Aditya Birla Group plans to acquire Stemcor’s India assets

By Arijit Barman, ET Bureau | 11 Nov, 2014
MUMBAI: Metals-to-telecoms Aditya Birla Group has revived plans to acquire the Indian assets - or at least some of the significant parts -- of Stemcor, one of the world's largest steel traders, majority owned by the Oppenheimer family.

rivate companies in UK - had appointed Goldman Sachs to sell its controlling 73% interest in an iron ore mine, a manganese ore mine, a 4 million tonne pellet plant and a 230 km long slurry pipeline connecting the iron mines with the pellet factory in the steel making hub of Odisha. But earlier this year, the formal divestment process fizzled out amidst heightened regulatory and judicial scrutiny on the domestic metals and mining sector. Moreover, Stemcor also successfully completed a complex, $1.3 billion global debt restructuring involving 80 banks. The recast -- in February of 2014 - means the multinational trading group, can sell several of its assets in different parts of the world at a more leisurely place in contrast to the fire sale that had seemed likely earlier.

The renewed interest from the Birlas, eight months after process was put on hold, currently center around Stemcor's pellet plant, which, unlike its mines are free from regulatory issues, said multiple sources aware of the developments. The group has already initiated discussions with several banks to explore financing for the transaction which will be carried out by Essel Mining and Industries (EMIL) - an unlisted mining company, which has long been considered the AV Birla Group cash cow.

The equity valuation of the pellet plant is likely to be around Rs 1200 -Rs 1250 crore, as per estimates of the Birla Group and which it is willing to pay upfront. The plan also has Rs 1500 crore of debt.

There is no guarantee that these discussions will result in a definitive transaction, according to the people cited earlier.

Essel is also open to acquiring Stemcor's iron ore mine for an additional Rs 1000 crore equity, but only if the mining license gets transferred to them and other regulatory clearances come through within a 12-18 month period. Since May, several mines in the state have been temporarily shut and their licenses are unlikely to be automatically renewed after mining activities in the state came under Supreme Court's scanner. Most of Essel's own mines, and that of Stemcor, are currently non-operational. According to industry officials, prior to the current impasse, Stemcor used to produce 5 million metric tons of ore in a year but has access to significantly higher reserves of over 100 million tonnes.