According to newspaper reports, the Steel Authority of India Ltd. (SAIL) has appointed J M Morgan to select a joint venture partner for the Salem Steel Plant (SSP).
SAIL is the world's 10th largest and India's largest steel manufacturer. It operates 4 integrated steel plants and 2 speciality steel plants.
SSP is involved in the manufacture of stainless steel and exports 50% of the output. It is however dependent to a large extent on imports for meeting its raw material requirements. The decision to go in for a joint venture is motivated by the fact that the new partner will help SSP integrate backward and also help it to capitalise on the rising demand for speciality steel in the international markets.
SAIL is currently mired in its own problems and is unable to nurture the speciality steel business to its full potential. A multinational partner will provide SSP access to large resources and managerial experience that would be necessary to become a global player. The decision by SAIL is laudable as it will help unlock the value of SSP, which otherwise would have continued to languish as just any other public sector unit.
Analysts have rated SAIL as a 'SELL' due its low employee productivity and outdated technology. Moreover, with the steel demand yet to show a definite uptrend, analysts are skeptical of a turnaround in the near future.
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