JSW Steel, ArcelorMittal in race to buy Vedanta mines, steel assets

Vedanta's ask price for both assets at Rs 10,000 cr

JSW Steel and ArcelorMittal, along with several private equity funds, have expressed interest in acquiring the iron ore mines and steel plant owned by ESL Steel, a part of Anil Agarwal’s Vedanta Ltd, sources close to the development said.

While the Vedanta group has indicated an enterprise valuation of Rs 10,000 crore for these assets, potential buyers are seeking a reduced valuation, the sources said. Vedanta had acquired the erstwhile Electrosteel Steels’s plant having a production capacity of 2.5 million tonnes per annum in June 2018 under the Insolvency and Bankruptcy Code, marking its entry into the sector, but it is now considering selling the asset due to mounting debt concerns.

“Both the assets could be sold separately, and the combined ask price is around Rs 10,000 crore. The offers, however, are expected in the range of Rs 7,500 crore to Rs 8,000 crore,” said a source.
 

When contacted, a spokesperson for Vedanta said the company “continues to review its strategic priorities in the normal course of its capital allocation discussions”.

“In this regard, the company is carrying out a strategic review of its steel and steel-making raw materials businesses. The review is evaluating a broad range of options to maximize stakeholder value, including but not limited to a potential strategic sale of some or all of the above mentioned steel businesses,” said the spokesperson.

JSW Steel and ArcelorMittal chose not to comment on the matter.

This isn’t the first time JSW Steel has been approached regarding the plant’s sale. “JSW Steel has shown interest particularly in the iron ore mines that Vedanta owns in Karnataka and Goa,” JSW Steel’s Joint Managing Director Jayant Acharya had said earlier.

Acquiring Vedanta’s steel plant in Jharkhand would provide ArcelorMittal, which previously purchased the Essar Steel plant in Gujarat, a foothold in Eastern India, thereby providing proximity to essential raw materials. It has been indicated by one of the bidders that the Vedanta group has committed to obtaining the necessary environmental clearances, which has, until now, delayed the sale.

The transaction is crucial for the Vedanta group to raise cash so that it can help its parent, Vedanta Resources, to repay debt worth $1 billion, which is due by January next year.

Beyond these assets, Vedanta Ltd has also considered selling its copper plant in Tamil Nadu, but, as of now, no offers have come forth, said a banker with knowledge on the matter.

The Supreme Court is set to conduct the final hearing concerning Vedanta's now-shuttered copper plant. Earlier in April, the Supreme Court granted Vedanta permission for maintenance activities at the facility. However, bankers have expressed that until a decision by the Supreme Court is reached, selling the asset might be challenging for Vedanta.

Recently, on September 29, Vedanta Ltd unveiled plans to establish six separate listed entities for its various businesses. According to this strategy, Vedanta Steel and Ferrous Materials will encompass the iron ore mines located in Karnataka, Goa, and Liberia, as well as ESL Steel. This segment will be the group's first to be offloaded.

Vedanta incorporates wholly-owned subsidiary

Vedanta on Wednesday said it had incorporated a wholly-owned subsidiary, Vedanta Base Metals, to implement the demerger of its five key businesses, including aluminium and oil and gas, PTI reported.

The unit has been incorporated to implement the demerger scheme that was intimated to the bourses late last month.