JSW plans to set up 2 arms, net rises 226%

MUMBAI: In an indication that consolidation in the steel industry is set to continue, JSW Steel, India’s second largest private steel manufacturer, is setting up two subsidiaries to “pursue acquisition opportunities in steel business” and for “investing in overseas coal assets.”

“The company has been on the lookout for acquiring value-added facilities in Europe and USA to identify and speed up acquisition of steel business-related assets and also to intensify interactions with various stakeholders to improve its business activities in international arena, The board has approved the formation of a wholly owned subsidiary overseas with an investment up to £1m,” JSW Steel said.

“The subsidiary will be set up in London and will look for opportunities,” said Seshagiri Rao, director, finance. ET had earlier reported that the Sajjan Jindal-led company is looking at acquiring a 1mt cold rolling mill either in Eastern Europe or in the US. JSW, according to sources, has identified the prospective company and the deal is pegged at about Rs 500 crore.

The company, which also announced its second quarter results on Thursday, will set up a subsidiary to invest in overseas coal assets. “A focused effort is being made for the last two years to identify prospective coal mining assets and invest in them to ensure long term coal security. The initial investment approved is up to $ 25m to be contributed either by equity or loans / extension of financial guarantees,” said the statement.

The company’s net profit saw a 226% jump at Rs 346 crore for the quarter ended September 30, ’06. The net sales stood at Rs 2,194.5 crore with growth of 42% and EBIDTA was up by 89% at Rs 744.5 crore.

JSW Steel has already signed an agreement with a local player in Mozambique to conduct due diligence study on a 6,900-hectare site that could be later mined for coal. Based on the study’s findings, the company has the option to carry out detailed exploration studies and prepare mining plans. Mr Rao added that the company might get into equity partnership for a mining asset in Australia and is also exploring opportunities in Indonesia.