SAIL-NINL merger move picks up steam

The proposed merger of Nilachal Ispat Nigam Limited with domestic steel giant SAIL has come a step closer...

The proposed merger of Nilachal Ispat Nigam Limited (NINL) with domestic steel giant SAIL has come a step closer, with NINL’s key stakeholder MMTC Limited and SAIL proposing to their respective valuers to evaluate the share price of the plant, which is a crucial criterion for the proposed merger.

SAIL has proposed that SBI Caps would finalise the share price value on its behalf while KPMG would do so on MMTC’s behalf, following which the next round of merger talks between the top brass of these organisations as well as steel and commerce ministry officials would begin. The valuers are likely to submit their report within three months, a steel ministry official said.

The Commerce Ministry had initiated talks with MMTC and its key suitor SAIL, asking them to express their views on the proposed merger between the two public-sector steel makers. In a meeting held in February, the Commerce Ministry top brass had asked both MMTC and SAIL to present their views on the proposed merger.

Orissa-based NINL, which is the country’s leading producer and exporter of pig iron is jointly promoted by MMTC and the Industrial Promotion and Investment Corporation of Orissa (IPICOL). MMTC Limited owns the majority stake in the steel company, while the Orissa government owns 26.29% through IPICOL and Orissa Mining Corporation.

The proposed merger received a setback after the Orissa government last September conveyed its disagreement on NINL’s valuation by IDBI Capital. IDBI Capital, appointed by the state, pegged the share value of NINL at Rs 27 which neither the state nor the steelmaker’s key stakeholders agreed. They argued that IDBI Captial did not taken into account the iron ore mines granted in favour of NINL while evaluating prices.

The commerce ministry officials are understood to have pointed out that valuation of the company could not be an impediment for the merger as that could be mutually agreed upon by the stakeholders and suitors. The steel ministry has also sought the consent of Orissa government and MMTC on the valuation to facilitate the merger and circulated a draft note for the consideration of the committee of secretaries.

Some time ago the Orissa-based steel maker was also exploring the possibility of offloading at least 10 per cent stake through an initial public offering to raise about Rs 80 crore amid reports that Steel Ministry has sought the Committee of Secretaries’ opinion to bail out the PSU from its current fiscal morass. SAIL has pledged to invest Rs 10,000 crore to ramp up its production capacity to 3 million tonne per year.