Tata Steel Long Products Ltd is likely to buy Neelachal Ispat Nigam for Rs 12,100 crore after a panel of ministers approved its offer to buy 93.71 percent of the company’s shares owned by state-run firms. The Neelachal Ispat Nigam is a partnership of four central public sector companies (CPSEs) MMTC, NMDC, BHEL, and MECON, as well as two Odisha government PSUs, OMC and IPICOL. The Indian government does not own any shares in the corporation. The Cabinet Committee on Economic Affairs (CCEA) ‘in-principle’ authorised strategic disinvestment of Neelachal Ispat Nigam on the request of the boards of selling shareholder PSEs and with the approval of the Government of Odisha. It gave permission for the transaction to be carried out by the Department of Disinvestment and Public Asset Management (DIPAM).
The Alternative Mechanism (AM), which includes Nitin Gadkari, Minister of Road Transport and Highways, Nirmala Sitharaman, Minister of Finance and Corporate Affairs, and Piyush Goyal, Minister of Commerce and Industry, has approved Tata Steel Long Products’ highest bid of Rs 12,100 crore for 93.71 percent of joint venture partners’ shares in four CPSEs and two Odisha Government state PSEs. A combination of Jindal Steel & Power and Nalwa Steel & Power, as well as JSW Steel, were the other bidders in the contest.
“M/s Tata Steel Long Products Limited (TSLP) emerged as H-1 bidder, whose bid has been accepted by the AM. Letter of Intent (LoI) is being issued to TSLP inviting them to sign the SPA. At this stage, 10% of the bid amount shall be paid by the successful bidder into the Escrow account,” said Union Finance Ministry.
The Neelachal Ispat Nigam has been losing a lot of money, and the factory has been shut down since March 30, 2020. As of March 2021, the firm owed about Rs 6,600 crores in debt and obligations, including substantial overdue from promoters (Rs 4,116 crore), banks (Rs 1,741 crore), other creditors, and workers. As of March 31, 2021, the firm had a negative net worth of Rs 3,487 crore and cumulative losses of Rs 4,228 crore.
“This is the first instance of privatization of a public sector steel manufacturing enterprise in India. The success of the transaction is a win-win situation for all. The biggest advantage of privatization 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 the infusion of fresh capital, which will help in augmenting the capacity of the plant,” Finance Ministry said.
The transaction is on a “going concern” basis, which means that Neelachal Ispat Nigam’s workers will continue to work for the firm under the provisions of the Share Purchase Agreement (SPA), which requires the buyer to have a one-year lock-in period.
