Tata Steel, JSW may pick up stakes in ICVL
20 May 10 10:25 AM
ET
NEW DELHI: Private steel firms such as Tata Steel, Essar, JSW, Ispat may pick up equity stakes in International Coal Ventures Ltd (ICVL), a joint venture of state-owned companies to acquire coal assets abroad.
“The time is ripe to rope in private companies as partners in the SPV (special purpose vehicle) and leverage the combined strength to tap global opportunities coming in the way,” an official of the steel ministry said.
As per another official informal discussion has already taken place with private steel firms. “We will decide on the quantum of equity that other partners may be offered. It will vary between 10% to 20%,” he said.
ICVL has been formed by five state-owned firms — National Mineral Development Corporation (NMDC), Coal India Ltd (CIL), Steel Authority of India Ltd (SAIL), Rashtriya Ispat Nigam Ltd (RINL) and NTPC. The join venture is formed for raw material security, he said. While coking coal is required by steel makers and non coking coal (or thermal coal) is needed in power plants.
Private participation will strengthen ICVL and help it in competing with large global companies for big ticket acquisitions. The need was felt as foreign firms have been outsmarting the Indian entity on several deals.
The company has made several failed attempts to acquire coking coal and thermal coal assets in countries like Australia, South Africa, Indonesia, Mozambique, Canada and United States. “There are 4-5 big players in the domestic steel industry.
They should come together to create a big war chest to go for big ticket acquisition of resources which are not available in the country. This would be in the interest of the industry,” SAIL chairman SK Roongta said. He is also the chairman of ICVL.
“We will evaluate the opportunity when it comes. It is always good to have multiple strategy in our quest for overseas resource assets,” said a senior executive of a private steel firms.
Apart from ICVL, steel and power companies have been individually looking for coal resources abroad. Jindal Steel and Power, JSW Steel, Tata Steel and Essar have minority stakes and other interest in coal assets in Australia, the United States and Mozambique.
Country’s largest power company NTPC is also close to acquiring interest in coal properties in Indonesia. Mining PSUs NMDC and Coal India Ltd (CIL) is in talks with Brazilian and the US mining firms for acquiring assets.
“The country’s top three steel producers - Tata Steel, SAIL and JSW Steel - will jointly need over 25 million tons of coking coal in the current fiscal (2010-11). Half of that will be imported, an industry expert said.
ICVL was set up as a SPV in late 2007 with the aim of functioning as an investment company under its unincorporated private limited company status initially.
As per the agreement now, SAIL and CIL would contribute Rs 1,000 crore of equity each for the new entity while RINL, NMDC and NTPC would put in Rs 500 crore each. Based on this equity (Rs 3,500 crore), the company would leverage debt of about Rs 6,500 crore, taking the size of the war chest to Rs 10,000 crore. This would be expanded further to Rs 25,000 crore.