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Tata Steel is set to acquire the integrated one million tonne steel-making facility of the Kolkata-headquartered Usha Martin Ltd (UML) for a cash consideration of around Rs 4,300-4,700 crore. The process of acquisition is likely to be complete in the next six-to-nine months.
“Tata Steel hereby announces that it has executed definitive agreements for acquisition of the steel business of Usha Martin through a slump sale on a going concern basis,” the company said in a notification to the bourses on Saturday.
Apart from the steel-making facility, the unit at Jamshedpur has a producing iron-ore mine, a coal mine under development and captive power plants.
Tata Steel Group is among the top steel makers with an annual global crude steel capacity of 27.5 million tonnes per annum (MTPA) as on March 31, 2018.
“The acquisition is part of the overall strategy to build capability in long products and expand offerings including high-value added products,” the release said.
The closing of the acquisition is subject to fulfilment of various conditions under the agreements. At the closing, Tata Steel or any of its subsidiaries or affiliates may carry out this acquisition, it added.
During FY-18, UML’s gross revenue from the steel business on a standalone basis stood at Rs 3441 crore, up by nearly 13 per cent as compared to Rs 3,055 crore in FY-17.
As on March 31, 2018, Usha Martin’s total debt stood at Rs 4,600 crore. With the selling of its steel-making unit, the company might be able to ‘almost wipe out’ its debt, said Debasish Mallick, deputy managing director, Exim Bank. The bank has an exposure of around Rs 400 crore in UML.
“All the employees pertaining to steel business will be transferred as part of the divestment and the sale proceeds will be applied first to repay existing lenders,” UML said in a notification to BSE on Saturday.
Post divestment of steel business and repayment of existing lenders, UML will be able to operate a ‘significantly deleveraged’ wire rope business, it added.
Apart from Tata Steel, Vedanta, JSW Steel, Liberty House and Kalyani Steel had evinced interest in taking over the steel business of the company and had entered into non-disclosure agreements.
It is to be noted that the consortium of lenders led by State Bank of India had suggested the setting up of a committee of independent directors to oversee the sale process. SBI Caps and Arpwood Capital had acted as the financial advisors to UML.
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