Jindal Stainless buys Indonesian plant for $32m

To gain a strong footing in the South Asian market, Jindal Stainless has bought a 50,000 tonne stainless steel cold rolling plant in Indonesia in a $32 million deal on an asset acquisition basis.

The new entity would be a 100 per cent subsidiary of Jindal Stainless and will be called PT Jindal Stainless Indonesia.

Jindal Stainless will buy the new plant from a Japanese collaboration, PT Maspion Stainless Steel. "We have signed a memorandum of understanding (MoU) with PT Maspion Stainless Steel and the deal will be completed in the next two months," Ratan Jindal, vice-chairman and managing director of Jindal Stainless, said at a press briefing.

Of the total amount, about $12 million would be through equity participation and the remaining would be through debts. The equity part would be funded through internal accruals.

Jindal Stainless aims to increase the capacity of the cold rolling plant by 100,000 tonne by the end of this fiscal year with an additional investment of $12 million. "The total cost may run up to $50 million including an additional working capital of $6 million," Jindal said.

Jindal said that about 25 per cent of the input required at PT Maspion Stainless would be sourced from the company's Indian operations.

"For the last six months, we had been providing hot rolled coils to the company and after this acquisition we would be sending our HR coils for further value addition to the cold rolled plant. This will give us twin advantage of export benefits from India and tariff advantages available in Indonesia for exporting the product to the South-East Asian region," he added.

Jindal is seeing this acquisition as a strategic move to gain foothold in ASEAN regions, particularly in Vietnam.

"This new plant is an extension of our existing cold rolling capacity and we are taking ourselves close to the high demand markets in Asia. We also have less competition as there are not many players in Indonesia besides plants by Indo Rama, Aditya Birla, L N Mittal and Srinivasan Group," Jindal said.

The Indonesian plant was set up in 1998 in a technical and financial collaborations with Sumitommo Metal Industries, Japan and Kanematsu Corporation, Japan and Nippon Yakin Kogyo, Japan. The company had been making losses but Jindal aims to touch a turnover of $75-80 million in the first year of operations.

Jindal Stainless is also looking at complete backward and forward integration and will be setting up a 1.6 million tonne integrated stainless steel project at Duburi in Orissa for which it has earmarked Rs 950 crore.

"We have already bought 250 acres of land to set up two furnaces for production of ferro-chromes," Jindal said.

Asean thrust

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• New entity to be a 100% arm and will be called PT Jindal Stainless Indonesia

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• Buyout a move to gain foothold in the Asean region, mainly Vietnam

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• Rs 30 crore plan on cards to set up service centres for finished products