The O P Jindal Group company Jindal Steel and Power Ltd has begun talks with the State Bank of India, Punjab National Bank and Canara Bank for financing its Rs 550 crore (Rs 5.50 billion) expansion plan.

"The debt component in the plan is Rs 275 crore (Rs 2.75 billion), for which we are talking to our existing bankers, including SBI, PNB and Canara Bank," Sushil Maroo, vice president (corporate finance) told PTI in New Delhi on Wednesday.

He said that the company had appointed SBI Caps for the financial appraisal and MN Dastur to conduct a technical feasibility study of the project.

With the completion of its expansion, the company is hoping to achieve a turnover of over Rs 2,000 crore (Rs 20 billion) by 2005-06.

The groundwork on the expansion had already started, which was being funded through internal accruals, he said, adding the financial closure for the project is expected in four months.

The two-phase plan, which will increase the company's capacity of sponge iron to 1.3 million tonnes and power generation by 50 MW to 255 MW, would be completed by September 2005.

The company would be investing Rs 375 crore (Rs 3.75 billion) in the phase-I, to be completed by March 2005, during which it would be adding sponge iron capacity of 3.3 lakh tonnes and power generation capacity of 25 MW, he said.

In the second phase to begin simultaneously, the company would be investing Rs 175 crore (Rs 1.75 billion) for similar addition in terms of sponge iron and power generation, he added.

Apart from its ongoing expansion, JSPL is also working towards bringing down its interest costs and is targetting a rate of 8 per cent this fiscal as against 9.5 per cent in 2002-03.

JSPL, which has a total long-term debt of Rs 800 crore (Rs 8 billion), has decided to keep a low debt to equity ratio in the future, Maroo said.

He said that the company had only a marginal exposure in the international market as its 99 per cent of demand was coming from the domestic market.

The company was exploring the export market and talking to various companies in Bangladesh, Pakistan and the other neighbouring countries.

He said that there was a demand-supply gap in the rails in India. With Steel Authority of India Ltd being the other main supplier of rails, Maroo was optimistic of getting good orders from the Indian Railways during the current financial year.

Rail and Beam Mill had already started trial run, he said, adding this would give a big push to its bottomline.