Centre to discuss possibility of SAIL acquiring stake in NINL

A govt official said equity by SAIL could be up to 26% and in that case MMTC has to dilute a portion of its stake from 49.78%

The Union ministry of commerce and industry has convened a meeting next week to discuss the possibility of maharatna PSU Steel Authority of India Ltd (SAIL) acquiring stake in MMTC promoted Neelachal Ispat Nigam Ltd (NINL).
 

Talks would also be centred on NINL’s growth strategy. Steel PSU NINL’s plan to expand steel capacity from 1.1 million tonne per annum (mtpa) to five mtpa at Duburi (Odisha) has been marred by slump in the steel market. NINL, the biggest producer and exporter of pig iron was finding exports unviable due to cheaper supplies from China and Ukraine. The company has been posting losses since 2012-13 and closed last fiscal with a steep loss of Rs 334.53 crore.
 

“There was an older proposal by SAIL to pick up stake in NINL. The commerce & industry ministry is keen to ascertain if SAIL is still keen on pursuing the proposal. The equity by SAIL could be up to 26 per cent and in that case MMTC has to dilute a portion of its stake”, said a highly placed government official in the know of the matter.
 

Currently, MMTC is the biggest shareholder in MMTC with equity of 49.78 per cent. Another navratna PSU National Mineral Development Corporation (NMDC) holds 12.87 per cent. Two Odisha government PSUs- Odisha Mining Corporation (OMC) and Industrial Promotion & Investment Corporation of Odisha Ltd (Ipicol) have a combined stake of around 27 per cent.
 

MMTC, however, is no hurry to accommodate SAIL as an equity partner in NINL. “We are waiting for our captive mine to commence operations and our expansion to take off. Till then, MMTC would continue to be the biggest stakeholder in NINL. At the time of expansion, we may think of inducting a strategic partner but we prefer to do it through an open, transparent tender’’, said a senior MMTC executive.
 

SAIL’s bid to acquire stake in NINL dates back to July 2005 when a committee of secretaries (CoS) had recommended the merger of NINL with SAIL as per a proposal by the steel ministry. Alternatively, the ministry had suggested inducting another PSU Rashtriya Ispat Nigam Ltd (RINL) as a strategic investor in NINL. In May 2009, the ministry revised its proposal, suggesting that RINL should purchase 51 per cent equity in NINL from MMTC and other PSUs. But, the proposed merger of NINL with RINL fell through as MMCT failed to get the fair value of its share.
 

In February 2014, the steel ministry revived its proposal for SAIL acquiring majority stake in NINL, stating that SAIL was best suited to utilise the existing facilities at NINL and help to achieve its full potential. But, the department of disinvestment opposed the proposal, saying any move to coercively take away the shares of MMTC held in NINL is unjustified and is also not legally tenable according to Company Law.
 

In January 2016, a decision was taken to form a committee to review the present status of NINL and come up with suitable recommendations. In June 2016, a draft report on restructuring of NINL was sent to the ministry of steel, soliciting its comments.
 

The NINL plant has a capacity to produce 0.5 million tonne (mt) of basic pig iron, 0.3 mt of steel billets and also, 0.3 mt of steel wire rods per annum. Instead of exports, NINL is selling more of its pig iron in the domestic market and is able to recover cost of production and stay EBITDA (earnings before interest, taxes, depreciation and amortisation) positive.