Jindal Stainless may bid for Salem Steel Plant

The plant is among the two identified by the Centre for divestment

Jindal Stainless may be interested in bidding for Steel Authority of India Ltd (SAIL)’s Salem Steel Plant, according to sources.

Salem Steel Plant in Tamil Nadu and the Visesvaraya Iron and Steel Plant in Karnataka, both owned by SAIL, are among the firms identified by Narendra Modi government for divestment. The aim is to make the two loss-making units profitable.

The landmark plant in Salem was established in 1970 and employs over 2,000 people. The plant has been making continuous losses. Its losses have increased to Rs. 349 crore in 2015-16 from nearly Rs. 100 crore in 2011-12.

The plan to privatise Salem Steel plant has been opposed by all the political parties in Tamil Nadu. The Tamil Nadu government has said it would not allow any privatisation in the State, amid protest by the unions.

It is reliably learnt that Jindal Stainless is keen on picking up stakes in the public sector company during the disinvestment exercise. However, officials are cautious in acknowledging it. “We have not decided anything on the issue of buying stake in SAIL’s Salem plant. The company always evaluates such decisions as per the prevailing business scenario,” a spokesperson of Jindal Stainless said.

A SAIL official declined to comment on the issue. This is not the first time the Government is trying to privatise the Salem Steel Plant. A similar attempt 13 years ago failed both for political and strategic reasons.

In 2003, 51 per cent of controlling stake of SAIL in Salem Steel Plant was up for sale and there were initially two bidders for the stake — the Tata Steel-Unisor combine and Jindal Strips.

Later, Tata Steel-Unisor pulled out saying it did not see any strategic sense in the deal, making Jindal Strips the sole bidder. But the Jindal Strips deal also did not go through due to disagreement over the sale price. Experts say that with the mounting losses of the Salem Steel plant, pricing of the deal would be the key.

“Last time, SAIL wanted to encash on the Salem plant’s brand goodwill. However, the value could not be realised at that time. The same problem would persist now as well,” Professor Kamal Ghosh Ray, an expert on mergers and acquisitions, said.