Monnet Ispat & Energy (MIEL) is in talks with investors for a stake sale in subsidiary Monnet Power Company...
Monnet Ispat & Energy (MIEL) is in talks with investors for a stake sale in subsidiary Monnet Power Company, a company official told FE. The official added that the company, which manufactures sponge iron, steel and ferro alloys, is in discussions with three to four players, including international companies.
“We are presently speaking to three-four players for a stake sale. The main reason is to reduce our debts. We cannot divulge any names or information on valuations at this stage as discussions are preliminary,” the official said.
MIEL shares gained as much as 12.9% in Tuesday’s trade before closing 2.2% higher at R53.65. The BSE benchmark Sensex was muted as it closed 30.3 points lower at 28,161.72 points.
The sale of the power subsidiary is part of the parent company’s efforts to pare its consolidated net debts (steel, mining and power) that stood at close to R10,611 crore as on March 31, 2014. Of this, the power company’s debt stands at around R4,500 crore, an official said. The consolidated finance costs during the quarter ended December 31, 2014, stood at R149 crore, up from R66 crore in the same quarter of the previous year. MIEL incurred a capex of R3,205 crore in 2013-14.
An official from a public sector bank that has lend to MIEL told FE that the “company has been looking to offload its power business for sometime now”. The banker said that the power subsidiary’s project in Angul, Orissa, was facing challenges like late approvals and delayed land acquisition resulting in time and cost over-runs.
MIEL’s annual report of 2013-14 notes that the revised cost of power project in Angul is pegged at R7,117 crore instead of R5,092 crore earlier. Similarly, the commercial operation date of the project has been revised to September 2015 instead of December 2012 earlier.
Some media reports have suggested JSW Steel and Adani Group are looking to buy a majority stake and take management control in the power subsidiary. As of December, promoters held 48.59% stake in the company.
According to the MIEL website, the Blackstone Group invested R275 crore for a 12.5% stake in Monnet Power.
The power plant is fuelled by captive coal mines and has received all clearances and statutory approvals to begin operations.