These companies have sought the approval of the Competition Commission of India (CCI), stating the proposed deal won’t “cause any appreciable adverse effect on competition in any relevant market in India”.
With the domestic steel sector recovering from a global price crash, the race to acquire input producers seems to be hotting up. The project management arm of Sajjan Jindal-led JSW Group and two other companies will acquire Brahmani River Pellets (BRPL) after Tata Steel’s deal to buy the Odisha-based pellet maker collapsed in October last year. JSW Techno Projects Management and Thriveni Pellets will pick up 49% each in BRPL from the latter’s holding company Aryan Mining and Trading Corporation (AMTC), while Mitsun Steels will buy 2%. These companies have sought the approval of the Competition Commission of India (CCI), stating the proposed deal won’t “cause any appreciable adverse effect on competition in any relevant market in India”. While the application doesn’t mention the deal value, sources told FE that JSW Techno could cough up `500-600 crore for its 49% stake in BRPL. Assuming that both Thriveni and Mitsun might have valued BRPL at the same level, the total deal size could be roughly around `1,100 crore. Tata Steel had in December 2016 announced to buy BRPL for `900 crore, before terminating the agreement in October 2017. BRPL has capacity to produce around four million tonne of pellet and has an iron ore processing facility with similar capacity in Odisha.
While JSW Techno could use the acquisition to further its interest in trading of mineral or pellets, a 49% stake in BRPL would substantially enhance Thriveni’s stature as a pellet maker. The JSW arm is learnt to be planning some investments in the mine, slurry pipeline and beneficiary plant of BRPL as well. So, it has to shell out in excess of `1,100 crore initially (for both the stake purchase and fresh investments), said the sources. JSW Techno had been in talks with BRPL even before Tata Steel got into the deal with the pellet maker, one of the sources said. The talks gained momentum again when the agreement between the Tatas and BRPL collapsed, leading to the clinching of the latest deal. JSW Techno Projects, a part of JSW Group, is owned by the Sajjan Jindal family trust. It is engaged in operation and maintenance/project management consultancy services; strategic investments; and manufacturing of industrial gases. It owns a 1000 tonne per day (tpd) oxygen plant in Dolvi in Maharashtra; a 2200 tpd oxygen plant is in the process of commissioning; and another 2200 tpd oxygen plant is under construction.
In their application with the CCI, the companies have said in case one or more acquirers don’t buy their portion of shares in BRPL, the other contender/s will have the right to own up to 100% in the pellet manufacturer. “Accordingly, it is possible that any one of the acquirers can own up to 100% of the shares of BRPL (alternate transaction) on the closing date,” they said. BRPL is a wholly owned subsidiary of AMTC (minus six shares held by nominee shareholders). As much as 73% in AMTC is held by the Moorgate Group through its wholly-owned subsidiaries — Stemcor Iron Ore Holdings, Cyprus, and Moorgate Industries India. The remaining 27% is held by the Saraf group. Late last year, informing the BSE of the termination of its agreement with BRPL, Tata Steel had said: “The transaction has not been completed within the long stop date, due to non-fulfilment of certain conditions precedent by the sellers, obtaining the necessary regulatory approvals from the Reserve Bank of India, settlement of proceedings under FEMA by the Directorate of Enforcement, approval from the Income Tax authorities, etc.”
India’s crude steel production rose nearly 6% to touch a record 101 million tonnes in 2017, according to official data. The pick-up suggests a growing appetite. With the government favouring greater use of domestic steel by various departments, local production may get a further boost, which could encourage more such consolidation deals in the coming years.