JSW Steel eyes Rs30,000-cr acquisition of Bhushan Steel, defers Italian plans

01 Dec 2014


JSW Steel Ltd, the third-largest steel maker in India, has deferred plans to acquire Italian steelmaker Lucchini SpV and instead decided to go for domestic acquisitions, buying Bhushan Steel's Odisha unit and through it a stake in Orissa Sponge as it focuses on its India operations.

The Sajjan Jindal-led JSW Steel is reported to be in talks to buy Bhushan Steel's Odisha steel unit and is also looking at buying out Bhushan Steel's promoter stake in Orissa Spong, in a deal worth about Rs30,000 crore.

Bhushan Steel has a total debt of around Rs35,000 crore on its books, which it has so far failed to bring down. Creditors have now asked Bhushan Steel to sell its Odisha unit, which is an integrated steel plant with a capacity of 5.6 million tonnes.

The promoters of Bhushan Steel are now left with no alternative than sell off the Odisha unit in order to bring down its debt.

Bhushan Group's energy arm has about 15 per cent stake in Orissa Sponge, in which Monnet Ispat holds 41 per cent.

Orissa Sponge had been in the middle of a takeover battle due to its iron ore and coal mine reserves.

If this deal materialises, JSW Steel's combined steel-making capacity will go up to nearly 20 million tonnes, the largest for any steel company in India.

"For the time being, plans for India are much stronger and larger. We want to focus on India.... We have deferred our decision to invest in the Italian project," JSW Steel chairman and managing director Sajjan Jindal said.

JSW Steel had also shelved plans for setting up a steel plant in West Bengal and instead decided to boost investments at its Vijayanagar plant near Bellari iron ore mines.

JSW Steel is working towards a de-risking strategy through backward integration for iron ore so as to turn its Bellary plant into the world's single-largest steel plant with an annual capacity of 20 million tonnes by 2022, up from 14.3 million tonnes at present.

"We are setting up 500km slurry pipeline to import iron-ore into the Vijayanagar plant in Bellary from a port near Goa. My vision is to turn Vijayanagar from 10 million tonnes to 20 million tonnes, world's largest single site steel plant by 2022," chairman and managing director Sajjan Jindal said on Sunday.

He was speaking on the sidelines of inauguration of Ispat Pragati Bhawan, the new office of Institute of Steel Development & Growth (Insdag) in the city.

In September, Jindal had announced plans to acquire the insolvent Lucchini for as little as $100 million.

Lucchini, which was owned by Russia's Severstal, had a steel capacity of about 2.5 million tonnes, but had become insolvent in 2012 and the Italian government had placed it under special administration and has since been looking for a buyer.

Sajjan Jindal had earlier said JSW would be in a position to acquire Lucchini's three mills for less than $100 million.

JSW Steel had also recently clarified in a stock exchange filing that the acquisition was in line with its strategy of operating nearer to markets.

"In line with our long-term strategy to acquire finishing mills near to the market, we have submitted a binding bid for takeover of rolling mills of the Piombini Plant of Lucchini in Italy subject to certain terms and conditions. We are yet to get the response on this bid," the company had stated in the stock exchange filing.

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