JSW Steel, ArcelorMittal along with several private equity funds have expressed interest in acquiring the iron ore mines and steel plant currently owned by ESL Steels Ltd, part of Anil Agarwal’s Vedanta Ltd.
Despite Vedanta Group’s estimate of an enterprise valuation of Rs 10,000 crore for the assets, potential buyers are leaning towards a lower valuation, according to insiders familiar with the matter. Vedanta bought the former Electrosteel Steels facility, capable of producing 2.5 million tonnes per annum, in June 2018 under the Insolvency and Bankruptcy Code 2017, marking its entry into the sector. Due to mounting debt concerns, Vedanta is now considering selling these assets.
An informed source mentioned, “The assets could potentially be sold individually, with a combined expected price close to Rs 10,000 crore. However, the bids are expected to be in the range of Rs 7,500 crore to Rs 8,000 crore.”
Interestingly, this is not the first time that JSW Steel has been approached regarding the sale of the plant. “JSW Steel has shown interest in particular in the iron ore mines that Vedanta owns in Karnataka and Goa,” JSW Steel joint managing director Jayant Acharya said.
While JSW Steel and ArcelorMittal chose not to comment on the development, Vedanta did not respond to queries. Nevertheless, Vedanta Group Chairman Anil Agarwal hinted at closing the deal by the end of the current financial year.
The acquisition of Vedanta’s steel plant in Jharkhand will give ArcelorMittal, which previously bought the Essar steel plant in Gujarat, a foothold in eastern India, thereby ensuring proximity to essential raw materials. One of the bidders pointed out that the Vedanta Group was committed to obtaining the necessary environmental clearances, which had so far delayed the sale.
The deal is vital for Vedanta as it aims to raise funds to help Vedanta Resources clear $1 billion in debt due by January next year. Besides these assets, Vedanta Ltd is also mulling the sale of its copper plant in Tamil Nadu, but no bids have come in so far, a banker familiar with the matter said.
The Supreme Court will hold the final hearing on the now closed Vedanta copper plant. Earlier in April, the Supreme Court granted permission to Vedanta for maintenance activities at the facility. Bankers, however, expressed that until a decision is taken by the Supreme Court, selling the asset could be a challenge for Vedanta.
Recently, on September 29, Vedanta Ltd revealed plans to create six separate listed entities for its various businesses. Under this strategy, Vedanta Steel and Ferrous Materials will cover iron ore mines located in Karnataka, Goa and Liberia, as well as ESL Steel Ltd. This segment will be the first segment of the group to be unloaded.