Arcil puts Bellary Steel unit on the block

The Karnataka-based Bellary Steel & Alloys' unfinished steel plant is on the block.

The Asset Reconstruction Company of India Ltd (Arcil), after taking over the company's bad debts from various lenders, has decided to conduct an auction for the steel plant.

It is learnt that four Indian groups and some foreign entities interested in buying the plant, which has been lying idle for over five years now.

Sources close to the development told Business Standard, "Some local players and some Canadian steel companies have evinced interest in the steel project. The plant assets are valued at around Rs 800 crore."

The plant needs a capital infusion of about Rs 400 crore for completion.

Bellary Steel has a 1 lakh tonne per annum induction arc furnace, a rolling mill, which makes billets and a 60,000 tonne per annum sponge iron plant.

It had decided to set up a 0.5 million tonne integrated steel plant in 2000, with an estimated cost of around Rs 2,000 crore. While Rs 1,200 crore was taken as loans, the promoters brought in equity of around Rs 250 crore but the project was never completed.

While large term lenders like State Bank of India and ICICI Bank have already sold their debt to Arcil, the Industrial Development Bank of India (IDBI), another large lender, is said to be in the process of doing so.

If that happens, Arcil will have over 60 per cent of the Rs 1,200 crore debt and will then be able to have more say in what happens with the plant.

"The auction should take place in a couple of weeks. The assets and liabilities of the plant will be sold. Post auction, it will be owned partly by Arcil and partly by the new buyers," said Arcil officials.

The route for the sale could be either a demerger of the unfinished plant from the parent company or else a take over of assets by Arcil through the Securitisation Act.

Arcil currently has bought out 42 per cent of the total debt of the company, which stands at Rs 1,200 crore.

The unfinished steel plant may need another three years to complete. It has a blast furnace that can manufacture pig iron which can be converted into mild steel. The addition of a rolling mill would help the unit produce rolled products such as rods and bars, angles.