KARACHI: Agha Steel Industries, under its second expansion plan, will invest some Rs7 billion to enhance its re-rolling capacity 160 percent by adopting the state-of-the-art Micro Mill Danieli Rolling Mill (MIDA) technology to cater to the rising demand for steel in the country.
The market is anticipating a huge demand for steel in coming year due to Prime Minister Imran Khan's special package for the construction industry and low-cost housing scheme, ML-1 project and construction of dams as well as recent developments in the CPEC projects.
Therefore, Agha Steel has decided to initiate the second phase of expansion of its plant and is seeking public equity to finance the massive expansion to scale up the output of grey steel bars by 160 percent.
Agha Steel Industries is going to offer more than one-fifth of its shares to institutional and individual investors next month through an initial public offering (IPO). The company is offering 120 million shares with a face value of Rs10 each to investors. Three-quarters of the issue will be offered via book building to big investors at the floor price of Rs30 per share.
The general public will subsequently buy one-fourth or 30 million shares at the strike price, which can go as high as Rs42 a share, subject to price discovery in the book-building phase.
Out of some Rs7 billion expansion plan, the company is expecting to raise funds between Rs3.6 billion and Rs5 billion through the IPO for expansion of its re-rolling capacity from 250,000 metric tons to 650,000 metric tons. The remaining financing will be obtained from the financial institutions.
Hussain Agha, CEO of Agha Steel Industries, said that the construction package announced by the prime minister has been a game changer and there's a lot of activity in the construction sector, and so the demand for steel is gradually growing.
"We will use new equity to finance the acquisition of the latest MIDA technology. It's a disruptive technology built around an endless casting and rolling procedure. As opposed to the traditional steel-making method that takes several days to turn scrap into steel, the new technology makes ready to ship rebars in only two hours," he said.
Hussain said that with the arrival of MIDA technology, Agha Steel expects to be the first steel mill in entire Asia, including China, to have an endless casting and rolling plant. A similar plant is under construction in China, and both countries are entering the new technological era at the same time, he added.
Along with increasing the output of its final product, Agha Steel is also in the process of developing a market for high-grade billets in Pakistan, he added. He said that the company installed the arc electric furnace in the first phase of its expansion, and with this electric arc furnace, the steel plant is able to manufacture various types of billets that were not even imagined in Pakistan until recently.
Copyright Business Recorder, 2020
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