Sunil Vaswani
• Stallion Group to achieve 1.5m tonnes in local rice production
Crusoe Osagie
Premium Steel & Mines, a company owned by Mr. Sunil Vaswani and
other institutional investors, has successfully acquired Delta Steel
Company Limited (also known as Aladja Steel) from the Asset Management
Corporation of Nigeria (AMCON) in a multibillion naira deal.
AMCON and Premium Steel, THISDAY learnt from sources conversant with
the transaction, closed the sale in March this year, paving the way for
the new owners to take over the steel plant and all of its non-core
assets such as its workers’ quarters, schools and hospitals.
The deal, according to a source, was struck after Premium Steel offered
to pay a sum higher than what was paid by Global Steel Holdings Limited
(GSHL), promoted by Mr. Pramod Mittal, to the federal government
through the Bureau of Public of Enterprises (BPE) almost a decade ago.
BPE had sold Delta Steel in 2006 under controversial circumstances to
Pramod Mittal, the younger brother of Lakshmi Mittal, an Indian
multibillionaire and Chairman/CEO of ArcelorMittal, the world’s largest
steel manufacturer.
However, the administration of President Umaru Musa Yar’Adua reversed
the privatisation of Delta Steel when it was discovered that GSHL
breached the terms of the sale by failing to inject equity into the
company.
Instead, it borrowed heavily from Zenith Bank Plc and other Nigerian
banks, but failed to repay the banks, thus forcing them to sell their
non-performing loans (NPLs) to AMCON between 2011 and 2012.
It was on this basis that AMCON, with the approval of the Federal
Ministry of Mines and Steel, undertook to sell the steel complex.
An initial attempt by AMCON to sell the plant in 2013 was botched when a Nigerian consortium failed to meet the payment terms.
AMCON then reopened the process to sell Delta Steel last year under
which a Chinese consortium fronted by Nigerians and Premium Steel
emerged bidders for the steel plant.
During negotiations with AMCON and its advisers for the sale, Premium
Steel was said to have offered more than the Chinese consortium to
emerge as the preferred bidder.
Although the source declined to disclose what Premium Steel paid for
the Delta plant, he said AMCON sold it at a loss since the NPLs it took
over from the banks, including interest charges, were valued at N35
billion on AMCON’s books at the time of the transaction.
However, AMCON felt that it would be better to transfer the plant to
new owners with the expertise and financial capacity to inject capital,
revitalise Delta Steel and create thousands of jobs.
Efforts to reach Vaswani, who holds dual Indian and Nigerian
citizenship, and along with his family owns Stallion Group, an African
conglomerate specialising in automobile manufacturing and sales,
agriculture and agro-processing, real estate, financial services, steel
manufacturing, logistics and shipping, to comment on the transaction
were unsuccessful.
The Managing Director/CEO of AMCON, Mr. Mustafa Chike-Obi, was also unavailable for comment.
Delta Steel, a fully integrated steel complex, was set up by the
federal government in the 1980s under its industrialisation policy.
However, like the Ajaokuta Steel Company in Kogi State, Delta Steel has
been lying moribund for decades.
In a statement issued by the company yesterday, Premium Steel said it
had established an elaborate plan for revival and is set to resuscitate
the plant with new investments of N70 billion in the first phase and
N300 billion in further phases.
“The investor’s plan includes a substantial socio-economic value chain
in the Delta region, through revival of the current plant to 1 million
metric tonnes capacity and thereafter expanding capacities and
establishing industries for other value added products.
“The product range at the complex is aimed at optimal utilisation of
the country’s mining and gas resources and produce import substitution
products, whilst providing gainful employment to the community,” the
company said.
It added that a critical area of its plan is also to foster the welfare
of the communities with assistance in the areas of education and
healthcare.
“Premium has taken over only the assets with a commitment for the
restoration of the operations, but the liabilities still remain the
responsibility of AMCON and the plant’s receivers,” it said.
In February, the Minister of Mines and Steel Development had appeared
before the Senate Committee on Power, Mines and Steel and explained that
AMCON had given Delta Steel the opportunity to pay back the loans, but
the company was unable to do so and the grace period had long lapsed.
The minister had informed the committee that there were no previous
claims that Delta Steel was a privately owned company, but it took loans
from the local banks, and by Nigerian law, AMCON was put in place to
make sure that banks do not fail.
Despite its acquisition, Premium Steel acknowledged that its challenges
as new investors in Delta Steel are “enormous and need perseverance,
patience and financial strength for resolution”.
The Delta Steel plant, it said, is in a very bad state of decay with
overgrown weeds, burnt down facilities and vandalised equipment and
other damaged infrastructure.
“Significant work and investments are required to restore the
completely burnt down sub-station, blown off roofing, cannibalised
furnaces, rusted scrap management machines, damaged cables and DRI
plant.
“Past employees and the communities have suffered immensely for lack of
gainful employment and non-settlement of their rightful dues. Their
obligations need to be resolved by AMCON after due verification.
“Needless to add, the successful resuscitation of Delta Steel would act
as a great catalyst for the restoration of peace and prosperity in the
region, while making productive use of gas resources and iron ore
reserves available in abundance,” it said.
When fully operational, Premium Steel revealed that the plant is
expected to employ in excess of 1,500 employees, expanding to 5,000 over
the next phases of expansion and diversification.
“Several suppliers and ancillary industries in the region are also
expected to flourish upon the restoration of operations,” it added.
Premium Steel is a large-scale industry operator with international
trading operations in several countries, mining operations and steel
plants in Turkey.
It has other plans to invest in mining and large-scale industrial
projects in Nigeria and sub-Saharan Africa in the next five years.
In addition to the acquisition of Delta Steel, Stallion Group announced
yesterday that it had intensified efforts to expand its operations in
Nigeria’s fully integrated rice value chain.
In a statement, it said the group’s efforts to increase local rice
production commenced as early as 2007 when the associated challenges
were more complex.
“Leveraging on the policy impetus provided by the federal government
through its Agricultural Transformation Agenda, Stallion Group has
already established a major increase in local production to 430,000
metric tonnes per annum.
"The group is targeting production of 1.50 million metric tonnes of
rice production in Nigeria through setting up more milling capacities
and structured farming activities,” Stallion said in the statement.
Investments by Stallion in the rice supply chain are expected to exceed N30 billion in the coming months, the company said.
The group is producing premium varieties of rice from local paddy being
marketed by the company under the names “Royal Stallion Shinkafa” and
“Super Champion” which are now amongst the most popular made in Nigeria
brands of rice.
Stallion Group Chairman, Vaswani, said: “Sensing the need for local
self-sufficiency and alignment with local government’s ambitions for
food security, Stallion pioneered investments into backward integration,
creating a fully integrated value chain.
“Stallion is working tirelessly to improve farm yields and bring in sustainable and scalable growth to farmers.”
The group said its vision is to preserve and enrich rice production in
Nigeria by ensuring genetic integrity of the seed, encouraging farmers
to adopt scientific agricultural practices and leveraging world-class
rice processing technologies; and emerge as the industry benchmark for
product quality and customer service.
According to Stallion, it has established several collection centres
spread across rice producing states of Adamawa, Taraba, Benue, Niger,
Jigawa, Sokoto and Kano, which not only assist farmers in understanding
modern rice farming techniques but also focuses on forming associations
with various farmers’ cooperatives and progressive farmers to lead the
Nigerian rice revolution.
ThisDay