Tata Steel, JSW, Adani likely to bid for Neelachal Ispat's Odisha plant

Topics NINL | Neelachal Ispat

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Tata Steel, JSW Steel, and Adani Group are likely to bid for Neelachal Ispat Nigam’s (NINL’s) one-million tonne (mt) steel plant in Odisha’s Kalinganagar industrial complex.

Earlier this month, the Cabinet Committee on Economic Affairs gave the go-ahead for strategic disinvestment of 100 per cent equity shares in NINL, jointly owned by MMTC, two Odisha government-controlled public sector undertakings (PSUs), and a clutch of central public sector enterprises — NMDC, Bharat Heavy Electricals, Mecon (formerly known as Metallurgical & Engineering Consultants), among others.

Plans are afoot to ramp up NINL steel plant’s nameplate capacity to 10 million tonnes per annum (mtpa), from the current 1.1 mtpa. 

Key facilities of the NINL steel mill, such as blast furnace and steel melting shop, are on shutdown for over six months for want of capital infusion by the lead promoters. Only the coke oven plant was operating at depleted capacity. 

While MMTC — the largest shareholder — has already apprised the BSE of its intent to sell its entire 49.78 per cent equity in NINL, two other Odisha government-owned PSUs — Odisha Mining Corporation and Industrial Promotion & Investment Corporation of Odisha — were no longer keen to retain their stake adding up to 32 per cent.

Analysts still believe NINL is a good asset up for grabs, with its facilities and a captive iron ore block, potentially making it an attractive bet for bidders.

“There is the vision of brownfield capacity being ramped up. The NINL plant can be revived. Besides, the steel plant has captive iron ore mines. The possibility of brownfield expansion and availability of land will be crucial for any bidder,” said Giriraj Daga, investment manager, KM Visaria Family Trust.

However, the prospective bidders are non-committal on their plans to bid for the NINL asset. Adani Group did not respond to a questionnaire sent by email.

“We would not like to offer any comment on the matter. Suffice it to say that evaluating stressed assets is an ongoing strategic process in Tata Steel,” said Tata Steel in a written response to Business Standard’s queries.

A spokesperson at JSW Steel said, “We have no comments to offer on this.” NINL had successfully completed the revamp of its blast furnace. It has also diversified its products portfolio by churning out steel billets and its own brand of TMT bars. But lack of capital infusion by the promoters queered the pitch for its expansion and diversification. An industry source said NINL needed an immediate injection of Rs 900 crore to make all the key components running again. 
NINL’s leveraged balance sheet made it ineligible to avail of formal credit from banks or financial institutions.  For the past five years on the trot, NINL has been stacking up losses. Last financial year too, it ended in the red, despite turning earnings before interest, tax, depreciation, and amortisation positive, following the successful completion of its blast furnace capital repair work and resuming of steel billet production. 

The steel plant possesses 2,500 acres of unencumbered land to expand capacity to 5 mt, a state-of-the-art coke oven battery with dry quenching facility, an already commissioned steel melting shop, proximity to the major port at Paradip, and an iron ore mine boasting of 110-mt deposits and with a lease validity spanning 50 years.

Mecon had previously revalued the assets of NINL at approximately Rs 8,300 crore on conservative estimates. NINL’s liabilities are below Rs 5,000 crore.

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