Centre's disinvestment plan: A stress test for zombie steel plants

 

With the government looking to divest loss-making steel assets, significant interest from secondary players is most likely this time apart from the anticipated list of large integrated primary steel producers, said industry experts.

Rashtriya Ispat Nigam Limited (RINL), Neelachal Ispat Nigam Ltd (NINL), NMDC Integrated Steel Plant (NISP)-Nagarnar, Ferro Scrap Nigam Ltd and three units of Steel Authority of India (SAIL) — Alloy Steels Plant, Durgapur; Visvesvaraya Iron and Steel Plant, Bhadravati; and Salem Steel Plant, Salem — constitute the divestment list. All the three units of SAIL have been loss-making for more than five years.

“Some promoter-driven secondary players could have much bigger interest towards the smaller, really stressed assets put out for divestment, making it a fresh list of buying interest this time,” said Saurabh Bhatnagar, Partner and National Leader, metals and mining at EY India.

Kalyani Steels, Godawari Power & Ispat Ltd and Prakash Industries are some of the secondary steel companies in the domestic market.

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“We are keen on expansion and have expressed interest in NINL. If we get it at the right price, our capacity would more than double from the current 0.5 million tonne,” said R K Goyal, managing director of Kalyani Steels.

Kalyani Steels has an integrated facility at Hospet and a secondary unit in Pune. It is currently running three mini blast furnaces at its Hospet plant. Its FY20 annual report shows that the company has cash and cash equivalent of Rs 14.8 crore with negligible debt on books. Its net profit margin in FY20 stood at 11.40 per cent from 9.40 per cent in the preceding fiscal. The company’s net worth has also grown over 8 per cent on a year-on-year basis.

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