Adhunik to float mining arm, raise Rs1,000 crore

The Agarwals of Adhunik Group are planning to raise close to Rs1,000 crore of equity capital through an initial public offering (IPO) of shares in the group’s merchant mining arm Orissa Manganese & Minerals Ltd and equity dilution in unlisted power arm Adhunik Power and Natural Resources Ltd as well as listed entity Adhunik Metaliks Ltd, according to sources in the know.

The move has turned imperative as the group’s debt level has reached Rs4,000 crore, which makes further leveraging difficult, said officials.

The Agarwals had, in fact, started working on the IPO of Orissa Manganese way back in 2008, before the economic crisis took hold.

Orissa Manganese, a 100% subsidiary of Adhunik Metaliks, has manganese and iron ore mines and also pellet plants.

It has six manganese ore mines in Orissa and one iron ore mine in Jharkhand. Since there is no captive clause on the mines, the ore can be sold in the open market. Ghatkuri iron ore mine in Jharkhand and Patmunda manganese ore mine in Orissa are presently its largest mineral reserves and the bulk of ore production happens at these mines. Iron ore reserves at Ghatkuri have been estimated at 97.21 million tonne (mt) and manganese ore reserves at Patmunda at 53.30 mt. The 1.2 million tonne per annum (mtpa) pellet and beneficiation plant in Jharkhand was set up a year back.

These apart, Orissa Manganese has economic interest in Suleipat iron ore mine, which has reserves of 40 mt, and started operations in September.

The Suleipat mining company, in which Orissa Manganese earlier had a 100% stake, has now been handed over to a 50% joint venture with the lessee of the mine for raising production from the presently approved 0.6 mtpa to 3 mtpa. But the mining right is yet to be to renewed and transferred to the new joint venture, Neepaz B C Dagara Steels Pvt Ltd.

Apart from raising output from its mines, Orissa Manganese also plans to set up a second pellet plant of 1.6 mtpa capacity utilising low-grade iron ore fines for conversion.

The timing of the Orissa Manganese IPO could also be influenced by the pact Adhunik has entered into with its lenders, promising not to bring down its stake in the company below 51% till the loans taken by it are paid in full.

Further, Adhunik has pledged 2 million equity shares, or 10% of its holdings in Orissa Manganese, as  security against the loans.

Adhunik Metaliks also needs to raise equity for its other subsidiary, Adhunik Power and Natural Resources Ltd, where it holds 79%. It had placed 12% with SBI Macquarie Infrastructure in 2010 and the balance with IDFC.

Adhunik Power has commissioned this month the first phase of its 270 mw power plant in Jharkhand at an investment of Rs3,151 crore, while the second unit is targeted to be operational in January.

Equity dilution is also being contemplated for Adhunik Metaliks to fund expansion into niche auto-grade steel making, sources said.