NEW DELHI :
The government signed a share purchase agreement with Tata Steel Long Products for selling debt-ridden Neelachal Ispat Nigam Ltd (NINL) for ₹12,100 crore. The plant located in Odisha will be handed over to the Tata Group company in the next and final step of the strategic disinvestment process.
“SPA signed today by JV partners of NINL with Tata Steel Long Products. The disinvestment transaction now moves to the closing stage,” Tuhin Kanta Pandey, secretary of department of investment and public asset management (DIPAM) said in a statement.
The government had approved Tata Steel Long Products Ltd as the strategic buyer for NINL with the highest bid of ₹12,100 crore, in January this year.
The financial bids from qualified bidders including consortium of Jindal Steel & Power Limited and Nalwa Steel and Power Ltd, JSW Steel Limited and Tata Steel Long Products Limited (TSLP) were considered before arriving at the winning bidder.
The government had issued a Letter of Intent (LoI) to TSLP inviting them to sign the SPA, on payment of 10% of the bid amount into an escrow account.
On the closure date, shares will be transferred to TSLP and the balance amount will be received to be utilized in the manner prescribed in the ‘waterfall agreement’ by 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 selling shareholders proportional to their shareholding, the finance ministry had said.
Neelachal Ispat Nigam Ltd is a joint venture of four CPSEs – MMTC, NMDC, BHEL, MECON and two state PSEs – OMC and IPICOL – which has an integrated steel plant with a capacity of 1.1 MT, at Kalinganagar, Odisha.
The company has been running in huge losses and plant is closed since March 2020, having debt and liabilities exceeding ₹6,600 crores as on March 2021, including huge overdues of promoters at ₹4,116 crore, banks at ₹1,741 crore, other creditors and employees.
The company has negative net worth of ₹3,487 crore and accumulated losses of ₹4,228 crore as of March 2021.
The ministry had said that this is the first instance of privatization of a public sector steel manufacturing enterprise in India, terming the success of the transaction as 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 infusion of fresh capital, which will help in augmenting the capacity of the plant,” the ministry had said.
It was decided to keep the employees’ dues as the top most ranking liability in the Waterfall Agreement to be satisfied first before any other liability.
The transaction is on “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.
Post-sale consideration will go towards settling of the liabilities of the company, in the order provided in Waterfall Agreement.
The alternate mechanism approved the highest bid from Tata Steel Long Products Limited for 93.71% of shares of joint venture partners of four central public sector enterprises (PSEs) and two Odisha government state PSEs at the bid enterprise value.
The government does not hold any equity in the company but on the request of the Boards of selling shareholder PSEs and on concurrence by the state government, the CCEA ‘in-principle’ approved strategic disinvestment of NINL in January 2020.