Union Govt plans to create steel giant through merger
The Centre will examine a proposal by the steel ministry to
first merge the loss-making steel firm.
The state run Neelachal Ispat Nigam (NINL) with
Rashtriya Ispat Nigam (RINL) and then merge it with Steel Authority of India
(SAIL) to create a single state-owned steel manufacturer to bring in
Similarly, it has also suggested consolidation of profitable iron
ore mining companies NMDC and KIOCL.
In a presentation to Prime Minister Narendra Modi in April,
chiefs of central PSUs had proposed the creation of public sector behemoths by
consolidating firms based on commonalities of functions to benefit from economy
of scale, global competitiveness and access to cheaper capital.
Modi had asked the PSUs and administrative ministries to
prepare an action plan on this.
There is scope for merger of these companies.
Integration of CPSEs engaged in the same business line would
limit the number of CPSEs in a sector and create profitable entities which will
have capacity to bear higher risks, take higher investment decisions and create
more value for stakeholders, officials reckon.
Bigger entities would be able to raise cheaper funds and
reduce their dependence on the government.
SAIL, the largest
state-run steel maker, achieved a sales turnover of Rs 58,297 crore during
FY18, 19% higher than the previous year.
SAIL’s losses slimmed by around 83% to Rs 482 crore in FY18
from Rs 2,833 crore in FY17.
The massive capex in the past few years to modernise plants
and recession in the steel sector has hurt SAIL in the recent years.
Neelachal Ispat Nigam is a joint venture company of MMTC,
which holds 49.78%, while the Industrial Promotion & Investment Corporation
of Odisha (IPICOL) holds 15.29% in the firm.
The bulk of the remaining 34.93% stake in NINL is held by
central PSUs. NINL incurred net loss of Rs 378 crore, while RINL incurred a net
loss of Rs 1,369 crore in FY18 due to slowdown in the industry.
In the iron ore-mining business, NMDC showed an impressive
47% increase in net profit at Rs 3,806 crore in FY18.
India’s largest iron ore producer also reported a 31.5%
increase in revenues at Rs 11,615 crore in FY18.
KIOCL (formerly Kudremukh Iron Ore Company) could
potentially be merged with NMDC. KIOCL showed an impressive 70% increase in net
profit at Rs 81 crore in FY18.