Mumbai-based mining giant Vedanta plans to sell Electrosteel Steels Ltd. to focus on its mining and industrial businesses and reduce debt on its balance sheet, which stood at $11.7 billion at the end of March, the Economic Times reported on November 15.
Vedanta said it has approached companies such as ArcelorMittal Nippon Steel (AMNS), Tata Steel, JSW, and Jindal Steel and Power Limited.
Vedanta beat Tata Steel to take over ESL in June 2018 for Rs 5,320 crore.
Electrosteel was the second steel company to end the insolvency process after Tata Steel took over Bhushan Steel in the same year.
The acquisition was also Vedanta’s foray into the steel business. In December 2018, Vedanta pumped $4 billion into Electrosteel to increase its production capacity from 1.5 million tons to 7 million tons per year.
In May of this year, the National Company Law Tribunal (NCLT) in Kolkata directed the lenders of the company to consider the exchange claims of operational creditors. It stated that in order to balance the interests of all stakeholders, the Committee of Creditors (CoC) must “assess” and “review” payments to various groups of operating creditors who have been paid zero.
One of the reasons for selling the company, as mentioned in the report, is concern about the global recession and additional pressure on commodity prices.
Electrosteel Steel was a subsidiary of Electrosteel Castings. After the takeover of Vedanta delisted the company.
Vedanta Limited (VDL), an India-based company consisting of diversified oil and gas, zinc, lead, silver, aluminum, iron ore, steel, and energy companies, owns 95.5% of ESL Steel. Vedanta Resources (VRL) is the parent company of Vedanta Limited, headquartered at
London and owns 69.7% of subsidiaries. In contrast, Volcan, the investment vehicle of the Agarwal family, owns 100% off.
The company’s portfolio includes cast iron, TMT bars, billets, ductile iron pipes, and wire rods.
In 2018, 2.51 million metric tons of electroslag steel were produced. Commission capacity was 1.5 million tonnes in 2018. Under Vedanta, the
company started a major expansion in Bangalore and Goa, and a new unit in Bellary, Karnataka.The company has announced an investment of USD 3.8 million to double its hot metal production capacity to 3 million tonnes per annum (MTPA) from the current 1.5 MTPA, to be completed this financial year.
With 12 MTPA of iron ore, is focused on value-added products to increase margins. The asking price of the Vedanta has more than doubled, and the company is valuing the at 10,500–12,000, people familiar with the matter said They said the premium for is a potential deal.”Several times, several players have approached Agarwal on behalf of Electrosteel, but he has never publicly acknowledged himself as a seller. Stress is building again.
Electrosteel also has environmental issues that it agreed to address. before closing the deal, but the demand is too high at a time when “We’re seeing pressure on credit markets,” said an industry veteran.