Companies & Sectors
Four possible bidders for Ispat

Cash-starved, mismanaged Ispat Industries has four bidders; but will ‘Ispat-friendly’ institutions step in to force a change in control?

Ispat Industries, which has been in dire straits for many years and has merely stayed afloat thanks to the combined largesse of financial institutions IDBI, ICICI, IFCI and State Bank of India (SBI), has four suitors for its cash-starved businesses: ArcelorMittal, Welspun, Sterlite/Vedanta group controlled by Anil Agarwal, and Navin Jindal, who controls the highly-successful Jindal Steel & Power. Interestingly, the Tatas, who run one of the largest steel businesses in the world, are not interested in the company.

However, while these four bidders have expressed interest in the deal, Welspun, which is the smallest of the four, wants to take the company over with the entire debt of Rs7,000 crores. The others want to pay off the institutional debt substantially.

While there can be more potential bidders for Ispat, the fact is that no deal is possible unless the financial institutions stop mothering the company and its promoters. Far from stepping in to discipline the promoters, the bankers have benignly watched Vinod and Pramod Mittal's mission to ape their estranged brother Lakshmi Mittal, who has built the largest steel group, ArcelorMittal, by stitching together favoured deals with governments around the world. In trying to emulate Lakshmi Mittal, the two brothers floated Global Steel Holdings, based in the tax haven the Isle of Man, though it is not clear how they funded their foreign adventure.

While Ispat Industries is struggling to even pay its salaries, power charges and interest, Global Steel Holdings is reported to be partnering with steel companies in various trouble-spots around the world. It apparently has steel operations in Bulgaria (and even owns the top football team there!), Nigeria, and runs a 20-year management contract to operate Zimbabwe Iron & Steel and coal blocks in Mozambique.

The Mittal brothers have also been reported to be fishing in another controversial spot, Libya. Most interestingly, The Economic Times reported in April this year that Global Steel was trying to get a stake in North Korea's Musan Iron Ore mines, estimated to hold reserves of more than seven billion tonnes. It looked strange that the Chinese, who dominate the global steel industry and have a stranglehold in North Korea, would let the discredited Mittal brothers enter into a deal with Musan.

As Moneylife wrote yesterday, over the past five years, Ispat Industries has defied every threat by its lenders to force a change of management and it has continued to raise fresh funds. Ispat's promoter-managers Pramod and Vinod Mittal have never failed to extract fresh funds, even when the company was on the verge of closure. Moneylife reported yesterday how Ispat Industires was sanctioned Rs130 crores by SBI just before its plants at Nagpur and Dolvi in Maharashtra shut down for a month. (Read: http://www.moneylife.in/article/4/11832.html)

The debt of Ispat Industries has been restructured twice already (2003 and 2009) against all prudent lending norms. Yet, neither the Reserve Bank of India (RBI) nor the government has even questioned the lenders about their continued largesse to the company and its continuing foreign adventures. If Ispat has to be salvaged and the banks' loans secured, a new owner will have to step in. What is not clear is why the institutions are postponing the inevitable.

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COMMENTS

bunty

6 years ago

ispat has most modern technology to produce steel at cheap rate only if the top management improves.

krishna

6 years ago

Good article BUT.. overseas bridges burned in late 2007 over troubles in Nigeria and the bankruptcy in Bulgaria. NO overseas lender will offer any credit. On the Q of "seed capital", the answer is self-evident. How do Indian entrepreneurs obtain the seed capital? From PSU's by over borrowing and then classifying 25% of the borrowings as equity. This is done through "over-invoicing of a project".. in this particular case a 10% surcharge on imports and 10% discount on exports would suffice, the foreign counterparty obliging. No secret to either RBI or the IT... so many engage in this practice.. Of course Tata does not want any part of this byzantine mess.. Burning Q for the bourse is whether AM will step in a-la UG.. half of the HRC output goes to UG, a shut down Dolvi creates a problem so there is a "logical business reason".. BUT will Aditya deem the collateral risk too large? Negative Fodder for the rumor mills in London/Continent? He is tough, the Number one Son.. bond to granpa not as strong as that of (number one) Son to Father.. The brothers so different, like night and day, gave rise to a "joke" originating from the myriad of expat employees in wage arrears stuck in Eastern Europe and West Africa " Same Father Different Mothers"..

Ravindra Shetye

6 years ago

While ISPAT operations of steel plant is a matter of concern (Or do we say 'should' be a matter of concern) it is naot necessary to paint all their operations abroad ( which incidentally are under a different, possibly non Indian company) need to be painted with black paint.
There are many companies which are profitable outside India but are not profitable India for the same operations.
As far as the steel plants in India are concerned the Government policy of not giving the Iron mine linkages to the Consumers i.e. Steel Plants but allowing the miners to just dig out this vital resource and export at fat profits needs to be investigated with the same vigour as the 2G scam. Surprisingly the two issues are very very similar. The Govt may come out with even more serious concerns with the Ministry of Mining.

Shadi Katyal

6 years ago

One wonders how such a group can stay afloat and banks keep giving such large loans. Is there no accountability?
Why would Tata or any other firm buy when they know the debt ratio plus the cost of production of steel in this group.
If the management has been so inadequate how come the unit has survived?
The bill has to be foot by Govt Banks and who knows how much went for various officers?

REPLY

Ravindra Shetye

In Reply to Shadi Katyal 6 years ago

The answer is there already in the recent Bank Loan scam if the Govt wants to look into it.

PRADEEP BALIYA

6 years ago

very nice COMMENT ON ISPAT

NTPC Vidyut Vyapar Nigam appoints Anil Agarwal as CEO

State-run NTPC said its wholly-owned subsidiary NTPC Vidyut Vyapar Nigam Ltd has appointed Anil Agarwal as its chief executive officer (CEO).

