Tata Steel is in talks to acquire an interest in Hanbo Iron & Steel of South Korea. Hanbo, with an installed capacity of around 3-3.5 million tonnes per annum, is one of the top five steel producers in South Korea, but went bankrupt after the East Asian crisis in 1997.

Tata Steel has an installed capacity of around 4 million tonnes, and the acquisition will help it gain a foothold in the Chinese and Japanese markets. Tata Steel executives had made several trips to South Korea for discussions on the issue, sources close to the development said.

Eyeing Korean firm

Hanbo, with an installed capacity of around 3-3.5 million tonnes per annum, is one of the top five steel producers in South Korea, but went bankrupt after the East Asian crisis in 1997 The acquisition will help Tata Steel gain a foothold in the Chinese and Japanese markets Tata Steel has an installed capacity of around 4 million tonnes

The opportunity for the South Korean foray came up when a consortium of investors, led by A K Capital, which had finalised a deal for acquiring the company for around $380 million, said it had failed to tie up the required funds.

The consortium then sought permission from a Seoul court for an extension of the deadline. The court rejected the request, leaving the field open to other bidders.

Hanbo has an accumulated debt of 6.7 trillion won ($5.69 billion). It reported sales of 377.7 billion won ($0.32 billion) for 2002-03.

While the Korean Asset Management Corporation holds 21.9 per cent in Hanbo, Korea Development Bank holds 18.1 per cent. Chohung Bank is the other institutional holder, with a 9.9 per cent stake.

It is not yet clear whether Tata Steel will strike a deal or participate in a fresh round of bidding.

"We are in talks with several overseas companies. We cannot speak about any specific deal as none of them is close to finalisation," a Tata spokesperson said.

Kwon Ho-sung, head of A K Capital and president of Chungwho Industrial, said he would ask the Seoul court to extend the deadline. A K Capital's attempt to purchase Hanbo Iron & Steel hit a roadblock on Wednesday after it failed to make its payments by the Tuesday deadline.

"We were unable to meet the payment deadline because KorAm Bank and Busan Bank, which had promised to issue a syndicated loan for the takeover, withdrew just four days before the deadline," Kwon is reported to have told the international press.

"If the court gives us 3-4 more days, we will be able to make the payments," he added. He said the consortium had secured all the necessary funds by Tuesday, but was unable to deposit them in the bank.

The Seoul court on Wednesday said it would start a new international auction next month to sell Hanbo Iron & Steel.

Tata Steel is also in talks with the Shanghai-based Baosteel Engineering and Equipment for a strategic alliance.