Public sector steel company, Rashtriya Ispat Nigam Ltd (RINL) is eyeing a merger proposal with NMDC even as the chief of the state-owned miner disclaimed knowledge of it.
RINL chairman and managing director P K Bishnoi told a press conference that the proposal had been informally discussed with the ministry of steel, the parent of the two companies, and with NMDC, which had not shown much interest. However, Rana Som, chairman and managing director, NMDC, said, "I am not aware of such a move."
Mr Bishnoi, who was speaking at a press conference to announce RINL's performance and plans, explained that the merger would be a win-win situation for both companies since RINL had no captive mines and NMDC was looking at forward-integration into steel-making. All RINL's iron ore requirements are met by NMDC through long-term contracts.
RINL has also drawn up a roadmap for the merged entity. By 2020, if the merger materialised then, the iron ore production under the new entity could be ramped up to 40-50 million tonnes and steelmaking capacity to 20-25 million tons.
NMDC accounts for 15 per cent of India's iron ore production, producing 30 million tonnes of iron ore from its Bailadila deposits in Chhattisgarh and Donimalai in Karnataka, and RINL produces three million tons of steel.
Mr Bishnoi said, RINL has 22,000 acres available that could be used to set up steel plants.
The merger announcement assumes significance as NMDC plans to set up a four million tonne plant in Chhattisgarh. Earlier the project was supposed to be a three-way venture with SAIL, RINL and NMD, but the miner is now going alone. However, with or without NMDC, RINL has a corporate plan of ramping up capacity to 16 million tonnes over the next 10 years.
Earlier a merger of Steel Authority of India Ltd (SAIL) and RINL had been explored but could not progress due to political resistance.
RINL's move to approach the ministry is driven by the surge in raw material prices. RINL officials said, that margins were around Rs 10,000 per tonne but a raw material price increase of Rs 8,000 per tonne was in the offing and with a freeze on prices, it would eat into the margins.
RINL is also a member of the special purpose vehicle, International Coal Ventures, for acquiring coal assets abroad. The other members are SAIL, Coal India, NTPC and NMDC. Bishnoi said, investment bankers' empanelment process was on and Mozambique, Australia, Canada and USA were the main targets.
Source: Business Standard
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