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Anirban Nag
Mumbai, Aug 27: The Essar Minerals-Stemcor Corporation deal hit a roadblock with the board of the Industrial Development Bank of India refusing to give its stamp of approval on Friday.
The head of financial institutions (HIM) meeting last week had cleared the Essar group's proposal to offer 51 per cent stake in Essar Minerals to the US-based company. They also decided to fund the project since it would be run by the US company now. However, the in-principle approval of the FIs' meeting was subject to the approval of the respective institution's board.
The board of IDBI which met in Mumbai today refused to clear the proposal. According to sources, the institution did not give its nod as the Ruias have "failed to comply with all stipulations laid out in the steel package" approved by IDBI sometime back. "A review of the decision will take place only after Essar fulfils all conditions," a highly placed institutional source said.
The clearance of Stemcor proposal at the HIM was seen as a move that couldhave helped the beleaguered Essar Steel as it would infuse funds to the tune of Rs 184 crore. Essar Steel was offering Stemcor the shares at par.
Earlier, Essar had offered only 30 per cent to Stemcor while National Minerals Development Corporation was also looking at investing around Rs 50 crore. But the institutionss wanted the British commodity-trading major to take a majority stake in Essar Minerals and had insisted on it before fresh disbursal of funds to the group.
Essar Minerals is currently a subsidiary of Essar Steel and operates a 3.3-million tonne pelletisation plant in Vizag, Andhra Pradesh. While pellets is a raw material used for the manufacture of hot briquetted iron, it is made from iron ore fines which Essar Minerals is procuring from the Bailadila mines. While the company used to depend on the railways earlier to transport iron ore to Vizag, it is now planning to set up a 268-km slurry pipeline with a view to reduce costs.
Essar Minerals will also set up a captive power plant at thepelletisation complex. The proposed 24-mw unit, which will use LSHS as fuel, could lead to a cost saving of around Rs 18 crore annually as compared with power from the state grid. The company will be required to invest Rs 70-75 crore in the proposed unit.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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