JSW Steel may sell 40% in Bengal unit

JSW Steel, which last week tied up with Japanese steel giant JFE for technology, may sell as much as 40% in its upcoming 10-million tonne steel unit in West Bengal to its overseas partner.

“At JSW Steel level it will be a minority stake, whereas, in JSW West Bengal, it could be in excess of let’s say 26% or 40%,” Sajjan Jindal, JSW managing director told ET NOW in an interview. He did not comment on valuations. There may be a stake sale in JSW, too.

The investments in both, the parent and the subsidiary, might happen in the next four months, as a team from the Japanese company will be in India next week to finalise the details, said an official in the company familiar with the development.

JFE could end up investing close to $1 billion in buying up to 40% stake in JSW Bengal Steel, said an analyst with a domestic firm who did not want to be identified. These funds would be used to build the steel plant which is estimated to cost about Rs 35,000 crore.

The company expects the construction of Bengal project to start soon since it has already acquired 4,500 acres of land at Salboni in Paschim Medinipur district of West Bengal.

Currently, JSW Steel holds 89% stake in the subsidiary, while the rest is held by the West Bengal state government. JSW Steel had delayed the construction of the plant due to unavailability of funds last year because of credit crisis.

JSW may even make a token reciprocal investment in the Japanse company even though India has brighter prospects. “India is where all the money is required, there won’t be much money we will invest in JFE. But as a strategy we don’t want to give away the option of JSW not investing in JFE but in reality whether JSW will invest in JFE is yet to be seen,” Jindal said on Monday.

JSW Steel last week announced a strategic alliance with Japan’s second-largest steelmaker JFE Steel Corporation, but the markets were then disappointed that the pact did not involve the acquisition of an equity stake in the Indian listed company.

JSW, India’s third largest steelmaker, then said the partnership will allow it access to JFE’s technology for producing steel used in automobiles. JSW Steel closed 2.93% up at Rs 998.95 a share on the BSE.