Maharashtra Seamless in race for Indonesian iron ore mining firm

June 26, 2008

June 26th (The Economic Times) – Maharashtra Seamless (MSL), the flagship company of the Rs 3,000-crore DP Jindal Group, is in the race to acquire an Indonesia-based iron ore mining firm for around Rs 300 crore. It is learnt that the Indonesian firm has iron ore reserves of close to 20 million tonne. If the deal goes through, MSL would also establish a 1 million-tonne steel plant close to the iron ore deposits in Indonesia with investments of up to Rs 1,200 crore.

Sources say MSL would resort to internal accruals to fund the proposed steel project as well as the acquisition. When contacted by ET, the company’s spokesperson declined to comment. As part of the backward integration initiatives, the company had planned to set up its first steel plant in Orissa. However, if the deal with the mining firm goes through, the plant would instead come up in Indonesia considering the proximity to iron ore reserves, said sources.

According to the industry sources, the acquisition of the Indonesian iron ore mining company would help MSL meet iron ore requirements for its proposed steel plant. The steel plant, in turn, would serve as a raw material source for company’s seamless pipes and tubes business. Last year, the Indian firm had acquired seamless pipes plant of SC Republica SA in Romania with an aim to double its seamless pipes capacity to 7 million tonnes a year by 2010 from 3.5 tonnes presently. With the acquisition, it also got access to the European and the Middle East markets.

“We are getting technology and equipment of the Romanian firm into India and establishing a 2 million tonnes plant at Nagothane in Maharashtra, which is close to existing seamless tubes facility. The project would entail an investment of close to Rs 300 crore,” said an official of the company. He added the company has already acquired the land worth Rs 80 crore for the new plant, which is likely to get commissioned by 2010.

The company plans to add another 1.5 lakh tonne by de-bottlenecking the existing capacity of 3.5 million tonnes, located at Raigad in Maharashtra, with an additional investment of close to Rs 100 crore. Presently, MSL supplies wide range of pipes and tubes to various domestic industries, primarily oil and gas, for exploration activities.

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