(Recasts, adds new plans, quotes)

MUMBAI, Nov 23 (Reuters) - Steel bar maker Rathi Bars Ltd <RATH.BO> plans to invest 2-2.25 billion rupees towards expansion and may go in for a follow-on public offer of shares for the purpose, a senior official said on Friday.

Earlier in the day, shares in the firm debuted at 37.80 rupees, up 8 percent from the issue price of 35 rupees.

The shares were trading at 35.45 rupees at 12:04 a.m. after touching a high of 45 rupees.

The company offered 7.14 million shares or 43.74 percent of post-issue capital to raise 250 million rupees through the initial public offer. It plans to use the money to expand to 100,000 tonnes a year by December 2008 from 75,000 tonnes.

Rathi Bars plans to invest 2-2.5 billion rupees for setting up a new sponge iron unit and a power plant in the eastern state of Orissa, director Anupam Rathi said.

He also said the company may go for a follow-on public offer of shares by end of 2008 to fund its new plans. "We will not dilute more than 45 percent," Rathi said.

The sponge iron unit will have an annual capacity of 90,000 tonnes while the power plant would have a capacity of 25 mega watts, he said.

Bulk of the sponge iron from its new unit would be used for its own induction furnaces while the rest would be sold for local consumption, he added.

Rathi Bars reported a net profit of 19.2 million rupees on sales of 557.1 million rupees in the quarter to June 2007. (Reporting by Narayanan Somasundaram and Kaustav Roy; editing by Sunil Nair ) (([email protected]; 91 22 6636 9068; Reuters Messaging [email protected])) Keywords: RATHI LISTING/