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The company, which was demerged from government-owned NMDC last year, is now trading independently on the bourses. It has an integrated steel plant at Nagarnar in Chhattisgarh, which has a capacity of 3 million tonnes and is scheduled to be commissioned by the end of this month.
India, which is currently the second largest producer of steel in the world, aims to produce about 300 million tonnes of steel per year by 2030, which is more than double of the 120 million tonnes of steel that it currently produces. In line with this vision of the government, most of the country’s steel producers, too, are expanding their production capacities through a combination of organic and inorganic route.
“There will be definitely companies which will be interested in buying this asset, but the commissioning will be very critical. Also, capex intensity of this plant has been high,” said Ritesh Shah, analyst at Investec Securities.
NMDC has reportedly spent about ‘20,000-23,000 crore on this plant.
For buyers, assets like these are beneficial because it is “ready to use, and it brings down the gestation period, with your asset running from day one,” said Jatin Damania, analyst at Kotak Securities.”While the balance sheets of steel makers do allow them this acquisition, the price at which the stake sale happens will be important…steel makers in India typically spend $1 billion on creating a capacity of 1 mt, so one can estimate the kind of valuation that the asset will get”, he said.
The government holds 60.79% stake in the company and is looking to sell 50.79%, along with management control.
Apart from the equipment, the company will also have low costs of logistics because of its location, and investors are attracted by prospects of good value-discovery during divestment,” said an analyst tracking the steel sector, asking not to be named.
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