The Hindu Business Line : MMTC may pump Rs 500 cr in Neelachal

IN view of the fact that the Union Government has not shown much interest in roping in a strategic partner with a controlling stake in Neelachal Ispat Nigam Ltd (NINL) through the open bidding route, MMTC Ltd is said to be getting ready to carry out the first phase of NINL's expansion all by itself.

The Centre has reportedly asked NINL to go slow with its proposal and explore the possibility of roping in a PSU steel maker as a strategic partner. MMTC had previously held several rounds of negotiations with Vizag Steel on the issue but without making much headway.

Senior level MMTC officials told Business Line that the company was now considering investing Rs 500 crore in the next three years to add steel- making capacity to NINL. "While some groundwork has already been done, we are still deliberating on the issue and may approach the board shortly to seek approval for the investment."

Stating that NINL currently had only iron-making capacity, the sources said that the proposed expansion would add a steel-melting shop and other required facilities to produce billets. "While the discussion over inviting a strategic partner continues, we would like to set the ball rolling by adding steel-making facilities. We have enough resources and if the board approves we can line up the investment from our internal accruals only."

Holding a controlling stake in NINL, MMTC had prepared a plan — as per the original project proposal — to offer 51 per cent stake in the expanded equity capital to a strategic partner, the target being to expand the capacity of NINL from 1.1 million tonne to four million tonne.

As the initial discussions with Vizag Steel failed to fructify, MMTC preferred the open bidding route to make the entire deal transparent and expeditious. It was planned that MMTC would hold a 26 per cent stake in NINL after induction of the new partner and the combined stake of all PSUs was pegged at 49 per cent.

The proposal, prepared by A F Ferguson, was apparently approved by the Orissa Government, a minority partner in the project, other minority stakeholders and also the lenders consortia led by IDBI and State Bank of India.

At a meeting on October 14 this year, the board of directors of MMTC had decided formally to approach the Union Commerce Ministry to issue an open tender inviting up to 51 per cent equity participation in NINL which, however, has not taken place till date.

Blessed with quality captive ore linkages, NINL had attracted many interested parties both in India and abroad during the past three years, including Tata Steel, SAIL and POSCO.