11 MARCH 2016The Hindu
Stuck deals to get ‘million-dollar’ push with tweaked mining law
Edited by : AL CIRCLE
3 min read
India will see billions of dollars moving into deals stuck in the power, cement and steel sectors, as the Cabinet on Thursday approved the amendments to the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act, 1957). This will pave the way for transfer of captive mining leases not granted through auction.
The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval for the amendment to the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act, 1957), according to an official statement from the Ministry of Mines.
The MMDR Act, which regulates mining activities in the country through the MMDR Amendment Act, 2015, restricted the scope of transferability of concessions granted through auction, and led to termination of deals — the latest ones being UltraTech’s proposal to buy Jaypee Group’s two cement units in Madhya Pradesh for INR 5,000 crore and Birla Corporation’s planto buy Lafarge India’s five million tonnes per annum (mtpa) cement units in Madhya Pradesh for INR 5,000 crore.
The latest amendment provides for transfer of captive mining leases, granted otherwise through auction, and would allow merger and acquisition of companies.
Besides, it will facilitate the ease of doing business to improve profitability and decrease costs of those companies dependent on supply of mineral ore from captive leases. Stocks of companies such as Vedanta, Jindal Steel and Power (JSPL), Tata Steel and Hindalco increased to five per cent in an otherwise dull market, after the Union Cabinet cleared the proposal to amend the MMDR Act.
Some of the impending deals awaiting the latest amendments include UltraTech’s proposal to buy out Jaypee Group’s 22 mtpa cement assets for INR 17,000 crore and JSW’s plans to buy out Lafarge India’s 10 mtpa cement assets for an enterprise valuation of INR 10,000 crore. Also, Adani Group’s interest in buying out JSPL power units will get a leg-up.
The transfer provisions will also facilitate banks and financial institutions to liquidate stressed assets, where a company or its captive mining lease is mortgaged, according to a government statement. “The amendment will benefit lessees desirous of transferring the captive leases not granted through auction. It will also benefit banks and financial institutions. It does not entail any recurring or non-recurring expenditure on the government.”
Investment advisor S P Tulsian believes that the latest amendments will have far-reaching implications and expedite mergers and acquisitions in the sector. “Players like Hindalco and Vedanta with huge investments in Odisha without bauxite, can now buy smaller players with captive bauxite mines. Similarly, sellers like Jaypee Group and JSPL, who were forced to sell their assets altogether can now sell unit by unit and get better realisations,” said Tulsian.
The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval for the amendment to the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act, 1957), according to an official statement from the Ministry of Mines.
The MMDR Act, which regulates mining activities in the country through the MMDR Amendment Act, 2015, restricted the scope of transferability of concessions granted through auction, and led to termination of deals — the latest ones being UltraTech’s proposal to buy Jaypee Group’s two cement units in Madhya Pradesh for INR 5,000 crore and Birla Corporation’s planto buy Lafarge India’s five million tonnes per annum (mtpa) cement units in Madhya Pradesh for INR 5,000 crore.
The latest amendment provides for transfer of captive mining leases, granted otherwise through auction, and would allow merger and acquisition of companies.
Besides, it will facilitate the ease of doing business to improve profitability and decrease costs of those companies dependent on supply of mineral ore from captive leases. Stocks of companies such as Vedanta, Jindal Steel and Power (JSPL), Tata Steel and Hindalco increased to five per cent in an otherwise dull market, after the Union Cabinet cleared the proposal to amend the MMDR Act.
Some of the impending deals awaiting the latest amendments include UltraTech’s proposal to buy out Jaypee Group’s 22 mtpa cement assets for INR 17,000 crore and JSW’s plans to buy out Lafarge India’s 10 mtpa cement assets for an enterprise valuation of INR 10,000 crore. Also, Adani Group’s interest in buying out JSPL power units will get a leg-up.
The transfer provisions will also facilitate banks and financial institutions to liquidate stressed assets, where a company or its captive mining lease is mortgaged, according to a government statement. “The amendment will benefit lessees desirous of transferring the captive leases not granted through auction. It will also benefit banks and financial institutions. It does not entail any recurring or non-recurring expenditure on the government.”
Investment advisor S P Tulsian believes that the latest amendments will have far-reaching implications and expedite mergers and acquisitions in the sector. “Players like Hindalco and Vedanta with huge investments in Odisha without bauxite, can now buy smaller players with captive bauxite mines. Similarly, sellers like Jaypee Group and JSPL, who were forced to sell their assets altogether can now sell unit by unit and get better realisations,” said Tulsian.
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