Energy deficit India mulls M& As

Coal and iron ore will be focus areas; Coal India doesn’t rule out imports to meet demand

New Delhi, April 6: Indian companies are likely to focus on acquiring coal and iron ore assets in the mining space this year, especially in Indonesia, Australia and Africa, says a report.

“We expect that coal and iron ore are likely to remain the focus of mining M& A during 2012, although other commodities including copper and zinc will also be targeted.

“Indian companies are likely to continue looking to Indonesia, Australia and Africa for growth, increas- ingly opting to acquire outright rather than simply through off- take agreements,” global consultancy Ernst & Young ( E& Y) said in a recent report.

Coal was one of the most sought- after assets in the mergers and acquisitions deals last year. Going by estimates, there were about 161 transactions targeting coal or initiated by coal entities in 2011.

Even though India is the world’s second largest coal producer, the country is grappling with acute shortage of the dry fuel which is

Though India is the world’s second largest coal producer, the country is grappling with acute shortage of the dry fuel

mainly hurting power and fertiliser sectors. India’s coal production is projected to see a shortfall of 142 million tonnes this year.

On Friday, Coal India’s chairman and managing director- designate, Mr S. Narsing Rao, said that the company may resort to imports to meet the obligations of supplying a minimum assured quantity of coal to power producers.

“We have to see how much we can increase production to meet the commitment. CIL will do the imports if it is inevitable,” Mr Rao, who is currently heading state- run Singareni Collieries told PTI.

Mr Rao, who is due to take the charge of the company shortly, said the PSU would weigh various options of importing coal that will include direct imports, if required.

According to E& Y, coking coal assets were in demand even as many deals did not get completed last year mainly due to strong competition from Chinese investors.

The report noted that investors seeking greater exposure to Chinese demand would look for assets in Indonesia and Mongolia, while those tar- geting “the longer Indian imbalance will focus on Australia and Indonesia”.

“With the exception of the domestic oil and gas deals, coal remained the most targeted commodity by the Indian mining and metals companies, representing 94 per cent of India’s outbound investments during 2011,” the report said. In signs of soaring demand for the commodity, the value of deals involving coal assets shot up to $ 41.4 billion last year from $ 17.9 billion in 2010.