Jindal brothers join race for Ispat

The O P Jindal Group has emerged as a strong contender for Ispat Industries, the debt-laden company owned by Pramod and Vinod Mittal.

Both the Jindal brothers — Sajjan Jindal of JSW Steel and Naveen Jindal of Jindal Steel & Power (JSPL) — are in the fray. While JSW has already signed a non-disclosure agreement and is carrying out due diligence, JSPL has been approached by Ispat, which appointed Kotak Mahindra Bank to explore possible suitors to take controlling interest in the company, sources familiar with the developments said.

Ispat’s move follows the failure of talks with Stemcor for a strategic 10 per cent stake sale.

JSW Steel Vice-Chairman & MD Sajjan Jindal was unavailable for comment, as was JSW Joint MD & Group CFO Seshagiri Rao. JSPL Group CFO & Director Sushil Maroo said, “We have not been approached. But I can’t say about the future.”

Sources, however, said it is unlikely that either JSW or JSPL would bid against each other for Ispat. “Sajjan and Naveen never go after the same asset. Both have been approached independently. They will take a call on who will actually go ahead,” said an official privy to the development.

ArcelorMittal is also understood to be carrying out due diligence, and sources added that it, too, has signed a non-disclosure agreement with Ispat. When contacted, the company’s spokesperson said, “We do not comment on market rumours.”

Sources added that SAIL and Welspun have been approached as well by bankers, but are unlikely to be serious contenders.

Sources said it is still not clear if the Mittals will exit entirely from Ispat or will retain a token stake even after they cease to control the company. The Ispat promoters currently own 41.1 per cent. A strategic deal will also trigger an open offer for an additional 20 per cent stake in the company.

Ispat industry shares were up over 6 per cent on Thursday and closed at Rs 22.55. Its current market cap is Rs 2,756 crore. At today’s price, buying the promoter’s stake would cost Rs 1,134 crore. After an open offer, the deal size could go up to Rs 1,685 crore.

For the Jindal brothers and ArcelorMittal, buying Ispat makes immense sense. For JSW Steel, which is the largest private sector steel producer in India, the acquisition would consolidate its position in the west. For JSPL, it would mean a foothold in the region.

For ArcelorMittal, it would be a major presence in India, something it has been attempting to accomplish for the past five years.

Ispat has a capacity of 3.3 million tonnes and also holds a prospecting licence for iron ore in Maharashtra. Initial estimates indicate the mine has reserves in excess of 100 million tonnes.

Mittals’ move to sell a majority stake in Ispat gathered momentum after talks with Stemcor failed and the plant shut down following a cash crunch. Ispat’s annual general meeting is scheduled for December 21 and some clarity could emerge then.

Ispat Finance Director Anil Sureka could not be reached for a comment, but late last night, the company issued a statement that rumours about ArcelorMittal picking up a 30 per cent stake were untrue.