With race for buying Stemcor’s $800-million Indian assets hotting up, the British steel company may go the auction way to choose a buyer from a host of interested entities including Tata Steel, JSW Steel and Jindal Power and Ispat, to ensure better value, sources said.

“Stemcor had approached almost all Indian steel makers for selling its assets in India that include a pellet plant and an operating mine, both located in Odisha. As the offer has got a good response, it is mulling auctioning these assets so to ensure the best returns,” a source said.

When contacted, Stemcor India’s Managing Director Matthew Stock, who is in London now, declined to comment.

A local representative of the company also side-stepped questions saying, ”Goldman Sachs is advising us on this. It won’t be appropriate for us to talk.”

Stemcor has the majority stake in Aryan Mining and Trading Corporation (AMTC), which has 100 million tonnes of iron ore reserves with the licence to mine 3 million tonnes per annum.

Stemcor also has a 10 per cent stake in Mideast Integrated Steel (MISL) in Odisha. MISL has an iron ore mine with a current output of four million tonnes per year.

The company has a subsidiary, Brahmani River Pellets Ltd (BRPL), which has a four million tonne per annum beneficiation plant at Barbil, Odisha, and a pellet plant complex at Jajpur, connected by a 220 km underground slurry pipeline.

“Goldman Sachs is advising Stemcor to sell its assets in India. It may wait for sometime to bring the assets under the hammer, but definitely within August as it has to submit its debt restructuring plan to its lenders before the end of next month,” another source said.

As a result of the slowdown in the global steel industry, Stemcor has reportedly run into trouble and is in talks with banks after defaulting on more than $1 billion of loans.

Last week, it had presented a recovery plan that proposed shrinking the business. It has to present a full debt restructuring plan to lenders by the end of August.

The Indian assets, estimated to be worth $800 million, will certainly boost the captive supply of an acquirer at a time when almost all of them are expanding capacities. The assets will also help them to ensure long term supply as well as value addition capabilities.

(This article was published on July 29, 2013)
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