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TOKYO: India’s third largest steelmaker JSW Steel Ltd. is in talks with to take a stake in the Japanese firm in a bid to strengthen their ties, a report said on Monday.

Sajjan Jindal, vice chairman and managing director of JSW, told the Nikkei business daily that his company aims to hold an interest of less than five per cent in the JFE Holdings Inc. unit within one to two years.

The two companies have already begun talks on the planned capital investment, Jindal said, adding that JFE Steel said it was ready to accept JSW’s offer.

Talks are also covering technological assistance in such fields as steel sheets used in electrical equipment, Jindal said, adding that JSW may boost its production capacity by forming a joint venture with JFE.

JFE Steel, the nation’s second-largest steelmaker, declined to confirm the report, saying in a statement: “Nothing has been decided on this issue.”

The firms formed an alliance in November 2009, with JFE spending around 90 billion yen (1.1 million dollars) to buy a stake of just under 15 per cent of JSW and agreeing to provide technology for auto steel sheets and steel mills.

Through the capital investment, JFE plans to boost ties with JSW and expand businesses in , where demand for crude steel is expanding rapidly.

JSW currently has a crude steel output capacity of 7.8 million tons a year, but plans to more than quadruple this to 32 million tons by 2020 through the expansion of current facilities and by building new mills in the states of West Bengal and Jharkhand.

The Indian steelmaker will spend four billion dollars to fire up the West Bengal mill by 2014 with annual production capacity of five million tonnes.