Essar group is planning to double the capacity of PT Essar Dhananjaya, its two-lakh tonne cold-rolling (CR) joint venture project in Indonesia, at an estimated cost of $35 million.

The overseas arm, which is in partnership with the Indonesia-based PT Garama Adipratama, is expected to complete the expansion by 2003.

Vikram Amin, president director of PT Essar Dhananjaya, one of the profit-making companies of the group, said: "We are looking at increasing our CR capacity to four lakh tonne."

The capacity expansion programme is mainly in anticipation of a possible return of high demand for CR steel in Indonesia and to achieve greater economies of scale.

"Out of the total estimated expenditure of $35 million, around $25 million would be in the form of term loans and the balance $10 million would be financed through internal accruals," Amin said.

The existing lenders of the company include the Commonwealth Development Corporation, Asia Finance Investment Corporation, Hongkong Bank and Exim Bank. Currently, the company is in the process of finalising the loan amount and negotiating the interest rate with the existing as well as other lenders.

The total debt component of the company at present is around $30 million and the average cost of borrowing of it is around nine per cent.

"We plan to repay around $20 million of our existing debt by 2003. Therefore, by 2004, we will have the remaining $10 million plus the $25 million that we now plan to raise in our books," Amin said.

PT Essar Dhananjaya is a leading player in the CR products market in Indonesia, along with Krakatao Steel Mills.

The company manufactures CR coils and sheets of various thickness used as basic input in industries such as pipes and tubes, furniture, general engineering and colour coated sheets.

The company is also engaged in marketing hot-dipped galvanised sheets and coils in its overseas markets. It has a diverse export base which includes countries such as Canada, US, Philippines, Bangladesh, China, Malaysia and Vietnam.