SAIL asked to divest non-core assets, focus on core activity

Sep 19,2020

The steel ministry has directed Steel Authority of India (SAIL) to identify its idle assets and chalk out detail plans for monetizing of such assets. The state-run company has also been asked to sell its investments in joint ventures and steel processing units (SPUs).

The move aimed at letting the company focus on its core activity to become a pure-play steel and mining company.

“SAIL has been asked to expedite the process of identification of idle assets/ decommissioned facilities, plant-wise, for monetization,” the steel ministry said in a recent note to the Cabinet. SAIL reported Rs 1,226-crore loss at the consolidated level in the first quarter of the current fiscal.

According to Edelweiss, SAIL’s gross debt, at the end of Q1 FY’21, stood at Rs 54,400 crore. SAIL sold 1.43 million tonne steel in August this year, up 35 per cent over the corresponding month last year.

An email sent to SAIL chairman Anil Kumar Chaudhary as well as its corporate communication department requesting to identify such assets elicited no response. A meeting on the monetisation of SAIL’s assets held in the steel ministry on August 20.

SAIL had four subsidiaries, one associate company and 24 joint ventures in areas like power generation, rail wagon manufacturing, and slag cement production and for securing coking coal supplies from overseas, with a cumulative investment of around Rs 1,500 crore, as on March 31, 2019.

Around Rs 694 core of all such investments were in International Coal Ventures (ICVL), a joint venture incorporated in 2009 among five state-run firms in which SAIL had 46.63 per cent stake, as on March 2016; while Rs 490.25 crore has been invested in NTPC-SAIL Power Company, another joint venture incorporated in 2001 between the two state-run firms. The JV has a little over 800 MW capacity. SAIL also has a 50:50 joint venture, mjunction services, with Tata Steel in the e-commerce space. In the cement space, SAIL has one joint venture with Jaypee Group, as per its 2018-19 annual report.

Collectively, SAIL’s joint ventures reported Rs 194.32 crore loss in 2019-20, down from Rs 222.87 crore loss a year earlier.

According to its annual report for 2018-19, SAIL has already initiated actions for closure or exit from certain joint venture companies as well as subsidiary companies which are either non-operational or non-performing. Closure actions for two subsidiary companies — SAIL Jagdishpur Power Plant and SAIL Sindri Projects (incorporated for the revival of Sindri unit of Fertiliser Corporation of India) —were in progress under fast track exit mode.

SAIL is also not pursuing Chhattisgarh Mega Steel, incorporated as a Special Purpose Vehicle (SPV) with the objective of fast-tracking developmental processes for setting up of an ultra-mega steel project.

In 2018-19, SAIL incorporated a JV company to develop a 10 MW hydropower plant at Mandira Dam, Rourkela. SAIL owns 26 per cent equity in the venture and the remaining 74 per cent equity is owned by Green Energy Development Corporation of Odisha (GEDCOL), an Odisha government company.

SAIL’s idle assets may include its Visvesvaraya Iron and Steel Plant (VISP) in Bhadrawati where production has come to a halt for more than a couple of years now. Along with VISP, the government had in October 2016 gave its ‘in-principle’ approval for strategic disinvestment of two other units — Salem Steel Plant (SSP) in Salem and Alloy Steels Plant (ASP) in Durgapur. These three units have been consistently making losses. Last fiscal, these three units cumulatively reported Rs 365 crore loss, lowering down SAIL’s profit before tax to Rs 3,171 crore.

On February 1, 2018, SAIL issued a notice seeking expression of interest (EoI) for disinvestment of ASP, but EoIs received did not meet the specified eligibility criteria. The fresh process has been initiated and revised EoIs for ASP, VISP and SSP have been issued.

SAIL has three SPUs — one each in Bihar, Uttar Pradesh and Himachal Pradesh — which convert semi-finished products into finished products.

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