JSW Steel, one of the top three steelmakers in the country, is understood to have concluded negotiations with the lenders of debt-ridden Karnataka-based Bellary Steel & Alloys for part-acquisition of the company.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

Though some modalities of the deal are still being worked out, sources said both sides have mutually agreed for the sale.

However, the deal is not yet signed as JSW will have to wait for other interested companies, which might like to participate in inter se bidding, till the time stipulated as per the clause in the bidding tender expires.

The consortium, led by IFCI includes IDBI Bank, Exim Bank, Industrial Investment Bank of India, SBI and HDFC Bank. It has a total debt exposure of Rs485 crore to Bellary Steel.

Under the deal, JSW Steel will pay Rs210 crore for the acquisition of 700 acres of Bellary Steel.

“So far there is no clarity on whether JSW will also buy the 0.5 million tonne of unfinished steel plant that the company was earlier building,” said the source.JSW Steel’s main interest is the land associated with the plant, which is located on the Bangalore-Hubli-Goa route.

“Since JSW has a steel plant in Bellary, the acquisition brings in a lot of operational synergy,” the source said.

In fact, while Bellary Steel was building a 0.5 mtpa steel plant at the site, a project note on its website said it has sufficient land there to scale up the capacity to 2 mtpa.

“The land could be a major boost for JSW which is currently scaling up its Vijaynagar capacity at a scorching pace and may look at the Bellary site as an additional opportunity to ramp up in the region,” said an analyst with a leading domestic brokerage firm.

JSW, which recently acquired 4.2 mtpa Ispat Industries, is currently expanding its Vijayanagar facility and is likely to touch 10 mtpa by March 2011, which will make it the biggest domestic producer of steel.

“Beyond another 2 mtpa of expansion at Vijaynagar, the company’s main issue will be of space which Bellary’s upcoming plant can solve,” said the analyst. However, he said it is very likely that the company will also acquire the unfinished plant as it will be a great value addition.