Ruia's-controlled Essar Group has reached an agreement to acquire a majority stake in Zimbabwe Iron and Steel Company (ZISCO) and would invest an estimated $750 million (Rs 3,375 crore) to revive the state-owned defunct firm. ZISCO was once one of Africa's largest steel producers with a capacity to produce up to one million tonnes a year.
A statement from Essar said that privately-held Essar Africa Holdings Ltd (EAHL) has reached a deal with the Government of Zimbabwe (GoZ) for the revival of ZISCO.
While Essar did not disclose the investment amount, sources in the know said the company would make an initial investment of $750 million to help restart operations at the Zimbabwe firm.
ZISCO, which has been non-operational for the last few years due to shortage of funds, also owns iron ore and limestone mining rights. After years of limping operations, the company shut down in 2008 at the height of Zimbabwe's economic collapse.
Under the agreement signed on Wednesday evening, EAHL and the Zimbabwe government will set up two joint venture companies that will acquire all the steel and mining-related assets and liabilities of ZISCO and its subsidiaries. EAHL will also release the Zimbabwe government from its guaranteed obligations under the ZISCO debt.
"The steel JV will be owned 60:40 by Essar and GoZ and the minerals JV will be owned 80:20 by Essar and GoZ, respectively," the release said.
Essar group vice chairman Ravi Ruia, who waspresent at the signing ceremony, was quoted in an agency report as saying that EAHL is expected to begin producing steel within 15 months of ZISCO's takeover. EAHL has global operations in more than 20 countries.