(Bloomberg) -- State-run Steel Authority of India Ltd. has finalized terms for a 60 billion rupee ($929 million) plant with ArcelorMittal to cater to the automobile sector, a deal that’s been in the works for more than two years, according to a person familiar with the development.
The agreement for the automotive grade steel plant is likely to be approved next week by SAIL’s board, the person said, asking not to be identified as the matter wasn’t public. The two steel producers are in talks with the state governments of Andhra Pradesh and Gujarat to acquire land for the project. A joint site selection committee will choose the location within the next quarter in either of the two states, the person said.
An e-mail sent to ArcelorMittal wasn’t immediately answered, while a SAIL spokesman didn’t immediately respond to calls seeking comment on the details. Shares of SAIL rose as much as 3.9 percent to 81.85 rupees in Mumbai on Friday. The stock is up 65 percent this year.
The world’s largest steelmaker ArcelorMittal is seeking to gain a foothold in the growing Indian market after its earlier plans to build a 12 million metric tons a year steel plant in Odisha failed on delays in getting land and mining permits.
An initial joint venture agreement for the automotive plant was signed in May 2015 and progress was delayed due to inability of the two companies to decide on terms. The new plant will take three years to build, said the person. Lakshmi Mittal and son Aditya Mittal have made several trips to the country to discuss the deal and scope out opportunities to invest in other stressed steel assets in India, the person said.
Steel consumption in India is gathering speed amid an infrastructure building boom that’s set to more than double the capacity of the nation’s mills and catapult it above Japan as the world’s second-biggest producer. The prospects have been attracting interest from global companies even as a clean-up of stressed assets leaves a number of highly indebted steelmakers on the block.
“India is a growth market, it is a large country and it has good prospects for the steel business,” Chief Financial Officer Aditya Mittal said in an interview last week. “We continue to look for growth opportunities, but at the same time we remain very cognizant of our balance sheet as well,” Mittal said, declining to comment on any interest in Bhushan Steel Ltd. and Essar Steel India Ltd.
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