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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