Why India’s biggest steel maker can’t shop big overseas

Currently a navratna like Sail is allowed to invest only 30 per cent of its net worth for mergers and acquisitions. For one project, this limit is 15 per cent or Rs 1,000 crore, whichever is lower. In effect Sail, with a net worth of Rs 12,385 crore on March 2006 can invest only Rs 3715.5 crore on mergers and acquisitions.

Union minister for Steel Ramvilas Paswan, however, is all for Sail pursuing acquisitions abroad - though he does not have an answer to the policy roadblocks just yet. "We have given full freedom to Sail to pursue acquisitions abroad and understand that consolidation is necessary for survival in the global arena. While we are undertaking domestic mergers (Neelanchal Ispat Nigam Ltd), we are open to overseas acquisitions should an opportunity present itself," Paswan said.

The irony cannot be more pronounced. At a time when the steel industry is witnessing large scale consolidation and big ticket acquisitions like Arcelor-Mittal and Tata-Corus are the order of the day, Sail remains grounded. "As a PSU we cannot over-reach ourselves. Tata as a private company can go ahead and buy a company thrice its size but we have limited freedom on acquisitions beyond the Rs 1,000 crore ceiling," said Sail chairman S.K. Roongta.