MMTC to sell 26% equity of Sical Iron Ore Terminals

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

This is the second joint venture (JV) company where MMTC is completely exiting its stake. 

Earlier in June,  the trading firm had invited bids from interested players to sell its residual 9.5 per cent stake in the Indian Commodity Exchange (ICEX), signalling its exit from the bourse. 

The MMTC board had decided not to make further investments in ICEX and pull out of it. Though MMTC did not elaborate on the reasons for exiting the exchange, it was attributed to ICEX’s dismal performance over the years when trading remained suspended for three years.

In a latest move, MMTC has invited bids from prospective buyers for acquisition of its 26 per cent stake in SIOTL. 

MMTC has already floated a Request for Proposal (RFP) to this effect. The financial bids for MMTC’s equity sale in SIOTL open on November 10. Before the bids open, MMTC would facilitate site visits for the interested and prospective bidders.

It’s not known why MMTC is divesting its equity in SIOTL. MMTC’s chairman and managing director Ved Prakash did not respond to calls nor answered text messages.

MMTC as its equity component has invested Rs 33.80 crore in SIOTL.

SIOTL was incorporated on September 5, 2006. The company entered into a Build, Operate & Transfer (BOT) license agreement with the Kamarajar Port Ltd (KPL) for 30 years with effect from February 6, 2008. 

The project was planned towards setting up an iron ore terminal of capacity six million tonnes per annum (mtpa) in Phase I to reach 12 mtpa in Phase II. 

Currently, Sical Logistics Ltd holds 63 per cent in the JV while MMTC Ltd and L&T IDPL (Infrastructure Development Projects Ltd) hold 26 per cent and 11 per cent, respectively.

Despite completion, the operations did not commence due to a Supreme Court ban on iron-ore mining operations in Karnataka in 2011. 

Post this, SIOTL sought approval from the Ministry of Shipping for conversion into a coal handling terminal. Subsequently, SIOTL received the approval from the Ministry of Shipping. The company received the Letter of Award from KPL in July 2016 for conversion of terminal to handle coal with a capacity of 12 mtpa.

According to an ICRA report dated August 22 2017, the terminal received environmental clearance recently and is expected to commence conversion operations shortly. 

The operations of coal terminal are expected to commence in early FY19. The management received a sanction of Rs 500 crore loan which is to be used for refinancing existing debt and also to fund the conversion Capex.

For 2016-17, SLL, on a standalone basis, reported a net profit of Rs 45.5 crore on an operating income of Rs 739.6 crore. SLL, on a consolidated basis logged net profit of Rs 39.3 crore on an operating income of Rs 922 crore in FY 2017.