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Sat, 24th Dec 2016 (Source:Mint)
Tata Steel Ltd on Friday said it agreed to buy Brahmani River Pellets Ltd (BRPL) from Moorgate Industries Group for about Rs900 crore, which would give it access to a 4 million tonne (mt) pellet production factory and a 4.7 mt iron ore processing facility in Odisha.
Moorgate Industries Group was set up to hold the Indian iron ore assets of UK’s debt-ridden steel trader Stemcor Group when it was restructured through a UK court process in 2015, in the aftermath of a crash in steel prices worldwide due to excess capacity in China and sluggish demand. Moorgate owns part of Brahmani River Pellets Ltd through Aryan Mining and Trading Corp. Pvt. Ltd, which is also part of the transaction.
Tata Steel already has steel production capacity of 28 mt a year. The acquisition is part of its efforts to secure long-term supply of raw materials and intermediates. The company had in its 2015-16 annual report highlighted the risk of raw material linkage and adverse regulatory environment among the operational risks it faced.
The acquisition has significant synergy with its 6 mt steel factory at Kalinganagar in Odisha and will make it more competitive, Tata Steel said. BRPL’s two facilities are connected through a 220km underground slurry pipeline. BRPL posted a revenue of Rs452 crore in the past fiscal, as per news agency reports.
Iron ore from Tata’s captive mine in the Joda and Khondbond region will get transferred in future through the slurry pipeline and pare freight costs significantly, Tata Steel quoted group executive director (finance and corporate) Koushik Chatterjee as saying. Also, the acquired pellet plant and other infrastructure will improve efficiency of blast furnace operations in Kalinganagar.
“To build a similar facility would have taken significant time and costs and, therefore, this acquisition is very timely as we are looking to ramp up the capacity of phase one at Kalinganagar. This is also a demonstration of our commitment to the state and people of Odisha,” Chatterjee said in a statement.
Tata Steel reported a net profit of Rs250 crore in July-September against a loss of Rs288 crore a year earlier. Shares of Tata Steel fell 0.42% Rs390.75 at close of trading on a day the BSE’s benchmark Sensex rose 0.24% to 26,040.70 points