Sumitomo to buy up to 40% in Bhushan unit

Japan’s Sumitomo is considering buying up to 40% in Bhushan Steel’s upcoming plant in West Bengal for about Rs20,000 crore. “We are exploring the possibility of buying a stake in the range of 25-40% in Bhushan Steel’s West Bengal project as it offers a great opportunity to invest in the Indian steel market,” Hiroshi Tomono, president of Sumitomo Metal, said here on Wednesday.

Asked about a possible stake buy in Bhushan Steel itself, Tomono said, “we can’t say about the future, but currently we are open to buying a stake only at the project level”.
The West Bengal project, with a capacity of 6 mtpa, will be developed in two phases of 3 mtpa each. Japan’s third-largest steel maker also signed a marketing agreement with Bhushan Steel’s Orrisa plant that will commission 2.2 mtpa by next month and increase capacity to 5 mtpa by October 2012.

Under the pact, Sumitomo will buy steel from the Indian firm and sell under its brand name to Japanese car makers operating in India, such as Honda, Toyota, and Suzuki. The Japanese firm will also share its technology with its Indian partner.

The marketing pact with a Japanese firm that has superior technology is also important for Bhushan Steel as there is a threat from the Chinese companies selling better steel products at cheaper rates.

“China poses a threat to the Indian steel market but we as a company are not concerned because of our superior quality of products,” said Neeraj Singhal, managing director, Bhushan Steel.

Bhushan Steel has a debt of around Rs9,000 crore on its balance sheet with cash reserves of more than Rs4,000 crore.