In a major blow to Indian steel and mining companies, the Australian Foreign Investment Review Board (FIRB) is considering a cap on foreign investment in mining companies.
The FIRB is of the view that foreign investments in greenfield projects should be limited to less than 50 per cent, while in major producers the cap should be 15 per cent.
If the board gets down to capping foreign investment, it would be a major impediment for Indian companies that had been looking to acquire raw material assets overseas, driven by the delay in asset allocation in India.
Tata Steel Global Minerals Holdings Pte Ltd, an indirect wholly-owned subsidiary of Tata Steel, raised its holding in Australia’s Riversdale Mining to 19.38 per cent. Riversdale has coal mining tenements.
Tata Steel’s holding is well below the 50 per cent level at the moment, but Bhushan Steel recently acquired a 60 per cent stake in Bowen Energy, an Australian coal and mineral exploration company.
Neeraj Singal, managing director of Bhushan Steel, said: “We already have the FIRB approval for the investment.” However, Bhushan is still scouting for assets in Australia and South Africa for coal.
Singal said, “It is still not clear but for future investments, if we don’t have management control it will be a problem.”
Government-owned NMDC is also looking for coal assets in Australia. Rana Som, chairman and managing director of NMDC, said: “It is absolutely all right to partner Australian companies in greenfield projects but investors will lose interest in brownfield projects if the holding is limited to 15 per cent.”
Industry sources say the FIRB decision will hamper raw material asset acquisition in a major way, since given the drop in prices, it did not make sense to acquire assets beyond Australia and South Africa.
Current investments made by mining companies were not going to be affected but the FIRB stand could come in the way of future projects.
The Gujarat NRE Coke group had made an off-market bid for Rey Resources, an Australian Securities Exchange (ASX)-listed company.
