Tata Steel has entered into an agreement to acquire the 1-million-tonne steel business of debt-ridden Usha Martin Ltd (UML) for a cash consideration of ₹4,300-4,700 crore. The process of acquisition is likely to be completed in 6-9 months.
As on March 31, Kolkata-based Usha Martin had ₹4,600-crore debt against a consolidated turnover of ₹4,767 crore, of which ₹3,441 crore was contributed by the steel business. The company also has a wire-rope business.
Differences between the promoters put paid to previous restructuring attempts. “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.
The closing of the acquisition is subject to fulfilment of various conditions under the agreement. Tata Steel or any of its subsidiaries or affiliates may carry out the acquisition, it added.
Other assets
Apart from the integrated steel plant in Jamshedpur, the UML’s steel business 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. Its domestic capacity currently stands at 13 MT per annum.
The divestment of steel business will help UML to ‘almost wipe out’ the debt burden, said Debasish Mallick, Deputy Managing Director, Exim Bank, which has nearly ₹400-crore exposure in UML.
A consortium of lenders, led by State Bank of India, is playing a lead role in the restructuring initiative. SBI Caps and Arpwood Capital acted as financial advisors to UML.
According to Rohit Nanda, Chief Financial Officer, UML, barring a few transaction related expenses and taxes, the entire amount from the sale proceeds will be used to repay the debt. All the employees pertaining to steel business will be transferred as part of the divestment process, said a notification by UML on the BSE.