Stemcor India’s valuations fall as litigation takes toll

Jan 09 2014, 15:03 IST
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Stemcor India’s current value being pegged at Rs 3,500-4,000 crore. PTI Stemcor India’s current value being pegged at Rs 3,500-4,000 crore. PTI
SummaryStemcor India’s current value being pegged at Rs 3,500-4,000 crore

Stemcor India, which had put up its assets in India for sale since September, has seen its valuations tumble to almost 50% of what was earlier quoted when the asset was first put on the block, say sources.

According to sources in companies currently looking at buying the assets, their current value is being pegged at not more than R3,500-4,000 crore, or roughly in the range of $6 million, against an earlier estimated figure of $1-1.2 billion. This is a downward revision since September 2013 and ushers in better negotiation power for companies like JSW Steel, Jindal Steel and Power, Essel Mining of the Aditya Birla Group, Essar Steel and Visa Steel.

In fact, with the interested bidders now progressing with their due-diligence of the two main assets of Stemcor India and their accounts, startling revelations have come out forcing the interested companies to look at Stemcor India as not an out-an-out attractive buyout.

This has been accentuated with the Justice MB Shah Commission’s debilitating report released on December 26 accusing most of the mining companies in Orissa of being involved in illegal mining.

The Commission report had said all 55 mines around the Baitarni river and its tributaries should not be allowed to operate till the time their environmental approvals are revisited. “Almost all major companies are part of the Baitarni river iron ore belt and Aryan Mining is one of them,” said a top official in the Orissa government’s mining department, while refusing to divulge any more information.

Aryan Mining, which is the shining jewel in Stemcor India’s crown, is also embroiled in litigations apart from the allegations of the Commission report. In 2012-13, the company had to keep its operations shut for almost seven months as the state government had initiated “investigation of various statutory compliance being carried out by the mining department”.

In November 2012, mining was suspended as a new policy was announced by the state government, which said the company’s mining lease would be renewed only if the extracted ore is used for captive consumption.

“However, on an application by the company to revisional authority, a stay order was issued against the suspension of mining operations and despatches resumed in February-March 2013,” the company’s annual statement said.

In response, the state government, too, filed a writ petition in the High Court Orissa, Cuttack, against the stay order of the revisional authority.

The company has also been slapped with a fine of Rs 507.82

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