The Alternate Mechanism on divestment has approved sale of 93.7% stake held in NINL by four central PSUs and two Odisha govt companies, to Tata Steel Long Products
Centre to relax lock-in period for sale of NINL assets to one year
Centre gets bids for Neelachal Ispat, sale moves to ‘concluding stage’
New Delhi, NFAPost: Public sector undertaking (PSU) Neelachal Ispat Nigam (NINL) has been bagged by the Tata Group, giving a strong push to the government’s privatisation drive showcasing the interest of marquee private sector investors in Centre’s assets.
The Alternate Mechanism on divestment has approved sale of 93.7% stake held in NINL, by four central PSUs and two Odisha government companies, to Tata Steel Long Products at an enterprise value of Rs 12,100 crore.
The alternative mechanism is empowered by Cabinet Committee on Economic Affairs (CCEA) to take divestment-related decisions, and includes Minister for Road Transport and Highways Nitin Gadkari, Finance Minister Nirmala Sitharaman and Commerce and Industry Minister Piyush Goyal. The reserve price for the PSU was set at Rs 5,616.97 crore, and approved by the Cabinet Secretary headed Core Group of Secretaries on Divestment.
Financial bids were submitted by two other bidders that include a consortium of Jindal Steel & Power and Nalwa Steel and Power, and JSW Steel.
· Other bidders included consortium of Jindal Steel & Power and Nalwa Steel and Power; and JSW Steel
· Reserve price was set at Rs 5,617 crore
· NINL owes debt and liabilities of over Rs 6,600 crore
· LoI is being issued to Tata Steel Long Products
· Employee lock-in period to be one year; staff dues to be given highest priority
· As the Centre does not directly own any stake in NINL, the sale will not lead to any divestment receipts for the exchequer.
The promoter of NINL is MMTC, with the PSU owning 49.78% stake. Other central PSU NMDC owns 10.10%, while MECON and Bharat Heavy Electricals hold 0.68% each. Odisha government-owned Industrial Promotion and Investment Corporation of Odisha (IPICOL) and Odisha Mining Corporation (OMC) own 12% and 20.47% stake in NINL, respectively. NINL has an integrated steel plant with a capacity of 1.1 million tonne, at Kalinganagar, Odisha.
The PSU has been incurring losses and its plant is shut since March 30, 2020. The company owes debt and liabilities exceeding Rs 6,600 crore as on March 31, 2021, including overdues of Rs 4,116 crore to promoters, Rs 1,741 crore to banks, other creditors and employees. NINL has a negative net worth of Rs 3,487 crore and accumulated losses of Rs 4,228 crore as on March 31, 2021.
Tata Steel Ltd owns 74.91% stake in Tata Steel Long Products. The buyer will pay 10% of the bid amount which will be deposited into an escrow account. Based on bidders’ demand, the government had amended the earlier clause of depositing 100% of the bid amount on execution date, and allowed depositing 10% of the bid amount on execution date and remaining 90% on completion date.
On the closure date of the transaction, shares will be transferred to the new buyer and the balance amount will be utilised as per the waterfall agreement signed among the selling shareholders. Part-sale proceeds would be infused in the company to the extent of the liabilities which will be set-off and the balance amount in the escrow account will be given to selling shareholders proportional to their shareholding.
As per the preliminary information memorandum, the amount paid by the bidder would be used towards settlement of labour dues, operational creditors, commercial lender debt, promoter debt and purchase of 93.71% of shareholding of NINL.
The Letter of Intent (LoI) is being issued to Tata Steel Long Products, inviting them to sign the share purchase agreement, the government said in a statement.
This is the first privatisation of a public sector steel manufacturing company in India. The sale would exude confidence to the Centre as it looks to privatise PSUs in non-strategic sectors that includes steel, tourism, hospitality, among others.
“The biggest advantage of privatisation will be to the local economy of the region as the strategic buyer will be able to revive a closed plant, bring in modern technology, best managerial practices and make an infusion of fresh capital, which will help in augmenting the capacity of the plant,” the Ministry of Finance said in a statement.
The new buyer will have to retain employees of NINL for one year. The buyer will also be bound to follow the terms of the voluntary retirement scheme applicable for central PSUs, whenever such a decision is taken.
It has been decided to give “topmost ranking liability” to employees’ dues in the waterfall agreement to be satisfied first before any other liability, the government said.
“The privatisation will help in creating new jobs in the region by the creation of ancillary industries and supplier’s network,” the statement by the finance ministry said.