Sesa Goa: Asset mining

Sesa Goa’s acquisition of Dempo Group’s iron ore assets in Goa bears a stamp of Vedanta Resources Chairman Anil Agarwal’s signature strategy — buy low-value assets, pump investments into them and work to turn them into cash cows. Vedanta’s previous acquisitions of Hindustan Zinc, Balco, Konkola Copper Mines and the 2007 takeover of Sesa Goa have helped the company multiply the value of its metals business. Along the same line, Agrawal-controlled Sesa Goa aims to scale up its iron-ore trade volume through the Rs 1,750-crore Dempo deal.

Sesa now has access to Dempo’s 21 mines in Goa with mineable resources of around 70 million tonne. At present, Sesa is the largest exporter to China where demand is picking up after the slump. Dempo, on its part, has international clients like Nippon Steel of Japan, Jinan Iron & Steel, Quingdao Steel of China and Noble Group of Hong Kong.

Ambit Corporate Finance Vice-president Ashim Bhuwania, the financial advisor of the deal, says that the acquisition brings strong operational synergies to Sesa Goa. “In Goa, some of the Sesa and Dempo mines share common boundaries and some of them are located close to each other. Sesa has a track record of ramping up production capacity and improving efficiency, which will improve the value of the assets acquired,” adds Bhuwania. Industry analysts say that Sesa is toeing the global trend where mining companies are consolidating assets for better price bargaining and market control.