Aims to tap the construction and infra market of West Asia.
Naveen Jindal-promoted Jindal Steel & Power said it would buy Oman-based Shadeed Iron & Steel for $464 million (Rs 2,088 crore) to expand its reach to West Asia.
This is the third largest acquisition of a steel company since 2007, when Tata Steel bought UK-based Corus for $12.9 billion and Essar Group paid $1.63 billion to buy Algoma Steel Inc.
Shadeed will have a capacity of 1.5 million tonnes and would be ready in about a year. It is a gas-based hot-briquetted iron plant based at Sohar in Oman.
“The acquisition is our entry into the Gulf countries, where the construction sector is doing well,” said Sushil Maroo, deputy managing director of the company. “Now we can also do linkages to India business or with our Bolivian mine,” he said.
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Jindal Steel’s plants in India may supply pellet or the company may set up a pellets manufacturing facility in Oman to support the Shadeed plant, Maroo said. The produce from the Oman facility can also be exported to China, which has strong demand for hot briquetted iron.
This plant, if commissioned on time, is likely to boost Jindal’s profitability in 2011-12. “The plant has a long-term supply of gas at lower prices and it is port-based, making it more economical on freight cost,” said an analyst with a foreign brokerage who did not wish to be quoted.
Jindal Steel had said on Saturday that it had discontinued talks with the United Arab Emirates-based Al Ghaith Holdings for the purchase of Shadeed due to lack of clarity on land titles and incremental liabilities. But the negotiations continued and finally it got through.
Jindal Steel & Power has an existing capacity of 1.3 million tonnes per annum of sponge iron and 3.6 million tonnes of finished iron. The stock of the company gained 1.2 per cent to Rs 623.8 a share on the Bombay Stock Exchange. Sensex was up by 0.6 per cent to 16,519 on the day.