Jindal Steel & Power (JSPL) is in talks to sell a 15% stake in itself to Japan's Yamato Steel for Rs 2,500 crore to reduce its leverage ratio, said people with knowledge of the matter.
CEO Ravi Uppal declined to make any specific comment on a possible deal.
He also added, "We look at small divestments from time to time... These corporate deals are of smaller magnitude and are part of our day-to-day management process”. "There are companies from Europe, China and the Far East that we keep talking to. These people are into power plants, mines and steel business. But we know our core and would never part with it."
JSPL expects to reach an agreement with banks on a debt recast for its steel business, Uppal said. Yamato Steel did not respond to emailed questions.
Indian companies with a Japanese stake of 10% or more get preference in raw material and execution contracts for the $90 billion Delhi-Mumbai freight corridor being built with the aid of Japanese banks and multilateral funding institutions.
JSPL, owned by former lawmaker Naveen Jindal, is one of the largest rail steel makers in India. Indian Railways is planning to invest $140 billion to build new tracks, locomotives and on maintenance, rail minister Suresh Prabhu said.
The company is currently seeking a debt recast for its steel business under the so-called 525 scheme. This involves banks providing 20-25 year loans that will be refinanced every five-seven years.
"Right now we are focused on getting approval for the 525 package for our steel business," Uppal said in a phone interview. JSPL is in talks with lenders including State Bank of India for a moratorium on interest payments and a longer repayment period for its debt, which is close to Rs 46,000 crore. The company has already secured approval under the 525 formula for its power business. "All the banks have agreed. We are hopeful of getting approvals are hopeful of getting approvals for the 525 scheme for steel," Uppal said, discounting talk of a stake sale. "However, (this is) nothing so strategic that would warrant a stake sale."
JSPL closed at Rs 83.50 on the NSE on Friday for a market value of Rs 7,781.2 crore.
A 525 recast helps increase long-term viability, reduces assetliability management issues, eases repayment stress, encourages efficient sharing of exposure by banks at various stages of the eco nomic life of projects and improves credit ratings If concluded, a deal with Yamato will mark the second entry of a Japanese steel maker into the second fastest-growing steel market that requires an investment of $4.7 trillion in the next five years.
