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The country’s largest steel wire rope maker, Usha Martin expects to complete the sale of its steel business to Tata Steel within the next two to three months.
Tata Steel through its subsidiary, Tata Sponge, will acquire the Jamshedpur unit at a consideration of approximately Rs 4,600 crore. 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.
The promoter group, Jhawars – which include Basant Kumar, his son Prashant, and his nephew Rajeev – hold 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 for quite sometime now, the father-son duo have agreed to support the sale of the company’s steel unit to Tata Steel.
According to Rajeev Jhawar, MD, Usha Martin, first on the cards is getting approval from the Competition Commission of India (CCI), following which there will be a transfer of iron ore and coal mines. “Over the next two to three months we should complete the deal,” he told reporters.
Deal Nuances
Rajeev further clarified that the entire sale proceeds will be kept in an escrow account and will be used towards reduction of debt. As on March 31, Usha Martin had a debt of over Rs 4, 900 crore (long term debts and working capital put together); which came down to Rs 4, 700 crore as on June 2018.
“There has been no haircut by any lender or financial institutions and the interest of minority shareholders have also been protected,” he said. De-leveraging the balance sheet will also help the company focus on its wire rope business, expansion of which has been stuck for quite some time due to non-availability of finance and high debt burden.
Wire Rope Business
Despite the sale, Usha Martin will still have close to Rs 400 crore worth of debt in its book. However, the debt will not be an issue for it’s wire rope business. “The wire rope business is comfortable with this debt level,” Rajeev said adding that the segment has a consolidated EBIDTA (taking into account international operations) of Rs 250 crore annually.
The segment accounts for nearly 40 per cent of the company’s total turnover. Expansion of the steel wire rope business will be focussed on and expanded ‘gradually’.
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