Mr Agarwal joined NTPC as executive trainee in 1977. He brings with him vast experience in the area of contracts. He has been associated with contracts related to power plants and also procurement of gas and coal for NTPC.

NVVN is the nodal agency for implementing the first phase of the Jawaharlal Nehru National Solar Mission of the government under the National Action Plan for climate change to achieve the objectives of long-term energy security and ecologically sustainable growth.

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Friday Closing Report: A sharp rally if the market is able to cross 22,050

The local market opened almost flat as its Asian peers drifted lower in morning trade. A sell-off in realty and consumer durables stocks, after recent appreciable gains, was the main cause of the market ending unchanged today.

The market opened almost unchanged from its previous close, as Asian markets were under slight pressure. Realty, consumer durables and banking stocks pushed the market sharply lower. The indices, which witnessed a high degree of choppiness in the morning session, fell sharply lower in post-noon trade on selling pressures and a negative opening in most European markets. The market settled flat with a negative bias, ending its four-day winning streak.

The Sensex was down 25.77 points (0.13%) at 19,966.93. The barometer touched a high of 20,067.81 and a low of 19,877.12 during the session. The Nifty ended the session at 18.90 points (0.31%) lower at 5,992.80. The index swung between a high-low of 6,025.40 and 5,964.25, intraday.

The market breadth tilted towards the losers. The Sensex had 17 declining stocks while 13 stocks ended in the positive zone. The 50-share Nifty list closed with 27 stocks in the red while 23 stocks settled higher. The broader indices, which led the recent gains, bore the brunt of today's sell-off. The BSE Mid-cap index tumbled 2.30% and the BSE Small-cap index tanked 3%.

The top gainers on the Sensex were Hero Honda (up 2.47%), Cipla (up 1.76%), Jindal Steel (up 1.53%), Mahindra & Mahindra (up 1.19%) and Hindustan Unilever (up 1.10%). The laggards in today's trade were DLF (down 4.53%), Reliance Infrastructure (down 4.29%), Jaiprakash Associates (down 4.27%), Sterlite Industries (down 2.39%) and ACC (down 2%).

BSE IT (up 0.66%), BSE Auto (up 0.30%) and BSE TECk (up 0.29%) were the notable sectoral gainers. On the other hand, BSE Realty (down 4.29%), BSE Consumer Durables (down 3.63%) and BSE Metal (down 1.25%) were the top sectoral losers.

The Asian pack ended the last trading day of the week on a mixed note as investors were nervous ahead of the US jobs data, due to be released later today. However, the European Central Bank's move to continue supporting banks came as a relief to marketmen.

The Shanghai Composite was down 0.04%, the Hang Seng lost 0.55%, the KLSE Composite shed 0.15% and the Straits Times gave up 0.80%. On the other hand, the Jakarta Composite added 0.05%, the Nikkei 225 rose 0.10%, the Seoul Composite gained 0.36% and the Taiwan Weighted was up 0.45% at close of trade.

The government late Thursday said it is "actively considering" a request from the tobacco industry to increase the duration of display of a particular pictorial warning in cigarette packets.

There are two existing pictorial warnings like scorpion and damaged lungs while a new and stricter one-a cancer-stricken mouth-was to be depicted from 1st December. Such warnings are to be rotated every year.

Tobacco companies, which were under an impression that the timeline for 'mouth cancer' warning would get pushed back, had made representations to the health ministry seeking clarity on the matter.

The US markets settled in positive territory for the second day in a row as positive data kept pouring in. Pending sales of US existing houses jumped by a record 10% in October, which followed a 1.8% drop in September, the National Association of Realtors said. The number of applications for jobless benefits averaged 4,31,000 a week, over the month ended 27th November, the lowest level since August 2008, according to Labor Department figures. Retail sales at chain stores rose 6% in November, above the estimated growth of 3.6% and the year-ago gain of 0.6%.

The Dow surged 106.63 points (0.95%) to 11,362.41. The S&P 500 added 15.46 points (1.28%) to 1,221.53. The Nasdaq rose 29.92 points (1.17%) to 2,579.35.

Foreign institutional investors were net buyers of equities worth Rs386.12 crore on Thursday. Domestic institutional investors were net sellers of stocks worth Rs225.04 crore on the same day.

Market regulator, Securities and Exchange Board of India (SEBI) on Thursday barred four companies-Murli Industries, Ackruti City, Welspun Gujarat Stahl Rohren and Brushman India-and their respective promoters from trading on the bourses for allegedly indulging in unfair trading practices.

The market watchdog has also barred one Sanjay Dangi and his group firms from dealing with any kind of securities. This ban has been imposed on charges of share price manipulation.

Following the development, Murli Industries ended 19.94% lower, Ackruti City tanked 19.99% and Brushman India declined 4.96%.

The country's largest realty firm DLF (down 4.53%) has sold 150 plots, garnering more than Rs 500 crore, in a township project at Gurgaon, sources said. DLF launched yesterday a 100-acre township 'Alameda' in Gurgaon.

In the first phase, it released 150 plots at Rs 60,000 a sq yard with inaugural discount of 10% and they were sold within a few hours of the launch, sources said. The plots are available in two sizes-540 and 700 sq yards.

Godrej Consumer Products (GCPL) (down 2.11%) has informed the Bombay Stock Exchange that it has acquired 100% stake in Naturesse Consumer Care Products Ltd and Essence Consumer Care Products Ltd from Muskan Projects Pvt Ltd for an undisclosed amount.

Naturesse Consumer and Essence Consumer own the brands Swastik and Genteel, respectively.

With the acquisition of these brands, GCPL has strengthened its position in the ever-growing Indian personal and household care segment.

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