Konoike Transport Wins Rs. 320 Crore Bid for MSTC's Stake in Ferro Scrap Nigam

The CCEA granted in-principle approval for the strategic disinvestment of MSTC Ltd's entire equity stake in FSNL in October 2016.

In a significant development, the Alternative Mechanism, empowered by the Cabinet Committee on Economic Affairs (CCEA) and comprising Shri Nitin Gadkari (Union Minister for Road Transport and Highways), Smt. Nirmala Sitharaman (Union Cabinet Minister for Finance), and Shri H.D. Kumaraswamy (Union Minister of Steel), has approved the highest bid of Rs. 320 crore from M/s. Konoike Transport Co. Ltd. for the sale of MSTC Ltd’s 100% equity shareholding in Ferro Scrap Nigam Limited (FSNL), including the transfer of management control.

FSNL, a 100% subsidiary of MSTC Ltd under the Ministry of Steel (MoS), was established on 28 March 1979. The company specializes in the recovery and processing of scrap from slag and refuse generated during the iron and steel making processes across various steel plants.

Disinvestment Process:

CCEA Approval: The CCEA granted in-principle approval for the strategic disinvestment of MSTC Ltd's entire equity stake in FSNL in October 2016.

Bidding Process: A competitive two-stage auction process was carried out with professional advisers (Transaction Adviser, Legal Adviser, Asset Valuer) overseeing the transaction. The Preliminary Information Memorandum (PIM) was issued on 31 March 2022, inviting Expressions of Interest (EoI) from prospective bidders, with the deadline for submission extended to 17 June 2022. Six interested bidders submitted EoIs, with five being shortlisted as qualified bidders. These bidders conducted due diligence and obtained necessary security clearances.

Request for Proposal (RFP): On 2 January 2024, the Request for Proposal (RFP) and Share Purchase Agreement (SPA) were issued, inviting financial bids. Two sealed financial bids were received by the deadline of 31 January 2024. The Reserve Price was independently set at Rs. 262 crore based on expert valuation.

Winning Bid: M/s. Konoike Transport Co. Ltd., a Japanese corporation listed on the Tokyo Stock Exchange, submitted the highest bid of Rs. 320 crore, surpassing the reserve price. The other bid was submitted by M/s. Indic Geo Resources Pvt. Ltd., a subsidiary of Chandan Steel Ltd.

About the Bidders:

Konoike Transport Co. Ltd.: With over 140 years of experience in steelworks, Konoike is renowned for its comprehensive steel division services, including slag treatment, scrap processing, and recycling projects like the Perfect Recycling System.

Indic Geo Resources Pvt. Ltd.: A subsidiary of Chandan Steel Ltd., Indic Geo Resources was incorporated in 2014 and focuses on processing ferrous scrap and slag in steel plants. It leveraged its parent company's financial strength for the bid.

Next Steps: The transaction now moves towards completion, with the next steps including issuing the Letter of Award, signing the Share Purchase Agreement (SPA), fulfilling the conditions precedent as outlined in the SPA, and closing the transaction. This marks a critical phase in the strategic disinvestment process, aimed at enhancing operational efficiency and integrating global expertise into FSNL’s operations.