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India -Govt to amend law to push mining M&As #WTFnews


TNN | Jan 12, 2016, 01.07 PM IST


NEW DELHI: The government has proposed amendments to the country’s mining law to allow transfer of lease for captive mines during mergers and acquisitions in a move aimed at helping companies pare debt and also enable banks to recover some of the funds that are locked up. The government released draft amendments to the Mines and Minerals (Development and Regulation) Act, 1957 as changes last year blocked transfer of leases for captive mines which were allotted before auctions became the norm.

As a result, companies such as Jaypee Associates, which is desperately seeking to sell some of its assets to reduce loans that add up to over Rs 40,000 crore, will be able to complete deals. “It will be particularly beneficial to the steel sector as several transactions have been held up,” said a banker. The move will also benefit other metal companies, which have been hit by an onslaught of cheap imports from China where there is surplus capacity due to an economic slowdown.

“The transfer of captive mining leases, granted otherwise than through auction, would facilitate banks and financial institutions to liquidate stressed assets where a company or its captive mining lease is mortgaged. The transfer provisions will also allow mergers and acquisitions of companies and facilitate ease of doing business for companies to improve profitability and decrease costs of the companies dependent on supply of mineral ore from captive leases,” the mines ministry said, while releasing the draft amendments.

Although amendments introduced by the Narendra Modi government have now made auction of mining rights mandatory, the amendments, which are proposed to be introduced during the budget session, would help all mining rights given earlier.

The ministry said the government would allow the transfer at the time of M&As but specified certain conditions. “The transfer of captive leases would be subject to the consideration of enforcing performance security, Mine Development and Production Agreement (MDPA), and realization of an appropriate amount, if found feasible at the time of framing terms and conditions,” the statement said. The passage of the amendment bill will enable the global cement giant Lafarge to sell its two plants of 5.15 million tonne per annum (MTPA) capacity in Jharkhand and Chhattisgarh . The sale is necessitated following the merger of Lafarge and Holcim globally. In India, their merger will take their combine capacity beyond the permissible limit under Competition Commission of India. Lafarge has agreed to sell both the plants to Birla Corp of K M Birla for Rs 5,000 crore.

Officials acknowledged that the provision had become an impediment to transactions. Banks are keen that several of the resource-dependent companies sell off some of their assets to reduce their debt and get business back into shape. These companies have been hit by low demand, accentuated by low rural incomes on account of two successive years of deficient rains.Govt to amend law to push mining M&As

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