Jindal Steel & Power has sold off its Oman-based steel mill Jindal Shadeed to one of JSPL’s promoter firms, Mauritius-based Templar Investments, for $1 bn as part of its efforts to reduce debt.
The transaction is subject to approval from shareholders of JSPL and lenders of Jindal Shadeed, among others. JSPL expects the transaction to close in approximately a month.
“This sale is in line with our vision to reduce debt and create a much healthier balance sheet for our investors and stakeholders. We firmly believe in the India growth story,” said JSPL managing director V.R. Sharma.
Indian steel mills took large debts from banks to finance rapid capacity expansion through greenfield steel and mineral projects and acquisitions that continued until late-2010s. Slower pace of economic growth over the past few years have created difficulties in repaying debt obligations for various steel mills, including bankruptcy and sale of five integrated producers.
JSPL had a net debt of INR 35,919 crore as of 31 March 2020. The company is seeking to sell stakes in its international operations to reduce debt. It recently reported trying to offload stake in its 5mtpa coal mine in Mozambique but progress has been slow due to adverse global economic conditions.
JSPL acquired Shadeed Iron & Steel in 2010 for $500mn. Post-acquisition, JSPL had invested around $1.1bn to expand the Sohar port-based, natural gas-fired plant’s capacity and product portfolio. Jindal Shadeed has a 1.8mtpa DRI capacity, 2.4mtpa steel melting shop (SMS) capacity and a 1.4mtpa rebar mill. The integrated plant sources its entire iron ore pellet requirement from Vale’s pellet-making facility at Sohar port while gas is supplied at concessional prices on long-term contract with the government of Oman. It procures scrap from third-party suppliers.
Jindal Shadeed sells its finished products for energy pipeline and construction projects in Oman and other Middle Eastern countries.
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