The upper house of India’s parliament on Monday approved an amendment to the mining law, allowing the transfer of mines from sellers to buyers in a victory for the State Bank of India (SBI) that had lobbied for the change.
Under pressure to cut corporate bad debts of more than $120 billion, lenders including SBI have been trying to forge tie-ups between distressed cement, steel and power companies and those that are in better shape.
The amendment to the Mines and Mineral Development and Regulation Act, requested by SBI some three months ago, has now cleared both houses of parliament and should soon become law.
Mines Secretary Balvinder Kumar told Reuters the changes were mainly aimed at helping companies sell limestone mining licences along with their cement plants. It could also facilitate a merger of the Indian assets of France’s Lafarge and Switzerland’s Holcim after a global merger between the two companies last year created Lafargeholcim.
SBI chair Arundhati Bhattacharya welcomed the move.
“This will enable banks to sell assets to relieve stress in group accounts,” she told Reuters. “Without (the) amendment selling was becoming untenable as assets were losing value in the absence of mines.”
The deal will help UltraTech Cement Ltd’s efforts to complete a deal to buy heavily indebted Jaiprakash Associates Ltd’s cement plants for 159 billion rupees ($2.39 billion) along with its limestone mines.
UltraTech’s finance head Atul Daga told Reuters before the parliament vote that the amendment would clear the way for the deal without leaving “any ambiguity on the value of the mines”.
He predicted more deals in the sector but did not elaborate.
Dalmia Bharat Ltd, which had also bid for the Jaiprakash cement plants, said the changes would help it look for deals in the longer run given its ambition to grow from being the No.3 player in the country.
“It will allow for consolidation, it will allow for efficiency, it will allow for scale of operations,” Sundeep Kumar, Dalmia Bharat’s corporate affairs head, said ahead of the upper house vote.