JSPL buys 10% in Gujarat NREs Oz unit

Jindal Steel and Power Ltd (JSPL), through its Mauritian unit, bought a 10 per cent stake in Gujarat NRE Coke Ltd’s Australian subsidiary, Gujarat NRE Coking Coal (GNM), for around $25 million (Rs 137.5 crore), the company said on Monday.

JSPL paid $0.25 per share for 100 million shares of GNM, which was a 48 per cent premium to GNM’s closing price of $0.17 per share on May 25.

Apart from the stake sale, the two companies also signed an off-take agreement for supply of five million tonnes (mt) of coking coal for Jindal Steel’s India operations for 10 years.

GNM said: “The off-take agreement over 10 years for a total of 5 mt is based on an annual offtake of 0.5 mt of run-of-mine (ROM) coal with the option for additional quantity of 0.5 mt at benchmark-linked price.”

The Australian firm owns and operates two premium quality hard coking coal mines required in steelmaking. The deal is expected to be completed by May 30.

This is not a huge investment by JSPL, but is in line with the company’s strategy to pick up stakes in firms that can offer raw material security. Sushil Maroo, director (finance) at JSPL, told Business Standard: “This investment is part of our policy to secure coking coal supplies.”

Arun Kumar Jagatramka, executive chairman of Gujarat NRE, said: “This is a win-win deal for both parties since it provides secured supply of premium hard coking coal to Jindal Steel, while it diversifies the customer base of the company.”

On May 8, JSPL had acquired a 9.25 per cent stake in another Australian company, Apollo Minerals, for $1 million.

Gujarat NRE Q4 loss at Rs 45.5 crore
Gujarat NRE Coke posted a stand-alone net loss of Rs 45.51 crore for the quarter ended March 31, due to a host of reasons, including decline in sales, increased interest outgo and forex losses. The Kolkata-based coke producer had reported a net profit of Rs 51.64 crore in the corresponding quarter of 2010-11.