Global steel giants may have to list on bourses

Mining panel moots mandatory listing of foreign majors.

Global steel majors such as Mittal Steel, Posco, Arcelor and Corus may soon have to list on domestic bourses if the recommendations of the Dang Committee on mining are any indication.

If accepted, the recommendation may trigger acquisitions in the steel sector as one of the options for the proposed mandatory listing could be takeover of domestic companies. The other option for the foreign player is to set up an subsidiary and list it on the exchanges.

In fact, sensing a possible spate of mergers and acquisitions, operators have started working overtime at small and medium steel counters.

The Lloyds Steel stock reached its 52-week high of Rs 21 on the Bombay Stock Exchange on Friday, before closing at Rs 20.95, 4.75 per cent higher than yesterday's close. The JSW Steel stock closed at Rs 283.85, 0.94 per cent higher. From the beginning of June, most steel stocks have gained by around 50 per cent.

Industry experts said the proposed mandatory listing of foreign steel companies was based on a quid pro quo principle: the government would give foreign companies mines of iron ore on a long-term lease so that they could get raw materials at a discounted rate. On their part, the global giants should also share their profits with domestic investors.

An official with a steel company said the listing proposal would also help foreign companies to raise funds from the burgeoning domestic capital market.

A 10 million tonne steel unit would call for an investment of minimum Rs 40,000 crore, excluding infrastructure investment. Posco had said that it would invest $1.2 billion for setting up a steel plant in India.

It is expected that the proposal for mandatory listing, if converted into a law, would give time to foreign giants to list their shares after commercial operations.

An expert cited the example of Coca-Cola when the government gave it five years to list after commercial production.

The Dang committee recommendations assume significance as it is one of the three panels to determine the national iron ore policy to be announced by the steel ministry shortly.

STEEL CLAMPS

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• The recommendation may trigger acquisitions as one of the options for the proposed mandatory listing could be takeover of domestic companies.
• The government would give foreign companies mines of iron ore on a long-term lease so that they could get raw materials at a discounted rate.
• The proposal would help foreign companies to raise funds from the burgeoning domestic capital market.