MMTC to offload 26% equity in Sical Iron Ore Terminal

2nd stake sale plan after the decision to divest 9.5% in ICEX

Government-owned trading company MMTC has initiated a process to offload its entire 26% equity in Sical Iron Ore Terminal (SIOTL), a subsidiary of Sical Logistics. The terminal has been set up at Kamarajar Port Ltd (formerly Ennore Port Ltd).

This is the second joint venture company where MMTC is completely exiting its stake. In June, it had invited bids from those interested to sell its residual 9.5% stake in Indian Commodity Exchange (ICEX), signalling its exit from the bourse. Though MMTC did not elaborate on the reasons, it was attributed to ICEX’s dismal performance, with trading suspended for three years.

In the latest move, MMTC has invited bids from prospective buyers for its stake in SIOTL. It had already floated a Request for Proposal to this effect. The financial bids for the sale would be opened on November 10. It’s not known why MMTC is divesting; chairman and managing director Ved Prakash did not respond to calls or answer text messages.

MMTC had invested Rs 33.8 crore. SIOTL was incorporated in September 2006. The company entered into a Build, Operate & Transfer licence agreement with KPL for 30 years, with effect from February 2008. The plan was to set up an iron ore terminal of six million tonnes per annum (mtpa) capa in the first phase, to reach 12 mtpa in phase-II. Currently, Sical Logistics has 63% in the JV, MMTC has 26% and L&T Infrastructure Development Projects has 11%.

Despite completion, the operations did not commence due to the Supreme Court ban in 2011 on iron ore mining in Karnataka. After this, SIOTL sought approval from the Union ministry of shipping for conversion to a coal handling terminal. This approval came and the company received a Letter of Award from KPL for this in July 2016, as a terminal to handle coal with a capacity of 12 mtpa. 

According to an ICRA report dated August 22 this year, the terminal received environmental clearance recently and is expected to commence the conversion. Coal terminal operations are expected to commence in early FY19. The management received sanction for a Rs 500-crore loan, to be used for refinancing of debt and to fund the conversion.

For 2016-17, SLL, on a standalone basis, reported a net profit of Rs 45.5 crore on an operating income of Rs 740 crore. On a consolidated basis, the net profit was Rs 39.3 crore on operating income of Rs 922 crore.