Prakash Inds in talks to buy Nova Iron & Steel

Prakash Industries, a medium-sized Delhi-based sponge-iron maker, is in talks to buy Nova Iron & Steel, two sources familiar with the development told DNA.

Nova Iron and Steel has a 1.5 lakh tonne sponge iron unit in Bilaspur district, Chhattisgarh. The company does not own any iron ore mines and buys the raw material from the market, mainly from Orissa.

Valuations could not be ascertained.

Prakash Industries did not respond to an email query. R K Gambhir, promoter, Nova, also did not respond despite numerous calls made to his office.

For the year ended March 31, 2010, Nova reported total revenues of Rs 144.77 crore and a net loss of Rs 4.23 crore.

For the first quarter of the current financial, its net sales stood at Rs 1.73 crore as against Rs 40.46 crore for the same period last year. The company suffered a net loss of Rs 4.05 crore in the quarter ended June 30, 2010 as against a profit of Rs 8.80 lakh for the same period last year.

As on June 30, 2010 the promoters of Nova Iron and Steel had 58.22% stake in the company. The total valuation of the promoter stake in the company as of August 10 stood at Rs 78 crore.
The Nova share closed down by 5% at Rs 18.71 per share on Tuesday. The company’s market capitalisation stood at Rs 165 crore.

Sources said the location of the Nova plant is ideal for Prakash. “Prakash has two sponge-iron units each in Champa (Chhattisgarh) and Raipur (Chhattisgarh). The unit of Nova Iron is located in Bilaspur which is in the middle of Champa and Raipur.”

Prakash Industries has been allotted two iron ore mines each in Sirkagattu (Orissa) and Kwardha (Chhattisgarh). The mines are less than 100 kilometers from the Champa sponge iron facility of Prakash and Nova’s Bilaspur is about 70 kilometers from Champa.

The total reserves of the two iron-ore mines are 85 million tonne. The company expects both the mines to come on stream by the end of the current financial.

Prakash is in the midst of a massive expansion whereby it will double its sponge iron production to 1.2 million tonne by the end of FY12. It is also raising its power generating capacity by 625 mw.

The company currently has a 100 mw plant.

The total spending on its expansion plans is Rs 3,300 crore. The company has already raised Rs 500 crore via FCCB for its various expansion plans.