Tata Steel, RINL eye Neelachal Ispat stake

State-owned Minerals & Metals Trading Corporation (MMTC) is considering divesting its stake in Orissa-based steel unit Neelachal Ispat Nigam Ltd (NINL). The company has invited expression of interests for divesting a majority stake of 51 per cent to a strategic partner.

Tata Steel and the Rashtriya Ispat Nigam Ltd (RINL) have evinced interest in picking up the stake.

Industry sources said the board of MMTC last week decided to formally approach the Union commerce ministry for issuing an open tender inviting up to 51 per cent equity participation in NINL.

Senior Tata Steel officials told Business Standard, "We are keen on a majority stake in Neelachal Ispat and will be sending in our expression of interest."

The RINL board has given its in-principle approval for sending letters of expression of interest. However, senior RINL officials said, "The board has given an in-principle approval for exploring the possibility of acquiring a stake in Neelachal."

While MMTC owns a majority stake in the company, the Orissa government, through the Industrial Promotion and Investment Coporation of Orissa Ltd, owns the remaining stake with some other small stake holders.

NINL has a one million tonne manufacturing facility, of which 6 lakh tonne is for producing pig iron and the balance is for producing structurals.

Sources close to the development said, "The NINL project was initially designed as a 2 million tonne unit, however, as the company has a huge debt burden, the project was ledt incomplete."

NINL has an outstanding debt of close to Rs 1,000 crore, which has recently been approved to undergo a corporate debt restructuring (CDR). Industrial Development Bank of India is the lead banker for the CDR consortium. NINL also has a coke plant and captive mines.

Industry sources said that consultancy and advisory firm, A F Fergusson, has advised the promoters to divest their stake for raking in funds to complete the project.

"An estimated investment of around Rs 1,000 would be required to get the entire project on stream," they said. The plant could be enhanced further upto 4 million tonne per annum, with finishing facilities.

"It is likely that government would given preference to a public sector unit as a strategic partner," sources said.