ADV Partners-led Arjas Steel, which came into being following the acquisition of Brazilian steel firm Gerdau’s Indian arm Gerdau Steel India last year, has embarked a four-year roadmap to expand capacity in the country. The company said it is betting on the prospects of the auto sector, which accounts for 90 percent of its sales, despite facing headwinds owing to the recent slowdown in automobile sales.
Sridhar Krishnamoorthy, managing director, Arjas Steel said, “We have decided on a four-year roadmap to grow in India. The plan includes adding capacity at our existing unit by moving into higher-value grades of automotive steel and also debottlenecking our current assets to produce more steel. In the last six months, the downturn in automobile sales has definitely hit us. However, we think it is a temporary phase that will not last long. We continue to remain focused on the longer-term prospects of the Indian market.”
The Arjas steel plant located at Tadipatri, in Anantapur district of Andhra Pradesh, has an installed capacity of 300,000 tonnes of special steel long products per year, focused on automotive, defense, railways and related industries. The initial plan is to increase the capacity to 350,000 to 375,000 tonnes.
The company, which has focused on the domestic market so far, is also looking at exports to tide over the slowdown in steel sales in the country. Krishnamoorthy said, “We would like to target around 10 percent of our products in the export market. Some of our customers have operations in Southeast Asia and we would like to build up a presence in those markets.”
Arjas Steel will also look at expansion through acquisitions and adding greenfield capacity as and when the market situation improves, he said.
Krishnamoorthy said, “We remain open to the possibility of acquiring new companies and adding greenfield capacity, be it in our existing unit at Andhra Pradesh or elsewhere. However, it is a call we will take when the situation so demands.”
In August 2018, Gerdau S.A. decided to sell its entire shareholding in its Spanish subsidiary Gerdau Hungria KFT Y CIA Sociedad Regular Colectiva to Blue Coral Investments Holdings and Mountain Peak Investment Holdings, owned and managed by ADV Partners. The latter is an Asia-focused private equity firm. Following the acquisition, ADV Partners renamed Gerdau Steel India as Arjas Steel.