JSW Steel signs deal with Cevital to buy Aferpi for Rs 6 billion

Sajjan Jindal-owned JSW Steel has signed a deal with Algeria's Cevital Group to buy Italy's second largest steel firm, Aferpi, formerly known as Lucchini, for around Rs 6 billion.

Aferpi has an annual production of two million tonnes in Piombino and manufactures special steels used in railway, automobile and earth-moving vehicles, among others. 

JSW's senior officials reached Italy on Friday and signed an agreement document at Italy's Ministry of Economic Development. JSW Steel will present the industrial plan for Aferpi, said sources.

Cevital, the largest privately-held group in Algeria, had bought Lucchini in 2014 and renamed it Aferpi. Originally, however, it was owned by Russia's Severstal.

JSW Steel had bid for Lucchini in 2014 when it was placed under special administration after being declared insolvent, but the deal didn’t finally materialise. JSW had made a piecemeal bid for the rolling facilities for about $100 million. Finally, Lucchini was acquired by the Algerian conglomerate, Cevital Group, and Aferpi was born.

Aferpi is currently involved in projects that involve the production of one million tonnes of long steel products.

The acquisition would help JSW Steel expand its reach in the specialised steel market, especially in the automobile sector. 

It also comes at a time when JSW is eyeing acquisitions in the domestic market by bidding for stressed assets under the Insolvency and Bankruptcy Code (IBC). JSW has bagged Monnet Ispat & Energy, however, the approval from the National Company Law Tribunal is pending.

Additionally, JSW has tied up with Numetal in the second round of bidding for Essar Steel which has a nameplate capacity of 9.7 million tonnes. 

JSW Steel is an investor in the step-down subsidiary, Nu Metal & Steel Pvt Ltd, that would implement the resolution plan for Essar Steel. Right now, however, the second round of bidding, is not under consideration, though Numetal has sought that the bids be opened in the National Company Law Appellate Tribunal (NCLAT).

At present, JSW Steel has a capacity of 18 million tonnes. It has lined up plans to expand the overall steelmaking capacity from 18 million tonnes to 24.7 million tonnes by March 2020. 

The company had announced a capex plan of Rs 268 billion last year, but has now enhanced it by Rs 176 billion to include new projects. Overall, JSW is now implementing a cumulative capex pipeline of Rs 444.15 billion over a four-year period between FY18 to FY21 to increase capacity.