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Tatas, Essar eye major pie in Indonesia steel JV

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Nevin John Mumbai
Last Updated : Jan 29 2013 | 1:14 AM IST
Interested parties are expected to submit bids by year-end, said Lutfii, adding: "The overseas partner would control a majority stake in the venture."  A Tata Steel spokesperson declined to comment on the development citing the silent period before the financial result. "As a group, we keep looking at growth opportunities in the sectors we are in. However, it is not our policy to comment on any specific proposal," an Essar spokesperson said.  There were reports earlier that the Tatas and Essar might pick up stake in Krakatau Steel itself. However, the plan to buy direct equity didn't materialise for the companies. Now, Krakatau plans to sell five per cent stake in a public offering in order to raise funds.  According to sources, the Indonesian steel major has no option but to float new company and offer stake to the overseas partner since it is facing a cash crunch.  Both Indian steel giants have been on an acquisition spree. In January 2007, Tata Steel acquired Anglo-Dutch steelmaker Corus for $11.3 billion, making it the largest overseas acquisition in India Inc's history.  This April, Essar bought Algoma Steel in Canada for $1.6 billion and, barely in a span of 48 hours, inked a $100-million deal to buy Minnesota Steel in the US.  Krakatau's new plant will set up essentially to supply steel to the domestic auto industry. Currently, Krakatau has a production capacity of 2.3 mt a year.  Indonesia's Vice-President Jusuf Kalla last month told the Antara news agency that it was not possible for Krakatau to make profits if it did not engage in the steel industry from upstream to downstream levels like ArcelorMittal or Tata Steel.  "Krakatau must have additional capital in order to increase its production capacity to meet the existing need. The investment can be in the forms of an initial public offering, a partnership or a joint venture," he added.  Indonesia, Southeast Asia's largest economy, needs seven million additional tonnes of steel a year. Krakatau is so far meeting the need by importing up to six MT.  Demand for steel in Indonesia is likely to rise by 10 per cent this year. ArcelorMittal, the world's largest steelmaker, plans to spend $10 billion on projects in the country.

 

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First Published: Jun 19 2008 | 12:00 AM IST

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