Rashtriya Ispat Nigam Ltd,the corporate entity of Vizag Steel,may not go for the proposed IPO this fiscal because of the worsened market conditions,sources said.
According to a senior official of the Ministry of Steel,the company will approach the central government to extend the ‘Navratna’ status until it hits the market.
“We do not expect markets to recover in the short to medium term. Market sentiment is down. In these circumstances we do not expect that the Department of Disinvestment will opt to go for IPO. Not at least until the end of this fiscal,” the official told PTI on condition of anonymity.
RINL was the first PSU to tap the capital market last year. The government is aiming to mop up Rs 2,500 crore by divesting its stake in the company. The launch has already been deferred twice,following suggestions of the merchant bankers in view of subdued market conditions and a fire accident at Vizag Steel Plant (VSP).
Earlier,the RINL management wrote a letter to the Steel Ministry requesting deferring the IPO as employees’ morale touched a low after a fire that killed 19 people,including 12 staffers.
On June 13 last year,a major explosion took place during the trial of a new oxygen control unit near the steel melting shop at VSP,resulting in fire and subsequent deaths.
On October 9,the government had indefinitely deferred its proposed initial public offer (IPO) due to differences with the merchant bankers on the price band.
The Steel Ministry official said the Department of Public Enterprises may consider extension of ‘Navratna’ status to Vizag Steel once again as the extension that was granted last year will expire in November.
RINL was awarded the Navratna status on November 16,2010,with the condition that it would get listed on the stock markets within two years. However,there are no clear signs of company’s IPO hitting the markets in immediate future.
In case of RINL losing the Navratna status,company’s financial autonomy will also get impacted as the coveted tag empowers the Board of a central PSU to take investment decisions up to Rs 1,000 crore in a joint venture project or wholly-owned subsidiary.
“RINL has nothing to do with IPO. The government has to decide whether to go for listing or not. We have not received any communication for the DPE on the status issue. We hope they will consider it,” the official said.
The Vizag-based company is the second largest state-owned steel maker in the country after SAIL,with a production capacity of 3.4 million tons per annum and is in the process of expanding the capacity to 6.3 million tons.