Jindal beats out Lakshmi Mittal to buy Indian steelmaker


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The uncertainty over the future of debt-laden Ispat Industries ended today with its owners Pramod and Vinod Mittal  agreeing to a deal to sell their ailing steelmaker. The buyer is JSW Steel, India’s third largest steelmaker, run by Sajjan Jindal of the O.P.Jindal Group. Jindal will acquire a 41% stake or 1086 million shares of Ispat through a preferential allotment at Rs 19.85 per share, an 8 % discount to the stock price, for a total consideration of $477 million.   Ispat, which is weighed down by debts to the tune of $1.5 billion, posted an annual net loss of $71 million in June. JSW Steel’s filing to the stock exchange contained no details relating to Ispat’s debt but at a press briefing following the announcement Jindal confirmed that his company would be assuming all Ispat’s debt. In keeping with Indian regulations, JSW will be making an open offer for 20% of Ispat’s equity. The Mittal brothers will retain a 26% stake which Jindal has the first right to buy if they decide to sell.


 In bagging Ispat, Jindal has pipped the Mittals’ successful sibling Lakshmi Mittal, whose Arcelor Mittal was reportedly one of the handful of suitors for the company who included Tata Steel. Earlier, a deal with UK’s Stemcor to sell a 10% stake had also collapsed following which the Mittal brothers were investigated by the Indian tax authorities.  Mittal, ranked as the world’s fifth richest person with a fortune of $26.1 billion, has been keen to expand his global steel empire in his home country. He left the family mothership over three decades ago to chart his own successful course and is currently resident in London.

For Jindal whose family is among India’s richest, the deal holds the potential of pushing his JSW Steel to the top ranks of Indian steel producers. Prasad Baji, senior vice president, Edelweiss Capital in Mumbai calculates that with the acquisition of Ispat’s 3.3 million tons of capacity and its own expansion of 3.2 million tons, JSW Steel’s total capacity  will nearly double to 14.3 million tons, making it India’s largest steel company.  A key factor, he maintains, is Jindal’s ability to execute a turnaround at Ispat which is possible through a combination of costs savings, more efficient operations and better prices for its products. “ JSW is capable and has the financial muscle to ramp up Ispat in the next 12 months, “ he adds.

A big attraction for Jindal is no doubt Ispat’s valuable mining leases. Observes Arun Kejriwal of KRIS, an investment advisory firm in Mumbai.  “ The real prize in this deal are the mining assets. Jindal has got the steel mill as a bonus.“

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