JSW Steel, ArcelorMittal, along with several private equity funds, have expressed interest in acquiring the iron ore mines and steel plant currently under the ownership of ESL Steels Ltd, a part of Anil Agarwal’s Vedanta Ltd.
Despite Vedanta Group’s projection of an enterprise valuation at Rs 10,000 crore for the assets, potential buyers are leaning towards a reduced valuation, according to insiders familiar with the matter. Vedanta had purchased the former Electrosteel Steels’s facility, capable of producing 2.5 million tonnes annually, 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 be potentially sold separately, with a combined expected price close to Rs 10,000 crore. However, offers are anticipated to be in the range of Rs 7,500 crore to Rs 8,000 crore.”
Interestingly, this isn’t the first time JSW Steel has been approached regarding the plant’s sale. “JSW Steel has shown interest particularly in the iron ore mines that Vedanta owns in Karnataka and Goa,” stated JSW Steel’s Joint Managing Director, Jayant Acharya.
While JSW Steel and ArcelorMittal chose not to comment on the development, Vedanta remained unresponsive to queries. Nevertheless, Vedanta’s Group Chairman, Anil Agarwal, has hinted at concluding the transaction by the end of the current financial year.
Acquiring Vedanta’s steel plant in Jharkhand would provide ArcelorMittal, which previously purchased the Essar Steel plant in Gujarat, a foothold in Eastern India, thereby providing proximity to essential raw materials. It has been indicated by one of the bidders that Vedanta Group has committed to obtaining the necessary environmental clearances, which has, until now, delayed the sale.
The deal is vital for Vedanta, aiming to amass funds to facilitate Vedanta Resources in clearing a debt amounting to $1 billion, due by January of the upcoming year. Beyond these assets, Vedanta Ltd has also considered selling its copper plant in Tamil Nadu, but as of now, no offers have come forth, stated a banker with knowledge on the matter.
The Supreme Court is set to conduct the final hearing concerning Vedanta’s now-shuttered copper plant. Earlier in April, the Supreme Court granted Vedanta permission for maintenance activities at the facility. However, bankers have expressed that until a decision by the Supreme Court is reached, selling the asset might be challenging for Vedanta.
Recently, on September 29th, Vedanta Ltd unveiled plans to establish six separate listed entities for its various businesses. According to this strategy, Vedanta Steel and Ferrous Materials will encompass the iron ore mines located in Karnataka, Goa, and Liberia, as well as ESL Steel Ltd. This segment will be the group’s first to be offloaded.