Fresh from getting a major concession from the corporate debt restructuring forum, the Pramod and V K Mittal-controlled Ispat Industries Ltd  on Monday said it aims to be counted among the world's top five lowest cost producers of steel by 2005.

"Our plant is very versatile and we will be among the top five lowest cost steel producers in the world by 2005 after completion of capacity expansion programme and reducing the cost of funds," IIL director (finance) and secretary Anil Sureka told reporters in Mumbai.

He said the company has already embarked on doubling the capacity from 1.5 million tonnes by June 2004 in two phases and the first phase to raise capacity to 2.40 m ton would be completed by September, 2003.

The total cost on doubling the capacity to 3.0 m ton would be about Rs 600 crore (Rs 6 billion), including Rs 120 crore (Rs 1.2 billion) on setting up a new oxygen plant, he said, adding, another Rs 200 crore (Rs 2 billion) would be needed for setting up a blast furnace by Ispat, Essar and Jindal had already been approved and final signing by companies was only a formality. Sureka said he was confident of garnering internal resources to finance the expansion project.

"For reduction in cost of funds, we have already initiated talks with our foreign lenders like KFW Bank of Germany, IFCI, Washington and also with bond holders for retiring old debts amounting Rs 1600 crore (Rs 16 billion) and replace it with new loans bearing fixed interest rate of eight per cent," Sureka said.

Hardening trend of steel prices over the past couple of months had already brought lot of confidence among the producers in the country and Sureka said they were expecting an earning before interest, depreciation and amortisation of Rs 550 crore (Rs 5.5 billion) by March, 2003.

"The projected EBIDA after completion of first phase of expansion provided market also supported was Rs 1500 crore (Rs 15 billion) in 2003-04. It is difficult to say, but hopefully we will be in profit by next fiscal, if prices continues to remain strong," he said.

Asked about the impact of CDR on the company, Sureka said Ispat Industries and Ispat Metalics together had a total debt of Rs 7000 crore (Rs 70 billion), "with average interest cost coming down to about 9.75 per cent from 12.50 per cent at present, we are expecting a saving of around Rs 190 crore (Rs 1.9 billion) per annum in interest charges."

He said this time the government was trying to bring in uniformity by conversion of part of debts of FIs to equity and by writing down equity by 40 per cent by converting it to preference shares bearing coupon rate of 0.01 per cent which would be redeemed after debt was fully paid.

There would be freeze on all numbers as on September 30, 2002 and 40 per cent of whatever rupee debt was outstanding as on that date would be converted to FCNR with a fixed rate of interest of eight per cent and balance 60 per cent will attract interest of 14 per cent.

Meanwhile, IIL said it has developed a unique technology for using 100 per cent hot metal charge mix from Blast Furnace for producing steel and has applied for patenting.

"We have pioneered a steel-making technology using 100 per cent hot metal charge mix from blast furnace resulting in zero power consumption in Electric Arc Furnace using CONARC Technology," IIL Director (HSM and projects) V V Jamnis said.

"Nowhere in the world is this technology used and a number of our end users had sought to know from us about how to use this so we have applied for patent," he said.