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Govt approves Tata Steel’s bid to acquire 93.71% equity in Neelachal Ispat

The Central government does not hold any stake in NINL directly, which has accumulated losses and a negative net worth. NINL is a joint venture of 4 CPSEs, — MMTC, NMDC, BHEL, MECON — and 2 Odisha government-owned companies OMC and IPICOL.

The government on Monday approved the highest bid of Tata Steel Long Products Limited for acquiring 93.71 per cent equity in Neelachal Ispat Nigam Ltd (NINL), held by joint venture partners of four CPSEs and two Odisha government companies, at an enterprise value of Rs 12,100 crore. NINL has an integrated steel plant with a capacity of 1.1 MT, at Kalinganagar, Odisha.

The Central government does not hold any stake in NINL directly, which has accumulated losses and a negative net worth. NINL is a joint venture of 4 CPSEs, — MMTC, NMDC, BHEL, MECON — and 2 Odisha government-owned companies OMC and IPICOL.
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An alternative mechanism, comprising Transport minister Nitin Gadkari, Finance Minister Nirmala Sitharaman, and Commerce & Industry Minister Piyush Goyal, has approved the bid, Union finance ministry said in a statement. The company has been running in huge losses and its plant is closed since April 2020.

“The company has huge debt and liabilities exceeding Rs. 6,600 crores as on 31.3.2021, including 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 31.3.2021,” the government said.

Tata Steel Long Products was chosen as the highest bidder, defeating JSW Steel and a consortium of Jindal Steel & Power Limited and Nalwa Steel and Power Ltd. The reserve price for the bid was approved at at Rs 5616.97 crore. The money raise through stake sale will go towards funding company liabilities and to the selling shareholders. This is second large privatisation deal post sale of Air India to Tata Group.

“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 infusion of fresh capital, which will help in augmenting the capacity of the plant,” the government said.

On the request of the Boards of selling shareholder PSEs and on concurrence by Odisha government, the Cabinet Committee on Economic Affairs had given ‘in-principle’ approval to strategic disinvestment of NINL in January 2020, the government said. The Department of Disinvestment & Public Asset Management said the transaction was made through an open-market, competitive bidding process.

The government will issue Letter of Intent to Tata Steel Long Products, and thereafter sign a share purchase agreement. At this stage, 10 per cent of the bid amount shall be paid by the successful bidder into the escrow account. The government had provided access to virtual data room of the company to the bidders for conducting due diligence.