off. We only seek a reduction in interest rates and
a little more time to repay our loans. In the current steel
prices, the high rates of interest put a stumbling block
for growth," he said.
The group, however, heavily pegs
on the oil and telecom businesses. In oil, besides refinery,
Essar Oil is also setting up a country-wide retail network.
"We are
coming up with our refinery and retail network at a time
when the country hardly has any oil surplus. Even if the
domestic oil sector grows by 5 per cent annually, we are
comfortable," Ruia said.
On telecom, Ruia said the
group's partnership with Hutchison has already started
paying off with over 1.4 million subscribers. "Diverse
business interests is our strength. Now it is to see how
better we can use this strength through our strategy and
efforts," he said.
CORPORATE