ArcelorMittal and Nippon Steel’s plan of Rs 18,697 crore capital expenditure into AMNS India (erstwhile Essar Steel) over the next six years will largely be funded out of internal accruals. The capex commitment, which is part of the resolution plan for AMNS India, is over and above the upfront payment of Rs 42,785 crore made for the acquisition.
“AMNS India is expected to reinvest cash flows from operations to finance its turnaround and growth plans,” ArcelorMittal said in its latest annual report for 2019.
The capex will be implemented over the medium term and it will be largely self-funded out of AMNS India’s internal accruals as the unit is cash generative and Ebitda (earnings before interest, taxes, depreciation and amortisation)-positive.
In an earnings call last month, ArcelorMittal’s chief financial officer Aditya Mittal, who is also the president of AMNS India, had stated that the company would be reinvesting its income to finance growth plans.
“Essar Steel has achieved an Ebitda of $600 million and has emerged as cash-flow positive on a monthly basis. We expect it to be cash-positive in 2020 too,” Mittal had said after ArcelorMittal announced its results for the quarter to December 2019.
The investment will increase the company’s finished steel production to 6.5 million tonnes per annum (mtpa).