On September 1, JSW Steel announced that it was merging JSW Ispat Steel with itself. JSW Steel had originally bought a majority stake in Ispat Industries — a steel company started by industrialist M L Mittal — in 2010, after which it was renamed. This brings to a finale, the tortured history of arguably one of the finest steel makers in the country that ultimately hit rock-bottom and fell by the wayside.
Set up as Nippon Denro Ispat Ltd in 1984 by M L Mittal, the plant, according to JSW Steel Chairman and Managing Director Sajjan Jindal, is, till today, one of the most modern steel plants in the country.
According to the company, Ispat is the only steel maker in India and among a few in the world to have total flexibility in the choice of the steel making route, be it the conventional blast furnace route or the electric arc furnace one. Its dual technology allows Ispat the freedom to choose its raw material feed, be it pig iron, sponge iron, iron ore, scrap or any combination of various feeds. It also has total flexibility in choosing its energy source, be it electricity, coal or gas.
Incidentally, Nippon Denro was granted the first industrial licence by the government of India for manufacturing galvanised plain/corrugated sheets. This is also where L N Mittal, chairman of ArcelorMittal, started his journey towards becoming the steel tsar of the world.
M L Mittal began his own voyage in the steel sector in 1952 when he took over an ailing steel mill in Calcutta, now Kolkata. He made it profitable and later sold it off. In 1974,
M L set his sights on Indonesia and the Ispat Group came into being. L N Mittal was dispatched to the country to handle this company, called PT Ispat Indo.
In 1994, L N Mittal broke away from the family and charted his own course with Ispat International. The control of Ispat Industries was held by his father and two brothers, Pramod and Vinod. In the same year, Ispat Industries set up its DRI sponge iron plant of 1.6 million tonne. This was the world’s largest and most efficient plant.
But, this efficiency proved largely irrelevant in the face of the financial losses incurred, and with practically no control over raw material supplies, the company ran itself into the ground. Ironically, L N at the time was buying steel mills all over the world and turning them around with blazing speed, unmatched by anyone else. Things back home, at Ispat, were only getting worse, with a global steel recession in full sway.
It’s not as if Ispat didn’t try to become a contender. It continued to add capacities with a hot strip mill in 1995 and conarc process to make steel in 1998 — the first of its kind in Asia — followed by a two million-tonne blast furnace to make steel in 2003. But, Ispat could never get back on its feet. Over the years, Ispat’s steel capacity stood at three million tonne, when companies like JSW Steel surpassed it.
The slowdown around the early part of the 2000s forced Ispat Industries, like Essar Steel and JSW Steel, into a debt restructuring programme to save the company. The other two successfully turned around and are leading steel makers today, with Essar having a global presence and a steelmaking capacity of 14 million tonne. JSW Steel also revived itself, increased its capacity to 11 million tonne and bought Ispat in 2010.
The recent, complete acquisition of Ispat Industries was not a straight affair for Jindal. His brother Naveen, of Jindal Steel and Power, was interested in the company, but the moment he came to know that JSW was also keen on it, he stepped back. JSW Steel hammered out the details of the acquisition in eight days.
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Meanwhile, In 2006, Mittal Steel successfully bought Arcelor and a new company, ArcelorMittal, was formed, controlling 10 per cent of the total steel production in the world.
Ispat continued to post losses, which in 2010, were in excess of Rs 2,500 crore. Two corporate debt restructuring packages later, it was finally time for lenders to push the button and force a change in management.
After JSW bought the majority 41 per cent stake in Ispat Industries, the Mittal brothers were left with 19.26 per cent in the company. Vinod Mittal continued to be the chairman to ensure a smooth transition to JSW Steel. With the merger ball finally rolling, the brothers will be left with around three per cent stake in JSW Steel and no representation on its board.
That will be the end of the road for Mittals and their association with Ispat. With the merger, JSW Steel is now looking at setting up 40 million-tonne-per-year steel capacity by 2020.
