ArcelorMittal circling Prakash Industries

ArcelorMittal is in talks to buy a stake in Prakash Industries, the New Delhi-based Rs 1,526 crore steel company.

Two sources familiar with the development said ArcelorMittal officials met the top brass of Prakash Industries when they were in London for the roadshow of their Rs 250 crore foreign currency convertible bonds issue.

They said ArcelorMittal has shown interest in buying a stake in Prakash for raw material reasons: the company has two iron ore mines with combined reserves of 85 million tonnes. The larger one, holding 75 million tonnes, is expected to be ready for extractions soon. Prakash also has three coal mines with estimated reserves of 150 million tonne.

But Vipul Agarwal, director (finance), Prakash Industries, denied such a development. “We are not in talks with Arcelor for any kind of stake sale,” he said.

The Lakshmi Mittal-owned company is also said to be in talks with Bhushan Power and Steel, an unlisted entity of the Rs 4,961 crore Bhushan Group.

Bhushan Power has seven steel plants with a combined capacity of 1.5 million tonne. It manufactures flat and long steel products and its customers include Hero Honda, Bajaj Auto and Maruti Udyog Ltd.

ArcelorMittal, in an emailed response, declined to comment, saying the company doesn’t respond to market rumours or speculation.

Sanjay Singal, chairman and managing director, Bhushan Power and Steel, did not comment for the story.

Prakash is currently expanding its billet and sponge iron making
capacities to one million tonne per annum (mtpa) each from the current 0.55 mtpa and 0.6 mtpa, respectively. It expects the expansion in the steel segment to be completed by 2012.

The company’s total investment on the expansion in its steel and power capacities will be Rs 3,300 crore, of which Rs 2,500 crore will go into the power business alone.

An analyst who wished not to be quoted, said, “Prakash Industries has huge iron ore reserves when compared to its size. It needs 1.6 mtpa of iron ore for its own consumption and can sell the rest in the open market.”

The company is also raising its power generation capacity from 100 mw to 775 mw in phases over the next four years. It plans to sell most of the power — around 500 mw — in the market.

Shares of Prakash Steel rose 5.16% to close at Rs 231.30 on the BSE on Thursday. Bhushan Steel and Power, the listed entity in the Bhushan group closed at Rs 1731.05, up 1.17%.

ArcelorMittal recently completed  the open offer and now is co-promoter of Uttam Galva Steels.