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Sources close to the deal said the transaction would value the company at around Rs 350 crore.
A senior Amtek Auto official said on condition of anonymity that the auto-component group is looking at acquiring a steel company with captive iron ore and coal mines as part of its strategy of backward integration.
In 2007-08, OISL had reported revenues of Rs 177 crore and net profit of Rs 8.4 crore. The promoters hold 61 per cent of the company.
Sources said Amtek Auto has begun the due diligence process and is expected to close the deal early next month, through a special purpose vehicle that will be funded by the promoters and also partially by the Amtek Auto.
OISL was originally a wholly- owned subsidiary of OCL and was spun off into a separate company in 2006. The company has captive iron ore mines of around 5 million tonnes and coal mines of around 20 million tonnes. It also has a 20,000 tonne a year sponge iron unit and is setting up a blast furnace. The company also has a 14 Mw power plant that is partly run on waste heat from the sponge iron plant and is partly coal based.
Dham had earlier explored the acquisition of Orissa Sponge Iron Ltd, which is now locked in a three-way battle between the promoters, the Singhal brothers of Bhushan Group and Monnet Ispat.
OISL’s share is currently trading at Rs 10.56 on the Bombay Stock Exchange.