Usha Martin secures shareholders’ approval to sell its steel unit to Tata Steel

KOLKATA, NOVEMBER 11

The country’s largest steel wire rope maker Usha Martin Ltd has secured shareholders’ approval to sell its steel unit to Tata Steel for approximately ₹4,600 crore.

Tata Steel, through its subsidiary Tata Sponge, will be acquire the Jamshedpur-based unit.

According to Rohit Nanda, CFO, Usha Martin, the deal is exptected to be completed over the next “few months”.

“ Ideally, the sale should happen within the next two-four months. There are some approvals that are required from various government departments,” he told BusinessLine.

Along with the sale of the steel unit, there will also be a transfer of the iron ore mine situated at Ghatkuri block, coal mine under development situated in the Brinda and Sisai districts, and captive power plants, all located in Jharkhand.

Usha Martin had on Saturday sought shareholders approval though an extra ordinary general meeting. A 75 per cent majority is required for the deal to go through.

A stock market notification by the company said that over 99 per cent of the shareholders have voted in favour selling the steel unit to Tata Steel on a slump sale basis.

The promoter group, Jhawars — which includes Basant Kumar, his son Prashant, and his nephew Rajeev — holds 51 per cent in the company while financial institutions and retail investors hold the remaining 49 per cent.

Although Prashant and his father are not on the same page with the Rajeev-led company management, the father-son duo have agreed to support the sale of the company’s steel unit to Tata Steel.

Deal Nuances

The entire sales proceed (of the steel unit) will be kept in an escrow account and will be used towards reduction of debt, the company management told shareholders during the extra ordinary general meeting.

Till June end (first quarter of this fiscal), Usha Martin had a debt of ₹4700 crore. This included both long-term debt and working capital.

There has been no haircut by any lender or financial institutions.

According to Nanda, repayment of debt will also help the company to focus on its wire rope business. Expansion of this segment has been stuck for quite some time due to non-availability of finance and high-debt burden. Post the sale and repayment, Usha Martin will still have close to ₹400 crore worth of debts on its book. However, this debt will not be an issue for its wire rope business.

“The wire rope business is comfortable with this debt level,” Nanda said adding that the segment has a consolidated EBIDTA (taking into account international operations) of ₹250 crore annually. The segment accounts for nearly 40 per cent of the company’s turnover and is operating at a near 80 per cent capacity.

“Expansion of the steel wire rope business will be focussed upon gradually after the debt reduction,” he added.

Published on November 11, 2018