ArcelorMittal, the world’s largest steel firm, Sajjan Jindal-led JSW Steel, Hyderabad-based Megha Engineering and Infrastructure Ltd (Meil) and Tata Steel are amid compaqnies that have been shortlisted for buying Neelachal lspat Nigam Ltd (NINL) as part of the government’s disinvestment programme, confirmed two people aware of the development.
The data room has been opened up for these qualified interested parties who were shortlisted after submitting expressions of interest (EoIs) and are now participating in the request for proposal (RFP) phase.
The draft share transfer agreement has been issued and site visits have been scheduled. Post this, the fiscal bids would be submitted.
“The RFP has been issued with the bidders doing due diligence," stated one of the two people cited above requesting anonymity.
SBI Capital Markets Ltd is the transaction counsellor appointed by the department of investment and public asset management (Dipam) for the proposed 100% strategic disinvestment of NINL. The state-run company was incorporated in 1982.
“The plants of Tata Steel and JSW are nearby Neelachal lspat," stated the second person cited above who also did not want to be named.
NINL’s integrated steel plant is located at Kalinganagar Industrial Complex, Duburi, Odisha, with its captive iron ore mines situated in Sundergarh and Keonjhar districts.
The state-run company has a 1.1 million tonne per annum pig iron production capacity, with its
captive iron ore mine having mineable reserves of around 90.91 million tonnes.
Spokespersons for SBI Capital Markets, JSW Steel and Tata Steel denied to comment.
A Megha Engineering and Infrastructure spokesperson said, “There is no immediate comment from our side, but the information is correct."
Dipam secretary Tuhin Kanta Pandey tweeted on 29 March said, “Multiple expressions of interest received for privatisation of Neelachal Ispat Nigam Ltd. The transaction moves ahead to the second stage, on schedule."
The cabinet committee on economic affairs last year gave its in-principle approval for the strategic disinvestment of equity shareholding of MMTC (49.78%), NMDC (10.10%), MECON (0.68%), BHEL (0.68%), IPICOL (12.00%) and The Orissa Mining Company Ltd (20.47%) in NINL.
In FY22, the Union government seeks to raise ₹1.75 trillion from asset sales as compared with ₹32,835 crore raised through disinvestments of public segment undertakings in FY21.
The other big-ticket privatization strategies are for Air India and Bharat Petroleum Corporation.
The interest from steel companies in Neelachal lspat comes amid robust demand for steel and high prices.
“Global steel prices, rallying from last year’s lows, were up 2.1 times on-year in June, reaching the highs last seen in 2008. While some easing is likely over the rest of 2021, prices may average $750-800 per tonne, still up 60% on-year," Crisil stated in a 6 July statement.
“Given the robust profitability, and the fact that steel mills are already operating at close to 90% utilization, steelmakers have already doubled their planned capex for fiscals 2022-24 compared with the previous three fiscals. As much as 27 million tonne capacity, accounting for almost 20% of domestic capacity, is expected to get added by fiscal 2025. This could get accelerated further, given sizeable brownfield opportunities for companies, including in acquired assets," Crisil further said.
This also comes when India is lining up a large infrastructure capital expenditure strategy.
“Domestic steel demand to grow in double digits in FY2022. With steel prices reaching stratospheric levels, earnings surge expected to continue in FY2022. Given two back-to-back years of strong performance, the credit metrics of the domestic steel industry is expected to witness a significant improvement in FY2022," Icra stated in a recent presentation.
