On 4th September, Uttam Galva Steels Ltd informed bourses about its co-promotion agreement with ArcelorMittal Netherlands BV, the world’s largest steel producer. Under the agreement, Mittal with purchase a 5% stake (at Rs120 a share) in Uttam Galva followed by an open offer to acquire another 29.4% making ArcelorMittal an equal partner with the Indian promoter Rajinder Miglani. Uttam Galva has a steel production capacity of 750,000 tonnes per annum.
However, very reliable sources told Moneylife Digital that Miglani and Mittal have another bigger project on the anvil. They say ArcelorMittal will partner with Miglani to set up a 2 million tonne Hot Rolled Coil (HRC) project at Redi near Goa. Miglani already owns 750 acres of land there, which once belonged to Usha Ispat, controlled by Vinay Rai. Usha Ispat had a pig iron plant at Redi, which was auctioned under the provisions of the Sarfaesi Act, 2002. The land is also located near a jetty and is close to the raw material source.
The advantage to the deal between Miglani and Mittal, say our sources, is that Uttam Galva has all the permissions in place to get the project off the ground very quickly. We learn that LN Mittal will be dominant partner in the Goa project with a 70% holding while Miglani will own 30% to start with. The company may raise public funds to finance the steel project.
With this partnership, Uttam Galva, a standalone galvanizer will enter the big league of steel players in India. This project is probably what Rajinder Miglani had in mind when he told a newspaper that “the whole purpose of the joint venture is to grow the business in India and transform Uttam Galva Steel from a galvanized player to an integrated steel maker”.
The change is reflected in the stock market’s reaction to the announcement. The Uttam Galva stock rose nearly 10% to close at Rs113.70 on the Bombay Stock Exchange on Friday.