Tata Steel and ArcelorMittal-Nippon Steel India (AM/NS India) may not bid for NMDC’s privatisation-bound, under-construction 3 million tonnes per annum (mtpa) steel unit at Nagarnar in Chhattisgarh. This leaves Sajjan Jindal’s JSW Steel, Naveen Jindal’s Jindal Steel and Power and new entrants into the steel sector like Vedanta and Adani Group, in the fray.
The Centre had in October 2020 approved demerger of the unit from the parent NMDC and strategic disinvestment of the demerged entity by selling its entire stake in it to a strategic player. NMDC is likely to complete the demerger process by August-September, coinciding with the commissioning of the unit. Following this, bids for the demerged entity would be called for.
NMDC may end up spending around Rs 22,000 crore, higher by Rs 6,500 crore than originally estimated, for the plant mainly due to seven years of time overrun.
“The long-term outlook for the steel industry in India is positive, given the huge investment expected in infrastructure. Therefore, a sizeable plant which is at a very advanced stage of commissioning should be attractive to steel players, since a greenfield steel project, otherwise, has a long gestation period,” said Jayanta Roy, Sr VP & group head, corporate sector ratings, ICRA.
Greenfield steel unit of the size of Nagarnar is rare. Barring JSPL’s greenfield unit of the 6 mtpa size at Angul in Odisha, commissioned in 2017, no major greenfield steel unit has come up in recent times. Meanwhile, steel firms have raised their capacities, but those are mostly through the brownfield route and debottlenecking of the existing facilities.
The Nagarnar steel plant has around 2,180 acres of land, including 1,940 acres on which the plant is located. The capacity of the unit can be scaled up by another 2-3 mtpa in the next phase without requiring additional land.
The product-mix of the unit is also attractive. Apart from hot-rolled coils and auto-grade steels, it will have grades for producing API pipes, used in modern infrastructure and products for manufacturing LPG cylinders.