Stemcor extends bid deadline over Shah commission proposals

New Delhi/Mumbai: UK steel trader Stemcor Holdings Ltd has extended the deadline for bids on its $800 million-$1 billion Indian assets sale to 20 January from Monday, possibly because buyers needed time to consider the potential impact of proposals made by the Justice M.B. Shah Commission on illegal mining.

“The new date is 20 January... we are evaluating (the company)... we will take a call,” said Seshagiri Rao, joint managing director and group chief financial officer of JSW Steel Ltd.

Debt-laden Stemcor Holdings last year asked Goldman Sachs to study the prospects of a sale of its Indian assets comprising an iron ore pellet plant and stakes in mines in Odisha, sparking interest among top steel producers seeking to secure raw material supplies.

The bid-deadline has been extended several times since mid-November with bidders saying that they were inspecting the assets.

“We have never talked publicly about a deadline for the India sale process. It continues to move forward well,” Charles Armitstead, a spokesman for Stemcor, said on Monday.

“The bidders want to wait and watch how the government treats Shah Commission’s recommendations,” said an industry member in the iron ore trade who did not wish to be named. “I won’t be surprised if the deadline is extended again.”

Justice M.B. Shah started examining the extent of illegal mining in 2010 and his latest report—on Odisha—is being evaluated by a committee of secretaries, according to government officials. It is likely to be presented to Parliament with an ‘Action Taken Report,’ at which point the report will be made public, the officials said.

Officials have said that the Commission has concluded that “all modes of illegal mining are being carried out” in Odisha. A report published in the magazine Infraline in October said that out of 192 mines of iron ore and manganese, 147 are operating with leases that have expired years ago.

A Press Trust of India (PTI) report dated 5 January said the operations of top steel and mining companies are likely to be affected if a recommendation by the Shah Commission to ban mining along the Baitarani river in Odisha is accepted by the Union government.

According to another PTI report dated 2 January, the Shah Commission has said about ₹ 60,000 crore should be recovered from miners for illegally mined iron and manganese ores, while another report dated 3 January said the Commission has asked for a Central Bureau of Investigation probe into illegal mining in Odisha.

Mines secretary R. H. Khwaja did not return calls made to his office seeking a confirmation of these reports and comments on what the government may do with the recommendations.

An analyst said bidding for Stemcor does involve risks and that these could lower its valuation.

“There are risks such as (getting government permission for) forest clearance and also clarity of the ownership,” said Giriraj Daga, an analyst at Nirmal Bang Equities Pvt. Ltd.

“Odisha suffering a fate similar to Karnataka and Goa where mining was banned (and later restored in the former) can’t be ruled out,” he said.

Other than JSW Steel, Tata Steel Ltd and Jindal Steel and Power Ltd (JSPL) said late last year they would bid for the assets but Tata Steel’s group executive director (finance and corporate) Koushik Chatterjee indicated at a press meet in mid-November that the company may not bid for Stemcor.

Other firms said to be interested, according to industry sources, are Aditya Birla group’s Essel Mining and Industries Ltd, international commodity trader Glencore India and UK-based Vedanta Resources Plc.

These companies have not confirmed they want to bid for Stemcor’s India assets.