Mumbai: JSW Steel, India’s’s No.3 producer of the alloy, expects to close talks with the steel unit of Japan’s JFE Holdings to sell a stake in the next six months, a top official told reporters on Tuesday.
“There is no delay. It’s happening, the talks are on... it will be (for) around 5-15 % (stake),” managing director Sajjan Jindal told reporters on the sidelines of its annual general meeting.
Last November, JFE Steel, the world’s sixth-largest steelmaker, and JSW had agreed a production tie-up and had said they may buy stakes in each other.
However, JFE Steel is not considering taking a large stake in the Indian firm, Eiji Hayashida, head of JFE Steel, told Reuters in an interview on 16 June.
While JSW would not be keen on buying picking shares in JFE at this time, Jindal said the partnership will give the Indian company better presence among the Japanese automobile manufacturers.
“Japan’s automakers prefer Japanese suppliers so if you have a JV with a Japanese player, marketing becomes easier,” Jindal told shareholders in response to queries on the partnership.
Toyota Motor Corp and Nissan Motor Co amongst others have set up manufacturing bases in Asia’s third-largest economy, which has been one of the few bright spots for the global auto market, posting its best May car sales, which rose 30% to a record.
Besides, JSW is rapidly raising capacity and scouting for iron ore and coking coal mines - both in India and abroad - to secure raw material supplies.
The company, which produces about 8 million tonnes of steel per annum, would raise annual capacity to 10 million tonnes by March 2011 and hopes to take it to 32 million by 2020.
To further consolidate its position, JSW is also in talks with Andhra Pradesh-based Brahmani Steel for a partnership and may pick stakes, Jindal said without divulging details.
“Wherever there is an opportunity, we will try and look at it,” he said when asked if the company was looking at buying smaller players.
Small and marginal players in the steel industry may not be able to survive the increasing pressure on raw material costs, paving the way for buyouts by larger producers, Manoj Mohta, the head of research at Crisil, had told Reuters this month.
Rising steel imports at lower prices is ‘very disturbing’, Jindal told shareholders, adding this along with higher iron ore exports are likely to put the local industry at a disadvantage.
“We shall continue to impress upon the government to take appropriate steps and implement policies, which will arrest this trend,” he said.
Steel prices have fallen in the past few months mainly on account of de-stocking, Jindal said adding “real demand” for steel is still intact.
Jindal expects input cost pressure to ease in the third-quarter ending December but did not give any numbers.
Shares in the firm ended down 1.3% at Rs1,048.9 in a weak Mumbai market.