Essar pips Jindal Steel to buy 60% stake in Zimbabwe Iron

The Ruias-controlled $15 billion Essar Group, which has interests in oil and gas, power, steel, shipping etc, has won the bid for the one million tonne Zimbabwe Iron and Steel Company (Zisco).

According to local news reports from Zimbabwe, Mauritius-based Essar Energy Holdings has won the bid to acquire a 60% stake in Zisco. It was chosen ahead of Jindal Steel and Power (JSPL), Essar’s main competitor in the race. Other companies in the fray were Sino Zimbabwe Ltd and Sovereign Capitala, a consortium of local and South African investors, the reports said.

However, an official of UK-based and London Stock Exchange-listed Essar Energy Plc, which is the parent company of Essar Energy Holdings said, “The company is essentially an oil and gas and power player and has no interest in steel.”

Sources said it is Essar Steel that had bid for Zisco, but did not divulge any further information.

“As a group, we keep looking at growth opportunities. However, it is not our policy to comment on any specific proposal,” said a  spokesperson for Essar.

Meanwhile, a news report from Zimbabwe, quoting a source, said, “The three principals (President Robert Mugabe, Prime Minister Morgan Tsvangirai and Deputy Prime Minister Arthur Mutambara) have settled for Essar. The Mauritius-based company is expected to invest more than $60 million to revive Zisco.” It further said an official announcement should be made next week if all goes according to plans.

The bid, which over the last few weeks had come down to a race between two Indian companies — Essar Steel and JSPL — was expected to be tilted towards Essar as in May, when the first round of bidding took place, JSPL’s bid was rejected on the reason the group being too large for a small steel plant.

In fact, both JSPL and ArcelorMittal were the front runners during the first bidding round in May and both were rejected based on same parameters and the process was called off.

Again, in August a fresh bidding round was initiated when Essar Steel also joined the process.

The plant had been on the block since 2009 when the African government decided to bring in foreign investment to the tune of $10 billion to the country through disinvestment after the country faced huge economic losses during the economic downturn.

Out of all the companies on the government list, Zisco was the first state-owned firm to be put up for sale.

The one million tonne, fully operational Zisco plant, once touted as a major source of revenue for the government, came to a grinding halt in 2008 after the company accumulated huge debts of around $300 million. Hence the government invited bids from players to hive off up to 60% of the company.