GPH Ispat opens $281 Million plant, stocks shoot up

[DalalErMaNodi]

GPH Ispat, a listed steel manufacturing company, witnessed a jump in share prices after news broke that its new Tk 2,390 crore plant began production using state-of-the-art technology on a trial basis.

The company has a paid-up capital of about Tk 378 crore and each share of it rose 9.76 per cent to Tk 27 yesterday, according to data from the Dhaka Stock Exchange (DSE).

The new factory, which is an expansion of GHP Ispat's existing operations, has the annual capacity to produce 840,000 tonnes of mild steel (MS) billet and 640,000 tonnes MS rod and medium section products, such as support beams and flat bars.

"We hope that we will be able to announce commercial production at the plant in December," said Kamrul Islam, executive director for finance at GPH Ispat.

The company is discarding the substandard products and making the standard ones ready to be sold in the domestic market, he said.


"We are calling it the trail start as we need a declaration from the machine supplier to announce the commercial opening," he added.

The cost to develop the new factory was paid through loans and equity.

To finance the project, GPH Ispat took term loans of $95 million from Germany's Oddo BHF Bank and $44.2 million from the World Bank, which were disbursed through commercial banks under the supervision of Bangladesh Bank.

Fourteen local banks also provided term loans for GPH Ispat while a further Tk 262 crore was raised by offloading the company's shares and around Tk 200 crore came from the company's retained earnings.

Meanwhile, the company's directors collectively lent Tk 107 crore while GPH Power Generation put forward Tk 80 crore to finance the project.

The factory will add some new products to the company's portfolio, said Islam, adding that some of these items could replace their imported counterparts.

With the start of full commercial production, the plant's annual production capacity will reach 10.08 lakh tonnes of MS billet and 760,000 tonnes MS rod and medium section products.

The cold commissioning of its new plant at Sitakunda was completed on January 14 earlier this year.

According to the plant supplier schedule, the expected hot commissioning was supposed to be complete by June 30. But it was delayed by the ongoing Covid-19 pandemic.

"When all the machines are tested without raw materials, then it is called cold commissioning and when raw material is used in testing, then it is called hot commissioning," Islam said, adding that the process takes 3 to 6 months in both cases.

Following the coronavirus outbreak in Bangladesh in March, almost all foreign experts involved with the commissioning of the plant returned home, leaving the project without hot commissioning, GPH Ispat said in its price sensitive information that was published on the DSE website yesterday.

As it remains uncertain when the foreign experts will return, the company's management recently started the hot commissioning process with the help of the plant supplier through online communication, it said.

During the hot commissioning, production of marketable products is going on, but it is not official commercial production.

Before the arrival of foreign experts, the management wants to continue producing trail products to sell those at the domestic market from today, GPH Ispat added.

The company purchased 8.85 acres of land for the expansion project at a cost of around Tk 73 crore in 2016.

GPH Ispat, listed with the country's bourses since 2012, provided 5 per cent cash and 5 per cent stock dividends for fiscal 2019-20.

The machinery used at the new plant was brought from Primetals Technologies Austria, a joint venture of Siemens and Mitsubishi Heavy Industries & Partners.

Various sponsors collectively hold a 49.61 per cent stake in the company while the rest belongs to general and institutional investors.


Source