Sesa Goa, a Vedanta Group company, has agreed to acquire the mining assets of Dempo Group for Rs 1,750 crore in an all-cash deal. The assets include mining leases, rights and related infrastructure in Goa.
Sesa Goa on Thursday signed a definitive share purchase agreement to acquire VS Dempo and Co Pvt Ltd, which owns 100 per cent equity shares of Dempo Mining Corporation Pvt Ltd and 50 per cent in Goa Maritime Pvt Ltd.
The deal will be funded by Sesa Goa through internal accrual, which stands at Rs 4,143 crore as on March 31, 2009, the company said in a release late on Thursday.
Greater synergy
Mr Anil Agarwal, Chairman, Vedanta Group, said the integration of Sesa and VSD’s operations will achieve greater synergy and it was an opportunity to consolidate the company’s iron ore business.
VSD, one of the largest exporters of iron ore from Goa, owns the rights to mine-able reserves and resources estimated at 70 million tonnes of iron ore in Goa.
The company’s assets include processing plants, barges, jetties, trans-shippers and loading capacities at Marmugao port. It produced 3.94 million tonnes of iron ore and sold 4.36 million tonnes in FY’09.
VSD’s unaudited revenue was about Rs 976 crore and EBITDA (earnings before interest, tax, depreciation and amortisation) in FY’09 was Rs 417 crore, the release said.
Core strenghts
“We are extremely pleased to have reached this agreement with Sesa Goa, which will ensure long-term sustenance of VSD’s operations,” said Mr Shrinivas V. Dempo, Chairman and Managing Director, Dempo Group.
Sesa Goa, one of the large iron ore exporters, has also diversified into the manufacture of pig iron and metallurgical coke. The company also has mining operations Karnataka and Orissa and operates a 280,000 tonnes a year metallurgical coke plant and a 250,000 tonnes a year pig iron plant in Goa.
Goa-based Dempo Group is a diverse industrial house with interests spanning across mining, calcined petroleum coke, pig iron, shipbuilding, food and travel. V S Dempo & Co Pvt Ltd and Dempo Mining Corporation Pvt Ltd constitute the Goa mining business of the Dempo Group.
Dempo has been involved in iron ore mining, beneficiation and exports for nearly 60 years.
Ambit Corporate Finance acted as financial advisor and J Sagar and Associates was the legal advisors to VSD. Luthra and Luthra was the legal advisors to Sesa Goa in the transaction.
Sesa Goa exported about eight million tonnes to China in 2008-09.
Miners in Goa have lower costs as mines are located near the port, and so avoid road and rail charges.
India produces over 200 million tonnes of iron ore annually and exports about half the production. There are about 500 mines held by about 80 companies. However, only 250 mines are operational.
China is the major importer of iron ore from India, with its proximity helping to secure ores with low freight costs.
The demand for iron ore has been on the rise and the prices have surged 10 per cent in first week of June, touching a four month high on account of large scale imports by China which imported 55.5 million tonnes in May, up 25 per cent over the same period last year.
Source: The Hindu Businessline