In an effort to exit the steel industry, Vedanta seeks to sell Electrosteel.

• ByStartupStory     |    November 15, 2022

The Vedanta Group, headed by Anil Agarwal, has decided to sell businesses in order to concentrate on its core industrial and mining businesses and reduce balance sheet leverage, which had a debt of $11.7 billion, four years after acquiring Electrosteel Steels Limited to create a stir in the steel industry, in late March, according to others with knowledge of the situation.

According to the persons, the group has made contact with a number of financial investors and steel corporations, including Arcelor Mittal Nippon Steel (AMNS), JSW, and Jindal Steel and Power Limited. Senior executives, including ArcelorMittal CEO Aditya Mittal, and representatives of the Vedanta Group reportedly visited the site recently.

The Vedanta Group declared that it did not wish to comment on the market rumors. Nippon Steel and JSW both declined to comment on the situation. “We don’t have any acquisitions currently under evaluation,” Koushik Chatterjee, CFO of Tata Steel, stated to ET. After creditors forced the struggling steelmaker into insolvency proceedings in the summer of 2018, Vedanta defeated Tata Steel to acquire Electrosteel for Rs 5.32 billion, and it became the second steel company to see the completion of bankruptcy proceedings after Tata Steel took control of Bhushan Steel in April 2018. As the vertical integration of steelmaking skills has the potential to produce significant economies, Vedanta had stated at the time that the acquisition will complement its current iron ore operations. One of Electrosteel Castings’ subsidiaries was Electrosteel Steels. Vedanta delisted the business after assuming control. 95.5% of ESL Steel is owned by Vedanta Limited (VDL), the Indian operating company that manages a diverse portfolio of oil and gas, zinc, lead, silver, aluminum, iron ore, steel, and energy industries. Vedanta Limited’s parent company, Vedanta Resources (VRL), is domiciled in London and holds 69.7% of the company’s shares. VRL is wholly owned by Volcan, the Agarwal family’s investment entity. Pig iron, TMT bars, billets, ductile iron pipes, and wire rods are some of the company’s product lines.

In 2018, Electrosteel Steels’ planned and operational steelmaking capacities were 2.51 and 1.5 million metric tons, respectively. Under Vedanta, the business has had significant growth in Bokaro and Goa Goa, well as a brand-new facility in Bellary, Karnataka. The company has announced a $348 million capital project that is anticipated to be finished in this fiscal year and will increase hot metal capacity from the present 1.5 MTPA to 3 MTPA. With 12 MTPA of iron ore, the goal has been to increase margins through value-added products. According to those with knowledge of the situation, Vedanta is now asking for a valuation of between Rs 10,500 and Rs 12,000 crore. They predicted that the premium could be a deal-breaker.

“On several occasions, Agarwal has been approached by various players about Electrosteel, but he has never openly admitted that he is a vendor. The stress is rising once again. Electrosteel also has environmental issues that he has promised to resolve before the transaction is consummated, but the demand is too high at a time when we are seeing a squeeze in the credit markets,” a seasoned professional in the field who wished to remain anonymous stated. “However, for those looking for a footprint in the east, this would be a good buy as the company has also been expanding its operations.”

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