The world’s sixth largest and Japan’s second biggest steel-maker JFE is likely to buy around 10% in India's JSW Steel for around $350-450 million as per a Japanese business daily report. JSW Steel, part of the OP Jindal group and led by Sajjan Jindal, is one of the world's lowest cost steel producers and have been a centre of attraction of many suitors including Arcelor Mittal.

But Jindals, who run a string of steel companies operating in different product categories, have maintained their commitment to the business despite diversifying into some new businesses such as energy.

Although, the deal for 10% stake is yet to be formally announced, JSW Steel and JFE disclosed today that they have struck a partnership pact to co-operate in developing automotive grade of steel. JFE is looking to build a supply base for Japanese carmakers such as Toyota and Nissan who are planning big-time manufacturing in India, one of the world's fastest growing car markets.

The two are expected to come out with a detailed document on their tie-up but, in the meantime, they propose to work together in automotive steel and have indicated plans of mutual stockholding which could a pointer to either a separate JV or as reported a 10% equity dilution in favour of JFE. The two may also work together in terms of joint procurement of raw material which could a major plus for JSW given the might of JFE globally and its negotiating power with mining giants.

The two will also work together in JSW’s upcoming integrated steel project in West Bengal which could be through a JV firm (not been officially disclosed as such). The partners will also extend the scope of deal beyond automotive steel. JSW has a production capacity of 7.8 million tone of steel and is ramping it up to around 11 million tonne in two years. JFE in contrast has capacity of 33 million or over four time the existing capacity of JSW Steel. JSW scrip was up 8% in intra day trade before closing down 1% in line with overall market.

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