Mahindra Ugine Steel Company (MUSCO) has achieved financial closure of the joint venture company Mahindra Sanyo Special Steel where it has partnered Japanese firms Sanyo Special Steel and Mitsui & Company.
Mahindra Sanyo Special Steel is the new name of Navyug Special Steel, in which 51 per cent is held by MUSCO, 29 per cent by Sanyo and the rest 20 per cent by Mitsui. MUSCO is a listed entity with interests in steel and stampings. The promoter group led by M&M holds 55.47 per cent in MUSCO.
MUSCO had approved the slump sale of its steel business into its 100-per-cent subsidiary Navyug Special Steel in November last year. Sanyo bought 29 per cent stake in this company for Rs 129 crore, while Mitsui paid Rs 89 crore for a 20 per cent stake, valuing the joint venture (JV) company at Rs 444.89 crore.
Yutaka Tsukamoto, senior managing director, Sanyo Special Steel, said: "We think that if we utilise our operational expertise with that of this new JV company and we introduce our total quality management method into this, there will be a great potential that this new JV could become the number one speciality steel manufacturer in India."
With financial, technical and operational inputs from Sanyo and Mitsui, the JV expects to enhance both its current production from the existing level of 120,000 tonnes per annum and improve operational efficiency.
Speciality steels are used for making gears in transmissions, they are used in engines, crankshafts and commodities and in bearings. Those are also used in making wheels, bulldozers, earth moving vehicles, robots, rolling stock and oil and gas industry.
The JV will look to tap into Sanyo's technical expertise which will enable it to strengthen and differentiate its product portfolio with the introduction of new products for niche and emerging market segments in India like the oil and gas, power and engineering industries, among others.
Mitsui will assist the JV in strengthening its sales and marketing footprints in niche and emerging markets and providing access to global customers.
Kalyani Steel is the largest manufacturer of speciality steel. Other manufacturers include SIAL and Mukand. The market for speciality steels in India has been growing by 10 per cent per annum, with annual sales of four-five million tonnes, according to Hemant Luthra, chairman, Mahindra Sanyo Special Steels.
The JV company intends to use the production mostly to satisfy the needs of the Indian market. However, it may look to exports at a later date, or when the need arises. Further investments could also be made by the three companies to enhance production.