BS reported that the central government’s plan to divest part of its stake in all undertakings of the steel ministry has come as a blessing in disguise for the ailing KIOCL.
KIOCL, which currently has no captive iron ore mine to run its pelletization and pig iron plants in Mangalore, will benefit from the government’s proposal to convert it into a subsidiary of NMDC. Following its acquisition, the ore-starved mining company will be assured of a captive mine in the iron rich Bellary region of north Karnataka.
Mr K Ranganath CMD of KIOCL said, “As part of the steel ministry’s 20-point agenda for the first 100 days, it is proposed to merge KIOCL with NMDC by way of a share swap arrangement. Both NMDC and KIOCL will divest stake to each other. As part of the arrangement, KIOCL will become a subsidiary of NMDC. While NMDC will have a 51% stake in KIOCL, the government of India will retain 48%. The remaining 1% will stay with public.”
KIOCL has a cash reserve of INR 1,400 crore, a part of which would be used to buy NMDC shares.
Mr Ranganath said “Currently, we do not have a captive iron ore mine and buying at market price is not viable. The ore cost after transportation and other variable costs works out to USD 107 per tonne assuming we produce 265,000 tonnes per annum, whereas the market price is just around USD 76 per tonne. The ministry has decided to convert KIOCL into a subsidiary of NMDC so that it gets captive mines.”
He also informed that “To smoothen the share-swap move, the capital base of both the companies will be increased. Both have been asked to appoint valuers to assess shares and assets. KIOCL has appointed Darashaw & Co, an investment and broking house, for this purpose. It has appointed another company to assess the value of its shares. Once the asset and share valuation is done, we will finalize the deal.”
He added that “As a result of the proposed merger, NMDC will transfer one of its iron ore mines at Donimalai in Bellary to KIOCL. A captive mine meant extraction of iron ore at the cost price, which would help KIOCL return to its old glory once again.”
A working group has also been appointed under former KIOCL chairman Mr P Ganesan. The committee has held one round of discussion at Mangalore with the employees. The second round will be held next week to sort out all issues.
