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April 23, 2024

ArcelorMittal Nippon Steel India Pursues $1 Billion Loan for Expansion Drive

ArcelorMittal Nippon Steel India, a prominent joint venture between global steel giants, is currently in discussions with several banks to secure a loan of approximately Rs 8,500 crore ($1 billion). This move aims to fuel the company’s expansion plans, marking what could potentially become the largest local-currency loan of the year.

Sources familiar with the matter revealed that State Bank of India, ICICI Bank, and Axis Bank are among the key lenders involved in this syndicated deal. The funds raised will be directed towards capital expenditure to bolster the firm’s operations. Although specific details of the lending facility are yet to be finalized, it is anticipated that SBI, India’s largest bank, may contribute more than half of the loan amount. The loan is expected to have a tenor exceeding five years and could be priced against a local interest rate benchmark.

If the negotiations succeed, this loan would represent the most substantial rupee-denominated financing in 2024 thus far, as per Bloomberg data. As India’s fourth-largest flat steel manufacturer, ArcelorMittal Nippon Steel India is strategically positioning itself to capitalize on potential infrastructure spending in the wake of Prime Minister Narendra Modi’s anticipated reelection.

Despite repeated attempts, ArcelorMittal Nippon Steel India, State Bank of India, ICICI Bank, and Axis Bank have not yet provided comments on the ongoing discussions.

Previously, the steel firm engaged in loan talks with other lenders; however, they failed to reach an agreement on the funding costs, according to insiders.

The company, a joint venture between ArcelorMittal South Africa Ltd. and Japan’s Nippon Steel Corp, stands as India’s fourth-largest flat steel producer, boasting an annual capacity of 8.8 metric tons as of March 2023, as reported by Crisil Ratings, a local credit risk assessor.

India’s steel demand is primarily driven by sectors such as building and construction (39%), infrastructure (27%), engineering and packaging (21%), and automotive (12%), according to a Bloomberg Intelligence analysis. This underscores the importance of strengthening the steel industry to support the country’s growth across various sectors.

The potential infusion of funds through this loan would not only facilitate ArcelorMittal Nippon Steel India’s expansion plans but also contribute to India’s industrial development, particularly in critical sectors like infrastructure and construction. As the demand for steel continues to surge, this move aligns with the nation’s objectives of enhancing domestic manufacturing capabilities and fostering economic growth.

Jhumpa Lahiri

Jhumpa Lahiri

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