The Tatas, Mittals and the Jindals are in the fray to acquire public sector Neelachal Ispat Nigam Ltd (NINL) via a centrally sponsored divestment programme. Monday was the cut off to submit an expression of interest (EoI) for the Odisha-based steel plant. All the major Indian steel players, including Vedanta, are believed to have submitted EOIs for the 1.1 million tonne asset.
Tata Steel put in the EoI through subsidiary Tata Steel Long Products Ltd, sources said. JSW Steel Ltd, which completed the acquisition of Bhushan Power & Steel Ltd on Friday, and AM/NS India — the joint venture between ArcelorMittal and Nippon Steel — also submitted EoIs.
According to the preliminary information memorandum circulated by the department of investment and public asset management, the successful bidder will get full ownership of the company, apart from the mining rights and leasehold land spread over 2,500 acres.
The secretary, Dipam, tweeted on Monday saying “multiple expressions of interest were received for privatisation of NINL. The transaction moves ahead to the second phase, on schedule”.
The asset
Central PSU Minerals and Metals Trading Corporation (MMTC) is the largest shareholder of NINL having a 49.78 per cent share, apart from NMDC, which holds 10.10 per cent. Two Odisha government entities, Odisha Mining Corporation (OMC) and Industrial Promotion and Investment Corporation of Odisha Ltd (IPICOL), hold 20.47 per cent and 12 per cent, respectively. The remaining 7.65 per cent is owned by an unlisted entity.
Set up in 1982 to promote industrialisation in the state of Odisha, the company has been underperforming for many years. Nine months into 2020, it recorded net sales of Rs 801.18 crore and loss of Rs 826.73 crore. The net worth of NINL stands at negative Rs 1,332.23 crore.
The company has Rs 1,425 crore of working capital loan/borrowing from the related party and other current liabilities in trade credit advance of Rs 1,796 crore.
However, the biggest asset of NINL, which makes pig iron and long products , appears to be the land in Kalinganagar, apart from a captive iron ore mine.
The players
All three top private sector players stand to gain from NINL’s assets.
Tata Steel has a strong presence in Odisha where it operates a 3mt plant at Kalinganagar. It is being scaled up by another 5mt. The company has expressed a desire to bid for NINL because of the strategic fit to the existing unit, apart from increasing exposure to the long products.
For JSW Steel, NINL could help expand operations significantly, soon after setting foot in Odisha with 2.5MT BPSL. The company has also acquired four iron ore mines in Odisha last year through an auction. The company is also interested in setting up a greenfield plant near Paradip even as land acquisition could be tricky.
AM/NS India also signed a fresh memorandum of understanding last month to set up a new plant in Odisha. It also won rights to one iron ore mine in auction last year. The company also operates a large pellet plant at Paradip. NINL could allow the company to significantly expand presence in the east and in the Indian market.
Benefits are no less for ESL Steel Ltd which may allow Vedanta to be a significant steel player from non-ferrous giant.
However, the successful bidder has to find a way to pacify the employees of NINL who have filed court cases to oppose the selloff. They want NINL to be taken over by other PSUs like SAIL or RINL.
