Stemcor looks to ramp up presence in India

MUMBAI: Stemcor, the world’s leading metals trading group, is in talks to double its stake in Delhi-based Mesco Steel from the current 10%. The $5-billion UK group has floated a wholly-owned subsidiary Brahmani River Pellet, through which it is investing Rs 1,500 crore to set up four MTPA iron ore pelletising complex in Orissa.

The company signed a MoU with the state government for the project. Stemcor may also help Mesco in setting up a 3m tonne per annum steel plant in Orissa. Mesco, also known as Mideast Integrated Steel, is currently in a turnaround phase and is in the process of paying off its debts. Stemcor India MD Matthew Stock confirmed the company is looking to increase its stake in Mesco but refused to give further details.

“We have helped them set up two blast furnaces and also might take part in future projects. Talks are still going on with Mesco but it is too early to tell,” he told ET. Sources say Stemcor has invested close to $150 million in Mesco since taking a stake in the Indian company in the end of 2004. “Mesco was having trouble financing its expansion in Orissa and that is where Stemcor chipped in. It has also helped Mesco pay off about 80% of its debts, amounting to about Rs 300 crore, to various banks,” said sources.

About 60% of Mesco’s equity is with the promoters and public holds about 25%. The company may relist on the BSE to raise funds to fund investments. “The total investment is Rs 1,500 crore, of which Rs 500 crore will be Stemcor’s equity and the balance will be raised as debt from Indian banks and financial institutions. The project consists of a beneficiation plant (to upgrade lower quality iron ore fines to iron ore concentrate), a slurry pipeline (to transport the iron ore concentrate thus removing the logistics difficulties in Orissa) and a pelletisation plant,” said Mr Stock.