Essar Steel announced that it has completed the acquisition of Hy-Grade Pellets Limited (HGPL) and Steel Corporation of Gujarat Limited (SCGL) from Stemcor, UK. Both the companies are now fully owned subsidiaries of Essar Steel Ltd.

With these acquisitions, Essar Steel becomes a totally integrated steel producer with end-to-end control over raw materials, processes, technology and finished products.

The acquisition of HGPL will bring in benefits of high quality raw material and considerably better yields in steel making. HGPL operates a 4 million tonnes per annum pellet plant at Visakhapatnam.

SCGL's acquisition is expected to result in considerable value addition across the chain and a more diversified product range. The acquisition will bring in 1.2 million tones of cold rolling capacity into Essar Steel, making it one of India's largest producers of cold rolled products. The Company is confident that these will provide a much wider market penetration capability and offers a hedge against cyclicality in domestic and international markets.

Commenting on the completion of the transaction, Shri. Prashant Ruia, Managing Director, Essar Steel, said "We are delighted that this transaction has been completed. We expect that these acquisitions will bring in increased synergy and seamless integration in our operations and help strengthen the company. We look forward to consolidating our position in the market, especially in the value added segment."

The acquisition of HGPL and SCGL were completed at a cost of US$ 450 million (approximately Rs.1950 crore) and funded through equity by way of issuance of Compulsorily Convertible Preference Shares as approved by shareholders and regulatory authorities.

Essar Steel has already finalized plans to increase steel making capacity to 4.6 million tonnes per annum by the second quarter of 2006 through addition of equipment, technology up-gradation, productivity improvements and de-bottlenecking. The capacity enhancement is expected to cost approximately Rs. 2000 crore.