RINL public issue may get deferred on weak signals

Rashtriya Ispat Nigam Ltd (RINL) may become second time unlucky as the government, deterred by the current valuation of steel companies, particularly, that of big brother Steel Authority of India (SAIL), may defer the initial public offering of the Visakhapatnam-based state-run steel maker, its top official indicated to dna.

The government is reportedly having a second thought on divesting its 5% stake in SAIL on valuation issues, which may affect the RINL's prospects as well.

"It normally takes 60-70 days from filing of the DRHP, which we did on Monday, to get approval from Sebi. But SAIL issue is believed to have been deferred, and we are in the same sector. So, what call the government would take finally...we will have to wait and see. But as of now the Group of Ministers is keen on going ahead," P Madhusudhan, chairman cum managing director of RINL told dna.

RINL had previously postponed its IPO in 2012.

The deferment, if it indeed happens again, would be a blessing a disguise for RINL as all the six iron ore mines of its subsidiary, Orissa Mineral Development Corp (OMDC), have been shut and efforts are on to reopen half of them within a year.

RINL doesn't own any iron ore mine and to fuel its existing and planned steel making capacities of up to 7.3 million tonne a year, it carried out a government-orchestrated acquisition of Kolkata-headquartered OMDC in 2011.

OMDC, a listed entity, has six mining leases at Barbil in Odisha with reserves of about 245 mt of iron ore and 44 mt of manganese ore spread across six mines. But none of these mines are producing any ore as yet as licences have lapsed and renewal clearances are stuck.

With zero production, OMDC which currently trades at close to Rs 3,430 a share on the bourses, is severely undervalued.

The scrip tanked 8% following the Supreme Court ruling on de-allocation of mines.

With impending public issue of its holding company RINL, the government has now turned aggressive in getting the mining leases renewed after years of delay and sloth by the management.

"We would be applying for environmental clearances for the three mines directly owned by OMDC - Bagiaburu, Bhadrasahi and Belkundi - within a day or two. There were significant delays in previous attempts to get clearances which got lapsed, and so this time we have appointed consultancy firm MECON to handle the application processes," Prabhat Sinha, director, production and planning, said.

Sinha expects the approvals to come in within a year's time, after which OMDC would need another 4-5 months to select contractors and start mining.

Other three iron ore mines - Thakurani, Dalki and Kolha Roida - are involved in numerous litigation and court cases and would need time to get the approvals.

Also, these mining rights are not with OMDC but with another company, Bharat Process and Mechanical Engineers Ltd, which is being liquidated.