Jindal Steel to buy Oman’s Shadeed for $464 million

Jindal Steel to buy Oman’s Shadeed for $464 million

In the third biggest global purchase by an Indian steel maker, Jindal Steel and Power Ltd said on Thursday it will buy Shadeed Iron and Steel Co. Llc of Oman for $464 million (around Rs2,170 crore), including debt.

Jindal Steel, the nation’s second biggest producer by market value, has tied up $400 million of bank loans to fund the acquisition, deputy managing director Sushil Maroo said on Thursday in a phone interview. The purchase includes liabilities of as much as $79 million, the firm said in a statement to the Bombay Stock Exchange.

Shadeed Iron is the first overseas steel acquisition by an Indian company since 2007, when Tata Steel Ltd bought UK-based Corus for $12.9 billion and Essar Group paid $1.63 billion to buy Algoma Steel Inc. Jindal Steel is expanding to West Asia as Oman’s government expects the economy to grow 6% and spend 1 billion rials ($2.6 billion) on infrastructure projects this year, minister of national economy Ahmed bin Adulnabi Macki had said last month.

West Asia is a growing area, so it makes sense to acquire assets there, said Paresh Jain, an analyst with Angel Broking Ltd in Mumbai. “We are working out the details to see whether the price is justified."

Jindal Steel shares rose 1.23% to close at Rs623.80 on Thursday. The benchmark Sensex rose 0.68%, to 16,519.68 points.

“It was a roller-coaster ride," Maroo said. “We did our own analysis and approached them directly. The deal virtually broke off, but then things just happened." Jindal Steel said on 14 May that it had scrapped talks with Al Ghaith Holdings PJSC, the parent firm to buy Shadeed Iron.

Shadeed is installing a 1.5 million tonnes sponge-iron plant at the Sohar Industrial Port area in Oman, according to the statement. Jindal Steel will spend around $61 million to complete the project, expected to be commissioned in the next 10 months, Maroo said.

The cost of production will be key in deciding the viability of the project, said Chirag Shah, an analyst at IDFC-SSKI Securities Ltd in Mumbai. Shah has a “neutral" rating on Jindal Steel shares.