JSW Techno Projects buys 49% in pellets firm for Rs 1,000 crore

Deal via promoter firm, perhaps with eye on possible bids for assets with NCLT

JSW Group, via promoter group company JSW Techno Projects Management, has acquired 49 per cent stake in Odisha-based Brahmani River Pellets (BRPL) in a deal estimated at over Rs 1,000 crore.

JSW Techno, not a listed entity, has executed an agreement with Aryan Mining and Trading Corporation for acquiring stake in BRPL. Currently, JSW Techno holds 9.5 per cent stake in JSW Steel. Sources did not reveal reasons for the acquisition through a promoter group company, instead of via JSW Steel, which has larger synergies with the acquired assets. BRPL makes iron ore pellets — it owns a four million tonne (mt) pellet plant, a 4.7-mt beneficiation plant and a 230-km slurry pipeline connecting the two. 

JSW Techno, however, is into rendering of project management services, including management consultancy. It advises on matters of finance, organisation, management, commencement or expansion, cost control and technical planning. However, it also undertakes strategic long-term investment.

JSW’s buying interest in BRPL follows a failed takeover bid by Tata Steel. In December 2016, Tata Steel had struck a deal to acquire 100 per cent equity in BRPL. The company felt the location of BRPL’s assets was strategic to its Kalinganagar operations and had significant operational synergies to make the plant more competitive. However, Tata Steel terminated the pact in October this year citing that the transaction could not be completed within the long stop date due to non-fulfilment of certain conditions set by the sellers such as obtaining necessary regulatory approvals from the Reserve Bank of India (RBI), settlement of proceedings under Foreign Exchange Management (FEMA) Act by the Directorate of Enforcement, and approval from the Income Tax authorities.

Earlier, JSW Steel and other companies like Jindal Steel & Power Ltd (JSPL), Essar Steel, and Aditya Birla Group-owned Essel Mining & Industries Ltd had made abortive attempts to buy out BRPL to gain access to its captive iron ore mines and strategically located pelletisation plant at Kalinganagar in Odisha’s Jajpur district, home to a cluster of steel projects owned by Tata Steel, Jindal Stainless Ltd, Visa Steel, Mesco Steel and others. Three years ago, BRPL was valued at around $1 billion. But, its valuation has been falling as its captive mines have remained out of operation and due to the uncertainty surrounding the resumption of operations. 

Brokerages feel the latest deal being routed through JSW Techno could be linked to the group buying another asset via the National Company Law Tribunal (NCLT) at a later date “If the JSW promoter manages to acquire an asset in NCLT, it would be via a joint venture (JV). Then, it makes more sense to keep this BRPL asset not linked to JSW Steel at present. Later, depending upon the outcome of the NCLT asset, decide under which business vertical it should be placed,” said a senior analyst, on condition of anonymity.

The Sajjan Jindal-led JSW Group has shown interest in NCLT-listed Bhushan Steel, Bhushan Steel & Power and Monnet Ispat. For all these three assets, Jindal is said to have expressed interest in a JV with private equity players. Of the three, Bhushan Steel and Bhushan Steel & Power are based in Odisha; Monnet has its operations in Madhya Pradesh.

An inorganic growth route to build capacity is not new for JSW Group. In JSW Energy, the company acquired two hydro power plants from Jaiprakash Power Ventures. JSW Steel has since merged Ispat Industries with itself and become geographically one of the most diversified steel makers in India. 

With installed steel-making capacity of 18 mt annually, JSW Group has presence in Maharashtra, Karnataka, Tamil Nadu and Punjab. A stake buy in BRPL will give the group’s steel business a needed presence in the east, where it is currently present through JSW Cement at Salboni in West Bengal.