JSPL likely to sell con­trol­ling stake in over­seas mines

The Pak Banker - - COMPANIES/BOSS -

MUM­BAI: Debt­laden Jin­dal Steel and Power Ltd (JSPL) is look­ing to sell a con­trol­ling in­ter­est in its Botswana coal mine in Africa and a mine un­der Aus­tralian sub­sidiary Wol­lon­gong Coal Ltd as it looks to re­duce debt and not com­mit fur­ther in­vest­ments in "de­vel­op­ment stage" as­sets, a com­pany spokesper­son said.

"The over­seas as­sets where the di­vest­ment is en­vis­aged are pri­mar­ily the de­vel­op­ment stage as­sets which will re­quire sub­stan­tial fur­ther capex and the com­pany is not com­mit­ting any fur­ther capex," said a JSPL spokesper­son in an email re­sponse to a query. The com­pany would raise about $300 mil­lion in the next two quar­ters by selling stakes in its over­seas mines at a time when un­cer­tain­ties in both iron ore and coal prices hurt its prof­itabil­ity, an­a­lysts es­ti­mate. The $300 mil­lion amount would in­clude $46 mil­lion in a set­tle­ment with the gov­ern­ment of Bo­livia for its as­sets there and $70 mil­lion for sale of an air­craft, wrote Bar­clays an­a­lyst Chi­rag Shah in his re­port.

De­spite stress on com­modi­ties, the com­pany is pro­gress­ing well in ef­forts to divest the iden­ti­fied as­sets at a fair val­u­a­tion, said the spokesper­son. The Naveen Jin­dal-led in­te­grated steel pro­ducer and power com­pany, which had debt of over Rs.44,000 crore as of 30 June, has since last year eval­u­ated op­tions in­clud­ing selling its mines in Africa and Aus­tralia, list­ing its sub­sidiary in Oman, and list­ing its power busi­ness in In­dia to re­duce debt. Find­ing buy­ers for its over­seas as­sets in a mar­ket that has seen global power pro­duc­ers face se­vere fi­nan­cial con­straints will be a chal­lenge for the com­pany, an­a­lysts said.

JSPL, which last week re­ported its third straight quar­terly loss, op­er­ates a 3 mil­lion tonne per an­num (MTPA) coal­based sponge iron plant. It is faced with a lack of cap­tive coal as its mines were deal­lo­cated from 31 March, forc­ing it to buy ex­ter­nal coal at higher prices. Two-thirds of the com­pany's 3,400 megawatts (MW) power ca­pac­ity is ei­ther idle or run­ning at very low plant load fac­tor (PLF). Sale of non-core as­sets and list­ing of sub­sidiaries are few of the op­tions which "the com­pany is vig­or­ously pur­su­ing to re­duce debt in FY16", JSPL said in a state­ment last week with­out giv­ing fur­ther de­tails. "They have been try­ing to sell these (over­seas as­sets) for the past six to eight months. With more and more news of slow­down com­ing in from China, the sale call gets tough," said one an­a­lyst, ask­ing not to be named as he is not au­tho­rised to speak with media.

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