Mumbai: The Calcutta high court has restrained the asset sale plan of Stemcor India Pvt. Ltd following a petition filed by lender ICICI Bank Ltd. The next hearing is on 7 October.
“The petitioner had lent and advanced substantial amount to the defendant No.1 (Stemcor). The defendant No.1 as principal borrower is presently indebted to the plaintiff (ICICI) to the extent of Rs.587 crore,” said the 19 September order, published on the high court’s website.
An email to ICICI Bank seeking details and comments did not elicit any response.
“This action was taken without any notification to the company and we were made aware of it last Friday evening,” said Charles Armitstead, Stemcor’s spokesperson, in reply to an email. “Stemcor has every intention of complying with its contractual obligations, which is all the procedure asks us to do, and believe that the matter will be resolved quickly.”
The court in its order said the loan had not yet been classified as a non-performing asset and that “it all depends upon the borrowers repaying the loan in December, 2013... The plaintiff seeks to protect its securities being dissipated and/or jeopardized.”
Several big companies have bid for Stemcor’s assets that comprise a 4 million tonne (mt) iron ore pellet plant in Orissa and stakes in two iron ore mines also in the state. The companies include Tata Steel Ltd, JSW Steel Ltd and Jindal Steel and Power Ltd.
Others include Vedanta Resources Plc’s Indian unit and international commodities trader Glencore India, but these two companies did not respond to emails sent by Mint.
India’s iron ore shortage has been caused by legal and regulatory action in the main producing areas, namely Karnataka, Orissa and Goa.
In Karnataka, a two-year Supreme Court environment case ended in April with the court allowing some miners to restart production, while asking for the cancellation of some leases, but production has only been a trickle so far.
In Goa, a similar environment case is being heard, while mining remains suspended.
In Orissa, the state government has been tightening the regulatory framework, penalizing many mines and keeping a check on iron ore transporters.
In the current fiscal year, India is expected to produce 130mt of iron ore, down from 144mt in fiscal 2013, according to OreTeam—an information website. Before the action on iron ore miners commenced, India produced at least 200mt of iron ore a year.
Many large steel companies are expanding their capacities, hoping there will be demand for steel as India needs to develop its infrastructure. Given these big steel capacities, companies are vying to secure iron ore assets in India and overseas.
Stemcor offers an attractive source of assured iron ore supply in the vicinity of many steel plants.
“The companies (named above) could bid as high as $1 billion,” said an investment banker who did not want to be named. “They will fall over each other to get Stemcor,” he said, adding, “Many of the bidding companies are in debt, but that is unlikely to deter them.”
One of the bidding companies said it had submitted a bid for a 100% stake in Stemcor in the second week of this month, even though Stemcor indicated it would sell only a minority stake.
“Goldman Sachs has been appointed to look at ways Stemcor could bring in new investors to its Indian assets or scale down its own investment,” Stemcor’s Armitstead had said in an email in August. “We are not commenting on timeframe, nor are we providing any guidance as to what our next steps might be.”