Sesa Goa in talks to buy Welspun's sponge iron facility; stock up

Anil Agarwal's Sesa Goa is in talks with the Welspun Group to buy their sponge iron facility at Salav in Maharashtra, sources with direct knowledge said. BK Goenka's closely held company, Welspun Maxsteel owns sponge iron facility which has an annual capacity of 0.9 million tonnes and sources say Welspun Group is looking at selling it at Rs 3000 crores. This is the same plant which Welspun Group had bought from the AV Birla Group for Rs 1030 crores about two years back.

At 12:40 pm, shares of Sesa Goa were trading 0.56% up at Rs 307 on the Bombay Stock Exchange.

Industry experts say that the iron ore exports by Sesa Goa has become less lucrative post a 20% export duty introduced by the government and the company is also under pressure to increase value addition to iron ore in the domestic market.

This is yet another effort by Anil Agarwal to enter the steel business, earlier, Sesa Goa had bid for Karnataka based Bellary Steel which has run into troubles with Sajjan Jindal's JSW Steel. Sesa Goa produces 22 million tonnes of iron ore per annum and has surplus cash on books of about Rs 8000 crores, a part of which will be deployed for buying Cairn India shares via open offer.

Welspun Group's effort to sell the Vikram Ispat unit reflects a complete change in their strategy from backward integration to going up the value chain. Group's flagship company, Welspun Corp is focusing on pipe manufacturing and infrastructure business.
Welspun had bought MSK Projects last year and has also tied up with Leighton International for furthering it's infrastructure business. Sources say, the group wants to invest on infrastructure business rather than steel plants which is backward integration for their pipe units.

Sesa Goa management declined to comment on the development and the Welspun Group did not respond to our query.