SAIL likely to buy Malavika Steel's plant

Unit located in Amethi; Mecon to evaluate acquisition plan.

State-run Steel Authority of India is close to buying Malavika Steel's plant at Jagdishpur, located in the Gandhi family's political stronghold of Amethi.

The acquisition plan has been referred to Mecon Ltd for evaluation. Top executives in SAIL confirmed that Mecon had been commissioned to examine the value of the plant and evaluate the financial viability of buying into the assets of the Rs 3,000-crore project that was left half unfinished in 1998, within 10 months of getting off the ground.

Promoted by the Usha Group, Malavika was taken over by financial institutions from the Rais. The company still owes almost Rs 1,300 crore to financial institutions.

Mecon executives said SAIL had initially approached them to evaluate the viability of buying the iron-making facility at the plant. After they submitted the report, the lead financial institution involved "" Industrial Finance Corporation of India "" put its foot down, saying it was not interested in partial sales.

SAIL then went back to Mecon to evaluate the project as a whole and prepare a feasibility report on the existing assets at Jagdishpur and determine whether there was a need for pumping in additional funds to make it operational as a fully integrated steel plant.

The steel maker will take a final call on the buy after receiving the report from Mecon, which is expected to be out in another six weeks.

Official sources at the public sector giant feel that it makes sense for it to buy an existing integrated unit rather than invest in a brand new facility that would have to be built from scratch.

They added that since the outlook for long products in the region looked good, it made sound business sense for SAIL to set up shop in Uttar Pradesh.

Malavika Steel's plant was initially planned to have a capacity of 8 lakh tonnes of sponge iron and 1.2 million tonnes of iron pellets, but it was converted into a 6.35-lakh-tonne integrated steel plant for manufacture of long products that are used extensively in the infrastructure and construction business.

SAIL currently manufactures long products at its facilities at Bhilai in Chattisgarh and Durgapur in West Bengal and at the IISCO unit it took over in the latter state last year.