UK-based investor Nithia Capital eyes more acquisitions in steel space

Firm has been active in Indian steel space the past few years. Earlier in the month, it completed acquisition of Crest - under IBC - for a consideration exceeding Rs 600 crore

UK-based global advisory and investment firm, Nithia Capital, which recently snapped up Crest Steel and Power, is eyeing more acquisitions.

“There are at this point three or four active transactions that we are pursuing. If we complete these assets we will add roughly around a million tonne to the existing steel capacity,” said Jai Saraf, founder and CEO, Nithia Capital.

Not all the assets are in the primary steelmaking space - some are downstream and some on the raw material side. A few assets are understood to be outside of the Insolvency and Bankruptcy Code (IBC) and through private negotiations.

Nithia has been active in the steel space in India the last few years. Earlier in the month, it completed the acquisition of Crest - under IBC - for a total consideration in excess of Rs 600 crore. The acquisition was in partnership with Amalgam Steel with Nithia having majority control of the partnership.

The Crest acquisition came after the acquisition of Uttam group companies early 2021. With CarVal Investors, Nithia had acquired Uttam Galva Metallics (UGML) and Uttam Value Steel (UVSL) for a total purchase consideration of more than Rs 2,000 crore. The assets were on the RBI’s second list of non-performing assets (NPAs) for debt resolution under IBC.

Two growth options are currently being pursued by Nithia. While it is looking at acquisitions, it is also looking to add capacity through brownfield expansion of the assets acquired.

Saraf said that Nithia will invest in 2 million tonne capacity, roughly at a cost of Rs 5,000-6,000 crore in the next three years, including acquisitions and capex.

At this point in time, Uttam is producing 700,000 tonnes of finished products. The aim is to make Uttam a single-site 2 mt fully integrated steel plant, said Saraf. That is likely in three years with phase wise expansion.

The investment in Uttam has paid off. Saraf said that in the first year of the completion of acquisition, that is FY22, the combined EBITDA for UGML and UVSL will be in excess of Rs 1,250 crore. At the time of acquisition, it had a negative EBITDA, he said.

“There is significant cash generation happening at the company level which is enough to fund its growth,” said Saraf. He also pointed out that there was significant room to leverage the balance sheet.

Saraf’s investment in India has been focused on steel and steel-related assets. “The India story is exciting and for the next 20-25 years, it will play a vital role in fuelling the growth for capacity,” explained Saraf.

Nithia had earlier looked at major steel assets like Essar Steel before it was put up for debt resolution under the Insolvency and Bankruptcy Code (IBC). However, as major steel players evinced interest, Nithia reconfigured its India strategy and started focusing on smaller assets.