ICVL counterbid only if Riversdale reins ensured

International Coal Ventures Ltd (ICVL), the public sector special purpose vehicle formed in May 2009 to buy resource assets abroad, would make a counterbid to acquire Australia’s Riversdale Mining Ltd only if it’s sure of getting control, two senior officials familiar with the development said.

“There is no point in having any stake less than 51%. We have already seen the kind of control Tata Steel has with 24% stake. All the participants in ICVL are keen on getting the asset and making the best use of the coal that is mined,” one person said.

While ICVL, which has a capital base of Rs3,500 crore, is said to be still engaged with Citigroup, it’s merchant banker, on a potential approach, what’s delaying the counterbid is the opinion of the five stakeholders of the deemed navaratna.

“ICVL would bid for 100% of Riversdale equity. But Tata Steel with 24% stake has said it would not exit the venture. That means there is about 76% that may be tendered. Anything above 51% would make the deal comfortable for the stakeholders,” a second person said.

Coal India Ltd owns 28% in ICVL, the same as Steel Authority of India Ltd, while NMDC, Rashtriya Ispat Nigam and NTPC have 14% each.

NMDC, which is based out of Hyderabad, was earlier planning to bid for some stake in Riversdale on its own.

But the state-owned miner dropped out for want of resources and its commitment to the ICVL joint bid.

“NMDC is working on a major forward integration strategy where coking coal is of great importance. Mozambique, where Riversdale has mines, is a goldmine for coking coal. If ICVL’s bid is successful, NMDC will be able to get its share, as will NTPC, another equally interested partner,” this person said.

NMDC once even considered joining Tata Steel for a straight bid for Riversdale. “But Australian laws do not allow a joint bid with an existing stakeholder. The same problem would dog ICVL in future if it settles for anything less than a majority stake,” the source said. “That’s why it’s an all or nothing situation.”

Rio Tinto, the third-largest mining company in the world, has offered to acquire Riversdale by paying about $3.9 billion and the key take away in the bid is the reserves the Australian company has in Mozambique of about 12 billion tonnes of coal.

All the stakeholders in ICVL are keen on the coal reserves for their captive needs and also meet the coal demand for their expansion plans.