New Delhi: In its second acquisition of a PSU in recent weeks, Tata group firm beat the likes of Jindal Stel and JSW Steel to snap loss-making Odisha-based Neelachal Ispat Nigam Ltd (NINL) for Rs 12,100 crore.
In a statement, the finance ministry said Tata Steel Long Products Ltd’s (TSLP) bid of more than double the reserve or base price, for NINL, whose 1.1 million tonnes a year capacity steel plant at Kalinganagar in Odisha was shut in March 2020 due to continued losses, has been accepted.
Just last week, a Tata Group firm completed the takeover of Air India – the first state-owned company to be privatised in nearly two decades. Tata Group had bid Rs 18,000 crore for Air India, higher than the reserve price of Rs 12,906 crore.
The NINL deal, which will be the second successful privatisation by the Modi government, will take at least a couple of months to conclude.
The finance ministry said TSLP outbid a consortium of Jindal Steel & Power Limited and Nalwa Steel and Power Ltd; and JSW Steel Ltd, in financial bid put for buying NINL, which is a joint venture of 4 CPSEs — MMTC, NMDC, BHEL, MECON and 2 Odisha Government PSUs — OMC and IPICOL.
The bid by TSLP was double the reserve price of Rs 5,616.97 crore set by the government based on the valuation of transaction adviser and asset valuer.
Since the government does not hold any equity in the company, hence the sale proceeds would not accrue to the exchequer and would instead go to the 4 CPSEs and 2 state government PSU.
“Government approves strategic buyer for Neelachal Ispat Nigam Ltd located in Odisha. The highest bid of Rs 12,100 crore by M /s Tata Steel Long Products Ltd is accepted,” DIPAM Secretary Tuhin Kanta Pandey tweeted.
NINL is the second successful privatisation by the current BJP Government. Incidentally, Air India — the first company in privatisation list — too has been bought by Tata group. Tata Group bid for Rs 18,000 crore for Air India, higher than the reserve price of Rs 12,100 crore.
The ministry said TSLP has emerged as highest bidder, whose bid has been accepted by the ‘Alternative Mechanism’ comprising Road Transport Minister Nitin Gadkari, Finance Minister Nirmala Sitharaman, and Commerce & Industry Minister Piyush Goyal.
The transaction is on a “going concern” basis and the employees of NINL will continue to be the employees of the company in terms of the Share Purchase Agreement (SPA), which binds the buyer to have a lock-in period of one year. The strategic buyer will also be bound to follow the terms of VRS applicable to CPSEs whenever such a decision is taken.
“Letter of Intent (LoI) is being issued to TSLP inviting them to sign the SPA. At this stage, 10 per cent of the bid amount shall be paid by the successful bidder into the Escrow account,” the ministry added.
NINL has huge debt and liabilities exceeding Rs. 6,600 crore as on March 31, 2021, including huge overdue of promoters (Rs 4,116 crore), banks (Rs 1,741 crore), other creditors and employees.
The company has a negative net worth of Rs 3,487 crore and accumulated losses of Rs 4,228 crore as of March 31, 2021. This is the first instance of privatisation 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 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 said.
On the request of the boards of selling shareholders and on concurrence by the Government of Odisha, the Cabinet had in January 2020 gave ‘in-principle’ approval for strategic disinvestment of NINL, and authorised the Department of Disinvestment & Public Asset Management (DIPAM) to undertake the transaction. Following this, Expressions of Interest (EoI) were invited on January 25, 2021, and multiple EoIs were received by the due date of March 29, 2021.
“Keeping in view the best interest of the serving employees, it was decided to keep the employees’ dues as the topmost ranking liability in the Waterfall Agreement to be satisfied first before any other liability… Post-sale consideration will go towards settling of the liabilities of the company, in the order provided in Waterfall Agreement,” the ministry said.