PROJECT PROFILE

ON

STEEL MELTING SHOP

(25 TPD)

PREPARED BY
 1. Introduction:

Steel is a product of a large and technologically complex industry having strong

forward and backward linkages in terms of material flows and income
generation. Ingots are manufactured in the steel melting shop which is
intermediate product, further used to manufacture TMT (Thermo Mechanically
Treated) bars. Ingots are corrosive resistant to manufacture TMT bars and
structural steel.

2. Market:

The growth in construction activity and infrastructure projects in India has

buoyed the demand for steel industry. There is a demand for steel products such
has Thermo Mechanically Treated (TMT) Bars , Structural steel viz., angles,
plates, channels, rounds etc.,

3. Raw Material:

The raw material used in manufacturing of Ingots is scrap and sponge iron.

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 4. Manufacturing Process

The most commonly used ingot mould sizes for ingot production are 3”x4”x60” 3 ½”x4
½”x60”. The process of manufacturing Ingots through steel melting shop is
explained in the following process flow diagram:

Selection of Raw Material

(Sponge Iron and Scrap)

Melting of steel
In furnace

Pouring of hot metal to

Ingot moulds

Solidification of ingots

Solid ingots are taken

out from moulds for gas
cutting and cleaning of ingots

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 5. Technology:

The technology/Machinery required for Steel Melting Shop unit are:

Melting Shop Machinery item like Induction Furnace, Ingot Moulds for casting,
Induced draft FRP cooling tower, sewing frame grinding machine and oil fired
heater for ladle heating etc
Melting shop electricals like Motors, drivers, pumps, electrical panels, cables,
liquid starters and Transformer of 2250 KVA etc
Melting shop Auxiliary equipments like EOT cranes, welding transformer, MS
Fabricated water treatment plant, electro mechanical weigh bridge, air
compressor, gas cutting machines and other Misc. auxiliary equipments etc.

6. Investment:

The investment for setting up a Steel Melting Shop Plant works out to Rs. 2.34
Crores and the break up of the cost is tabulated below.

The land requirement will be around 1.0 acres. The Preliminary & Pre-operative
expense works out to Rs 0.17 crores. Plant & Machinery including installation,
erecting & transportation charges are of 0.60 Crores. Buildings and civil works
are estimated to be 0.30 Crores. Electricity Deposits of 0.38 Crores has been
estimated. The cost of electrical installation and Misc. Fixed assets works out to
Rs. 0.50 Crores. Contingencies @ 3% have been considered in the project cost.
Margin money for working capital is estimated to be 0.28 Crores.

Table 1: Project Cost

S.No. Description Cost
(Rs in Crores)
1 Land & Site Development 0.80
2 Buildings & Civil works 0.30
3 Plant & Machinery including erc., ins.,& trans 0.60

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 4 Electrical Inst. & Misc. Fixed Assets 0.50
5 Contingency @ 3% 0.04
6 Electricity Deposits 0.38
7 Preliminary & Pre-operative Expenses 0.17
8 Margin Money for Working capital 0.28
Total Project Cost 2.34
Means of Finance

The project is proposed to finance with a debt equity ratio of 1.99:1 and the
means of finance is as follows:

Table 2: Means of Finance

Cost
S.No. Sources of Funds
(Rs in Crores)
1 Share Capital - Equity 0.78
2 Term Loan 1.56
Total 2.34

7. Profitability Assumptions:

Basic assumptions of the Steel Melting shop unit are given in the table below:
• The installed capacity is considered at 25 TPD
• The unit will work for 300 days with single shift operations of 8 hours.
• The unit can work at 80% capacity for the first year and can increase by 5%
there on till third year.
• The manpower requirement is considered at 38 personnel for various level
viz. casual labour, Technical & Supervisory staff and administrative staff.

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 8. Key Financial indicators:
The returns are adequate enough to repay the term loan in 5 years. The key financial indicators are tabulated below.

(Rs. in Crores)
S No Particulars Year 1 Year 2 Year 3 Year 4 Year 5
1 Sales 12.96 13.77 14.58 14.58 14.58
2 Total Expenditure 12.19 12.93 13.67 13.68 13.70
3 PBIDT 0.77 0.84 0.91 0.90 0.88
4 PBT 0.39 0.49 0.59 0.60 0.62
5 PAT 0.30 0.36 0.42 0.42 0.42
6 Cash Accruals 0.38 0.44 0.49 0.50 0.50
7 BEP @ Operating capacity 52.55% 46.80% 41.99% 40.06% 38.13%
8 Debt Equity Ratio 1.68 1.38 1.07 0.77 0.46
9 DSCR (Gross) 1.34 1.50 1.70 1.77 1.87
10 Average DSCR 1.80
11 DSCR (Net) 1.61 1.84 2.08 2.09 2.10
12 Average DSCR 2.15
13 IRR (%) 22%

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