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| Uttam Galva banks on Mittals' 'Midas touch' |
| BS Reporter / Mumbai Sep 06, 2009, 00:03 IST |
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Says the co-promoter deal will give it technology access, assured raw material supplies.
Uttam Galva, which entered into a co-promoter deal with ArcelorMittal yesterday, today said it expected assured raw material supplies and access to technology from the tieup with the world’s largest steel company.
The Rs 4,500-crore Uttam Galva will enter new segments like specialised steel production for automobiles and white goods. At present, the company specialises in processing hot-rolled coils into cold-rolled coils and further into galvanised and colour-coated coils.
“The deal will get us the Midas touch of the Mittals,” Ankit Miglani, Uttam Galva’s director, told reporters a day after announcing the deal with ArcelorMittal. “It makes sense to align ourselves with a global steel company, as it has technology that we don’t have. Also, we are getting raw material security from this association. However, we still retain the option to import from other sources.” This collaboration is not to enhance volumes but to enhance products, he added.
ArcelorMittal signed an agreement with the Miglani family, the founder of Uttam Galva, yesterday to buy a 5.6 per cent stake. Luxembourg-based ArcelorMittal will make an open offer at Rs 120 a share for a 29.4 per cent stake in Uttam Galva starting Monday.
Miglani said that he doesn’t expect any major change in the way the company is running currently. “There will be joint management and the board will have equal number of directors from both the promoters. The mix would include three directors from the existing promoters and three from the co-promoters.”
Commenting on the open offer, Miglani said if the open offer was successful, ArcelorMittal will hold 35 per cent in the company.
If the open offer fails to go through, ArcelorMittal’s stake will be 22.5 per cent. The promoters hold 45 per cent stake in the company now. He also said that the funds coming from the transaction will go to the shareholders and not the company. “Equity enhancement is not an option at this point, but the option is not ruled out going forward”, he said. Miglani said the company was unable to achieve full capacity utilisation so far, but that could change now with ArcelorMittal coming on board. He, however, ruled out any expansion of production capacity from the existing one million tonnes. Asked whether ArcelorMIttal will eventually hold a majority stake in Uttam Galva, Miglani said that was not a possibility. He also ruled out any plan to sell the 200 acres held by Uttam Galva in Orissa to the proposed ArcelorMittal greenfield project in the state. However, Uttam Galva was open to such deals if its board decides so, he added.
Uttam Galva currently procures 500,000 tonnes of hot-rolled steel from various ArcelorMittal facilities. The deal is neither binding on Uttam Galva nor will it be eligible for any price concession as a result of the co-promotion deal.
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