National Minerals Development Corporation (NMDC), India's largest iron ore producer and exporter, will acquire the Hyderabad-based Sponge Iron India (SIIL) for a maximum of Rs 800 crore. The acquisition proposal is yet to be approved by SIIL.
NMDC has formed a draft proposal to merge with SIIL by acquiring the Hyderabad company's shares. It will also have to pay Rs 80 crore to the Government of India as purchase consideration and buy Andhra Pradesh Government's 1.23% stake in SIIL.
A company official said, “We want to diversify our portfolio and add value to our products and in the process we realised that we have no assets in Andhra Pradesh. So, we decided to buy SIIL.”
The acquisition of SIIL is of strategic importance to NMDC, as it expands its iron ore production. The official said that NMDC plans to leverage SIIL's production capabilities. SIIL produces 60,000 tonnes sponge iron, 1,40,000 tonnes iron ore and 70,000 tonnes coal annually.
With an investment of Rs 23,000 crore, NMDC hopes to increase its turnover six-fold to Rs 35,000 crore by 2014. By FY15, the company plans to take its overall production capacity to 50 million tonne per year.
The company is setting up a Rs 14,000-crore integrated steel plant in Chhattisgarh and a Rs 1,400-crore pig iron plant. It is also expanding capacity at three of its mines at a cost of Rs 4,500 crore.
Source: Sify