The four-month long bidding race for Mitsui's stake in Sesa Goa is drawing to a close. As per the reports, Mitsui will announce the winner in the next ten days.

Sources say that Arcelor-Mittal is a front-runner with a bid of Rs 2,050 a share. Other prominent contenders such as JSW Steel and CVRD earlier dropped out, citing high valuations. Companies like Vedanta Resources and Essel Mining might also be in the fray. Earlier, there was talk of the deal being finalised at somewhere near Rs 2500 per share.

Mitsui hasmandated Morgan Stanley to find a buyer for its 51% in Sesa Goa. The Japanese firm is selling this stake as part of a global strategy to exit the mining business. The successful bidder will also have to make an open offer to Sesa Goa shareholders, to buy a further 20% stake.

But Sesa Goa valuations sank after the finance minister levied an duty of Rs 300 per tonne of iron ore exports. The Sesa Goa stock had declined sharply from Rs 1928.70 on 20 February 2007 to Rs 1611.10 by 7 March 2007.

Sesa Goa's gross earnings were expected to take a 10% hit. This may have prompted the six bidders to lower their bids, which Mitsui has agreed to.

Sesa Goa's annual exports amount to around 5 million tonnes out of Marmagao, Chennai and Paradip port. It supplies iron-ore to China, Japan and Europe, and is also the sole supplier of iron ore to Pakistan Steel Mill, the only steel manufacturing unit in that country.

Arcelor-Mittal's bid values Sesa Goa at about Rs 8000 crore, Rs 1700 crore lower than its pre-Budget bid. Besides, market watchdog Sebi rules state that a winning bidder must make an open offer of another 20%.

For Arcelor-Mittal, bagging Sesa Goa will mean access to mines in Goa, Karnataka and Orissa. Sesa Goa also has an exploratory lease for the Chiria mines in Jharkhand.

The Indian steel and sponge iron industries have been strongly lobbying for restricting iron-ore exports, not only to conserve the ore for India’s domestic needs, but also to reduce high prices of domestic ore (particularly the small sponge iron producers). The government’s decision to levy export duty, however, may not impact local iron-ore prices.

Sesa Goa reported a net profit growth of 23% to Rs 194.94 crore for Q3 December 2006 versus Rs 157.85 crore in Q3 December 2005. Net sales for the December 2006 quarter rose 15% to Rs 587.89 crore (Rs 510.37 crore).