UPDATE 2-India group has muscle for Riversdale bid – Coal India

* India group not in formal talks with Tata Steel- Coal India

* India consortium members have financial strength for bid

* Citi to submit report to India group in two weeks

(Recasts, adds quotes, background)

By Prashant Mehra

MUMBAI, Dec 24 (BestGrowthStock) – An Indian state consortium has the financial
strength to fund a possible rival bid for Africa-focused coal miner Riversdale
, the chairman of one of the group’s members said on Friday.

Anglo-Australian miner Rio Tinto offered $3.9 billion on
Thursday to buy Riversdale in an agreed deal as it seeks secure coking coal
reserves sought after by steelmakers. [ID:nL3E6NM1LU]

Partha Bhattacharyya, chairman of Coal India , said the
consortium, International Coal Ventures Ltd (ICVL), was awaiting a
recommendation from its adviser Citigroup on whether to bid.

“All the companies in ICVL are strong financially. Funding will not be a
problem,” told Reuters.

Bhattacharyya also said ICVL was not in formal talks with India’s Tata
Steel , a private-sector firm that owns 24 percent of Riversdale and
is its largest shareholder.

However, a source familiar with the matter said on Friday, “everyone is
talking to everyone,” when asked whether ICVL and Tata Steel were in talks to
form an alliance.

The person said talks included the possibility of a joint bid for
Riversdale or support from Tata Steel for an ICVL bid.

ICVL consists of utility NTPC , Steel Authority of India Ltd
, iron ore miner NMDC , Coal India and steelmaker Rashtriya
Ispat Nigam Ltd.

Late on Thursday the Indian group hired Citigroup to conduct due
diligence on Riversdale, with a report to be submitted in two weeks and a
decision on whether to bid within a month, Bhattacharyya said.

“Citi’s mandate is to tell us whether we should consider a bid higher than
$3.9 billion,” he said.

The four listed state firms in the consortium held combined cash reserves
of around 440 billion rupees ($9.8 billion) as of the end of September,
although all four also have ambitious expansion or acquisition plans.

Indian steel, power and coal companies are scouting for overseas coal
mines to satisfy demand from the fast-growing economy, Asia’s third-largest.

Riversdale, with coking coal reserves in Mozambique, is an attractive
asset for companies seeking to secure coking coal reserves amid soaring Asian
demand for the key steel-making ingredient.

Riversdale’s Benga project could be expanded by a further 6 million tonnes
a year for 20 years, which would raise the value of Riversdale shares to
$20.80 each, a report by Commonwealth Bank of Australia said — well above
Rio’s A$16 per share offer.

TATA STEEL ALLIANCE

Analysts in India have said Tata Steel, the world’s seventh-largest
steelmaker, should hold on to its stake in Riversdale to assure coal supplies
for its Corus unit, which does not have any captive raw material supplies.

However, the company is burdened with debt of about $10 billion, which
limits its flexibility.

Teaming up with the state consortium, meanwhile, might prove unwieldy
given the different management and decision-making styles that separate public
and private sector firms in India. Tata Steel has tie-ups with two of the
consortium partners for overseas acquisitions, although neither has borne fruit.

Tata Steel’s director on Riversdale’s board abstained from voting on Rio’s
bid.

On Friday, Tata Steel said it has received shareholder approval to raise
long-term funding. In November, Chief Financial Officer Koushik Chatterjee
said the company planned to raise 70 billion rupees ($1.6 billion).

The ETNow TV channel reported on Friday that Tata Steel would raise $1
billion through an equity issue with differential voting rights. The company
could not immediately be reached for comment.
($1=45.1 rupees)
(Editing by Tony Munroe and Muralikumar Anantharaman)

UPDATE 2-India group has muscle for Riversdale bid – Coal India