Uttam Galva up 5% on talks with POSCO to set up steel plant

Shares of Uttam Galva Steel rallied 5 percent on Tuesday as sources said South Korean steel major Posco has initiated talks with company to set up a three million-tonne per annum facility in Maharashtra with an estimated Rs 16,000 crore investment.

The deal, if fructifies, would see two of the world's leading steel makers joining hands as Lakshmi Mittal-led ArcelorMittal has 33.80 percent stake in the Mumbai-based Uttam Galva Steel.

A source close to the development said representatives of all the three firms had a meeting last week and are in favour of the joint venture. The shareholding and other details of the proposed project are yet to be worked out.

It generally takes USD one billion or Rs 5,500 crore to set up a steel plant of one million tonne capacity.

CR and galvanised steel maker Uttam Galva Steels Deputy Managing Director Ankit Miglani declined to comment on the development.

Posco India's Chairman and Managing Director Y W Yoon did not reply to queries in this regard. Arcelor-Mittal India spokesperson could not be contacted immediately.

The required 1,700 acres land for the facility, which is proposed to be set up at Satarda in the Konkana region of the western state, would be provided by Uttam Galva Steels which owns the land parcel.

Satarda is closer to Goa, a state with prolific reserves of iron ore. However, the iron ore produced from the state is low-iron bearing. Posco's patented Finex technology of iron producing uses fines (low-grade iron).

The South Korean steel major had intended to use Finex technology in a proposed joint venture with state-owned Steel Authority of India, but the project hasn't taken shape so far due to differences over shareholding structure. While Posco insisted on holding a majority stake in the proposed venture with SAIL, the Indian government was not willing to offer it more than 50 per cent of the holding. Leading global steel makers are increasingly vying for Indian market as the demand for the alloy is set to go up in the coming years to meet its infrastructure needs. India is now the world's fourth largest steel producer following China, Japan and US. Posco had produced 39.1 million tonnes steel in 2011.

At 10:23 hours IST, the stock was quoting at Rs 70.95 on Bombay Stock Exchange. There were pending buy orders of 10,491 shares, with no sellers available.
 
Market capitalisation of the company currently stands at Rs 1,009.34 crore.
 
(With inputs from PTI)