After a three-year incubation of India’s special purpose vehicle (SPV) to ferret out trace minerals —including lithium and cobalt — overseas, there are fresh plans of an equity top-up. Both the mines and finance ministries have held discussions this summer to identify the sources.
Khanij Bidesh (KABIL) was approved in August 2019 as a joint venture (JV) between three state-owned mineral companies — National Aluminium Company (Nalco), Hindustan Copper (HCL), and Mineral Exploration Company. This is the third time in two decades after ONGC Videsh and Coal Videsh that will have the government promote JVs to prospect for minerals overseas.
But KABIL has no money to go for an acquisition. It clads a slim management structure, even though it nurtures grandiose plans. It is supposed to identify and acquire mineral assets of a critical and strategic nature overseas, such as lithium and cobalt, to ‘ensure supply-side assurance’, states a Parliament reply.
The three promoter companies have promised to plumb in equity in the ratio of 40:30:30.
According to Nalco, it has released just Rs 1 crore in 2020-21. In 2021-22, Nalco made a profit of Rs 2,951.97 crore. HCL had a profit of Rs 373.78 crore.
Aware of fund paucity, for all the memoranda of understanding (MoUs) KABIL has signed with any foreign partner, the mines ministry has stepped in with support.
The challenge? These MoUs have a limited shelf life — a few years at best.
“None of the promoter companies have the management width to venture into new sectors. Nalco has stayed with aluminium. HCL has not spread its wings,” says a government official in the know.
The Ministry of Mines has reported that on the basis of a study commissioned and the selection criteria, KABIL has initiated engagement with several state-owned organisations in countries like Argentina and Australia to acquire mineral assets.
Last year, a mines ministry delegation visited the Catamarca Province in Argentina. Camyen, the state-owned enterprise of Catamarca Province, has assured it would collaborate with KABIL to ensure preferential allocation of prospective lithium-bearing mineral acreages located within the province.
“The visiting delegation also had extensive interactions with YPF, a federal government-owned enterprise. Both YPF and KABIL outlined a broad contour of activities that need to be taken up on priority since the acquisition process entailing engagement with target companies need to be started expeditiously,” says the official quoted earlier.
The options to raise finance for the SPV are either to tap into markets or seek state support. Both are challenging since they will have to be financed from the balance sheet of promoter companies. The finance ministry is in no position this year to offer any support.
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