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FIs for merger of 4 private steel firms

Indian financial institutions which have a huge exposure to the steel industry have proposed the merger of four private steel groups - Essar, Jindal, Ispat and Lloyds, to reduce their non-performing assets, a leading financial daily said on Monday.

The Economic Times newspaper said that the proposal to merge these four companies, which will create a domestic steel conglomerate with a capacity of 9.8 million tonnes, was being discussed in the steel ministry.

It said the merged entity would be able to compete effectively with state-owned Steel Authority of India which has a eight million tonne capacity and private-sector giant Tata Iron and Steel Company Ltd which has 3.5 million tonne capacity.

The paper said financial institutions' non-performing assets were highest in the steel sector because of cost overruns and poor utilisation of capacities.

"The financial institutions are deeply concerned about their non-performing assets in the steel industry and are desperately trying to find a solution before the sickness envelopes several units and jeopardises the very existence of the institutions themselves," the paper said, quoting an institutional official.

According to the financial institutions' concept note, their exposure to the four companies was Rs 80 billion in loans and Rs 6 billion in equity, it said.

It quoted Jindal Vijaynagar's chairman Sajjan Jindal as saying the merger would be ineffective, but Lloyds group chairman Mukesh Gupta welcomed the proposal.

The Ruias of the Essars were unaware, the paper said. It did not give any reaction from the Ispat group.

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