Now, Vedanta eyeing stressed steel assets

Vedanta Resources' chairman Anil Agarwal (Photo: Subrata Majumder)
Stressed steel assets — currently facing insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 — have now courted interest from natural resources conglomerate Vedanta.

“We are not looking at it right now, but whenever it comes up for auction, we will definitely look at it,” Vedanta Resources Plc Chairman Anil Agarwal has said, while making it clear that the firm would only bid for assets that give return on capital.

In June, an internal advisory committee, set up by the Reserve Bank of India, had identified 12 defaulters. The RBI had then issued directions to banks to immediately file for insolvency proceedings against the 12 firms. Five — Bhushan Steel, Essar Steel, Bhushan Power & Steel, Monnet Ispat & Energy, and Electrosteel Steels — were from the steel sector. 

The other likely bidders for the steel assets are ArcelorMittal, Posco, JSW Steel, and Tata Steel, among others.

Agarwal, overall, was bullish on India, and its interest in bidding for stressed assets could well be an endorsement of the India story. It is not clear what size of asset Vedanta might be looking at. The size of the steel assets, which are currently facing bankruptcy proceedings, range from 1.5 million tonne (mt) to 10 mt.

At this point, because of all the policy changes, there may have been a slowdown, Agarwal said. He was speaking in the context of the gross domestic product (GDP) growth, which was at a three-year low in the first quarter of the financial year 2018. 

He, however, said that India would bounce back in a big way. “This decade is for India. I am 100 per cent sure that the GDP growth will cross 8-9 per cent in one or two years. We just need to give some time to let things settle down,” he said. 

Vedanta has outlined an investment of $7 billion over the next 3-4 years. Of this, $2.5-3 billion would go to oil, $1-1.5 billion in aluminium, $1 billion in iron ore, $0.5 billion in copper, and another $1 billion in zinc. “We employ 80,000 people, I am looking at another 30,000-40,000 people (in the next 3-4 years) with the new production,” Agarwal said. With this investment, the firm is looking to expand capacity by at least 60 per cent.

The company is also planning to invest around ~5,000 crore in start-ups and plans to nurture them under the verticals the company operates in. “We will give support to start-ups. There are 50 types of new products that can be developed in copper, iron ore. We can support them to make the feasibility and with raw material. We are working with them. We may go to the board with the funding plan,” Agarwal said.

Agarwal, however, expressed anguish over the cap on iron-ore mining. In April 2014, the Supreme Court had set a 20-mt-a-year cap on iron-ore mining in Goa. “On the one hand, the government says we have to produce 300 mt of steel, and, on the other hand, there is a cap. It has to be removed. We have to increase production. We are working with the government, working with the court. This is an emergency. We should run full capacity and make full production,” said Agarwal.

The chairman also wants to increase oil production, but is selling at a 10 per cent discount. “With the 10 per cent discount, nobody will invest in India. The government is also working and we are also suggesting that we should be allowed to get international price and we should be encouraged to produce more oil,” he said.

But Vedanta's investment story stands irrespective of the chinks in the India story. Of the proposed $7-billion investment, the company would invest $2.5 billion in the next one year — most of that would be in oil & gas and aluminium sectors.

Vedanta's plans

  • In 3-4 years, it would invest $7 bn in existing businesses to enhance capacities by 60%
  • Firm to make additional employment of 30,000-40,000 people in 3-4 years for new production
  • Plans to create around Rs 5,000 crore start-up fund
  • Vedanta Resources Plc has revenue of $11.5 bn, Ebitda of $3.2 bn 

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