New Delhi: Vedanta Resources Plc., which agreed to buy 51% stake in iron-ore company Sesa Goa Ltd for $981 million (Rs41,202 crore) in cash, is considering setting up steel plants in Jharkhand or Orissa.
“We are planning to set up a steel plant but don’t have concrete announcements to make yet,” said Vedanta chairman Anil Agarwal. “We will be negotiating with both the states.”
More than a year ago, the London-based company negotiated with the Orissa government to set up a six-million tonne (mt) steel plant.
Its stake in Sesa Goa reflects a global strategy to become an integrated mining company, Agarwal said. “We are mining copper, zinc and aluminium, and iron ore fitted into our strategy. It’s very rare to get an iron-ore asset,” he said, describing the deal as “nice”.
Vedanta Resources, with mining operations in India, Zambia and Australia and listed on the London Stock Exchange, has made an offer to Sesa Goa shareholders to buy another 20% of its shares at the same price.
Agarwal beat Arcelor Mittal and Aditya Birla Group with its offer of Rs2,036 a share in negotiations lasting four months.
Its consideration for 71% stake would drive the price to $1.37 billion, funded through a mix of debt and existing cash. The offer is to be launched in four days and will remain open until July.
For the initial majority stake, Vedanta bought 100% of UK-based Finsider International Ltd, a subsidiary of Mitsui & Co. Ltd. Finsider owned the 51% stake in Sesa Goa, the country’s biggest private iron-ore producer at 10mt per year, controlling 8-10% of the export business.
Earlyguard Ltd, a Mitsui subsidiary that held the shares of Finsider, in turn sold the stakes to Richter Holding Ltd and Westglobe Ltd, two units wholly owned by Vedanta.
Agarwal disagrees with the government’s export duty on iron-ore producers. “There is enough iron ore in the country, and iron ore is a commodity whose prices are internationally driven,” he said.
Sesa Goa, which reported revenues of $432.2 million last year, has mining leases in Orissa, Karnataka and Goa. It also has a prospecting licence in Jharkhand.
Mitsui India was Sesa Goa’s sole iron-ore agent in China and Japan, according to a Mitsui official in New Delhi. “Mitsui received commission from Sesa Goa but we can’t reveal how much...,” he said.
Shares of Sesa Goa fell 2.5% to Rs1698.55 on Tuesday, even as the BSE metal index rose by 1.49%. Vedanta shares closed at 1,411 pence on the London Stock Exchange.