Bhushan Steel not looking at mine buys

Bhushan Steel not looking at mine buys

Mumbai: Bhushan Steel Ltd, which recently acquired Australia’s Bowen Energy, is not “seriously" looking at mine buys, even as peers are aggressively trying to secure raw material linkages, a top official said.

Most Indian steel makers, whose profitability shrunk on soaring raw material prices in FY09, have been scouting out for mines to lower their cost of production, and consider this as a good time for bargains due to the recent slump in prices.

“Presently, we would be focussing on exploring activities at Bowen. We are looking at a lot of things but at the moment we are not serious (on mine buys)," Nittin Johari, chief financial officer, told Reuters over the telephone on Monday.

Bhushan, however, plans to spend $6-$7 million a year for exploration activities at Bowen, Johari said.

Besides, the company is eyeing a majority stake in Orissa Sponge Iron and Steel for the latter’s large iron ore and coal reserves and has already bought 17-18% in the company.

Orrisa Sponge is caught in a three-way takeover battle with Monnet Ispat and two warring factions of the Bhushan family, with interests in steel and power, in the fray.

Johari expects it will take another 6-8 months to get clarity on the issue, which awaits regulatory approval.

“I think it will take another 6-8 months to really come to know where we stand and where all other people stand," he said.

In 2008-09, Bhushan saw flat growth in net profit to Rs425 million, while net sales rose nearly a fifth to Rs4,960 crore on lower realisations.

Bhushan counts Fiat, Honda Motor, Ashok Leyland, Tata Motors, Videocon , Samsung and BPL among its clients.

Indian steel makers, including Bhushan Steel, this month raised prices of the alloy by Rs1500-2,000 per tonne citing higher international rates and input cost push.

Johari expects prices to consolidate “over the next 2-3 months." “After that we may see some firmness," he said.

Shares in Bhushan jumped 4 times so far in 2009, while the BSE Metal index rose nearly 178% in the period. The 30-share BSE index rose 73%.

Foreign Links

Bhushan is working out details with a Japanese firm to build a steel plant in India, confirming foreigners interest to enter the world’s second fastest growing major economy.

Bhushan had said in April it was in preliminary talks with Japan’s Sumitomo Metal Industries for building a steel plant in West Bengal.

Though talks have still not been decisive, Johari said without elaborating, the two steel makers are still in talks.

“We are exploring a possibility and we are looking into the details. It is for our Kolkata facility."

India, where steel demand is seen growing at 10% annually, has seen interest from ArcelorMittal and Posco, but political and land-related roadblocks have stifled projects.

Foreign firms “have realised that it is not possible to do business standalone in India. They are not very comfortable doing it alone," Johari said.