Days after Tata group took over stressed national carrier Air India, another arm of the conglomerate - Tata Steel Long Products Ltd (TSLP) - has been selected by the government as the strategic buyer of the state-run Neelachal Ispat Nigam Ltd (NINL).
TSLP submitted the highest bid of Rs 12,100 crore for 93.71 percent stake in the public sector iron and steel production company, the Ministry of Finance said in a statement issued on January 31.
Tata Steel, the parent body of TSLP, said the acquisition "is being financed through a combination of internal accruals and bridge loans which are expected to be paid down through internal generation of Tata Steel over the next few quarters".
The bid was approved by the Centre's Alternative Mechanism, comprising of Union Ministers Nirmala Sitharaman, Piyush Goyal and Nitin Gadkari.
The panel has "approved the highest bid of M/s Tata Steel Long Products Limited for 93.71% of shares of Joint Venture partners of 4 CPSEs and 2 Odisha Govt State PSEs at the Bid Enterprise Value of Rs. 12,100 crore," the finance ministry said.
NINL, which has an integrated steel plant with a capacity of 1.1 MT, is a joint venture of 4 CPSEs, namely MMTC, NMDC, BHEL, MECON and two Odisha government PSUs, namely OMC and IPICOL.
As of December 23, 2021, the Department of Disinvestment & Public Asset Management (DIPAM) had received three bids to takeover the company.
While TSPL emerged as the highest bidder, the other two bidders in the fray were - JSW Steel Limited and a consortium of Jindal Steel & Power Limited and Nalwa Steel and Power Ltd.
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TSLP, one of the largest specialty steel plants in India in SBQ segment with an annual capacity of one million tons, is expected to further boost its yearly production through the acquisition of NINL.
"The acquisition of NINL provides a significant opportunity for Tata Steel to not only restart the one million ton per annum steel plant expeditiously but also begin work immediately to build a 4.5 million ton per annum state of the art long products complex in the next few years, and further expand it to 10 million ton per annum by around 2030," the company said in a statement.
"It is Tata Steel’s endeavour to utilise its expertise in operating excellence, mining and project management to transform NINL into a state of the art, competitive and sustainable enterprise in the future," it added.
Notably, NINL has been running under massive losses and the plant is closed since March 30, 2020.
The company has debt and liabilities exceeding Rs 6,600 crores as on March 31 2021, the government said. This includes huge overdues of promoters (Rs 4,116 crore), banks (Rs 1,741 crore), other creditors and employees. The company has negative net-worth of Rs 3,487 crore and accumulated losses of Rs 4,228 crore as of March 31, 2021, the finance ministry added.
The Centre does not hold any equity in the company. However, on the request of the boards of selling shareholder PSEs and on concurrence by the government of Odisha, the Cabinet Committee of Economic Affairs had ‘in-principle’ approved strategic disinvestment of NINL on January 1, 2020.
The privatisation process was conducted through an open-market, competitive bidding process towards the enterprise value of the company, comprising the liabilities of the company as on March 31 last year and the 93.71 percent equity of the company held by the 6 selling PSE shareholders.
The finance ministry, in its statement, noted that the strategic sale transaction is on “going concern” basis and the employees of NINL will continue to be the employees of the company in terms of the share purchase agreement, "which binds the buyer to have a lock-in period of one year".
