Transaction advisors looking into the divestment of NMDC’s steel unit - NMDC Steel Ltd - have raised concerns over the delay in commissioning of the plant following a break-down in one its equipments. This could lead to an overall delay in the divestment process.
A proposal to delay the divestment process — and coincide it with the commissioning at a later date — was also shot down by the Department of Investment and Public Asset Management (DIPAM), under the Union Ministry of Finance.
DIPAM has also “considered the delay as serious” and asked NMDC — the country’s largest iron-ore miner — to get technical issues sorted out.
Commissioning the steel plant without re-installation of the now defunct equipment, could lead impact “on true value” of the de-merged entity, the transaction advisor, SBICAPS, have said during the review meeting.
According to the minutes of a meeting accessed by BusinessLine, SBICAPS highlighted that “this delay in commissioning of plant could delay other activities such as site visits to plant by the interested bidders”.
It was also highlighted that if demerger activities are completed without timely commissioning of integrated steel plant, “the true value of the company i.e. NMDC Steel Limited (NSL) may not be reflected”.
“Keeping in view the original objective of demerger, i.e. NSL’s immediate disinvestment to strategic buyer upon its demerger, it was highlighted that delay in commissioning may also delay the disinvestment process,” it was noted in the minutes of the meeting.
As a result, NMDC Steel Ltd will start functioning as a GoI company with an under-construction plant requiring fund infusion for completion of project, another concern that was highlighted during the meeting.
Delaying the de-merger
The PSU miner (NMDC), on its part, has informed that they have a Letter of Credit (LOC) from SBI of ₹5,000 crore of which can be utilised for the same. This credit, though, as was pointed out to the present NMDC officials, is available mainly for the capex purposes.
“NMDC suggested to delay the de-merger process so as to coincide with delay in commissioning of plant. This suggestion was not accepted by DIPAM as it would further delay the disinvestment process,” the minutes said.
Currently, commisioning of NMDC’s 3-million tonne per annum integrated steel plat at Nagarnar has been delayed “by at least three months” due to burning of motor which has in turn stalled commissioning of the oxygen plant.
NMDC has during the meeting informed that BHEL – the equipment maker – has indicated six months timeline for repair of motor.